once the Board exercised its statutory authority to vote to enter into a specific contract with him, to have that proposed contract reviewed according to the procedures mandated by state law and approved if it met the criteria of state law.
It is clear that the Board possessed statutory authority to contract for the services of a financial consultant by virtue of 24 Pa.C.S. § 8502(b), which provides that "the Board shall contract for the services of . . . an investment counselor . . . as it deems advisable." Pursuant to this authority, the Board twice voted to enter into contracts with Mr. Hixon. Proposed contracts were prepared and submitted to defendant Bartle (in the case of the 1980 contract) and to defendant Waldman (in the case of the 1981 contract) for review. While state law gave the defendants the authority to review the respective contracts, it did not give them unlimited discretion to withhold their approval, but rather limited their authority by establishing standards for their review of contracts. See 71 Pa.S.A. § 292; 37 Pa.Code § 161.12 (1980) (provisions applicable to defendant Bartle); and 71 Pa.S.A. § 732-301(11) (provision applicable to defendant Waldman). The nature of the standards governing defendants' review of contracts, and the question whether the undisputed facts show that defendants violated those standards in this case, will be discussed later in this memorandum. In deciding whether plaintiff has asserted a property interest protected by the 14th Amendment, it is essential merely to note that state law established limits on defendants' authority to review the contracts at issue.
Under the circumstances, plaintiff possessed a protected property interest in having his proposed, executory contracts, which had been formally voted upon by the Board, reviewed in accordance with state law and approved if they met the requirements of state law. The Logan case, supra, in which the Supreme Court held that a state-created right of a claimant to use certain adjudicatory procedures to resolve a claim of discrimination constituted a protected property interest, reaffirmed prior case law holding that something as intangible as a cause of action can constitute property within the meaning of the due process clause. Moreover, the Third Circuit Court of Appeals in Winsett, supra, established the proposition that state officials violate the due process clause when they go beyond the permissible scope of their discretion, as established by state regulation, in refusing to grant a benefit which, if obtained, would constitute "liberty" (specifically, in denying a prisoner's application to a work release program). The Winsett holding may also be stated thus: where state law grants an official authority to confer a benefit which would be entitled to due process protection upon those meeting certain criteria, due process is violated when the official goes beyond those criteria in refusing to confer that right or entitlement on a specific individual. Mr. Hixon, after the Board's formal votes to enter into the proposed contracts with him, was entitled under the holding in Winsett to have his contracts approved and finalized if they met the criteria for approval established by state law.
Although the protected interest in Winsett was a liberty interest, not a property interest, there is no reason to suppose that the Court of Appeals intended its holding to apply only to cases involving liberty interests. In a well reasoned opinion, Judge Diamond of the Western District of Pennsylvania applied the reasoning of Winsett to a property interest case. Three Rivers Cable-Vision, Inc. v. City of Pittsburgh, 502 F. Supp. 1118 (W.D.Pa.1980). Accord Duva v. World Boxing Assoc., 548 F. Supp. 710 (D.N.J.1982); Teleprompter of Erie, Inc. v. City of Erie, 537 F. Supp. 6 (W.D.Pa.1981). Three Rivers held that a disappointed bidder for a cable television franchise possessed a protected property interest as the claimant of "the right of the lowest responsible bidder in full compliance with the specifications to be awarded the contract once the City, in fact, decided to make an award. The due process to which one possessing the protected interest was entitled was the non-arbitrary exercise by the City of its discretion in making the award. And it follows that a deprivation of the substantive benefit (the protected property interest) without the process due is an actionable wrong." 502 F. Supp. at 1131.
The principal to be derived from Logan, Winsett, and Three Rivers is a simple one. When state law provides that a given benefit which constitutes "property" or "liberty" (i.e., money damages to redress unlawful discrimination, admission into a work-release program, or a cable television franchise) shall be conferred upon those who take the requisite procedural steps and meet the requisite substantive standards, the right of an individual who has taken the requisite procedural steps to have his claim of entitlement to the benefit decided, not arbitrarily, but in accordance with state law, itself constitutes an interest protected by the due process clause. Because the interest does not arise until the individual claiming entitlement to the benefit has taken the requisite procedural steps (i.e., has filed a charge of discrimination with the appropriate agency, or has filed a facially adequate application to a work-release program, or has bid for a contract which a municipality is required to award to the lowest responsible bidder), the class of those entitled to the protection of the due process clause is, in each case, appropriately limited.
In Mr. Hixon's case, there was no law requiring the Board to offer a contract for financial advice to the lowest bidder, but there was a law authorizing the Board to contract for the services of a financial consultant as it deemed advisable. While Mr. Hixon had no protected property interests so long as he was merely seeking a contract with the Board, a protected property interest arose after the Board formally voted, pursuant to its statutory authority, to enter into contracts with him. At that point, Mr. Hixon was entitled to the substantive benefit of those contracts unless they contained one or more of the flaws defendants were responsible for detecting in the course of their statutorily mandated review.
2. Due Process Violation.
Plaintiff's claim that he was deprived of due process of law by the actions of defendants Bartle and Waldman is based on his charge that defendants refused to approve his contracts on grounds which exceeded their statutory and regulatory authority. As the Third Circuit noted in Winsett, supra, the failure of state officials to make decisions affecting protected interests according to the express criteria governing those decisions constitutes a violation of procedural due process as a deprivation of fundamental fairness. 617 F.2d at 1007-08. Accord Gibson v. Lynch, 652 F.2d 348, 360 (3rd Cir.1981). Thus, if the undisputed facts show that defendants refused to approve plaintiff's contracts on grounds which exceeded their statutory and regulatory authority, plaintiff is entitled to partial summary judgment on the issue of liability, unless defendants can establish an affirmative defense. On the other hand, if the undisputed facts show that defendants acted within their authority, they are entitled to summary judgment in their favor. As it is undisputed that defendants' actions were based on the reasons they expressed in writing at the time (see Uncontested Facts Nos. 20 and 26), it may be determined as a matter of law whether their actions exceeded their authority.
Defendant Bartle, as Acting Attorney General, acted pursuant to 71 Pa.S.A. § 292 in reviewing Mr. Hixon's 1980 contract. That statute provided that the Attorney General was to give legal advice to the Board concerning its operations and affairs, but it did not define the scope of the Attorney General's review of contracts. An implementing regulation, 37 Pa.Code § 161.12 (1980), defined the scope of the Attorney General's review of contracts as follows:
"Review of contracts will go to the substance of the contract in addition to the review of the technical sufficiency of the execution of the contract. Such review will determine: (1) the existence of statutory or other legal authority of the Commonwealth agency and official to enter into such contract; (2) the legality of the provisions of the contract; (3) the adequate protection of all appropriate rights and remedies of the Commonwealth in the contract; (4) the existence of an appropriation of funds for the contract purpose and of consideration for the Commonwealth; (5) the sufficiency of the form and manner of execution of the contract."