D & D Associates Inc v. North Plainfield Board of Educ

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________

No. 12-2046 & 12-2236
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D & D ASSOCIATES, INC.
a New Jersey Corporation

Appellant (12-2046)

v.

BOARD OF EDUCATION OF NORTH PLAINFIELD; THE VITETTA GROUP, INC.,
n/k/a/ Vitetta; BOVIS LEND LEASE INC; ROBERT C. EPSTEIN

Robert C. Epstein,
Appellant (12-2236)

________________

Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 3-03-cv-01026)
District Judge: Honorable Mary L. Cooper
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Submitted Under Third Circuit LAR 34.1(a)
November 19, 2013

Before: AMBRO, and SMITH, Circuit Judges
and O’CONNOR,* Associate Justice (Ret.)

(Opinion filed: January 8, 2014)

*
Honorable Sandra Day O’Connor, Associate Justice (Ret.) for the Supreme Court of the
United States, sitting by designation.
 ________________

OPINION
________________

AMBRO, Circuit Judge

Plaintiff D&D Associates, Inc. (“D&D”), a New Jersey contractor, entered into a

variety of contracts for school renovation with defendant North Plainfield Board of

Education (the “Board”). After relations soured, D&D sued the Board and the Board’s

attorney, Roger Epstein (“Epstein”), as well as the construction management company

and architect the Board hired. D&D’s claims covered a variety of contractual, tort, and

civil rights claims. The District Court dismissed all counts of the complaint or granted

summary judgment in favor of defendants. D&D appeals as to some counts of the

complaint; Epstein cross-appeals as to two. On all issues properly before us, we affirm

the District Court.

I. Background

In 2001, the Board awarded construction contracts to D&D for the renovation and

expansion of five schools. To fulfill its contractual bonding requirements, D&D obtained

bonds from American Motorists Insurance Company (“the Surety”). The Surety and

D&D entered into a General Indemnity Agreement (“GIA”). It contained a provision

stating that, in the event of a default, D&D would “assign, transfer, and set over to

Surety, all of their rights under all Bonded Contract(s), including . . . all claims and

causes of actions against any parties to the Bonded Contract[.]” The Board entered into

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contracts for the project with an architecture firm, Vitteta Group, Inc. (“Vittetta”), and a

construction management firm, Bovis Lend Lease, Inc. (“Bovis”).

Relations among the parties quickly broke down and, after repeatedly informing

D&D of issues relating to the construction, Epstein, on behalf of the Board, sent the

Surety a letter stating that D&D was in default in February 2002, but withdrew the notice

a month later. Despite the withdrawal, between March and July 2003 the Board, after

providing notice, terminated D&D from all contracts and demanded that the Surety fulfill

the contractor’s remaining obligations. The Board and the Surety entered into takeover

agreements to facilitate the completion of all responsibilities.

During this time, the Surety began to decline D&D’s requests for further large-

scale bonding. From 2000 to 2003, D&D applied for prequalification, a New Jersey

classification allowing a contractor to bid on school facilities projects. This application

was approved each year until 2003, when D&D submitted an incomplete application that

was deemed withdrawn. D&D asserts that because it had lost bonding capacity, it would

not have been eligible for prequalification even with a complete application. It filed for

Chapter 11 bankruptcy in August 2003, and its reorganization plan was approved in

January 2005.

In March 2003, D&D filed its initial complaint in this action, charging the Board,

Vitteta, Bovis, and Epstein with a variety of civil rights and tort claims. An amended

complaint added additional claims. Between 2003 and 2012, the case went through

extensive litigation at the District Court. This culminated in a March 2012 opinion that

granted summary judgment for the Board on all remaining counts and for Epstein on

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Count Two (stigma-plus reputational harm). The same order denied both Epstein’s

motion for summary judgment on Count Ten (tortious interference) and Count Eleven

(defamation) and D&D’s motion for summary judgment on various counts. Having

disposed of all federal law claims, the District Court declined to exercise supplemental

jurisdiction over Counts Ten and Eleven, both state law claims, and dismissed those

counts against Epstein, Bovis, and Vitteta without prejudice. D&D appeals the grants of

summary judgment in favor of the Board on several counts and in favor of Epstein on

Count Two. Epstein cross-appeals the denial of his motion for summary judgment on

Counts Ten and Eleven.

II. Jurisdiction & Standard of Review

The District Court had jurisdiction over D&D’s federal law claims under 28

U.S.C. § 1331 and supplemental jurisdiction over D&D’s state law claims under 28

U.S.C. § 1367. We have jurisdiction over the appeal under 28 U.S.C. § 1291. We review

summary judgment orders de novo, applying the same test as the district court, which

states that “[s]ummary judgment is appropriate when the moving party is entitled to

judgment as a matter of law and there is no genuine dispute of material fact.” Hampton v.

Borough of Tinton Falls Police Dep’t, 98 F.3d 107, 112 (3d Cir. 1996). Where we have

jurisdiction to do so, we exercise plenary review over a denial of a motion for summary

judgment. See Giuffre v. Bissell, 31 F.3d 1241, 1251 (3d Cir. 1994).

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 III. Analysis

A. Count One: Property Seizure

In the first count of the amended complaint, D&D argues it was denied due

process through the unlawful seizure of its property. The District Court granted summary

judgment for both the Board and Epstein on this count in 2007. Although portions of

D&D’s opening brief appear to relate to this count, it has not been properly preserved on

appeal.

D&D’s opening brief does not request that this count be reinstated or at any point

identify Count One specifically as being erroneously dismissed. Where the brief to us

refers to property seizure, those arguments are entangled with contentions on other

counts. In addition, the citation seemingly intended to indicate the property-seizure claim

in the statement of issues corresponds to a section of the District Court’s 2007 opinion

concerning other claims, not Count One, meaning that the portion of the judgment

appealed from is never identified. D&D’s vague efforts are insufficient to place the issue

before us, and we make no decision on the merits of this claim.

B. Count Two: Stigma Plus

The second count of the amended complaint charges various defendants of making

false statements that deprived D&D of its liberty interest in prequalification. The

contractor argues that the District Court erred in dismissing this count against the Board

and not reinstating this count against Epstein.1

1
In a previous order, the District Court granted summary judgment for Epstein on Count
Two.
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 Civil rights claims under 42 U.S.C. § 1983 based on reputational harms are known

as “stigma-plus” claims. See Hill v. Borough of Kutztown, 455 F.3d 225, 236 (3d Cir.

2006). In order to make out such a claim, “a plaintiff must show a stigma to his

reputation plus deprivation of some additional right or interest.” Id. (emphasis in

original). In other words, reputation damage is not actionable unless “it occurs in the

course of or is accompanied by a change or extinguishment of a right or status guaranteed

by state law or the Constitution.” Clark v. Twp. of Falls, 890 F.2d 611, 619 (3d Cir.

1989). While stigma-plus analysis is most common in public employment cases, see, e.g.,

Ersek v. Twp. of Springfield, 102 F.3d 79 (3d Cir. 1996), it can also be used in other

contexts, see Baraka v. McGreevey, 481 F.3d 187, 208-10 (3d Cir. 2007).

To establish stigma, the relevant statements by the defendant must be both made

publicly and false. Hill, 455 F.3d at 236. Here, D&D asserts that the Board and Epstein

falsely claimed it was in default when no formal default proceedings had occurred.

Because of the disagreement among the parties as to whether D&D was actually in

default, the District Court correctly concluded that “there is at least a factual dispute

between the parties” over whether the relevant statements were false. This dispute is

sufficient for D&D to avoid summary judgment on the stigma prong of its stigma-plus

claim.

The second, or “plus,” requirement refers to the additional deprivation needed to

transform a stigmatizing statement into a § 1983 claim. D&D suggests that the loss of its

status as a prequalified contractor satisfies this requirement. The District Court concluded

that prequalification is not an interest protected by due process, a conclusion that is at

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least somewhat in tension with precedent. See Berlanti v. Bodman, 780 F.2d 296, 300 (3d

Cir. 1985) (noting that New Jersey recognizes “a property interest in not being arbitrarily

debarred” from public contracts that triggers “some procedural protection under the due

process clause”).

We need not determine whether a protected interest in prequalification exists

because the connection between the alleged stigma and the loss of prequalification is too

remote for stigma-plus liability against either the Board or Epstein. By D&D’s own

argument, the alleged reputational attacks affected prequalification only indirectly, by

causing the Surety to decline further bonding. Even if those indirect effects were

sufficient, the Surety’s decisions were attributable to other factors, including liens from

D&D’s subcontractors, the size of D&D’s assets, and concerns about D&D’s ability to

handle existing projects.

Moreover, in 2003, the only year D&D applied for and did not receive

prequalification, its application was missing necessary signatures, notarizations,

affidavits, and financial records. It did not respond to requests to cure these deficiencies

and, as a result, the application was deemed withdrawn. D&D has not applied for

prequalification since 2003. The contractor’s own actions in failing to apply properly for

prequalification therefore intervened between the actions of the defendants and

prequalification not being renewed. Such an attenuated connection is too strained to

support a stigma-plus claim. See WMX Techs., Inc. v. Miller, 80 F.3d 1315, 1320 (9th Cir.

1996) (“[T]he ‘stigma-plus’ test requires that the defamation be accompanied by an

injury directly caused by the Government, rather than an injury caused by the act of some

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third party.”). Hence the loss of prequalification here is insufficient to raise a genuine

question of material fact regarding the stigma-plus claim, and the District Court did not

err in granting summary judgment on this count.

C. Counts Three & Four: First Amendment Retaliation

D&D argues the District Court erred in granting summary judgment for the Board

on the contractor’s § 1983 claims of retaliation for exercising its First Amendment rights.

The amended complaint includes two such claims: Count Three charges that the

defendants issued default letters in retaliation for D&D’s response to delays in the project

schedule; Count Four alleges that D&D’s contracts with the Board were terminated in

retaliation for this lawsuit.2

To prevail on a First Amendment retaliation claim under § 1983, “a plaintiff must

prove ‘(1) that he engaged in constitutionally-protected activity; (2) that the government

responded with retaliation; and (3) that the protected activity caused the retaliation.’”

Miller v. Mitchell, 598 F.3d 139, 147 (3d Cir. 2010) (quoting Eichenlaub v. Twp. of

Indiana, 385 F.3d 274, 282 (3d Cir. 2004)). Where the speaker is a government

employee, that person “must show that he or she spoke as a citizen on a matter of public

concern.” Borough of Duryea, Pa., v. Guarnieri, 131 S. Ct. 2488, 2493 (2011) (emphasis

added). This test, “adjusted to weigh the government’s interests as contractor rather than

2
In its appellate brief, D&D alleges the Board suppressed a newspaper article and
retaliated against D&D for “protesting the Board’s unlawful attempt to proceed without
building permits.” Because these arguments were apparently not raised before the District
Court, they are waived and not before us. See United States v. Lockett, 406 F.3d 207, 212
(3d Cir. 2005) (“It is well settled that arguments asserted for the first time on appeal are
deemed to be waived and consequently are not susceptible to review in this Court absent
exceptional circumstances.”).
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as employer,” applies to government contractors like D&D. Board of Cnty. Comm’rs v.

Umbehr, 518 U.S. 668, 673 (1996).

Count Three fails on the first prong because the speech in question was in D&D’s

capacity as a contractor, not a citizen, and therefore not constitutionally protected. D&D

claims it was retaliated against for refusing to “make false statements for public

distribution that the Projects were on schedule” and for actually making “statements that

defendants themselves had caused delays; for D&D’s requests for extensions of time and

other compensation; and for D&D’s attempt to meet with other prime contractors affected

by defendant’s improper actions to form a coordinated attempt to seek scheduling

adjustments and other redresses.” The District Court concluded that this speech was on a

matter of public concern, but was made (or not made) in D&D’s employee capacity and

not protected by the First Amendment. On appeal, D&D does not challenge the

conclusion that the relevant speech was in its capacity as an employee. Because there is

no underlying constitutionally protected speech, it is unnecessary to reach the other steps.

Therefore, the District Court did not err in granting summary judgment for the Board on

Count Three.

Count Four, charging that the Board retaliated against D&D for initiating this

litigation, has not been properly preserved for appeal. As discussed above with regard to

Count One, appellants are deemed to have abandoned a claim on appeal unless, in their

opening brief, they identify that claim in the statement of issues and present arguments in

support of their position on that claim. See Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.

1993) (“[C]asual mention of an issue in a brief is cursory treatment insufficient to

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preserve the issue on appeal.”). Here, D&D requested in its conclusion that this count be

reinstated against the Board but made no arguments regarding retaliation for initiating

litigation anywhere in the brief. Nor, for that matter, did D&D specifically refer to

retaliation for litigation in its statement of the issues. While D&D’s reply brief contains

some specific references to this claim, mention in a reply brief does not remedy the

absence of issues in the initial appellate brief. See Hoxworth v. Blinder, Robinson & Co.,

903 F.2d 186, 204-05 n. 29 (3d Cir. 1990) (“As a general matter, the courts of appeals

will not consider arguments raised on appeal for the first time in a reply brief.”). This

argument is abandoned, and we need not address it here.

D. Count Eight: Breach of Contract

Count Eight of the complaint alleged contractual breaches by the Board. The

District Court granted summary judgment to the Board on the ground that the claim had

been assigned to the Surety. On appeal, D&D argues that the grant of summary judgment

was inappropriate for several reasons, but does not challenge the District Court’s general

reasoning.

First, D&D charges that the District Court improperly ignored relevant state law,

specifically a series of cases under the New Jersey Trust Fund Act (“NJTFA”), N.J. Stat.

Ann. § 2A:44-148. This line of argument is precluded. In granting summary judgment on

Count Seven, the District Court specifically concluded that the NJTFA does not apply in

this case because, under New Jersey law, no trust had been created. Because D&D has

not appealed the District Court’s ruling on Count Seven, res judicata precludes this

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argument. See Laborers’ Int’l Union of N. Am. v. Foster Wheeler Energy Corp., 26 F.3d

375, 396 n. 24 (3d. Cir. 1994).

Second, D&D argues that the District Court’s grant of summary judgment violated

Federal Rule of Civil Procedure 17(a)(3) because it did not allow time for the real party in

interest to “ratify, join, or be substituted into the action.” Fed. R. Civ. P. 17(a)(3).

Because this claim appears not to have been raised at the District Court, it is waived and

not properly before us. See United States v. Lockett, 406 F.3d 207, 212 (3d Cir. 2005).

Third, D&D argues that United States v. Aetna Casualty & Surety Co., 338 U.S.

366 (1949), controls here and requires the conclusion that D&D was entitled to pursue

the breach of contract claim in its own name. Aetna is inapplicable because it concerns an

entirely dissimilar fact pattern. In that case, the Supreme Court held that where an insurer

has only partially paid a claim and is therefore a partial subrogee to the insured, both the

insured and the insurer may bring actions in their own names for the portions of the claim

they respectively hold. See id. at 380-81. Here the District Court concluded that D&D’s

rights were wholly, not partially, assigned to the Surety. D&D has not argued, nor even

clearly suggested, that the ruling was in error for concluding that the contractual rights

were wholly assigned. Aetna and cases following it thus provide no reason to question the

District Court’s conclusion.

Fourth, D&D argues that its confirmed Reorganization Plan foreclosed the District

Court’s conclusion that the Surety is the real party in interest. As the District Court

specifically noted, this argument was raised for the first time in D&D’s motion to alter

judgment, which was interpreted as a motion for reconsideration. Thus, despite the fact

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that the Reorganization Plan was filed in 2004 and the Board first sought summary

judgment because the Surety was the real party in interest in 2006, D&D did not raise this

argument until 2012.

The Reorganization Plan argument is effectively an appeal of the denial of the

motion for reconsideration. This motion can only be granted if the party seeking to alter

the judgment can show “(1) an intervening change in the controlling law; (2) the

availability of new evidence that was not available when the court granted the motion for

summary judgment; or (3) the need to correct a clear error of law or fact or to prevent

manifest injustice.” Max’s Seafood Café ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669,

677 (3d Cir. 1999). As the District Court concluded, there was neither an intervening

change in law nor new evidence, meaning only a “clear error of law or fact” or the

prevention of “manifest injustice” could justify granting the motion. Neither occurred

here. D&D cannot use a motion for reconsideration to avoid the consequences of failing,

without providing any explanation, to raise this argument in the six years this issue has

been under litigation. See United States v. Dupree, 617 F.3d 724, 732 (3d Cir. 2010)

(“Such motions are granted for ‘compelling reasons,’ such as a change in the law which

reveals that an earlier ruling was erroneous, not for addressing arguments that a party

should have raised earlier.” (internal quotation marks omitted) (quoting Solis v. Current

Dev. Corp., 557 F.3d 772, 780 (7th Cir. 2009))).

For all these reasons, the District Court did not err in granting summary judgment

for the defendants on Count Eight, nor did it err in denying the motion for

reconsideration.

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 E. Counts Ten and Eleven: Tortious Interference and Defamation

Epstein cross-appeals on Count Ten, which charged him and other defendants with

tortious interference with D&D’s business, and Count Eleven, which alleged that he and

other defendants defamed D&D. The District Court declined to exercise supplemental

jurisdiction over these state law claims and dismissed them without prejudice as to

Epstein, Bovis, and Vitteta. Epstein contends that the District Court erred in doing so

because both claims are barred by the New Jersey absolute litigation privilege for

attorneys and the Board’s immunity ought to have been extended to him.

“[F]ederal appellate courts have jurisdiction to hear appeals only from ‘final

decisions’ of the district courts. Accordingly, we normally do not entertain appeals from

a district court order denying a motion for summary judgment because such orders do not

put an end to the litigation.” Rivas v. City of Passaic, 365 F.3d 181, 191 (3d Cir. 2004)

(citation omitted). Epstein’s appeal is particularly unusual because these counts have

been dismissed against him and D&D has not appealed their dismissal. He apparently

seeks, through this cross-appeal, to preclude the bringing of these claims against him in

state court through a grant of summary judgment in his favor.

Epstein argues that, because a dismissal without prejudice where the case cannot

be reinstated in federal court is equivalent to a dismissal with prejudice, the decision is

final and denial of summary judgment is reviewable. See Morton Int’l, Inc. v. A.E. Staley

Mfg. Co., 460 F.3d 470, 477 (3d Cir. 2006) (“[A] case dismissed without prejudice that

cannot be reinstituted is in the same position as a case dismissed with prejudice in that

both classes of cases have reached finality.”). This principle, however, is drawn from

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cases assessing the finality of dismissals without prejudice as they relate to the finality of

orders on other issues, not interlocutory orders on the same issue. See, e.g., Tiernan v.

Devoe, 923 F.2d 1024, 1031 (3d Cir. 1991).

While the dismissals without prejudice of Counts Ten and Eleven are final, that

does not render the decision to deny summary judgment directly reviewable. Reviewing

the denial of summary judgment would impermissibly end run the District Court’s

discretionary decision declining supplemental jurisdiction. By statute, a “district court[]

may decline to exercise supplemental jurisdiction over a claim” when it “has dismissed

all claims over which it has original jurisdiction,” precisely as occurred here. 28 U.S.C. §

1367(c). Moreover, by Epstein’s own arguments, deciding these claims would require

determining the effect of New Jersey’s absolute litigation privilege, which shields

attorneys and parties from defamation liability based on statements made in judicial or

quasi-judicial proceedings. See, e.g., Hawkins v. Harris, 661 A.2d 284, 289 (N.J. 1995).

The application of this privilege represents a significant and complex state law question

that suggests an additional reason based on statute to decline supplemental jurisdiction.

See 28 U.S.C. § 1367(c) (“The district courts may decline to exercise supplemental

jurisdiction over a claim under subsection (a) if . . . the claim raises a novel or complex

issue of State law[.]”).We review the decision not to exercise supplemental jurisdiction

only for abuse of discretion. See Elkadrawy v. Vanguard Grp., Inc., 584 F.3d 169, 172

(3d Cir. 2009). The District Court therefore did not abuse its discretion in declining to

exercise supplemental jurisdiction over these claims.

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 * * * * *

In short, the District Court did not err in granting summary judgment on any count

properly before us on appeal, nor did it abuse its discretion in dismissing without

prejudice the remaining state law counts.3 We affirm its judgments.

3
Because they are now moot, we deny Epstein’s motion to supplement the appendix and
D&D’s motion to combine its briefs.
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