Synergy Project Mgmt., Inc. v. City & County of San Francisco

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 7, 2021
• Docket: 19-17558
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 7 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

SYNERGY PROJECT MANAGEMENT, No. 19-17558 INC., D.C. No. 4:17-cv-06763-JST Plaintiff-Appellant,

v. MEMORANDUM*

CITY AND COUNTY OF SAN FRANCISCO, et al.,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of California Jon S. Tigar, District Judge, Presiding

Argued and Submitted April 26, 2021 San Francisco, California

Before: HURWITZ and BRESS, Circuit Judges, and CORKER,** District Judge.

Synergy Project Management, Inc. appeals the dismissal of its state law claim

of intentional interference with contract and federal claims for First Amendment

retaliation, stigma-plus due process, and de facto debarment. Synergy also

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Clifton L. Corker, United States District Judge for the Eastern District of Tennessee, sitting by designation. challenges the district court’s denial of leave to amend and its decision to take

judicial notice of complaints from previous litigation. We have jurisdiction under

28 U.S.C. § 1291 and review de novo the district court’s dismissal under Federal

Rule of Civil Procedure 12(b)(6). Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992,

998 (9th Cir. 2010). We review the denial of leave to amend and decision to take

judicial notice for abuse of discretion. Gompper v. VISX, Inc., 298 F.3d 893, 898

(9th Cir. 2002); Ritter v. Hughes Aircraft Co., 58 F.3d 454, 458 (9th Cir. 1995). We

affirm in part, vacate in part, and remand.

I.

The district court dismissed Synergy’s intentional interference claim, holding

that although the City was not a party to the subcontract agreements, it was also not

a “stranger to the contracts” because they envisioned the City’s performance as the

owner. Since the district court’s decision, the California Court of Appeal rejected

the district court’s interpretation of California law. See Caliber Paving Co., Inc. v.

Rexford Indus. Realty & Mgmt., Inc., 268 Cal. Rptr. 3d 443, 446 (Cal. Ct. App. 2020)

(“[A] defendant who is not a party to the contract . . . is not immune from liability

for intentional interference with contract by virtue of having an economic or social

interest in the contract.”). Given Caliber, the City could potentially be liable under

a tortious interference theory.

We note that the California Supreme Court recently held that “to state a claim

2 for interference with an at-will contract by a third party, the plaintiff must allege that

the defendant engaged in an independently wrongful act.” Ixchel Pharma, LLC v.

Biogen, Inc., 470 P.3d 571, 580 (Cal. 2020). Because Ghilotti Brothers, Inc., the

general contractor, could remove Synergy in its sole discretion, Synergy’s

interference claim survives only if Synergy alleged an independently wrongful act.

Id. The district court did not reach this issue, and we decline to do so in the first

instance. We leave it to the district court’s discretion to either address this issue on

remand or, because no federal claims will remain, to remand the claim to state court

for resolution. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 357 (1988); 28

U.S.C. § 1367(c)(3).

II.

The district court did not abuse its discretion in dismissing Synergy’s federal

claims without leave to amend because amendment would be futile. See Thinket Ink

Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004).

A

We first address Synergy’s First Amendment retaliation claim. An essential

element of that claim is that the plaintiff “engaged in protected speech.” Coszalter

v. City of Salem, 320 F.3d 968, 973 (9th Cir. 2003).1 In this context, to be protected,

1 Because they were public records, the district court could take judicial notice of the complaints in Synergy’s prior lawsuits to determine whether they constituted protected activity. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

3 speech must involve “matters of public concern” rather than “matters only of

personal interest.” Connick v. Myers, 461 U.S. 138, 147 (1983). Synergy’s prior

lawsuits against the City related to payment for services rendered on construction

contracts, a quintessential private interest. While Synergy’s allegations in the

Proposed Fourth Amended Complaint framed the lawsuits as being part of a public

effort to obtain the City’s compliance with California’s prompt payment laws, this

recasting does not alter the true “context” of the lawsuits—a private contractual

dispute. Id.

Although the district court did not reach the issue, Synergy also did not

establish the lawsuits were “a ‘substantial or motivating’ factor” in the City’s

decision to remove it from the projects, a separate requirement. Coszalter, 320 F.3d

at 973 (citations omitted). Construing the allegations in the light most favorable to

Synergy, the City removed Synergy because of its substandard performance on these

projects, not for its prior lawsuits.

B

Under the “‘stigma plus’ test,” a plaintiff may establish a violation of due

process “based on governmental defamation” by showing “the public disclosure of

a stigmatizing statement by the government . . . plus the denial of ‘some more

tangible interest[ ] such as employment,’ or the alteration of a right or status

recognized by state law.” Ulrich v. City & Cnty. of San Francisco, 308 F.3d 968,

4 982 (9th Cir. 2002) (quoting Paul v. Davis, 424 U.S. 693, 701, 711 (1976))

(emphasis and alteration in original). Synergy’s allegations that City officials

publicly depicted it as a bad contractor, blamed it for cutting corners, and called it

incompetent, are not “severe and genuinely debilitating” and do not “import serious

character defects” sufficient to establish a due process violation under the stigma-

plus test. Hyland v. Wonder, 972 F.2d 1129, 1141–42 (9th Cir. 1992) (quotations

omitted).

C

A claim asserting a violation of substantive due process by public employers

is limited to “extreme cases, such as a government blacklist, which when circulated

or otherwise publicized to prospective employers effectively excludes the

blacklisted individual from his occupation, much as if the government had yanked

the license of an individual in an occupation that requires licensure.” Engquist v.

Oregon Dep’t of Agric., 478 F.3d 985, 997–98 (9th Cir. 2007) (quotations omitted).

Synergy does not allege in either its Third Amended Complaint or its Proposed

Fourth Amended Complaint that it could not bid on or obtain contracts with the City.

See id. at 998 (to prove de facto debarment, the plaintiff “must show that the

stigmatizing actions make it virtually impossible for [it] to find new employment”

(quotations omitted)).

* * *

5 In sum, we affirm the district court’s dismissal of Synergy’s federal claims

without leave to amend, vacate the district court’s dismissal of the intentional

interference claim, and remand for further proceedings. Synergy’s motion to take

judicial notice, filed April 21, 2021 (Dkt. 65), and City and County of San

Francisco’s motion to take judicial notice (Dkt. 35) are DENIED. The parties shall

bear their own costs on appeal.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED.