Contract Design Grp., Inc. v. Wayne State Univ., Case No: 10-14702

CONTRACT DESIGN GROUP, INC., and ROBERT MURRAY, Plaintiffs,

v. WAYNE STATE UNIVERSITY, THE WAYNE STATE UNIVERSITY BOARD OF GOVERNORS,JAMES R. SEARS, JOAN M. GOSSMAN, and JOHN L. DAVIS, Defendants.

Case No: 10-14702

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

Dated: May 20, 2013

Hon. Victoria A. Roberts

AMENDED ORDER GRANTING IN PART AND DENYING IN PART

DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (Doc. 109)

I. INTRODUCTION

This is an action for alleged constitutional violations under the United States and Michigan constitutions and claims based on tort and contractual theories, between a contractor and a public university and its employees and agent.

Before the Court is Defendants' motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. Defendants move for summary judgment on Plaintiffs' claims for due process and equal protection violations, intentional interference with business relations, account stated, and breach of contract.

Defendants' motion is GRANTED IN PART and DENIED IN PART. Summary judgment for Defendants is granted on Plaintiffs' substantive due process and equalprotection claims under the U.S. and Michigan constitutions; there are no issues of fact regarding these claims. Summary judgment is also granted on Plaintiffs' claim for intentional interference of business relations, but only on Plaintiffs' assertion of Defendants' malice; it will proceed to trial on defamation. Summary judgment is denied on Plaintiffs' other claims; issues of material fact remain.

II. BACKGROUND

Contract Design Group, Inc. ("CDG") is a flooring contractor; Robert Murray is its president (collectively, "Plaintiffs"). Wayne State University is a Michigan non-profit corporation and a state educational institution; James R. Sears, Joan M. Gossman, and John L. Davis were employed by it during the times relevant to this action. Wayne State University Board of Governors ("Board") is a state agency which conducts the affairs of Wayne.

CDG provided flooring work for Wayne under lump sum contracts. CDG then also entered into contracts with Wayne to provide an indefinite amount of floor covering work ("blanket contracts"). The blanket contracts carried time-and-material and unit-priced components, and included prevailing wage requirements for compensation of workers in Wayne's projects. The last blanket contract was entered into in 2008.

The crux of this litigation relates to Wayne's decision in 2009 to suspend CDG's work and terminate its contracts for alleged fraudulent behavior, breach of contract, and noncompliance with Michigan's Prevailing Wage and Projects Act, P.A. 166 of 1965 ("PWA"). Whistleblowers informed Wayne of CDG's alleged noncompliance. In October, 2009, Wayne notified CDG that it was considering debarring it from participation in any of Wayne's bid processes or awards, and gave it twenty days to submit information inopposition to the proposed debarment and a written request for a meeting to discuss it. A hearing was held on December 7, 2009, and on December 16, 2009, Plaintiffs were notified that they were debarred for three years. They unsuccessfully protested the debarment.

Plaintiffs say the hearing was a "kangaroo court" proceeding; it was conducted without proper notice of the allegations against them, it was done without following Wayne's debarment policies, it was not recorded, and it did not afford Plaintiffs an opportunity for argument or presentation of evidence and testimony. They also say that they were de facto debarred prior to the hearing.

Plaintiffs claim that Wayne has refused to pay them for work they continued to perform on a lump sum basis up to the time of debarment, outside of the blanket contracts proceedings.

On July 8, 2011, Plaintiffs filed this lawsuit, claiming that Defendants assumed the State's function when prosecuting the prevailing wage law, and violated their substantive and procedural due process and equal protection rights protected by the Fourteenth Amendment to the United States Constitution. Plaintiffs also allege state law claims; they say that Defendants violated the Michigan Constitution for the same reasons as the United States Constitution, and intentionally interfered with business relations and prospective business relations, and that their account with Wayne is stated and that their lump sum contracts were breached because they were not compensated.

III. STANDARD OF REVIEW

The Court will grant summary judgment if "the movant shows that there is nogenuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-57 (1986). A fact is material if it could affect the outcome of the case based on the governing substantive law. Anderson, 477 U.S. at 248. A dispute about a material fact is genuine if on review of the evidence, a reasonable jury could find in favor of the nonmoving party. Id.

The moving party bears the initial burden to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant meets this burden, the nonmoving party must "go beyond the pleadings and ... designate specific facts showing that there is a genuine issue for trial." Id. at 324. The Court may grant a motion for summary judgment if the nonmoving party who has the burden of proof at trial fails to make a showing sufficient to establish the existence of an element that is essential to that party's case. See Muncie Power Prods., Inc. v. United Tech. Auto., Inc., 328 F.3d 870, 873 (6th Cir. 2003).

In reviewing a summary judgment motion, the Court must view the evidence and all inferences drawn from it in the light most favorable to the nonmoving party. Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1133 (6th Cir. 1986). "The court need consider only the cited materials, but it may consider other materials in the record." Fed. R. Civ. P. 56(c)(3). The Court's function at the summary judgment stage "is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

IV. ANALYSIS

Defendants move for summary judgment on Plaintiffs' claims for: (A) violations to the U.S. Constitution; (B) violations to the Michigan Constitution; (C) intentional interference with business relations; (D) account stated; and, (E) breach of contract.

A. Violations of Plaintiffs' Rights Under the U.S. Constitution

Plaintiffs allege 42 U.S.C. § 1983 claims against Defendants for violations of their procedural and substantive due process and equal protection rights under the Fourteenth Amendment to the U.S. Constitution.

"Where any person acting under color of state law abridges rights secured by the Constitution or United States laws . . . § 1983 provides civil redress." Miller v. Calhoun County, 408 F.3d 803, 812 (6th Cir. 2005) (citing 42 U.S.C. § 1983; City of Canton, Ohio v. Harris, 489 U.S. 378, 388-89 (1989)). "To state a claim under 42 U.S.C. § 1983, Plaintiff must allege: (1) a deprivation of a right secured under the Constitution or federal law; and (2) that a person acting under color of state law subjected him to the deprivation or caused him to be subjected to the alleged deprivation." Alford v. City of Detroit, 657 F. Supp. 2d 847, 852-53 (E.D. Mich. 2009) (citing Alkire v. Irving, 330 F.3d 802, 813 (6th Cir. 2003)).

1. Procedural and Substantive Due Process Claims

In Counts One and Two, Plaintiffs claim substantive and due process violations. Plaintiffs say that Defendants' prosecution of Plaintiffs with a premeditated malicious, bad faith intent to debar them, violated their substantive due process rights. They also say they were denied due process in that the prosecutorial and adjudicatory functions of Wayne were mixed.

Both procedural and substantive due process claims require a showing that a constitutionally protected property or liberty interest has been infringed. Hahn v. Star Bank, 190 F.3d 708, 716 (6th Cir. 1999) ("To establish a procedural due process claim pursuant to § 1983 . . . [plaintiffs] must establish . . . that they have a life, liberty, or property interest protected by the Due Process Clause of the Fourteenth Amendment to the United States Constitution . . . ."); Braun v. Ann Arbor Charter Twp., 519 F.3d 564, 573 (6th Cir.2008) ("'To state a substantive due process claim ... a plaintiff must establish that (1) a constitutionally protected property or liberty interest exists, and (2) the constitutionally protected interest has been deprived through arbitrary and capricious action.' ") (citation omitted).

Defendants argue that a contractor does not have a property or liberty right to be awarded a government contract or to bid on public projects.

Defendants' argument is unavailing; they mischaracterize CDG's claimed property and liberty interests. A constitutionally protected property interest in a publicly bid contract exists when a bidder can show that it was actually awarded the contract and then deprived of it. Expert Masonry, Inc. v. Boone Cnty., Ky., 440 F.3d 336, 348 (6th Cir. 2006) (citing Enertech Electrical, Inc. v. Mahoning County Comm'rs, 85 F.3d 257, 260 (6th Cir.1996)). In addition, although the right to bid on government contracts is not a property interest, a contractor's liberty interest is implicated when denial of a government contract is based on a charge of fraud or dishonesty. Lasmer Indus., Inc. v. Def. Supply Ctr. Columbus, 2:08-CV-0286, 2008 WL 2457704 (S.D. Ohio June 13, 2008) (citing Transco Security, Inc. v. Freeman, 639 F.2d 318, 321 (6th Cir.1981).

CDG was awarded a publicly bid blanket contract in 2008, which was later terminated--and CDG was debarred from future bids--based on, inter alia, allegedly fraudulent behavior. Accordingly, Plaintiffs have a protected property interest in the terminated blanket contract and a protected...