The opinion of the court was delivered by: ARTHUR D. SPATT
The plaintiff, Nu-Life Construction Corp. ("Nu-Life"), in its Fourth Amended Complaint, alleged that it sustained damages resulting from the violation of its civil rights under " 42 U.S.C. § 1983, et seq" (Fourth Amended Complaint, at P 1). The defendant, Board of Education of the City of New York, which encompasses the Division of School Buildings of the Board of Education of the City of New York, moves for an order dismissing Nu-Life's complaint, pursuant to Fed. R. Civ. P. 12 or for summary judgment in its favor, pursuant to Fed. R. Civ. P. 56.
Nu-Life was in the building, construction, and maintenance business. Between February 1984 and June 1984, Nu-Life was awarded three contracts with the Board of Education's Division of School Buildings ("DSB") to provide construction and maintenance services to three separate schools. The DSB is a subdivision of the Board of Education of the City of New York ("Board") and is charged with the responsibility of supervising construction and maintenance of the approximate 1,000 school buildings in the five boroughs of the City of New York.
The three contracts awarded to Nu-Life involved performing work at Public School 100 ("P.S. 100"), Public School 132 ("P.S. 132"), and Junior High School 126 ("J.H. 126"). Each school is located in Kings County.
Nu-Life contends that from the outset of its business relationship with the Board, it was harassed and subjected to extortion by employees of both the DSB and the Board, including General Building Inspector Stanley Dobrowolski ("Dobrowolski"), Field Inspector John Trapanotto ("Trapanotto"), their supervisor, Area Manager David Krugman ("Krugman"), and Executive Director of the DSB, Nicholas Borg ("Borg").
Nu-Life asserts that there was a widespread practice of extorting money from independent contractors that were awarded contracts by the Board. Inspectors were alleged to have sought "kickbacks" from the contractors to ensure that all their work was approved, paid for, and to ensure that they would receive extra work and future contracts. According to Nu-Life, if a contractor refused to make such a kickback, additional work and payment for work completed was withheld.
Nu-life further contends that this kickback scheme was so institutionalized that set percentages existed for various types of work. For example, it was alleged that two (2) percent of a contract was required to be "kicked back" to inspectors for all work approved for payment and ten (10) percent was expected on all extra work necessary or reasonably required to complete the job. In addition, inspectors demanded twenty-five (25) percent of the cost of all "unnecessary extra work." Such extra work made an existing contract more lucrative than contemplated and was assigned to the contractors at the sole discretion of the individual inspector.
On or about February 27, 1984, Nu-Life commenced work at P.S. 100. Nu-Life asserts that shortly thereafter, Trapanotto met with Anthony Damigos, an employee of Nu-Life and father of Paul Damigos, the principal stockholder and officer of Nu-Life. Nu-Life asserts that Trapanotto explained the kickback scheme and made a demand for money. Anthony Damigos rejected this demand. He was then told by Trapanotto that to do so "was a big mistake." On or about March 17, 1984 Nu-Life demanded payment from the Board for work performed and requested an informal hearing with Board officials to discuss Trapanotto's comments (A. Damigos Depo. p. 382).
On March 19, 1984, at an informal meeting with Dobrowolski, Nu-Life alleged that Dobrowolski refused to approve payment and threatened that he would "sit on" all payments due Nu-Life for weeks and then finally disapprove them, unless Nu-Life cooperated with the inspectors and accede to their demands for money. After this meeting, Nu-Life immediately complained to Krugman, the area manager, and requested that the problem be brought to the attention of Executive Director Borg. Krugman told Anthony Damigos not to go to Borg and that he would resolve the situation. A few days later, after Nu-Life submitted a new payment application, Nu-Life's cost breakdown and payments were approved (A. Damigos Depo. pp. 411-12, 480-82).
Nu-Life further alleges that in June 1984 Dobrowolski also demanded kickbacks in the same percentages previously requested by Trapanotto.
Disputes arose between Nu-Life and the DSB as to the quality of Nu-Life's work with regard to the three contracts at issue. As early as March 7, 1984, prior to Nu-Life's complaints of extortion, Nu-Life was cited by Krugman for its failure to adhere to contract specifications (Def. Ex. CC - Letter from Krugman to Nu-life).
On March 27, 1984 Krugman addressed another letter to Nu-Life referring to several problems with the work at P.S. 100 (Def. Ex. DD). This letter was followed by several other warnings issued by the DSB stating objections to the workmanship and techniques employed by Nu-Life at each of the contract sites (see, e.g., Def. Ex. FF [Krugman letter of April 10, 1984 as to sub-quality painting and plaster work (P.S. 100)]; Def. Ex. JJ [Krugman letter of August 3, 1984 as to use of pneumatic tools in violation of contract (P.S. 132)]; Def. Ex. LL [Sheldon G. Tobak letter of September 7, 1984 to Krugman as to failure to complete work prior to opening of school (J.H. 126)].
By letter dated September 11, 1984 addressed to Donald Dyer, Acting Deputy Director for Maintenance of DSB, Krugman described some of the difficulties DSB was experiencing with Nu-Life in regard to the work performed at P.S. 100. Based on those difficulties, Krugman recommended that default proceedings be instituted against Nu-Life (Def's Ex. NN). A default proceeding is an administrative process by which a contractor is determined to be in breach of its obligations under its contracts. On or about September 17, 1984, Dyer requested that the Office of Contract Compliance hold Nu-Life in default with regard to the contract for P.S. 100.
On October 1, 1984, Krugman again recommended to Dyer that Nu-Life be placed in default, this time in connection with the work performed at P.S. 132 and J.H. 126. Krugman noted that, in his opinion, the personnel utilized by the contractor were unqualified (Def's Ex. QQ).
By letter dated October 2, 1984, Paul Damigos requested an additional 90 days to complete the work at P.S. 132, in accordance with the contract specifications (Def's Ex. PP). He attributed the delay, in part, to a lack of cooperation of the part of Dobrowolski and the custodians in the schools.
In a letter dated October 9, 1984, Paul Damigos complained to Krugman that Inspectors Trapanotto and Dobrowolski disapproved payment for work performed at P.S. 100. Damigos asserted that the inspectors were "bias [sic] against us because of personal reasons". Damigos concluded by demanding a meeting and he informed Krugman that Nu-Life would "take all steps necessary to protect [its] interests, and [would] hold [Krugman] personally responsible for damages" (Def's Ex. RR).
Borg also contacted Joyce Brauer, a Board lawyer and Special Assistant to the Executive Director of the Office of Contract Compliance, on or about October 23, 1984, to verify whether a Board of Review had been recommended. A "Board of Review" involves the investigation of a contractor's performance under a contract to determine whether a finding of default is justified. Brauer confirmed that such a review had been recommended (Tr. p. 4505). Borg expressed his concern that the charges raised by Nu-Life were merely a "smoke screen" intended to obfuscate the underlying problem of faulty workmanship.
In order to determine whether Nu-Life was performing substandard work, Borg asked Carl Grunow, a special inspector from the Contract Compliance Unit, to investigate Nu-Life's work at P.S. 132. Grunow, who was not part of the DSB regular workforce in the field, determined that Nu-Life's work was grossly substandard (Tr. p. 4422).
In addition, in October 1984, the Bureau of Maintenance recommended that Nu-Life be placed in default with regard to its contracts for work at P.S. 132 and J.H. 126 (Brauer Aff. P 12). These requests were held in abeyance pending clearing by Inspector General Sofarelli. In early November 1984 the Office of Contract Compliance received clearance from the Inspector General's office to proceed with the default. In response to this action, on November 27, 1984, Nu-Life filed the first of seven lawsuits against the Board and various employees. on December 3, 1984 the first Board of Review was commenced, to investigate complaints lodged against Nu-Life concerning the poor quality of its workmanship (Def. Ex. Z [Letter from Joyce Brauer to I. William Spivak]).
During December 1984 a criminal investigation was undertaken by the Office of the District Attorney of Kings County, with the assistance of Anthony Damigos, with regard to allegations of extortion by building inspectors in Brooklyn. Anthony Damigos concealed a "wire" and tape recorded conversations with various building inspectors (Tr. p. 5457). The Board of Review was delayed several times as a result of the District Attorney's investigation. According to Joyce Brauer, she, along with Inspector General Sofarelli, objected to any delays of the Board of Review, maintaining that it could be conducted independently from the District Attorney's investigation. She stated that, even assuming that corruption was present, if the work of the contractor was unacceptable and not in accordance with contract specifications, a default would nevertheless be warranted (Brauer Aff. P 18). ultimately,. the criminal investigation resulted in the convictions of several DSB inspectors (see e.g., People v. Manfredi, 166 A.D.2d 460, 560 N.Y.S.2d 679, 681 [2d Dep't 1990]).
In late 1985, a separate investigation into the quality of Nu-Life's work was conducted by the New York City Housing Authority on behalf of the Board. Inspectors, independent of the Board, reviewed the work performed under all of Nu-Life's contracts. In a comprehensive report dated April 30, 1986, Nu-Life's work was characterized as a "sub-standard" (Brauer Aff. P 20; see also Def's Ex. CCC).
The Board of Review continued intermittently until July 20, 1987. The eventual finding of sub-standard work by Nu-Life resulted in a default with regard to the P.S. 100 contract. Given the substantial time and money expended in regard to the P.S. 100 default, the Board declined to continue default proceedings with regard to Nu-Life's other contracts (Woods Aff. P 93).
Nu-Life's present civil rights claims chronologically follow its action pursuant to the Racketeer Influenced Corrupt Organization ("RICO") statute, 18 U.S.C. § 1964(c), which was commenced by Nu-Life on March 18, 1986 ("RICO Action"). Along with another plaintiff, Terminate Control Corporation, Nu-Life sought civil RICO damages against the Board, the DSB, David Krugman, Stuart Horowitz, Stanley Dobrowolski, John Trapanotto, John Finocchiaro, Benjamin Haziak, John J. Manfredi, John Frisone, and Nicholas Borg.
After extensive motion practice and several amendments to the complaint, Nu-Life's RICO case was brought to trial against Borg, Horowitz, Dobrowolski, and Trapanotto on January 6, 1992. During trial, the Court dismissed Nu-Life's RICO conspiracy claim against Horowitz. By a verdict rendered on March 10, 1992, the jury determined that Nu-Life has failed to prove any RICO claim against Borg. In addition, the jury found that while Nu-Life did not prove that Trapanotto and Dobrowolski violated any substantive RICO counts, they did find that Trapanotto and Dobrowolski conspired to violate the RICO statute, which is a violation of the statute in itself (See 18 U.S.C. § 1962[d]).
During the course of the trial, the Court permitted Nu-Life to amend its complaint to add the civil rights claims pursuant to 42 U.S.C. § 1983 ("section 1983"). In response, the Board brought the instant motion for to dismiss the amended complaint and for summary judgment with regard to alleging Section 1983 violations.
The complaint sets forth three grounds for Section 1983 liability. First, it alleges violations of the plaintiff's First Amendment right to engage in constitutionally protected public speech by alleged acts of retaliation against Nu-Life in the form of the Board of Review proceeding, which was allegedly instituted with the intention of silencing any complaints Nu-Life would have made against the Board or its employees. Second, Nu-Life alleges that its rights under the Equal Protection Clause of the Fourteenth Amendment were violated in that the Board singled out Nu-Life, with malicious intent, for "enforcement of oppressive measures, under color of state law" (Complaint, at P 33). Finally, Nu-Life alleges that its Fourteenth Amendment substantive and procedural Due Process rights were violated in that it was deprived of ...