Sector Enterprises, Inc. v. DiPalermo, No. 87-CV-1585.

CourtUnited States District Courts. 2nd Circuit. United States District Court of Northern District of New York
Citation779 F. Supp. 236
Decision Date26 December 1991
PartiesSECTOR ENTERPRISES, INC., Michael P. McMahon and Terry M. Parks, Plaintiffs, v. John D. DiPALERMO, Deputy Commissioner of the New York State Department of Social Services, et al., Defendants.
Docket NumberNo. 87-CV-1585.

779 F. Supp. 236

SECTOR ENTERPRISES, INC., Michael P. McMahon and Terry M. Parks, Plaintiffs,
v.
John D. DiPALERMO, Deputy Commissioner of the New York State Department of Social Services, et al., Defendants.

No. 87-CV-1585.

United States District Court, N.D. New York.

December 26, 1991.


779 F. Supp. 237
COPYRIGHT MATERIAL OMITTED
779 F. Supp. 238
Peter Henner, Albany, N.Y., for plaintiffs

Robert Abrams, Atty. Gen. of State of New York (Judith I. Ratner, Asst. Atty. Gen., of counsel), Albany, N.Y., for defendants.

MEMORANDUM-DECISION AND ORDER

McCURN, Chief Judge.

Plaintiffs commenced this action pursuant to 42 U.S.C. §§ 1983, 1985(3), and 1988, and N.Y. Const. art. 1, §§ 6 and 11. When this suit was filed in 1987, plaintiffs were two New York State employees and the corporation for which they are principals.1 The defendants were ten officials of the New York State Department of Social Services.2 Plaintiffs alleged that the defendants violated their First Amendment right to free speech, their Fourteenth Amendment rights to equal protection and due process, and their rights to equal protection and due process as guaranteed by the New York State Constitution. Defendants have denied the allegations.

On March 10, 1989, this court issued an order dismissing plaintiffs claims insofar as they were brought:

(1) under 42 U.S.C. § 1985(3);
(2) under the due process clause of the Fourteenth Amendment; and
(3) under the First Amendment, against the defendants in their individual capacities.

Thus, remaining before the court are the following claims:

(1) First Amendment, against defendants in their official capacities only;
(2) equal protection (Fourteenth Amendment), against defendants in their individual and official capacities; and;
(3) pendent state constitutional claims, against defendants in their individual and official capacities.

Defendants now move for summary judgment on the remaining claims. Plaintiffs cross-move for summary judgment on their First Amendment claim. For the reasons stated herein, defendants' motion for summary judgment is granted in its entirety. Plaintiffs' motion for partial summary judgment is therefore denied.

I. FACTS

A. Parties and Background

In 1986, plaintiffs Terry Parks and Michael McMahon were employed by the New York State Department of Social Services ("DSS"), in the Division of Information Technology Management. Parks was a data base programmer/analyst in the department; McMahon was a project assistant. The defendants were Parks's and McMahon's superiors at DSS.3

DSS operates the New York State Child Support Management System ("CSMS"). CSMS is an elaborate, computerized "management information system" which is designed to, inter alia, assist state and local social service agencies in obtaining federal reimbursement for payments they make for child support. The system is highly regarded in the field of child support management; as of 1986, eleven states had either expressed an interest in, or were otherwise considering, adopting versions of the New York CSMS. Pl.Mem. at 3-4.

779 F. Supp. 239

As a project assistant, McMahon supervised the transmissions of daily checks and reports into the CSMS, and monitored the interaction of the CSMS with other units within DSS. Parks asserts that although he was responsible for maintaining several data bases, including the data base used for the CSMS, he had no direct involvement in the maintenance or operation of the CSMS itself during his tenure with DSS.4 Regardless of the exact nature of their duties, one can safely conclude that both McMahon and Parks understand the complexities of implementing and operating the CSMS.

In June, 1986, Parks and McMahon formed plaintiff Sector Enterprises, Inc. ("Sector"). Parks is president of Sector, McMahon is vice-president. Parks and McMahon have been and continue to be the only officers of Sector.5 They formed Sector for the primary purpose of selling their technical expertise with the New York CSMS to other states and governmental agencies which are considering implementing the system. As described in the complaint,

Sector Enterprises seeks to assist states and governmental agencies other than New York in installing the CSMS and adapting it to the other states sic. computer system, inputing the data necessary for running the system, training the data processing staff and the user community, and assisting the state or governmental agency in obtaining reimbursement from the Federal Government for the statutorily provided reimbursement from the Federal Government.

Complaint ¶ 16.

When they assumed their new positions with Sector, Parks and McMahon knew of New York's laws and regulations governing outside employment by state employees. See Pl.Mem. at 6. Specifically, New York Public Officers Law §§ 73 (repealed 1989) and 74 regulated commercial and other outside activities of state employees; these sections severely limited, if not prohibited, state employees' ability to engage in outside employment which has the potential to conflict with their state employment. See generally N.Y.Pub.Off.L. §§ 73 (repealed 1989), 74 (McKinney 1988). In addition, in 1985 defendant Perales—then-Commissioner of DSS—promulgated separate regulations concerning outside employment by DSS employees in particular. Pursuant to the commissioner's regulations, all DSS employees in "Grade 18" or above, including plaintiffs herein, were required to obtain written approval from their superiors as a prerequisite to performing outside employment.6 See Complaint exh. "A" (Perales memorandum) and "B" ("Manager's Guide"), describing new DSS regulations. The superiors from whom Parks and McMahon needed to obtain approval included some of the defendants in this action.

B. Controversy giving rise to this litigation

In accordance with the DSS regulation, in June, 1986 Parks and McMahon took steps to secure approval for their participation in outside employment on behalf of Sector. They submitted their request for approval in anticipation of their attendance on behalf of Sector at a conference sponsored by the American Public Welfare Association ("APWA conference"). Parks's and McMahon's attendance at the conference, scheduled to take place in September,

779 F. Supp. 240
1986, would allow them to form contacts with people who would likely seek Sector's services in implementing a CSMS

The parties have outlined in intricate detail the procedures Parks and McMahon followed in seeking permission to engage in outside employment, and to attend the APWA conference in particular. By all accounts, Parks and McMahon followed the proper channels in applying for leave, but the State nonetheless denied their persistent requests for approval. The State even denied their requests to take personal vacation time to attend the conference. Parks and McMahon ignored the State's orders and attended the APWA conference, prompting the State to sanction them for insubordination. Since then (September, 1986), Parks and McMahon have adhered to the State's directives and refrained from acting on Sector's behalf while employed by the State, thus rendering Sector a virtual nullity. Meanwhile, Sector's sole competitor, UNISYS Corporation, has had free reign to control the lucrative CSMS market, unilaterally courting the business of the eleven states and various other governmental entities that are considering implementing versions of the New York CSMS.

The State has consistently maintained that its refusal to allow Parks and McMahon to pursue their proposed activity is grounded in its belief that the endeavor would create a conflict of interest with Parks's and McMahon's duties at DSS. Beyond expressing concern about the time constraints required by their participation in Sector, the State has noted, inter alia, the appearance of impropriety created by Parks's and McMahon's plans:

The state's interests in preventing tainted decision-making, protecting the integrity of its public officials, preserving confidence in government by avoiding the appearance of impropriety and maintaining the efficiency of its employees are all not less significant during plaintiffs' advertising campaign.... Plaintiffs' advertising of the same services they perform for the Department while employed by the Department, creates opportunities for plaintiffs to make decisions based on plaintiffs' private financial interests, affects plaintiffs' efficiency and appears improper.

Def.Mem. at 19-20 (citation omitted) (footnote omitted).

Parks and McMahon brought this suit in 1987, seeking monetary relief for the State's alleged unconstitutional denial of their professed right to solicit business, while in the State's employ, on behalf of Sector.

II. DISCUSSION

As stated above, see supra p. 238, this court's March, 1989 ruling leaves in issue only those claims relating to the First Amendment, equal protection clause, and state constitutional rights. The State moves for summary judgment on all remaining claims; plaintiffs cross-move for summary judgment on their First Amendment claim. Each remaining claim will be discussed seriatim.

A. First Amendment

The State urges the court, as a preliminary matter, that the activity at issue in this case, to wit Parks's and McMahon's work on behalf of Sector, is not "speech" within the reach of First Amendment protection. The State contends that the proposed activity here is "conduct," and as such is not entitled to First Amendment protection.

Ordinarily, a court must make a threshold determination as to whether the activity in question constitutes speech and is thus entitled to First Amendment protection. E.g. Central Hudson Gas & Elec. Co. v. Public Serv. Comm'n, 447 U.S. 557, 566, 100 S.Ct. 2343, 2351, 65 L.Ed.2d 341 (1980). Even assuming that Parks's and McMahon's activity in question here is speech, however, the court nonetheless finds that the State's restrictions thereon are constitutional. Under the circumstances, therefore, the...

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4 practice notes
  • Rounseville v. Zahl, No. 89-CV-1020.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • April 15, 1993
    ...dismissal of pendent state claims as well based on lack of subject matter jurisdiction, e.g., Sector Enterprises, Inc. v. DiPalermo, 779 F.Supp. 236, 247-48 (N.D.N.Y.1991) (McCurn, C.J.), other courts have acknowledged under certain circumstances that there is discretion to retain jurisdict......
  • Belch v. Jefferson County, No. 98-CV-1227.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • August 24, 2000
    ...be served by the limitations on partisan political activities ... contained in the Hatch Act."); Sector Enterprises, Inc. v. DiPaleramo, 779 F.Supp. 236, 244 (N.D.N.Y.1991). Citizens rightfully expect police agencies to enforce the law in a fair and just manner and their confidence in the p......
  • Brown v. City of Oneonta, No. 93-CV-349.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • January 3, 1996
    ...an equal protection claim, it is not enough to show `bad motive' on the part of the defendant." Sector Enterprises, Inc. v. DiPalermo, 779 F.Supp. 236, 247 (N.D.N.Y. 1991). In order to assert a valid claim of equal protection rights, the plaintiffs must show the existence of a similarly sit......
  • Wall v. Cherrydale Farms, Inc., No. 97-CV-70796-DT.
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • June 8, 1998
    ...to identify a class of persons to whom they are similarly situated but less favorably treated." Sector Enterprises, Inc. v. DiPalermo, 779 F.Supp. 236, Page 789 (N.D.N.Y.1991). In Sector, because plaintiffs could not satisfy that "rudimentary requirement of equal protection analysis," they ......
4 cases
  • Rounseville v. Zahl, No. 89-CV-1020.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • April 15, 1993
    ...dismissal of pendent state claims as well based on lack of subject matter jurisdiction, e.g., Sector Enterprises, Inc. v. DiPalermo, 779 F.Supp. 236, 247-48 (N.D.N.Y.1991) (McCurn, C.J.), other courts have acknowledged under certain circumstances that there is discretion to retain jurisdict......
  • Belch v. Jefferson County, No. 98-CV-1227.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • August 24, 2000
    ...be served by the limitations on partisan political activities ... contained in the Hatch Act."); Sector Enterprises, Inc. v. DiPaleramo, 779 F.Supp. 236, 244 (N.D.N.Y.1991). Citizens rightfully expect police agencies to enforce the law in a fair and just manner and their confidence in the p......
  • Brown v. City of Oneonta, No. 93-CV-349.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Northern District of New York
    • January 3, 1996
    ...an equal protection claim, it is not enough to show `bad motive' on the part of the defendant." Sector Enterprises, Inc. v. DiPalermo, 779 F.Supp. 236, 247 (N.D.N.Y. 1991). In order to assert a valid claim of equal protection rights, the plaintiffs must show the existence of a similarly sit......
  • Wall v. Cherrydale Farms, Inc., No. 97-CV-70796-DT.
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • June 8, 1998
    ...to identify a class of persons to whom they are similarly situated but less favorably treated." Sector Enterprises, Inc. v. DiPalermo, 779 F.Supp. 236, Page 789 (N.D.N.Y.1991). In Sector, because plaintiffs could not satisfy that "rudimentary requirement of equal protection analysis," they ......

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