Ramirez v. Arlequin

• Decision Date: 03 May 2006
• Docket Number: No. 05-1494.,05-1494.
• Citation: 447 F.3d 19
• Court: U.S. Court of Appeals — First Circuit
• Parties: Reinaldo RAMÍREZ; Remexcel Managerial Consultants, Inc.; Maria S. Kortright, Plaintiffs-Appellants, v. Edgardo ARLEQUÍN, Mayor of the Municipality of Guayanilla, in his official and personal capacity; Municipality of Guayanilla, Defendants-Appellees.

Page 19

447 F.3d 19

Reinaldo RAMÍREZ; Remexcel Managerial Consultants, Inc.; Maria S. Kortright, Plaintiffs-Appellants, v. Edgardo ARLEQUÍN, Mayor of the Municipality of Guayanilla, in his official and personal capacity; Municipality of Guayanilla, Defendants-Appellees.

No. 05-1494.

United States Court of Appeals, First Circuit.

Heard November 10, 2005.

Decided May 3, 2006.

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.

Before TORRUELLA, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge^*, and LIPEZ, Circuit Judge.

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. 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 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 termination of their contracts. Applying precedents governing termination of government employment, such as Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976), and Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (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 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, 110 S.Ct. 975, 108 L.Ed.2d 100 (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, 116 S.Ct. 2342, 135 L.Ed.2d 843 (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, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977)); Rosenfeld v. Egy, 346 F.3d 11, 15 (1st 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, 116 S.Ct. 2353, 135 L.Ed.2d 874 (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 relevant to the employee's job. See Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980); Elrod v. Burns, 427 U.S. 347, 367-68, 96 S.Ct. 2673, 49 L.Ed.2d 547 (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...