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SECTOR ENTERPRISES, INC. v. DIPALERMO

December 26, 1991

SECTOR ENTERPRISES, INC., MICHAEL P. MCMAHON AND TERRY M. PARKS, PLAINTIFFS,
v.
JOHN D. DIPALERMO, DEPUTY COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: McCURN, Chief Judge.

West

MEMORANDUM-DECISION AND ORDER

Plaintiffs commenced this action pursuant to 42 U.S.C. § 1983, 1985 (3), and 1988, and N.Y. Const. art. 1, §§ 6 and 11. When this suit was filed in 1987, plaintiffs were two New York State employees and the corporation for which they are principals.*fn1 The defendants were ten officials of the New York State Department of Social Services.*fn2 Plaintiffs alleged that the defendants violated their First Amendment right to free speech, their Fourteenth Amendment rights to equal protection and due process, and their rights to equal protection and due process as guaranteed by the New York State Constitution. Defendants have denied the allegations.

On March 10, 1989, this court issued an order dismissing plaintiff's claims insofar as they were brought:

(1) under 42 U.S.C. § 1985 (3);

  (2) under the due process clause of the Fourteenth
      Amendment; and
 (3) under the First Amendment, against the defendants
     in their individual capacities.

Thus, remaining before the court are the following claims:

  (1) First Amendment, against defendants in their
      official capacities only;
  (2) equal protection (Fourteenth Amendment), against
      defendants in their individual and official
      capacities; and;
  (3) pendent state constitutional claims, against
      defendants in their individual and official
      capacities.

Defendants now move for summary judgment on the remaining claims. Plaintiffs cross-move for summary judgment on their First Amendment claim. For the reasons stated herein, defendants' motion for summary judgment is granted in its entirety. Plaintiffs' motion for partial summary judgment is therefore denied.

I. FACTS

A. Parties and Background

In 1986, plaintiffs Terry Parks and Michael McMahon were employed by the New York State Department of Social Services ("DSS"), in the Division of Information Technology Management. Parks was a data base programmer/analyst in the department; McMahon was a project assistant. The defendants were Parks's and McMahon's superiors at DSS.*fn3

DSS operates the New York State Child Support Management System ("CSMS"). CSMS is an elaborate, computerized "management information system" which is designed to, inter alia, assist state and local social service agencies in obtaining federal reimbursement for payments they make for child support. The system is highly regarded in the field of child support management; as of 1986, eleven states had either expressed an interest in, or were otherwise considering, adopting versions of the New York CSMS. Pl.Mem. at 3-4.

As a project assistant, McMahon supervised the transmissions of daily checks and reports into the CSMS, and monitored the interaction of the CSMS with other units within DSS. Parks asserts that although he was responsible for maintaining several data bases, including the data base used for the CSMS, he had no direct involvement in the maintenance or operation of the CSMS itself during his tenure with DSS.*fn4 Regardless of the exact nature of their duties, one can safely conclude that both McMahon and Parks understand the complexities of implementing and operating the CSMS.

In June, 1986, Parks and McMahon formed plaintiff Sector Enterprises, Inc. ("Sector"). Parks is president of Sector, McMahon is vice-president. Parks and McMahon have been and continue to be the only officers of Sector.*fn5 They formed Sector for the primary purpose of selling their technical expertise with the New York CSMS to other states and governmental agencies which are considering implementing the system. As described in the complaint,

  Sector Enterprises seeks to assist states and
  governmental agencies other than New York in
  installing the CSMS and adapting it to the other
  states [sic.] computer system, inputing the data
  necessary for running the system, training the data
  processing staff and the user community, and assisting
  the state or governmental agency in obtaining
  reimbursement from the Federal Government for the
  statutorily provided reimbursement from the Federal
  Government.

Complaint M 16.

When they assumed their new positions with Sector, Parks and McMahon knew of New York's laws and regulations governing outside employment by state employees. See PI.Mem. at 6. Specifically, New York Public Officers Law §§ 73 (repealed 1989) and 74 regulated commercial and other outside activities of state employees; these sections severely limited, if not prohibited, state employees' ability to engage in outside employment which has the potential to conflict with their state employment. See generally N.Y.Pub.Off.L. §§ 73 (repealed 1989), 74 (McKinney 1988). In addition, in 1985 defendant Perales — then-Commissioner of DSS — promulgated separate regulations concerning outside employment by DSS employees in particular. Pursuant to the commissioner's regulations, all DSS employees in "Grade 18" or above, including plaintiffs herein, were required to obtain written approval from their superiors as a prerequisite to performing outside employment.*fn6 See Complaint exh. "A" (Perales memorandum) and "B" ("Manager's Guide"), describing new DSS regulations. The superiors from whom Parks and McMahon needed to obtain approval included some of the defendants in this action.

B. Controversy giving rise to this litigation

In accordance with the DSS regulation, in June, 1986 Parks and McMahon took steps to secure approval for their participation in outside employment on behalf of Sector. They submitted their request for approval in anticipation of their attendance on behalf of Sector at a conference sponsored by the American Public Welfare Association ("APWA conference"). Parks's and McMahon's attendance at the conference, scheduled to take place in September, ...


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