Bannum, Inc. v. Town of Ashland, 90-1411

• Decision Date: 18 December 1990
• Docket Number: No. 90-1411,90-1411
• Citation: 922 F.2d 197
• Parties: BANNUM, INCORPORATED, Plaintiff-Appellant, v. TOWN OF ASHLAND, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 197

922 F.2d 197

BANNUM, INCORPORATED, Plaintiff-Appellant, v. TOWN OF ASHLAND, Defendant-Appellee.

No. 90-1411.

United States Court of Appeals, Fourth Circuit.

Argued Oct. 3, 1990.

Decided Dec. 18, 1990.

Joseph William Kaestner, Kaestner, Galanides and Spieth, Richmond, Va., for plaintiff-appellant.

Larry Ellis Gilman, Johnson, Gilman & Stacey, Ashland, Va., for defendant-appellee.

Before CHAPMAN and NIEMEYER, Circuit Judges, and BUTZNER, Senior Circuit Judge.

NIEMEYER, Circuit Judge:

Bannum, Inc., a business which operates half-way houses throughout the country under contracts with the United States Bureau of Prisons, had been advised by the Bureau of Prisons that it would receive a contract to operate a half-way house in the Town of Ashland, Virginia. The Bureau of Prisons, however, notified Bannum that it would not finalize the contract for operation of the Ashland facility because the Town of Ashland had withdrawn its requisite approval to have the facility there. Having lost the approval of Ashland and therefore the anticipated contract with the Bureau of Prisons, Bannum sued the Town of Ashland under 42 U.S.C. Sec. 1983, contending that Ashland deprived Bannum of property and liberty interests without due process in violation of the Fourteenth Amendment and impaired its contractual rights in violation of Art. 1, Sec. 10, cl. 1 of the United States Constitution. On review of the district court's dismissal of the complaint, we affirm.

I.

In 1989, Bannum submitted a proposal to the Bureau of Prisons to operate a community correctional center, or half-way house, at the Kings Budget Inn in Ashland, Virginia. It intended to rent apartments on a daily basis from Kings Budget Inn as needed. After Ashland gave its approval, which was required by the Bureau of Prisons before it awarded a contract, the Bureau of Prisons notified Bannum by letter dated May 10, 1989, that Bannum's proposal had been "selected" subject to administrative reviews and approvals which were unrelated to the approval given by Ashland. The letter stated further:

This notification does not constitute award of a contract.

The contract shall be effective from the date of award, which is projected for July 1, 1989, with the base year running until December 31, 1989, and each option year beginning January 1. The exercise of the option year is a unilateral right of the Government in accordance with the terms of this contract. Your firm must be ready to begin performance on the date of award.

(J.A. 11.)

Pending finalization of the contract, the Bureau of Prisons issued 30-day purchase orders to Bannum to fund operation of the half-way house and Bannum began housing inmates at the Kings Budget Inn. During this interim period, three of the inmates were arrested on three separate occasions for unrelated offenses. Ashland officials began to express concern for the "safety and welfare of the citizens of Ashland" and the Town Council decided to request that the Bureau of Prisons either discontinue the program or tighten its control over the inmates and select "white-collar" inmates. The town wrote to the Bureau of Prisons:

[T]he Council is hereby requesting the Bureau of Prisons terminate this operation within Ashland as soon as possible.

Failing that, we would ask that the level of supervision of residents be improved immediately, that no long-term contract be entered into for the operation of this program without review by Town Council, that any violations of law or rules of conduct be reported to the Ashland Police Department within twenty-four hours and the Police Department continue to receive information pertaining to the operation as needed.

(J.A. 21.)

In response to the concerns of Ashland, the Bureau of Prisons informed Bannum that it would not proceed with its plans to fund a facility at the Kings Budget Inn in Ashland, but it stated that Bannum could submit proposals for alternative sites. Bannum immediately filed suit in the district court to obtain a temporary restraining order. The district court denied the restraining order and dismissed the action. This appeal followed.

II.

Bannum contends that it had a property interest in the executory agreement with the Bureau of Prisons which was protected by the Fourteenth Amendment because all that stood in the way of finalization of the contract was governmental "red tape" unrelated to the continued approval of Ashland. According to Bannum, "the BOP [Bureau of Prisons] evidenced its intention to make the contract final by permitting Bannum to establish the Community Correctional Center [half-way house] and take on residents. Bannum had commenced performance of the contract and this action was ratified by the BOP when the BOP accepted and paid Bannum for these services." Brief of Appellant at 8.

Undoubtedly, Ashland's withdrawal of approval led to the Bureau of Prisons' change of position and, for purposes of this discussion, it can be assumed that the change injured Bannum's business. Before Bannum may seek the protection of the Fourteenth Amendment, however, it must show that Ashland deprived it of a property or liberty interest.

The Fourteenth Amendment does not grant property interests; rather, it protects those interests, derived from an independent source, from deprivation by the state without due process. The nature and extent of a property interest is determined by "existing rules or understandings that stem from an independent source such as state law." Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). It is well settled that property interests which are protected extend beyond ownership of tangible property and include those interests that "a person has already acquired in specific benefits." Id. at 576, 92 S.Ct. at 2708. As the Court in Roth noted:

To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it.

Id. at 577, 92 S.Ct. at 2709. Thus, in determining whether Bannum had a property interest of which it was deprived by the Town of Ashland, we must focus on whether Bannum could legitimately claim an entitlement in the continuation of the approval for a half-way house that had been given by Ashland.

Ashland sent Bannum a letter dated April 5, 1989, which provided:

The Town of Ashland will allow the U.S. Bureau of Prisons to operate a Transitional Center under contract to Bannum Enterprises, Inc. at Kings Budget Inn, 101 South Carter Road within the Town of Ashland.

Please advise if further information is desired.

(J.A. 10.)

This approval was given pursuant to an informal request without the payment of a fee. No underlying ordinance, rule or procedure applied to the application for or the grant of the approval, and no other term or condition attached by operation of law or by understanding. The approval was a simple statement, "we approve," without more. Moreover, nothing in the record suggests that Ashland could not have unilaterally withdrawn the approval at any time. Certainly, mere reliance on the approval did not elevate Bannum's interest in it to an entitlement.

Therefore, when Ashland withdrew its approval of the location at the Kings Budget Inn for use as a half-way house, it breached no law or understanding between the parties. Bannum, no doubt, did not expect the withdrawal and planned for a longer term, but it could not, by any principle of property law, contract law or other independent source, enforce a longer term.

Bannum's claim to a loss of entitlement becomes more attenuated by the fact that it never consummated a contract with the Bureau of Prisons. Although the Bureau of Prisons had expressed its intent to enter into a formal contract with Bannum, and even had issued 30-day purchase orders to Bannum to finance operations in the interim, Bannum has conceded that no contract was signed because the administrative approval process had not yet been completed. The Bureau of Prisons could have refused to proceed with the contract for some unforeseen administrative reason at any time prior to finalization of the agreement.

In short, while Bannum may have identified a well-founded expectancy which was frustrated by Ashland's actions, this expectancy does not rise to the level of a property interest protected by the Fourteenth Amendment.

III.

Bannum also contends that Ashland deprived it of a liberty interest without due process because Ashland denied Bannum a de facto license. Bannum argues that Ashland's approval of a half-way house was a condition to Bannum's ability to contract with the Bureau of Prisons and thereby take advantage of a business and employment opportunity. Ashland's power to withhold its approval, therefore, is equivalent to a power to withhold a business opportunity and amounts to a de facto licensing power. Accordingly, Bannum argues, "[s]ince the right to hold specific employment forms a constitutionally protected liberty interest, and since this de facto license to operate...