The opinion of the court was delivered by: LAWRENCE KAHN, District Judge
MEMORANDUM-DECISION AND ORDER*fn1
Melissa Dorsett-Felicelli is the President and Executive
Director of two corporations, Dorsett-Felicelli, Inc., d/b/a
Pyramids (hereafter "Pyramids"), and Pyramids Pre-School, Inc.
(hereafter "Pre-School") (collectively "Plaintiffs"). Plaintiffs
bring this action pursuant to 42 U.S.C. § 1983, alleging that
Defendants took retaliatory actions in violation of
Dorsett-Felicelli's First Amendment rights. Currently before the
Court is a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) by Defendants County of Clinton ("County"),
Paula Calkins LaCombe ("LaCombe"), and Katherine O'Connor
("O'Connor") (collectively "County Defendants"). II. Facts
Pyramids is a corporation that provides individualized
services, such as speech, nutritional, occupational and physical
therapies, to children of ages birth through three, pursuant to
the Early Intervention Program ("EIP") established by New York
Public Health Law. See N.Y. PUB. HEALTH LAW §§
2540-2559.*fn2 The approval of New York State's Department
of Health is required to become an authorized provider of these
services. N.Y. COMP. CODES R. & REGS. tit. 10, § 69-4.5 (1997).
Once approval has been received, a municipal official refers
children to the service providers. N.Y. PUB. HEALTH LAW § 2552;
N.Y. COMP. CODES R. & REGS. tit. 10, §§ 69-4.2, 4.3 (1997). As
evidenced by its contract with the Clinton County Department of
Public Health for the period January 12, 2004 through December
31, 2004, Pyramids is an authorized EIP service provider. EIP
Contract (Dkt. No. 3, Ex. F). Pyramids receives the statutory fee
of $70 for each therapy session provided. Dorsett-Felicelli Aff.
(Dkt. No. 3) at ¶ 6.
Pre-School provides special education and related therapy
services to children ages three through five who have learning
disabilities, pursuant to the Preschool Special Education ("PSE")
Program that has been established under New York State Education
Law. N.Y. EDUC. LAW § 4410. Approval of the Commissioner of the
New York State Department of Education is required to become a
service provider under this program. N.Y. EDUC. LAW § 4410(9).
For participation in the PSE Program, children are referred to
Pre-School through a school district's board of education. N.Y.
EDUC. LAW § 4410(2). Pre-School has signed a contract with the
Clinton County Public Health Department to offer PSE services
from July 1, 2004 through June 30, 2005. PSE Services Contract (Dkt. No. 3, Ex. M).
Beginning in the Fall 2003, Dorsett-Felicelli began to voice
her objection to what she perceived as the County's unlawful use
of independent unlicensed contractors as service providers under
these programs. Complaint (Dkt. No. 1) at ¶¶ 27-28.
Dorsett-Felicelli contends that the County designates certain
providers as independent contractors to save money because this
status avoids payment of certain state and federal employee
taxes. Dorsett-Felicelli Aff. (Dkt. No. 3) at ¶ 9. Affording some
providers this status therefore undercuts Pyramids' and
Pre-School's ability to compete and to retain and recruit
qualified specialists. Id.
In a meeting in September 2003, Dorsett-Felicelli complained to
several County officials, County Administrator William Bingel,
County Attorney Dennis Curtin, and Assistant County Administrator
Michael Zurlo, about the County's use of independent contractors
for work under these programs. Id. at ¶ 10. In October 2003,
Dorsett-Felicelli met with Zurlo, Curtin, and O'Connor, County
Coordinator for EIP services, to reiterate her concerns. Id. at
¶ 11. She contends that upon voicing her objection, Curtin
threatened that she could encounter problems with the way that
Pyramids does its billing. Id. On December 10, 2003,
Dorsett-Felicelli took her concerns to the Clinton County
Legislature, but she claims that she only received "lip service."
Id. at ¶ 12.
Plaintiffs contend that the County was surreptitiously involved
in encouraging three of Pyramids' employees, Melissa Puchalski,
Stephanie Girard and Kelly McCauley, to form North Country Kids,
a competing agency which also provided EIP and PSE services.
Id. at ¶ 14. As evidence of this allegation, Plaintiffs point
out that the County scrambled to have North Country Kids'
provider status approved prior to Pyramids' termination of
employment of these three employees because their employment with
a licensed service provider, such as Pyramids, was necessary to allow transfer of session hours to North Country
Kids. Id. To expedite the North Country Kids' service provider
approval, the County Legislature "took the unusual step of
calling for a vote on the agreement by telephone rather than in
chambers." Id. Plaintiffs also note that North Country Kids was
included on a February 4, 2004 list of service providers compiled
by the Clinton County Department of Public Health, when its
approval by the County Legislature was not obtained until February 11.
Id. at ¶¶ 15-16. State approval was never obtained.
In a memorandum dated February 12, 2004, County Defendants
notified Pyramids and Pre-School that effective February 16,
2004, County Defendants had elected to transfer EIP and PSE
session hours away from Pyramids and Pre-School to North Country
Kids. Clinton County Health Dep't. Memo (Dkt. No. 3, Ex. G).
Plaintiffs contend that this represents a gross revenue of
$207,480 annually. Dorsett-Felicelli Aff. (Dkt. No. 3) at ¶ 17.
Shortly after this transfer of session hours, an anonymous
letter was sent to the Department of Education, alleging that
Pyramids' services jeopardize the safety of the children. Id.
at ¶ 18. The Department of Education, understandably concerned
for the safety of the children, did an investigation and reported
that there was no merit to these allegations and that Pyramids
services were of "exemplary quality." Letter of Rusty Kindlon,
State Dep't. of Ed. (Dkt. No. 3, Ex. I). Dorsett-Felicelli
believes that County Defendants were involved in the sending of
this letter. Dorsett-Felicelli Aff. (Dkt. No. 3) at ¶ 18. She
hired a forensic linguistic analyst who is of the opinion that
O'Connor may have written the anonymous letter. Id. at ¶ 18.
The County has refused requests to investigate the matter. Id.
On June 1, 2004, Pyramids filed an Article 78 proceeding in the
Supreme Court of the State of New York, County of Clinton,
against defendants County of Clinton, County of Clinton Department of Public Health, LaCombe, and O'Connor. Complaint
(Dkt. No. 1) at ¶ 51. That action seeks declaratory and
injunctive relief and specifically "seeks to have the session
hours reinstated on the ground that the respondents in that
proceeding acted arbitrarily and capriciously with regards to
Pyramids." Dorsett-Felicelli Aff. (Dkt. No. 3) at ¶ 19.
Plaintiffs contend that in response to the filing of that
Article 78 proceeding, County Defendants retaliated against
Pyramids and Pre-School. Id. at ¶ 20. In August 2003, County
Defendants had made 546 EIP session referrals to Pyramids, a
number consistent with previous months, but in June 2004,
referrals dropped to 100. Id. Additionally, after the filing of
the Article 78 proceeding, on September 1, 2004, County
Defendants transferred Special Education Itinerant Teacher
("SEIT") services for 11 students, a total of 30 sessions per
week for 40 weeks, sessions that are part of the PSE Program,
away from Pre-School.*fn3 Id. at ¶ 21. The transfer of
SEIT sessions constitute a loss of about $76,800 of income to
Pre-School. Complaint (Dkt. No. 1) at ¶ 57.
Plaintiffs filed the instant action on September 30, 2004,
along with a motion for a preliminary injunction. Complaint (Dkt.
No. 1); P.I. Motion (Dkt. No. 3). The Clinton County Supreme
Court issued a decision in the Article 78 proceeding on October
31, 2004. Dorsett-Felicelli, Inc., d/b/a/ Pyramids v. County of
Clinton, et al., No. 04-0547 (N.Y. Sup. Ct. Oct. 31, 2004).
Justice McGill dismissed the case and held that petitioners,
Dorsett-Felicelli and Pyramids, lacked standing because the statutes and regulations were not
implemented to protect against the harm of which they complained,
explaining that "petitioner[s] simply failed to make the
`critical showing' that [their] injury falls within the `zone of
interest' of either [the Public Health Law or Education Law]."
Id. at 9.
On November 16, 2004, the Court issued an Order ("Nov. 16
Order") on the motion for a preliminary injunction holding,
inter alia, that (1) the Court would abstain from all claims
for declaratory or injunctive relief relating to the transfer of
EIP session hours and (2) the motion with respect to the ...