United States Court of Appeals
For the First Circuit
No. 05-1494
REINALDO RAMÍREZ; REMEXCEL MANAGERIAL CONSULTANTS, INC.;
MARÍA S. KORTRIGHT
Plaintiffs-Appellants,
v.
EDGARDO ARLEQUÍN, Mayor of the Municipality
of Guayanilla, in his official and personal capacity;
MUNICIPALITY OF GUAYANILLA
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]
Before
Torruella, Circuit Judge,
John R. Gibson, Senior Circuit Judge*,
and Lipez, Circuit Judge.
Pedro R. Vázquez, III for appellants.
Jorge Martínez-Luciano and Gina Ismalia Gutiérrez-Galang, with
whom Carlos Del Valle-Cruz was on brief, for appellees.
May 3, 2006
*
Of the United States Court of Appeals for the Eighth Circuit,
sitting by designation.
JOHN R. GIBSON, Circuit Judge. We are called upon to
decide whether a deliberate executive decision by a state actor,
based only on a partisan political change of administration, to
deprive independent contractors of a payment to which they are
legally entitled, violates the contractors' First Amendment rights.
We hold that it does. Accordingly, we reverse the district court's
dismissal of the First Amendment claims of Remexcel Managerial
Consultants, Inc., and Maria S. Kortright arising under 42 U.S.C.
§ 1983. We affirm the district court's dismissal of their due
process claims and of all the claims asserted by Reinaldo Ramírez.
I.
Because this suit was dismissed under Fed. R. Civ. P.
12(b)(6) for failure to state a claim, we review the district
court's decision de novo and take the facts as pleaded in the
complaint, drawing all reasonable inferences in the plaintiffs'
favor. Campagna v. Massachusetts Dep't of Envtl. Prot., 334 F.3d
150, 154 (1st Cir. 2003). The complaint alleges that Ramírez and
his company, Remexcel, entered into a contract with the
Municipality of Guayanilla during the tenure of Mayor Ceferino
Pacheco Guidicelli, who was a member of the New Progressive Party,
or "NPP." The contract called for Remexcel to provide accounting
services that would identify taxpayers who had not paid taxes owed
to the Municipality. Remexcel's compensation was to be ten percent
of taxes successfully collected as a result of its efforts.
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Pursuant to the contract, Remexcel identified deficiencies in the
amount of $4,444,058.87 owed by Stinnes Interoil to the
Municipality for the tax years from 1992 to 1997. Following
administrative proceedings in which Remexcel assisted the
Municipality, the Municipality notified Stinnes of its final
determination that Stinnes owed $4,419,100.28 in taxes and
interest. Stinnes objected and filed a lawsuit in the Puerto Rico
courts, Veba Oil Supply v. Municipality of Guyanilla, Civil No. JCO
96-0003 (Super. Ct. Ponce).
The Municipality was obliged to hire counsel to defend
the lawsuit. It hired Kortright under a contingency contract, which
gave her the right to ten percent of the moneys collected as a
result of her work. She worked on the litigation through the end
of 2000, doing legal research, investigating the facts, and filing
the summary judgment motions on which the suit was ultimately
resolved. However, at the beginning of 2001, a new mayor, Edgardo
Arlequín, took office; Arlequín is a member of the Popular
Democratic Party, or "PDP."
The complaint alleges that Arlequín began "a pattern and
practice of discrimination by taking adverse action against anyone
associated with the prior New Progressive Party administration at
any level." Arlequín "refused to continue any professional
association with the Plaintiffs." Kortright was told to withdraw
as counsel for the Municipality in the Veba Oil case, which she did
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on January 22, 2001. She was replaced with a new lawyer, who did
nothing of record but enter his appearance before the court granted
summary judgment to the Municipality in the amount of $4.5 million,
based on Kortright's work. The new lawyer then settled the suit
for $3 million dollars, of which $1.8 million was paid to the
Municipality and $1.2 million was paid to a different municipality.
The complaint alleges that Arlequín and the Municipality
refused to pay Ramírez, Remexcel, and Kortright moneys which they
had earned and to which they were entitled and that the only reason
for the refusal was their association with the previous mayor. The
complaint alleges causes of action under 42 U.S.C. § 1983 against
the Municipality and against Arlequín, individually and in his
official capacity, for violation of Ramírez's, Remexcel's, and
Kortright's First Amendment right of association and for
deprivation of property without due process of law, as well as a
claim for breach of contract.
Arlequín and the Municipality moved to dismiss the
complaint for failure to state a claim. The district court held
that Ramírez lacked standing to assert a claim because the only
injury was to Remexcel and Ramírez did not have standing to assert
the corporation's claim. Ramírez v. Arlequín, 357 F. Supp. 2d 416,
421 (D.P.R. 2005).
The district court next considered whether Remexcel and
Kortright were entitled to First Amendment protection against the
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termination of their contracts. Applying precedents governing
termination of government employment, such as Elrod v. Burns, 427
U.S. 347 (1976), and Branti v. Finkel, 445 U.S. 507 (1980), the
district court held that as a lawyer, Kortright occupied a
confidential position and so was not entitled to protection from
political firing. Ramírez, 357 F. Supp. 2d at 421-24. The
district court held that Remexcel's contract also involved
policymaking, and so was not entitled to protection from political
discrimination. Id. at 425. The district court stated that
Kortright and Remexcel's claims for moneys earned were merely
contract claims, not claims for political discrimination. Id. at
424-25. The district court dismissed Remexcel's and Kortright's
procedural due process claims on the ground that they had no
property interest in the proceeds of their contracts. Id. at 426-
27. Their substantive due process claims were dismissed because
they alleged neither conduct that shocked the conscience nor
deprivation of the kind of interests "actionable under the
substantive modality of the due process clause." Id. at 427.
Having dismissed the federal claims, the district court then
declined to exercise supplemental jurisdiction over the contract
claim arising under Commonwealth law. Id.
Ramírez, Remexcel, and Kortright appeal the dismissal of
their claims. However, Ramírez does not argue that the district
court erred in holding that he lacked standing; we therefore
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consider him to have waived the argument, and we will consider the
remaining arguments only with regard to Remexcel and Kortright.
II.
Remexcel and Kortright argue that their complaint states
a violation of substantive and procedural due process, as well as
a violation of their First Amendment rights. In Zinermon v. Burch,
494 U.S. 113, 125 (1990), the Supreme Court identified three kinds
of due process claims that can be asserted under § 1983: (1) for
violation of one of the substantive rights found in other
provisions of the Constitution, such as the First Amendment; (2)
for arbitrary, wrongful government actions, regardless of the
fairness of the procedure used; and (3) for deprivation of life,
liberty or property by unfair procedures. Remexcel and Kortright
allege all three kinds of claims.
A.
Under the doctrine of "unconstitutional conditions," the
government may not deny a benefit to a person on a basis that
infringes the person's First Amendment rights. Bd. of Comm'rs v.
Umbehr, 518 U.S. 668, 674 (1996). Under the related doctrine of
"retaliation," the government may not impose burdens on persons in
order to discourage or punish them from exercising protected
constitutional rights. See Powell v. Alexander, 391 F.3d 1, 16-17
(1st Cir. 2004) (citing Mt. Healthy City Sch. Dist. Bd. of Educ. v.
Doyle, 429 U.S. 274 (1977)); Rosenfeld v. Egy, 346 F.3d 11, 15 (1st
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Cir. 2003). Generally, the government may not coerce persons into
supporting a political party or punish them for exercising their
right of association. O'Hare Truck Serv., Inc. v. City of
Northlake, 518 U.S. 712, 721 (1996) ("[T]he government may not
coerce support in this manner, unless it has some justification
beyond dislike of the individual's political association.").
The disputed question in this case is whether Remexcel
and Kortright were entitled to First Amendment protection against
retaliation for their affiliation with the former Mayor and the
NPP. It might be tempting to view this case as just a breach of
contract claim with no constitutional dimension. As discussed
below, Remexcel's and Kortright's Fourteenth Amendment procedural
due process claim fails because state contract remedies provide the
requisite due process. Remexcel's and Kortright's First Amendment
claim, on the other hand, is premised on a constitutionally
proscribed reason for the alleged breach of contract–namely, the
political affiliation of individuals claiming a right to payment
for work already performed. Although we must always be concerned
about constitutionalizing traditional common law claims, we see no
theoretical bar to the First Amendment claim that is alleged here.
In a line of cases brought by government employees who
were fired or penalized because of their political association, the
Supreme Court held that there is no right to protection for
political affiliation where political affiliation is legitimately
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relevant to the employee's job. See Branti v. Finkel, 445 U.S. 507
(1980); Elrod v. Burns, 427 U.S. 347, 367-68 (1976) (plurality).
"[I]f an employee's private political beliefs would interfere with
the discharge of his public duties, his First Amendment rights may
be required to yield to the State's vital interest in maintaining
governmental effectiveness and efficiency." Branti, 445 U.S. at
517. In Elrod, Justice Stewart's concurring opinion identified the
kind of jobs that were protected from political discrimination as
"nonpolicymaking, nonconfidential" government jobs. 427 U.S. at
375. Branti clarified that the policymaking or confidential
criteria are merely signposts for the real question of whether the
government has a legitimate interest in using political persuasion
in hiring and firing:
[T]he ultimate inquiry is not whether the label
"policymaker" or "confidential" fits a particular
position; rather, the question is whether the hiring
authority can demonstrate that party affiliation is an
appropriate requirement for the effective performance of
the public office involved.
445 U.S. at 518.
The district court concluded that Remexcel and Kortright
performed policymaking or confidential duties under their contracts
with the Municipality, and that they were therefore not entitled to
First Amendment protection against discrimination based on their
political affiliation. Ramírez, 357 F. Supp. 2d at 421-25. We must
decide whether the exemption of "policymakers" from protection
against political affiliation discrimination applies outside the
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government employment context to someone who is neither a
government employee nor seeks a continuing relationship with the
government, but who merely asks to be paid in accordance with a
contract which that person has already performed.
This circuit has held that the government's policymaking
interest could override the First Amendment protection against
political discrimination, even where the plaintiff was not a
government employee. In Prisma Zona Exploratoria de Puerto Rico,
Inc. v. Calderón, 310 F.3d 1 (1st Cir. 2002), Prisma Zona had
negotiated an agreement with two public corporations created by
Puerto Rico for Prisma Zona to operate a children's museum;
however, Prisma Zona had failed to obtain a final commitment from
the corporations before an election brought in a new
administration, allegedly hostile to Prisma Zona because of its
political affiliation. The new administration refused to transfer
the museum funds to Prisma Zona. Prisma Zona brought a § 1983 suit
alleging that the governor and others refused to transfer the
assets to Prisma Zona because of its political affiliation and that
this discrimination violated its First Amendment rights. Id. at 4.
This court said the "legal landscape" for the claim was the Elrod
line of cases. Id. at 4-5. Prisma Zona contended that the
government could not decide against transferring the funds based on
Prisma Zona's political affiliation, but we held it could, based on
analogy to the government's right to fire policymakers for having
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the wrong political affiliation:
Even in core cases involving politically motivated
hirings and firings, the Supreme Court has itself
recognized that a wholly antiseptic application of the
Elrod principle is unrealistic. Instead, party
affiliation is an appropriate consideration in hiring and
firing decisions with respect to government positions
that may be characterized as "policymaking" or
"confidential."
Here, Prisma seeks to attack a set of decisions
related to the possible privatization (whether to do so
and through whom) of the operation of a children's museum
and directing to it millions of dollars of public monies.
Where policy choices of this magnitude are presented,
courts ought not be second-guessing how much party
politics in the narrower sense may also have played a
role.
Id. at 7 (emphasis in original; citations omitted); accord Walker
v. City of Lakewood, 272 F.3d 1114, 1132 (9th Cir. 2001). Thus, in
Prisma Zona we applied the policymaking exemption from First
Amendment protection outside the government employment setting.
Even though the policymaking exemption can apply to non-
employees, there remains an important distinction between Kortright
and Remexcel, on the one hand, and Prisma Zona and the fired
government employees, on the other. Prisma Zona and the fired
employees sought a continuing relationship with the government that
would hamstring the government's ability to change policy
directions, while Remexcel and Kortright seek only payment for
services already rendered. While the government has a legitimate
interest in having employees who possess all the attributes
necessary for their jobs, even, where appropriate, political
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attributes, here the government is not being asked to keep
unqualified employees or contractors. Kortright and Remexcel were
hired by a previous administration that considered them qualified,
and they did their work for that administration; now, only the
government's obligation of payment remains.
We suggested twice in Prisma Zona that the result might
have been different if Prisma Zona had obtained a binding contract
to operate the museum. First, we said that the lack of a binding
contract weakened Prisma Zona's claim for protection from political
discrimination: "Although a binding contract is not necessarily a
condition of First Amendment protection, it would give Prisma Zona
a much firmer basis in Supreme Court precedent to argue that it was
protected from a politically motivated refusal to deal, quite apart
from its use as an independent basis for relief under local law."
Id. at 5. Later, we restricted our holding recognizing the
government's policymaking interest to cases where the plaintiff had
no binding contract: "Policymakers can be replaced, despite
reliance, absent legal tenure or contract." Id. at 8. Once the
government has entered a binding contract, its legitimate interest
in preserving its freedom to disavow the contract is accordingly
diminished.
Here, Kortright and Remexcel have alleged a binding
contract, under which they have performed their part. Given the
procedural posture of a Rule 12(b)(6) motion, we need not decide
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whether the Municipality in fact has some legitimate policy-making
interest that should eventually be taken into account in deciding
whether it could refuse to pay debts on political grounds. We need
only decide whether such an interest appears on the face of the
complaint. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957) ("[A]
complaint should not be dismissed for failure to state a claim
unless it appears beyond doubt that the plaintiff can prove no set
of facts in support of his claim which would entitle him to
relief."); Educadores Puertorriqueños en Accíon v. Hernández, 367
F.3d 61, 66 (1st Cir. 2004). No legitimate governmental interest
does so appear.
Since no governmental interest justifying discrimination
on the basis of political affiliation is stated in the complaint,
the case appears to be a routine First Amendment retaliation case.
Remexcel and Kortright must plead that they engaged in protected
association, that they were entitled to payment under their
contracts, and that the Municipality denied the payment in
retaliation for their exercise of associational rights. See Baker
v. Coxe, 230 F.3d 470, 475 (1st Cir. 2000). These elements are
adequately pleaded in the complaint. We therefore must reverse the
dismissal of the First Amendment retaliation claim.
B.
Remexcel and Kortright also contend that they have stated
a § 1983 claim for breach of their right to procedural due process
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by virtue of the Municipality's failure to pay them amounts owing
under their contracts. A claim of breach of contract by a state
actor without "any indication or allegation that the state would
refuse to remedy the plaintiffs' grievance should they demonstrate
a breach of contract under state law," Casey v. Depetrillo, 697
F.2d 22, 23 (1st Cir. 1983) (per curiam), does not state a claim
for violation of the plaintiffs' right of procedural due process.
In Lujan v. G&G Fire Sprinklers,Inc., 532 U.S. 189, 196-98 (2001),
the Supreme Court held that a claim for breach, under color of
state law, of a contract to pay money would not support a due
process claim unless state contract remedies were closed to the
plaintiff. Kortright and Remexcel do not allege that there is no
complete and adequate remedy available under state law for the
breach of contract. The district court correctly dismissed their
procedural due process claims.
C.
Kortright and Remexcel also invoke the doctrine of
substantive due process in connection with the Municipality's
political discrimination against them. Their substantive due
process claim is coextensive with their First Amendment claim.
Where the plaintiffs have stated a viable First Amendment claim for
the very same conduct, we have declined to "enter the uncharted
thicket of substantive due process to find an avenue for relief."
Nestor Colón-Medina & Sucesores, Inc. v. Custodio, 964 F.2d 32, 46
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(1st Cir. 1992); accord Rosenfeld v. Egy, 346 F.3d 11, 15 (1st Cir.
2003) (same when equal protection claim duplicates First Amendment
claim). Accordingly, we decline to reverse on substantive due
process grounds.
We REVERSE the district court's dismissal of Remexcel's
and Kortright's First Amendment retaliation claims and AFFIRM its
dismissal of Ramírez's claims and of Remexcel's and Kortright's
procedural and substantive due process claims. Each party is to
bear their own costs on appeal.
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