United of Omaha Life Ins. Co. v. Solomon

• Decision Date: 30 March 1992
• Docket Number: No. 91-1332,91-1332
• Parties: UNITED OF OMAHA LIFE INSURANCE COMPANY, a Nebraska corporation, Plaintiff-Appellee, v. Shelby P. SOLOMON, Director, Michigan Department of Management and Budget, William S. Warstler, Director, Office of Purchasing, Michigan Department of Management and Budget, Defendants, Royal Maccabees Life Insurance Company, Intervening Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 31

960 F.2d 31

UNITED OF OMAHA LIFE INSURANCE COMPANY, a Nebraska

corporation, Plaintiff-Appellee, v. Shelby P. SOLOMON, Director, Michigan Department of

Management and Budget, William S. Warstler,

Director, Office of Purchasing, Michigan

Department of Management and

Budget, Defendants,

Royal Maccabees Life Insurance Company, Intervening

Defendant-Appellant.

No. 91-1332.

United States Court of Appeals, Sixth Circuit.

Argued Oct. 31, 1991.

Decided March 30, 1992.

Jeffrey V. Stuckey, Joseph A. Fink (briefed), Peter H. Ellsworth (argued), Dickinson, Wright, Moon, Van Dusen & Freeman, Lansing, Mich., for plaintiff-appellee.

Louis B. Reinwasser (argued and briefed), Clifford T. Flood, Lawrence D. Owen (briefed), Miller, Canfield, Paddock & Stone, Lansing, Mich., for intervening defendant-appellant.

Before: RYAN and BOGGS, Circuit Judges, and HOOD, District Judge. ^*

PER CURIAM.

This is an appeal from an order of the district court granting the plaintiff-appellee's motion for a preliminary injunction and denying the intervening defendant-appellant's motion for judgment on the pleadings. For the reasons which follow, we reverse the decision of the district court and remand with directions to dismiss the complaint.

I.

The pertinent facts are undisputed. The State of Michigan (State) has been offering life insurance to its employees for years. It is a self-insurer, assuming essentially all of the risk for payment of claims. It hires an insurance company to provide administrative services in connection with the payment of claims. For the past thirty years United of Omaha Life Insurance Company (United) has provided those administrative services. However, on March 15, 1990, the State put the contract for these services out for bid by issuing a Request for Quotation (RFQ). The RFQ required sealed bids to be submitted by 2:00 P.M. on April 27, 1990. It also advised that the State reserved the right to reject any and all bids if it was in its best interest to do so.

Only four insurance companies, including United and Royal Maccabees Life Insurance Company (Maccabees), submitted bids in response to the RFQ. However, only two of the bids were opened because it was determined that the other two--one of which was Maccabees'--did not meet the specifications established by the Michigan Department of Civil Service, the department required to administer the contract for the State. After these two bids were opened, it was determined that United had the lowest bid. Consequently, the State's Office of Purchasing, Department of Management and Budget, headed by William S. Warstler (Warstler) recommended that the contract be awarded to United.

Before the contract was awarded, Maccabees appealed from the State's refusal to open its bid, pointing out that it did meet the specifications and, alternatively, that the specifications were too stringent. After consulting with the Michigan Insurance Bureau, Warstler--who is not a party in this appeal--found, as Maccabees urged him to do, that the specifications as issued would preclude a significant number of very stable and capable insurance companies from competing. Warstler further determined that the specification should be rewritten and the contract rebid.

Prior to completion of the rebidding process, United obtained a temporary restraining order and a preliminary injunction which precluded the State from rebidding the contract. United argued that the State's failure to follow certain purchasing guidelines published in a booklet entitled "Doing Business with the State of Michigan--A Guide for Vendors" (Vendors Guide) [J.A., pp. 32-65] deprived it of property and/or liberty interests without procedural due process in violation of the Fifth and Fourteenth Amendments. Although not raised in its complaint or amended complaint, United also asked the district court in a brief to find that the State's actions amounted to a deprivation of its right to substantive due process under the Fourteenth Amendment. The district court held that the Vendors Guide provisions created a "protected" interest for United and that Warstler's actions deprived United of that interest without due process of law. United of Omaha Life Ins. Co. v. Solomon, 768 F.Supp. 613 (W.D.Mich.1990). Maccabees takes this appeal from the order granting the preliminary injunction and denying its motion for judgment on the pleadings.

II.

To state a claim under 42 U.S.C. § 1983, the plaintiff must show two things: (1) that the defendant acted under color of state law, and (2) that the defendant deprived the plaintiff of a federal right, either statutory or constitutional. Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 1923, 64 L.Ed.2d 572 (1980). Here, there is no doubt that Warstler was acting under color of state law. The question is whether Warstler deprived United of a federally-guaranteed right. Bacon v. Patera, 772 F.2d 259, 263 (6th Cir.1985).

A.

The district court found that United had a protected liberty interest based on two provisions of the Vendors Guide. The first of these two provisions states To maintain fair and equal treatment of all bidders, the Office of Purchasing will not hear protests or grant appeals claiming inappropriate specifications in the RFQ/RFP unless the vendor raised the issue, in writing, at least seven days prior to the bid due date.

Vendors Guide, p. 22 [J.A., p. 45].

The second provision states:

In fairness to bidders who meet specification and to prevent delays in procurement, the Office of Purchasing will not withdraw a recommendation to award or re-evaluate bids when an appeal maintains that the RFQ/RFP specifications were unnecessarily restrictive or that a bid exceeding specifications provided a better value than a lower bid meeting specifications. A vendor must raise concerns about RFQ/RFP specifications as described in "Inappropriate Specifications" in this booklet.

Vendors Guide, p. 31 [J.A., p. 49].

A protected liberty interest goes beyond freedom from bodily restraint; it includes the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge and to enjoy generally those privileges long recognized as essential to the orderly pursuit of happiness by free men. Board of Regents v. Roth, 408 U.S. 564, 572, 92 S.Ct. 2701, 2706, 33 L.Ed.2d 548 (1972). Although this definition of liberty interest has been somewhat narrowed by later Supreme Court cases, see, e.g., Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976), it is recognized that the due process clause forbids arbitrary deprivation of liberty " '[w]here a person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him.' " Goss v. Lopez, 419 U.S. 565, 574, 95 S.Ct. 729, 736, 42 L.Ed.2d 725 (1975) (quoting Wisconsin v. Constantineau, 400 U.S. 433, 437, 91 S.Ct. 507, 510, 27 L.Ed.2d 515 (1971)). Assuming for the moment that this case presents one of those limited circumstances where a corporation can claim a liberty interest, Warstler's actions neither precluded United from entering into other contracts with the State, nor besmirched United's good name. Hence, we find no deprivation of a protected liberty interest occurred.

B.

United also argues that the two quoted provisions from the Vendors Guide provided it with a property interest protected by the due process clause, an issue not fully addressed by the district court. ¹ We do not agree with this contention as "[c]ourts generally agree that no property interest exists in a procedure itself, without more." Curtis Ambulance of Florida, Inc. v. Board of County Comm'rs, 811 F.2d 1371, 1377 (10th Cir.1987).

A "disappointed bidder" to a government...