United States Cold Storage, Inc. v. City of Lumberton , 34 F. App'x 429 ( 2002 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES COLD STORAGE, 
INCORPORATED,
Plaintiff-Appellant,
v.  No. 01-2197
CITY OF LUMBERTON,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Wilmington.
James C. Fox, Senior District Judge.
(CA-00-18-7-F(1))
Argued: April 4, 2002
Decided: May 2, 2002
Before MICHAEL and MOTZ, Circuit Judges, and
Walter K. STAPLETON, Senior Circuit Judge of the
United States Court of Appeals for the Third Circuit,
sitting by designation.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Robert Edward Hornik, Jr., THE BROUGH LAW FIRM,
Chapel Hill, North Carolina, for Appellant. Charles Floyd McDarris,
HOLT, YORK, MCDARRIS, L.L.P., Raleigh, North Carolina; Albert
Mansell Benshoff, Lumberton City Attorney, Lumberton, North Caro-
lina, for Appellee.
2 U.S. COLD STORAGE v. CITY OF LUMBERTON
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
United States Cold Storage, Incorporated brought this 42 U.S.C.A.
§ 1983 (1994) action, alleging violation of First Amendment rights,
and a pendent state law breach of contract claim, against the City of
Lumberton. The district court granted summary judgment to the City;
we affirm.
I.
Cold Storage, which leases refrigerated space for food storage,
opened a new facility just outside the City’s corporate limits in 1987.
Cold Storage and the City signed a written contract, dated June 8,
1987, under which the City agreed to extend its water and sewer lines
to the facility, and to provide water and sewer services. In return,
Cold Storage agreed to pay the City "the applicable rate . . . as
required by the Code of the City of Lumberton." The relevant code
provision, Lumberton City Ordinance § 23-6, provides that "[t]he
monthly charge for city sewer service shall be based upon the water
usage of the customer." Specifically, the volume of water received,
measured in gallons, is multiplied by a rate per gallon, also stated in
§ 23-6, to generate the sewer service charge. The parties refer to this
billing method as "water in/sewer out"; it is commonly used by
municipalities because water inflow is easy to measure and in most
cases provides a good approximation of discharge into a sewer system
(water piped into a facility for use normally returns for treatment).
Over the next eight years, the City provided water and sewer ser-
vices but failed to bill Cold Storage for sewer. (It appears that the
City’s finance department was in almost complete disarray.) When
the City discovered its error, in September 1995, it sent Cold Storage
a bill for sewer services based on the water in/sewer out method.
Although Cold Storage conceded an obligation to pay for sewer ser-
U.S. COLD STORAGE v. CITY OF LUMBERTON 3
vices, it objected to use of the water in/sewer out method. About 85
percent of the water received by Cold Storage’s Lumberton facility is
sent into cooling towers, where it evaporates rather than returning to
the City for treatment. Cold Storage therefore believed that its facility
burdened the City’s treatment plant far less than the volume of water
inflow would suggest.
Cold Storage presented this argument to the Public Works Director,
who proved receptive. The Director conferred with the City Manager,
and then instructed Cold Storage to begin measuring the flow of water
into its towers. Thereafter, the Director told Cold Storage, it would be
charged the per-gallon rate for treatment only on water not sent into
the towers. And, in fact, Cold Storage has proffered undisputed evi-
dence that the City’s finance department used this method to calculate
Cold Storage’s bills for just over three years.
In July 1999, however, the City discontinued this novel billing
method and issued Cold Storage a bill based on the water in/sewer out
method, resulting in a charge more than ten times higher than Cold
Storage’s two previous bills. When Cold Storage protested, the City
informed it that water in/sewer out was the proper billing method
under the 1987 contract, that the City would use this method to pre-
pare all future bills, and that the City would shortly bill Cold Storage
for undercharges over the past three years.
The parties differ sharply as to why the billing method changed.
The City asserts that in mid-1999 it was beginning to improve finan-
cial controls after years of mismanagement. It had hired a new City
Manager, who installed new billing software in May 1999 and discov-
ered a large number of billing irregularities. The City insists that its
billing policy has been evenhanded, and that Cold Storage is only one
of many companies whose bills either have been or soon will be
brought into line with written City policy.
Cold Storage contends, to the contrary, that many City customers
continue to benefit from billing arrangements that deviate from writ-
ten policies, and that the City has punished it for opposing a recent
annexation ordinance. The City announced plans to annex land just
outside its limits late in 1998, including the land on which Cold Stor-
age’s Lumberton facility is located. Cold Storage opposed the City’s
4 U.S. COLD STORAGE v. CITY OF LUMBERTON
plans at a public meeting in December 1998, and then, after the City
Council adopted an annexation ordinance in March 1999, challenged
the ordinance in state court. Cold Storage asserts that the City has
retaliated against it for pursuing this suit by the change in billing
methods, surprise meter inspections, threats to cut off Cold Storage’s
water during a good faith dispute about the billing method, sewer cer-
tificate inspections, inquiries into Cold Storage’s use of its industrial
well, and critical press releases from the City Manager’s office mis-
stating Cold Storage’s position on the annexation issue.
II.
On February 4, 2000, Cold Storage filed this action, naming the
City as the sole defendant. In its complaint, Cold Storage alleges that
the City, by the acts set forth above, retaliated against Cold Storage
for its exercise of First Amendment rights, in violation of 42 U.S.C.A.
§ 1983 and breached the 1987 contract, as modified in 1995, by bill-
ing according to the water in/sewer out method. (Cold Storage also
brought a third claim, alleging that the City threatened to breach a
contract to provide fire protective services. After discovery, however,
Cold Storage agreed to dismiss this claim, and it is not before us.) The
City filed a counterclaim, in which it asked the court to "require [Cold
Storage] to pay all unpaid water and sewage amounts that are past due
and owing to the City of Lumberton."
At the close of discovery the district court granted summary judg-
ment to the City on all claims. With respect to the retaliation claim,
the district court assumed, without deciding, that the City could be
held liable for the actions of its City Manager, but held that Cold Stor-
age had not proffered sufficient evidence of retaliatory acts by the
City to create a material issue of fact. On the contract claim, the court
held that the 1995 modification would be valid only if supported by
consideration, and that Cold Storage had offered no evidence of con-
sideration. The district court then declined to exercise jurisdiction
over the City’s counterclaim, which it dismissed without prejudice.
Only Cold Storage appeals. We consider each of its claims in turn.
III.
Even assuming that the acts Cold Storage cites were retaliatory in
nature, the company’s retaliation claim cannot succeed because these
U.S. COLD STORAGE v. CITY OF LUMBERTON 5
acts cannot be attributed to the City. A municipality is liable only for
injuries arising from a municipal "policy or custom." Monell v. New
York City Dept. of Social Servs., 436 U.S. 658, 694 (1978). Municipal
policy may be expressed in legislative acts, like an ordinance or regu-
lation; in a single action taken by a municipal official with "final poli-
cymaking authority" in the relevant area; or even by the actions of a
subordinate official that a higher official ratifies. See Jett v. Dallas
Indep. Sch. Dist., 491 U.S. 701, 737 (1989); Pembaur v. City of Cin-
cinnati, 475 U.S. 469, 480 (1986).
The decisive question in any case is whether the acts that cause
injury constitute acts "‘of the municipality’ — that is, acts which the
municipality has officially sanctioned or ordered." Pembaur, 475 U.S.
at 479. By extension, practices not authorized by express policy may
nonetheless constitute acts "of the municipality" if "persistent and
widespread" and "so permanent and well settled as to constitute a
‘custom or usage’ with the force of law." Carter v. Morris, 164 F.3d
215, 218 (4th Cir. 1999) (quoting Monell, 436 U.S. at 691). See also
City of St. Louis v. Praprotnik, 485 U.S. 112, 127 (1988) (plurality
opinion) (explaining that liability for municipal "custom" is intended
to forestall "egregious attempts by local governments to insulate
themselves from liability for unconstitutional policies" which they
have ratified sub silentio).
In this case, Cold Storage does not allege that it suffers from a City
"custom" of retaliation against the exercise of First Amendment
rights. Nor does it allege that the City’s ordinances or written policies
are themselves discriminatory. In fact, City Ordinance § 23-6 sets
forth a uniform per-gallon rate for all sewer bills, and a uniform
method of calculating the volume on which that rate is charged. What
Cold Storage contends is that the City’s written policy was not uni-
formly enforced, but was enforced against Cold Storage to procure its
silence in the annexation dispute.
To succeed on this claim, Cold Storage must prove that the
assertedly retaliatory acts were authorized by a decisionmaker with
final policymaking authority, who intended to punish Cold Storage
for its speech or was deliberately indifferent to that possibility. See
Board of County Comm’rs v. Brown, 520 U.S. 397, 405 (1997). In
deciding which officials have final policymaking authority, two dis-
6 U.S. COLD STORAGE v. CITY OF LUMBERTON
tinctions are of critical importance. First, the decisionmaker must be
authorized to make "policy," i.e., to "set and implement general goals
and programs of municipal government, as opposed to discretionary
authority in purely operational aspects of government." Spell v.
McDaniel, 824 F.2d 1380, 1385 (4th Cir. 1987). Second, the decision-
maker’s authority in the relevant policy area must be "final," i.e., not
subject to further review within the municipality. See Praprotnik, 485
U.S. at 112.
Although the Supreme Court did not produce a majority opinion in
Praprotnik, seven Justices did agree on principles with clear applica-
tion to this case. Justice O’Connor, writing for four members of the
Court, explained that "[w]hen an official’s discretionary decisions are
constrained by policies not of that official’s making, those policies,
rather than the subordinate’s departures from them, are the act of the
municipality." Praprotnik, 485 U.S. at 127 (plurality opinion). Justice
Brennan, writing for three Justices, similarly stated that:
a municipality is not liable merely because the official who
inflicted the constitutional injury had the final authority to
act on its behalf; rather . . . the official in question must pos-
sess final authority to establish municipal policy with
respect to the challenged action . . . . [I]f, in a given county,
the Board of County Commissioners established county
employment policy and delegated to the County Sheriff
alone the discretion to hire and fire employees, the county
itself would not be liable if the Sheriff exercised this author-
ity in an unconstitutional manner, because the decision to
act unlawfully would not be a decision of the board.
Praprotnik, 485 U.S. at 139-40 (Brennan, J., concurring). See also
Greensboro Prof’l Fire Fighters Ass’n, Local 3157 v. City of Greens-
boro, 64 F.3d 962, 964-66 (4th Cir. 1995).
With these distinctions in mind, we consult "the relevant legal
materials, including state and local positive law, as well as custom or
usage having the force of law," to determine which officials in the
City of Lumberton had "final policymaking authority" over municipal
sewer bills and inspections. Jett, 491 U.S. at 737. In North Carolina
"[e]xcept as otherwise provided by law, the government and general
U.S. COLD STORAGE v. CITY OF LUMBERTON 7
management of the city shall be vested in the [City] council."
N.C.G.S. § 160A-67 (1999). Cold Storage points to no provision of
North Carolina law that gives final policymaking authority over any
matter to the City Manager, the Director of Public Works, or the
Chief Inspector of the City. Nor does Cold Storage assert that the City
Council of Lumberton delegated its authority over billing or inspec-
tion policy to these officials, or that the officials’ actions were not
subject to review by the Council. Compare Gros v. Grand Prairie,
Texas, 181 F.3d 613, 616, n.2 (5th Cir. 1999). Thus, only the City
Council had final policymaking authority over any actionable, alleg-
edly retaliatory, act. See Riddick v. School Bd. of the City of Ports-
mouth, 238 F.3d 518, 523 (4th Cir. 2000) ("When a municipal
official’s discretionary action ‘is subject to review by the municipali-
ty’s authorized policymakers, they have retained the authority to mea-
sure the official’s conduct for conformance with their policies.’")
(citation and quotation marks omitted).
The record, even when viewed in the best light for Cold Storage,
does not permit an inference that the City Council authorized discrim-
ination against Cold Storage or intended to punish the company for
its political activities. Cold Storage has proffered no evidence to indi-
cate that the Council ordered any of the meter or sewer inspections,
either directly or indirectly, or that the Council otherwise singled out
Cold Storage for adverse treatment. Consequently, even assuming that
the City’s express policy of nondiscrimination was unevenly
enforced, we could hold the City liable only on a theory of respondeat
superior, which controlling legal authority expressly prohibits. See
Monell, 436 U.S. at 692-94.
IV.
Cold Storage also contends that the district court erred in holding
that no consideration supported modification of its contract with the
City in 1995. Before us, Cold Storage makes two arguments not pre-
sented to the district court. We will consider such arguments "only in
very limited circumstances, such as where refusal to consider the
newly-raised issue would be plain error or would result in a funda-
mental miscarriage of justice." Muth v. United States, 1 F.3d 246, 250
(4th Cir. 1993). There is no danger of plain error or injustice here.
First, Cold Storage contends that the City waived the defense of
lack of consideration by failing to plead the defense in its answer as
8 U.S. COLD STORAGE v. CITY OF LUMBERTON
required by Fed. R. Civ. P. 8(c). But Cold Storage can succeed on this
contention only by showing that the City’s failure was prejudicial. See
Brinkley v. Harbour Recreation Club, 180 F.3d 598, 612 (4th Cir.
1999) ("[A]bsent unfair surprise or prejudice to the plaintiff, a defen-
dant’s affirmative defense is not waived when it is first raised in a
pre-trial dispositive motion.") (citations omitted). It cannot make such
a showing. The City raised the lack of consideration defense in its
motion for summary judgment, after which Cold Storage had almost
a month to prepare its reply, and five additional months to prepare for
oral argument. During that time, Cold Storage had ample opportunity
to marshall evidence (and argue) that it provided consideration for the
modification; for example, it could have presented affidavits attesting
to negotiations with the City or internal financial records to document
a payment. Instead, Cold Storage asserted that no consideration was
needed to support modification because the Uniform Commercial
Code governed its contract with the City, an argument properly
rejected by the district court. Having failed in the district court to
argue that consideration was present, or present evidence to that
effect, Cold Storage is not entitled to a second bite at the apple.
For similar reasons, Cold Storage’s second argument also fails. On
appeal, Cold Storage contends that there is record evidence which,
viewed in the best light for it, would support a finding that it provided
consideration for the modification. Specifically, Cold Storage asserts
that it could have drilled a well in 1995, and obtained water from that
well instead of from the City. According to Cold Storage, the City
knew that it had this opportunity, and agreed to modify the contract
in exchange for Cold Storage’s forbearance. But Cold Storage never
made this argument to the district court. And, even on appeal, Cold
Storage cannot point to evidence sufficient to create a triable issue of
fact. The record contains no evidence, for example, that Cold Storage
told the City it might drill a well, or that the City changed its billing
practice as a direct response. Indeed, at oral argument, counsel for
Cold Storage conceded that the sole evidence supporting modification
was the behavior of the City after 1995.
V.
For these reasons, the judgment of the district court is
AFFIRMED.