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Comsys Inc v. City of Kenosha

United States District Court, E.D. Wisconsin

August 29, 2019





         This litigation arises from the termination by the City of Kenosha (the “City”) and the Kenosha Water Utility (the “Water Utility”) of their contracts with an outside information technology vendor, Comsys Inc. (“Comsys”), a private, for-profit Wisconsin corporation based in Racine. Comsys and its sole shareholder, Kathryne McAuliffe (“McAuliffe”), brought a litany of claims against the City and the Water Utility, as well as many individual defendants, including, the City's mayor Keith Bosman (“Mayor Bosman”), the City's administrator Frank Pacetti (“Pacetti”), the general manager for the Water Utility Edward St. Peter (“St. Peter”), the City's alderpersons, and a former Comsys employee, Merril A. Kerkman, Jr. (“Kerkman”).

         The plaintiffs brought claims under 42 U.S.C. §§ 1983, 1985, and 1986 seeking damages to remedy various First, Fourth, and Fifth Amendment violations, as well as claims for alleged violations of several Wisconsin state statutes. See generally (Docket #31). The allegations underlying both the federal and state law claims concern certain IT service contracts that the City and the Water Utility entered into with Comsys from approximately 1987 until 2015 (the “Comsys Contracts”). Id. ¶¶ 32-42. The plaintiffs claim that the events leading up to-and ultimately culminating in-the termination of the Comsys Contracts involved a complex conspiracy among various government officials and a rogue former employee who now works for the City. Id. ¶¶ 32-121.

         The defendants brought a motion to dismiss under Rule 12(b)(6), pursuant to which the Court dismissed one count of the Amended Complaint (a Monell claim against the City and Water Utility for Fourth Amendment violations) as well as the plaintiffs' official capacity claims asserted against the individually-named defendants. (Docket #41).

         The defendants then filed a motion for summary judgement under Rule 56 seeking dismissal of all claims. The Court granted it in part and denied it in part. See generally (Docket #114). Specifically, the Court dismissed the plaintiffs' federal claims for civil conspiracy, failure to protect, and Fifth Amendment takings. Id. at 32-37. It also dismissed the plaintiffs' state law claims for breach of the implied contractual covenant of good faith, conversion, civil extortion, victim intimidation, injury to business, intentional infliction of emotional distress, and, as to one defendant, tortious interference. Id. at 37-50. The claims that remained following summary judgment included two federal claims (for violations of the First and Fourth Amendments) and two state law claims (a breach of contract claim against the Water Utility for underpayment of amounts due under its contract with Comsys and a claim for tortious interference against Kerkman).

         The First Amendment claim is alleged against Pacetti, Mayor Bosman, St. Peter, the City, and the Water Utility. Pacetti, Mayor Bosman, and St. Peter argued in their Rule 56 motion that they were entitled to qualified immunity, and the Court declined to apply the defense at the summary judgment stage. Id. at 23-26. Similarly, as to the Fourth Amendment claim alleged against Pacetti and Kerkman, the Court declined Pacetti's request for qualified immunity. Id. at 31-32.[1]

         The defendants then filed an interlocutory appeal of the Court's denial of qualified immunity. (Docket #117). In light of the appeal, the Court stayed proceedings in this case. (Docket #116). On July 12, 2018, the Court of Appeals issued its mandate, reversing this Court's denial of qualified immunity as to Pacetti, Mayor Bosman, and St. Peter. (Docket #132). With those defendants excused from liability, the only defendants remaining in the case are the City, the Water Utility, and Kerkman.

         On September 4, 2018, the remaining defendants filed a second motion for summary judgment. (Docket #134). They ask the Court to dismiss the First Amendment and Fourth Amendment claims in light of the Seventh Circuit's pronouncements in the interlocutory appeal about the law applicable to those claims. Id. In response, the plaintiffs argue that no legal or factual bases exist to dismiss their First Amendment claim against the City and Water Utility, brought under Monell. (Docket #137). However, the plaintiffs concede that their Fourth Amendment claim must be dismissed. Id. In light of the parties' agreement, the Court will dismiss that claim (Counts One and Two of the Amended Complaint). Neither the plaintiffs nor the defendants address the remaining state law claims.


         The same standard announced in the Court's order on the defendants' first motion for summary judgment applies to the instant motion as well.

         When a party files a motion for summary judgment, it is her “contention that the material facts are undisputed and the movant is entitled to judgment as a matter of law.” Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 601 (7th Cir. 2015) (citing Fed.R.Civ.P. 56(a)). “Material facts” are those facts which “might affect the outcome of the suit, ” and “summary judgment will not lie if the dispute about a material fact is ‘genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, to demonstrate a genuine dispute about a material fact, a party opposing summary judgment “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, the non-moving party “must set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e).

         “Where. . .the movant is seeking summary judgment on a claim as to which it bears the burden of proof, it must lay out the elements of the claim, cite the facts it believes satisfies these elements, and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant on the claims.” Hotel 71 Mezz, 778 F.3d at 601. A court considering a motion for summary judgment must draw all reasonable inferences from the materials before it in favor of the non-moving party. See Johnson v. Pelker, 891 F.2d 136, 138 (7th Cir. 1989). A court will deny a motion for summary judgment when “one or more material facts are disputed or. . . the facts relied on by the motion do not entitle the movant to judgment as a matter of law.” Hotel 71 Mezz, 778 F.3d at 602.

         3. RELEVANT FACTS

         Apart from a short set of supplemental facts proposed by the plaintiffs, the parties did not include new facts in their briefing.[2] They agree that the relevant facts are unchanged since their previous submissions. Therefore, the Court will reproduce its summary of the relevant facts here.

         Beginning in the late 1980s, Comsys began performing IT services for the City and the Water Utility as an independent computer facilities management provider. In that role, Comsys performed various functions such as furnishing professional and technical assistance in connection with IT management, information system administration, and programming support services. Comsys had contracts with the City and the Water Utility, each of which were amended over time. (Docket #77 at 5). Kerkman was a longtime employee of Comsys, and from January 1, 2013 until March 31, 2014, he served as the company's Chief Information Officer. Id.

         The Amended Complaint alleges an elaborate conspiracy between Pacetti, the city administrator, and Kerkman, his mole, to misappropriate Comsys' goodwill, confidential information, trade secrets, and employees so that the City could create its own IT department. More specifically, the plaintiffs allege that sometime around July 2013, Kerkman buddied up to Pacetti, soliciting him to create a Director of IT position for the City and hire Kerkman to fill that role. To that end, the plaintiffs claim that Kerkman unlawfully obtained access to Comsys' and McAuliffe's confidential data by unlawfully surveilling Comsys' and McAuliffe's email accounts and archives, and then passed that information along to Pacetti for his use in building an in-house IT department for the City.

         Kerkman's and Pacetti's conspiracy was confronted with a hiccup in February 2014, the plaintiffs claim, when Deputy Chief Daniel Miskinis (“Miskinis”) of the Kenosha Police Department began an administrative investigation to determine whether Kerkman had complied with a 2009 directive not to archive City Police Department emails on the City's computer server. Id. at 17. On March 7, 2014, Miskinis met with McAuliffe to question her (and another Comsys employee) in connection with his investigation into Kerkman. McAuliffe gave true and accurate responses to Miskinis' questions and performed actions on the City's server at his direction.

         Miskinis met with McAuliffe again a couple of days later, and during that interview, McAuliffe told Miskinis about a 2013 meeting between Kerkman and Pacetti where the two men discussed the police department emails being archived on the City's server. She also told Miskinis that she had reason to believe Kerkman had accessed her email account without authorization because in the fall of the previous year, McAuliffe discovered a confidential email printed from her archives on Kerkman's desk. Id. at 10- 11.

         Around this time, Pacetti requested a meeting with the Police Chief and Miskinis, wherein he expressed disagreement with Miskinis' findings in the Kerkman investigation at that point. Id. at 19. Pacetti also summoned McAuliffe to his office, and during the meeting, according to McAuliffe, Pacetti yelled at her and banged his fist on the desk, accusing her of initiating the Kerkman investigation and threatening wholesale changes to the IT department, leaving McAuliffe in tears. Id. at 20. Shortly afterward, McAuliffe spoke with Kenosha Joint Services Director Thomas Genthner who informed her that Pacetti asked him for copies of Comsys' contract that day and said the relationship between Joint Services and Comsys needed to ...

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