Comsys, Inc., and Kathryne L. McAuliffe, Plaintiffs-Appellees,
Frank Pacetti, Edward St. Peter, and Keith G. Bosman, Defendants-Appellants.
March 30, 2018
from the United States District Court for the Eastern
District of Wisconsin. No. 16-CV-655-JPS - J.P. Stadtmueller,
Easterbrook and Rovner, Circuit Judges, and Gilbert, District
Easterbrook, Circuit Judge.
City of Kenosha, Wionsin, hired Comsys to be its
information-technology department. Comsys had its offices
inside City Hall and stored all of its electronic information
on the City's servers. The contract between Comsys and
the City automatically renewed from year to year unless
terminated, adding that both Comsys and the City "shall
have the right, with or without cause, to terminate the
Agreement by written notice delivered to the other party at
least twelve (12) calendar months prior to the specified
effective date of such termination." The City's
Common Council voted on June 2, 2014, to end the contract,
and the City's Mayor (Keith G. Bosman) delivered formal
notice two days later. The contract ended on June 5, 2015.
then sued everyone in sight-the City, the City's Water
Utility (for which Comsys also had worked), the Mayor, the
City Administrator (Frank Pacetti), the General Manager of
the Water Utility (Edward St. Peter), the City's Director
of Information Technology (Merril Kerkman, who moved from
Comsys to the City on May 1, 2014), and every member of the
Common Council who voted to terminate the contract. Comsys
asserted that all defendants had violated the First and
Fourth Amendments to the Constitution (applied to these
defendants through the Due Process Clause of the Fourteenth
Amendment), and are liable under state contract and tort law
to boot. The district court dismissed several claims on the
pleadings, 223 F.Supp.3d 792 (E.D. Wis. 2016), and later
dismissed the Council's members on the ground of
legislative immunity. 2017 U.S. Dist. Lexis 70518 (E.D. Wis.
May 9, 2017). The May 2017 opinion also denied motions for
summary judgment on the First and Fourth Amendment claims.
Mayor Bosman, Administrator Pacetti, and Manager St. Peter
have appealed from the order to the extent it rejected their
argument for official immunity. See Mitchell v.
Forsyth, 472 U.S. 511 (1985).
record (read favorably to Comsys) shows that after Kerkman
was appointed as Chief Information Officer of Comsys at the
beginning of 2013, Administrator Pacetti began to make plans
to get rid of Comsys and take the work in-house, under
Kerkman's direction. Kathryne McAuliffe, Comsys's CEO
and sole owner, got wind of this plan, and hostilities
ensued. Kerkman accessed some of McAuliffe's emails and
passed information, which may have included trade secrets and
other confidences, to Pacetti. While the Police Department
was investigating Kerkman on an unrelated matter, McAuliffe
told police about his unauthorized access of her emails. She
later filed a criminal complaint against Kerkman and Pacetti,
and the Sheriff's Office investigated her charges. In May
2014 the Sheriff's Office confiscated the City's
servers on the authority of a search warrant. That step
caused bad feelings as well as considerable difficulty in
getting work done. Within days Mayor Bosman asked the Common
Council to end the City's relation with Comsys. McAuliffe
wrote to the Common Council, strongly objecting, but the
Council sided with the Mayor.
and McAuliffe contend that the contract's termination
violated the First Amendment by penalizing three episodes of
speech. Plaintiffs call this "retaliation, " but
that word does not add anything to the basic claim that the
City made protected speech costly by ending a contract that
was profitable to Comsys. See Fairley v. Andrews,
578 F.3d 518, 525 (7th Cir. 2009).
to isolate contract administration from speech may be
impossible. Even when a contractor serves at a city's
pleasure, the deal is unlikely to be called off without some
reason. Terminations follow breakdowns of relations. Dur- ing
a breakdown, charges and countercharges are likely; it is
impossible to imagine the end to a relation such as the one
between Comsys and the City without either side saying
something to the other. Words may be harsh and the exchanges
acrimonious. If that were enough to permit recovery under the
Constitution, however, then the federal courts will have
displaced state contract law and effectively nullified
agreements allowing termination without cause.
of this kind led the Supreme Court to hold in Garcetti v.
Ceballos, 547 U.S. 410 (2006), that a public employee
cannot use the First Amendment to block (or get damages for)
a discharge that follows things the worker said as part of
the job. As the Court saw matters, the managers in a public
office must be able to maintain discipline and assure that
the office functions as elected officials wish. Id.
at 422- 23. The Justices concluded that a public employee is
not speaking as a citizen, and therefore is not protected by
the First Amendment, when speaking as part of the job.
the Supreme Court nor the Seventh Circuit has considered
whether the same principle applies to the administration of
public contracts, but every circuit that has addressed the
issue has given an affirmative answer. See Decotiis v.
Whittemore, 635 F.3d 22, 26 n.1 (1st Cir. 2011);
Ma-rez v. Bassett, 595 F.3d 1068, 1074 (9th Cir.
2010); Walden v. Centers for Disease Control &
Prevention, 669 F.3d 1277, 1285 (11th Cir. 2012). That
conclusion is sound, especially when the contractor is acting
as a de facto branch of a public body. Until 2015
Kenosha used a contract, rather than a civil-service system,
to provide its information-technology needs. It should have
as much freedom to manage that contractual relation as to
manage an internal IT department.
of County Commissioners v. Umbehr, 518 U.S. 668 (1996),
and O'Hare Truck Service, Inc. v. Northlake, 518
U.S. 712 (1996), reinforce this conclusion. Those decisions
hold that public contractors are treated just like public
employees with respect to the rule against hiring and firing
to carry out political patronage. If contractors and
employees are alike in this constitutional respect, why not
others? It is hard to see how there could be a
difference; after all, the employment relation is itself a
matter of contract under state law, which provides the tenure
and conditions of public employment.
least one aspect of the current suit can be resolved on the
basis of the Ceballos principle. The day the Common
Council was to vote on terminating the contract, McAuliffe
sent it a letter accusing Kerkman (by then a City employee)
and Pacetti of unseemly conduct. The letter's stated
purpose was to provide the Council's members with
"as much information as possible [as] they
contemplate[d] options with [Comsys's] contracts."
This letter spoke for Comsys as a contractor trying to keep
business. True, the letter was not required by the contract,
but it dealt with contract administration. If Ceballos, after
being told that he was in hot water for what he had written
on the job, had penned a letter to his managers protesting
his impending discharge, he could not have used the
letter's lack of success as the fulcrum of a First
Amendment claim. Allowing that step would make
Ceballos empty. Our decisions hold that internal
memos protesting coworkers' misconduct are not protected
by the First Amendment. Forgue v. Chicago, 873 F.3d
962, 966-67 (7th Cir. 2017); Fairley, 578 F.3d at
522. That understanding covers McAuliffe's letter as
other matters cannot be resolved on the basis of
Ceballos. During the initial probe of Kerkman in
winter 2014, McAuliffe met with an investigating officer and
made statements adverse to him. Then in May 2014 McAuliffe
filed a criminal complaint against Kerkman. Both of these
steps may have affected the contract but did not occur as
part of its administration. Statements given under oath at
trial or before a grand jury fall outside the scope of
Ceballos, because the "independent obligation
[to tell the truth] renders sworn testimony speech as a
citizen and sets it apart from speech made purely in the
capacity of an employee." Lane v. Franks, 134
S.Ct. 2369, 2379 (2014); see also Chrzanowski v.
Bianchi, 725 F.3d 734, 740 (7th ...