The opinion of the court was delivered by: Caldwell, District Judge.
Pursuant, in part, to Fed.R.Civ.P. 12(b)(6), the defendant,
Nancy M. Sobolevitch, Court Administrator of Pennsylvania and the
Chief Administrative Officer of the Administrative Office of
Pennsylvania Courts (AOPC), has filed a motion to dismiss the
complaint. The plaintiff, John O. Vartan, trading as Independent
American Investments, sued Sobolevitch under 42 U.S.C. § 1983,
alleging that she violated his right to due process under the
fourteenth amendment when she terminated a lease between Vartan
and the AOPC without first giving him an opportunity to contest
the termination.
The lease, executed on October 10, 1989, was for a courthouse
intended as the home of the Pennsylvania Commonwealth Court. It
was for an initial leasehold of twenty-nine years and would have
required Vartan to build the courthouse in downtown Harrisburg,
Pennsylvania. Plaintiff asserts that in the months following the
execution of the agreement he expended great time, money and
effort to advance the construction of the project, which all went
to naught when Sobolevitch terminated the contract on June 6,
1990. She did so pursuant to the apparent authority the lease
conferred upon her if she was not able to obtain the approval of
the "judicial branch of the Commonwealth of Pennsylvania" for the
lease. (complaint, exhibit D, the lease agreement). Vartan
believes that Sobolevitch had, in fact, already obtained the
necessary approval at the time she wrote her letter and that the
termination was therefore in breach of the lease.
Among other reasons for dismissal, defendant asserts Vartan's
claim is for a mere breach of contract and that such a claim is
not protected by the due process clause. In opposition, the
plaintiff contends that he had a property interest in the lease
because Sobolevitch could not terminate it except on certain
grounds. Because defendant therefore could not have terminated
the lease except, as Vartan has argued, "for cause," the contract
created a property right which is protected by the due process
clause.
"Today it is beyond dispute that a contract with a state entity
can give rise to a property right protected under the Fourteenth
Amendment," Unger v. National Residents Matching Program,
928 F.2d 1392, 1397 (3d Cir. 1991), but, as also noted by the court
of appeals in Unger, not "every state contract gives rise to a
property interest." Id. Further, the Third Circuit has been
reluctant to recognize such a right for a very good reason:
Many . . . courts have observed that if every breach
of contract by someone acting under color of state
law constituted a deprivation of property for
procedural due process purposes, the federal courts
would be called upon to pass judgment on the
procedural fairness of the processing of a myriad of
contractual claims against public entities. We agree
that such a wholesale federalization of state public
contract law seems far afield from the great purposes
of the due process clause.
Id. at 1398 (quoting Reich v. Beharry, 883 F.2d 239, 242 (3d
Cir. 1989) (citations omitted in Unger)).
Nevertheless, in a review of Supreme Court and federal appellate
case law, the Third Circuit has acknowledged:
928 F.2d at 1399 (brackets added).
Vartan asserts that his lease was of the second type. Although
he concedes that the lease did not specify that it could be
terminated only for cause, he contends its substantive
provisions, permitting termination only on the happening of
certain events, had that effect. Hence, the contract did create a
property right which he further asserts required a pretermination
hearing before the agreement could be ended.
Whether the contract creates a property right is a difficult
question. It appears that Farr v. Chesney, 437 F. Supp. 521
(M.D.Pa. 1977) would support such a conclusion, but it was
decided prior to the Third Circuit's decision in Unger so we
are not inclined to follow Farr. In any event, that case is
distinguishable because a contract to provide personal services
was at issue there. See San Bernardino Physicians' Services
Medical Group, Inc. v. County of San Bernardino, 825 F.2d 1404,
1409 n. 5 (9th Cir. 1987). Other cases from this district would
support the opposite conclusion but they are distinguishable as
well. In Ruman v. Commonwealth of Pennsylvania, Department of
Revenue, 462 F. Supp. 1355 (M.D.Pa. 1979), the court stated that
a mere breach of contract could not constitute a due process
violation but no argument was made there that the contract could
not be terminated except for cause. In Swin Resource Systems,
Inc. v. Lycoming County, 678 F. Supp. 1116 (M.D.Pa. 1988), the
plaintiff advanced a substantive due process claim.
However, we need not decide this issue. Assuming that the
contract does create a property right, due process does not
require the pretermination hearing that Vartan has requested.
[T]o determine whether predeprivation process was
required, we must apply the familiar tripartite test
set out in Mathews v. Eldridge, 424 U.S. 319, 96
S.Ct. 893, 47 L.Ed.2d 18 (1976). Under that test, we
must weigh the importance of the interest of which
the plaintiff is being deprived, the extent, if any,
to which the particular procedure contended for will
reduce the risk of an erroneous deprivation, ...