Martin v. Haling

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

SUZY MARTIN, )

)

Plaintiff, ) 21 C 5494

)

vs. ) Judge Gary Feinerman

)

SUSAN HALING, MICHELLE CASEY, DONALD )

EDWARDS, CHICAGO HOUSING AUTHORITY, )

MARK LISCHKA, MICHAEL MORAN, BOARD OF )

EDUCATION OF CITY OF CHICAGO, JONATHAN )

MAPLES, and DOES 1-10, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Suzy Martin brings this suit against Susan Haling, Michelle Casey, and Donald Edwards

in their official capacities as Illinois state officials; the Chicago Housing Authority (“CHA”) and

two of its employees, Mark Lischka and Michael Moran, in their official and individual

capacities; and the Board of Education of the City of Chicago and its employee, Jonathan

Maples, in his official and individual capacity. Doc. 1. The complaint alleges that Defendants

violated Martin’s Fourteenth Amendment procedural due process rights by making false and

stigmatizing statements about her participation in an alleged bribery and kickback scheme

involving elevator contracts her business, Smart Elevators Co., held at the University of Illinois

Chicago (“UIC”). Ibid. Edwards, Haling, Casey, and CHA move under Civil Rule 12(b)(1) to

dismiss the suit for lack of subject matter jurisdiction, and all Defendants move under Civil Rule

12(b)(6) to dismiss for failure to state a claim. Docs. 32, 36, 38, 39, 41, 43. The Rule 12(b)(1)

motions are denied, the Rule 12(b)(6) motions are granted, and Martin is given an opportunity to

file an amended complaint.

Background

In resolving a Rule 12(b)(1) motion asserting a facial challenge to subject matter

jurisdiction, as in resolving a Rule 12(b)(6) motion, the court assumes the truth of the operative

complaint’s well-pleaded factual allegations, but not its legal conclusions. See Zahn v. N. Am.

Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016) (Rule 12(b)(6)); Silha v. ACT, Inc., 807

F.3d 169, 173 (7th Cir. 2015) (Rule 12(b)(1)). The court must also consider “documents

attached to the complaint, documents that are critical to the complaint and referred to in it, and

information that is subject to proper judicial notice,” along with additional facts set forth in

Martin’s brief opposing dismissal, so long as those additional facts “are consistent with the

pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal

quotation marks omitted). The facts are set forth as favorably to Martin as those materials allow.

See Domanus v. Locke Lord, LLP, 847 F.3d 469, 478-79 (7th Cir. 2017). In setting forth the

facts at this stage, the court does not vouch for their “objective truth.” Goldberg v. United

States, 881 F.3d 529, 531 (7th Cir. 2018).

A. OEIG Investigation and Report

Martin is the owner and president of Smart Elevators, an elevator servicing and repair

company operating in the Chicago area. Doc. 1 at ¶ 10. In October 2010, Smart Elevators began

providing elevator and escalator services to UIC. Id. at ¶ 27. Smart Elevators’s work at UIC

increased in 2011 and 2012 and remained steady through 2016. Id. at ¶¶ 28-31.

On October 16, 2015, the Office of the Executive Inspector General for the Agencies of

the Illinois Governor (“OEIG”) received a whistleblower complaint alleging that Martin and

Smart Elevators participated in a bribery and kickback scheme in which James Hernandez, a UIC

employee in charge of its elevator payment and procurement systems, improperly directed work

to Smart Elevators and paid it for services that it did not provide. Id. at ¶¶ 2, 34-37. The OEIG

opened an investigation and interviewed Martin on February 1, 2016. Id. at ¶¶ 35, 40. During its

investigation, the OEIG discovered that Martin had written a series of checks to Hernandez’s

daughter from March 2013 through August 2015, which the OEIG suspected were bribes. Id. at

¶ 41. On March 4, 2016, UIC told Smart Elevators that it could no longer provide elevator

services to UIC, id. at ¶ 44, and on March 17, Hernandez resigned from UIC, id. at ¶ 43.

On May 26, the OEIG referred its uncompleted investigation to the United States

Attorney’s Office for the Northern District of Illinois. Id. at ¶ 45. The U.S. Attorney’s Office

asked the OEIG to suspend its investigation, which it did. Id. at ¶¶ 46-47. The OEIG later

learned that Smart Elevators had submitted a bid on a contract to provide elevator repair services

to UIC. Id. at ¶ 47. The OEIG decided to issue a report “at th[at] time in order for UIC to be

able to make an informed decision in its procurement process regarding Smart Elevators, rather

than waiting until the U.S. Attorney’s Office ha[d] concluded its case.” Ibid.

On April 3, 2017, the OEIG and the Illinois Executive Ethics Commission (“EEC”)—the

governmental body that publishes OEIG reports—issued a non-public report finding that Martin

and Hernandez “operated a kickback scheme in which Ms. Martin paid Mr. Hernandez at least

$83,530 in kickbacks, and likely as much as $199,430,” and violated the gift ban provision of the

State Officials and Employees Ethics Act. Id. at ¶ 48. The report recommended that UIC

“terminate any existing contracts and work orders with Smart Elevators, and bar Smart

Elevators, or any other business operated by Suzy Martin, from future UIC contracts or work.”

Id. at ¶ 49.

B. UIC “Shadow Debarment”

On April 24, 2017, UIC’s Executive Director of University Ethics and Compliance stated

that UIC would defer action on the OEIG report’s recommendations until the U.S. Attorney’s

Office concluded its investigation. Id. at ¶ 56. According to Martin, UIC in fact decided to bar

her and Smart Elevators from any UIC work based on the OEIG report, thereby imposing a

“shadow debarment.” Id. at ¶ 67.

On May 2, 2018, the U.S. Attorney’s Office issued a press release announcing federal

bribery charges against Martin and Hernandez. Id. at ¶ 58. Eight months later, the EEC publicly

released the OEIG report, and on January 3, Hernandez pleaded guilty to the federal charges. Id.

at ¶¶ 59-60. On January 15, the OEIG released a public newsletter setting forth information

about the OEIG report. Id. at ¶ 62.

On February 22, 2019, after a four-day jury trial, Martin was found not guilty of all

charges. Id. at ¶ 64. The OEIG and the EEC have nonetheless refused to withdraw the OEIG

report, on which UIC continues to rely to bar Martin and Smart Elevators from any UIC work.

Id. at ¶¶ 65, 67. In October 2020, Martin wrote to the President of UIC to ask that he “make an

independent assessment of her relationship with UIC in order to clear her name,” but she never

received a response. Id. at ¶ 68. In January 2021, UIC employees told a contractor that it would

not be awarded any work at UIC if it used Smart Elevators as a subcontractor. Id. at ¶ 69.

C. CHA Debarment

In April 2019, a CHA contractor hired Smart Elevators as a subcontractor. Id. at ¶ 72.

That month, the CHA Office of the Inspector General (“CHA OIG”) learned of the OEIG report.

Id. at ¶ 73. On April 17, CHA OIG Investigator Mark Lischka contacted UIC’s Executive

Director of University Ethics and Compliance, who told him that, while UIC had not officially

debarred Martin and Smart Elevators, it was not awarding Smart Elevators any contracts in light

of the OIEG investigation and the federal criminal charges. Id. at ¶¶ 74-75. The CHA OIG

concluded that there was “strong and sufficient evidence” that Martin and Smart Elevators had

operated a kickback scheme with Hernandez, and recommended that Martin and Smart Elevators

be debarred from doing any business with CHA for three years. Id. at ¶ 76.

On October 16, Michael Moran, CHA’s Chief Financial Officer and Acting Chief

Procurement Officer, sent Martin a letter stating that CHA had determined—based on

Hernandez’s plea agreement, the OEIG’s investigation, and the CHA OIG’s investigation—that

she and Smart Elevators were “non-responsible, and therefore, ineligible to enter into new

contracts to perform services at CHA and CHA-related properties.” Id. at ¶ 79. As a result,

Smart Elevators’s contracts with CHA were cancelled, and Martin and Smart Elevators remain

ineligible to provide work to CHA. Id. at ¶ 81. In November 2020, Martin wrote to CHA’s

Chair of the Board of Commissioners asking that she clear Martin’s name and reject the OEIG

report’s findings, but Martin never received a response. Id. at ¶ 80.

D. CPS Debarment

Smart Elevators began working as a subcontractor for Chicago Public Schools (“CPS”) in

2017. Id. at ¶ 82. On January 22, 2020, Martin met with Jonathan Maples, the Chief

Procurement Officer for the Chicago Board of Education, to discuss the allegations in the OEIG

report. Id. at ¶ 86. On February 23, 2021, Maples issued a Notice of Proposed Debarment and

Interim Restraints to Martin and Smart Elevators. Id. at ¶ 87. Citing the OEIG report and the

transcripts from Martin’s trial, the notice informed Martin and Smart Elevators that they were

immediately suspended from performing under any existing Board contract; proposed that the

Board’s Chief Operating Officer impose interim constraints on Martin and Smart Elevators to

make them ineligible to obtain any new Board business; and recommended that the Board’s

Chief Operating Officer seek Board approval to fully and permanently debar Martin and Smart

Elevators. Id. at ¶¶ 88-89, 91. In her response to the notice, Martin denied any wrongdoing and

requested a hearing before the Board, but no hearing was held. Id. at ¶ 92. Martin and Smart

Elevators are currently ineligible to provide work to CPS. Id. at ¶ 93.

E. Smart Elevators’s Other Contracts

On March 6, 2019, just over a week after Martin’s acquittal, the United States

Department of the Navy terminated its suspension of Martin and Smart Elevators from

performing work for the Navy. Id. at ¶ 71. In 2021, the United States Department of Justice

awarded Smart Elevators a contract to perform elevator renovation services at the Metropolitan

Correctional Center in Chicago. Id. at ¶ 70. In addition to its contracts with the federal

government, Smart Elevators has contracts with private entities and various state agencies. Id. at

¶ 25.

Discussion

I. Rule 12(b)(1)

Several defendants challenge the court’s subject matter jurisdiction over Martin’s claims,

but those challenges have no merit.

A. Article III Standing

Edwards and CHA argue that Martin, who brings this suit in her personal capacity, lacks

Article III standing because she seeks relief on behalf of only Smart Elevators. Doc. 33 at 10-11;

Doc. 42 at 9. The “irreducible constitutional minimum of standing consists of three elements.

The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged

conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.”

Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016) (citation and internal quotation marks omitted).

Edwards and CHA challenge only the third element, redressability. Doc. 33 at 10-11; Doc. 42 at

9. “Redressability ‘examines the causal connection between the alleged injury and the judicial

relief requested.’” Lac Du Flambeau Band of Lake Superior Chippewa Indians v. Norton, 422

F.3d 490, 501 (7th Cir. 2005) (quoting Allen v. Wright, 468 U.S. 737, 753 n.19 (1984)). “On a

motion to dismiss, a plaintiff need only plead that there is a substantial likelihood that the relief

requested will redress the injury claimed.” Ibid. (internal quotation marks omitted).

Edwards and CHA’s argument fails because Martin seeks relief on her own behalf.

Specifically, Martin alleges that UIC, CHA, and CPS imposed debarments that extended to both

Smart Elevators and “any other business operated by Suzy Martin,” Doc. 1 at ¶¶ 49, 67, 76, 79,

88-89, and she asks that the debarments “against Smart Elevators and Martin” be enjoined, id. at

¶¶ 116, 128, 141 (emphasis added). Because there is a substantial likelihood that Martin’s

alleged injury—disqualification from operating a business that can compete for contracts at UIC,

CHA, and CPS—would be remedied by an injunction lifting the debarments against her, she

satisfies Article III’s redressability requirement. See Spokeo, 578 U.S. at 338; Lac Du

Flambeau, 422 F.3d at 501.

B. Eleventh Amendment

Edwards, Haling, and Casey argue that Martin’s claims are barred by the Eleventh

Amendment. Doc. 33 at 5-6; Doc. 40 at 7-9; Doc. 44 at 5-7. The Eleventh Amendment “bars

actions in federal court against a state, state agencies, or state officials acting in their official

capacities.” Ind. Prot. & Advocacy Servs. v. Ind. Family & Soc. Servs. Admin., 603 F.3d 365,

370 (7th Cir. 2010). Interpreting the Eleventh Amendment, the Supreme Court held in Ex parte

Young, 209 U.S. 123 (1908), that injunctive relief—but not monetary damages for past harms—

is available in federal court against state officials sued in their official capacities. See id. at 159-

60; Driftless Area Land Conservancy v. Valcq, 16 F.4th 508, 521 (7th Cir. 2021) (explaining that

“Ex parte Young … applies only when a plaintiff seeks prospective relief against an ongoing

violation of federal law,” and that, while “[i]njunctive relief is prospective relief …[,] monetary

damages to remedy past harms” is not) (citing Idaho v. Coeur d’Alene Tribe of Idaho, 521 U.S.

261, 281 (1997)); McDonough Assocs., Inc. v. Grunloh, 722 F.3d 1043, 1050-51 (7th Cir. 2013)

(observing that a federal court cannot “direct a state to make payments … to remedy a past injury

to a private party”).

Edwards, the Chairman of UIC’s Board of Trustees, argues that Martin’s request for an

injunction enjoining him from “enforcing any debarment” against and “canceling any existing

contracts” with her and Smart Elevators, Doc. 1 at ¶ 116, “is really a claim for money damages

in violation of [UIC’s] Eleventh Amendment sovereign immunity,” Doc. 33 at 5. According to

Edwards, while the relief sought by Martin is “technically in the nature of a mandatory

injunction to … accept[] and evaluat[e] [her] company’s bids, the primary relief [she] seeks is

the payment of money from the state.” Id. at 9. That argument is wrong. The complaint focuses

on Martin’s inability to compete for bids, and her requested relief correspondingly seeks to

remove that barrier by allowing her bids to be “accept[ed] and “evaluat[ed].” Doc. 1 at ¶ 116.

The complaint does not request an injunction compelling any defendant to contract with Martin

or to pay her. As she seeks only prospective injunctive relief, rather than “monetary damages to

remedy past harms,” Martin’s injunctive relief claim against Edwards in his official capacity can

proceed under Ex parte Young. See Driftless Area, 16 F.4th at 521.

Next, Edwards and Casey, the EEC’s Executive Director, argue that Martin

“impermissibly asks this Court to direct [] Illinois state entit[ies] on how to comply with Illinois

law.” Doc. 33 at 5; Doc. 44 at 5-7. Under Pennhurst State School & Hospital v. Halderman,

465 U.S. 89 (1984), the Eleventh Amendment precludes federal courts from exercising

jurisdiction to grant either “prospective or retroactive” relief “when a plaintiff alleges that a state

official has violated state law.” Id. at 106; see also James v. Madigan, 373 F. App’x 619, 621

(7th Cir. 2010) (“Although Ex parte Young permits prospective relief against a state official to

ensure future compliance with federal law, this approach does not apply to claims under state

law.”). But Martin does not seek such relief.

True enough, Martin alleges that the EEC’s decision to issue the OEIG report before the

OEIG’s investigation was complete, and without the report’s conclusions being supported by

“reasonable cause,” was “improper and contrary to state law.” Doc. 1 at ¶¶ 52-53. But those

allegations are made as part of Martin’s claim that the EEC’s decision to issue the OEIG report

deprived her of her federal due process right to “continue to work and contract” with UIC, CHA,

and CPS. Id. at ¶ 103. It follows that Martin’s claims against the EEC do not impermissibly ask

the court to direct it to comply with Illinois law. See Trump v. Wis. Elec. Comm’n, 983 F.3d 919,

925 (7th Cir. 2020) (holding that federal courts can, consistent with the Eleventh Amendment,

“decide whether [state officials’] interpretation of state law violated a provision of the federal

Constitution,” and observing that a complaint that is “anchor[ed] in alleged violations of state

law” can still “present[] a federal question”); Bennett v. Tucker, 827 F.2d 63, 71 n.3 (7th Cir.

1987) (holding that Pennhurst “is no bar to the federal courts adjudicating” a suit in which “the

plaintiffs do not ground their claim on the defendant’s alleged failure to comply with state law

[and instead] allege that the defendant has refused to comply with the dictates of the Due Process

Clause,” and explaining that “existing state procedures may be relevant in determining the

dictates of due process”).

As for Edwards, Martin alleges that UIC’s informal decision to debar her deprived her of

“an opportunity to rebut or appeal a[] formal decision by UIC,” thereby impinging on her

“existing liberty rights [under the Fourteenth Amendment] to continue to work and contract with

UIC.” Doc. 1 at ¶¶ 110, 114, 116. Edwards notes that Illinois statutes and regulations govern

vendor debarment procedures for state agencies. Doc. 33 at 9; see 30 ILCS § 500/1-1 et seq.; 44

Ill. Adm. Code § 4.2005 et seq. But Martin alleges that UIC’s “shadow debarment” process

violated her federal due process rights, not Illinois’s debarment procedures. Doc. 1 at

¶¶ 110-116. Accordingly, Martin’s claims against Edwards do not impermissibly ask the court

to direct UIC to comply with Illinois law. See Bennett, 827 F.2d at 71 n.3.

Last, Haling, the OEIG’s Executive Inspector, argues that she cannot be sued under Ex

parte Young because the OEIG was “not responsible” for publishing the OEIG report. Doc. 40 at

7-9. Ex parte Young applies only to state officials with the authority to perform the challenged

state action. See Young, 209 U.S. at 157 (“In making an officer of the state a party defendant in a

suit to enjoin the enforcement of an act alleged to be unconstitutional, it is plain that such officer

must have some connection with the enforcement of the act.”); Sherman v. Cmty. Consol. Sch.

Dist. 21 of Wheeling Twp., 980 F.2d 437, 441 (7th Cir. 1992) (holding that Ex parte Young did

not “support[] a suit against the Attorney General, who has never threatened the [plaintiffs] with

prosecution and as far as we can tell has no authority to do so”).

To support her view that she is not properly subject to suit under Ex parte Young, Haling

cites the complaint’s allegation that, “[i]n January 2019, … the EEC publicly released the OEIG

Report.” Doc. 1 at ¶ 59. Elsewhere in the complaint, however, Martin alleges that both the EEC

and the OEIG issued the OEIG report. Id. at ¶ 48 (“On April 3, 2017 … the EEC and OEIG

issued a report (the ‘OEIG Report’) … .”); id. at ¶ 52 (“The EEC and OEIG decision to issue the

OEIG Report … .”). And the complaint alleges that the report’s April 2017 issuance, undertaken

by the EEC and the OEIG, violated her federal due process rights by causing UIC to refuse to do

business with her. Id. at ¶¶ 66-67. Thus, even though Martin alleges that the OEIG was

involved only in issuing the report, not in publicly releasing it, the OEIG was still responsible for

some of the state action of which she complains. Martin’s injunctive relief claim against Haling

therefore is permitted under Ex parte Young.

II. Rule 12(b)(6)

Martin brings only federal claims, and those claims allege violations of her Fourteenth

Amendment procedural due process rights—specifically, that Defendants deprived her of her

“protected liberty interests in her continuing right to contract and work with UIC, CHA and

CPS.” Id. at ¶¶ 101-103, 112-114, 124-126, 137-139. “A procedural due process claim requires

a two-fold analysis. First, [the court] must determine whether the plaintiff was deprived of a

protected interest; second, [the court] must determine what process is due.” Leavell v. Ill. Dep’t

of Natural Res., 600 F.3d 798, 804 (7th Cir. 2010). Focusing on the first element, Defendants

argue that Martin’s admission that Smart Elevators has other contracts defeats her submission

that she has a protected liberty interest in contracting with UIC, CHA, and CPS. Doc. 38 at 10-

11; Doc. 40 at 10-13; Doc. 42 at 10-13; Doc. 44 at 12-13.

Among the liberty interests protected by the Due Process Clause is an individual’s right

“to engage in any of the common occupations of life.” Bd. of Regents of State Colls. v. Roth, 408

U.S. 564, 572 (1972). To state a due process claim for the deprivation of occupational liberty, a

plaintiff “must [allege] that (1) [s]he was stigmatized by the defendant’s conduct, (2) the

stigmatizing information was publicly disclosed[,] and (3) [s]he suffered a tangible loss of other

employment opportunities as a result of public disclosure.” Townsend v. Vallas, 256 F.3d 661,

669-70 (7th Cir. 2001).

As to the third requirement, Seventh Circuit precedent holds that a plaintiff “suffer[s] a

tangible loss of other employment opportunities” only when the defendant’s stigmatizing

conduct caused “the [plaintiff’s] good name, reputation, honor or integrity [to] be called into

question in a manner that makes it virtually impossible for the [plaintiff] to find new employment

in his chosen field.” Ibid. (emphasis added); see also Doe v. Purdue Univ., 928 F.3d 652, 661

(7th Cir. 2019) (“Liberty interests are impinged when someone’s good name, reputation, honor

or integrity are called into question in a manner that makes it virtually impossible for him to find

new employment in his chosen field.”) (internal quotation marks and alterations omitted); RJB

Props., Inc. v. Bd. of Educ. of Chicago, 468 F.3d 1005, 1011 (7th Cir. 2006) (same). The

“virtually impossible” standard excludes from the scope of an occupational liberty claim

defamation that “merely result[s] in reduced economic returns and diminished prestige,” Munson

v. Friske, 754 F.2d 683, 693 (7th Cir. 1985), or that “even … causes serious impairment of one’s

future employment,” Khan v. Bland, 630 F.3d 519, 534 (7th Cir. 2010) (internal quotation marks

omitted). See Santana v. Cook Cnty. Bd. of Rev., 679 F.3d 614, 621 (7th Cir. 2012)

(“Defamation by the government [] does not deprive a person of a liberty interest protected by

the Fourteenth Amendment, even when it causes serious impairment of one’s future

employment.”) (internal quotation marks omitted); McMahon v. Kindlarski, 512 F.3d 983, 988

(7th Cir. 2008) (“[I]t is well-established that mere defamation, while it may be the basis for a

solid claim based on state law, does not deprive a person of liberty protected by the Fourteenth

Amendment. This is true even when the defamation causes serious impairment of future

employment opportunities.”) (citation omitted); Hojnacki v. Klein-Acosta, 285 F.3d 544, 548

(7th Cir. 2002) (“[M]ere defamation by the government does not deprive a person of ‘liberty’

protected by the Fourteenth Amendment, even when it causes serious impairment of [one’s]

future employment.”) (internal quotation marks omitted).

The complaint alleges that Smart Elevators currently has contracts with the Department

of Justice, private entities, and state agencies, and that it is free to compete for contracts with the

Department of the Navy. Doc. 1 at ¶¶ 25, 70-71. At the hearing on Defendants’ motions,

Doc. 61, Martin confirmed that Smart Elevators performs work for state agencies. Given these

admissions, it indisputably is not “virtually impossible for [Martin] to find new employment in

[her] chosen field.” Doe, 928 F.3d at 661. To the contrary, Smart Elevators’s success in

securing contracts in the elevator service and repair industry—including with state and federal

governmental clients—shows, as a matter of law, that Martin has not been deprived of any

occupational liberty interest. See Khan, 630 F.3d at 533-35 (holding that the plaintiff’s

debarment from renting properties under a Section 8 Housing Choice Voucher Program did not

implicate a protected occupational liberty interest given that he “could still rent to non-Section 8

housing tenants and participate in other state or government assistance programs”); Wroblewski

v. City of Washburn, 965 F.2d 452, 455-57 (7th Cir. 1992) (holding that the plaintiff, a

Wisconsin marina manager, did not state a due process claim for deprivation of occupational

liberty when the defendant municipality “effectively prevented [him] from obtaining any

potential employment or subcontracting work in connection with [its] marina,” which “required

[him] to leave Wisconsin for a period of time to obtain employment,” because those actions did

not subject him to a “permanent exclusion from” employment in his occupation).

Because Martin fails to allege that she was deprived of a protected liberty interest, her

due process claim necessarily fails. See Khan, 630 F.3d at 527 (“An essential component of a

procedural due process claim is a protected property or liberty interest.”) (internal quotation

marks omitted). Pressing the contrary result, Martin cites Medley v. Milwaukee, 969 F.2d 312

(7th Cir. 1992), for the proposition that a protected occupational liberty interest is implicated

“when a government contractor is debarred or otherwise precluded from further government

work.” Doc. 50 at 26. But in Medley, the Seventh Circuit held that the plaintiffs had not been

deprived of a protected liberty interest when the City of Milwaukee’s Housing Authority

debarred them from renting property through the city’s Rent Assistance Program, reasoning that

the debarment “did not foreclose their opportunity to contract with any local or state housing

assistance programs or to lease their units to persons who were not in the Rent Assistance

Program” and thus “did not effectively put them out of business.” /d. at 318 (internal quotation

marks and alterations omitted). Medley thus reinforces the proposition that debarment implicates

a protected liberty interest only when it effectively eliminates the plaintiff's ability to find work

in her field.

Martin next submits that debarment from an entire class of contracts—here, contracts

with state agencies—can implicate a protected liberty interest. Doc. 50 at 25-27; Doc. 61. The

point is questionable under governing precedent, but it would not help Martin even if it were

correct because the complaint alleges, and Martin confirmed at the motion hearing, that Smart

Elevators has contracts with “various state agencies.” Doc. 1 at § 25.

Conclusion

Defendants’ motions to dismiss are denied insofar as they seek dismissal under Rule

12(b)(1) and are granted insofar as they seek dismissal under Rule 12(b)(6). Martin’s claims are

dismissed on the merits without prejudice, and she has until May 17, 2022 to file an amended

complaint. See Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d

510, 519 (7th Cir. 2015) “Ordinarily, ... a plaintiff whose original complaint has been dismissed

under Rule 12(b)(6) should be given at least one opportunity to try to amend her complaint

before the entire action is dismissed.”). If Martin does not file an amended complaint, the

dismissal will convert automatically to a dismissal with prejudice, and judgment will be entered.

April 26, 2022

United States District Judge

14