Coleman & Williams v. Wis. Dept. of Workforce Dev.

• Decision Date: 17 November 2005
• Docket Number: No. 05-C-0466.,05-C-0466.
• Citation: 401 F.Supp.2d 938
• Parties: COLEMAN & WILLIAMS, LTD., Plaintiff, v. State of WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT and Roberta Gassman, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

Page 938

401 F.Supp.2d 938

COLEMAN & WILLIAMS, LTD., Plaintiff, v. State of WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT and Roberta Gassman, Defendants.

No. 05-C-0466.

United States District Court, E.D. Wisconsin.

November 17, 2005.

COPYRIGHT MATERIAL OMITTED

Patrick J. Knight, Kathryn A. Keppel, Gimbel Reilly Guerin & Brown, Milwaukee, WI, for Plaintiff.

Diane L. Milligan, William H. Ramsey, Wisconsin Department of Justice, Office of the Attorney General, Madison, WI, for Defendants.

DECISION AND ORDER

ADELMAN, District Judge.

Plaintiff Coleman & Williams, Ltd., an African-American owned accounting firm, brought this action in state court against the Wisconsin Department of Workforce Development ("DWD"), a state agency, and its Secretary, Roberta Gassman ("Gassman"). Plaintiff alleges that defendants violated 42 U.S.C. §§ 1981 and 1983 when Gassman made defamatory statements about its performance as the auditor of the Opportunities Industrialization Center of Greater Milwaukee ("OIC"), an entity providing services to Milwaukee's African-American community, and defendants removed it as OIC's auditor and from DWD's list of approved providers of accounting and auditing services. Plaintiff seeks injunctive relief and damages. Defendants timely removed the case and now move to dismiss the complaint for failure to state a claim. Plaintiff moves to amend the complaint to add a state law defamation claim.

I. BACKGROUND AND ALLEGATIONS

Pursuant to a contract with DWD, OIC administered the Wisconsin Works ("W-2") program in Milwaukee. (Bernstein Aff. Ex. 1.)¹ For certain purposes, OIC was a division of DWD and required to use an accountant/auditor approved by DWD. Prior to 2004, plaintiff was approved by DWD as a provider of accounting and auditing services and provided such services to OIC. (Id. Ex. 2.)² Around 2004, OIC became the subject of a federal investigation involving mismanagement and corruption. The investigation led to the criminal convictions of OIC's chief operating officer, Carl Gee, counsel, Mark Sostarich, and a state senator, Gary George, who was closely associated with OIC.³

In 2004, DWD removed plaintiff as OIC's auditor. On February 10, 2005, the Milwaukee Journal-Sentinel quoted Gassman as stating that plaintiff "gave a false picture" of OIC's finances. (Compl.¶ 6.) On February 13, 2005, the same paper quoted Gassman as stating that plaintiff "provided extremely inaccurate information" about OIC's finances and that if it had done a better job of auditing, OIC "would have had information that would have allowed them to correct and address problems." (Compl. ¶ ¶ 7 & 8.) On February 14, 2005, DWD informed plaintiff that as a result of its performance as OIC's auditor, DWD had removed it from its list of approved providers of accounting and auditing services. On February 22, 2005, the State of Wisconsin Investment Board notified plaintiff that based on the newspaper articles it was re-evaluating its use of plaintiff's services. On March 2, 2005, Gassman advised the state legislature that DWD had relied on plaintiff's annual audits of OIC that regularly gave it a clean bill of health.

Plaintiff alleges that Gassman's statements about it were false and that her statements and its removal as OIC's auditor and from DWD's list of approved providers of accounting and auditing services were racially motivated.

II. MOTION TO DISMISS

A. Legal Standard

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted. Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir.1997). I may grant a Rule 12(b)(6) motion only if it is clear that the plaintiff can prove no set of facts in support of its claims that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The essence of a Rule 12(b)(6) motion is not that the plaintiff has pleaded insufficient facts; it is that even assuming all of the facts alleged are accurate, the plaintiff has no legal claim. Payton v. Rush-Presbyterian-St. Luke's Med. Ctr., 184 F.3d 623, 627 (7th Cir.1999). In ruling on such a motion, I assume that all of the facts alleged in the complaint are true, and I draw all reasonable inferences from those facts in the light most favorable to the plaintiff. Bethlehem Steel Corp. v. Bush, 918 F.2d 1323, 1326 (7th Cir.1990).

B. Claims Against DWD

Section 1983 authorizes civil rights plaintiffs to recover against certain "persons." However, a state is not a "person" under the statute, and a suit against a state agency is treated as a suit against the state. Will v. Mich. Dept. of State Police, 491 U.S. 58, 70, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989). Thus, I must dismiss plaintiff's § 1983 claim against DWD.

In addition, the Eleventh Amendment bars suits against states unless the state has waived its immunity or Congress has abrogated such immunity. Id. at 66, 109 S.Ct. 2304. For purposes of the Eleventh Amendment, a suit against a state agency is treated as a suit against the state. Alabama v. Pugh, 438 U.S. 781, 782, 98 S.Ct. 3057, 57 L.Ed.2d 1114 (1978). With respect to plaintiff's § 1981 claim, plaintiff does not argue that DWD has waived its Eleventh Amendment immunity. Further, in order to abrogate state immunity, Congress must have demonstrated an unequivocal intent to do so either in the language of a statute or in legislative history. Quern v. Jordan, 440 U.S. 332, 345, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). Although there is some indication that Congress intended § 1981 to apply to state conduct, see Daisernia v. New York, 582 F.Supp. 792, 801-02 (N.D.N.Y.1984), the Seventh Circuit has held that § 1981 claims against states are barred by the Eleventh Amendment, Rucker v. Higher Educ. Aids Bd., 669 F.2d 1179, 1184 (7th Cir.1982). Thus, I must also dismiss plaintiff's § 1981 claim against DWD.

C. Claims Against Gassman

1. Official and Personal Capacity Claims

In its complaint, plaintiff avers that it sues Gassman in her official and personal capacities. A suit against a state official in her official capacity is a suit against the state and barred by the Eleventh Amendment. Kentucky v. Graham, 473 U.S. 159, 169, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985). Similarly, a state official acting in an official capacity is not a "person" within § 1983. However, a suit against a state official in her official capacity that seeks prospective relief is not treated as an action against the state, and a state official named in such a suit is a "person" under § 1983. Will, 491 U.S. at 71 n. 10, 109 S.Ct. 2304. Thus, plaintiff's official capacity claims against Gassman are barred except to the extent that they seek prospective relief.

Personal capacity claims seek to impose personal liability upon a government official for actions taken under color of state law. Graham, 473 U.S. at 165, 105 S.Ct. 3099. Such claims do not implicate the Eleventh Amendment. Moreover, Gassman, in her personal capacity, is a "person" within § 1983. Thus, neither the Eleventh Amendment nor the requirement that a § 1983 action be directed at a person bars plaintiff's personal capacity claims against Gassman.

2. Section 1983 Claim

In order to prove a violation of § 1983, plaintiff must establish that Gassman deprived it of a federal constitutional right while acting under color of state law. Bublitz v. Cottey, 327 F.3d 485, 488 (7th Cir.2003). The Fourteenth Amendment provides that "[n]o state shall ... deprive any person of life, liberty or property, without due process of law." U.S. Const. amend. 14 § 1. Plaintiff alleges that while acting under color of state law, Gassman deprived it of liberty without affording it due process. The type of claim that plaintiff seeks to assert is sometimes known as a "stigma-plus" claim. In order to state such a claim, plaintiff must allege that a state official made a stigmatizing statement about it and, incidental to such statement, altered its status in a tangible way or deprived it of a right that the state previously recognized. See Paul v. Davis, 424 U.S. 693, 701, 711-12, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976); see also Siegert v. Gilley, 500 U.S. 226, 234, 111 S.Ct. 1789, 114 L.Ed.2d 277 (1991); Doyle v. Camelot Care Ctrs., Inc., 305 F.3d 603, 617 (7th Cir.2002). Plaintiff alleges that Gassman made defamatory statements about it and incidental thereto removed it from DWD's list of approved providers without granting it a hearing.

Before determining whether plaintiff states a stigma-plus claim, I must consider whether, as a corporation, it may assert such a claim. The Supreme Court has held that corporations are protected by some constitutional provisions but not others. For example, corporations have a constitutional right of access to the federal courts, are protected by the First Amendment's guarantee of a free press, and are entitled to freedom from unreasonable search and seizures, equal protection under the Fourteenth Amendment, and protection against double jeopardy. On the other hand, corporations are not citizens within the meaning of the privileges and immunities clause and are not protected by the privilege against self-incrimination. Lawrence Shire, Recent Decision — Government Contracts — Nonresponsibility Determinations — the Federal Government Violates a Contractor's Due Process Liberty Interest by Failing to Provide Prior Notice and an Opportunity to Rebut Charges Contained in Nonresponsibility Determinations Based on Lack of Integrity — Old Dominion Dairy Products, Inc. v. Secretary of Defense, 631 F.2d 953 (D.C.Cir.1980), 50 Geo. Wash. L.Rev. 90, 96 (1981). Moreover, the Court's decisions concerning the constitutional rights of corporations lack a unifying rationale. Id. at 105; see also Carl J. Mayer, Personalizing the Impersonal: Corporations & the Bill of Rights, 41 Hastings L.J. 577, 579 (1990) (arguing that the Supreme Court lacks a theory of the corporation...