Mother Goose Nursery Schools, Inc. v. Sendak

• Decision Date: 29 June 1984
• Docket Number: Civ. No. H 78-449.
• Parties: MOTHER GOOSE NURSERY SCHOOLS, INC., an Indiana Not-for-Profit Corporation, Plaintiff, v. Theodore L. SENDAK, Individually and as Attorney General of the State of Indiana, Defendant.
• Court: U.S. District Court — Northern District of Indiana

591 F. Supp. 897

MOTHER GOOSE NURSERY SCHOOLS, INC., an Indiana Not-for-Profit Corporation, Plaintiff, v. Theodore L. SENDAK, Individually and as Attorney General of the State of Indiana, Defendant.

Civ. No. H 78-449.

United States District Court, N.D. Indiana, Hammond Division.

June 29, 1984.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John Kappos and Hawk P.C. Kautz, Kappos & Kautz, Merrillville, Ind., for plaintiff.

George B. Huff, Jr., Deputy Atty. Gen., Indianapolis, Ind., Gilbert F. Blackmun, Friedrich, Bomberger, Tweedle & Blackmun, Highland, Ind., for defendant.

MEMORANDUM JUDGMENT AND ORDER

LEE, District Judge.

"Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case." Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). The matter before the court is one such controversy which has raged over a deprivation of a property right allegedly in violation of the Due Process Clause of the Fourteenth Amendment.

In the context of cross-motions for summary judgment, the Honorable Phil M. McNagny, Jr., then a judge of this court, determined the issue of liability in this case in favor of the plaintiff and against the defendant in an order dated December 16, 1980. Mother Goose Nursery Schools, Inc. v. Sendak, 502 F.Supp. 1319 (N.D.Ind. 1980). At the conclusion of the order, Judge McNagny noted that the court had heard no evidence on damages and therefore ordered the parties to submit briefs on the issue and further indicated that, upon full briefing, the matter would be set for a hearing on the issue of damages. The parties duly filed the requested briefs, but Judge McNagny's illness prevented the court from setting the promised hearing and precluded the court from assessing damages at the anticipated time.

A damage hearing was eventually held by the undersigned. At the conclusion of the hearing this court ordered the parties to submit post-hearing briefs. These briefs have been received and accordingly the court is in a position to determine the amount of damages to be awarded to plaintiff in this action. Prior to the assessment of damages, however, the court will address certain arguments relating to liability raised again by the defendant, through his brief and argument, in the damage phase of this case. The court further feels compelled to raise, sua sponte, an issue only touched upon, if at all, in Judge McNagny's order, which has received much attention recently. That issue relates to whether or not a deprivation within the meaning of the Due Process Clause of the Fourteenth Amendment occurred so that the complaint states a justiciable cause of action under 42 U.S.C. § 1983.

I

Because it has a bearing upon the ultimate disposition of this case, a review of the background underlying this controversy is necessary.

The plaintiff, Mother Goose Nursery Schools (hereinafter Mother Goose), is a not-for-profit organization¹ incorporated in the State of Indiana and has been licensed as a day care nursery from 1954 to the present. The defendant, Theodore L. Sendak, is the former Attorney General of the State of Indiana.

A dispute arose between these parties in September of 1978 when Sendak, then the Attorney General of Indiana, refused to approve as to "form and legality" a contract between plaintiff and the Indiana State Department of Public Welfare. Such refusal, Judge McNagny ruled, violated plaintiff's constitutional rights and consequently rendered defendant liable under 42 U.S.C. § 1983.²

The events leading to the ruling by this court were based upon the following scenario. Beginning in November of 1975, Mother Goose entered into three yearly contracts³ with the Indiana Department of Public Welfare for the provision of day care services and transportation to children of families participating in the Aid to Families with Dependent Children (AFDC) program. (Title XX). The last of these contracts expired on June 30, 1978. At that time another proposed contract between plaintiff and the Indiana State Department of Public Welfare for the period from July 1, 1978 to June 30, 1979 was submitted to defendant for his approval. Under Indiana law, all contracts entered into by public agencies such as the State Department of Public Welfare must be approved by the Attorney General "as to form and legality." Ind.Code § 4-13-2-14.⁴ Defendant did not take any action on this matter until September 26, 1978 when he wrote a letter to the Governor of Indiana stating that he refused to approve the subject contract because Mr. Anthony Cifaldi, President and Director of Mother Goose, was twice convicted of making false statements on his income tax returns.⁵

On October 1, 1978, after receipt of a letter from the Administrator of the Indiana Department of Public Welfare requesting that he resign from his position with Mother Goose, Cifaldi tendered his resignation. The Board of Directors of plaintiff corporation advised the Administrator that they had accepted Cifaldi's resignation. In spite of this information, the contract was never approved, nor was plaintiff informed of any reason for this refusal after Cifaldi's resignation.

On November 21, 1978, plaintiff filed its complaint in this court. In the order dated December 16, 1980, Judge McNagny found defendant's refusal of the subject contract to be outside of the scope of his authority and contrary to law. Judge McNagny was further of the view that this unlawful act deprived plaintiff of its constitutional right to contract and that defendant's failure to hold a hearing and give plaintiff an opportunity to confront the charges violated plaintiff's constitutional right to procedural due process. The court found that, because defendant was acting outside the law,⁶ he was not entitled to immunity and therefore, damages would be a proper remedy under 42 U.S.C. § 1983.

II

Before discussing the arguments about liability raised by the defendant in his post-hearing brief the court will address, sua sponte, the United States Supreme Court decision in Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981). At least two reasons exist for analyzing Parratt. First, that undeniably was a landmark decision addressing the process due for a deprivation of a property right under the Fourteenth Amendment within the context of a section 1983 action. Since Judge McNagny ruled that plaintiff was deprived of a property interest without being afforded due process, and since Judge McNagny did not have the benefit of Parratt, a review of that case and its rapidly escalating progeny seems appropriate. Second, because of the Parratt decision, some doubt was cast upon the continued validity of Judge McNagny's ruling by the United States Court of Appeals for the Seventh Circuit decision in Flower Cab Co. v. Petitte, 685 F.2d 192 (7th Cir.1982). There, Judge Posner, on a petition for rehearing, wrote:

When the motion to stay the preliminary injunction was filed with this court, the appellees, in opposing the motion, did not cite a single case in support of their position. In their motion to vacate they have overcorrected this omission by citing a large number of cases. One, Mother Goose Nursery Schools v. Sendak, 502 F.Supp. 1319 (N.D.Ind.1980), though distinguishable on its facts, supports their petition. But since it is a district court decision, rendered before Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981) (the principal basis of our opinion in this case), it is not substantial authority in their favor.

Id. at 195. Thus, this court concludes that Judge McNagny's order should be reassessed in light of Parratt. If the doctrine espoused in Parratt precludes plaintiff's claimed deprivation of a property right under section 1983, plaintiff's prayer for damages must, as a consequence, fail because of the lack of a cognizable federal claim.

In Parratt, a Nebraska prison inmate ordered a $23.50 hobby kit through the mails. The hobby kit was lost after it reached the prison. The inmate filed a § 1983 suit against the Warden and "hobby manager" of the prison alleging that they were negligent in allowing the hobby kit, contrary to prison policies, to be signed for and delivered to persons other than the inmate who ordered it. The district court held that by negligently failing to follow their own regulations, the prison officials had deprived the inmate of his property without due process of law. On this basis, the district court granted plaintiff's motion for summary judgment and this decision was affirmed by the Eighth Circuit Court of Appeals, 620 F.2d 307 (8th Cir.1980). On review, the Supreme Court reversed and dismissed the inmate's complaint, 451 U.S. at 544, 101 S.Ct. at 1917. In doing so, the Supreme Court analyzed two troublesome areas in section 1983 litigation: the state of mind requirement of the actors and the exhaustion of remedies. After determining that section 1983 covers negligent as well as intentional deprivations and that exhaustion of remedies is not generally a prerequisite to suit in federal court under that statute, the Supreme Court in Parratt indicated that analysis of a claim under section 1983 must focus upon whether or not the essential elements of a cause of action under that statute exists:

Accordingly, in any § 1983 action the initial inquiry must focus on whether the two essential elements to a § 1983 action are present: (1) whether the conduct complained of was committed by a person acting under color of state law; and (2) whether this conduct deprived a person of rights, privileges, or immunities secured by the Constitution of the United States.

451 U.S. at 535, 101 S.Ct. at 1913.

In this case, the first element set forth in ...