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Blackout Sealcoating, Incorporated v Peterson

Case No. 12-3352 (C.A. 7, Jul. 18, 2013)

Blackout Sealcoating performs asphalt paving work and other services for public and private construction projects. Until spring 2012 the Chicago Transit Authority was among its clients. Blackout’s two contracts with the CTA were terminable at will, and on May 8, 2012, the CTA informed Blackout that it would not do business with the firm for the next year. The CTA calls such a decision debarment.

Because the contracts were terminable at will, Blackout could not get damages for breach—and at all events such a suit would belong in state court even if the firm asserted that breach of contract deprived it of a property interest. See, e.g., Mid-American Waste Systems, Inc. v. Gary, 49 F.3d 286 (7th Cir. 1995); cf. Simmons v. Gillespie, 712 F.3d 1041 (7th Cir. 2013). Illinois law allows judicial review of public bodies’ debarment decisions, see Arroyo v. Chicago Transit Authority, 394 Ill. App. 3d 822, 827 (2009), but Blackout did not avail itself of that opportunity. Nor did it use the law of libel, even though it insists that every public announcement of debarment is defamatory. The CTA announced the debarment without giving a public reason. During the litigation, the reason came out: Blackout had hired Michael Ferro, who was under debarment at the CTA. The CTA viewed this as a stratagem to evade its decision about Ferro. Blackout contends that it did not know of Ferro’s debarment. The CTA’s decision to employ a strict-liability or nofault approach to derivative debarment may be harsh but would not be defamatory. But one way or the other defamation is a state-law issue that was never presented to the state judiciary.

Having foregone their opportunity to litigate statutory and common-law claims in state court, Blackout and its two owner-managers filed this suit in federal court under 42 U.S.C. §1983, contending that the CTA had deprived it of “occupational liberty” without due process of law. The theory of such a suit, based on Wisconsin v. Constantineau, 400 U.S. 433 (1971), as limited by Paul v. Davis, 424 U.S. 693 (1976), is that, even though defamation affects neither “liberty” nor “property” for the purpose of the fourteenth amendment, and even though Blackout lacked a property right in the at-will contract, defamation that substantially limits one’s ability to pursue the common callings of life is a deprivation of liberty. The year’s debarment has ended, but the case is not moot because plaintiffs seek damages.
 

 

Judge(s): Frank Easterbrook
Jurisdiction: U.S. Court of Appeals, Seventh Circuit
Related Categories: Construction , Government / Politics
 
Circuit Court Judge(s)
Frank Easterbrook
Daniel Manion
Ilana Rovner

 
Trial Court Judge(s)
Elaine Bucklo

 

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that it would not do business with the firm for the cedes that it stopped bidding for public contracts. that marina popovic, one of the cta’s vice-presidents, pre- lexis 13316 (10th cir. june 27, 2013) (en banc), with the district court should have indulged that assumption jackson county v. cherry, 980 f.2d 1362, 1368 (11th cir. no. 12-3352 7 cta sent blackout a “notice of intent to debar.” blackout after the cta’s decision, does not plausibly allege another firm through which to practice their occupa- neither necessarily means unemployment for life or sealcoating, inc., the kolineks may be able to organize 894 f. supp. 2d 1067 (n.d. ill. 2012). the court held that plaintiffs bid for work at any other public agency 827 (2009), but blackout did not avail itself of that op- v. sindermann, 408 u.s. 593 (1972). the court held in it did not know about ferro’s debarment, and the cta had deprived it of “occupational liberty” without but would not be defamatory. but one way or the conestoga wood specialties corp. v. secretary of health and until the term’s expiration; an at-will contract does not. clause requires notice and an opportunity to present one’s the cta’s decision to employ a strict-liability or no- notify it of the cta’s concerns. one opportunity to re- supreme court wrote in goss v. lopez, 419 u.s. 565, 579 medina v. united states, 709 f.2d 104 (1st cir. 1983); other doors and effectively prevented blackout from while the appeal was pending, blackout submitted a ment is defamatory. the cta announced the debarment equivalent to an employee’s suspension for misconduct; united states court of appeals arroyo v. chicago transit authority, 394 ill. app. 3d 822, review of public bodies’ debarment decisions, see plaintiffs-appellants, no. 12-3352 which every internal recommendation kicks off a new material facts are in dispute. in september 2010 the occupational liberty. whether personal liberty may be summary judgment, the judge asks her law clerk for a blackout again replied in writing. blackout has never terry peterson, et al., corporation is that the claim is derivative. corporations due process of law. the theory of such a suit, based on than 5% of civil suits and are never necessary unless before easterbrook, chief judge, and manion and argued that it did not employ ferro; it argued only that effect elsewhere, or a contention that blackout had sub- the assumption that corporations have “occupational 8 no. 12-3352 in the is not simply that blackout failed to allege that it 2 no. 12-3352 one final comment. we have resolved this appeal on portunity. nor did it use the law of libel, even though though blackout lacked a property right in the at-will ferencz v. hairston, 119 f.3d 1244 (6th cir. 1997); bank of does not mandate a third. perhaps illinois law requires contends that it did not know of ferro’s debarment. no. 12-3352 5 4 no. 12-3352 because the contracts were terminable at will, blackout employer from the universe of all jobs does not affect v. most litigants in federal court receive; trials occur in less that inability to work for a single employer does not other defamation is a state-law issue that was never do not have occupations; they are legal constructs. interest. see, e.g., mid-american waste systems, inc. v. gary, no. 12 c 4369—elaine e. bucklo, judge. if, after the briefs have been exchanged on a motion for board of regents v. roth, 408 u.s. 564 (1972), with perry made up for the lack of personal experience by showing blackout sealcoating, incorporated, legations along those lines. the district judge thus (7th. cir. 2008), which hold that the removal of one job or deprive a person or corporation of occupational lib- defendants-appellees. twombly to distinguish plausible from speculative claims. district judge thought the allegation implausible in the so blackout had no entitlement to do work for the the complaint alleges that it had this effect, but the suspended or fired by a single employer (that’s what appeal from the united states district court 6 no. 12-3352 hold hearings before ending at-will contracts. compare (1975). often an opportunity to comment in writing is all by paul v. davis, 424 u.s. 693 (1976), is that, even though argued april 11, 2013—decided july 18, 2013 plaint too gloomy about blackout’s business prospects. that debarment by the cta amounted to blackballing forms asphalt paving work and other services for pub- record closed when the district court entered its judg- roth that, to have a protected interest, a person must without giving a public reason. during the litigation, the exercised through the corporate form is an issue that has its portfolio of private contracts) but that blackout con- tion to the parties before acting on it. the due process and its two owner-managers filed this suit in federal absence of a statute giving one agency’s debarment an notice and a hearing unless its decision closed many position; it does not require an extended to-and-fro in pare hobby lobby stores, inc. v. sebelius, 2013 u.s. app. cir. 2012) (reserving the question). us pause about imputing “occupational liberty” to a yet many a person fired by one employer can find no. 12-3352 3 app. p. 28. we do not rely on it as a reason to affirm; the tory and common-law claims in state court, blackout tions of doom would be hard to support on summary as a stratagem to evade its decision about ferro. blackout contract, defamation that substantially limits one’s 7-18-13 wisconsin v. constantineau, 400 u.s. 433 (1971), as limited contract. it says that the contract was small and the from the industry. blackout replies that, since its kimberly kolinek, and paul kolinek, f.3d 1041 (7th cir. 2013). illinois law allows judicial a job at another. debarment is either like firing or is kind of notice and afforded some kind of hearing”, the united industries, inc. v. chicago, 669 f.3d 847, 850 (7th 49 f.3d 286 (7th cir. 1995); cf. simmons v. gillespie, 712 cta evidently thought that possibility immaterial. acted within the scope of her authority under iqbal and letters in september 2010 and march 2011 failed to district that the cta’s decision did not imply that it for the seventh circuit feasible. we mention the issue only to show that we produced a speculative complaint. plaintiffs might have in its favor. 2013). we need not pursue that subject today. what gives bid to a public agency (a school district) and won the ability to pursue the common callings of life is a depri- the cta did to blackout) as a deprivation of liberty or spond was enough; two was ample; the constitution fault approach to derivative debarment may be harsh occupational liberty. other circuits agree. see, e.g., serrano lic and private construction projects. until spring 2012 liberty.” it is not clear to us that this is so. kimberly and tion. the record does not show whether that would be sented her recommendation to the cta’s debarment matter failed to allege the effect of the cta’s decision on successful bid to our attention by a letter under fed. r. property would be to override the supreme court’s and suspension committee. that strikes us as equivalent was under debarment at the cta. the cta viewed this ment; but it certainly shows that the complaint’s predic- had, and used, the opportunity to respond in writing. have a “legitimate claim of entitlement” rather than mitted the low bid for work elsewhere and been turned such a suit would belong in state court even if the firm inability to work for public or private entities other than has debarred, but the complaint does not contain any al- the cta sent an amended notice in march 2011; friendly, “some kind of hearing,” 123 u. pa. l. rev. 1267 was irresponsible. blackout commendably brought this opportunity to respond—people “must be given some the chicago transit authority was among its clients. getting other people’s business. even a need to change occupations. plaintiffs’ difficulty erty—and that the complaint, which does not allege written exchanges. it contends that the cta violated could not get damages for breach—and at all events at will, and on may 8, 2012, the cta informed blackout for the northern district of illinois, eastern division. process complex, since it had to persuade the school judgment or trial. owners knew that bids would have been futile, there for the purpose of the fourteenth amendment, and even just a hope or expectation. 408 u.s. at 577. a term affirmed memorandum and does not circulate that recommenda- decisions in wroblewski v. washburn, 965 f.2d 452, 455 (7th submitted bids to other public agencies (and for that where success is normal could support an inference the case is not moot because plaintiffs seek damages. have not resolved it one way or the other. see also chicago presented to the state judiciary. the hearing required. indeed, that’s all the hearing asserted that breach of contract deprived it of a property (1975) (emphasis in original). see also cleveland board of court under 42 u.s.c. §1983, contending that the the district court dismissed the complaint, ruling that to arguing that a district court violates the constitution round of submissions. plaintiffs do not contend that the paul kolinek assuredly have personal liberty, including human services, 2013 u.s. app. lexis 2706 (3d cir. feb. 7, what happened to other contractors that the cta conclusion that public employers need not give notice or was no need to try—and that at the complaint stage defamation affects neither “liberty” nor “property” blackout’s two contracts with the cta were terminable occasioned disagreement among courts of appeals. com- having foregone their opportunity to litigate statu- cir. 1992), and mcmahon v. kindlarski, 512 f.3d 983, 988 if debarment sounds the death knell for blackout vation of liberty. the year’s debarment has ended, but what the due process clause requires is notice and an it insists that every public announcement of debar- next year. the cta calls such a decision debarment. reason came out: blackout had hired michael ferro, who down. repeated failure to get work under circumstances easterbrook, chief judge. blackout sealcoating per- rovner, circuit judges. the cta. see, e.g., ashcroft v. iqbal, 556 u.s. 662 (2009); contract can create a legitimate claim of entitlement cta, which therefore was not required to provide 1991). the law could hardly be otherwise. to treat being would produce a failure of proof at trial as surely as it in this court blackout denigrates the two more, but plaintiffs rely exclusively on the constitution. bell atlantic corp. v. twombly, 550 u.s. 544 (2007). the district court’s approach tracks this court’s suppose the district judge erred in thinking the com- education v. loudermill, 470 u.s. 532 (1985); henry j. it did not state a claim on which relief may be granted. the constitution by not providing a third round, after


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