Court Opinion

ID: 6985264
Source: CourtListenerOpinion
Date Created: 2022-07-24 02:58:22.807155+00
Date Added: 2024-06-11T16:09:24.996827
License: Public Domain

CANBY, Circuit Judge,
concurring in part and dissenting in part:
I concur fully in that part of Judge Takasugi’s opinion which holds that the Bellingham defendants are not entitled to qualified immunity with regard to De-Boer’s Fourth Amendment claims.1
My disagreement with the majority is over DeBoer’s due process claim. In my view, the contract between the City and D & M Operating Company, of which De-Boer was a partner, created no due-process-protected property interest in DeBoer that protects him against a breach by the City. As the majority opinion indicates, the City’s contract was not a contract of employment, nor was it even a contract for DeBoer’s personal services as an independent contractor. It therefore does not fall within that large body of precedent holding that an employment contract under which a state employee may be discharged only for “cause” creates a constitutionally protected property interest. See Perry v. Sindermann, 408 U.S. 593, 601, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972).
The majority, however, concludes that DeBoer’s interest is protected because the contract between his firm and the City could be terminated unilaterally by the City only for “cause.” In so holding, I believe that the majority contravenes San Bernardino Physicians’ Services Medical Group v. County of San Bernardino, 825 F.2d 1404 (9th Cir.1987). There we held that a corporation’s contract to provide medical services to the County, terminable only for “cause,” did not create a constitutionally protectible interest because the corporation stood “in the position of supplier, not employee.” Id. at 1409. We declined to extend due process protection to such contracts because “[i]t is neither workable nor within the intent of section 1983 to convert every breach of contract claim against a state into a federal claim.”2 Id. at 1408.
*873The same considerations control here.3 The D & M partnership contracted to supply services to the City, and the contract was terminable by the City for “cause,” with D & M to be given an opportunity to correct the cause-creating defect. The City terminated without following these provisions, and thereby breached its contract.4 D & M has a remedy for that breach under state law.5
The majority relies upon a dictum in Unger v. National Residents Matching Program, 928 F.2d 1392 (3d Cir.1991), that property interests are created by contract in two classes of cases: (1) where the contract confers a protected status, either of extreme dependency such as welfare benefits, or of tenure for employees; and (2) where the contract includes a provision that it is terminable only for cause. See id. at 1399. With all respect, I do not believe that the second category extends to the ordinary business contract. The only holdings Unger cites for its second category are employment cases. See id. (citing Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 538-39, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985); Arnett v. Kennedy, 416 U.S. 134, 166-67, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974)). Unger also catalogs numbers of decisions, including San Ber-nardino, that support the proposition that all state breach-of-contract cases ought not to be turned into constitutional cases. See Unger, 928 F.2d at 1397-99.
There is a very important reason why the presence of a clause providing termination for “cause” should not convert rights under a business contract into property protected by the due process clause. In the employment cases, a contractual provision that employment may be terminated only for “cause” merely establishes the entitlement to an expectation of continued employment, which triggers the constitutional protection. See Perry, 408 U.S. at 601, 92 S.Ct. 2694. By this logic, a contract of employment for a fixed term is also entitled to due process protection, because it provides for no termination at all during the specified term. Indeed, we have so held. See Stretten v. Wadsworth Veterans Hospital, 537 F.2d 361, 367 (9th Cir.1976); see also Vanelli v. Reynolds School Dist. No. 7, 667 F.2d 773, 777 (9th Cir.1982).
By the same reasoning, if we are to afford due process protection to state business contracts because they contain a provision for termination only for “cause,” then we must extend due process protection to state business contracts that extend for a fixed term whether or not they contain “cause” provisions. Certainly the state should occupy no stronger position when it contracts for ten years with no right to terminate for cause, than it would if it had contracted for ten years and provided that it could terminate the contract for cause. Thus, a huge portion of ordinary commercial breach of contract cases will be converted into due process constitutional cases when the state is the breaching party. Rather than run the risk of “convert[ing] every breach of contract claim against a state into a federal claim,” San Bernardino, 825 F.2d at 1408, I would *874exclude these commercial contracts from the category of due-process-protected property, despite the presence of a “cause” termination clause or a fixed term.
In all other respects, I agree with the majority opinion.

. I also agree that the judgment granting qualified immunity to the state defendants, which was entered on the strength of the ruling in favor of the Bellingham defendants, must be reversed. The district court may then address the degree, if any, to which the actions of the state defendants differed materially from the actions of the Bellingham defendants.

. The majority opinion asserts that San Ber-nardino did not have occasion to consider the effect of the "cause” requirement because the County had rescinded the termination notices before trial. But the plaintiffs there continued to assert a due process claim based on their contract. San Bernardino therefore still had to consider, and did consider, whether the contract (with its "cause” requirement for termination) was constitutionally-protected property. In deciding it was not property, San Bernardino did not rely at all on the fact that termination had been rescinded; the rescission appears only in the recitation of facts and played no part in our reasoning. See San Bernardino, 825 F.2d at 1406.

. We are not confronted with a situation where some other governmental agency confiscated D & M’s contractual rights which the Cily was still prepared to honor. Such a scenario would raise entirely different constitutional considerations from those presented by the City’s breach as a contracting party.

. Because we are reviewing a summary judgment for the defendants, I accept DeBoer’s version of the facts for purposes of appeal.

. O’Hare Truck Service, Inc. v. City of Northlake, 518 U.S. 712, 116 S.Ct. 2353, 135 L.Ed.2d 874 (1996), does not aid DeBoer. There the Supreme Court held that a towing company could not be removed from the City’s referral list (which was governed by a "cause” requirement for removal) because of its political activity or inactivity. The Court refused to differentiate First Amendment rights of employees from those of independent contractors. See id. at 721-23, 116 S.Ct. at 2359. First Amendment rights, however, ordinarily do not depend on contractual status, while contractual property rights necessarily do. O’Hare does not control this case.