Triad Associates, Inc. v. Chicago Housing Authority
| Decision Date | 15 February 1990 |
| Docket Number | Nos. 88-1353,88-2830 and 88-2876,s. 88-1353 |
| Citation | 892 F.2d 583 |
| Parties | , 15 Fed.R.Serv.3d 477, RICO Bus.Disp.Guide 7402 TRIAD ASSOCIATES, INC. d/b/a Guardian Security, J.K. Guardian Security Services, Inc. and K & J Management, Inc., Plaintiffs-Appellants, v. CHICAGO HOUSING AUTHORITY, Renault Robinson, James Thomas, George Cramer, Wilbert Allen, Brenda Gaines and Joseph Gardner, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
John L. Gubbins, Gubbins & Associates, Chicago, Ill., for plaintiffs-appellants.
Thomas E. Johnson (argued), Anthony J. Fusco, Jr., Chicago Housing Authority, Dan K. Webb, Winston & Strawn, Chicago, Ill., for defendants-appellees.
Before BAUER, Chief Judge, WOOD, Jr., and KANNE, Circuit Judges.
In this consolidated appeal, plaintiffs below, Triad Associates, Inc., J.K. Guardian Security Services, Inc., and K & J Management, Inc., ("Triad" collectively), appeal the district court's grant of a motion to dismiss their complaint in favor of defendants ("CHA" collectively). 1 Triad further appeals the district court's subsequent award of attorney's fees and sanctions under Rule 11 and 42 U.S.C. § 1988 with regard to Counts II and IV.
In its complaint, Triad alleged that the CHA had discriminated against Triad on the basis of race and political affiliation. Specifically, the complaint alleged violations of 42 U.S.C. § 1983, based on first, fifth, and fourteenth amendment rights, as well as a § 1985(3) claim and a civil RICO action. In support of these allegations, Triad claimed that the CHA engaged in a "campaign of harassment" designed to deter Triad's political support for opponents of the administration of the late Mayor Harold Washington. Triad further alleged that this "campaign of harassment" was racially motivated. The district court dismissed the complaint in its entirety under Federal Rule of Civil Procedure 12(b)(6).
Subsequently, the CHA motioned the district court to impose Rule 11 sanctions upon plaintiffs and/or to award attorney's fees under 42 U.S.C. § 1988. The CHA argued that Counts I thru IV were frivolous and not objectively warranted by existing law, that Triad failed to conduct a reasonable inquiry into the facts prior to filing suit, and that this litigation was pursued for an improper purpose. The district court ruled that Triad was subject to sanctions under Rule 11 and attorney's fees under § 1988 with respect to Counts II and IV. The CHA's motion with respect to Counts I and III was dismissed.
We affirm in part, reverse in part, and remand for further proceedings.
Triad Associates, Inc., d/b/a Guardian Security, is an Illinois corporation in the business of providing security, investigative and alarm services. J.K. Guardian, also an Illinois corporation, is in the business of providing security services. K & J Management manages and operates both Triad and Guardian. James Malinowski and Kenneth Kotz, the owners of Triad and Guardian, are white males. 2
The Chicago Housing Authority, a municipal corporation, provides housing for low income families within the City of Chicago. The CHA is governed by a seven-member Board of Commissioners appointed by the Mayor of the City of Chicago. At all times relevant to this appeal, Renault Robinson was the Chairman of the Board of Commissioners.
Triad first began providing security services for the CHA in 1982. After his appointment as Chairman of the CHA Board by the late Mayor Harold Washington, Robinson allegedly began a campaign, with the aid of the other named individual defendants, to intimidate, harass, and ultimately drive white employees and contractors from the ranks of the CHA and replace them with black employees and contractors who supported the political aspirations of Robinson and the Washington administration. The manifestation of this "campaign" most germane to the issues presented today is Triad's contention that Robinson enlisted the services of Digby Detective and Security Agency ("Digby") and GEJ Security, both black-owned companies who allegedly supported Robinson and the Washington administration, to replace Triad in its provision of security services for the CHA.
Triad's assertion that the CHA engaged in a "campaign of harassment" to further this politically and racially motivated scheme is based upon the following specific allegations: (1) with only two days notice, the CHA replaced Triad with Digby at the CHA's senior housing operations; (2) the CHA falsely maintained that Victor Vrdolyak (brother of Washington arch-rival Edward Vrdolyak) owned and controlled Triad's business; (3) without requiring the same of black-owned firms, the CHA subjected Triad to extensive audits and inspections in an effort to intimidate and embarrass; (4) in order to allow black-owned companies to qualify for certain CHA security contracts, the defendants blocked the award of a CHA contract to Triad by lowering the bid standards after Triad's bid had been recommended to the Board for approval; (5) the CHA awarded security contracts to black-owned companies although Triad tendered lower bids; (6) the CHA attempted to stop Triad from commencing performance on the contract it had been awarded by requiring the immediate posting of a performance bond, and proof of insurance, and refusing to confirm the contract's start dates while giving the black-owned companies written confirmations of their start dates; (8) the CHA assigned a service contract for the CHA headquarters to Digby even though Digby did not bid on the contract; (9) the CHA refused to make timely payments for services provided; and (10) the CHA reduced the amount of services Triad performed.
In Count I of its seven-count complaint, Triad maintained that the CHA's actions violated their rights of free association and speech as guaranteed by the first and fourteenth amendments and § 1983. In Count II, Triad alleged a violation of their due process rights as guaranteed by the fourteenth amendment and § 1983. In Count III, Triad alleged that the CHA's actions deprived them of the equal protection of the laws under the fourteenth amendment and § 1983. Count IV alleged a conspiracy on the part of the CHA to deprive Triad of rights guaranteed by the Constitution and laws of the United States in violation of § 1985(3). Count V is a civil RICO action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(c) and (d). In Counts VI and VII respectively, Triad alleged tortious interference with contract and breach of contract under Illinois state law. The district court dismissed Counts I thru V with prejudice. Counts VI and VII were dismissed without prejudice.
The standard of review in determining the propriety of the grant of a motion to dismiss is well-established. As we stated in Ed Miniat, Inc. v. Globe Life Insurance Group, Inc., 805 F.2d 732, 733 (7th Cir.1986), cert. denied, 482 U.S. 915, 107 S.Ct. 3188, 96 L.Ed.2d 676 (1987), all well-pleaded facts in the plaintiff's complaint must be taken as true. Moreover, as the Supreme Court admonished in Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974):
When a federal court reviews a sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.
The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits. Thus, a motion to dismiss for a failure to state a claim can be granted only if it appears beyond doubt that the plaintiff could prove no set of facts entitling him to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir.1985), cert. denied, 475 U.S. 1047, 106 S.Ct. 1265, 89 L.Ed.2d 574 (1986).
Counts I-III of Triad's amended complaint pray for relief under the provisions of 42 U.S.C. § 1983. Section 1983, however, does not by itself confer any substantive rights. Rather, it is a remedial provision to be employed only in the event of the deprivation of some right, privilege, or immunity guaranteed by the Constitution or laws of the United States. See 42 U.S.C. § 1983; Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 618, 99 S.Ct. 1905, 1916, 60 L.Ed.2d 508 (1979). Thus, in order to withstand a motion to dismiss, Triad's complaint in Counts I-III must allege facts which, if believed, would show that the CHA was acting under color of state law and that its conduct deprived Triad of a right which was actually protected by the Constitution or laws of the United States. The district court dismissed all § 1983 Counts under this standard. We affirm with regard to Count I. With regard to the due process claim under Count II and the equal protection claim under Count III, however, we reverse and remand.
In Count I of its amended complaint, Triad alleged that the CHA's conduct deprived them of their rights to free association and speech as guaranteed by the first amendment. Relying on this court's decision in LaFalce v. Houston, 712 F.2d 292 (7th Cir.1983), cert. denied, 464 U.S. 1044, 104 S.Ct. 712, 79 L.Ed.2d 175 (1984), and a subsequent decision by the third circuit, Horn v. Kean, 796 F.2d 668 (3d Cir.1986), the district court held that the first amendment does not prohibit a city's use of political criteria in awarding public contracts. 3 As such, the district court found that Triad had failed to state a claim entitling them to relief under § 1983 and dismissed that portion of the complaint.
Triad maintains that the district court's reliance on LaFalce and Horn was in error....
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