Russo v. School Board of the City of Hampton, Virginia
Filing
12
MEMORANDUM OPINION AND ORDER that Defendant's Motion to Dismiss is GRANTED. The parties shall bear their own costs associated with this litigation. Signed by District Judge Raymond A. Jackson and filed on 12/15/2011. (rsim)
IN THE UNITED STATES DISTRICT COUR
FOR THE EASTERN DISTRICT OF VIRGIN
Newport News Division
FILED
DEC 1 5 2011
CLERK. U.S. DISTRICT COURT
PATRICK J.RUSSO,
NOF;"OlK. VA
Plaintiff,
v.
Civil Action No. 4:llcv68
SCHOOL BOARD OF THE CITY
OF HAMPTON, VIRGINIA,
Defendant.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion to Dismiss, or in the alternative, for Summary
Judgment, pursuant to Rules 12(b)(l) and 56 of the Federal Rules of Civil Procedure,
respectively. This matter has been fully briefed and is ripe for judicial determination. For the
reasons set forth herein, Defendant's Motion to Dismiss is GRANTED.
I. FACTUAL AND PROCEDURAL HISTORY
Dr. Patrick J. Russo ("Dr. Russo") has brought this action against the School Board of the
City of Hampton, Virginia ("School Board"), alleging various constitutional and breach of
contract claims arising from an employment contract by which the School Board employed Dr.
Russo as Superintendent of Hampton City Schools between July 1,2004 and June 30,2009.
Am. Compl. fflj 1-2,74-113. As there have been parallel proceedings in Virginia state court on
this matter, the procedural history will incorporate that proceeding, which is summarized infra.
A. Factual History
The School Board hired Dr. Russo as Superintendent under a four-year contract
beginning July 1,2004. Am. Compl. ^ 1. This 2004 contract contained a contract extension
provision. Def.'s Br. Supp. Mot. Dismiss or Alternative, Summ. J. at U 2, p. 2 ("Def.'s Br. Supp.
Mot. Dismiss"). Pursuant to the contract extension provision, Dr. Russo and the School Board
entered into a new four-year contract on September 26,2006, which became effective on July 1,
2006, and expired on June 30,2010 ("2006 Contract"). Am. Compl. f 6. The 2006 Contract
provides that the School Board would pay Dr. Russo an annual salary of $169,260, full
premiums for medical and dental insurance for Dr. Russo and his family, all contributions for Dr.
Russo to the Virginia Retirement System ("VRS"), and other benefits. Am. Compl. ffl[ 7-14;
Am. Compl., Ex. 1. Section 5(B)(ii) of the 2006 Contract also provides that the School Board
would make payments for a tax deferred annuity, titled jointly with Dr. Russo and the School
Board, pursuant to either Section 403(b), 415, or 457 of the Internal Revenue Code. Am.
Compl., Ex. 1, § 5(B)(ii). Under Section 5(B)(ii), the School Board was to fund twenty-four
months of retirement credit for each year Dr. Russo worked under the 2006 Contract. Am.
Compl., Ex. 1, § 5(B)(ii). This Section also states that if Dr. Russo terminated his employment
with the School Board before the expiration date of the contract, i.e., June 30,2010, he would
forfeit the payments the School Board made for the annuity. Am. Compl., Ex. 1, § 5(B)(ii).
Dr. Russo set up the annuity under 26 U.S.C. § 403(b)(7) of the Internal Revenue Code
through his personal financial advisor with whom he had an existing investment account, and Dr.
Russo signed a Salary Deferral Agreement. Am. Compl. ffi| 10,16; Am. Compl., Ex. 2; Def.'s
Br. Supp. Mot. Dismiss at U 5, p. 2. The annuity was held in Dr. Russo's name only and was not
jointly titled with the School Board. Def.'s Br. Supp. Mot. Dismiss at f 10, p. 3; see Am.
Compl., Ex. 2. Dr. Russo hired Dr. Victor Hellman as the Chief Operations Officer for the City
of Hampton Schools and Dr. Hellman executed the Salary Deferral Agreement on October 11,
2006. Am. Compl. tH 18-19; Def.'s Br. Supp. Mot. Dismiss at ffl[ 6-7, p. 2.
The Salary Deferral Agreement states, in relevant part:
The above named Employee [Dr. Russo] of the referenced Employer [the School Board]
agrees to work for a reduced salary as indicated herein and the Employer agrees to remit
this amount on Employee's behalf into the program selected [pre-tax 403(b)(7)]
The
Employee understands and agrees to the following: 1) this Salary Deferral Agreement is
legally binding and irrevocable with respect to all amounts earned while this agreement is
in effect; 2) this Salary Deferral Agreement may be terminated at any time for amounts
not yet earned
3) this Salary Deferral Agreement may be changed with respect to
salary not yet earned in accordance with Employer's administrative procedures ....
Am. Compl., Ex. 2 at 7.
In approximately May or June of 2008, the Chairman of the School Board, Mr. Fred
Brewer, informed Dr. Russo that a majority of the School Board had agreed not to extend Dr.
Russo's 2006 Contract at that time. Am. Compl. ^ 33. Mr. Brewer also knew that the School
Board was not in favor of extending Dr. Russo's contract in the future. Am. Compl. U 33.
Months after Dr. Russo learned that the School Board did not intend to extend his 2006 Contract,
a recruiter approached Dr. Russo about interviewing for another school superintendent position.
Am. Compl. f 37. As a result, Dr. Russo informed the School Board in February 2009 that,
effective June 30,2009, he was resigning as Superintendent of the City of Hampton Schools to
become Superintendent of Henrico County Public Schools. Am. Compl. ^ 38.
Following Dr. Russo's notice of resignation, he and the School Board discussed entering
into a Superintendent's Transition Agreement and General Release ("Transition Agreement").
Am. Compl. ^ 41. The School Board's attorney then drafted the Transition Agreement and Dr.
Russo reviewed it prior to finalization. Am. Compl. ffi| 41-45. Accordingly, on or about
April 14, 2009, the School Board approved the Transition Agreement and authorized the
Chairman of the School Board to enter into the Agreement, which the Chairman then executed.
Am. Compl. ffi[ 46-47; see Am. Compl., Ex. 4. Dr. Russo also executed the Transition
Agreement. Am. Compl. ^ 48; see Am. Compl., Ex. 4.
The pertinent terms of the Transition Agreement were as follows: 1) Dr. Russo's
resignation would be effective June 30,2009, and an Interim Superintendent would be appointed,
effective April 15,2009; 2) Dr. Russo would be expected to be available until June 30,2009, to
assist the Interim Superintendent with the transition; 3) Dr. Russo would be able to use his office,
computer, email account, and cell phone until June 30,2009; 4) Dr. Russo could participate in
graduation and other events associated with his position and the School Board would continue to
pay for any expenses and insurance associated with Dr. Russo's professional duties; 5) the
School Board would continue to provide Dr. Russo with all compensation and other benefits
contained in the 2006 Contract from April 15,2009, until June 30,2009; and 6) Dr. Russo would
be paid his accrued and unused leave time, and he would not be required to use any leave after
April 15,2009. Am. Compl. ffl| 49-52.
Within a month of executing the Transition Agreement, the School Board learned that Dr.
Russo had not jointly titled the annuity, as required under the 2006 Contract. Am. Compl. \ 55;
Def.'s Br. Supp. Mot. Dismiss at f 10, p. 3. As a result, the School Board voted to discontinue
and then discontinued payment of Dr. Russo's base salary and benefits, including: annuity
payments for April, May, and June 2009; contributions to Dr. Russo's VRS account for May and
June 2009; dependent care Flexible Spending Account contributions for May and June 2009; Dr.
Russo's travel supplement for May and June 2009; and Dr. Russo's accrued but unused leave as
of April 15,2009. Am. Compl. ffl| 55-61. The School Board also did not transfer Dr. Russo's
accrued and unused sick leave from Hampton City Schools to Henrico County Public Schools.
Am. Compl. H 62.
In accordance with Dr. Russo's tendered resignation and the Transition Agreement, his
employment with the School Board terminated on June 30,2009. See Am. Compl., Ex. 4.
B. Procedural History
Before this matter came to this Court, there was a related proceeding in the Circuit Court
of Hampton, Case No. CL09002356. In that case, the School Board filed a two-count complaint
against Dr. Russo on November 3,2009, claiming that Dr. Russo breached the 2006 Contract by
not jointly titling the annuity and seeking judgment for the payments the School Board made for
the annuity. Def.'s Br. Supp. Mot. Dismiss, Ex. A. On December 11,2009, Dr. Russo
responded by filing a demurrer and counterclaim based on the Transition Agreement, claiming
that the Transition Agreement constituted a novation of the 2006 Contract, asserting that the
Transition Agreement contained no provision for forfeiture of the annuity payments, and seeking
a judgment for salary and benefits under the Transition Agreement. Def.'s Br. Supp. Mot.
Dismiss, Ex. B. On July 16, 2010, the School Board filed a motion for partial summary
judgment against Dr. Russo, seeking a judgment that the Transition Agreement was not a
novation of the 2006 Contract and that Dr. Russo was obligated to reimburse the School Board
for the annuity payments it made, pursuant to the 2006 Contract's forfeiture provision. Def.' s
Br. Supp. Mot. Dismiss, Ex. C. On July 19,2010, Dr. Russo then moved for summary judgment
on the School Board's claims against Dr. Russo and on Dr. Russo's breach of contract claim
against the School Board. Def.'s Br. Supp. Mot. Dismiss, Ex. D.
Following full briefing by the parties and oral argument on the motions for summary
judgment, Circuit Court Judge Thomas A. Shadrick first ruled from the bench on March 21,
2011, and later issued a formal opinion on May 23,2011.' PL's Br. Opp'n Mot. Dismiss, Ex. 8 at
24; Def.'s Br. Supp. Mot. Dismiss, Ex. E. Judge Shadrick held that Dr. Russo forfeited the
School Board's payments toward the annuity when he resigned his position prior to the
expiration of the 2006 Contract and awarded judgment for the annuity payments to the School
Board. Def.'s Br. Supp. Mot. Dismiss, Ex. E. In particular, Judge Shadrick ruled that the
Transition Agreement and the Salary Deferral Agreement were not novations of the 2006
Contract. Def.'s Br. Supp. Mot. Dismiss, Ex. E. Judge Shadrick also denied Dr. Russo's motion
for summary judgment on his counterclaim. Def.'s Br. Supp. Mot. Dismiss, Ex. E. On May 23,
2011, Dr. Russo filed a motion for reconsideration, which Judge Shadrick denied on May 24,
2011. Def.'s Br. Supp. Mot. Dismiss, Ex. F. Judge Shadrick also granted Dr. Russo a nonsuit on
his counterclaim on May 23,2011. Def.'s Br. Supp. Mot. Dismiss, Ex. G.
In the instant case, Dr. Russo filed a complaint with this Court on April 19,2011,2 and an
Amended Complaint on April 20,2011. Dr. Russo's Amended Complaint asserts four claims
upon which he seeks relief. In Count I, Dr. Russo seeks a declaration that the Salary Deferral
Agreement is legally binding and that all contributions made into the 403(b)(7) account pursuant
to the Salary Deferral Agreement are elective deferral contributions that are fully vested and,
thus, fully owned by Dr. Russo. Am. Compl. fflf 67-73; Am. Compl. at 17. In Count II, Dr.
Russo seeks a declaration that he has a property right in the 403(b)(7) contributions made from
November 2006 through March 2009 and in his compensation and benefits pursuant to the Salary
Deferral Agreement and the Transition Agreement. Am. Compl. ffi[ 74-81; Am. Compl. at 171 There appear to be some discrepancies in the dates in the Circuit Court records, as some of the court documents
refer interchangeably to March 2011 and May 2011 as when the court ruled on the motions for summary judgment
and motion for reconsideration. For the purposes of this Court's decision, the difference in dates is inconsequential
and the Court presumes that the relevant events in the state court proceedings occurred in May 2011, rather than
March 2011.
2 Thus, Dr. Russo filed his complaint in this case before the Hampton Circuit Court issued its formal opinion on
May 23,2011.
18. In Count III, Dr. Russo asserts that the School Board's decision to stop paying Dr. Russo his
salary and benefits, including contributions toward his 403(b)(7) account under the Salary
Deferral Agreement and the Transition Agreement, constituted a deprivation of vested property
rights without due process under the Fourteenth Amendment to the United States Constitution.
Am. Compl. ffil 82-91, 97-98; Am. Compl. at 18. In Count III, Dr. Russo also asserts that the
School Board's failure to pay him his salary and benefits constituted a taking under the Fifth
Amendment to the U.S. Constitution. Am. Compl. ffl| 92-98; Am. Compl. at 18. Dr. Russo
brings both claims in Count III under 42 U.S.C. § 1983. In Count IV, Dr. Russo asserts a breach
of contract claim against the School Board for failure to pay his salary and benefits in accordance
with the Salary Deferral Agreement and the Transition Agreement. Am. Compl. ffl| 99-113; Am.
Compl. at 18.
Dr. Russo seeks actual, compensatory, and punitive damages for the School Board's
alleged breach of contract and violations of Dr. Russo's constitutional rights, as well as interest,
reasonable attorney's fees and costs, and any other relief this Court deems appropriate. Am.
Compl. at 15.
In response, the School Board moved to dismiss Dr. Russo's Amended Complaint for
lack of subject matter jurisdiction, pursuant to Rule 12(b)(l) of the Federal Rules of Civil
Procedure, on August 9,2011. In the alternative, the School Board seeks summary judgment in
its favor under Rule 56 of the Federal Rules of Civil Procedure. The School Board moves to
dismiss, or in the alternative, seeks summary judgment, on three grounds: 1) Dr. Russo's claims
arising from the Salary Deferral Agreement and Transition Agreement present no federal
question; 2) Dr. Russo's claim to the annuity payments is barred by the doctrine of res judicata;
and 3) the Court should abstain from exercising jurisdiction under the Younger and Colorado
River doctrines.
II. LEGAL STANDARD
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
Federal Rule of Civil Procedure 12(b)(l) provides for the dismissal of an action if the
Court lacks subject matter jurisdiction. Fed. R. Civ. P. 12(b)(l). Unless a matter involves an
area over which federal courts have exclusive jurisdiction,3 a plaintiff may bring suit in federal
court only if the matter involves a federal question arising "under the Constitution, laws or
treaties of the United States," 28 U.S.C. § 1331, or if "the matter in controversy exceeds the sum
or value of $75,000, exclusive of interests and costs, and is between citizens of different States,"
28 U.S.C. § 1332(a)(l). See Pinkley, Inc. v. City of Frederick, Md, 191 F.3d 394, 399 (4th Cir.
1999) ("Federal courts are courts of limited subject matter jurisdiction, and as such there is no
presumption that the court has jurisdiction."). Accordingly, "before a federal court can decide
the merits of a claim, the claim must invoke the jurisdiction of the court." Miller v. Brown, 462
F.3d 312,316 (4th Cir. 2006).
The Court assumes that all factual allegations in the complaint are true if it is contended
that a complaint simply fails to allege facts upon which subject matter jurisdiction can be based.
Adams v. Bain, 697 F.2d 1213,1219 (4th Cir. 1982). However, if the factual basis for
jurisdiction is challenged, the plaintiff has the burden of proving subject matter jurisdiction.
Richmond, Frederichsburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.
1991). To determine whether subject matter jurisdiction exists, the reviewing court may
consider evidence outside the pleadings, such as affidavits or depositions, Adams, 697 F.2d at
3 See 28 U.S.C. § 1333 (federal courts have exclusive jurisdiction to hear admiralty, maritime, and prize cases); 28
U.S.C. § 1334 (federal courts have exclusive jurisdiction to hear bankruptcy cases and proceedings).
8
1219, or whatever other evidence has been submitted on the issues, GTE South Inc. v. Morrison,
957 F. Supp. 800, 803 (E.D. Va. 1997). A party moving for dismissal for lack of subject matter
jurisdiction should prevail only if material jurisdictional facts are not in dispute and the moving
party is entitled to prevail as matter of law. Richmond, Fredericksburg & Potomac R.R. Co., 945
F.2d at 768.
Under the jurisdictional grant of 28 U.S.C. § 1331, a case unequivocally "arises under"
federal law where federal law creates the cause of action. Dixon v. Coburg Dairy, Inc., 369 F.3d
811,816 (4th Cir. 2004). However, a case may also "arise under" federal law where "the
vindication of a right under state law necessarily turn [s] on some construction of federal law,"
id. (quoting Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986), but "only [if]...
the plaintiffs right to relief necessarily depends on a substantial question of federal law," id.
(quoting Franchise Tax Bd. ofState ofCal v. Constr. Laborers Vacation Trust for S. Cal, 463
U.S. 1,28 (1983). Accord Morgan Cnty. War Mem'l Hosp. v. Baker, 314 F. App'x 529, 533 (4th
Cir. 2008). Thus, in determining whether to grant federal question jurisdiction for a state law
claim, courts must ask whether the "state-law claim necessarily raise[s] a stated federal issue,
actually disputed and substantial, which a federal forum may entertain without disturbing any
congressionally approved balance of federal and state judicial responsibilities." Grable & Sons
Metal Prod. v. Darue Eng g & Mfg., 545 U.S. 308, 314 (2005). "A plaintiffs right to relief for a
given claim necessarily depends on a question of federal law only when every legal theory
supporting the claim requires the resolution of a federal issue." Dixon, 369 F.3d at 816.
B. Alternative Motion for Summary Judgment
According to Rule 56 of the Federal Rules of Civil Procedure, "[t]he court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also
McKinney v. Bd of Trustees ofMd. Cmty. Coll., 955 F.2d 924, 928 (4th Cir. 1992) ("[S]ummary
judgments should be granted in those cases where it is perfectly clear that no issue of fact is
involved and inquiry into the facts is not necessary to clarify the application of the law.")
(citations omitted). In deciding a motion for summary judgment, the court must view the facts,
and inferences to be drawn from the facts, in the light most favorable to the nonmoving party.
Anderson v. Liberty Lobby Inc., All U.S. 242, 247-48 (1986); Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Once a motion for summary judgment is properly made and supported, the opposing
party "must come forward with specific facts showing that there is a genuine issue for trial."
Matsushita, 475 U.S. at 586-87 (internal quotations omitted). Summary judgment will be
granted "against a party who 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." Celotex Corp. v. Catrett, All U.S. 317, 324 (1986).
III. DISCUSSION
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
1. Counts I, II, and III: Section 1983 Claims
Dr. Russo invokes the jurisdiction of this Court under 42 U.S.C. § 1983 ("§ 1983" or
"Section 1983"). Section 1983 provides, in relevant part:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of
any State or Territory or the District of Columbia, subjects, or causes to be subjected, any
citizen of the United States or other person within the jurisdiction thereof to the
deprivation of any rights, privileges, or immunities secured by the Constitution and laws,
shall be liable to the party injured in an action at law, suit in equity, or other proper
proceeding for redress....
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42 U.S.C. § 1983. As a general matter, claims brought under Section 1983 confer federal
question jurisdiction. See Front Royal & Warren Cnty. Indus. Park Corp. v. Town ofFront
Royal, Va., 135 F.3d 275,278 (4th Cir. 1998) ("Federal court jurisdiction to hear § 1983 cases
exist under the general federal question statute, 28 U.S.C. § 1331."). Further, local government
bodies - like the School Board in this case - are considered "persons" for the purposes of
Section 1983. Monellv. Dep't ofSocial Servs. ofCityofN.Y., 436 U.S. 658,690 (1978).
However, the U.S. Supreme Court has held that a simple breach of contract claim does
not give rise to a Section 1983 claim. In Shawnee Sewerage & Drainage Co. v. Steams, the
Court held that when a "simple breach of contract is... alleged on the part of the city ... [t]he
breach of a contract is neither a confiscation of property nor a taking of property without due
process of law." Shawnee Sewerage & Drainage Co. v. Steams, 220 U.S. 462,471 (1911); see
also Gannett Fleming West, Inc. v. Village ofAngel Fire, 375 F. Supp. 2d 1104,1108 (D.N.M.
2004) ("Other federal courts have also found that breach of contract claims do not fall within the
scope of constitution [sic] violations that § 1983 protects.") (citing Shawnee Sewerage &
Drainage Co., 220 U.S. at 471).
More recently, the Supreme Court affirmed that, where a state
provides a remedy through a breach of contract suit in state court, there is no due process
violation where the state does not pay a contract. See Luj'an v. G & G Fire Sprinklers, Inc., 532
U.S. 189, 195-96 (2001). In Lujan, the Court stated:
Unlike... claimants [who had been denied a present right, such as seizure of real
property or employment suspension], respondent has not been denied any present
entitlement. [Respondent] has been deprived of a payment that it contends it is owed
under a contract, based on the State's determination that [Respondent] failed to comply
with the contract's terms. [Respondent] has only a claim that it did comply with those
terms and therefore that it is entitled to be paid in full. Though we assume for the
purposes of the decision here that [respondent] has a property interest in its claims for
payment, it is an interest, unlike the interests discussed above, that can be fully protected
by an ordinary breach-of-contract suit.
11
Lujan, 532 U.S. at 196. Accordingly, the Court held: "[I]f California makes ordinary judicial
process available to respondent for resolving its contractual dispute, that process is due process."
Lujan, 532 U.S. at 197.
Similarly, the United States Court of Appeals for the Fourth Circuit has held that a simple
breach of contract against a public entity does not give rise to an action under Section 1983. In
Heath v. City ofFairfax, the Fourth Circuit held that the district court had no jurisdiction, absent
diversity of citizenship, in an action that was simply one for breach of contract. Heath v. City of
Fairfax, 542 F.2d 1236,1237-38 (4th Cir. 1976) (per curiam). The plaintiffs in Heath were
police officers who contended that the city, pursuant to a salary scale ordinance, violated both
their due process rights by failing to pay them the salary they claimed under their contract and
their right to equal protection since the city paid the police chief his salary increases but not the
police officers'. Heath, 542 F.2d at 1237. The Fourth Circuit further explained in Heath:
The plaintiffs' theory that the City has violated their due process rights by failing to pay
them the salary they claim under their contract, and that it has violated equal protection
by giving "automatic" annual salary increases to the Chief of Police and not to them,
thereby giving rise to jurisdiction under [28 U.S.C. § 1331], if sustained, would mean that
whenever a City or political subdivision fails to pay a disputed claim, and pays other
claims, a suit on such claim rises above the level of a mere breach of contract and
becomes an assertion of constitutional rights, justiciable under [28 U.S.C. § 1331]. Such
a specious theory of federal jurisdiction has been uniformly repudiated.
Heath, 542 F.2d at 1238 (citing, inter alia, Shawnee Sewerage & Drainage, 220 U.S. at 471,
McCormickv. Okla. City, 2i6 U.S. 657, 660 (\9\ 5), Manila Inv. Co. v. Trammell, 239 U.S. 31,
32-33 (1915), and Doby v. Brown, 232 F.2d 504, 505 (4th Cir. 1956).
Additionally, in Taliaferro v. Willett, the Fourth Circuit held that a tenured teacher's
claim for contract damages did not present a substantial federal question. Taliaferro v. Willett,
588 F.2d 428,428-29 (4th Cir. 1978) (per curiam). In Taliaferro, a former teacher alleged that
her employer, a public college, violated her right as a tenured teacher to continue teaching until
12
the age of seventy by forcing her to retire prematurely, thereby resulting in contractual damages,
and the teacher did not claim that the procedural deprivations caused her any independent injury.
Taliaferro, 588 F.2d at 428-29. Accordingly, the Fourth Circuit remanded the case to the district
court with "directions to dismiss for lack of a substantial federal question." Taliaferro, 588 F.2d
at 429. Notably, the court in Taliaferro found no substantial federal question even where the
issue was the teacher's right to continued employment, as opposed to her right to a specific
benefit of that employment, the former of which is usually subject to greater constitutional
protection. See, e.g., Boydv. RockwoodArea Sch. Dist., 105 F. App'x 382 (3d Cir. 2004)
(acknowledging the distinction between a protected property interest in continued employment
and a protected property interest in a benefit of that employment); Ramsey v. Bd. ofEduc. of
Whitley Cnty., Ky., 844 F.2d 1268,1274-75 (6th Cir. 1988) (holding that "an interference with a
property interest in a pure benefit of employment, as opposed to an interest in the tenured nature
of the employment itself, is an interest that can be and should be redressed by a state breach of
contract action and not by a federal action under section 1983").
More recently, in MCI Constructors, Inc. v. City of Greensboro, the Fourth Circuit
reaffirmed the holding in Heath that "there manifestly are no federal constitutional issues posed
by a simple dispute over the construction of a [contract] and that is all there is to the case.' "
MCI Constructors, Inc. v. City of Greensboro, 125 F. App'x 471,477-78 (4th Cir. 2005)
(quoting Heath, 542 F.2d at 1238). In MCI Constructors, the city entered into a contract with
MCI Constructors ("MCI"), which provided that all disputes concerning MCI's fulfillment of the
contract be submitted to the City Manager as a condition precedent to the MCI's recovery of
payment under the contract. MCI Constructors, 125 F. App'x at 475,477-78. MCI alleged that
13
this process denied MCI procedural due process. MCI Constructors, 125 F. App'x at 477-78.
The Fourth Circuit rejected MCI's argument, stating:
For there to be a due process violation, the City must have acted to deprive an individual
of life, liberty, or property. There is no such deprivation here when it is grounded on the
contractual language agreed to by the parties. "The mere fact that a city is a municipal
corporation does not give to its refusal to perform a contract the character of a law
impairing its obligation or depriving of property without due process of law."
MCI Constructors, 125 F. App'x at 478 (quoting McCormick, 236 U.S. at 660). See also Dover
Elevator Co. v. Ark State Univ., 64 F.3d 442,446 (8th Cir. 1995) ("[I]t is well established that 'a
simple breach of contract does not rise to the level of a constitutional deprivation.' ") (quoting
Medical Laundry Serv. v. Bd. of Trustees of Univ. ofAla., 906 F.2d 571, 573 (11th Cir. 1990));
BockAssocs. v. Chronister, 951 F. Supp. 969, 975 (D. Kan. 1996) (holding that state's alleged
breach of contract for failure to pay just compensation for Medicare services did not give rise to
a claim for deprivation of a property right without due process and noting "[sjeveral circuit
courts have held that alleged breaches in contracts to provide services to governmental entities
are not violations of due process rights either because a property interest was not involved or
because the right to litigate the matter in court was sufficient 'due process.' ") (citing to a
comprehensive list of cases from other circuits holding the same).
With respect to employment contracts of public employees specifically, the Fourth
Circuit has stated:
The contract may provide a basis for recovery under a breach of promise theory, but that
issue is not elevated to a constitutional question solely because the State is a party to the
contract. As we have admonished repeatedly '(every) disagreement between a public
employee with his employer over... the terms of his contract does not reach
constitutional proportions.'
Kilcoyne v. Morgan, 664 F.2d 940, 942 (4th Cir. 1981) (quoting Sigmon v. Poe, 564 F.2d 1093,
1096 (4th Cir. 1977). In this context, the Sixth Circuit's decision in Ramsey v. Board of
14
Education., on which the School Board relies in its brief, is instructive. See Ramsey v. Bd. of
Educ. ofWhitley Cnty., Ky., 844 F.2d 1268,1274-75 (6th Cir. 1988). In Ramsey, a retired
teacher brought an action against the board of education and school superintendent under Section
1983, claiming she was deprived of property without due process when the board reduced her
number of accumulated sick leave days and reduced her compensation for sick leave days when
she retired. Ramsey, 844 F.2d at 1270-71. In holding that the teacher's claim did not state a
valid Section 1983 action, the Sixth Circuit stated:
Like an employee hired for a determinate period of time, an employee deprived of a
property interest in a specific benefit, term, or condition of employment, suffers a loss
which is defined easily (here, Ramsey has lost 113 (her eliminated days) times the
amount of compensation per day the Board will give her when she retires) and therefore,
any interference with that interest is redressed adequately in a state breach of contract
action
We emphasize that we do not hold that interferences with employment
benefits cannot involve deprivations of property. We do hold, however, that an
interference with a property interest in a pure benefit of employment, as opposed to an
interest in the tenured nature of the employment itself, is an interest that can be and
should be redressed by a state breach of contract action and not by a federal action under
section 1983.
Ramsey, 844 F.2d at 1274-75 (citing, inter alia, the Fourth Circuit decision in Taliaferro,
discussed supra). See also Costello v. Town ofFairfield, 811 F.2d 782, 784 (2d Cir. 1987)
(alleged deprivation of a pension benefit increase did not "give rise to a cause of action under
section 1983"); Boston Envtl Sanitation Inspectors Ass 'n v. Boston, 794 F.2d 12,13 (1st Cir.
1986) (alleged deprivation of seniority and promotion rights contained in a collective bargaining
agreement did not "amount to a deprivation of property without due process actionable under
section 1983"); Diederich v. Cnty. ofRockland, 999 F. Supp. 568, 573 (S.D.N.Y. 1998)
(rejecting takings claim alleging "loss without compensation of vacation time, personal, holiday,
and sick leave time accruals, and retirement credit").
15
In the instant case, Dr. Russo was an employee of a public entity, the School Board.
Thus, under Section 1983, Dr. Russo asserts that, as a public body, the School Board violated his
Fourteenth Amendment right to due process prior to depriving him of property and that the
School Board took his property without just compensation, in violation of the Fifth Amendment.
Specifically, Counts I seeks a declaration that all contributions made into the 403(b)(7) account
pursuant to the Salary Deferral Agreement are elective deferral contributions that are folly vested
and, thus, folly owned by Dr. Russo. Count II seeks a declaration that Dr. Russo has a property
right in the 403(b)(7) contributions made from November 2006 through March 2009 and in his
compensation and benefits pursuant to the Salary Deferral Agreement and in the Transition
Agreement. Further, Count III asserts that the School Board's refusal to pay him his base salary
from April to June 2009, and to provide his annuity payments and other benefits for May and
June 2009, constitute a deprivation of his vested property rights without due process. Count III
also asserts that the School Board's failure to pay Dr. Russo for these alleged vested property
rights amounts to a takings without just compensation.
As an initial matter, the Court understands that Dr. Russo's claims to his salary and
benefits are based upon the Salary Deferral Agreement and Transition Agreement only and not
the 2006 Contract, since Hampton Circuit Court Judge Shadrick ruled that Dr. Russo owed the
School Board its payments towards his annuity under the 2006 Contract. Further, Judge
Shadrick ruled that neither the Salary Deferral Agreement nor the Transition Agreement were
novations of the 2006 Contract, although Dr. Russo essentially re-asserts this argument before
this Court. However, the Court need not reach the merits of this claim in order to render a
decision in this case.
16
The Court FINDS that Dr. Russo's asserted claims to his salary and benefits, stemming
from the Salary Deferral Agreement and Transition Agreement, do not give rise to an action
under Section 1983, as they properly can be addressed by an ordinary breach of contract action
in state court. The case law from the U.S. Supreme Court and the Fourth Circuit is clear that,
under the facts of this case, Dr. Russo has failed to present a substantial federal question and his
invocation of Section 1983 does not cure this infirmity. See Lujan v.G&G Fire Sprinklers,
Inc., 532 U.S. 189,195-96 (2001); Heath v. City of Fairfax, 542 F.2d 1236,1237-38 (4th Cir.
1976); MCI Constructors, Inc. v. City of Greensboro, 125 F. App'x 471,477-78 (4th Cir. 2005).
Further, invocation of the Fourteenth Amendment's due process guarantees requires Dr.
Russo to show that the School Board deprived him of a protected property interest. Kilcoyne v.
Morgan, 664 F.2d 940, 942 (4th Cir. 1981) (citing Bd. ofRegents v. Roth, 408 U.S. 564, 569
(1972)). However, even if the Court were to find that Dr. Russo had a vested property interest in
his salary and benefits, as he contends, this finding does not answer the question of whether a
federal cause of action under Section 1983 is the proper remedy for his deprivation of these
rights. See Lujan, 532 U.S. at 196 (assuming, without deciding, that the state statutory scheme
depriving contractors of payment constituted a property interest, but holding "it is an interest...
that can be fully protected by an ordinary breach-of-contract suit"); Ramsey, 844 F.2d at 1272
("Determining that [Plaintiff] has a property interest in her accumulated sick leave days does not
resolve the question of what process is due, and particularly, the question of whether a federal
cause of action is the appropriate remedy for her deprivation."); Piekutowski v. Township of
Plains, 2006 WL 3254536, at* 6 (M.D. Pa. Nov. 9,2006) (holding Plaintiff has no property
interest in his accumulated sick leave and stating "even if [Plaintiff s] property interest is
protectable, due process is satisfied by the availability of a post-deprivation breach of contract
17
action in state court.") (citing Ramsey, 844 F.2d at 1268). The remedies Dr. Russo seeks are
readily available in an ordinary breach of contract action in state court. Therefore, Dr. Russo's
allegation that he was deprived of vested property rights arising from his employment contract
does not insulate his claims from dismissal for lack of a substantial federal question.
Accordingly, Counts I, II, and III of Dr. Russo's Amended Complaint, relating to his
Section 1983 claims, are hereby DISMISSED.
2. Count IV: Breach of Contract Claim
In light of the dismissal of Dr. Russo's Section 1983 claims, the Court must determine
whether supplemental jurisdiction over Dr. Russo's remaining state law breach of contract claim
should be declined. See 28 U.S.C. § 1367(c)(3) ("The district court may decline to exercise
supplemental jurisdiction over a claim ... if... the district court has dismissed all claims over
which it has original jurisdiction."). Further, "trial courts enjoy wide latitude in determining
whether or not to retain jurisdiction over state claims when all federal claims have been
extinguished." Shanaghan v. Cahill, 58 F.3d 106,110 (4th Cir. 1995); see also United Mine
Workers v. Gibbs, 383 U.S. 715,725-26 (1966) (federal courts' power to hear state and federal
claims arising from "a common nucleus of operative fact" does not need to be "exercised in
every case in which it is found to exist. It has consistently been recognized that pendent
jurisdiction is a doctrine of discretion, not of plaintiff s right."). Thus, having dismissed Dr.
Russo's Section 1983 claims, this Court declines to exercise jurisdiction over his state law
breach of contract claim arising from the same case and controversy.
Accordingly, Count IV of Dr. Russo's Amended Complaint is hereby DISMISSED.
Further, as the Court dismisses Dr. Russo's Complaint for lack of subject matter jurisdiction, the
18
Court does not address the School Board's alternative bases for dismissal - resjudicata and
doctrines of abstention.
B. Summary Judgment
Having dismissed the Complaint for lack of jurisdiction, the Court does not reach the
School Board's alternative Motion for Summary Judgment.
IV. CONCLUSION
For the reasons stated above, Defendant's Motion to Dismiss is GRANTED. The parties
shall bear their own costs associated with this litigation.
The Court DIRECTS the Clerk to send a copy of this Memorandum Opinion and Order
to counsel and parties of record.
IT IS SO ORDERED.
Raymond A. Jackson
United States District Judge
Norfolk, Virginia
December ff, 2011
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