Opinions of the United 1997 Decisions States Court of Appeals for the Third Circuit

1-9-1997

Independent Entr Inc v. Pittsburgh Water Precedential or Non-Precedential:

Docket 96-3009

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N0. 96-3009

INDEPENDENT ENTERPRISES INC.; THOMAS LOZECKI Appellants

v.

PITTSBURGH WATER AND SEWER AUTHORITY; CITY OF PITTSBURGH

On Appeal From the United States District Court For the Western District of Pennsylvania (D.C. Civil Action No. 95-cv-01358)

Argued July 25, 1996

BEFORE: BECKER, STAPLETON and MICHEL,* Circuit Judges

(Opinion Filed January 9, 1997)

Alan S. Miller (Argued) Picadio, McCall, Kane & Norton Suite 3180 USX Tower 600 Grant Street Pittsburgh, PA 15219 Attorneys for Appellants

Kimberly A. Brown (Argued) Stacey L. Jarrell Thorp, Reed & Armstrong One Riverfront Center Pittsburgh, PA 15222 and Craig E. Frischman Kapetan, Meyers, Rosen, Louik & Raizman Suite 200, The Frick Building Pittsburgh, PA 15219-6003 Attorneys for Appellee Pittsburgh Water and Sewer Authority

1 * Hon. Paul R. Michel, United States Circuit Judge for the Federal Circuit, sitting by designation. Virginia S. Scott (Argued) City of Pittsburgh Department of Law 313 City County Building Pittsburgh, PA 15219 Attorney for Appellee City of Pittsburgh

OPINION OF THE COURT

STAPLETON, Circuit Judge:

We here review the district court’s dismissal under

Fed. R. Civ. P. 12(b)(6) of a multiple-count complaint brought

against the City of Pittsburgh (the “City”) and the Pittsburgh

Water & Sewer Authority (the “Authority”) by Independent

Enterprises Inc. (“Independent”), a construction company, and

Thomas Lozecki, a City taxpayer and Authority ratepayer.1 The

claims asserted in the complaint include a civil contempt of

court claim, an equal protection claim and procedural and

substantive due process claims brought under

,

and pendent state law claims. All of these claims arose in the

context of the Authority’s failure to award Independent three

Authority contracts on which Independent had submitted the lowest

bids.

1. Lozecki is a party only to the pendent state law claims.

2 I. The Facts

Because the district court dismissed Independent's

claims pursuant to a motion to dismiss under Fed R. Civ. P.

12(b)(6), we accept as true all factual allegations in

Independent’s complaint and all reasonable inferences therefrom.2

Nami v. Fauver,

(3d Cir. 1996); Spence v. Straw,

(3d Cir. 1995).

In 1986, Independent sued the City and Authority in the

United States District Court for the Western District of

Pennsylvania after the City declared that Independent was

"noncompetent" to bid on any projects in which it had an interest

and the Authority consequently rejected a low bid by Independent.

In settlement of that suit, the parties agreed to a consent

decree that was ultimately entered by the court. The consent

decree provided that Independent could not be "debarred" from

bidding on City contracts based on any past performance, and that

if the City or Authority wanted to "disqualify" Independent from

2. The Appellees filed a "Motion to Dismiss or For Judgment on the Pleadings." Independent argues on appeal that the district court converted the Appellees' motion to one for summary judgment by considering matters outside of the pleadings, and that such conversion was improper because Independent was not given notice of the conversion or an opportunity to submit relevant materials. See Fed. R. Civ. P. 12(b). Independent thus asserts that "it was reversible error for the district court to grant the motion without having afforded Independent any opportunity to submit materials under Rule 56." Appellant's Brief at 34. Because Independent indeed was not given an opportunity to submit evidence to defeat a motion for summary judgment, we will treat the district court's decision as a 12(b)(6) dismissal and will disregard anything other than the allegations of the complaint when conducting our plenary review of that decision.

3 City or Authority work because of problems with future

performances, it would first have to conduct a hearing under the

Pennsylvania Local Agency Law. Between the issuance of the

consent decree and the solicitation of bids for the 1995

contracts at issue here, Independent satisfactorily performed

"numerous" contracts for both the City and Authority.

In May 1995, the Authority solicited bids for two

projects, the "Annual Water Line Contract" and the "Grandview

Avenue Project." Independent submitted bids for both projects.

In accordance with the Authority's "MBE/WBE Utilization

Requirements," each of Independent's bids included a list of

minority- and women-owned business enterprises ("MBE/WBEs") that

Independent intended to use as subcontractors if awarded the

contract. One of the MBEs Independent listed was Whaley & Sons,

a firm that Independent claims was certified by the Authority as

an approved MBE/WBE vendor. Independent's bids were the lowest

for both projects, and an independent consultant recommended that

the Authority award both contracts to Independent.

Before the Authority made a decision about awarding

the contracts, the City's Deputy Mayor of Government Operations,

Salvatore Sirabella, issued a memorandum (the "Sirabella

memorandum") to the Authority's Executive Director. In the

memorandum Sirabella expressed concern about the cost over-run on

a recent Authority project that had been completed by

Independent, and directed the Authority to "temporarily halt

awarding any contracts to Independent ...." App. at 87. Shortly

after receiving the Sirabella memorandum, the governing body of

4 the Authority (the "Board") decided that Whaley & Sons was an

unacceptable MBE subcontractor and resolved to reject

Independent's bids for both the Water Line Contract and the

Grandview Avenue Project "for failure to meet the MBE/WBE

requirements of the specifications." Auth. Res. 67 & 68, App. at

197-98. The Board then awarded the two contracts to the next

lowest bidders. About a month later, the contracts with those

bidders were rescinded, all bids were rejected, and the Authority

resolved to readvertise both the Water Line and Grandview Avenue

projects.

In June, 1995, Independent submitted a bid to the

Authority for the "Annual Sewer Improvement Contract." Again,

Independent's was the lowest responsible bid. And again, despite

its low bid, Independent was not awarded the contract. There was

apparently some communication between the attorney for the

Authority and Independent regarding the absence of a Power of

Attorney form in Independent's bid package, but ultimately the

Authority did not reject Independent's bid on that basis.

Instead, the Authority's Board simply rejected all of the Sewer

Improvement Contract bids without explanation and readvertised

the project.

In response to the Authority's failure to award it the

Water Line Contract, the Grandview Avenue Project, and the Sewer

Improvement Contract, Independent filed this suit. Its

complaint alleged that: (1) the Authority and City violated the

terms of the consent decree by "disqualifying" Independent from

Authority and City contracts; (2) the Authority's MBE/WBE

5 Utilization Requirements discriminate against Independent and

other construction companies on the basis of race, ethnicity,

national origin, and/or sex, thereby denying them the equal

protection of the laws; and (3) the Authority's and the City's

disqualification of Independent, and the Authority's resulting

refusal to award it the Water Line Contract, the Grandview Avenue

Project, and the Sewer Improvement Contract, deprived Independent

of property without procedural and substantive due process.

The district court dismissed all of Independent’s

federal claims. First, the court dismissed the § 1983 claims

against the Authority on the ground that the Authority is not a

"person" within the meaning of § 1983. The district court then

dismissed the civil contempt claim on the ground that Independent

had not been "debarred" from bidding on City or Authority

contracts.

Turning to Independent's procedural due process claim,

the district court held that "Pennsylvania provides a judicial

procedure for unsuccessful bidders to challenge whether a local

contracting authority has violated a bidder's rights under the

Municipal Authority Act." Op. at 7. In the court's view, an

adequate post-deprivation procedure thus existed to satisfy the

demands of the Due Process Clause. The court dismissed

Independent's substantive due process claims because it found

that Independent had not alleged facts showing that the City had

deprived it of a protected property interest.

With respect to the equal protection claim, the court

held that Independent lacked standing because the complaint

6 failed to allege a causal connection between the MBE/WBE

requirements and the injury Independent had suffered from the

rejection of its bids.3

We will affirm the dismissal of Independent's due

process claims. We will reverse the judgment of the district

court, however, and remand for further proceedings on

Independent's civil contempt and equal protection claims.

II. The Civil Contempt Claim

In Count I of its complaint, Independent alleges that

the Authority and City are in civil contempt of court because

their disqualification of Independent pursuant to the Sirabella

memorandum and the Authority's resulting rejection of

Independent's three low bids violated the terms of the 1986

consent decree. The district court dismissed the contempt claim

because it found that the facts alleged did not show a violation

of the terms of the consent decree. We disagree.

The 1986 consent decree provided in part: 2. Independent shall not be debarred from bidding on any City of Pittsburgh Contract based on past conduct or performance.

3. Independent, City and Authority shall act in a cooperative manner on all contracts. Independent shall:

(a) cooperate with inspectors at job site; and

3. The district court, having dismissed the federal claims, declined to exercise supplemental jurisdiction over Independent's state claims and dismissed them without prejudice. It may reconsider that decision on remand in light of our disposition of the federal claims.

7 (b) cooperate with consultants and officials of the City and Authority in regard to problems that occur at the job site and administrative matters; and

(c) move quickly to resolve any disputes with adjoining property owners as a result of their work.

4. If, because of problems with future performances, the City or Authority desire to disqualify Independent from City or Authority work, a hearing shall be held prior to disqualification under the Pennsylvania Local Agency Law, and Independent shall have all rights afforded thereunder.

App. at 138-39.

At the time the consent decree was entered, the

Pittsburgh Code contained a provision entitled "Debarment from

Bidding On and Participating in City Contracts." § 161.22. This

provision states that any person or enterprise that had committed

an "offense," as defined therein, will not be allowed to bid and

will not be "a responsible bidder on any city contract."

"Offense" is defined in a non-exclusive list to include sixteen

different categories of conduct ranging from fraud in connection

with the obtaining or performance of a contract to the following: (10) Willful or material failure to perform the terms of a contract or agreement in accordance with specifications or within contractual time limits;

(11) A record of failure to perform or of unsatisfactory performance in accordance with the terms of one or more contracts, provided that the failure or unsatisfactory performance was within a reasonable period of time preceding the determination to debar and was caused by acts within the control of the person or enterprise debarred;

* * *

8 (16) Other cause affecting responsibility as a city contractor or vendor as may be determined by the city.

Pittsburgh Code § 161.22(b). Debarments under this provision are

to last for "a reasonable, definitely stated period . . .

commensurate with the seriousness of the cause therefore," but

"as a general rule [are not to] exceed three years." Id.

§ 161.22(d)(3). Debarment proceedings are initiated at the

discretion of the Mayor and the City's Director of the Department

of General Services. The stipulated process includes a notice to

the contractor and a right to a hearing before the Director at

which the cause for the debarment has to be established by a

preponderance of the evidence.

The Pennsylvania Local Agency Law referenced in

paragraph 4 of the consent decree is found in Title 2 of the

Pennsylvania Consolidated Statutes Annotated at §§ 551-555 and

751-754.4 These subchapters relate solely to process; they

stipulate the procedural rights that interested parties will have

in any "adjudication" by a local agency, e.g., the rights to a

hearing, representation by counsel, cross-examination, a written

decision, judicial review, etc. Nothing in these subchapters

4. Title 2 is devoted to "Administrative Law and Procedure." Subchapter 5A provides procedure for "Commonwealth agencies" and subchapter 5B stipulates procedure for "local agencies", which include any "government agency other than a Commonwealth agency." 2 Pa. C.S.A. § 101. Section 105 of Title 2 provides:

The provisions of Subchapter B of Chapter 5 (relating to practice and procedure of local agencies) and Subchapter B of Chapter 7 (relating to judicial review of local agency action) shall be known and may be cited as the "Local Agency Law."

9 describes the circumstances under which a would-be contractor may

be foreclosed from contracting with a local agency.

In the context of these statutory provisions and the

litigation that produced the consent decree, the intent of

paragraph 4 seems clear and unambiguous. Independent was

concerned about being foreclosed from doing City and Authority

work based on complaints about its conduct and contract

performance. In the interest of settling the pending lawsuit,

the City was willing to assure that there would be no foreclosure

based on past conduct or performance. While it and the Authority

were not willing to give the same assurance with respect to

future contract performance, they were willing to commit to

hearing Independent's side of the story regarding any alleged

deficiency in its performance before foreclosing it from City and

Authority work. Independent would be able to give its side in a

hearing to be held in accordance with the Pennsylvania Local

Agency Law. This reading of paragraph 4 gives the word

"disqualified" its commonly understood meaning. "Disqualify,"

according to Webster, means "to deprive of a power, right or

privilege" or make "ineligible . . . for further competition

because of violations of the rules," Webster's Ninth New

Collegiate Dictionary 366 (1990); Black defines "disqualify" as

"to render ineligible." Black's Law Dictionary 472 (6th ed.

1990).

Given this intent, we further think it clear that if

Independent can prove its allegations, it will have established a

violation of paragraph 4 of the consent decree. If the Sirabella

10 directive, as alleged, resulted in Independent's not being

considered for City or Authority work for a period of time

because of a cost overrun on a contract entered after the consent

decree, the failure to give Independent a hearing on the overruns

was a violation of paragraph 4.

In reaching its contrary conclusion, the district court

reasoned that (1) "debarred" in paragraph 2 was intended to

include only disqualifications for City work pursuant to the

"formal procedure" spelled out in § 161.22 of the City Code; (2)

"disqualify" in paragraph 4 is synonymous with the concept of

"debar" in paragraph 2; (3) there was no "formal procedure" under

§ 161.22 conducted in connection with the Sirabella directive;

and (4) therefore, there was no disqualification of Independent

and no need for a hearing. We believe this approach leaves

paragraphs 2 and 4 virtually without effect.

Even assuming that "debarred" in paragraph 2 refers to

a foreclosure from City work for a period of time for the reasons

set forth in § 161.22, it seems highly unlikely to us that the

parties intended to limit its scope to situations in which the

City both foreclosed Independent and invoked the formal process

of § 161.22. After all, paragraph 2 simply says that the City

won't debar Independent, i.e., declare it a non-responsible

bidder, for past performance. But even further assuming that

paragraph 2 is so limited, "disqualified" could not have been

intended to limit the scope of paragraph 4 to situations where

the "formal process" of § 161.22 is invoked. That process is

11 City-specific and, by its own terms, cannot be invoked by the

Authority.5

Giving the word "disqualify" and the phrase "because of

problems with future performances" in paragraph 4 their commonly

understood meaning, we find paragraph 4 broad enough to include a

blanket foreclosure of Independent from City or Authority work

because of an overrun on a post-consent decree contract.

Moreover, it seems to us that the stated causes for debarment

under § 161.22 are broad enough to include such a foreclosure.

Accordingly, our conclusion would not be different even if we

regarded the term "disqualify" in paragraph 4 as limited by the

use of "debarred" in paragraph 2.

III. The § 1983 Claims

A. The "Person" Requirement

Independent brought its equal protection and due

process claims against the City and Authority under 42 U.S.C.

5. In its opinion, the district court commented that, even assuming there had been a violation of the consent decree, the appropriate remedy would have been to file an application in the earlier suit. In response to the district court's suggestion, Independent stresses that the judge who presided over the former civil action had retired before the present action was commenced. Therefore, Independent argues, nothing should preclude it from including the contempt of court claim with its other claims against Appellees, and indeed that "[t]he assertion of all claims in one action serves the interests of judicial economy of resources. Moreover, even if the civil action was required to be brought at the old docket number, the proper action would be to transfer the matter rather than dismissal [sic]." Appellant's Brief at 21 n.6. We agree that Independent should not be precluded from pursuing its contempt claim merely because it, for apparently logical reasons, failed to file that claim under the docket number under which the consent decree was entered.

12 § 1983, which provides that: Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State . . . subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to be deprived of any rights, privileges, or immunities secured by the Constitution or laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

.

In support of its conclusion that the Authority "is not

a 'person' within the meaning of section 1983," Op. at 4, the

district court cited Will v. Michigan Department of State Police,

(1989). Will held that "neither a State nor its

officials acting in their official capacities are 'persons' under

§ 1983." Id. at 71. We cannot accept the district court's

conclusion that Will compels a finding that the Authority is not

a "person" under § 1983. Indeed, the limited record presently

available on the issue indicates that the Authority, in all

likelihood, is a "person" under § 1983.6

6. At oral argument, counsel for the Authority informed us that the Authority had not argued before the district court that it was not a "person" under § 1983. Counsel further candidly acknowledged that she could cite no case in which a public entity had been held not to be a "person" on the basis of a record similar to the one before us. Counsel stopped short of conceding, however, that the Authority is a "person" under § 1983. As a result, the district court, on remand, will have to determine whether the Authority is a "person." This will require it to afford the parties the opportunity to develop a record and to then weigh, with the assistance of the parties, the factors identified by this court in Fitchik v. New Jersey Transit Rail Operations, Inc.,

(3d Cir.) (in banc), cert. denied,

(1989), and Bolden v. Southeastern Pennsylvania Transportation Authority,

(3d Cir. 1991) (in banc), cert. denied,

(1992).

13 The framework for addressing the question of whether

the Authority is a "person" within the meaning of § 1983 was

established by Will and the earlier case of Monell v. New York

City Department of Social Services,

(1978). In

Monell, the Supreme Court overturned its earlier decision in

Monroe v. Pape,

(1961), and held that municipalities

and other local government units are "persons" subject to

liability under § 1983.

. However, the Court

limited its holding "to local government units not considered

part of the State for Eleventh Amendment purposes."

at 690

n.54.

In Will, the Court gave effect to the limitation

expressed in Monell. Relying on the ordinary meaning of the term

"person," the legislative history of § 1983, and federalism

concerns, the Court held that "neither a State nor its officials

acting in their official capacities are 'persons' under § 1983."

. The Will Court emphasized the continuing

validity of Monell, however, and limited Will's holding "only to

States or governmental entities that are considered 'arms of the

State' for Eleventh Amendment purposes."

. The limitations that define the boundaries of the

holdings in Monell and Will establish that the most important

inquiry in determining whether a governmental entity is a

"person" within the meaning of § 1983 is whether the entity is an

"'arm[] of the State' for Eleventh Amendment purposes." Id.; see also Monell, 463 U.S. at 690 n.54. In Fitchik v. New Jersey

Transit Rail Operations, Inc., this court summarized the factors

14 to be considered in analyzing an entity's status as an "arm of

the State" entitled to Eleventh Amendment immunity: (1) Whether the money that would pay the judgment would come from the state (this includes three ... factors--whether payment would come from the state's treasury, whether the agency has the money to satisfy the judgment, and whether the sovereign has immunized itself from responsibility for the agency's debts); (2) The status of the agency under state law (this includes four factors--how state law treats the agency generally, whether the entity is separately incorporated, whether the agency can sue or be sued in its own right, and whether it is immune from state taxation); and (3) What degree of autonomy the agency has.

873 F.2d at 659 (summarizing more detailed list of factors set

forth in Urbano v. Board of Managers,

(3d Cir.

1969), cert. denied,

(1970)). See also Bolden, 953

F.2d at 814-16.

We have repeatedly held that the most important factor

in determining whether an entity is an "arm of the State" for

purposes of the Eleventh Amendment is "whether any judgment would

be paid from the state treasury." Fitchik, 873 F.2d at 659; see

also Christy v. Pennsylvania Turnpike Comm'n,

, 1145

(3d Cir.), cert. denied,

(1995); Bolden, 953 F.2d at 818; Urbano,

. According to Pennsylvania's

Municipal Authorities Act of 1945 (the "MAA"), under which the

Authority is organized, the Authority "shall have no power ... to

pledge the credit or taxing power of the Commonwealth of

Pennsylvania ..., nor shall any of its obligations be deemed to

be obligations of the Commonwealth ..., nor shall the

Commonwealth ... be liable for the payment of principal or

15 interest on such obligations." 53 P.S. § 306(C). The MAA also

grants the Authority the power "[t]o fix, alter, charge and

collect rates and other charges ... for the purpose of providing

for the payment of the expenses of the Authority, ... [and] the

payment of the principal and of interest on its obligations ...."

Id. § 306(B)(h). Because the Authority also has the power "[t]o

sue and be sued," id. § 306(B)(b), the "obligations" which the

Authority will pay from the funds collected through "rates and

other charges" presumably include judgments. Under these

provisions, it appears that the Authority's funding does not come

primarily from the State, and that any judgment against the

Authority would not be "paid from the state treasury." This

would weigh heavily against the Authority's being considered "an

arm of the State" for Eleventh Amendment purposes.

The second factor, the Authority's status under state

law, also appears to weigh against a finding that the Authority

is an "arm of the State," if less clearly. Like SEPTA, which we

held in Bolden is a “person” under § 1983, 953 F.2d at 820, the

Authority appears to exhibit some attributes not characteristic

of an arm of the State and other attributes that are associated

with the State. On the one hand, a municipal authority is "a

body politic and corporate," 53 P.S. § 302, with the power to sue

and be sued. Id. § 306(B)(b). In addition, municipal agencies

are not entitled to sovereign immunity from state tort actions

under 42 Pa. C.S.A. § 8521, but instead are "local agencies"

entitled only to governmental immunity under 42 Pa. C.S.A.

16 § 8541. See Miller v. McKeesport Mun. Water Auth.,

(Pa. 1989); E-Z Parks, Inc. v. Larson,

(Pa.

Cmwlth. 1985), aff'd per curiam,

(Pa. 1986).

On the other hand, municipal authorities have the power

of eminent domain, 53 P.S. §306(B)(l), and have been held to be

"agencies of the Commonwealth" independent from their

incorporating municipality and not governed by laws empowering

local municipalities. Whitemarsh Township Auth. v. Elwert,

(Pa. 1964); Forney v. State Ethics Comm'n,

(Pa. Cmwlth. 1981); Highland Sewer & Water Auth. v.

Engelbach,

(Pa. Super. 1966).

Like the first two, the third factor, the Authority’s

“degree of autonomy” from the state, seems to weigh against a

finding that the Authority is an “arm of the State.” The

provisions of the MAA afford the Authority a high degree of

autonomy from the Commonwealth of Pennsylvania. For example, the

members of the Board--which exercises all of the Authority's

powers--are appointed not by the State but by the governing body

of the City of Pittsburgh, the incorporating municipality. 53

P.S. § 309(A)(a). The Authority is granted "all powers necessary

or convenient" for carrying out its purposes, including, inter alia, the power to sue and be sued, to purchase property, to make

by-laws, to appoint officers and define their duties, and to make

contracts. Id. § 306(B).

We have thus far discussed only the most significant

inquiry identified by Will and Monell, i.e., whether an entity is an "arm of the State" for Eleventh Amendment purposes. Will also

17 relied on two additional factors in reaching the conclusion that

a State is not a "person" within the meaning of § 1983 -- (1)

"the language of Section 1983 and the meaning of the word

'person'" and (2) the fact that "states enjoyed sovereign

immunity from suit at common law, and ... Section 1983 was not

intended to override 'well established immunities or defenses

under common law.'" Bolden, 953 F.2d at 816. We note that

neither of these factors supports the district court's finding

that the Authority is not a "person" under § 1983.

First, although the term "person" in common usage does

not include the "sovereign," Will,

, the term does

refer to "bodies corporate and politic," meaning "corporations,

both private and public (municipal)."

. Because the

Authority is expressly identified under the MAA as a "body

politic and corporate," 53 P.S. § 302, and appears to be the sort

of "public corporation" that is included in the "common usage" of

the term "person," the linguistic rationale underlying Will's

exclusion of States from the "persons" suable under § 1983 does

not apply to the Authority.

Second, the Will Court also recognized that "in enacting § 1983, Congress did not intend to override well-

established immunities under the common law."

.

Therefore, because the sovereign immunity to which States are

entitled was a well-recognized principle of the common law at the

time § 1983 was enacted, the Court was unwilling to extend § 1983

liability to States. Id. The Authority, however, cannot claim

the same common law immunity from suit historically enjoyed by

18 States. In Owen v. City of Independence,

(1980), the Supreme Court noted that municipalities had lost

their entitlement to sovereign immunity by the end of the 19th

century. In addition, Pennsylvania courts have explicitly held

that local municipal authorities such as a public parking

authority and a local redevelopment authority are not entitled to

the sovereign immunity enjoyed by the Commonwealth. See, e.g.,

Trustees of Second Presbyterian Congregation v. Public Parking

Auth. of Pittsburgh,

(Pa. 1956); Greer v.

Metropolitan Hosp.,

(Pa.Super. 1975).

Therefore, treating the Authority as a "person" under § 1983

would not override any common law immunity to which the Authority

is entitled.

It would be premature to express an opinion on the

result that the required weighing process should produce. A

record must first be developed and the parties permitted to

comment upon it. We hold only that the Authority may be a person

within the meaning of § 1983 and that the district court erred in

ruling to the contrary on the present record.

B. The Equal Protection Claim Having concluded that it was error to dismiss the

§ 1983 claims against the Authority on the ground that it is not

a "person," we now turn to Independent's equal protection claim.

It alleges that the Authority's MBE/WBE Utilization

Requirements, which were the asserted basis for the Authority's

rejection of Independent's bids for the Water Line Contract and

19 Grandview Avenue Project, discriminate against Independent and

its owners on the basis of race, sex, or national origin, thereby

violating their right to equal protection. The district court

dismissed the claim for lack of standing because it found that

Independent "fail[ed] to allege facts that establish a causal

relationship between the injury--its rejected bids--and the

challenged conduct--the minority utilization requirement." Op.

at 11. It reached this conclusion by focusing on those portions

of the complaint alleging that Independent had submitted bids in

compliance with the utilization requirements and that those bids

were rejected because of the Sirabella memorandum.

Standing is "an essential and unchanging part of the

case-or-controversy requirement of Article III" of the

Constitution. Lujan v. Defenders of Wildlife,

(1992). In order to satisfy the standing requirement, a party

must demonstrate (1) an "injury in fact" which is both "concrete

and particularized" and "actual or imminent"; (2) a causal

relationship between the injury and the challenged conduct such

that the injury "fairly can be traced to the challenged action of

the defendant"; and (3) a likelihood that the injury will be

redressed by a favorable decision. Northeast Fla. Chapter of Assoc'd Gen. Contractors of America v. City of Jacksonville,

(1993) (citations omitted). At this stage in the

proceeding, we look to the plaintiff's complaint to determine

whether these requirements for standing have been met.

20 In construing the plaintiff's complaint, we are of

course bound by the Federal Rules of Civil Procedure. Rule

8(e)(2) of those Rules provides that: A party may set forth two or more statements of a claim or defense alternatively or hypothetically, either in one count or defense or in separate counts or defenses. ... A party may also state as many separate claims or defenses as the party has, regardless of consistency ....

This Rule permits inconsistency in both legal and factual

allegations, see, e.g., Babcock & Wilcox Co. v. Parsons Corp.,

(8th Cir. 1970); Dugan v. Bell Telephone of

Pa.,

(W.D. Pa. 1994); 5 Wright & Miller,

Federal Practice & Procedure § 1283, at 533 (1990), and has been

interpreted to mean that a court "may not construe [a

plaintiff's] first claim as an admission against another

alternative or inconsistent claim." Henry v. Daytop Village,

(2d Cir. 1994); Molsbergen v. United States,

(9th Cir.), cert. dismissed,

(1985).

This is especially the case in circumstances in which proving the

plaintiff's alternative claims may require "complex inquiries

into the parties' intent." Henry,

. The district court here failed to afford Independent

the privilege of asserting alternative and inconsistent claims.

Independent's complaint alleges, inter alia, two inconsistent

claims: First, Independent claims that the Authority and the

City disqualified it from Authority work, per the instruction in

the Sirabella memorandum, in violation of the 1986 consent

decree. In connection with this claim, Independent claims that

21 the Authority's asserted reason for rejecting it's Water Line and

Grandview Avenue bids, i.e., the alleged failure to comply with

the MBE/WBE requirements, was a pretext intended to mask the

Authority's disqualification of Independent in a manner which

violated the consent decree. Alternatively, Independent asserts

that if the Authority in fact rejected its bids because

Independent failed to satisfy the MBE/WBE requirements, that

rejection was a violation of Independent's Fourteenth Amendment

right to equal protection. Thus, in accordance with Rule

8(e)(2), Independent's equal protection claim must be examined

independently of its contempt claim to determine whether

Independent has standing to pursue the claim.

Independent's equal protection claim does allege facts

satisfying all of the requirements of standing. The complaint

alleges an injury in fact (the rejection of Independent's bids);

causation (that the rejection resulted, according to the

Authority, from Independent's inability to meet satisfactorily

the Authority's MBE/WBE Utilization Requirements)7; and

7. The Authority argues that Independent's allegation that its bids were rejected "ostensibly" because of its failure to satisfy the MBE/WBE requirements does not constitute an "affirmative allegation" that Independent was precluded from getting the contracts because of the allegedly discriminatory requirements. However, reading the complaint as a whole and clarifying any ambiguities in Independent's favor, it is clear that Independent "affirmatively alleged" that the Authority rejected Independent's bids on the ground that Independent did not satisfy the MBE/WBE requirements. In accordance with Rule 8(e)(2), if that ground was a pretense for the Authority's impermissible disqualification of Independent from the bidding process, Independent should be allowed to pursue its civil contempt claim. On the other hand, if failure to satisfy the MBE/WBE requirements was the actual ground for the Authority's rejection of the bids, Independent should be allowed to pursue its claim that rejection on such grounds violates its right to equal protection.

22 redressability (that the injury can be remedied through the award

of the contracts or damages and an injunction against future

enforcement of the Utilization Requirements).

Turning from standing to the issue of whether

Independent has stated a claim on which relief could be granted,

we conclude that it has. Independent's complaint alleges that

the Authority has established MBE/WBE Utilization Requirements

which require that all bidders on certain contracts provide with

their bids a "utilization plan" that identifies the portion of

work under the contract that will be subcontracted to "certified"

minority- or women-owned firms. According to the complaint, bids

that do not meet the MBE/WBE utilization goals are rejected.

Finally, the complaint alleges that the MBE/WBE Utilization

Requirements were not established to remedy past discrimination

or passive participation in discrimination by the City or

Authority against minority- or women-owned construction

companies. These allegations support an equal protection claim

under City of Richmond v. J.A. Croson Co.,

(1989),

in which the Supreme Court held that a race-based MBE utilization

program was unconstitutional because it was not narrowly tailored

to remedy specific discrimination or "passive participation" in

discrimination by the enacting government unit.8 See also 8. The gender-based preference embodied in the Authority's MBE/WBE Utilization Requirements will be reviewed under "intermediate scrutiny" rather than under the "strict scrutiny" applied to review of race-based preferences. See Contractors' Ass'n of E. Pa. v. City of Phila.,

(3d Cir. 1993). Nonetheless, Independent should still be afforded the opportunity to demonstrate the absence of "probative evidence in support of" the gender-based aspect of the Authority's MBE/WBE requirements,

, because it has alleged that the

23 Contractors' Ass'n of E. Pa. v. City of Phila.,

(3d Cir. 1996).9

C. The Due Process Claims

Independent further alleges that the Authority deprived

it of property without procedural or substantive due process when

it disqualified Independent and rejected its bids on the Water

Line Contract, the Grandview Avenue Project and the Sewer

Improvement Contract. The property interest of which it was

allegedly deprived was an interest in these contracts created by

Pennsylvania statutes requiring that public contracts be awarded

to the lowest responsible bidder. 73 P.S. § 1622; 53 P.S. § 312.

(..continued) Authority adopted the utilization requirements without having established any history of discrimination against either MBEs or WBEs.

9. We decline to accept the Authority's invitation to affirm the district court's dismissal of the equal protection claim on the merits on the ground that the MBE/WBE policy is "facially valid." The Authority claims that the MBE/WBE Statement that must be submitted with each bid "itself does not require the use of minority or women subcontractors but merely requests information regarding the percentage of such subcontractors that the bidder intends to use on the project," and thus "does not create a discriminatory set-aside or quota program" but "serves merely to identify and guard against discrimination." Appellees' Brief at 16-17 (emphasis added). We agree with Independent that this assertion of the facial validity of the Authority's MBE/WBE policy "is an argument on the merits inappropriate at the Rule 12(b)(6) motion to dismiss stage." Appellant's Reply Brief at 12. At this stage in the proceedings, particularly in light of the Authority Resolutions that expressly rejected Independent's Water Line and Grandview Avenue bids "for failure to meet the MBE/WBE requirements," Auth. Res. 67 & 68, App. at 197-98 (emphasis added), "Independent's allegation that the [Authority] rejects bids which do not meet the MBE/WBE goals must be taken as true, and forecloses [the Authority's] assertion that they are not requirements but merely informational." Appellant's Reply Brief at 12 (citations omitted).

24 The remedies that Independent seeks are an injunction barring

the Authority from awarding the three contracts to anyone other

than Independent, an injunction barring the City and the

Authority from refusing to consider Independent a competent

bidder on future City contracts, and an award of compensatory and

punitive damages. We will affirm the district court's dismissal

of Independent's substantive and procedural due process claims,

albeit for a reason different from that given by the district

court.

The district court dismissed Independent's procedural

due process claim on the ground that Pennsylvania law provided a

post-deprivation remedy that afforded all the "due process"

required by the Fourteenth Amendment. According to the district

court, the post-deprivation remedy, of which Independent had

attempted to avail itself, consisted of "a judicial procedure for

unsuccessful bidders to challenge whether a local contracting

authority has violated a bidder's rights under the Municipal

Authority Act." Op. at 7-8. The district court apparently

reached this conclusion based on a statement in the Authority's

Motion to Dismiss that there was a pending state action between

the parties. On appeal, however, the parties agree that

Pennsylvania law in fact provides no such procedure.

Nonetheless, the Authority and the City argue that the district

court's dismissal of Independent's procedural due process claim

should be affirmed on the alternative ground that their actions

did not deprive Independent of any property interest protected by

the due process clause.

25 The Supreme Court outlined the parameters of the

Fourteenth Amendment’s procedural due process protection for

property interests in Board of Regents v. Roth,

(1972). First, the Court emphasized that "[t]he requirements of

procedural due process apply only to the deprivation of interests

encompassed by the Fourteenth Amendment's protection of liberty

and property."

. Second, the Court set forth the

rationale for affording procedural protection to those property

interests that are protected: "The Fourteenth Amendment's

procedural protection of property is a safeguard of the security

of interests that a person has already acquired in certain

benefits."

(emphasis added). Third, the Court

identified the attributes of the property interests protected by

procedural due process: To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it."

(emphasis added). Finally, the Court identified the

sources to which courts should look to determine a plaintiff's

"entitlement" to a claimed property interest. Property

interests, the Court declared, "are created and their dimensions

are defined by existing rules or understandings that stem from an

independent source such as state law."

According to the teachings of Roth, therefore,

Independent may not pursue its procedural due process claims

against the City and Authority unless “an independent source such

26 as state law” affords it a "legitimate claim of entitlement" to

be awarded a municipal contract for which it was the lowest

responsible bidder. Independent relies only on state competitive

bidding law as the "independent source" providing its "legitimate

claim of entitlement."10

Although Pennsylvania's competitive bidding statutes

require that public contracts be awarded to the lowest

responsible bidder, 53 P.S. § 312(A); 73 P.S. § 1622,

Pennsylvania courts have long held that such laws are for the

benefit of the public only and do not give a low bidder standing

to challenge a municipality's failure to award a contract in

accordance with the statute. See, e.g., R.S. Noonan, Inc. v.

School Dist. of York,

(Pa. 1960) (citing

Commonwealth ex rel. Snyder v. Mitchell,

(1876)); J.P.

Mascaro & Sons, Inc. v. Township of Bristol,

(Pa. Cmwlth. 1986); see also ARA Servs., Inc. v. School District

of Phila.,

(E.D. Pa. 1984) (“[T]he

existence of ... a property interest [in the award of a municipal

contract] cannot properly be derived from the regulations and

specifications governing the procurement process in light of the

Pennsylvania courts’ long and consistent refusal to recognize 10. At oral argument, Independent's counsel suggested for the first time that paragraph 4 of the consent decree may have created a property interest for Independent. This suggestion mistakes a right to a particular process for a substantive right in a contract. The right to a particular process does not alone create a property interest. Olin v. Wakinekona,

(1983). Paragraph 4 gives Independent only a right to a particular kind of hearing; it does not give Independent any more legitimate expectation of receiving a contract than it has without this portion of the consent decree.

27 such an interest.”). In R.S. Noonan, for example, the

Pennsylvania Supreme Court held that "a disappointed bidder ...

sustain[s] no personal injury which entitles him to redress in

court."

. Statutes requiring the award of public

contracts to the lowest bidder exist solely for the benefit of

taxpayers, and only taxpayers suffer a legally cognizable injury

from a violation of the statute that entitles them to bring suit.

Thus, the statute bestows no legally enforceable right on a

bidder prior to the acceptance of its bid. Id.; see also Lutz

Appellate Printers, Inc. v. Commonwealth of Pa.,

(Pa. 1977); Highland Express Lines v. Winter,

(Pa. 1964); Regional Scaffolding & Hoisting Co. v. City of

Phila.,

(E.D. Pa. 1984) ("The competitive

bidding procedures are designed to protect the taxpayers from the

wasteful or fraudulent expenditure of public funds, and create no

rights in 'disappointed bidders' who are not also taxpayers.").11

11. Although the Pennsylvania Supreme Court has dealt only with challenges brought under the bidding statutes themselves, the Pennsylvania Commonwealth Court recently directly addressed the issue of the applicability of the R.S. Noonan standing principle to a due process challenge to the rejection of a low bid. J.P. Mascaro & Sons, Inc. v. Township of Bristol,

(Pa. Cmwlth. 1986). There, the court concluded that a disappointed bidder "has no standing to assert violations of its due process rights under either the federal or state constitutions as it has no legitimate claim of entitlement to the [municipality's] contract."

. The United States District Court for the Eastern District of Pennsylvania reached the same conclusion in ARA Servs. Inc. v. School District of Phila.,

(E.D. Pa. 1984), and J.P. Mascaro & Sons, Inc. v. Township of Bristol,

(E.D. Pa. 1980). A line of cases from the Western District of Pennsylvania reached a contrary conclusion. E.g., Teleprompter of Erie, Inc. v. City of Erie,

(W.D. Pa. 1981) and

(W.D. Pa. 1983); Three Rivers Cablevision, Inc. v.

28 These Pennsylvania cases demonstrate that one who bids

on a public contract has no legitimate expectation of receiving

it until the contract is actually awarded. See Highway Express

Lines v. Winter,

(Pa. 1964) (“By their bid [the

unsuccessful bidders] proposed to contract for certain work; that

bid was not accepted. It was a mere proposal that bound neither

party, and as it was never consummated by a contract, the city

acquired no right against the [bidders] nor they against the

city.”). Since Independent's bids were never accepted, it never

acquired an enforceable right with respect to the contract being

awarded. It, therefore, has not been deprived of a property

interest that warrants procedural due process protection.

As Independent stresses, the law of this circuit

recognizes that “an entitlement may exist for a benefit sought

but not yet obtained if state law limits the exercise of

discretion by the state official responsible for conferring the

benefit.” Midnight Sessions, Ltd. v. City of Phila.,

, 679 (3d Cir. 1991) (citing Winsett v. McGinnes,

(3d Cir. 1980) (in banc), cert. denied,

(1981)). Relying on this authority, Independent urges that the

limitations placed on the Authority’s discretion by the

competitive bidding laws rendered Independent “entitled” to

receive the contracts for which it was the low bidder as soon as

it submitted its low bids and the Authority decided to award the

contracts. Midnight Sessions and Winsett are inapposite here, (..continued) City of Pittsburgh,

(W.D. Pa. 1980). We find the reasoning of this line unpersuasive.

29 however. Midnight Sessions involved the deprivation of a portion

of a property owner's interest in the use of his real property.

Winsett involved prison regulations that mandated work release

for an inmate when he satisfied certain criteria. We held that

state regulations conferred on the inmate a legally enforceable

right to work release. As a result, the inmate had a liberty

interest that warranted due process protection. Here, however,

under Pennsylvania law Independent clearly had no legally

enforceable interest in receiving the contracts and thus had no

"entitlement" to the benefit sought.

Finally, we turn to Independent's substantive due

process claim. Although the Third Circuit has recognized that a

governmental deprivation that comports with procedural due

process may still give rise to a substantive due process claim

“upon allegations that the government deliberately and

arbitrarily abused its power,” Midnight Sessions, 945 F.2d at 683

(citing Bello v. Walker,

(3d Cir.), cert.

denied,

, and cert. denied,

(1988)), we

have also held that a substantive due process claim grounded in

an arbitrary exercise of governmental authority may be maintained

only where the plaintiff has been deprived of a “particular

quality of property interest.” DeBlasio v. Zoning Bd. of Adjustment,

, 600 (3d Cir. 1993); see also Homar v.

Gilbert,

(3d Cir. 1996); Reich v. Beharry,

(3d Cir. 1989) (“[I]n this circuit at least, not

all property interests worthy of procedural due process

protection are protected by the concept of substantive due

30 process.”).12 Although our court has suggested that only

fundamental property interests are worthy of substantive due

process protection, DeBlasio, 53 F.3d at 599, it has provided

little additional guidance regarding what specific property

interests should receive substantive due process protection: We have held that “ownership is a property interest worthy of substantive due process protection,” [DeBlasio, 53 F.3d at 600], but we have found that neither interest in prompt receipt of payment for professional services

12. Although Bello and Midnight Sessions both contained language indicating that substantive due process is violated whenever a governmental entity deliberately or arbitrarily abuses government power by, for example, taking actions that are motivated by bias, bad faith, or partisan or personal motives unrelated to the merits of the matter before it, Midnight Sessions, 945 F.2d at 683; Bello,

; see also Blanche Rd. Corp. v. Bensalem Township,

(3d Cir.), cert. denied,

(1995); Neiderhiser v. Borough of Berwick,

(3d Cir.), cert. denied,

(1988), we do not read the cases to stand for that broad principle. The court in Midnight Sessions expressly stated that it was assuming, without deciding, that the plaintiffs were entitled to substantive due process in the consideration of their applications for dance hall licenses. 945 F.2d at 682 n.11. Moreover, all of the cases involved zoning decisions, building permits, or other governmental permission required for some intended use of land owned by the plaintiffs, matters which were recognized in DeBlasio as implicating the “fundamental” property interest in the ownership of land. 53 F.3d at 600. Thus, in light of the court’s explicit statement in DeBlasio that some "particular quality of property interest" must be infringed before substantive due process protection may be invoked, id. at 600, these cases cannot be understood as affording substantive due process protection from every arbitrary and irrational governmental act, but only for those that deprive the plaintiff of a fundamental property right "implicitly protected by the Constitution." Id. at 599; see also Blanche Rd.,

(plaintiffs stated a substantive due process claim because they claimed that defendants "acted deliberately and under color of state law to deprive them of their property rights by interfering in and delaying the issuance of permits") (emphasis added); Neiderhiser,

("[I]f [plaintiff] can successfully demonstrate that the [town] arbitrarily and irrationally denied the [zoning] exemption, visiting a constitutional deprivation on [plaintiff], then [plaintiff] may prevail on its due process claim.") (emphasis added).

31 provided to the state, Reich,

, nor state law entitlement to water and sewer services, Ransom v. Marrazzo,

(3d Cir. 1988), are the “certain quality” of property interest worthy of substantive due process protection. We have also strongly suggested in dictum that a student’s right to continued enrollment in a graduate program does not rise to such a level on the ground that such an interest bears “‘little resemblance to the fundamental interests that previously have been viewed as implicitly protected by the Constitution.’” Mauriello v. Univ. of Med. & Dentistry of N.J.,

, 40 (3d Cir. 1986) (quoting Regents of Univ. of Michigan v. Ewing,

(Powell, J., concurring).

Homar,

.

We will leave for another day definition of the precise

contours of the “particular quality of property interest”

entitled to substantive due process protection. We have no

difficulty in concluding that the property interest alleged to

have been infringed here, which we have concluded is not entitled

to procedural due process protection, is not the sort of

“fundamental” interest entitled to the protection of substantive

due process. Accordingly, we conclude that Independent has

failed to state either a procedural due process claim or a

substantive due process claim upon which relief can be granted.

IV. Conclusion We will reverse the judgment of the district court and

remand for further proceedings consistent with this opinion.

32