1 13-3871-cv Safepath Systems LLC v. N.Y.C. Dep’t of Educ.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT


## SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 20 07, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party mu st cite either the Federal Appendix or an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not represented by counsel.

At a stated term of the United States Cour t of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 30 th day of April, two thousand fourteen.

PRESENT:

G UIDO C ALABRESI , J OSÉ A. C ABRANES , D EBRA A NN L IVINGSTON , Circuit Judges

.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x S AFEPATH S YSTEMS LLC, G YM D OOR R EPAIRS , I NC ., Plaintiffs-Appellants,

-v.- No. 13-3871-cv

N EW Y ORK C ITY D EPARTMENT OF E DUCATION , D ENNIS M. W

ALCOTT , AS C HANCELLOR OF THE N EW Y ORK C ITY D EPARTMENT OF E DUCATION , N EW Y ORK C ITY S CHOOL C ONSTRUCTION A UTHORITY , T HE B OARD OF T RUSTEES OF THE N EW Y ORK C ITY S CHOOL C ONSTRUCTION A UTHORITY , C ITY OF N EW Y ORK , J OHN T. S HEA , AS C HIEF E XECUTIVE O FFICER OF THE N EW Y ORK C ITY D EPARTMENT OF E DUCATION D IVISION OF S CHOOL F ACILITIES , V OLKERT B RAREN , AS D IRECTOR OF P ROGRAM M ANAGEMENT OF NYCDOE, C HRIS C OYLE , AS B OROUGH C ONTRACT M ANAGER OF N EW Y ORK C ITY D EPARTMENT OF E DUCATION , T HOMAS F ANIZZI , AS M ANHATTAN M AINTENANCE P LANNER OF N EW Y ORK C ITY D EPARTMENT OF E DUCATION AND D IVISION OF S CHOOL F ACILITIES , J OHN D OES 1-5, WHOSE NAMES ARE NOT PRESENTLY KNOWN , AS2 AGENTS , SERVANTS AND EMPLOYEES OF T HE C ITY OF N EW Y

ORK , Defendants-Appellees

.

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FOR PLAINTIFF-APPELLANT: E RIC S U (Anurima Sonu Ray, on the brief ), Ogletree, Deakins, Nash, Smoak & Stewart, P.C., New York, NY.

FOR DEFENDANTS-APPELLEES: M ICHAEL J. P ASTOR (Kristin M. Helmers, on the brief ), for Zachary Carter, Corporation Counsel of the City of New York, New York, NY.
Appeal from a judgment, entered October 7, 20 13, of the United States District Court for the Southern District of New York (Robert W. Sweet, Judge ).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the District Court is AFFIRMED IN PART insofar as it dismissed plaintiffs’ due process claims and VACATED IN PART insofar as it dismissed plaintiffs’ First Amendment retaliation claims, and REMANDED for further proceedings consistent with this Order.
Plaintiffs Safepath Systems LLC (“SSL”) and Gy m Door Repairs, Inc. (“GDR”) appeal from the judgment of the District Court granting defend ants’ motion to dismiss. They brought claims under 42 U.S.C. § 1983 against the City of New Yo rk (the “City”), New York City Department of Education (“NYCDOE”), New York City School Construction Authority (“NYCSCA”), and a number of City, NYCDOE, and NYCSCA employees (collectively, “defendants”). Plaintiffs allege that defendants violated their constitutionally-protected procedural and substantive due process rights, in violation of the Fourteenth Amendment. They also allege that defendants retaliated against them for plaintiffs’ exercise of their First Amendment rights.
We otherwise assume the parties’ familiarity with the underlying facts, procedural history, and specification of issues for review, to which we refer only as necessary to explain our decision.

We review de novo a district court’s grant of a motion to dismiss under Rule 12(b)(6), “accepting as true all allegations in the complaint and drawing all reasonable inferences in favor of the non-moving party.” Gonzalez v. Hasty , 651 F.3d 318, 321 (2d Cir. 2011). To survive a Rule 12(b)(6) motion to dismiss, the complaint must include “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). A claim will have “facial plau sibility when the plaintiff pleads factual content that allows the court to draw the reasonable infere nce that the defendant is liable for the misconduct3 alleged.” Iqbal , 556 U.S. at 678. Although all allegations contained in the complaint are assumed to be true, this tenet is “inapplicable to legal conclusions.” Id.

A. Procedural Due Process Claim
The District Court was correct to dismiss plaint iffs’ procedural due process claim, because the plaintiffs were not deprived of any constituti onally cognizable property interest. “To state a claim for deprivation of property without due proce ss of law, a plaintiff must identify a property interest protected by the Due Process Clause.” Harrington v. Cnty. of Suffolk , 607 F.3d 31, 34 (2d Cir. 2010).
Here, plaintiffs’ claims arise from the “Safe Pa th System,” their patented system of electric folding partitions primarily used in school gyms . They contend that the combination of a New York State statute (Education Law § 409-f), a state regulation (New York State Education Department Commissioner’s Regulation § 155.25) , and a specification (New York City School Construction Authority Manual § 2.02(G)(4)) (co llectively, the “mandates”) created a property interest. Specifically, they argue that, read in comb ination, these regulations required that plaintiffs’ patented Safe Path System be used in all New York City schools and that plaintiffs be the sole contractors permitted to install and repair them. Plaintiffs assert that defendants failed to enforce these mandates and thereby deprived plaintiffs of pr operty. They also allege that defendants barred them from future contracts for work in City schools and amended the specification to remove mention of the Safe Path System.
Property interests are “created and their dime nsions are defined by existing rules or understandings that stem from an independent source such as state law-rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.” Bd. of Regents of State Colleges v. Roth , 408 U.S. 564, 577 (1972). Such an interest cannot be created out of “an abstract need or desire for it,” nor from a “unilateral ex pectation of it”; rather, a plaintiff must “have a legitimate claim of entitlement to it.” Id. A statutory benefit is not a protected entitlement if it may be denied at the government’s discr etion or if the law does not create an individual entitlement. Harrington , 607 F.3d at 34–35; see also Town of Castle Rock, Colo. v. Gonzales , 545 U.S. 748, 756 (2005) (“[A] benefit is not a protected entitlement if government officials may grant or deny it in their discretion.”); W. Farms Assocs. v. State Traffic Comm’n of State of Conn. , 951 F.2d 469, 472 (2d Cir. 1991) (“[U]niversal benefits are not property interes ts protected by the Due Process Clause.”); Kelly Kare, Ltd. v. O’Rourke , 930 F.2d 170, 175 (2d Cir. 1991) (“If th e statute, regulation, or contract in issue vests in the state significant discretion over the contin ued conferral of that benefit, it will be the rare case that the recipient will be able to esta blish an entitlement to that benefit.”).
Although defendants were obliged to abide by the mandates while they were in force, the specification and regulation could be changed in defendants’ discretion (as in fact the specification was). And the mandates did not create an individual entitlement for plaintiffs that guaranteed an4 ongoing employment, contractual, or vendor relationship with the City. “Ordinarily, there is no constitutionally protected property interest in prospective government employment.” Abramson v. Pataki , 278 F.3d 93, 100 (2d Cir. 2002). That is pa rticularly true under New York’s competitive bidding system, in which “bidders lack property ri ghts in future contracts to be awarded under competitive bidding procedures.” Terminate Control Corp. v. Horowitz , 28 F.3d 1335, 1352 (2d Cir. 1994); see also Conduit & Found. Corp. v. Metro. Transp. Auth. , 66 N.Y.2d 144, 148–49 (1985) (“Neither the low bidder nor any other bidder has a vested property interest in a public works contract.”).
Because plaintiffs did not possess a cognizable property interest in the Safe Path System being installed in all City schools or in maintaining those that were installed, their procedural due process claim was properly dismissed.

B. Substantive Due Process Claim
Plaintiffs’ substantive due process claim was also properly dismissed, because they did not identify a constitutionally-protected property right. See Local 342, Long Island Pub. Serv. Emps., UMD, ILA, AFL-CIO v. Town Bd. of Town of Huntington , 31 F.3d 1191, 1196 (2d Cir. 1994) (“In view of our conclusion that [plaintiffs] possessed no protectible property interest . . . , it would appear obvious that [defendants’] termination of those payments in no way violated the substantive due process rights of [plaintiffs].”); cf. Regents of the Univ. of Mich. v. Ewing , 474 U.S. 214, 229 (1985) (Powell, J., concurring) (“Even if one assumes the existence of a property right, . . . not every such right is entitled to the protection of substantive due pro cess. While property interests are protected by procedural due process even though the interest is derived from state law rather than the Constitution, substantive due process rights are created only by the Constitution.”).
Alternatively, plaintiffs contend that defendants engaged in arbitrary and conscienceshocking behavior. These allegations are entirely c onclusory and, in any event, appear to be based solely on the deprivation of rights we have determined were not protected property interests.
Even if we were to assume that plaintiffs’ right to these contracts could be considered fundamental under the Due Process Clause, the defe ndants’ alleged conduct in depriving them of that right was not “so shocking, arbitrary, and egregious that the Due Process Clause would not countenance it even were it accompanied by full procedural protection.” See Anthony v. City of New York , 339 F.3d 129, 143 (2d Cir. 2003) (internal quotation marks omitted).
Accordingly, the District Court quite properly re jected the plaintiffs’ substantive due process claim.

C. First Amendment Retaliation Claim

The District Court erred, however, in dismi ssing plaintiffs’ First Amendment retaliation claim.5 It is well-established that “the First Amendment protects a public employee’s right, in certain circumstances, to speak as a citizen ad dressing matters of public concern.” Garcetti v. Ceballos , 547 U.S. 410, 417 (2006). Although plaintiffs are inde pendent contractors rather than public employees, their First Amendment rights are still protected: The Supreme Court has held that “proper application of the Pickering balancing test,” “adjusted to weigh the government’s interests as contractor rather than as employer,” is appr opriate for both public employees and independent

contractors. Bd. of Cnty. Comm’rs, Wabaunsee Cnty., Kan. v. Umbehr , 518 U.S. 668, 673, 678 (1996); see also Fahs Const. Grp., Inc. v. Gray , 725 F.3d 289, 291 (2d Cir. 2013).
To make out a First Amendment retaliation claim, a plaintiff must demonstrate that “‘(1) his speech addressed a matter of public concern, (2) he suffered an adverse employment action, and (3) a causal connection existed between the speech and the adverse employment action, so that it can be said that his speech was a motivati ng factor in the determination.’” Cobb v. Pozzi , 363 F.3d 89, 102 (2d Cir. 2004) (quoting Mandell v. Cnty. of Suffolk , 316 F.3d 368, 382 (2d Cir. 2003)).
Here, plaintiffs claim they were retaliated against for complaining of, and making public, defendants’ failure to comply with the various mandates. Specifically, plaintiffs allege that they notified defendants of their failure to comply, and, upon seeing no result, also notified the New York City Department of Investigations (“NYCDOI”) and the New York State Attorney General’s Office (“NYAG”). Plaintiffs also filed a lawsui t in New York state court pursuant to NYCPLR Article 78 to compel defendants to enforce the law, regulation, and manual. Plaintiffs allege that defendants thereafter “instructed contractors . . . to ‘never use’ GDRI or SPS on any NYCDOE or NYCSCA projects.” They also “removed (or caused the removal of) the Safe Path System from the specifications of NYCSCA.”
The District Court concluded that plaintiffs faile d to allege any adverse action in retaliation for their speech, on the basis that they had no proper ty interest in servicing and installing their Safe Path Systems in City schools. In doing so, it erred by addressing only whether plaintiffs were deprived of a property interest.

It is true that “retaliation cannot be establishe d where no adverse action has been alleged.” Kuck v. Danaher , 600 F.3d 159, 168 (2d Cir. 2010). The Su preme Court has held, however, that a First Amendment retaliation claim does not require any property interest protected by the Due Process Clause: “[E]ven though a person has no ‘right’ to a valuable governmental benefit and even though the government may deny him the benefit for any number of reasons, there are some reasons upon which the government may not rely. It may not deny a benefit to a person on a basis that infringes his constitutionally protected interests—especially, his interest in freedom of speech.” Perry v. Sindermann , 408 U.S. 593, 597 (1972); see also Umbehr , 518 U.S. at 674 (applying “unconstitutional conditions” doctrine to First Amendment retaliation against independent contractors).6 Plaintiffs allege that they suffered “lost business opportunities and revenue, and deprivation and infringement of Plaintiffs’ rights as the owners and registrants of the intellectual properties related to the Safe Path System.” Joint App’x 30. At the motion to dismiss stage, we must credit those allegations, which are certainly plausible given that contractors were ostensibly instructed never to contract with plaintiffs on City projects.
Accordingly, the District Court’s conclusion that plaintiffs did not allege an adverse action was in error.
On appeal, defendants also press the argument that plaintiffs were not speaking on a matter of public interest, because they have a business interest in the result.
“[A] topic is a matter of public concern for First Amendment purposes if it is ‘of general interest,’ or ‘of legitimate news interest,’ or ‘of va lue and concern to the public at the time’ of the speech.” Jackler v. Byrne , 658 F.3d 225, 236 (2d Cir. 2011) (quoting City of San Diego, Cal. v. Roe , 543 U.S. 77, 83–84 (2004)). Plaintiffs’ complaints an d their subsequent lawsuit were of public interest, because they were publicly asserting that defendan ts were failing to comply with the law, thereby allegedly endangering New York City schoolchildren. Th at there is an ancillary private interest (here, plaintiffs’ profit motive) does not preclude First Amendment protection for speech that accuses defendants of failing to follow the law.
Equally important here, however, is plaintiffs’ right to petition the government for a redress of grievances. “The rights to complain to public officials and to seek administrative and judicial relief from their actions are pro tected by the First Amendment.” Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals , 282 F.3d 83, 91 (2d Cir. 2002); see also White Plains Towing Corp. v. Patterson , 991 F.2d 1049, 1059 (2d Cir. 1993) (rig ht to petition claims governed by same constitutional analysis as free speech claims). Thus, even if the topic had not been of public interest, by complaining to defendants, the NYCDOI, and the NYAG, and by filing the Article 78 petition, plaintiffs were engaging in protected speech.
Plaintiffs have also met the third element required to allege First Amendment retaliation. At the pleading stage, “[i]t is sufficient to allege facts from which a retaliatory intent on the part of the defendants reasonably may be inferred .” Dougherty , 282 F.3d at 91 (emphasis supplied). Given the chronology of events as alleged, we conclude that there are questions of fact as to retaliatory intent that cannot properly be deter mined on a motion to dismiss.
Accordingly, we vacate the District Court’s dismissal of plaintiffs’ First Amendment retaliation claim and remand for further proceedings consistent with this Order.
We also remand for consideration by the District Court of the claim for injunctive relief. In so doing, we do not intimate any views as to the appropriateness vel non of such relief.7 CONCLUSION

We have reviewed the record and considered plaintiffs’ remaining arguments on appeal, and find them to be without merit. For the reasons set out above, we AFFIRM IN PART the October 7, 2013, judgment of the District Court insofar as it dismissed plaintiffs’ due process claims, VACATE IN PART insofar as it dismissed plaintiffs’ First Amendment retaliation claims, and REMAND for further proceedings consistent with this Order.

FOR THE COURT, Catherine O’Hagan Wolfe, Clerk of Court