RJB Properties Inc v. Bd Educ City Chicago ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-1547
RJB PROPERTIES, INC.,
Plaintiff-Appellant,
v.
BOARD OF EDUCATION OF THE CITY OF CHICAGO,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 5226—Robert W. Gettleman, Judge.
____________
ARGUED SEPTEMBER 29, 2006—DECIDED NOVEMBER 15, 2006
____________
Before FLAUM, Chief Judge, and EVANS and WILLIAMS,
Circuit Judges.
FLAUM, Chief Judge. Shortly after the City of Chicago’s
Board of Education (the Board) denied RJB Properties,
Inc. (RJB) two contracts to provide janitorial services, RJB
sued the Board, claiming that the Board’s decision vio-
lated RJB’s equal protection and procedural due process
rights. The district court granted the Board’s motion for
summary judgment, concluding that RJB had not offered
evidence from which a jury reasonably could find that
the Board’s decision was irrational or that the Board
deprived RJB of a liberty interest. RJB appeals the dis-
trict court’s ruling. For the following reasons, we affirm.
2 No. 06-1547
I. Background
RJB is a minority-owned business principally located
in Orland Park, Illinois. It has done business with the
Board since 1987 and is owned by Ronald Blackstone.
Between 1993 and 2000, the Board awarded RJB more
than $18 million in milk contracts to provide milk to the
Chicago Public Schools (CPS). On January 31, 2000, the
Board’s Office of the Inspector General (OIG) interviewed
Blackstone, specifically inquiring about RJB’s role as a
prime contractor and as a minority business enterprise
(MBE) subcontractor for Nick’s Dairy Service, another one
of the Board’s milk providers. According to the OIG’s
interview summary, Blackstone admitted that his company
was not a dairy, owned no milk delivery trucks, milk
drivers, or milk storage facilities, and merely acted as a
broker for other companies. To bid on milk contracts,
Blackstone said that he contacted Chicago-area dairies,
obtained a quote for milk, and contacted a distributer to
determine a price for shipping costs. Based on these
price quotes, he calculated and submitted a bid price.
The interview summary also stated that OIG investiga-
tors asked Blackstone to name the company that paid RJB
for the services it provided as an MBE subcontractor for
Nick’s Dairy. Initially, Blackstone said that Nick’s Dairy
paid RJB, but he later said that RJB received payment from
another company, McMahon’s Dairy. Blackstone also told
investigators that RJB did not submit invoices to Nick’s
Dairy or McMahon’s Dairy, and he refused to provide
information concerning the frequency or amount
of payments RJB received from those companies. The OIG
told Blackstone that under the terms of the Nick’s Dairy
contract, RJB was required to verify that it received the
money it was due as an MBE subcontractor. Nevertheless,
Blackstone persisted in his refusal, claiming that he
furnished statements to the CPS Bureau of Affirmative
No. 06-1547 3
Action declaring that RJB received all of the money due
under the contract.
On March 28, 2001, the OIG issued a report discussing its
investigation into RJB’s dealings with the Board. The
report said that RJB signed a milk contract agreeing to
furnish milk and milk products and to participate directly
in the contract, but instead only acted as a broker, arrang-
ing for other companies to produce and deliver milk to CPS.
The report also said that McMahon’s Dairy did not provide
RJB with settlement or accounting sheets documenting the
payments it made; that Blackstone “refused to give any
information concerning the frequency or amount of pay-
ments he ha[d] received as a sub[contractor] to Nick[’s
Dairy]”; that Blackstone “refused to answer questions posed
in a subsequent interview with a court reporter”; and that
after RJB obtained a CPS contract to provide 1% and 2%
milk to schools, RJB exclusively delivered more expensive
1% milk without CPS’s authorization. The March 28, 2001
report never came to a definitive conclusion about whether
RJB engaged in misconduct because the OIG was unable to
obtain documents— such as contracts, leases, and financial
records—concerning RJB’s relationship with Nick’s Dairy
and McMahon’s Dairy.1
During 2003 and 2004, the OIG conducted a separate
investigation into Preferred Meals Systems, Inc. (Pre-
ferred), another food services company, to determine
whether it had complied with a contractual provision
requiring it to use MBE subcontractors that perform a
1
Blackstone told the OIG that McMahon’s possessed all of the
documents related to his participation in the Nick’s Dairy
contract. As a result, the OIG initiated a lawsuit against
McMahon’s seeking to enforce an administrative subpoena
demanding the records. By the time the OIG issued its March 28,
2001 report, however, the lawsuit was still pending. The case
was eventually dismissed for reasons not disclosed in the record.
4 No. 06-1547
commercially independent function. As part of that investi-
gation, the OIG interviewed Richard Thomas, the president
of T&T Foodservices, Inc., a minority-owned
food distributer. According to the OIG’s interview summary,
Thomas said that in 2002 someone at Preferred contacted
him about acting as a subcontractor for one of Preferred’s
CPS contracts, because RJB had “gotten into some trouble
and had to drop out of Preferred’s contract with CPS.” Def.
Ex. A. Thomas also said that Preferred offered T&T the
same deal it had with RJB, which was to get paid for doing
very little.
On September 17, 2003, the Board issued a request for
proposals (RFP) to provide janitorial services at the Board’s
620 schools, and on November 17, 2003, RJB submitted a
timely bid. On March 15, 2004, the Board’s Professional
Custodial Management Evaluation Team recommended
that the Board award RJB one of the contracts. On May 19,
Sean Murphy, who was then the Board’s Chief Purchasing
Officer, met with Michael Scott, the Board President, and
presented the Evaluation Team’s March 15 report. Scott
asked whether Murphy was aware of any past issues
regarding RJB’s contract performance. Murphy said that he
was not aware of any such issues but promised to investi-
gate whether such issues existed. After the meeting,
Murphy looked into RJB’s history of doing business with
the Board and read the OIG’s March 28, 2001 and April 23,
2004 reports.
On May 26, 2004, the Board had a closed-session meeting
and discussed the janitorial contracts. During the meeting,
Murphy exchanged a number of e-mail messages via his
Blackberry with Lynne Moore, the Board’s Director of
Facility Maintenance. Murphy indicated that he might be
willing to let RJB slide because three years had elapsed
since the OIG issued its reports. Moore initially responded
that the Board’s Law Department had “O.K.’d RJB” but
later wrote that one of the Board’s lawyers thought that
No. 06-1547 5
RJB was “shady” and that if the Board awarded RJB a part
of the contract, “OIG would for sure investigate and dig for
dirt.” Murphy responded, “O.K. Stay with the original plan.
That email was exactly what I needed. Thank you!” Murphy
testified in his deposition that the original plan was to
eliminate RJB from consideration during the closed-session
meeting. Shortly after the e-mail exchange with Moore,
Murphy recommended against hiring RJB, and the Board
followed his recommendation.
On April 7, 2004, the Board issued and advertised a
second RFP for janitorial services at 125 S. Clark Street
in Chicago, Illinois. On April 28, RJB submitted a bid. On
June 3, the Board’s Procurement Department issued a
memorandum noting that the Board had considered
RJB the front-runner for the first janitorial services
contract but later determined that RJB was “non-responsi-
ble” based on the March 28, 2001 OIG report. Pl. Supp. App.
at 87-88. On June 11, 2004, the Board sent RJB a letter
informing it that the Board was no longer considering RJB’s
first proposal (dated November 17, 2003). On July 1, 2004,
the Board awarded janitorial contracts to companies named
A&R, Total Facility, and We Clean.
On October 1, 2004, the Board sent RJB a letter stating
that the Board was no longer considering RJB’s second
proposal (dated April 28, 2004). According to Board Chief
Purchasing Officer Heather Obora, the letter was a stan-
dard “will not award letter,” which encouraged RJB to
continue participating in the RFP process. The letter did
not inform RJB that the Board had found it non-responsi-
ble. RJB has not performed any work for the Board since
the Board denied RJB the two janitorial contracts.
On August 17, 2005, the Board awarded a multi-million
dollar milk contract to a joint-venture called C&M JV1.
According to Obora’s testimony, Nick’s Dairy and
McMahon’s Dairy might be, and Bareman’s Dairy prob-
ably is, a part of C&M JV1.
6 No. 06-1547
RJB filed its original complaint on August 9, 2004 and a
second amended complaint on August 1, 2005, which
alleged a “class of one” equal protection claim, a pro-
cedural due process claim, and a state law claim that is not
part of this appeal. The district court granted the Board’s
motion for summary judgment on RJB’s equal protection
and procedural due process claims. It concluded that the
Board had a rational reason for not awarding RJB contracts
and that RJB had not demonstrated a genuine issue of
material fact with regard to whether the Board had de-
prived it of a liberty or property interest.
II. Analysis
The Court reviews de novo the district court’s entry of
summary judgment. See Lee v. Keith, 463 F.3d 763, 767 (7th
Cir. 2006). Under Federal Rule of Civil Procedure 56(c), a
party moving for summary judgment has the initial burden
of “informing the district court of the basis for its motion,
and identifying those portions of ‘the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any,’ which it believes demonstrate
the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving
party meets its burden, summary judgment is proper if the
non-moving party “fails to make a showing sufficient to
establish the existence of an element essential to that
party’s case, and on which that party will bear the burden
of proof at trial.” Id. at 322. In other words, to survive the
Board’s summary judgment motion, RJB had to offer
evidence from which a jury reasonably could find in its
favor. See Yindee v. CCH, Inc., 458 F.3d 599, 601 (7th Cir.
2006).
No. 06-1547 7
A. Equal Protection
RJB contends that the district court erred by granting the
Board summary judgment on RJB’s “class of one” equal
protection claim. “The purpose of the Equal Protection
Clause of the Fourteenth Amendment is to ‘secure every
person within the State’s jurisdiction against intentional
and arbitrary discrimination, whether occasioned by
express terms of a statute or by its improper execution
through duly constituted agents.’ ” Smith v. City of Chicago,
457 F.3d 643, 650 (7th Cir. 2006) (quoting Vill. of
Willowbrook v. Olech, 528 U.S. 562, 564 (2000)). Where, as
in this case, the plaintiff’s claim does not involve a funda-
mental right or a suspect classification, the Court evaluates
the claim under rational basis review. Id.To succeed on a “class of one” equal protection claim, a
plaintiff must prove that the State, without rational reason,
treated it differently from other similarly situated entities.2
Nevel v. Vill. of Schaumburg, 297 F.3d 673, 681 (7th Cir.
2002). The plaintiff bears a “very significant burden” of
offering evidence that other entities are similarly situated
in all relevant respects. Discovery House, Inc. v. Consoli-
dated City of Indianapolis, 319 F.3d 277, 283 (7th Cir.
2003). The plaintiff’s evidence must be such that it allows
a reasonable jury to “eliminate any reasonably conceivable
state of facts that could provide a rational basis for the
classification.” Id. at 282; see also Racine Charter One, 424
F.3d at 683; McDonald v. Vill. of Winnetka, 371 F.3d 992,
1003 (7th Cir. 2004); Bell v. Duperrault, 367 F.3d 703, 708
2
The Court has noted that a “class of one” equal protection claim
may also require a plaintiff to prove one additional element: that
the State acted with an illegitimate animus. See Racine Charter
One, Inc. v. Racine Unified Sch. Dist., 424 F.3d 677, 683-84
(7th Cir. 2005). As in Racine Charter One, we need not decide
whether such a requirement exists, because RJB has not
offered evidence satisfying the less demanding standard.
8 No. 06-1547
(7th Cir. 2004); Purze v. Vill. of Winthrop Harbor, 286 F.3d
452, 455 (7th Cir. 2002).
RJB has not pointed to a similarly situated company that
the Board treated more favorably. Though RJB has offered
evidence that the Board continues to do business with other
companies that the OIG investigated for misconduct, RJB
has not pointed to a company that has been accused of the
same types of wrongdoing. The OIG’s March 28, 2001 report
suggested that RJB was involved in a wide range of suspi-
cious activity: performing no “commercially independent
function” as an MBE subcontractor; refusing to provide
information about income it received as a subcontractor for
Nick’s Dairy; overcharging the Board for milk; passing
money designated for an MBE to a majority owned com-
pany; and making fraudulent misrepresentations in
contractor disclosure documents. See Pl. Supp. App. 46-48.
The OIG also accused McMahon’s and Nick’s Dairy of
overcharging and not turning over documents, but RJB has
not offered evidence that the OIG accused those companies
of entering milk contracts without possessing the equip-
ment to perform on those contracts or making fraudulent
statements on contractor disclosure documents. In the same
vein, the Board awarded contracts to Preferred, Total
Facility, and T&T, companies that the OIG also accused of
wrongdoing, but RJB has not offered evidence that the OIG
accused those companies of overcharging or refusing to turn
over documents.
Because OIG’s allegations about RJB were different
than those leveled against other companies, the Board
had a rational reason to treat RJB differently. See Bell, 367
F.3d at 708 (holding that individuals were not similarly
situated where they submitted applications for pier exten-
sions at different times, requested different extensions, or
requested to replace existing structures rather than build
new ones). Indeed, the Board rationally could have con-
cluded that the OIG’s unique (and more numerous) allega-
No. 06-1547 9
tions against RJB made RJB more likely to engage in future
misconduct and less likely to perform the janitorial contract
to the Board’s satisfaction.
RJB contends that the reasons the Board now provides for
not selecting it to perform the two janitorial contracts are
not the same as the ones provided by Sean Murphy in his e-
mail exchange with Lynne Moore just before the Board
made its decision. However, even assuming that
the government’s present reasons for its decision are
different from those it previously provided, this change
in position has no bearing on whether the Board acted
rationally. Under rational basis review, “the plaintiff has
the burden of proving the government’s action irrational,”
and “[t]he government may defend the rationality of its
action on any ground it can muster, not just the one
articulated at the time of decision.” See Smith, 457 F.3d
at 652.
RJB also maintains that it never overcharged for milk,
refused to turn over documents, or acted as a minority pass-
through company. This argument also misses the point.
Regardless of whether RJB actually engaged in wrongdoing,
the OIG suspected it of wrongdoing, and that is enough to
justify the Board’s decision not to do business with them.
The government does not violate the Equal Protection
Clause by making decisions based on rational suspicions not
confirmed by evidence satisfying some burden of proof. See
Vaughn v. Sullivan, 83 F.3d 907, 913 (7th Cir. 1996)
(stating, in the context of rational basis review, that “a
legislative decision ‘may be based on rational speculation
unsupported by evidence or empirical data.’ ”) (quoting FCC
v. Beach Commc’ns, Inc., 508 U.S. 307, 315 (1993)).
10 No. 06-1547
B. Procedural Due Process
RJB also contends that the district court erred by grant-
ing summary judgment on its procedural due process claim.
To demonstrate a procedural due process violation, a
plaintiff must prove that the State deprived it of a protected
liberty or property interest and failed to provide adequate
process. See Sonnleitner v. York, 304 F.3d 704, 711 (7th Cir.
2002).
RJB maintains that the Board deprived it of a liberty
interest in its good name, reputation, honor, or integrity, so
that it was foreclosed from obtaining employment opportu-
nities. See Mitchell v. Glover, 996 F.2d 164, 167 (7th Cir.
1993). To prove a deprivation of this liberty interest, a
plaintiff must establish that the defendant publicly dis-
closed stigmatizing information that caused the plaintiff to
suffer a tangible loss of other employment opportunities.
See Harris v. City of Auburn, 27 F.3d 1284, 1286 (7th Cir.
1994). “In such cases, the employee’s good name, reputa-
tion, honor or integrity must be called into question in a
manner that makes it virtually impossible for the employee
to find new employment in his chosen field.” Townsend v.
Vallas, 256 F.3d 661, 670 (7th Cir. 2001).
The district court ruled that RJB had not offered evidence
indicating that the Board publicly disclosed stigmatizing
information or that the Board precluded RJB from pursuing
its desired employment field. RJB’s only argument in
response is that the Board disseminated stigmatizing
information by placing it in documents available to the
public under the Illinois Freedom of Information Act. This
Court has held, however, that information is not publicly
disseminated where it may be, but has not yet been,
disclosed to third parties. See Olivieri v. Rodriguez, 122
F.3d 406, 408 (7th Cir. 1997); Johnson v. Martin, 943 F.2d
15, 17 (7th Cir. 1991) (“[T]he mere existence of damaging
information in Johnson’s personnel file cannot give rise to
No. 06-1547 11
a due process challenge.”) (citing Clark v. Maurer, 824 F.2d
565, 566 (7th Cir. 1987)). Because RJB has not offered
evidence that the Board actually disseminated stigmatizing
information to the public—only that the Board made
stigmatizing information available in a file—no jury
reasonably could find that the Board deprived RJB of a
liberty interest. Accordingly, the district court correctly
granted the Board’s motion for summary judgment on RJB’s
procedural due process claim.
III. Conclusion
For the foregoing reasons, we AFFIRM the district court’s
ruling.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-15-06