Beischel, Karen v. Stone Bank School , 362 F.3d 430 ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-2182 & 03-2327
KAREN BEISCHEL,
Plaintiff-Appellee,
Cross-Appellant,
v.
STONE BANK SCHOOL DISTRICT, BOARD OF
EDUCATION FOR STONE BANK SCHOOL DISTRICT,
MARGARET D. KASIMATIS, AMY LENTZ,
SUSAN MUSCHE, and KATHY ROSENHEIMER,
Defendants-Appellants,
Cross-Appellees.
____________
Appeals from the United States District Court
for the Eastern District of Wisconsin.
No. 00-C-623—Charles N. Clevert, Jr., Judge.
____________
ARGUED JANUARY 7, 2004—DECIDED MARCH 29, 2004
____________
Before FLAUM, Chief Judge, and MANION and EVANS,
Circuit Judges.
EVANS, Circuit Judge. Karen Beischel’s 2-year contract
as district administrator and principal of the tiny Stone
Bank School District in Oconomowoc, Wisconsin, was not
2 Nos. 03-2182 & 03-2327
renewed. Beischel, however, was not about to go away
without a fight, so she sued the District and some of the
individual board members in federal court where she
prevailed on some claims and lost on others. The District
has appealed.
The Stone Bank School District serves approximately 315
families in one school covering kindergarten through eighth
grade. In 1997 the District hired Beischel to be both its
administrator and the principal of its school. She was given
a contract for a 2-year term ending on June 30, 1999. In
general, her duties included the “supervision and man-
agement of the professional work of the schools [sic] and the
promotion of the pupils.” In particular, her duties involved
establishing a curriculum, preparing a budget, resolving
problems with students, parents, and staff, participating in
community events as a representative of the District, and
working with the school board. She was to work “under the
direction” of the board.
Problems began in the first year of the contract, but,
hoping things would improve, the board voted to give
Beischel the statutory maximum salary increase for the
next year. Rather then improving, however, the situation
deteriorated. By August or September 1998, members of the
board raised concerns about Beischel’s performance with
the board president, Margaret Kasimatis. The board, which
under § 118.24 of the Wisconsin Statutes has sole authority
to terminate or renew employment contracts with adminis-
trators, began to discuss whether Beischel’s contract should
be renewed when it expired in June. After several meetings,
on January 14, 1999, the board issued a formal notice to
Beischel advising her that it was considering not renewing
her contract. The notice advised Beischel that within 7 days
she had a right to request a hearing on the contract
nonrenewal. The notice also indicated that if she requested
a hearing, one would be held 2 weeks later on January 28.
By letter delivered to Kasimatis on January 21, Beischel
requested a public hearing and also asked for a written list
Nos. 03-2182 & 03-2327 3
of the reasons the board was considering the nonrenewal of
her contract. The board drew up a list and sent it, along
with supporting documents and exhibits, to Beischel and
her attorney on January 22.
Beischel’s attorney objected to the January 28 hearing
date and requested more time to prepare. The District of-
fered to delay the hearing if, in turn, Beischel would agree
that District policy 2001.5 did not apply to the proceedings.
That policy said that at least “5 months prior to the expira-
tion of the administrator’s contract, the Board will indicate
in writing (by registered mail) if the Board decides on
termination of the administrator’s contract. Dismissal
procedures as defined in section 118.24 of the Wisconsin
Statutes will be followed.” The board asked for Beischel’s
agreement because it feared that a delay in the hearing
date might run afoul of the policy. Beischel refused to agree
that the policy did not apply, but she continued to demand
a delay of the hearing date. Her requests were denied.
Beischel also requested that the District retain an inde-
pendent adjudicator to preside over the hearing, which
otherwise, under Wisconsin law, would be presided over by
the board. That request was also denied.
Getting nowhere, on January 28 Beischel filed an action
in the state circuit court for Waukesha County seeking
a temporary restraining order to prohibit convening the
hearing that evening. The restraining order was entered; it
prohibited the District from holding a hearing before
February 15. The hearing finally went forward on February
23, 1999, and ran for 12 hours before wrapping up at 6
o’clock the next morning. At the hearing, Beischel called as
many witnesses as she wished, including board members.
Later that day, the board voted 4 to 1 not to renew her
contract. The notice of nonrenewal was hand-delivered to
Beischel’s office and also sent to her residence via regis-
tered mail that same day.
Meanwhile, in the circuit court action, Beischel’s attorney
requested time to amend the pleadings to include claims
4 Nos. 03-2182 & 03-2327
involving the nonrenewal proceedings. No amendments
were ever filed, however, and the case was set for dismissal
on January 10, 2000. Beischel agreed to the dismissal but
requested attorney’s fees as a “prevailing party” on her
claims regarding the hearing date. That request was
denied, and the case was dismissed by order on May 30,
2000.
Then on May 4, Beischel initiated the present proceedings
in the district court where summary judgment motions were
filed. Each side prevailed on some issues and lost on others.
The bottom line was that Beischel was granted judgment on
her claim that she had been denied a property interest
without due process of law. The defendants, except for
Kathy Rosenheimer, were denied qualified immunity on
that claim. However, the defendants won dismissal of
Beischel’s claim based on a denial of a liberty interest
without due process of law and all of her claims under
Wisconsin law. Even though there is no final judgment in
the case, the defendants have appealed both the decision
denying qualified immunity and the decision on the merits.
We, of course, have appellate jurisdiction over the decision
denying qualified immunity as a matter of law. Mitchell v.
Forsyth, 472 U.S. 511 (1985). And although we are ordi-
narily “skittish” about the doctrine of pendent appellate
jurisdiction, see Greenwell v. Aztar Indiana Gaming Corp.,
268 F.3d 486 (7th Cir. 2001), we agree with the parties who
contend that the issues on the merits are so intertwined
with the appealable claim that jurisdiction exists over the
entire appeal. And as it turns out, the dispositive issues in
our decision today are issues on the merits rather than on
qualified immunity.
Although the claims in this case are brought under four
theories (federal due process, breach of contract, violation
of Wisconsin Statutes § 118.24(6) and (7) and violation of
school board policy number 2001.5), they fall into two main
categories for our analysis: notice of nonrenewal of the
Nos. 03-2182 & 03-2327 5
contract and the fairness of the hearing itself. We review a
district court’s decision on summary judgment de novo,
drawing our own conclusion of law and fact from the record
before us. Thiele v. Norfolk & Western Ry. Co., 68 F.3d 179
(7th Cir. 1995).
As argued before us, the notice claims involve the timing
of the notice under state statute, the contract, and the
District policy. There is no claim that the notice was in-
adequate to inform Beischel of what was happening.
As to timing, § 118.24(7) Wis. Stat. requires a preliminary
notice that the board is considering nonrenewal of a
contract 5 months prior to its expiration. Section 118.24(6)
Wis. Stat. requires that the actual nonrenewal be communi-
cated to the employee 4 months prior to the expiration of
the contract. Beischel’s contract says that nonrenewal of the
contract “shall be governed by Sec. 118.24(6) and (7),
Wisconsin Statutes.” In contrast, the District policy says
that at least 5 months prior to the expiration of the contract
the board will indicate in writing “if the Board decides on
termination of the administrator’s contract.” The policy also
states, however, that dismissal procedures defined in §
118.24 Wis. Stat. will be followed. Before Beischel obtained
the state court restraining order, the hearing was scheduled
so it would be convened in compliance with her contract, the
state statute, and the policy. Delaying the hearing meant
that the final decision on her status was made 4 months,
not 5, prior to the termination of her contract. In other
words, it was in compliance with her contract and the state
statute but not the District policy.
We need not determine the effect of noncompliance with
the policy. The notice claims are barred by the doctrine of
claim preclusion and were properly dismissed. It is well-
settled that “a final judgment is conclusive in all subse-
quent actions between the same parties as to all matters
which were litigated or which might have been litigated in
6 Nos. 03-2182 & 03-2327
the former proceedings.” DePratt v. West Bend Mut. Ins. Co.,
334 N.W.2d 883, 885 (Wis. 1983). Three elements must
exist for claim preclusion to apply. There must be an
identity between the parties or their privies in the former
and present lawsuits. There must be an identity between
the causes of action in the two suits. And finally, there must
have been a final judgment on the merits in a court of
competent jurisdiction in the first lawsuit. Northern States
Power Co. v. Bugher, 525 N.W.2d 723 (Wis. 1995). Beischel’s
claim is that there was no identity between the causes of
action in the two suits she filed. We disagree. Wisconsin has
adopted a transactional approach to this issue. Under this
approach, a second suit is ordinarily barred “if both suits
arise from the same transaction, incident or factual situa-
tion . . . .” Pliska v. City of Stevens Point, Wis., 823 F.2d
1168, 1173 (7th Cir. 1987).
Under this analysis, Beischel’s notice claims are barred.
As we noted above, she filed suit in the circuit court for
Waukesha County where she obtained a temporary re-
straining order delaying the hearing on the nonrenewal of
her contract. The order was issued following a hearing at
which the judge indicated that he could “draw a distinction .
. . between termination and failing to renew,” hinting that
the District policy was not applicable and the restraining
order would therefore not harm anyone. Because the judge
was considering a temporary restraining order, however, he
did not make a finding in that regard. He indicated that he
would allow the parties to brief the issue. That the briefing
never occurred does not change the fact that Beischel
brought her claims regarding notice to the state circuit
court. She clearly could have obtained a finding on whether
the policy provisions regarding termination of a contract
apply in this situation—and, perhaps more importantly,
whether they supersede the notice provisions in the state
statute and in her contract. Perhaps fearing the direction in
which the state court judge was leaning, she did not do that
Nos. 03-2182 & 03-2327 7
and instead seeks to litigate the notice issue in this case.
She argues that the issues were not ripe at the time the
request for a restraining order was filed—that they did not
ripen until the hearing was held. That argument may save
her other claims, but it cannot save the claims regarding
notice. Beischel chose her forum and was required to
litigate the notice issue in that forum.
We move, then, to the claims regarding the nonrenewal
hearing. Beischel alleges that the actions of the school
board members deprived her “of her liberty interests and
property interests without due process of law . . . .” The
most seriously contested claim is whether the board was an
impartial decisionmaker at Beischel’s hearing. Beischel
argues that the board did not have the appearance of
impartiality because it simultaneously was complainant,
prosecutor, witness, and judge. In addition, some members,
she contends, felt personally attacked by her and some
made prehearing statements that created a impermissible
risk of partiality. She adds that the board attorney was
overly active in the hearing process.
Although the School District does not vigorously press the
issue, we will first examine whether Beischel has a property
interest in the renewal of her contract, which would in turn
require due process protections. To have a protectable
property interest, a plaintiff must show a legitimate claim
of entitlement, not just a hopeful expectation. Board of
Regents v. Roth, 408 U.S. 564 (1972). We look to independ-
ent sources, such as state law, to determine the scope of a
property interest. Dixon v. City of New Richmond, 334 F.3d
691 (7th Cir. 2003). Beischel’s claim comes from her
contract, which in turn references the state law we have
just been discussing. Her contract says that “[r]enewal and
non-renewal of this contract shall be governed by Sec.
118.24(6) and (7) Wisconsin statutes.” The question is
whether § 118.24 Wis. Stat. confers a property interest in
her continued employment.
8 Nos. 03-2182 & 03-2327
Under Wisconsin law, we have said, a dichotomy exists
between employment “at-will” and employment which can
be terminated only “for cause.” The latter receives due pro-
cess protections. Flynn v. Kornwolf, 83 F.3d 924 (7th Cir.
1996). A statute can confer a protected property interest on
an employee, as § 62.13(5) did for Wisconsin police officers
and firefighters. Larson v. City of Tomah, 193 Wis. 2d 225
(1995); Schultz v. Baumgart, 738 F.2d 231 (7th Cir. 1984).
Section 62.13(5) requires “just cause” for terminations.
The problem in this case is that § 118.24 and Beischel’s
contract seem to make her case fall between the two poles
set up in Wisconsin law. Does the contract give Beischel a
legitimate expectation of continued employment? We have
found no case based on Wisconsin law which gives us a
definitive answer.
Under Illinois law, in a similar fact situation, we have
chosen to pass the question as to whether a property
interest exists and go directly to the issue of the adequacy
of the procedures. In Crim v. Board of Education of Cairo
School District No. 1, 147 F.3d 535 (7th Cir. 1998), a su-
perintendent was told his contract would not be renewed.
He requested a hearing. At the hearing he was not allowed
to question board members as witnesses. In his subsequent
due process claim, he said that the board deprived him of a
property interest because state law required that his
contract be renewed automatically unless the board gave
notice, stated the reasons, and afforded him a hearing. We
found that there was no need to decide whether the statute
creates a cognizable property interest for purposes of the
federal due process clause because he received all the
process to which he was due.
In contrast, another Illinois case, Head v. Chicago School
Reform Board of Trustees, 225 F.3d 794 (7th Cir. 2000),
involved the nonrenewal of a principal’s contract. We found
that his contract made it absolutely clear that the principal
Nos. 03-2182 & 03-2327 9
had no expectation of renewal and that the Illinois School
Code did not override the contract. His contract
was exceptionally clear. It said, “This Agreement, including
and not withstanding the procedures set forth herein, shall
expire at the end of its stated term and shall not grant or
create any contractual rights or other expectancy of contin-
ued employment beyond the term of this Agreement.” At
802. Beischel’s contract contains no such explicit language.
Despite the somewhat gray area in which we find our-
selves, we are convinced that under Wisconsin law Beischel
did not have a legitimate expectation that her employment
would continue beyond the 2-year term of her contract.
There are no statutory limitations as to the bases on which
the nonrenewal decision can rest. In Hohmeier v. Leyden
Community High Schools District 212, 954 F.2d 461 (7th
Cir. 1992), we noted that “[t]he Supreme Court has held
that regulations must contain ‘explicitly mandatory lan-
guage,’ i.e., specific directives to the decisionmaker that if
the regulations’ substantive predicates are present, a
particular outcome must follow, in order to create a liberty
interest. Kentucky Dept. of Corrections v. Thompson, 490
U.S. 454, 463, 109 S. Ct. 1904, 1910, 104 L. Ed. 2d 506
(1989). We found these principles equally applicable to the
analysis of alleged property interests. See Wallace v.
Robinson, 940 F.2d 243, 246-47 (7th Cir.1991) (en banc).”
Even if Beischel had a property interest, however, her due
process rights were not violated. Her claim that they have
been grows out of the procedure set out in § 118.24 Wis.
Stat. That statute contemplates that the school board is the
body that hires and fires district employees. In doing so, it
must comply with certain procedures, such as the notice
requirements we just discussed. In addition, the law
provides that the employee “has the right to a hearing be-
fore the board prior to being given written notice of refusal
to renew the contract.” The statute then sets the school
board up as the body which both considers nonrenewal and
10 Nos. 03-2182 & 03-2327
ultimately decides following a hearing whether a contract
will be renewed. The board complied with the statutory
requirements, but Beischel nevertheless contends due
process requires that an outside decisionmaker hear her
case.
We disagree. Withrow v. Larkin, 421 U.S. 35 (1975), in-
volved whether a doctor’s license should be suspended for
allowing an unlicensed doctor to perform abortions in his
clinic. The Court said that it was not a violation of due
process to have the administrative agency, which inves-
tigated the complaint, also act as the decisionmaker. Re-
ferring to a bevy of examples, the Court summarized, “our
cases, although they reflect the substance of the problem,
offer no support for the bald proposition . . . that agency
members who participate in an investigation are disquali-
fied from adjudicating.” At 52. Exceptions to that proposi-
tion exist if the adjudicator has a pecuniary interest in the
outcome or if he has been the “target of personal abuse or
criticism from the party before him.” At 47.
Those principles were applied directly to Wisconsin school
boards in Hortonville Joint School District No. 1 v.
Hortonville Education Association, 426 U.S. 482 (1976),
which involved a teachers’ strike which violated state law.
When teachers were ordered to return to work, some did
not, and the board decided to conduct disciplinary hearings
for those remaining on strike. The issue the Court consid-
ered was “whether School Board members, vested by state
law with the power to employ and dismiss teachers, could,
consistent with the Due Process Clause of the Fourteenth
Amendment, dismiss teachers engaged in a strike prohib-
ited by state law.” At 483-84. The teachers contended that
because the board had manifested personal bitterness
toward the teachers and had been engaged in negotiating
with them, it would be a violation of their right to an
impartial decisionmaker for the board to conduct the
hearing. The teachers analogized their case to the revoca-
Nos. 03-2182 & 03-2327 11
tion of parole in Morrissey v. Brewer, 408 U.S. 471 (1972),
in which someone not involved in the case was required as
the decisionmaker. In rejecting the analogy, the Court
noted that under Wisconsin law a school board has broad
power over the management of the property and affairs of
the school district and is the only body vested with the
power to employ and dismiss teachers. In that situation, the
board could, consistent with due process concerns, conduct
the hearing and render a decision. The Court said:
State law vests the governmental, or policymaking,
function exclusively in the School Board and the State
has two interests in keeping it there. First, the Board is
the body with overall responsibility for the governance
of the school district; it must cope with the myriad day-
to-day problems of a modern public school system
including the severe consequences of a teachers’ strike;
by virtue of electing them the constituents have de-
clared the Board members qualified to deal with these
problems, and they are accountable to the voters for the
manner in which they perform. Second, the state
legislature has given to the Board the power to employ
and dismiss teachers, as a part of the balance it has
struck in the area of municipal labor relations; altering
those statutory powers as a matter of federal due
process clearly changes that balance. Permitting the
Board to make the decision at issue here preserves its
control over school district affairs, leaves the balance of
power in labor relations where the state legislature
struck it, and assures that the decision whether to
dismiss the teachers will be made by the body responsi-
ble for that decision under state law.
At 495-96.
In our case, the Stone Bank school board, having the
same powers and duties as those held by the Hortonville
board, was considering whether to renew the contract of its
12 Nos. 03-2182 & 03-2327
top administrator. Before it could finally decide what to do,
it had to give Beischel notice and allow her an opportunity
to present her case for renewal. The board heard her case
for 12 hours through the night, and its attorney facilitated
the hearing process. Through this ordeal, there is no in-
dication that Beischel did not have every opportunity to
plead her case and attempt to convince the board to renew
her contract.
But the question remains whether there was something
so unusual in this case that the board was biased to an
extent that allowing it to make the decision was a viola-
tion of the Due Process Clause. As we said, the Withrow
Court held that actual bias might arise if an adjudicator
has a pecuniary interest in the outcome or has been a target
of personal abuse from the party before him. No board
member had a pecuniary interest in the outcome of this
hearing. Beischel contends, though, that certain board
members felt that they were a target of personal abuse from
her. Board members Amy Lentz, Susan Musche, and
Kasimatis answered yes to a question whether they felt
personally attacked by Beischel for disagreeing with her.
However, their explanations of the attacks are less than
compelling. Lentz said Beischel personally attacked her
by saying she was “inappropriately confrontational with
teaching staff and had a history of being banned from a
previous school.” Musche felt Beischel had “questioned her
character and motives” by saying she had “blindsided” her
on an issue and by accusing her of inappropriately ordering
textbooks for her own children whom she home-schooled.
Kasimatis also felt “blindsided” and said Beischel acted “out
of a personal agenda.” We are not convinced that these
generalized statements can, as a matter of law, overcome
the presumption that the board members were carrying out
their duties with honesty and integrity.
As the Court also said in Withrow:
The contention that the combination of investiga-
tive and adjudicative functions necessarily creates an
Nos. 03-2182 & 03-2327 13
unconstitutional risk of bias in administrative adjudica-
tion has a much more difficult burden of persuasion to
carry. It must overcome a presumption of honesty and
integrity in those serving as adjudicators; and it must
convince that, under a realistic appraisal of psychologi-
cal tendencies and human weakness, conferring investi-
gative and adjudicate powers on the same individuals
poses such a risk of actual bias or prejudgment that the
practice must be forbidden if the guarantee of due
process is adequately implemented.
At 47.
It is surely a strange posture Beischel finds herself in—
arguing, in effect, that school board members cannot judge
her fairly because she has been sufficiently abusive to them
as to make them biased. It could hardly be desirable to
encourage employees to use personal abuse as a tactical
choice in an attempt to disqualify a board and get in its
place an alternative decisionmaker. And while we are on
the subject, we are also somewhat bewildered by Beischel’s
choice at the hearing to question the school board members
at length—throughout the night, in fact. It is hard to see
how such questioning was designed to convince them that
her contribution to the school district supported the renewal
of her contract.
As the cases show, it is not an easy matter to overcome
the presumption of “honesty and integrity.” Nor should it be
here. Wisconsin Statutes charge school boards with the
duty of hiring school district administrators. The school
board is accountable to the voters of the district for the
decisions it makes. For the board to delegate its statutory
responsibility and its obligation to the voters in any but the
most compelling circumstances could be seen as passing the
buck on one of the most important, and perhaps difficult,
decisions it is charged with making. The board was not
required to recuse itself from this spat and turn its author-
14 Nos. 03-2182 & 03-2327
ity over to an “independent adjudicator,” unaccountable to
the voters of the Stone Bank School District.
Finally, Beischel asserts what seems to be a separate
claim that the board violated her liberty interest by a press
release after the hearing. It stated in part that “Beischel
has demonstrated a pattern of . . . providing misinformation
to community and board members so many times now that
there is a loss of trust and credibility, not only for the board
but a segment of our community as well . . . .”
A person has no cognizable liberty interest in his reputa-
tion; consequently, allegations which merely damage one’s
reputation do not implicate a liberty interest. See Paul v.
Davis, 424 U.S. 693 (1976). This is true even when a
statement causes serious impairment of one’s future em-
ployment. Hojnacki v. Klein-Acosta, 285 F.3d 544 (7th Cir.
2002). But when a state actor attacks a person’s good name
in a manner that makes it “virtually impossible” for the
person to find new employment, that person’s liberty
interest to pursue his occupation is infringed. Townsend
v. Vallas, 256 F.3d 661 (7th Cir. 2001). The alleged de-
famatory statements must be false statements of fact.
Strasburger v. Bd. of Educ. of Hardin County, 143 F.3d 351
(7th Cir. 1998). In such a case, a hearing is required. Doyle
v. Camelot Care Centers, Inc., 305 F.3d 603 (7th Cir. 2002).
What we have here are the conclusions reached by the
board after a hearing. They are not the sort of statements
giving rise to a deprivation of a liberty interest.
In short, Beischel’s claims cannot be sustained. The
decision of the district court, insofar as it resolved issues in
Beischel’s favor, is REVERSED and the case is REMANDED for
the entry of an order granting judgment to the defendants.
Nos. 03-2182 & 03-2327 15
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-29-04