Watters v. Board of School Directors of the City of Scranton

UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

JOSHUA WATTERS, MOLLY POPISH, and —:

LAURIE BURDETT, :CIVIL ACITON NO. 3:18-CV-2117

Plaintiffs, -(JUDGE MARIANI)

v. .

BOARD OF SCHOOL DIRECTORS OF THE

CITY OF SCRANTON and SCHOOL

DISTRICT OF THE CITY OF SCRANTON,

Defendants.

MEMORANUDM OPINION

I. INTRODUCTION

Defendants’ Motion to Dismiss Plaintiffs’ Complaint (Doc. 4) is pending before the

Court. Defendants removed Plaintiffs’ five-count Complaint (Doc. 1 at 8-22) from the Court

of Common Pleas of Lackawanna County, Pennsylvania, on November 2, 2018. (Doc. 1.)

They did so pursuant to 28 U.S.C. § 1331 asserting federal question jurisdiction based on

the 42 U.S.C. § 1983 claim contained in Plaintiffs’ Complaint. (Doc. 1 at 2-3.) When

Plaintiffs filed their Complaint in the Lackawanna County Court of Common Pleas on

September 28, 2018, they were all tenured teachers in the Scranton School District who had

been furloughed on August 30, 2018.1 (Compl. ff 11, 39, 41.) Plaintiffs describe the action

as “a hybrid” of an appeal of determinations made in a local agency adjudication pursuant to

1 Plaintiffs’ Complaint is found in Defendants’ Notice of Removal, Document 1 at pages 8 to 22.

2 Pa. C.S. § 752 and a constitutional challenge to provisions of the School Code of 1949

(“School Code”) pursuant to the Contract Clauses of the United States and Pennsylvania

Constitutions. (Compl. Introduction (Doc. 1 at 8).) For the reasons discussed below, the

Court concludes Defendants’ motion is properly granted as to Count Ill and the Court has

no basis to retain jurisdiction of Plaintiffs’ remaining state law claims.

ll. BACKGROUND

A. Factual Allegations

The Board of School Directors of the City of Scranton (‘the Board”) held a “Special

Meeting for General Purposes” on January 25, 2018. (Compl. ] 25.) At the meeting, the

Personnel Committee presented “Resolution of the Intent to Suspend of the Scranton Board

of Education” (“Resolution”) for vote by the Board. (/d.) The Superintendent of the

Scranton School District (“the District”), Dr. Alexis Kirijan, told the members of the Board

that the Resolution did not include program cuts with the exception of the library. (/d. {| 26.)

Before the January 25, 2018, meeting, the Board had neither approved nor authorized the

curtailment or elimination of any programs or the furlough of any employees. (Id. □ 27.)

The Board voted unanimously to pass the Resolution. (Id. ] 28.)

On January 28, 2018, the District’s Chief Human Resources Officer issued

correspondence to twenty-eight tenured teachers, including Plaintiffs, which stated the

following in relevant part:

It is with the utmost regret that the Board of Education and the Scranton School

District has approved a resolution of intent to suspend you and directed that

you be notified pursuant to Sections 1124 and 1125.1 of the Public School

Code of 1949, as amended, and the Local Agency Law (2 Pa. C.S. § 101 et

seq.). This correspondence will formally notify you that this is the intent of the

Board that you will be suspended from employment effective August 31, 2018

due to the economic reasons that require a reduction of professionals and/or

the curtailment and/or alteration of the District's educational programs in order

to conform with standards of organization and/or educational activities required

by law and/or recommended by the Pennsylvania Department of Education and

for economic reason. The Board of Education has approved the Resolution of

Intent to Suspend at a public meeting held on January 25, 2018.

(Compl. J 29.) Approximately seventy-one notices of non-renewal were issued to

temporary employees (non-tenured) teachers on the same date. (/d. {| 30.)

Consistent with the School Code, each of the twenty-eight suspended tenured

teachers submitted a timely written request to initiate a hearing before the Board for the

purpose of challenging the suspensions. (/d. { 32.)

On March 28, 2018, the District passed a final budget which included the suspension

of teachers. (Id. J 33.)

In May and June 2018, the District engaged in a posting and bidding process

designed to benefit displaced, tenured teachers. (/d. 34.) As a result of the process and

additional resignations, the District was able to “call-back” a number of tenured teachers

who had previously received furlough notices. (Id.) By June 22, 2018, the District

determined that seven tenured teachers, including Plaintiffs, would be furloughed. (/d.)

In response to Plaintiffs’ challenges to their suspensions, the Board held evidentiary

hearings on July 19, 2018, and July 25, 2018. (/d. 9 35.) On August 25, 2018, the Board

convened a special meeting “to vote on the Resolution in order [t]o approve suspended

professional employees of the Scranton School District effective August 30, 2018, in

accordance with the provisions of Section 1124 and 1125.1 of the Public School Code.”

(Id. 36.) Six of nine members of the Board were present. (/d. ] 37.) The vote was split

three-three, and, therefore, the vote failed. (/d. ] 38.) The Board reconvened on August 30,

2018, to conduct another vote on the Resolution presented at the August 25!" meeting. (Id.

{ 39.) The Resolution passed nine-zero. (/d. 40.) As a consequence of the vote, the

District’s physical education, music, art, family and computer science, and industrial arts

programs were curtailed. (Id. 42.)

The District's solicitor, who had served as the Hearing Officer during prior evidentiary

hearings, issued Findings of Fact and Conclusions of Law in which he concluded that the

Resolution “satisfied the district’s statutory obligation.” (/d. | 43.) The Hearing Officer

further concluded that the “proposed suspension should be sustained for both economic

and non-economic (curtailment or alteration) of programs.” (/d.)

Four of the seven tenured teachers who received furlough notices either found work

outside the District or were called back by the District. (/d. 41.) Thus, Plaintiffs were the

only tenured professional employees furloughed by the District. (/d.)

B. Relevant Statutory Provisions

At the time they were suspended, Plaintiffs had all achieved tenure status as defined

by the School Code, 24 Pa. S.A. § 11-1101(1) because each had completed at least three

years of service, 24 Pa. S.A. § 11-1108: Plaintiff Popish had been employed by the District

as a professional employee since August of 2013; Plaintiff Watters had been employed

since September 2014; and Plaintiff Burdett had been employed since September 2015.

(Compl. If 8-11.) As such, the School Code provision titled “Contracts; execution; form”

regarding required contracts between a school district and its professional employees, 24

P.S. § 11-1121, is relevant.

Section 11-1121 of the School Code, last amended in 1996, requires that school

districts enter into contracts as follows:

(a) In all school districts, all contracts with professional employes shall be in

writing, in duplicate, and shall be executed on behalf of the board of school

directors by the president and secretary and signed by the professional

employe.

(b)(1) Each board of school directors in all school districts shall hereafter enter

into contracts, in writing, with each professional employe initially employed by

a school district prior to June 30, 1996, who has satisfactorily completed two

(2) years of service in any school district of this Commonwealth.

(2) Each board of school directors in all school districts shall hereafter enter

into contracts, in writing, with each professional employe initially employed by

a school district, on or after June 30, 1996, who has satisfactorily completed

three (3) years of service in any school district of this Commonwealth.

(c) Contracts under subsection (b) shall contain only the following:

“IT IS AGREED by and between .......... Professional Employe, and the Board

of Directors (or Board of Public Education) of the school district of ..........,

Pennsylvania, that said professional employe shall, under the authority of the

said board and its successors, and subject to the supervision and authority of

the properly authorized superintendent of schools or supervising principal,

serve as a professional employe in the said school district for a term of ...

months, for an annual compensation of §.........., payable monthly or semi-

monthly during the school term or year, less the contribution required by law to

be paid to the Public Schoo! Employes’ Retirement Fund, and less other proper

deductions for loss of time.

‘This contract is subject to the provisions of the ‘Public School Code of 1949"

and the amendments thereto.

“AND IT IS FURTHER AGREED by the parties hereto that none of the

provisions of this act may be waived either orally or in writing, and that this

contract shall continue in force year after year, with the right of the board of

school directors (or board of public education) to increase the compensation

over the compensation herein stated, from time to time, as may be provided

under the provisions and proper operation of the established salary schedule,

if any, for the school district, subject to the provisions of law, without invalidating

any other provision of this contract, unless terminated by the professional

employe by written resignation presented sixty (60) days before resignation

becomes effective, or by the board of school directors (or board of public

education) by official written notice presented to the professional employe:

Provided, That the said notice shall designate the cause for the termination and

shall state that an opportunity to be heard shall be granted if the said

professional employe, within ten (10) days after receipt of the termination

notice, presents a written request for such hearing.”

24 P.S. § 11-1121.

Plaintiffs each executed separate contracts (“Tenure Contracts”) with the Board upon

their attainment of tenure. (Compl. 15.) The contracts were in “substantially the same

form” as provided in 24 Pa. S.A. § 11-1121. (Compl. { 15.)

Because Plaintiffs’ allegations relate to the rationale for the Board’s suspension

decision, the School Code’s “Causes for suspension” provision, 24 P.S. § 11-1124, is

relevant. Until November 2017, § 11-1124 provided as follows:

(a) Any board of school directors may suspend the necessary number of

professional employes, for any of the causes hereinafter enumerated:

(1) substantial decrease in pupil enrollment in the school district;

(2) curtailment or alteration of the educational program on recommendation of

the superintendent and on concurrence by the board of schoo! directors, as a

result of substantial decline in class or course enrollments or to conform with

standards of organization or educational activities required by law or

recommended by the Department of Public Instruction;

(3) consolidation of schools, whether within a single district, through a merger

of districts, or as a result of joint board agreements, when such consolidation

makes it unnecessary to retain the full staff of professional employes,

(4) when new school districts are established as the result of reorganization of

school districts pursuant to Article II., subdivision (i) of this act, and when such

reorganization makes it unnecessary to retain the full staff of professional

employes.

24 Pa. C.S. § 11-1124.

In November 2017, the Pennsylvania Legislature passed what is known as Act 55 of

2017 (“Act 55”) which, inter alia, added subsection (a)(5) to § 11-1124 allowing for

suspension based on “economic reasons that require a reduction in professional employes.”

24 Pa. C.S. § 11-1124(a)(5). Suspensions under § 11-1124(a)(5) are subject to specific

statutory mandates. 24 Pa. C.S. § 11-1124(c) and (d). The 2017 amendments to § 11-

1124 directed that “[a] school district may not use an employe's compensation in

determining which professional employes to suspend, but shall use the procedures in

section 11-1125.1 to determine the order in which professional employes are suspended.”

24 Pa. C.S. § 11-1124(a.1)(1).

Pursuant to § 11-1125.1, as amended by Act 55, the order of suspension of

professional employees is guided by the results of the employee's two most recent

performance evaluations.2 24 Pa. C.S. § 11-1125.1(a). Section 11-1125.1 also provides

“fa] school entity shall realign its professional staff so as to ensure that more senior

employes are provided with the opportunity to fill any positions within the school entity for

which they are certificated and which are being filled by less senior employes, subject to the

order specified in subsection (a),” 24 Pa. C.S. § 1125.1(c.1).3

C. Procedural Background

Plaintiffs’ Complaint contains the following counts: Count I- Local Agency Code

Appeal Failure to Comply with Section 1124(a)(2) of the Pennsylvania School Code of 1949;

Count Il - Local Agency Code Appeal Failure to Comply with Section 1124(a)(2) of the

2 Before the 2017 amendment, § 11-1125.1(a) provided in pertinent part that “Professional employes shall

be suspended under section 1124 (relating to causes for suspension) in inverse order of seniority within the

school entity of current employment.”

3 Section 11-1125.1(c.1) was added with the 2018 Amendments to § 11-1125.1 (effective July 1, 2018). A

similar section, 11-1125.1(c), which was deleted with the 2017 amendments had provided that “[a] school

entity shall realign its professional staff so as to insure that more senior employes are provided with the

opportunity to fill positions for which they are certificated and which are being filled by less senior

employes,”

Act 55 also added subsection (f) to § 1124 which provides the following:

(1) A collective bargaining agreement negotiated by a school district and an exclusive

representative of professional employes in accordance with the act of July 23, 1970 (PLL.

563, No. 195), known as the “Public Employe Relations Act,” after the effective date of this

subsection may not prohibit the suspension of professional employes for economic reasons

other than as provided for in this section.

(2) A provision in any agreement or contract in effect on the effective date of this subsection

that prohibits the suspension of professional employes for economic reasons in conflict with

this section shall be discontinued in any new or renewed agreement or contract or during

the period of status quo following an expired contract.

24 Pa. C.S. § 11-1124/(f).

Pennsylvania School Code of 1949 (Act 55); Count III — Violation of 42 U.S.C. § 1983 -

Substantial Impairment of Contractual Rights in Violation of the United States Constitution,

Article |, Section 10, Clause 1; Count IV — Impairment of Article |, Section 17 of the

Pennsylvania Constitution; and Count V - Declaratory and Injunctive Relief. (Compl. (Doc.

1 at 15-22).)

With Defendants’ Motion to Dismiss Plaintiffs’ Complaint filed pursuant to Federal

Rules of Civil Procedure 81(c) and 12(b)(6), they request that the Court dismiss Plaintiffs’

Complaint with prejudice. (Doc. 4 at 1-2.) In their supporting brief, they specifically assert

that Plaintiffs’ demand for a jury trial as to Counts | and I! should be stricken (Doc. 11 at 17)

and Counts Ill, IV, and V should be dismissed in their entirety (id. at 18-38). Defendants’

motion is now fully briefed and ripe for disposition.

ill. STANDARD OF REVIEW

A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it

does not allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim

has facial plausibility when the plaintiff pleads factual content that allows the court to draw

the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft

v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).

“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need

detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement

to relief requires more than labels and conclusions, and a formulaic recitation of the

elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal citations,

alterations, and quotations marks omitted). A court “take[s] as true all the factual allegations

in the Complaint and the reasonable inferences that can be drawn from those facts, but...

disregard[s] legal conclusions and threadbare recitals of the elements of a cause of action,

supported by mere conclusory statements.” Ethypharm S.A. France v. Abbott Labs., 707

F.3d 223, 231 n.14 (3d Cir. 2013) (internal citation, alteration, and quotation marks omitted).

Thus, “the presumption of truth attaches only to those allegations for which there is

sufficient ‘factual matter’ to render them ‘plausible on [their] face.” Schuchardt v. President

of the U.S., 839 F.3d 336, 347 (3d Cir. 2016) (alteration in original) (quoting /qbal, 556 U.S.

at 679). “Conclusory assertions of fact and legal conclusions are not entitled to the same

presumption.” /d.

“Although the plausibility standard ‘does not impose a probability requirement,’ it

does require a pleading to show ‘more than a sheer possibility that a defendant has acted

unlawfully.” Connelly v. Lane Constr. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (internal

citation omitted) (first quoting Twombly, 550 U.S. at 556; then quoting /qbal, 556 U.S. at

678). “The plausibility determination is ‘a context-specific task that requires the reviewing

court to draw on its judicial experience and common sense.” /d. at 786-87 (quoting

Iqbal, 556 U.S. 679).

10

lf a court determines that a complaint is subject to Rule 12(b)(6) dismissal, “a district

court must permit a curative amendment unless such an amendment would be inequitable

or futile.” Phillips v. Cty. of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008).

[E]ven when plaintiff does not seek leave to amend his complaint after a defendant

moves to dismiss it, unless the district court finds that amendment would be inequitable

or futile, the court must inform the plaintiff that he or she has leave to amend the

complaint within a set period of time.

Id.

IV. ANALYSIS

Allegations that Defendants did not adhere to proper procedures in suspending them

pursuant to 24 Pa. C.S. § 1124(a)(2) and (a)(5) form the basis of Plaintiffs’ Local Agency

Code appeals in Counts | and II. (Compl. ff] 44-60.) In support of their constitutional

claims, Plaintiffs assert that “tenured status constitutes an enforceable contractual right,

conferred by the Pennsylvania legislature, school boards and districts upon a professional

employe who meets the conditions of tenure, such as Plaintiffs.” (Compl. {| 22.) They

further state that

[aln employee's contractually enforceable tenure is not honored by Act 955.

Tenured teachers may be suspended for economic reasons — that is, reasons

other than the specific scenarios enumerated in P.S. § 11-1124(a)(1)-(4). At

the time Plaintiffs attained tenured status — prior to 2017 — these scenarios

were the only ones in which [sic] available to Defendants to suspend Plaintiffs.

Compl. J 23.) These allegations form the basis of Plaintiffs’ constitutional claims, Counts Ill

and IV. (See Compl. J] 61-74.)

11

Defendants assert their motion should be granted for the following reasons: 1)

Plaintiffs’ request for a jury trial as to Counts | and II should be stricken because the local

agency determination was complete; 2) Plaintiffs’ 42 U.S.C. § 1983 action based on an

alleged Contracts Clause violation fails as a matter of law; 3) Plaintiffs’ claims pursuant to

Article 1, Section 17 of the Pennsylvania Constitution fail as a matter of law; 4) Count V for

declaratory and injunctive relief must be dismissed; and 5) amendment would be futile.

(Doc. 11 at 13.)

Because Defendants removed this action from state court pursuant to federal

question jurisdiction grounded in Plaintiffs’ 42 U.S.C. § 1983 claim (Doc. 1 at 1-3), the Court

will first consider whether Defendants have shown that this federal claim must be dismissed.

A. 420U,S.C. § 1983

Defendants contend that Plaintiffs’ 42 U.S.C. § 1983 claim for violation of the

Contracts Clause in Count Ill fails as a matter of law. (Doc. 11 at 18.) They base this

assertion on four grounds: 1) there is no private cause of action pursuant to § 1983 for a

violation of the Contracts Clause (id.); 2) Plaintiffs cannot identify a “contractual right’

protected by the Contracts Clause (id. at 21); 3) assuming arguendo that Plaintiffs are able

to identify a contractual right “sufficient to maintain a cause of action for violation of the

Contracts Clause, Plaintiffs are unable as a matter of law to establish that the amendments

to the Public School Code ‘substantially impaired’ their contractual rights without a

reasonable, legitimate public purpose” (id. at 26); and 4) assuming arguendo “that the Court

12

concludes that there is a private cause of action for a violation of the Contracts Clause, that

Plaintiffs have a contractual right, and that such right was substantially impaired, any

resulting impairment was clearly reasonable and necessary to accomplish a legitimate

public purpose’ (id. at 30). Plaintiffs refute each of Defendants’ arguments. (Doc. 18 at 11-

29.)

1. Private Cause of Action Under 42 U.S.C. § 1983

Defendants maintain that there is no private cause of action under § 1983 for a

Contracts Clause violation based on the United States Supreme Court's decision in Carter

v. Greenhow, 114, U.S. 317 (1885).4 (Doc. 11 at 18.) Plaintiffs respond that general § 1983

considerations and the Supreme Court’s consideration of Carter in Dennis v. Higgins, 498

U.S. 439, 443 (1991), indicate that a plaintiff may bring a § 1983 claim for violation of the

Contracts Clause. (Doc. 18 at 13-16.) The parties acknowledge a circuit split on the issue

with the Fourth and Sixth Circuits concluding that Carter precludes a § 1983 action

grounded in the Contracts Clause and the Ninth Circuit concluding that such an action is

available. (Doc. 11 at 19-20; Doc. 18 at 15-16.) For the reasons discussed below, the

Court will, for purposes of consideration of Defendants’ motion, adopt the narrow reading of

4 Defendants note “that some courts refer to the applicable provision as the ‘Contract Clause’ while others

identify it as the ‘Contracts Clause.” (Doc. 11 at 18 n.1.) They further note that they will use the term

“Contracts Clause” based on Justice Kagan’s use of it in Sveen v. Melin, 138 S. Ct. 1815 (June 11, 2018).

(Id.) The Court will do the same.

13

Carter set out in Dennis and follow the reasoning of the Ninth Circuit which has found that a

plaintiff may bring a § 1983 claim for violation of the Contracts Clause.

The Contracts Clause of the United States Constitution provides that “[nJo State shall

pass any . . . Law impairing the Obligation of Contracts.” Art. |, § 10, cl. 1. As stated in

Transport Workers Union of America, Local 290 v. Southeastern Pennsylvania Transportation

Authority, 145 F.3d 619 (3d Cir. 1998),

Contracts enable individuals [and public entities] to order their ... affairs

according to their particular needs and interests. Once arranged, those rights

and obligations are binding under the law, and the parties are entitled to rely

on them.” Allied Structural [Steel Co. v. Spannaus, 438 U.S. 234, 245

(1978)]. The purpose of the Contract Clause is to protect the legitimate

expectations that arise from such contractual relationships from unreasonable

legislative interference.

445 F.3d at 622. “Although the language of the Contract Clause is facially absolute,

its prohibition must be accommodated to the inherent police power of the State ‘to

safeguard the vital interests of its people.” Energy Reserves Grp., Inc. v. Kansas Power &

Light Co., 459 U.S. 400, 410 (1983) (quoting Home Bldg. & Loan Ass'n v. Blaisdell, 290

U.S. 398, 434 (1934)).

The question of whether a private right of action exists for a Contracts Clause

violation was succinctly summarized in Elliott v. Board of School Trustees of Madison

Consolidated Schools, 876 F.3d 926 (7" Cir. 2017), cert. denied, 138 S. Ct. 2624 (2018).

in Carter v. Greenhow, 114 U.S. 317, 5 S.Ct. 928, 29 L.Ed. 202 (1885), the

Supreme Court found that there was no federal question jurisdiction over the

plaintiffs Contract Clause claim. Using a predecessor of § 1983, the plaintiff

challenged a state law that affected his state-issued bonds by prohibiting him

14

from using his coupons to pay his property taxes. /d. at 321-23, 5 S.Ct. 928.

Some courts have read Carter broadly as prohibiting any Contract Clause

Claims under § 1983. See Kaminski v. Coulter, 865 F.3d 339, 347 (6th Cir.

2017); Crosby v. City of Gastonia, 635 F.3d 634, 640 (4th Cir. 2011). But

Supreme Court and other opinions reflect another view, reading Carter as

based more narrowly on the way the particular claim in that case was pled

and the failure to satisfy the amount-in-controversy requirement applicable at

the time. See Dennis v. Higgins, 498 U.S. 439, 451 n.9, 111 S.Ct. 865, 112

L.Ed.2d 969 (1991), quoting Chapman v. Houston Welfare Rights Org., 441

U.S. 600, 613 n.29, 99 S.Ct. 1905, 60 L.Ed.2d 508 (1979); Southern California

Gas Co. v. City of Santa Ana, 336 F.3d 885, 886-87 (9th Cir. 2003) (per

curiam); see also White v. Greenhow, 114 U.S. 307, 307-08, 5 S.Ct. 923, 29

L.Ed. 199 (1885) (allowing claim for damages for violation of Contract Clause

in companion case to Carter); Kaminski, 865 F.3d at 350 (Moore, J., dissenting)

(arguing for limited scope of Carter)

Elliott, 876 F.3d at 932-33. Elliott was able to bypass this “potentially difficult issue”

because it did not affect the court's subject matter jurisdiction and the defendants had

waived the potential defense. /d. at 933.

Defendants correctly note that there is no Third Circuit precedent on this issue and

urge that the Court adopt the Fourth and Sixth Circuits’ interpretation of Carter and hold that

no cognizable cause of action exists under § 1983 for violations of the Contracts Clause.

(Doc. 11 at 21.) Identifying the well-recognized principle that § 1983 is to be broadly

interpreted and advocating a narrow reading of Carter, Plaintiffs posit that the Ninth Circuit's

Santa Ana decision more closely tracks the Supreme Court’s guidance on the issue set out

in Dennis. (Doc. 18 at 16.) The Court finds Plaintiffs’ position persuasive.

It is well-established that 42 U.S.C. § 1983 is to be broadly construed. In Dennis v.

Higgins, the Supreme Court explained the basis for the principle:

15

A broad construction of § 1983 is compelled by the statutory language, which

speaks of deprivations of “any rights, privileges, or immunities secured by the

Constitution and laws.” (Emphasis added.) Accordingly, we have “repeatedly

held that the coverage of [§ 1983] must be broadly construed.” Golden State

Transit Corp. v. Los Angeles, 493 U.S. 103, 105, 110 S.Ct. 444, 448, 107

L.Ed.2d 420 (1989). The legislative history of the section also stresses that as

a remedial statute, it should be “ ‘liberally and beneficently construed.’ ” Monell

v. New York City Dept. of Social Services, 436 U.S. 658, 684, 98 S.Ct. 2018,

2032, 56 L.Ed.2d 611 (1978) (quoting Rep. Shellabarger, Cong.Globe, 42d

Cong., 1st Sess., App. 68 (1871)).

Dennis, 498 U.S. at 443.

In finding that suits for violations of the Commerce Clause could be brought under §

1983, Justice White, writing for the majority, countered the minority’s view that a private

cause of action could not be brought under § 1983 for a Commerce Clause violation with

specific reference to the dissent’s reliance on the Court's 1885 Carter v. Greenhow

decision:

In arguing that the Commerce Clause does not secure any rights, privileges, or

immunities within the meaning of § 1983, the dissent relies upon Carter v.

Greenhow, 114 U.S. 317, 29 L.Ed. 202, 5 S.Ct. 928 (1885). See post, at 457-

458. This Court, however, has already given that decision a narrow reading,

Stating that the case “held as a matter of pleading that the particular cause of

action set up in the plaintiffs pleading was in contract and was not to redress

deprivation of the ‘right secured to him by that clause of the Constitution’

[the contract clause], to which he had ‘chosen not to resort.” Chapman v.

Houston Welfare Rights Organization, 441 U.S. 600, 613, n. 29, 60 L.Ed.2d

908, 99 S.Ct. 1905 (1979); see also Hague v. Committee for Industrial

Organization, 307 U.S. 496, 527, 59 S.Ct. 954, 83 L.Ed. 1423 (1939) (opinion

of Stone, J.) (emphasis added).

Dennis, 498 U.S. at 451 n.9.

16

In Santa Ana, the Ninth Circuit relied on Dennis and adopted a narrow reading of

Carter, stating that

[t]he [defendant's] argument that section 1983 provides no relief for a party

deprived of its rights under the Contracts Clause is without merit. Section 1983

provides for liability against any person acting under color of law who deprives

another “of any rights, privileges, or immunities secured by the Constitution and

laws” of the United States. 42 U.S.C. § 1983. The rights guaranteed by section

1983 are “liberally and beneficently construed.” Dennis v. Higgins, 498 U.S.

439, 443, 111 S.Ct. 865, 112 L.Ed.2d 969 (1991) (quoting Monell v.

Department of Social Services, 436 U.S. 658, 684, 98 S.Ct. 2018, 56 L.Ed.2d

611 (1978)). The right of a party not to have a State, ora political subdivision

thereof, impair its obligations of contract is a right secured by the first article of

the United States Constitution. A deprivation of that right may therefore give

rise to a cause of action under section 1983.

The Supreme Court's decision in Carter v. Greenhow, 114 U.S. 317, 5

S.Ct. 928, 29 L.Ed. 202 (1885), is not to the contrary. The Supreme Court has

explicitly given Cartera narrow reading and rejected the interpretation

advanced by the [defendant]. See Dennis, 498 U.S. at 451 n. 9, 111 S.Ct. 865

(stating that Carter can only be read to have “held as a matter of pleading that

the particular cause of action set up in the plaintiff's pleading was in contract

and was not to redress deprivation of the right secured to him by that clause of

the Constitution [the contract clause], to which he had chosen not to resort.”)

(emphasis added) (internal quotations and citations omitted).

Santa Ana, 336 F.3d at 887.

For the purpose of consideration of Defendants’ motion, the Court concludes that

Santa Ana best applies relevant Supreme Court guidance regarding a narrow reading of

Carter and broad application of § 1983. Therefore, for present purposes, the Court does not

adopt Defendants’ argument that the Fourth and Sixth Circuits’ determinations that a private

cause of action based on a Contracts Clause violation cannot be brought under § 1983 are

17

more in line with Carter.5 (See Doc. 11 at 21.) Finding on this basis that Plaintiffs have a

private right of action to bring a Contracts Clause violation under § 1983, the Court will now

turn to Defendants’ argument that Plaintiffs cannot identify a “contractual right” protected by

the Contracts Clause (Doc. 11 at 21).

2. Contractual Right Protected by the Contracts Clause

Defendants assert that Plaintiffs cannot show that the School Code created a

“contractual right” sufficient to sustain a Contracts Clause violation and, therefore, their

constitutional claims based on a violation of the Contracts Clause must fail. (Doc. 14 at 21 □

Plaintiffs respond that their statutorily granted right to tenure is a contractual right. (Doc. 18

at 18.) For the reasons discussed below, the Court concludes that Defendants have not

shown that Plaintiffs cannot establish the existence of contractual right cognizable under the

Contracts Clause.

To prove a violation of the Contracts Clause, “a plaintiff must demonstrate that ‘a

change in state law has operated as a substantial impairment of a contractual relationship.”

Transport Workers, 145 F.3d at 621 (quoting General Motors Corp. v. Romein, 503 U.S.

181, 186 (1992) (internal quotation omitted)). “Contract Clause analysis requires three

threshold inquiries: (1) whether there is a contractual relationship; (2) whether a change in a

> The Court notes that Defendants cite Dennis for the proposition that “[t]he Contracts Clause can be said

to secure individual rights ‘only indirectly and incidentally.” (Doc. 11 at 18 (quoting Dennis v. Higgins, 498

U.S. at 456).) This statement deserves no further consideration in that the quoted language is found in the

dissenting opinion authored by Justice Kennedy and joined by Chief Justice Rehnquist, 496 U.S. at 457,

which Justice White countered as set out in the text.

18

law has impaired that contractual relationship; and (3) whether the impairment is

substantial.” /d. (citing Romein, 503 U.S. at 186).

The parties come to opposite conclusions on the first threshold issue which hinges

on whether the statutory provision upon which Plaintiffs base their asserted contractual right

to tenure can be construed as creating a contractual relationship. While the parties agree

that there is a presumption against interpreting statutes as contractual agreements (Doc. 11

at 24; Doc. 18 at 18-19), Plaintiffs maintain they have overcome the presumption whereas

Defendants assert they cannot make the required showing (Doc. 11 at 25-26; Doc. 18 at 19-

21).

The Supreme Court discussed the issue of the interpretation of laws as contracts in

National R.R. Passenger Corp. v. Atchison Topeka and Santa Fe Ry. Co., 470 U.S. 451

(1985).

For many decades, this Court has maintained that absent some clear indication

that the legislature intends to bind itself contractually, the presumption is that

“a law is not intended to create private contractual or vested rights but merely

declares a policy to be pursued until the legislature shall ordain

otherwise.” Dodge v. Board of Education, 302 U.S. 74, 79, 58 S.Ct. 98, 100, 82

L.Ed. 57 (1937). See also Rector of Christ Church v. County of Philadelphia, 24

How. 300, 302, 16 L.Ed. 602 (1861) (“Such an interpretation is not to be

favored”). This well-established presumption is grounded in the elementary

proposition that the principal function of a legislature is not to make contracts,

but to make laws that establish the policy of the state. Indiana ex rel. Anderson

v. Brand, 303 U.S. 95, 104-105, 58 S.Ct. 443, 447-448, 82 L.Ed. 685 (1938).

Policies, unlike contracts, are inherently subject to revision and repeal, and to

construe laws as contracts when the obligation is not clearly and unequivocally

expressed would be to limit drastically the essential powers of a legislative

body. Indeed, “ ‘[t]he continued existence of a government would be of no great

value, if by implications and presumptions, it was disarmed of the powers

19

necessary to accomplish the ends of its creation.’ ” Keefe v. Clark, 322 U.S.

393, 397, 64 S.Ct. 1072, 1074, 88 L.Ed. 1346 (1944) (quoting Charles River

Bridge v. Warren Bridge, 11 Pet. 420, 548, 9 L.Ed. 773 (1837)). Thus, the party

asserting the creation of a contract must overcome this well-founded

presumption, Dodge, supra, 302 U.S., at 79, 58 S.Ct., at 100, and we proceed

cautiously both in identifying a contract within the language of a regulatory

Statute and in defining the contours of any contractual obligation.

In determining whether a particular statute gives rise to a contractual

obligation, “it is of first importance to examine the language of the

statute.” Dodge v. Board of Education, supra, at 78, 58 S.Ct., at 100. See

also Indiana ex rel. Anderson v. Brand, supra, 303 U.S., at 104, 58 S.Ct., at

447 ("Where the claim is that the State's policy embodied in a statute is to bind

its instrumentalities by contract, the cardinal inquiry is as to the terms of the

Statute supposed to create such a contract’). “If it provides for the execution of

a written contract on behalf of the state the case for an obligation binding upon

the state is clear.” 302 U.S., at 78, 58 S.Ct., at 100 (emphasis supplied). But

absent “an adequate expression of an actual intent” of the State to bind

itself, Wisconsin & Michigan R. Co. v. Powers, 191 U.S. 379, 386-387, 24 S.Ct.

107, 108-109, 48 L.Ed. 229 (1903), this Court simply will not lightly construe

that which is undoubtedly a scheme of public regulation to be, in addition, a

private contract to which the State is a party.

Nat R.R. Passenger Corp., 470 U.S. at 465-67,

Dodge and Anderson, both authored by Justice Roberts in the 1937-1938 term of the

Supreme Court, considered the question of whether state statutes addressing teachers’

rights created contractual agreements. The decisions reached opposite conclusions on the

basis of factual differences: Dodge determined that an Illinois statute setting the amount of

annuity payments to retired teachers did not create a contract, 302 U.S. at 75-81; Anderson

acknowledged and distinguished the Dodge holding in determining that an Indiana statute

establishing tenure rights created a contract, 303 U.S. at 100-109.

20

Defendants rely primarily on Dodge and the Strong presumption against interpreting

Statutes as contractual agreements. (Doc. 11 at 24.) Plaintiffs argue that both Dodge and

Anderson support the existence of a contractual agreement in the School Code’s tenure

provisions. (Doc. 18 at 20.) Before addressing the parties’ substantive arguments, the

Court notes, as a preliminary matter, the question of whether there is relevant state law on

the issue must be considered.

Although “[t]he question whether a contract was made is a federal question for

purposes of Contract Clause analysis [even when] it turns on issues of general or purely

local law,” Romein, 503 U.S. at 187, state law decisions related to the contractual issue are

to be considered in the analysis, Phelps v. Bd. of Educ. of Town of W. New York, 300 U.S.

319, 322 (1937) (the “court is not bound by the decision of a state court as to the existence

and terms of a contract, the obligation of which is asserted to be impaired, but where a

Statute is claimed to create a contractual right we give weight to the construction of the

Statute by the courts of the state.”).

In Moffitt v. Tunkhannock Area Sch. Dist., 160 F. Supp. 3d 786, 801 (M.D. Pa. 2016),

this Court noted “Pennsylvania case law provides little guidance’ on the issue of when a

Statutory provision is a contract. Moffitt cited Young v. Bethlehem Area Vo-Tech Sch., Civ.

A. No. 06-CV-2285, 2007 WL 674617, at *13 (E.D. Pa. Feb. 28, 2007), in support of the

observation. Id. In Young, the district court stated that it was “aware of no case applying

Pennsylvania law to decide whether a statute, or something perhaps resembling a statute

21

(such as an Act 93 administrative compensation plan), is a contract.” The parties do not

present, and the Court has not found, any recent development on this issue in Pennsylvania

law.

In support of their argument that Plaintiffs have no contractual basis for their

Contracts Clause claim, Defendants state that ‘[iJt is well-established that ‘[t}he existence of

a Pennsylvania statute which provides for termination of public school employees only for

specific causes does not create a contract between Plaintiff and her employer, the School

District.” (Doc. 11 at 24 (quoting Moffitt, 160 F. Supp. 3d at 801 (citing Judge v. Shikellamy

Sch, Dist., 135 F. Supp. 3d 284, 297-98 (M.D. Pa. 2015)).) The Court rejects Defendants’

conclusion.

First, Moffit is factually distinguishable in that it considered a state law breach of

contract claim dealing with a different Pennsylvania statute, known as “Act 93,” and

concluded it did not evidence an intent to serve as the school district's contractual

obligation. 160 F. Supp. 3d at 800-01. Act 93, 24 P.S. § 11-1164, “provide[s] a means by

which compensation matters affecting school administrators can be resolved within the

framework of a management team philosophy.” 24 P.S. § 11-1164(b). It does not contain

contractual language or obligate the school district to contract with administrators. See id.

In addition to the contextual distinction between Moffitt and the case at bar,

Defendants’ assertion is undermined by the fact that Moffitt quoted Judge and Judge, which

also considered Act 93, provided no citation for the quoted material. 160 F. Supp. 3d at 801:

22

135 F. Supp. 3d at 297. Thus, although Defendants conclude, based on the allegedly “well-

established” principle that “Plaintiffs cannot establish that they have a ‘contractual right’

subject to the considerations of the Contracts Clause” (Doc. 11 at 25; see also id. at 25-26),

neither Moffitt nor Judge provide the suggested basis for the conclusion. (Doc. 11 at 24-

25.)

Defendants’ reliance on the Pennsylvania Commonwealth Court’s decision in

Commonwealth Ass'n of Sch. Adm'rs ex rel. Axelrod v. Bd. of Educ., 740 A.2d 1225, 1230-

31 (Pa. Cmwlth. Ct. 1999), (Doc. 11 at 25; Doc. 19 at 10) is similarly unavailing. The

Commonwealth Court considered a different Statutory provision, spoke in generalities, and

mischaracterized the scope of Dodge with the statement that “rights granted under a statute

are not contractual in nature, vest no contractual rights in anyone, and no constitutional

rights are implicated if they are changed or eliminated.” Id. at 1231 (citing Dodge, 302 U.S.

74). Rather than the blanket rejection of “whether a law tenders a contract to a citizen,”

302 U.S. at 78, Dodge set out factors relevant to the consideration of whether the party

asserting such a contract had shown otherwise, id. at 78-79,

Defendants’ misplaced reliance on Moffitt and Commonwealth Ass'n of Sch. Adm'rs

renders unsubstantiated their assertion that “Plaintiffs are unable to demonstrate that the

Public School Code created a ‘contractual right’ sufficient to sustain a Contracts Clause

violation.” (Doc. 11 at 26.) Defendants do not conduct the detailed statutory analysis

23

required by the Supreme Court. See, e.g. Anderson, 303 U.S. at 100.6 Therefore, they

have not satisfied their burden of showing that it is not plausible that Plaintiffs can prevail on

® It is noteworthy that Defendants do not cite to Anderson. (See Docs. 11, 19.) They distinguish Eliott on

the basis that “[t]he Elliott Court noted that the Indiana Teachers Tenure Law was ‘{uJnlike tenure statutes

in many other states’ and explained that the bill ‘removed the protection for tenured teachers in layoffs,’

Elliott, 876 F. 3d at 929” (Doc. 19 at 11). Their citation is accurate, but it fails to acknowledge that

Anderson is a source of the distinction between Indiana and other States, Elliott, 876 F.3d at 929.

Importantly, with Defendants’ distinction of Elliott and the case at bar, they do not address Anderson's

consideration of the existence of a contract grounded in a state Statute, an analysis pertinent to the inquiry

here. As one of many factors considered, Anderson recognized that earlier Indiana state court cases had

interpreted a teacher's right to continued employment created pursuant to the statute at issue to be

contractual, but, in the circumstances considered by the Supreme Court, the Supreme Court of Indiana did

not follow that precept. See 303 U.S. at 100, 105. Therefore, in its analysis, Anderson focused on other

relevant factors.

A review of factors considered in Anderson shows that the statute at issue here arguably has

features similar to those found indicative of a contractual agreement in Dodge and found to have created a

contract in Anderson. Anderson found it significant that the relevant state Statutory provisions “required the

execution of written contracts between teachers and school corporations, specified certain subjects with

which such contracts must deal, and required that they be made a matter of public record.” 303 U.S. at 104.

The Court also found significance in the following facts:

[t]he title of the act is couched in terms of contract] [i]t speaks of the making and canceling

of indefinite contracts|,] ... [the] indefinite contract is to remain in force unless succeeded

by a new contract signed by both parties or canceled as provided in [another] section|,} . . .

such indefinite contracts may be canceled by the school corporation only in the manner

specified [and] [t]he admissible grounds of cancellation, and the method by which the

existence of such grounds shall be ascertained and made a matter of record, are carefully

set out.

303 U.S. at 105.

Here 24 P.S. § 11-1121 is titled “Contracts; execution; form” and requires all school districts to

enter into written contracts with professional employees who have satisfactorily completed a set term of

service. 24 P.S. § 11-1121(b). As set out above, see supra pp 5-6, the statute also mandates the precise

language of the contracts. 24 P.S. § 11-1121(c). The mandated language includes the term of the contract

(“this contract shall continue in force year after year’); it includes specific reference to the provisions of the

School Code ("[tJhis contract is subject to the provisions of the ‘Public School Code of 1949’ and the

amendments thereto”); immediately following the “subject to” provision, it states that the parties to the

contract agree that the provisions of the act cannot be waived (“AND IT IS FURTHER AGREED by the

parties hereto that none of the provisions of this act may be waived either orally or in writing”); and it

provides for the exclusive methodology for termination of the contract. Jd.

24

their § 1983 claim based on the lack of a contractual right. With this determination, the

Court will assume, for purposes of this motion only, that a contractual right is established in

the Pennsylvania School Code statutory scheme. Whether that contract was impaired by

the passage of Act 55, as alleged by Plaintiffs, is a separate and pivotal issue.

3. Substantial Impairment of Contractual Rights

Defendants contend that Plaintiffs, as a matter of law, cannot show that the

amendments to the School Code “substantially impaired” their contractual rights. (Doc. 11

As noted above, Anderson is distinguishable because earlier Indiana state court cases had

interpreted a teacher's right to continued employment as contractual and here Pennsylvania courts have

not done so. However, Anderson did not decide the case based on state precedent and advised as a

general matter that courts should not do so. 303 U.S. at 100. Further, Anderson reviewed state court cases

which had found the relationship created by Indiana statute to be contractual and several features of the

Indiana statute considered significant by the state courts are arguably analogous to features of the Schoo!

Code. “The position of a teacher in the public schools is not a public office, but an employment by contract

between the teacher and the school corporation. The relation remains contractual after the teacher has,

under the provisions of a Teachers' Tenure Law, become a permanent teacher—but the terms and

conditions of the contract are thereafter governed primarily by the statute.” 303 U.S. at 105 (quoting /n

School City of Elwood v. State ex rel. Griffin et al, 180 N.E. 471, 474 (Ind. 1932)). “The local school

corporations are agents of the state in the administration of the public schools and the General Assembly

has the power to prescribe the terms of the contract to be executed by these agents.” 303 U.S. at 107

(quoting Kostanzer v. State, 187 N.E. 337, 341 (Ind. 1933)). “The source of authority for the so-called

permanent teacher's contract is the statute. The Legislature need not have provided for such contracts, but,

since it did so provide, the entire statute, with all of its provisions, must be read into and considered as a

part of the contract.” 303 U.S. at 107 (quoting Arburn v. Hunt, 191 N.E. 148, 149 (ind. 1934)).

Importantly, Anderson distinguished the statute at issue in Dodge with that at issue in the case

before it: the statute at issue in Dodge “did not purport to bind [the board of education] by contract to the

payment of annuities, and similar legislation in respect of other municipal employees had been consistently

construed by the courts as not creating contracts.” 303 U.S. at 107 (citing Dodge, 302 U.S. 74). Here the

School Code binds school districts by contract to its terms with the mandated contract and no state courts

have consistently construed legislation using the contractual language found in the School Code as not

creating contracts.

25

at 28.) Plaintiffs assert that Act 55 is a substantial impairment to teacher tenure rights.

(Doc. 18 at 21.) The Court concludes that Plaintiffs have not pled a plausible claim that Act

substantially impaired their contractual rights.

The Court of Appeals for the Third Circuit has explained the relevant inquiry:

“we must determine whether there has been a substantial impairment of a contractual

relationship by inquiring whether legitimate expectations of the plaintiffs have been

substantially thwarted.” Transp. Workers Union, 145 F.3d at 622. The Supreme Court had

earlier explained that

the severity of the impairment measures the height of the hurdle the state

legislation must clear. Minimal alteration of contractual obligations may end the

inquiry at its first stage. Severe impairment, on the other hand, will push the

inquiry to a careful examination of the nature and purpose of the state

legislation.

The severity of an impairment of contractual obligations can be measured by

the factors that reflect the high value the Framers placed on the protection of

private contracts. Contracts enable individuals to order their personal and

business affairs according to their particular needs and interests. Once

arranged, those rights and obligations are binding under the law, and the

parties are entitled to rely on them.

Allied Structural Stee! Co. v. Spannaus, 438 U.S. 234 at 245 (1978). The Court has found it

relevant whether a plaintiff can seriously contend that he was substantially induced to enter

into the contract based on the right at issue and whether he interpreted the right to be “of

everlasting effect.” /d. at 244 n.14 (quoting E/ Paso v. Simmons, 379 U.S. 497, 514 (1965)).

More recently, pointing to Allied Structural Steel and E/ Paso, the Court summarized the

“substantial impairment” inquiry as follows: “the Court has considered the extent to which

26

the law undermines the contractual bargain, interferes with a party's reasonable

expectations, and prevents the party from safeguarding or reinstating his rights.” Sveen v,

Mein, 138 S. Ct. 1815, 1822 (citing Allied Structural Steel, 438 U.S. at 244: E/ Paso, 379

U.S. at 514-15),

Based on Supreme Court precedent, Elliott broke the relevant inquiry into two

questions: “[flirst, was the impaired term a ‘central undertaking’ of the bargain such that it

‘substantially induced’ teachers to enter their contracts? . . . [and] [s]econd, was the change

in law foreseeable, meaning that the risk of change was reflected in the original contract?”

Elliott, 876 F.3d at 934 (citing E/ Paso, 379 U.S. at 514: Energy Reserves, 459 U.S. at 413-

16).

In their supporting brief, Defendants argue that Plaintiffs cannot show their rights

have been substantially impaired because they knew their suspensions would be controlled

by the School Code and its amendments, and, therefore, their “reasonable expectations

include the possibility that the legislature would be able to amend the Public School Code to

include additional mechanisms by which a professional employee could be suspended.”

(Doc. 11 at 29-30.)

Plaintiffs respond that

Defendants’ argument, at its essence, would suggest that this proviso has

effectively inoculated any state actor from any contractual obligation that a

legislature may choose to substantially alter or eliminate—however arbitrary or

baseless the reason may be. Such a position is untenable, and requires such

an overly broad application of the concept of "legitimate expectation" as to

render it virtually meaningless. All legislation is subject to alteration or

27

modification by amendment — whether or not the possibility of such is

specifically set forth within its text. The impact of these laws do not waiver and

their validity or impact are not altered by some potential, future event that may

theoretically occur. See Elliott, 876 F.3d at 936 ("One can anticipate that any

State law may change in the future, but retroactive application to impair existing

contract rights and reliance interests is another question.") (emphasis added).

Such an expansive interpretation would surely turn the contract clause into

"dead letter’, contrary to the instruction of Spannaus that ‘the Contracts Clause

remains part of the Constitution.” Ass'n of Surrogates, 940 F.2d at 773

(quoting Allied Structural Stee! Comp. v. Spannaus, 338 U.S. 234, 241 (1978)).

(Doc. 18 at 24-25.)

Pointing to cases which have found substantial impairment of contractual rights

where contracted-for wages have been reduced or deferred, Plaintiffs contend, “[i]t would

belie reason to suggest that . . . the loss of contracted-for tenure and termination thereafter

does not” substantially impair contractual rights. (Doc. 18 at 22.) Plaintiffs proceed to argue

that

Act 55 plainly operates as a substantial impairment of Plaintiffs’ employment

contracts. Here, the impairment is particularly severe, as Plaintiffs faced and

continue to face indefinite suspension of their employment. As the impairment

was severe, this Court should exercise a high level of scrutiny in reviewing

Defendants’ impairment of Plaintiffs' employment contracts. Energy Reserves,

459 U.S. at 411. Although "[tJotal destruction of contractual expectations is not

necessary for a finding of substantial impairment[,]" id., the converse is

certainly true—where contractual expectations were totally or virtually

destroyed, as here, substantial impairment is present. The reliance interests in

this case are also strongly present.

Central to the employment relationship between a teacher and their

public employer is the employee's reliance upon the state's and the District's

promise of tenure in their contracts. For public school teachers:

The promise of job security, especially during layoffs, lies close

to the core of teacher tenure. Having job security, even in tough

28

economic times, was a central term to induce people to become

teachers and seek tenure in Indiana. It is a term with significant

value to teachers, who as a matter of economics have traded

higher salaries for the protections that tenure offers over the

course of a career.

Flliott, 876 F.3d at 934. Had tenure not been part of the deal, teachers would

likely have demanded (through their unions) higher compensation to cover

employment instability. Since Plaintiffs had tenure, it was certainly reasonable

for them to rely on that promise and accept a lower level of compensation in

exchange for the value of tenure. Defendants cannot have it both ways —they

cannot provide lower compensation while Plaintiffs rely on tenure and at the

same time break their promise of tenure whenever they think it economically in

their interest.

(Doc. 18 at 22-23.)

Defendants reply that Plaintiffs knew, at all times, that they were subject to

suspension. (Doc. 19 at 12.) This is indisputably true in that, as set out above, the School

Code, pre-Act 55, provided four bases for suspension. The parties do not discuss the

precise impact of the Act 55 economic basis for suspension found in § 11-1 124(a)(5) which

Plaintiffs contend is the provision by which their “contractually enforceable tenure status is

not honored” (Compl. ] 23). Rather, the parties speak in generalities: Plaintiffs’ arguments

are based on Act 55 and tenure generally (Doc. 18 at 22-25); Defendants’ refute Plaintiffs’

generic arguments and rely on the amendment language in the statute and contracts

between Plaintiffs and the District (Doc. 19 at 12-18).

The Court will first focus on Defendants’ core argument which is that legitimate

expectations cannot be thwarted by an amendment to the statute when the Statutory

provision which creates the alleged contract contains the express amendment language

29

contained here (“[T]his contract is subject to the provisions of the ‘Public School Code of

1949’ and the amendments thereto,” 24 P.S. § 11-1121 (c)). (Doc. 19 at 17; see also Doc.

11 at 29-30.) Defendants assert that “[t]o disregard this express legislative provision, as the

Plaintiffs argue, would render it completely meaningless and mere surplusage, requiring this

Court to disregard the plain language and clear meaning of the applicable provisions of the

Public School Code.” (/d.)

Plaintiffs do not directly address the statutory/contractual provision upon which

Defendants rely, nor do they provide an alternative interpretation of the statutorily mandated

amendment language found in § 11-1121(c). Their notation of the general proposition that

‘all legislation is subject to alteration or modification by amendment — whether or not the

possibility of such is specifically set forth within its text” (Doc. 18 at 24) is a statement of fact

with no further specific applicability to the circumstances of this case or any case where the

statute/contract expressly includes an amendment provision. Plaintiffs’ follow-up statement

that “[t]he impact of these laws do [sic] not waiver and their validity or impact are not altered

by some potential, future event that may theoretically occur” (id. (citing Elliott, 876 F.3d at

936)) is another general statement of fact with no implication in the circumstances at issue

here—the statement applies in ai! pre-amendment situations and the present inquiry is

concerned primarily with post-amendment implications. Finally, while Plaintiffs’ accurately

quote Elliott, (“O]ne can anticipate that any state law may change in the future, but

retroactive application to impair existing contract rights and reliance interests is another

30

question” (Doc. 18 at 24 (emphasis added by Plaintiffs)), the quoted material does not

advance Plaintiffs’ position because Elliott did not consider or make reference to a

Statute/contract which specifically addressed incorporation of statutory amendments. See

876 F.3d 926.

Defendants’ interpretation of § 11-1121(c)’s amendment language essentially means

that any and all amendments to the School Code which were and/or may be adopted after a

professional employee signed a contract with the District could not substantially impair the

employee's rights because the employee had no reasonable expectation that he or she had

any rights under the contract which could not be altered or taken away by the legislature.

(Doc. 11 at 29-30; Doc. 19 at 14, 16-18.) As discussed above, Plaintiffs do not provide

support for an alternative interpretation.

With no basis to conclude that Defendants’ interpretation of the statutory/contractual

amendment language is inconsistent with recognized principles of statutory analysis or the

law of contracts,’ the Court finds that Defendants’ interpretation is properly accepted. Thus,

” Anderson recognized the Indiana Supreme Court's discussion of relevant contract principles where the

appellants had argued that “a contract which does not bind both parties binds neither of them.” 303 U.S. at

106 (quoting Kostanzer, 187 N.E. at 342). Anderson then set out Konstanzer’s related finding:

This proposition is undoubtedly supported by the law of contracts. But there is nothing in the

law of contracts to prevent one party to a contract granting to the other the privilege or

rescission or cancellation on terms not reserved to the former party. The local school

corporations are agents of the state in the administration of the public schools and the

General Assembly has the power to prescribe the terms of the contract to be executed by

these agents.

303 U.S. at 106-07 (quoting Kostanzer, 187 N.E. at 342).

31

the Court accepts Defendants’ interpretation of the amendment language of the contract at

issue for purposes of consideration of the pending motion only. The Court finds Act 55's

addition of § 11-1124(a)(5) to the prior statutory provision did not substantially impair

Plaintiffs’ contractual rights because Plaintiffs, based on the amendment language in their

contracts, had no reasonable expectation that § 11-1124(a) would remain unchanged for

the duration of their employment with the District. This conclusion is based on the facts that

Plaintiffs’ contracts contained the amendment language of § 11-1121(c) (Compl. J 15); the

additional reason for suspension identified in § 11-1 124(a)(5) was adopted by statutory

amendment (id. {] 18); when Plaintiffs signed their contracts they agreed to be subject to

the suspension provisions of the School Code, § 11-1 124(a) and amendments thereto; and

Plaintiffs identify no other basis for their § 1983 claim (see Compl. J 23). These facts show

that amendment to § 11-1124(a) brought about by Act 55 could not substantially impair

Plaintiffs’ contractual rights regarding suspension. Put another way, by the terms of their

contracts, Plaintiffs could not have had reasonable expectations that they would not be

Subject to legislative amendments to § 11-1124(a) or that the provision would never be

amended.

Alternatively, assuming arguendo the validity of Plaintiffs’ position that the

amendments provision cannot be read as absolute (Doc. 18 at 24-25), the Court would,

nonetheless, conclude that the change in law brought about by Act 55's allowing for

suspension based on “economic reasons that require a reduction in professional employes,”

32

24 Pa. C.S. § 11-1124(a)(5), was foreseeable and, therefore, did not substantially impair

contractual rights. As stated in Elliott “for an impairment to be substantial[,] the parties must

not have anticipated the change in law.” 876 F.3d at 935. Elliott also stated that “(t]he

Supreme Court has found that a change in law was foreseeable in at least two contexts. In

the first, the Court pointed to the history of ‘extensive and intrusive’ regulation in the affected

industry.” Jd. (citing Energy Reserves, 459 U.S. at 413-16). In Elliott the change in law

meant that a qualified tenured teacher who, at the time of contracting had an enforceable

contractual right to be retained over non-tenured-teachers in a reduction in force, no longer

had that right with the passage of the intervening legislation. 876 F.3d at 933-34. Elliott

found the Energy Reserves context inapplicable based on the specific circumstances of the

case: the state had regulated tenure since 1927; the state had held in 1938 that the

regulations were contractual and protected by the Contracts Clause: and the state had not

materially amended those terms for more than eighty years. 876 F.3d at 936 (citations

omitted). Differentiating between a small and predictable Step as opposed to a bill which

affected basic tenure rights upon which teachers had “built their entire careers,” Elliott

concluded that theirs was not a case where the regulation granting tenure had put the

plaintiff “on notice that an entirely different scheme’ would likely be imposed.” 876 F.3d at

936 (quoting Chrysler Corp. v. Kolosso Auto Sales, Inc., 148 F.3d 892, 894 (7" Cir. 1998).

Here, the change brought about by §11-1124(a)(5) did not deprive Plaintiffs of the

right to be retained over non-tenured teachers and neither Pennsylvania court decisions nor

33

legislative history indicate that the School Code provisions are contractual and protected by

the Contracts Clause.® Rather, the School Code has been regularly amended and the there

has been extensive regulation of public school education, including the relationship between

teachers and school districts, through the School Code. Section 11-1124(a)(5) did not

impose “an entirely new scheme” regarding tenure. Thus, unlike Elliott, the situation

presented here is one where the change brought about by § 11-1124(a)(5) would have been

foreseeable on the basis of the Pennsylvania legislature’s “extensive and intrusive”

regulation of public education within the state.

Further, foreseeability can also be premised on the School Code’s pre-Act 55

provision which contemplated suspensions based on practical considerations related to

pupil enrollment, curtailment or alteration of the educational program, school consolidation,

and the creation of new school districts. 24 P.S. § 11-1124(a)(1)-(4). Before and after Act

99, Suspension pursuant to the “curtailment or alteration of the educational program’

provision could be based on either “a substantial decline in class or course enrollments or to

conform with standards of organization or educational activities required by law or

recommended by the Department of Education.” 24 P.S. § 11-1124(a)(2) (emphasis

added). Thus, Plaintiffs were on notice, prior to the enactment of Act 55, that the articulated

grounds for suspension set out in the suspension provision of the School Code were not

limited to those specifically identified, i.e., “a substantial decline in class or course

8 This inquiry differs from that undertaken in the previous section of this Memorandum Opinion.

34

enrollments,” was not the only reason for suspension under § 11-1124(a)(2)—suspension

related to curtailment or alteration of the educational program could also be based on

undefined standards of law or the Department of Education (then called the “Department of

Public Instruction”’). In other words, an alteration of the specific grounds for suspension set

out in § 11-1124(a) was foreseeable at the time Plaintiffs entered into contracts with the

District. In these circumstances, the Court concludes Plaintiffs cannot show that they had a

legitimate expectation that the suspension provision of the School Code would, throughout

their employment with the District, remain limited to the grounds for suspension specifically

articulated when they signed their contracts. It follows that Plaintiffs cannot show a

substantial impairment of their contract rights based on suspension-related expectations

where the amendment articulated an additional reason for suspension. With this

determination, Plaintiffs’ 42 U.S.C. § 1983 action based on the Contracts Clause must be

dismissed.

The Court's determination that Plaintiffs cannot show (under either parties’

interpretation of the amendment provision of the School Code/contract) that their contractual

rights were substantially impaired is based on the language of the statute and relevant law.

The decision is not based on a deficit of facts pled, nor would additional facts change the

language considered or the law applied. Therefore, the Court concludes that granting

Plaintiffs leave to amend their 42 U.S.C. § 1983 claim would be futile.

® See 2017 Pa. Legis. Serv. Act 2017-55 (H.B. 178).

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B. Remaining Claims

The conclusion regarding Plaintiffs’ 42 U.S.C. § 1983 claim indicates that the claim in

Count V for Declaratory and Injunctive Relief based on the Contracts Clause in the United

States Constitution (Compl. | 79) is properly stricken. As the Court will grant Defendants’

motion as it pertains to Plaintiffs’ 42 U.S.C. § 1983 action, the Court must decide whether to

retain jurisdiction over Plaintiffs’ remaining claims because the remaining claims are based

on state law.

28 U.S.C. § 1367(c)(3) provides that “district courts may decline to exercise

supplemental jurisdiction over a claim ... if... the district court has dismissed all claims

over which it has original jurisdiction.” Further, the Third Circuit has instructed “that, ‘where

the claim over which the district court has original jurisdiction is dismissed before trial, the

district court must decline to decide the pendent state claims unless considerations of

judicial economy, convenience, and fairness to the parties provide an affirmative justification

for doing so.” Hedges v. Musco, 204 F.3d 109, 123 (3d Cir. 2000) (emphasis in original)

(quoting Borough of W. Mifflin v. Lancaster, 45 F.3d 780, 788 (3d Cir. 1995).

Here, the Court finds that there are no “considerations of judicial economy,

convenience, [or] fairness to the parties” which merit this Court retaining jurisdiction over the

remaining state law claims. Accordingly, given that this Court has dismissed all the claims

over which it had original jurisdiction, the Court will decline to exercise supplemental

jurisdiction over Plaintiffs’ remaining state law claims.

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V. CONCLUSION

For the reasons set out above, the Court will grant Defendants’ Motion to Dismiss

Plaintiffs’ Complaint (Doc. 4) as to Count III for a Violation of 42 U.S.C. § 1983 and the

related claim for declaratory and injunctive relief in Count V (Compl. | 79) will be stricken

from Count V. The Court will decline to exercise jurisdiction over the remaining state law

claims. A separate Order will be filed simultaneously with this Memorandum Opinion.

(2

X LAUML

Robert D..Mariani

United States District Judge

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