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November 20, 1991


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, ...

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