United States District Court, E.D. Pennsylvania
STEWART DALZELL, District Judge.
Susan Dichter sued the City of Philadelphia (the "City") and Public Health Management Corp. ("PHMC") over the circumstances surrounding her February 3, 2012 termination. Both defendants seek dismissal of all claims. Dichter opposes both motions and, in the alternative, seeks leave to amend her complaint a second time pursuant to Fed.R.Civ.P. 15. For the reasons detailed below, we will grant the City's motion to dismiss as to Count I (breach of contract); Count VI (conspiracy to deprive plaintiff of her civil rights in violation of 42 U.S.C. § 1983); Count VII (violation of City Charter and Civil Service regulations); Count VIII (wrongful discharge); Count XI (Due Process violation) and Count XII (civil conspiracy) and deny its motion as to Count IV (First Amendment retaliation). We will grant PHMC's motion as to Count II (breach of contract); Count V (conspiracy to deprive plaintiff of her civil rights in violation of 42 U.S.C. § 1983); Count IX (wrongful discharge); Count X (Due Process violation); and Count XIII (civil conspiracy) and deny its motion as to Count III (First Amendment retaliation). We will also deny Dichter's motion to amend.
We have federal question jurisdiction over the plaintiff's federal claims pursuant to 28 U.S.C. § 1331 and 42 U.S.C. § 1983, and over her supplemental state claims pursuant to 28 U.S.C. § 1367.
I. Legal Standard
A. Motion to Dismiss
A defendant moving to dismiss under Fed.R.Civ.P. 12(b)(6) bears the burden of proving that a plaintiff has failed to state a claim for relief, see Fed.R.Civ.P. 12(b)(6); see also, e.g., Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). A Rule 12(b)(6) motion tests the sufficiency of the allegations contained in the complaint and "[t]he question, then, is whether the facts alleged in the complaint, even if true, fail to support the claim." Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993) (internal citation and quotation marks omitted). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), in order to survive a Rule 12(b)(6) motion "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face', " Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). A claim is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, " Iqbal, 556 U.S. at 678.
Our Court of Appeals requires district courts considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6) to engage in a two-part analysis:
First, the factual and legal elements of a claim should be separated.
The district court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a district court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.'
Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679).
In deciding a motion to dismiss, all well-pleaded allegations of the complaint must be taken as true and interpreted in the light most favorable to the plaintiff, and all inferences must be drawn in her favor. See McTernan v. City of York, PA, 577 F.3d 521, 526 (3d Cir. 2009) (internal quotation marks omitted). To survive a motion to dismiss, a plaintiff must allege facts that "raise a right to relief above the speculative level on the assumption that the allegations in the complaint are true (even if doubtful in fact)." Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Twombly, 550 U.S. at 555).
B. Leave to Amend
Fed. R. Civ. P. 15(a)(2) requires a party to seek leave from the Court or the opposing party to amend its pleading more than once and urges us to "freely give leave when justice so requires." But we may deny leave to amend when special circumstances "such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment" are evident. Foman v. Davis, 371 U.S. 178, 182 (1962). The decision to grant leave is within the Court's discretion. In re Burlington Coat Factory Sec. Litig., 114 F.3d. 1410, 1434 (3d Cir. 1997). However, any refusal to grant leave to amend must be justified. Id. (citing Foman, 371 U.S. at 182).
Futility exists when a complaint, as amended, would fail to state a claim upon which relief could be granted. Holst v. Oxman, 290 F.Appx. 508, 510 (3d Cir. 2008). The same standard determines the futility of an amendment as governs a Rule 12(b)(6) motion to dismiss, that is, "if a claim is vulnerable to dismissal under Rule 12(b)(6), but the plaintiff moves to amend, leave to amend generally must be granted unless the amendment would not cure the deficiency." Id.
II. Factual and Procedural Background
We draw our recitation of the pertinent allegations from plaintiff's First Amended Complaint, taking her allegations as true as we must.
Dichter alleges that in 2008 she became aware of a three-year $21 million grant from the United States Department of Housing and Urban Development ("HUD") to fund the City's Homeless Prevention and Rapid Re-Housing Program, or HPRP. First Amended Complaint ("FAC") at ¶¶ 15, 16. In January of 2009 she contacted Dainette Mintz, Deputy Managing Director for the City who was responsible for overseeing the City's Office of Supportive Housing ("OSH"), the agency charged with policy and planning for the City's homeless programs, about the HPRP grant. FAC at ¶¶ 7, 17. OSH employs 160 individuals, some directly and others in arrangements with contractors - including PHMC - to disburse federal, state and city funds for the alleviation of homelessness in Philadelphia. Id. at ¶¶ 8, 9. PHMC is a not-for-profit public health institute that partners with governmental and non-governmental organizations to provide public health services for communities. Id. at ¶ 10.
In March of 2009 Mintz contacted Dichter and orally offered her the position of HPRP Tracking Manager at OSH with a $75, 000 annual salary plus benefits, to start on April 13, 2009, which Dichter accepted. Id. at ¶ 18. On April 3, 2009, Mintz wrote to PHMC's Celeste Collins to inform her that Dichter had been hired in that position, stating:
Please allow this letter to serve as authorization for Ms. Susan Dichter to be hired as the Homeless Prevention Program Tracking Manager with the City of Philadelphia's Office of Supportive Housing.
Id. at ¶ 19, see also Ex. 1. The letter detailed Dichter's $75, 000 salary, her start date, and the fact that the City had interviewed her and felt she would be "an asset to our organization." Id.
Dichter contends that she filled out an application form with PHMC and received her paycheck and health benefits through PHMC but was nonetheless a City employee and that PHMC's role in her employment was "a sham, " because she had no interaction or communication with PHMC during her nearly three years with OSH. FAC at ¶¶ 20, 21. Dichter contends that she was an employee of the City, working in a City office, on City business and under the supervision, direction and control of City employees and officials. Id. at ¶ 20. She also maintains that she was expected to adhere to City policies and standards of conduct. Id.
She alleges that the City structured her employment in this manner to deny her the rights and benefits guaranteed under Article VII, Chapter 3 of the City Charter and terminated her in violation of her First and Fourteenth Amendment rights. Id. at ¶¶ 23, 26. Dichter also alleges that she was an outspoken critic about poor management and other issues beyond her responsibilities as Tracking Manager throughout her tenure at OSH. Id. at ¶¶ 36, 37. As a result, she claims she encountered hostility from a group of OSH employees including Deputy Director Letitia Egea-Hinton, Homeless Program Director Katrina Pratt-Roebuck, and Rhonda Sadler and Cheryl Ford. Id. at ¶ 40.
Dichter believed her responsibilities to include: (1) reporting quarterly to HUD and the Commonwealth of Pennsylvania about the $21 million HPRP grant and related grants; (2) ensuring those reports complied with state and federal regulations - that is, included complete and accurate information; and (3) reporting any fraud, waste or mismanagement. Id. at ¶ 29. She contends that she understood that the City would protect her from adverse or retaliatory treatment for such reporting. Id. She also alleges that "Joan Markum", then-Chief Integrity Officer for the City, assured her in an OSH meeting that she and others were to report any fraud and that all staff involved in the HPRP grant were shielded from retaliation under federal, state and city "whistleblower" laws and ethics policies. Id. at ¶ 30.
Dichter alleges that after the Philadelphia Inquirer ran a negative story in June of 2011 about a family shelter the City funded through OSH, she met with OSH Chief of Staff Joye Presson to express her concerns about that situation. Id. at ¶¶ 41, 42. In that meeting, Dichter contends, she also expressed concern about OSH's funding of SELF, Inc., a homeless service provider that had engaged in apparent fiscal mismanagement before dismissing two of its principals. Id. at ¶ 43. Dichter alleges she stated her concern that OSH had not picked up on the alleged mismanagement in its audits of SELF, Inc. Id. at ¶ 44. Dichter contends that Presson was upset and went to inquire further in the OSH fiscal department. Id. at ¶ 45. That afternoon Dichter met with Mintz who told Dichter she was aware of Dichter's conversation with Presson and expressed the view that the Inquirer article was inaccurate and unfair. Id. at ¶ 46.
About two months later, Dichter learned that the two individuals dismissed from SELF, Inc. for fiscal mismanagement now operated a new entity, New Roads to Success, which also received OSH funding through a contract review committee that Presson chaired. Id. at ¶¶ 47, 48. In December of 2011, Dichter learned that the City's Chief Integrity Officer and a local television station had been informed that the two New Roads to Success principals had misappropriated homeless shelter funding. Id. at ¶ 50. Dichter also alleges she encountered delays regarding the Health Management Information System ("HMIS") used for the HUD reporting requirement, which she attributed to Pratt-Roebuck's "inadequacies." Id. at ¶¶ 54, 56.
Dichter contends the New Roads revelation provoked anxiety among the individuals at OSH she identified as hostile to her, which, along with the HUD reporting difficulties, contributed to the retaliatory actions that led to her termination. Id. at ¶¶ 52, 53, 57.
On January 11, 2012, plaintiff contacted Susan Krestge, Chief of Staff to Dr. Donald Schwartz, Managing Director of the City's Department of Health which oversaw OSH. Id. at ¶ 58. At this meeting, Dichter shared her concerns about fiscal mismanagement at OSH. Id. at ¶ 60. Krestge told plaintiff she would share those concerns and telephoned her later that day to advise that she had spoken with Schwartz and Kevin Vaughn, Integrity Officer at the Department of Health, who asked for a written report. Id. at ¶ 62. Dichter also spoke with Evan Meyers, Chief Legal Counsel of the City's Board of Ethics. Id. at ¶ 63.
Dichter and Pratt-Roebuck attended a January 25, 2012 OSH staff meeting at which a budgeting error was discovered that resulted in the failure to allocate $327, 000 of the HUD HPRP grant to any program despite its award to the City. Id. at ¶¶ 65, 66. After the meeting, Dichter mentioned her concern over the loss of the $327, 000 grant to Presson. Id. at ¶ 71. Later that week, Dichter circulated an agenda and information for the weekly meeting, intending to discuss the reporting concerns, but Pratt-Roebuck cancelled the meeting by email. Id. at ¶ 72. Dichter alleges she replied, "Why-this needs to be handled, " id. at ¶ 73, in response to which Pratt-Roebuck replied that Dichter was yelling at her by email and should express herself more professionally. Id. at ¶ 74.
On Monday, January 30, 2012, Pratt-Roebuck emailed Dichter to summon her to a 4:30 p.m. meeting. Id. at ¶ 75. Dichter agreed but asked that Presson be present. Id. at ¶ 76. At the meeting, Pratt-Roebuck handed Dichter a document citing her for insubordination, which Dichter refused to accept, attempting instead to address the reporting concerns. Id. at ¶¶ 77, 78. Pratt-Roebuck stood up and yelled at plaintiff, "This is my meeting." Id. at ¶ 78. Dichter replied, "Let's bring [Deputy Director] Dainette [Mintz] into the meeting right now and let her know how f[***]ed HMIS really is." Id. at ¶ 79. Presson declared the meeting over and followed Dichter to her office, where Dichter told her Presson needed to supervise Pratt-Roebuck more closely. Id. at ¶¶ 80, 81.
At the next HMIS meeting on February 2, 2012, Dichter contends Pratt-Roebuck was hostile to her, as a result of which Dichter emailed (1) Human Resources Director Raymond Davis about the possibility of filing a grievance against Pratt-Roebuck, (2) the Chief Legal Counsel about filing an ethical complaint, and (3) two City employees with oversight responsibility for federally-funded stimulus grants, to request a meeting about her HPRP reporting and compliance concerns. Id. at ¶¶ 84, 85.
On February 3, 2012, Dichter was invited to a meeting with Presson and Davis. Id. at ¶ 86. They informed her at the meeting that she was being terminated immediately for using profanity in the January 30 meeting. Id. at ¶ 88. Dichter stated that the real reason was the SELF investigation, which Davis denied knowing about - and he then summoned two security guards who escorted Dichter from the building. Id. at ¶¶ 89, 90. Dichter requested a written statement of the reasons for her termination, which she received from PHMC on February 7, 2012. Id. at ¶ 92. The letter stated that she was being terminated for violating PHMC's Business Conduct Policy ("Treat all employees fairly, with dignity and respect"), because she displayed loud, disruptive and angry behavior and used profanity in the workplace. Id. at Ex. 2.
Dichter contends that the letter is full of contradictions and inaccuracies, including its assertions that she worked as an HPRP Program Manager for PHMC since 2009, yet the City decided to terminate her, and that her employment was "at will." Id. at ¶ 93. She states she was never advised of PHMC's Business Conduct Policy. Id. She also maintains that she was never given reasonable notice or an opportunity to be heard, in violation of Article VII, Chapter 3 of the City Charter, which provides that she (1) could only be disciplined for just cause, (2) was entitled to ten days' advance notice of any proposed discipline or dismissal, (3) had the right to respond and receive a further, final notice of discipline or dismissal, and (4) had a right of appeal. Id. at ¶¶ 94, 95. She was never given notice of her rights, which she alleges were concealed from her under the false pretense that she was not a City ...