Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-01317/USCOURTS-azd-2_06-cv-01317-1/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights Act

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 Co-defendant Comet Towing, Inc. has filed a one-sentence joinder in the motion to

dismiss.

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

The Yadin Company, Inc, d/b/a )

Automotive Dynamics, Inc., )

)

Plaintiff, ) No. CV-06-1317-PHX-PGR

)

vs. )

) OPINION AND ORDER

City of Peoria, et al., )

)

Defendants. ) )

Pending before the Court is defendant City of Peoria's Motion to Dismiss

(doc. #6), wherein the City of Peoria ("Peoria") seeks the dismissal of the entirety

of this action pursuant to Fed.R.Civ.P. 12(b)(6).1

 Having taken the factual

allegations of the complaint as true and having construed them in the light most

favorable to plaintiff The Yadin Company, Inc., d/b/a Automotive Dynamics, Inc.

("Yadin"), the Court finds that the motion to dismiss should be granted in part with

leave to amend, and deferred in part. 

Case 2:06-cv-01317-PGR Document 13 Filed 01/09/07 Page 1 of 9
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Background

This action arises from Peoria's failure to award a municipal towing

contract to Yadin. The complaint makes the following pertinent allegations:

(1) that Yadin held a towing services contract with Peoria from May 1994

until November 2001, when Peoria awarded the contract to co-defendant Comet

Towing, Inc. ("Comet"); 

(2) that Yadin thereafter became aware from numerous complaints from

citizens that Comet was overcharging for its services under the towing contract by

adding unauthorized service and processing fees, that Yadin informed Peoria of

Comet's contract violations by letter dated October 1, 2002, that Peoria produced

an audit of Comet on June 18, 2003, but that the audit failed to address Comet's

violations of the towing contract;

(3) that at that time (presumably June 2003), Herman Koebergen, the

supervisor of Peoria's Materials Management Department, advised Yadin's

principal that Yadin would "never receive another towing contract with the City[;]"

(4) that Peoria solicited bids for a new four-year towing contract in January

2005, that both Yadin and Comet submitted bids on the new contract, and that

Peoria informed Yadin in April 2005 that the towing contract had been awarded to

Comet because a contract with Comet would be the most advantageous to

Peoria;

(5) that Yadin made a public records request to Peoria in May 2005 for

material related to Comet's bid and Peoria's decision-making process, that the

disclosed records indicated that Peoria awarded the contract to Comet on

improper grounds in that while Peoria gave Yadin 23 higher points than Comet

based on Yadin's superior cost considerations and staff experience and the fact

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that Comet had the least experience of all of the vendors and because Comet's

pricing was a little high, Peoria gave Comet 31 more points than Yadin in the

"company's experience/performance" category for the stated reason that Yadin

engaged in "[u]nprofessional performance during contract period with current

vendor [Comet]. Made accusation to members of City staff[,]" and that Peoria

arbitrarily awarded Comet 16 more points than Yadin in the "conformance to

proposal and scope of work" category because Yadin's sections were not tabbed;

(6) that Yadin filed a notice of claim with Peoria for $4,000,000 on

December 12, 2005 but that Peoria never responded to it; and

(7) that the Maricopa County Attorney has failed to respond to Yadin's

request that he initiate a quo warranto action against Peoria and Comet for

Comet's unlawful holding and exercising of Peoria's towing franchise.

The complaint raises three claims: Count One seeks a declaration pursuant

to A.R.S. § 12-1831 that Peoria's towing contract with Comet is void and illegal

and that the towing contract should have been awarded to Yadin; Count Two

alleges that Peoria violated Yadin's rights under the U.S. and Arizona

Constitutions by not awarding it the towing contract in retaliation for its exercise of

its right to petition government and provide comment on matters of public interest,

including the right to report any potential and actual violations by Comet of the

terms of its towing contract; and Count Three seeks leave pursuant to A.R.S. 

§ 12-2043 to bring a quo warranto action against Peoria and Comet for Comet's

unlawful holding and exercise of Peoria's towing franchise because the Maricopa

County Attorney has failed to bring such an action.

Discussion

This action was removed to this Court on the basis of federal question

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jurisdiction. The sole federal question alleged in the complaint is that portion of

Count Two that raises a retaliation claim against Peoria based on an alleged

violation of Yadin's First Amendment's right "to petition government and provide

comment on matters of public interest," which the Court construes as being

brought pursuant to 42 U.S.C. § 1983.

A. Monell Issue

Peoria argues in part that the § 1983 claim should be dismissed pursuant

to Monell v. Dept. of Social Services, 436 U.S. 658, 98 S.Ct. 2018 (1978), on the

ground that the claim fails to allege that Peoria has a custom or policy of violating

First Amendment rights in the bid or procurement process. The Court agrees.

Yadin initially argues in part that Peoria's Monell argument is "totally

inappropriate at the motion to dismiss stage, before [it] has been allowed to take

any discovery" on Peoria's policies and conduct because the "vast majority" of

cases in the Ninth Circuit dismissed pursuant to Monell involve motions for

summary judgment and not motions to dismiss. This is a meritless argument

because a § 1983 claim against a municipality is appropriately dismissed

pursuant to Rule 12(b)(6) if the complaint does not make at least a bare

allegation that the allegedly unconstitutional conduct at issue conformed to an

official policy or custom. See e.g., Molina v. Richardson, 578 F.2d 846, 848 (9th

Cir.), cert. denied, 439 U.S. 1048 (1978) (Court affirmed the dismissal of a § 1983

claim against a city for failure to state a claim because the plaintiff did not argue

that the allegedly illegal conduct represented the city's official policy.)

Yadin further argues, fairly impliedly, that the complaint does allege an

official policy underlying the retaliatory denial of its bid on the towing contract. Its

position is apparently that the policy at issue is the statement by Koebergen, a

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Peoria supervisory employee, that Yadin would never receive another towing

contract from Peoria. Peoria argues in its reply that the complaint does not allege

that Peoria has a policy of retaliating against persons for exercising

constitutionally protected rights, or that any final policymaker violated its rights.

The Court concludes that the complaint, as currently written, does in fact

fail to state an actionable § 1983 claim based on Monell. Under Monell, a

municipality may be held liable under § 1983 only for constitutional violations

occurring pursuant to an official government policy or custom because there is no

§ 1983 respondeat superior liability based on a municipality's employment of a

tortfeasor. There are three ways to show a policy or custom of a municipality: 

(1) by showing a longstanding practice or custom which constitutes the

municipality's standard operating procedure; (2) by showing that the decisionmaking official was a final policy-making authority under state law whose edicts or

acts may fairly be said to represent official policy in the area of decision; or (3) by

showing that an official with final policy making authority either delegated that

authority to, or ratified the decision of, a subordinate. Menotti v. City of Seattle,

409 F.3d 1113, 1147 (9th Cir. 2005). In the Ninth Circuit, a claim of municipal

liability under § 1983 is sufficient to withstand a motion to dismiss even if it is

based on nothing more than a bare allegation that the conduct of municipal

employees conformed to official policy, custom, or practice. Galbraith v. County of

Santa Clara, 307 F.3d 1119, 1127 (9th Cir. 2002). Yadin's § 1983 claim is

deficient because it does not identify any official city policy or custom or

specifically allege that any city official conformed his or her conduct to that policy

or custom in violating Yadin's First Amendment rights. 

While Yadin inexplicably does not request the opportunity, this pleading

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deficiency is one that may be able to be corrected through an amended

complaint. See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) ("In

dismissing for failure to state a claim, a district court should grant leave to amend

even if no request to amend the pleading was made, unless it determines that the

pleading could not possibly be cured by the allegation of other facts.") (Internal

quotation marks omitted).

B. Umbehr Issue

In effect contending that any amendment of the § 1983 claim would be

futile, Peoria also argues that the § 1983 claim fails to state a claim even if it

complies with Monell because Yadin did not have an ongoing business

relationship with Peoria at the time of the bid process and award at issue. 

Underlying the resolution of this issue is Board of County Commissioners,

Wabaunsee County, Kansas v. Umbehr, 518 U.S. 668, 116 S.Ct. 2342 (1996). 

Umbehr involved a § 1983 action by an independent contractor who alleged that

county commissioners terminated (or prevented the automatic renewal of) his

trash hauling contract with the county in retaliation for his First Amendmentprotected criticism of the county and the board. The Supreme Court concluded

in Umbehr that, as with government employees, government contractors are

protected by the First Amendment from termination of their government contracts

in retaliation for the exercise of their freedom of speech notwithstanding that they

did not have a property interest in their contracts. At issue in this case is the

Supreme Court's express limitation of its holding in Umbehr:

[W]e emphasize the limited nature of our decision today. Because

Umbehr's suit concerns the termination of a pre-existing commercial

relationship with the government, we need not address the possibility

of suits by bidders or applicants for new government contracts who

cannot rely on such a relationship.

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518 U.S. at 685, 116 S.Ct. at 2352.

The Ninth Circuit has not resolved the issue of whether Umbehr's rationale

should be applied to mere bidders on new government contracts, and there is a

split of authority among the few circuits that have decided the issue. 

Peoria, relying on the Third Circuit's decision in McClintock v. Eichelberger,

169 F.3d 812 (3rd Cir.), cert. denied, 528 U.S. 876 (1999), contends that Umbehr

should not be extended to a mere bidder situation such as this one. In

McClintock, the court affirmed the Rule 12(b)(6) dismissal of a § 1983 action by a

marketing and advertising firm which alleged that its First Amendment rights were

violated because its bid for a government contract was rejected in retaliation for

its support of the political opponents of the public officials who awarded the

contract. The majority of the Third Circuit's panel, over a strong dissent, refused

to extend the Umbehr ruling to situations where the disappointed independent

contractor bidder did not have a pre-existing commercial relationship with the

government entity, noting in part that its previous case law cautioned against

extending First Amendment holdings if they would cause the judiciary to intrude

into such traditional practices as contract awards by a government entity. 169

F.3d at 816-17.

In the absence of controlling authority, the Court concludes that the better

reasoned view on this issue is the one more recently presented by the Fifth

Circuit in Oscar Renda Contracting, Inc. v. City of Lubbock, Texas, 463 F.3d 378

(5th Cir. 2006), a decision rendered after the completion of the briefing on Peoria's

motion. The Oscar Renda case involved a § 1983 action by a construction

company which alleged that its First Amendment rights were violated because its

bid for a public works project was rejected in retaliation for its previous lawsuit

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 The Fifth Circuit also concluded that Justice Scalia's dissent in Umbehr supported its

reasoning. 463 F.3d at 385. Justice Scalia, referring in his dissent to the statement in Umbehr

reserving the issue of whether contractors without a pre-existing relationship are entitled to First

Amendment protection, stated that it was "[n]ot likely; in fact, not even believable" that the

Supreme Court majority would fail to extend First Amendment protection to bidders without a

pre-existing relation with the government entity given the Supreme Court's previous decisions,

such as Rutan. 518 U.S. at 709, 116 S.Ct. at 2373 (Scalia, J., dissenting).

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against a different government entity. The trial court dismissed the action

pursuant to Fed.R.Civ.P. 12(b)(6) in part because the construction company did

not have a pre-existing commercial relationship with the city. In reversing the

dismissal and in expressly rejecting the McClintock approach, the Fifth Circuit

noted that the Supreme Court, prior to Umbehr, had held in a government

employment context that no prior relationship is required before an employment

applicant is permitted to assert a claim for First Amendment retaliation, citing in

particular to Rutan v. Republican Party of Illinois, 497 U.S. 62, 110 S.Ct. 2719

(1990), wherein the Supreme Court held in part that a government entity's refusal

to hire someone as an employee based on that person's political affiliation or

support could be considered to be an impermissible infringement on First

Amendment rights. 463 F.3d at 383. The Fifth Circuit, reading Umbehr and

Rutan together to conclude that "[s]ince First Amendment rights have been

afforded to individuals applying for employment with the government, no different

result should be afforded to bidders applying for 'employment' with the

government under a bidding arrangement[,]" held that the Supreme Court would

not require a contractor to have a prior relationship with a government entity

before being able to assert a First Amendment claim.2 Id. at 385-86. The Court

is similarly persuaded.

Because the Court concludes that the McClintock decision should not

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control Yadin's § 1983 claim, the Court will permit Yadin a single opportunity to

amend its complaint to conform to the pleading requirements of Monell.

Peoria has also moved to dismiss all of Yadin's state law claims. Since the

Court is dismissing the only federal claim with leave to amend, the Court, in the

exercise of its discretion, will defer ruling on the propriety of the state law claims

until such time as Yadin files an actionable federal claim. If the § 1983 claim is

not timely and/or properly amended, the Court will decline to exercise

supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. 

§ 1367(c) and will remand those claims to the state court. If an actionable § 1983

claim is filed, the Court will then reinstate and will resolve the remainder of the

motion to dismiss as necessary. Therefore,

IT IS ORDERED that the City of Peoria's Motion to Dismiss (doc. #6) is

granted in part solely to the extent that the portion of Count Two of the complaint

alleging a First Amendment retaliation claim pursuant to 42 U.S.C. § 1983 is

dismissed pursuant to Fed.R.Civ.P. 12(b)(6) with leave to file an amended

complaint. The Court defers ruling on that portion of the motion to dismiss

directed at the state law claims.

IT IS FURTHER ORDERED that plaintiff The Yadin Company, Inc., d/b/a

Automotive Dynamics, Inc. shall no later than February 5, 2007 file either an

amended complaint properly stating a federal claim or a notice stating that it will

not file an amended complaint.

DATED this 8th day of January, 2007.

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