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Contractor Allowed to Pursue First Amendment Claim Against City that Refused to Accept Its Low Bid, but Claim Fails After Discovery
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June 15, 2009 (and Updated on March 22, 2010)
Howrey LLP
The U.S. Court of Appeals for the 5th Circuit, in a 2-to-1 decision, allowed a contractor to pursue its claim that the City of Lubbock, Texas, wrongfully refused to do business with the contractor because of a lawsuit it had filed against another local government.
However, after remand to the trial court and discovery, summary judgment was entered against the contractor on its constitutional claim, and that judgment was affirmed on appeal.
The contractor, Oscar Renda Contracting, Inc., bid on a storm drainage system improvement project in Lubbock. Texas law required Lubbock to award the contract to the “lowest responsible bidder” or to the bidder providing the best value. Renda’s bid was more than $2.2 million lower than the next-low bidder. When Renda learned Lubbock officials had recommended that the contract be awarded to the next-low bidder, Renda requested a meeting with city staff officials. At the meeting, city officials allegedly stated that they knew Renda had sued the El Paso Water District and was awarded damages and that they were concerned Renda was “lawsuit happy.” Renda explained why it had filed the El Paso lawsuit.
The city officials then recommended that the contract be awarded to Renda but only on condition that Renda sign an affidavit reaffirming its familiarity with the terms of the contract and the requirements of the project. Renda did so. Despite that, the City Council awarded the contract to the next-low bidder on a 4-to-3 vote, claiming that it had concerns about Renda’s business practices.
Renda filed suit in U.S. District Court, alleging that the Lubbock retaliated against Renda for exercising its First Amendment rights by suing the El Paso Water District. Renda alleged that Lubbock’s refusal to award it the contract because of its suit against El Paso amounted to retaliation in violation of its First Amendment rights under the U.S. Constitution.
The U.S. District Court granted Lubbock’s motion to dismiss Renda’s First Amendment retaliation claim because Renda did not allege that the speech involved a matter of public concern to Lubbock. The District Court found that because Renda’s speech took place in El Paso, not in Lubbock where the retaliation allegedly occurred, Renda could not prove that its speech involved a matter of public concern in the community. The District Court also dismissed the suit because Renda did not have a pre-existing commercial relationship with Lubbock – that is, this was Renda’s first bid to Lubbock. On appeal, the 5th Circuit reversed, remanding the case for further proceedings. Oscar Renda Contracting, Inc. v. City of Lubbock, Tex., 463 F.3d 378 (5th Cir. 2006), cert. den. 127 S.Ct. 2033.
The appeals court concluded that a contractor bidding for a public works contract may sue for First Amendment retaliation just as a public employee can. There is no distinction between a person seeking employment with a public entity and a contractor bidding for contracts with a public entity. Otherwise, the court wrote, government agencies would have “carte blanche to terminate independent contractors for exercising their First Amendment rights.”
Consequently, a contractor claiming First Amendment retaliation by a public agency must allege the following: 1) the employee/contractor suffered an adverse employment decision; 2) the employee’s/contractor’s speech involved a matter of public concern; 3) the employee’s/contractor’s interest in commenting on matters of public concern must outweigh the defendant’s interest in promoting efficiency; and 4) the employee’s/contractor’s speech much have motivated the employer’s adverse action.
The appeals court found that the District Court’s definition of community – that the El Paso lawsuit had nothing to do with a public issue in Lubbock -- was too narrow. Relying on 5th Circuit and Supreme Court precedent, the appeals court utilized the standard that “public concern is something that is a subject of legitimate news interest.” Under this standard, it did not matter that the protected activity took place in El Paso and the retaliation occurred in Lubbock.
Lubbock also argued that Renda’s lawsuit against El Paso was not a matter of public concern. The appeals court noted that an employee’s suit against an employer is not considered a per se matter of public concern. If the lawsuit is only a matter of personal interest to the employee, then it is not considered a matter of public concern. However, the appeals court noted that Renda’s suit against Lubbock alleged that Renda’s suit against the El Paso Water District had contained a claim for First Amendment retaliation as well as for breach of contract and that it had prevailed in the El Paso suit. The appeals court also noted that the Lubbock suit sought to redress claimed violations of federally protected rights. These allegations were sufficient to defeat a motion to dismiss, the appeals court held.
Finally, the appeals court held that a contractor need not have a pre-existing business relationship with the public entity in order to maintain a retaliation suit. Because this was an issue of first impression, the panel relied heavily on U.S. Supreme Court precedent that no pre-existing relationship is necessary in the context of an individual employee retaliation suit. Stating that “no different result should be afforded to bidders applying for ‘employment’ with the government under a bidding arrangement” than to “individuals applying for employment with the government,” the appeals court held that no pre-existing relationship is required before a contractor may assert a claim for First Amendment retaliation against a public entity.
On remand after the first appeal, discovery was conducted, and the City of Lubbock then moved for summary judgment. The U.S. District Court granted the motion, and the U.S. Court of Appeals for the 5th Circuit affirmed. Oscar Renda Contracting, Inc. v. City of Lubbock, Texas, 577 F.3d 264 (5th Cir. 2009). The appeals court wrote:
Deposition testimony and other evidence in the record establishes that Renda’s litigious reputation was founded on more than the El Paso suit…, and as for the El Paso suit’s alleged importance to the Lubbock decisionmakers, the record is devoid of any specific interest in the El Paso suit, aside from the vaguest statements provided by Renda’s witnesses…. There is, significantly, no evidence that Lubbock knew or even could have been likely to discover that there were constitutionally protected dimensions to the [El Paso] Water District litigation. The lack of knowledge might not be dispositive in all circumstances, but here… there is ample evidence that the Water District litigation involved a large damage award derived largely or solely from disagreements that were not of public concern, and there is no evidence that Lubbock had any inkling of the claim now put forward as a matter of public concern in that litigation at all….
Lubbock’s decision only partly depended on Renda’s reputation for litigiousness; Renda’s reputation for litigiousness only partly emerged from the El Paso litigation; and the El Paso litigation only partly involved issues of public concern. By the end of this chain, the First Amendment values dim to vanishing…. [T]he connection between the Lubbock decision and any protected constitutional claims in the El Paso litigation is simply too attenuated to take to a jury.
Recognizing the “tension… between the public interest in open and robust debate on issues of the day and government interest in good stewardship when participating in economic activities,” the appeal court wrote:
[I]f there is to be any meaning to the principle that not all construction contract disputes involving government entities or agents are matters of public concern, then much of the El Paso suit fails to register as such.
The appeals court concluded that constitutionally protected speech was not a significant or motivating factor in Lubbock’s decision; that Lubbock’s need for efficient decisionmaking outweighed the contractor’s First Amendment interests; and that Lubbock had proved a defense: that it would have reached the same decision even if the contractor had not engaged in protected conduct. 1/
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-848-4996 or at paulberning@howrey.com or contact your Howrey attorney. For more information about Howrey’s Construction Practice Group, click here.
ENDNOTE
| 1/ | See also, Heritage Constructors, Inc. v. City of Greenwood, Arkansas, 545 F.3d 599 (8th Cir. 2008) [award of contract allegedly denied in violation of First and Fourteenth Amendments because of contractor’s prior arbitration with city; arbitration held to involve a private financial interest and not a matter of public concern; case dismissed].
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©2009 Howrey LLP
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