Oscar Renda Contracting, Inc. v. City of Lubbock

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit August 31, 2006

Charles R. Fulbruge III
Clerk
No. 05-10836

OSCAR RENDA CONTRACTING, INC.; ET AL

Plaintiffs

OSCAR RENDA CONTRACTING, INC.; JOHN C. BECK

Plaintiffs - Appellants

VERSUS

THE CITY OF LUBBOCK TEXAS; MARC MCDOUGAL, in his official
capacity as Mayor for injunctive relief

Defendants - Appellees

Appeal from the United States District Court
For the Northern District of Texas, Lubbock
5:05-CV-29

Before DAVIS, BARKSDALE, and DeMOSS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Appellant, Oscar Renda Contracting, Inc. (“Renda”) appeals the

district court’s order dismissing its suit for failure to state a

claim. The principal issue in this case is whether the First

Amendment protects a contractor whose bid has been rejected by a

city in retaliation for the contractor’s exercise of freedom of

speech where the contractor had no pre-existing relationship with
that city. Although the Supreme Court expressly reserved this

question in Board of County Commissioners v. Umbehr, 518 U.S. 668,

116 S. Ct. 2342 (1996), the Court’s analysis in that case when read

along with Rutan v. Republican Party of Illinois, 497 U.S. 62, 110

S.Ct. 2729 (1990), persuades us that the absence of a prior

relationship would not preclude the contractor’s claim. We vacate

the order dismissing this case and remand it to the district court

for further proceedings.

I.

Appellant, Renda, is a construction company based in Roanoke,

Texas, and specializes in public works projects. The Appellee,

City of Lubbock (“the City”), is an incorporated municipality in

Texas. The City requested bids for construction of improvements

to its storm drainage system—the “South Lubbock Drainage

Improvements Project.” Renda submitted the lowest bid by more than

$2.2 million. The next lowest bidder was Utility Contractors of

America (“UCA”). Under Texas law, the City is required to award

the contract to the “lowest responsible bidder.”1

After becoming aware that City officials had recommended that

the City award the contract to UCA, Renda requested a meeting with

the City staff officials. During the meeting, the City officials

apparently stated that they knew Renda had previously filed a

lawsuit against the El Paso Water District (“Water District suit”)

1
Tex. Loc. Gov’t Ann. § 252.043(d)(1)(Vernon Supp. 2005).

2
and was awarded damages, and they expressed concern that Renda was

“lawsuit happy.” Renda explained to the City staff officials its

reasons for filing the lawsuit, and Renda left the meeting

believing it had dispelled any concerns the City officials had

regarding the lawsuit. The City officials recommended the

acceptance of Renda’s bid proposal, but only on the condition that

Renda execute an affidavit reaffirming its familiarity with the

conditions and requirements of the construction project and the

applicable contractual provisions. Renda complied with the demand

and signed the affidavit on the same day the City Council voted on

the contract.

Despite the signed affidavit, the Council awarded the contract

to UCA, by a 4-3 vote, claiming that they had reservations

concerning Renda’s business practices. Renda, on the other hand,

alleged that the City’s real reason for denying its bid stemmed

from Renda’s lawsuit against the Water District. Renda alleged in

Paragraph 17 of its petition that it was explained to City

representatives, including the attorneys from the City Attorneys’

Office, that Renda asserted a First Amendment retaliation claim and

a breach of contract claim in the Water District case. Renda also

alleged that it prevailed in this suit.

Renda filed suit in the district court seeking damages and

other relief because the City retaliated against it for exercising

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its First Amendment rights.2 The district court granted the City’s

motion to dismiss the First Amendment retaliation claim because (1)

Renda did not allege that the speech involved a matter of public

concern to the relevant city of Lubbock, Texas; and (2) Renda did

not have a pre-existing commercial relationship with the City. On

appeal, Renda argues that the district court erred in resolving

both issues against it and in dismissing its suit.

II.

A.

We review dismissals under Rule 12(b)(6) de novo. Causey v.

Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir.

2004)(citing Hamilton v. United Healthcare of Louisiana, Inc., 310

F.3d 385, 388 (5th Cir.2002)). “In doing so, we accept as true the

well-pleaded factual allegations in the complaint.” Id. (citing

Hermann Holdings Limited. v. Lucent Technologies Inc., 302 F.3d

552, 557 (5th Cir.2002)). The dismissal should be upheld only if

it appears beyond doubt that the plaintiffs can prove no set of

facts in support of their claim which entitles them to relief. Id.

(quotations and citations omitted). Subsumed within this standard,

is the requirement that the plaintiff’s complaint be stated with

enough clarity to enable a court or an opposing party to determine

whether a claim is sufficiently alleged. Elliot v. Foufas, 867 F.2d

2
Renda asserted other claims which are not before us on appeal.

4
877, 880 (5th Cir. 1989).

B.

Renda argues first that the district court erred in concluding

that it failed to adequately allege that Renda’s speech — the Water

District lawsuit — involved a matter of public concern. To state

a First Amendment retaliation claim, an employee suing his employer

must establish four elements: (1) the employee must suffer an

adverse employment decision; (2) the employee’s speech must involve

a matter of public concern; (3) the employee’s interest in

commenting on matters of public concern must outweigh the

defendant’s interest in promoting efficiency; and (4) the

employee’s speech must have motivated the employer’s adverse

action. Kinney v. Weaver, 367 F.3d 337, 356 (5th Cir. 2004)(en

banc)(emphasis added). The Supreme Court explained in Connick v.

Myers, 461 U.S. 138, 147-48 (1983), that “[w]hether an employee’s

speech addresses a matter of public concern must be determined by

the content, form, and context of a given statement, as revealed by

the whole record.”

As stated earlier, the district court concluded that the

plaintiffs failed to plead that the prior lawsuit against El Paso

Water District involved a matter of public concern because the suit

had nothing to do with a public issue in Lubbock and thus did not

address a matter of public concern to Lubbock — “the relevant

community”.

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 The City relies on the language in a number of Supreme Court

cases and cases from this court requiring proof that the speech is

a matter of concern in the “community.” See, e.g., Connick, 461

U.S. at 146 (1983)(stating that the speech should fairly relate to

a “matter of political, social, or other concern to the

community”); Alexander v. Eeds, 392 F.3d 138, 143 (5th

Cir.2004)(quoting Markos v. City of Atlanta, 364 F.3d 567, 572 (5th

Cir. 2004))(concluding that the speech at issue was not public

speech because “no one could reasonably argue that [the] []

complaints were made against a backdrop of widespread debate in the

community” but were merely matters of private concern)(emphasis

added); Tompkins v. Vickers, 26 F.3d 603, 607 (5th Cir.

1994)(stating that the plaintiff’s speech was made “against a

backdrop of widespread debate in the Greenville community regarding

the art program and other aspects”)(emphasis added).

The City tracks the position taken by the district court and

argues that while allegations in the Water District suit of

wrongdoing by El Paso officials might be a matter of public concern

in El Paso, it would be of little interest to the residents of the

Lubbock community.

We have found no cases expressly discussing whether the speech

at issue must be a matter of public concern in the community where

the retaliation and plaintiff’s damages occur. However, the

district court’s affirmative answer to this question is

6
inconsistent with the result in this circuit’s en banc decision in

Kinney. 367 F.3d 337.

In that case we permitted plaintiffs to assert claims for

First Amendment retaliation even though the location of the

protected activity and the place where the retaliatory activity

occurred were hundreds of miles apart. Kinney, 367 F.3d 337. At

argument, the City agreed that Kinney was dispositive of this

issue.

This conclusion is also more consistent with our reading of

the Supreme Court’s cases that public concern has a broader meaning

than that given by the City. As the Supreme Court in City of San

Diego v. Roe, 543 U.S. 77, 83-4, 125 S.Ct. 521, 525-26 (2004),

stated “[t]hese cases make clear that public concern is something

that is a subject of legitimate news interest.” We conclude,

therefore, that the district court erred in concluding that Renda’s

complaint failed to allege that the Water District lawsuit was a

matter of “public concern in the community” because the protected

activity (the lawsuit) occurred in El Paso rather than Lubbock,

where the retaliation occurred.

C.

The City also argues that Renda’s allegation that its bid was

rejected because it filed a lawsuit against the El Paso Water

District is insufficient to raise an inference that the lawsuit is

a matter of public concern. If the petition alleged only that

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Renda filed a lawsuit we would agree with the City. In this

circuit an employee’s suit against her employer is not considered

per se a matter of public concern. If the lawsuit is only a matter

of personal interest to the employee, it is not considered a matter

of public concern. See Rathjen v. Litchfield, 878 F.2d 836, 842

(5th Cir. 1989)(citing Day v. South Park Indep. Sch. Dist., 768

F.2d 696, 700 (5th Cir. 1985 )).

But Renda alleged in Paragraph 17 that its suit “involved

Renda asserting a First Amendment retaliation claim and a breach of

contract claim.” Renda also alleged that its suit sought to

“redress violations of federally protected rights.” Together,

these allegations are sufficient under a 12(b)(6) standard to put

the City on notice that its El Paso suit involved more than Renda’s

personal interests and implicated matters of public concerns.

We, therefore, conclude that Renda’s petition was sufficient

to put the City on notice that its El Paso suit involved matters of

public concern.

D.

We turn next to Renda’s argument that the district court erred

in concluding that unless a contractor has a prior relationship

with a governmental entity, the contractor cannot state a First

Amendment claim against that entity for rejecting the contractor’s

bid in retaliation for the contractor’s exercise of its right to

free speech.

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 The Supreme Court has held in a governmental employment

context that no prior relationship is required before an employee

is permitted to assert a claim for First Amendment retaliation.

More particularly, the Court in Rutan held that a government

entity’s refusal to hire an employee for engaging in protected

activity supports a claim for First Amendment retaliation. 497 U.S.

at 74 (relying in large part upon Perry v. Sindermann, 408 U.S.

593, 597 (1972), and applying it to the patronage context); see

also Pierce v. Tex. Dep’t of Criminal Justice, 37 F.3d 1146, 1149

(5th Cir. 1994). The Supreme Court has explained that the

protection from political patronage is to “prevent[] the

government, except in the most compelling circumstances, from

wielding its power to interfere with its employees’ freedom to

believe and associate, or to not believe and not associate.” Rutan,

497 U.S. at 76. Similarly, this court has held that the focus of

permitting claims for First Amendment retaliation should be based

upon “the government’s duty not to punish protected speech, not the

citizen’s supposed ‘right’ to government patronage.” Kinney, 367

F.3d at 357.

In Blackburn v. City of Marshall, 42 F.3d 925 (5th Cir. 1995),

this court extended the same First Amendment protection enjoyed by

employees to contractors dealing with a governmental entity.

Blackburn, who was the owner of a wrecker service, brought suit

against the City of Marshall under 42 U.S.C. § 1983, alleging in

9
part that the City retaliated against him for his protected First

Amendment activities by revoking his permission to use the city

radio frequency. This action effectively rendered Blackburn

ineligible to participate in the rotation list for wrecker service.

Id. at 929-30. The district court dismissed Blackburn’s suit for

failure to state a claim, reasoning that Blackburn was not entitled

to assert First Amendment retaliation claims because he was a

contractor and not a public employee. Id. at 930. We reversed the

dismissal, holding that independent contractors enjoy First

Amendment protections against governmental interference with free

speech. Id. at 929.

One year later, in Board of County Commissioners v. Umbehr,

518 U.S. 668 (1996), the Supreme Court of the United States agreed

with this court’s holding in Blackburn. In Umbehr, a trash hauler

lost an existing contract with a county after the contractor

criticized the county commissioners. Id. at 671. Consistent with

this court’s analysis, the Supreme Court rejected the argument that

independent contractors should not be afforded First Amendment

rights along with public employees. Id. at 676. The Court declined

to draw a bright line between employees and contractors granting

First Amendment protection to employees and withholding this

protection from contractors. Instead, the Court applied the

Pickering balancing test where the interests of the government in

regulating speech is balanced against the interest of the

10
contractor to First Amendment protection. So rather than

withholding all First Amendment protection from contractors, the

Court’s approach was to use the familiar Pickering balancing test

to accommodate the differences between employees and contractors

and determine the extent of First Amendment protection that would

be afforded to contractors. The seven-justice majority concluded:

We therefore see no reason to believe that proper
application of the Pickering balancing test cannot
accommodate the differences between employees and
independent contractors. There is ample reason to
believe that such a nuanced approach, which recognizes
the variety of interests that may arise in independent
contractor cases, is superior to a bright-line rule
distinguishing independent contractors from employees.
The bright-line rule proposed by the Board and the
dissent would give the government carte blanche to
terminate independent contractors for exercising First
Amendment rights. And that bright-line rule would leave
First Amendment rights unduly dependent on whether state
law labels a government service provider’s contract as a
contract of employment or a contract for services, a
distinction which is at best a very poor proxy for the
interests at stake.

Id. at 678-79 (citing Political Patronage in Public Contracting, 51

U. Chi. L.Rev. 518, 520 (1984)(“[N]o legally relevant distinction

exists between employees and contractors in terms of either of the

government’s interest in using patronage or of the employee or

contractor’s interest in free speech.”)(other citations omitted)).

Because the underlying lawsuit involved a contractor’s loss of

an existing contract, the Supreme Court reserved for another day

the question of whether an independent contractor with no pre-

existing commercial relationship would be permitted to assert a

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First Amendment retaliation claim. Id. at 686.3

The Third Circuit is the only circuit to address the question

the Supreme Court reserved in Umbehr. See McClintock v.

Eichelberger, 169 F.3d 812, 816-17 (3d Cir. 1999). Ten years

before Blackburn was adopted by the Supreme Court in Umbehr, the

Third Circuit held that independent contractors possess no right to

pursue claims for First Amendment retaliation unless the contractor

is able to prove the existence of a property interest. Horn v.

Kean, 796 F.2d 668, 674 (3d Cir. 1986) (en banc), overruled by

Umbehr, 518 U.S. at 673.

Even though the Supreme Court expressly overturned the

reasoning of Horn in Umbehr, 518 U.S. at 673, a divided panel of

the Third Circuit declined to extend Umbehr’s protections to

independent contractors who possess no pre-existing contractual

relationship with the government. McClintock, 169 F.3d at 816-17.4

3
The same day, the Supreme Court, in a companion opinion,
extended to a corporate independent contractor the right to
protection from political patronage under the First Amendment. See
O’Hare Truck Serv. Inc., v. City of Northlake, 518 U.S. 712 (1996).
4
There is some question as to whether the discussion of the right
of a contractor without a pre-existing relationship with the
government to First Amendment protection is dicta since the court
first stated that the only argument the contractor made was based
on having a prior relationship. See McClintock, 169 F.3d at 817
(stating “[w]e...will not entertain this argument as appellants did
not plead it as the basis for relief in their complaint,” and
“[i]n any event, even if we entertained appellants’ argument that
without regard for their status under Umbehr and O’Hare they are
entitled to relief, we would affirm.”).

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 In dissent, Judge Roth criticized the McClintock majority for

construing the Umbehr Court’s decision not to address First

Amendment retaliation suits by bidders as categorically denying

claims by contractors without a pre-existing commercial

relationship with the government. Id. at 818. Judge Roth reasoned

that the Supreme Court simply did not address the issue because it

was not presented in the case. As Judge Roth pointed out, nothing

in the Supreme Court’s opinion suggested that it would not permit

retaliation claims by those without a pre-existing relationship

with the government entity. Citing Perry and Rutan, Judge Roth

reasoned:

Given these holdings and the reasoning that the Court
employed in reaching them, it is logical to conclude that
all independent contractors fall within the standard set
forth in Umbehr, in O’Hare, and in the government
employee cases. The opposite inference, that this
precedent should be understood to bar suits by
contractors who are applicants for new contracts, is not
logical. Id. at 820.

Judge Roth concluded that the Supreme Court’s holding in Rutan

made the inference “inescapable.” Id. Since 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. See id.

We agree with Judge Roth’s dissent in McClintock. Reading

Umbehr and Rutan together, the Court’s reasoning strongly supports

13
her conclusion that the contractor - like the individual job

applicant - is protected by the First Amendment if its bid is

rejected in retaliation of its exercise of protected speech.

Justice Scalia’s dissent supports this reading of the majority

opinion. Although he strongly disagrees with the majority’s

approach, he holds out no hope that in the next case, the majority

will decline to extend First Amendment protection to the contractor

which has no prior relationship with the government:

The quoted statement in Umbehr, [reserving the question
of whether contractors without a pre-existing
relationship are entitled to First Amendment protection],
invites the bar to believe, therefore, that the Court
which declined to draw the line of First Amendment
liability short of firing from government employment
(Elrod and Branti), short of nonhiring for government
employment (Rutan), short of termination of a government
contract (Umbehr), and short of denial of a government
contract to someone who had a “pre-existing commercial
relationship with the government” (O’Hare) may take a
firm stand against extending the Constitution into every
little thing when it comes to denying a government
contract to someone who had no “pre-existing commercial
relationship.” Not likely; in fact, not even believable.

Umbehr, 518 U.S. 668, 709, 116 S.Ct. 2361, 2373 (Scalia, J.,

dissenting).

For the reasons stated above, the Court’s analysis in Umbehr

leads us to conclude that the Court would not require a contractor

to have a prior relationship with a governmental entity before

being able to assert a First Amendment claim and the district court

erred in dismissing the suit on this ground.

III.

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 For the reasons stated above, we conclude that plaintiff

stated a claim for a First Amendment violation. We do not however

express any opinion on the ultimate outcome of this case. We vacate

the district court’s order dismissing this suit and remand this

case to the district court for further proceedings.

VACATED and REMANDED.

ENDRECORD

15
DeMOSS, Circuit Judge, dissenting:

Because the majority opinion unnecessarily expands

the law in an area in which I believe we have already

strayed too far from the text of the Constitution and

because affirming the district court’s decision would

promote the resolution of Appellant-Renda’s state law

claims in the more appropriate state court forum, I

respectfully dissent.

A.

The portion of the First Amendment of the U.S.

Constitution relevant to this case reads, “Congress shall

make no law . . . abridging the freedom of speech.” U.S.

CONST. amend. I. Although I disagree with the premise that

the Fourteenth Amendment was intended to make the First

Amendment applicable to the States, necessitating the

transformation of the quoted text into “Neither Congress

nor any State or State entity shall make any law

abridging the freedom of speech,” I am forced to

recognize, at a minimum, this judicial interpretation.

What I cannot recognize is the majority’s transformation

of the ten words quoted above into the following passage:

A city council of a city organized under the
 laws of any State shall not deny the award of
any contract for public services that is subject
to competitive bidding to any corporation on the
grounds that such corporation has previously
filed suit against another governmental entity
organized under the laws of the State alleging
that such other governmental entity required the
corporation to take actions contrary to local
state law.

The majority deems this transformation necessary per the

Supreme Court precedent it cites, but I tend to agree

with Justice Scalia that the precedent is questionable,

and I am dismayed that the majority feels the need to

expand upon it. I also have serious doubts about the

majority’s treatment of the term “public concern” in the

free speech context.

First, as mentioned above, the Free Speech Clause

contains but ten words. The power to amend those words

lies with the Congress and the States. U.S. CONST. art. V.

Although I do not here go so far as to accuse the Supreme

Court of usurping the power to amend, I agree with

Justice Scalia that “when a practice not expressly

prohibited by the text of the Bill of Rights bears the

endorsement of a long tradition of open, widespread, and

unchallenged use that dates back to the beginning of the

17
Republic, [the courts] have no proper basis for striking

it down.” Rutan v. Republican Party of Ill., 497 U.S. 62,

95 (1990) (Scalia, J., dissenting).

Second, neither the Supreme Court precedent cited by

the majority nor any other Supreme Court case I have

found has recognized a cause of action accruing in a

corporation that alleges that its right to free speech

has been infringed by a governmental entity. And I see no

reason to continue to expand the law in the free speech

context. Further, as a corporation, Renda (i) is not

eligible to vote in any state or federal election;

(ii) is not eligible to run for or hold any public

office; (iii) is not eligible to be a member of any

political party; (iv) is not eligible in Texas to make

any contribution to any political candidate, and its

ability to contribute funds to support a political party

is severely limited; (v) cannot be an employee of any

governmental entity; and (vi) is not counted as a

“person” in any census, and therefore its existence has

no influence on the composition of state legislative or

congressional districts. While I realize that the Supreme

18
Court has recognized some sort of free speech right in

corporations with respect to the promotion,

advertisement, and sale of their respective products and

services, I do not see any good reason, and the majority

has not provided one, to expand the free speech right of

corporations in this context where even the Supreme Court

has yet to do so.

Third, whatever the controversy between the El Paso

Water District, Renda, and the City of Socorro was, I am

convinced it was not a matter of public concern to the

citizens of Lubbock County, some 450 miles away from El

Paso County. In this vein, I note that Renda’s home

office is in the suburbs of Dallas/Forth Worth in Denton

County, some 300 miles from Lubbock County and in the

opposite direction from El Paso County.

Again, expansion of free speech rights in this case

is inappropriate because we have already lost sight of

the text of the Free Speech Clause; corporations have not

previously been given the same broad free speech

protection as individuals; and the notion of “public

concern” is here stretched beyond recognition.

19
 B.

I also dissent because I am bothered by the effect of

the majority’s decision on the course of the litigation

between Renda and the City of Lubbock. I believe that

affirming rather than reversing Judge Cummings’s decision

would better serve the interest of federalism in

providing the best forum for the resolution of the real

controversy between Renda and the City of Lubbock. It

appears from the pleadings and Judge Cummings’s statement

of the facts that the dollar amount of Renda’s bid was

less than the dollar amount of the winning bid. Under

Texas law, a city contract for a civil engineering

construction project must be awarded to the “lowest

responsible bidder.” TEX. LOCAL GOV’T CODE § 252.043(d)(1).

To me, the real controversy in this case is whether the

City of Lubbock met that obligation; and that issue

should be decided in state court, where the court would

be best able to determine, under Texas law, the scope of

the City’s discretion in determining which bidders

qualify as “responsible” bidders.

For the foregoing reasons, I would affirm the

20
decision of the district court.

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