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F. Steven Kirk and Dbs Planning Consultants v. New York State Office of Community Renewal and Joseph Rabito

January 27, 2011


The opinion of the court was delivered by: Norman A. Mordue, Chief U.S. District Judge:



Defendants New York State Office of Community Renewal ("OCR") and Joseph Rabito ("Rabito") move to dismiss the action under Fed. R. Civ. P. 12(b)(6) on the ground that the complaint fails to state a claim upon which relief could be granted. (Dkt. No. 6).


Plaintiff Steven F. Kirk ("Kirk"), a resident of North Greenbush, New York, is the owner and principal of DBS Planning Consultants, Inc. ("DBS"). Kirk is a registered member of the Republican party. DBS is a New York corporation that provides services for the planning and community and economic development needs of small municipalities in upstate New York.

OCR is a public benefit corporation with offices in Albany, New York. OCR administers the Federal Community Development Block Grant ("CDBG") program in New York. In March 2007, defendant Rabito was appointed Deputy Commissioner of the NYS Division of Housing and Community Renewal and President of OCR. Rabito is a member of the Democratic party.

In administering the CDBG program, defendants are required to comply with federal rules and regulations regarding procurement and have promulgated their own procurement standards. Pursuant to these regulations, the officials administering the CDBG program may not consider political affiliations.

Prior to March 2007, DBS was successful in obtaining and managing community development projects for municipal and not-for-profit clients funded through the CDBG program. Since March 2007, plaintiffs claim that defendants have denied applications by plaintiffs' clients for CDBG grants causing the Greene County IDA to terminate its contract with plaintiffs and subjecting the plaintiffs' activities to excessive and unwarranted scrutiny and causing the Village of Athens to not use plaintiffs' services with respect to the "ELCO project".*fn2 Plaintiffs claim that defendants "blackballed" plaintiffs from participation in the CDBG program and have subjected plaintiffs to adverse action due to Kirk's political affiliations.

The complaint sets forth two causes of action alleging violations of 42 U.S.C. § 1983 and one state law cause of action. Plaintiffs claim that defendants' actions constitute an illegal interference with plaintiffs' First Amendment rights of association and further, constitute a denial of plaintiffs' equal protection rights. Plaintiffs also allege they have been denied due process based upon Kirk's political affiliation and have been blackballed in an entirely arbitrary fashion without any finding of incompetence or wrongdoing. Finally, plaintiffs allege that Rabito's actions constitute tortious interference with plaintiffs' contractual relationships. Plaintiffs claim they lost their primary source of income and have been prevented from pursuing their livelihood resulting in severe financial losses. Plaintiffs seek compensatory damages for financial loss, past and future emotional pain and suffering, injunctive relief, attorneys' fees and costs.

Defendants move to dismiss the complaint on the following grounds: (1) plaintiffs lack standing to raise the claims asserted because their alleged injuries are derivative of injuries suffered by third parties; (2) defendants are entitled to qualified immunity protection on plaintiffs' First Amendment claims; (3) plaintiffs' remaining federal claims are premised upon an insufficient First Amendment claim and thus, barred pursuant to Second Circuit precedent; and (4) plaintiffs did not pursue an Article 78 proceeding. Defendants also claim that if no federal claims survive this motion to dismiss, this Court should decline to exercise supplemental jurisdiction over plaintiffs' state law claims.


I. Standard on Rule 12(b)(6)

In addressing defendants' motion to dismiss, the Court accepts as true all of the factual allegations in the complaint and draws inferences from those allegations in the light most favorable to plaintiffs. See Albright v. Oliver, 510 U.S. 266, 268 (1994); McEvoy v. Spencer, 124 F.3d 92, 95 (2d Cir. 1997). Dismissal is proper only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir. 1994). "[T]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims".

Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001). It is well settled that the Court may not look to evidence outside the pleadings in deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim. Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991) ("In considering a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), a district court must limit itself to facts stated in the complaint or in documents attached to the complaint as exhibits or incorporated in the complaint by reference.").

II. Standing

Defendants argue that plaintiffs' lack standing to sue because plaintiffs' injuries are entirely derivative to the claims of others. Specifically, defendants contend that plaintiffs' alleged injuries are the result of defendants' denial of federal grants to plaintiffs' clients (third parties)

and consequently, from plaintiffs' clients' decisions to discontinue business with plaintiffs. Plaintiffs disagree and claim they suffered actual harm because defendants, "solicit[ed] participants in the program not to do business with [plaintiffs]" which resulted in financial loss and constitutional violations.

"The doctrine of standing, which addresses the question of whether the plaintiff is entitled to have the court decide the merits of the dispute or of particular issues, embraces both 'constitutional' and 'prudential' requirements." Ctr. for Reprod. Law and Policy v. Bush, 304 F.3d 183, 195-196 (2d Cir. 2002) (citing Sullivan v. Syracuse Hous. Auth., 962 F.2d 1101, 1106 (2d Cir. 1992) (quotation marks and brackets omitted)). The requirement of standing is "an essential and unchanging part of the case-or-controversy requirement of Article III [of the United States Constitution]." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). "'[T]he irreducible ...

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