Beischel v. Stone Bank School District

In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 03-2182 & 03-2327

KAREN BEISCHEL,

Plaintiff-Appellee,

Cross-Appellant,

v.

STONE BANK SCHOOL DISTRICT, BOARD OF

EDUCATION FOR STONE BANK SCHOOL DISTRICT,

MARGARET D. KASIMATIS, AMY LENTZ,

SUSAN MUSCHE, and KATHY ROSENHEIMER,

Defendants-Appellants,

Cross-Appellees.

____________

Appeals from the United States District Court

for the Eastern District of Wisconsin.

No. 00-C-623—Charles N. Clevert, Jr., Judge.

____________

ARGUED JANUARY 7, 2004—DECIDED MARCH 29, 2004

____________

Before FLAUM, Chief Judge, and MANION and EVANS,

Circuit Judges.

EVANS, Circuit Judge. Karen Beischel’s 2-year contract

as district administrator and principal of the tiny Stone

Bank School District in Oconomowoc, Wisconsin, was not

2 Nos. 03-2182 & 03-2327

renewed. Beischel, however, was not about to go away

without a fight, so she sued the District and some of the

individual board members in federal court where she

prevailed on some claims and lost on others. The District

has appealed.

The Stone Bank School District serves approximately 315

families in one school covering kindergarten through eighth

grade. In 1997 the District hired Beischel to be both its

administrator and the principal of its school. She was given

a contract for a 2-year term ending on June 30, 1999. In

general, her duties included the “supervision and man-

agement of the professional work of the schools [sic] and the

promotion of the pupils.” In particular, her duties involved

establishing a curriculum, preparing a budget, resolving

problems with students, parents, and staff, participating in

community events as a representative of the District, and

working with the school board. She was to work “under the

direction” of the board.

Problems began in the first year of the contract, but,

hoping things would improve, the board voted to give

Beischel the statutory maximum salary increase for the

next year. Rather then improving, however, the situation

deteriorated. By August or September 1998, members of the

board raised concerns about Beischel’s performance with

the board president, Margaret Kasimatis. The board, which

under § 118.24 of the Wisconsin Statutes has sole authority

to terminate or renew employment contracts with adminis-

trators, began to discuss whether Beischel’s contract should

be renewed when it expired in June. After several meetings,

on January 14, 1999, the board issued a formal notice to

Beischel advising her that it was considering not renewing

her contract. The notice advised Beischel that within 7 days

she had a right to request a hearing on the contract

nonrenewal. The notice also indicated that if she requested

a hearing, one would be held 2 weeks later on January 28.

By letter delivered to Kasimatis on January 21, Beischel

requested a public hearing and also asked for a written list

Nos. 03-2182 & 03-2327 3

of the reasons the board was considering the nonrenewal of

her contract. The board drew up a list and sent it, along

with supporting documents and exhibits, to Beischel and

her attorney on January 22.

Beischel’s attorney objected to the January 28 hearing

date and requested more time to prepare. The District of-

fered to delay the hearing if, in turn, Beischel would agree

that District policy 2001.5 did not apply to the proceedings.

That policy said that at least “5 months prior to the expira-

tion of the administrator’s contract, the Board will indicate

in writing (by registered mail) if the Board decides on

termination of the administrator’s contract. Dismissal

procedures as defined in section 118.24 of the Wisconsin

Statutes will be followed.” The board asked for Beischel’s

agreement because it feared that a delay in the hearing

date might run afoul of the policy. Beischel refused to agree

that the policy did not apply, but she continued to demand

a delay of the hearing date. Her requests were denied.

Beischel also requested that the District retain an inde-

pendent adjudicator to preside over the hearing, which

otherwise, under Wisconsin law, would be presided over by

the board. That request was also denied.

Getting nowhere, on January 28 Beischel filed an action

in the state circuit court for Waukesha County seeking

a temporary restraining order to prohibit convening the

hearing that evening. The restraining order was entered; it

prohibited the District from holding a hearing before

February 15. The hearing finally went forward on February

23, 1999, and ran for 12 hours before wrapping up at 6

o’clock the next morning. At the hearing, Beischel called as

many witnesses as she wished, including board members.

Later that day, the board voted 4 to 1 not to renew her

contract. The notice of nonrenewal was hand-delivered to

Beischel’s office and also sent to her residence via regis-

tered mail that same day.

Meanwhile, in the circuit court action, Beischel’s attorney

requested time to amend the pleadings to include claims

4 Nos. 03-2182 & 03-2327

involving the nonrenewal proceedings. No amendments

were ever filed, however, and the case was set for dismissal

on January 10, 2000. Beischel agreed to the dismissal but

requested attorney’s fees as a “prevailing party” on her

claims regarding the hearing date. That request was

denied, and the case was dismissed by order on May 30,

2000.

Then on May 4, Beischel initiated the present proceedings

in the district court where summary judgment motions were

filed. Each side prevailed on some issues and lost on others.

The bottom line was that Beischel was granted judgment on

her claim that she had been denied a property interest

without due process of law. The defendants, except for

Kathy Rosenheimer, were denied qualified immunity on

that claim. However, the defendants won dismissal of

Beischel’s claim based on a denial of a liberty interest

without due process of law and all of her claims under

Wisconsin law. Even though there is no final judgment in

the case, the defendants have appealed both the decision

denying qualified immunity and the decision on the merits.

We, of course, have appellate jurisdiction over the decision

denying qualified immunity as a matter of law. Mitchell v.

Forsyth, 472 U.S. 511 (1985). And although we are ordi-

narily “skittish” about the doctrine of pendent appellate

jurisdiction, see Greenwell v. Aztar Indiana Gaming Corp.,

268 F.3d 486 (7th Cir. 2001), we agree with the parties who

contend that the issues on the merits are so intertwined

with the appealable claim that jurisdiction exists over the

entire appeal. And as it turns out, the dispositive issues in

our decision today are issues on the merits rather than on

qualified immunity.

Although the claims in this case are brought under four

theories (federal due process, breach of contract, violation

of Wisconsin Statutes § 118.24(6) and (7) and violation of

school board policy number 2001.5), they fall into two main

categories for our analysis: notice of nonrenewal of the

Nos. 03-2182 & 03-2327 5

contract and the fairness of the hearing itself. We review a

district court’s decision on summary judgment de novo,

drawing our own conclusion of law and fact from the record

before us. Thiele v. Norfolk & Western Ry. Co., 68 F.3d 179

(7th Cir. 1995).

As argued before us, the notice claims involve the timing

of the notice under state statute, the contract, and the

District policy. There is no claim that the notice was in-

adequate to inform Beischel of what was happening.

As to timing, § 118.24(7) Wis. Stat. requires a preliminary

notice that the board is considering nonrenewal of a

contract 5 months prior to its expiration. Section 118.24(6)

Wis. Stat. requires that the actual nonrenewal be communi-

cated to the employee 4 months prior to the expiration of

the contract. Beischel’s contract says that nonrenewal of the

contract “shall be governed by Sec. 118.24(6) and (7),

Wisconsin Statutes.” In contrast, the District policy says

that at least 5 months prior to the expiration of the contract

the board will indicate in writing “if the Board decides on

termination of the administrator’s contract.” The policy also

states, however, that dismissal procedures defined in §

118.24 Wis. Stat. will be followed. Before Beischel obtained

the state court restraining order, the hearing was scheduled

so it would be convened in compliance with her contract, the

state statute, and the policy. Delaying the hearing meant

that the final decision on her status was made 4 months,

not 5, prior to the termination of her contract. In other

words, it was in compliance with her contract and the state

statute but not the District policy.

We need not determine the effect of noncompliance with

the policy. The notice claims are barred by the doctrine of

claim preclusion and were properly dismissed. It is well-

settled that “a final judgment is conclusive in all subse-

quent actions between the same parties as to all matters

which were litigated or which might have been litigated in

6 Nos. 03-2182 & 03-2327

the former proceedings.” DePratt v. West Bend Mut. Ins. Co.,

334 N.W.2d 883, 885 (Wis. 1983). Three elements must

exist for claim preclusion to apply. There must be an

identity between the parties or their privies in the former

and present lawsuits. There must be an identity between

the causes of action in the two suits. And finally, there must

have been a final judgment on the merits in a court of

competent jurisdiction in the first lawsuit. Northern States

Power Co. v. Bugher, 525 N.W.2d 723 (Wis. 1995). Beischel’s

claim is that there was no identity between the causes of

action in the two suits she filed. We disagree. Wisconsin has

adopted a transactional approach to this issue. Under this

approach, a second suit is ordinarily barred “if both suits

arise from the same transaction, incident or factual situa-

tion . . . .” Pliska v. City of Stevens Point, Wis., 823 F.2d

1168, 1173 (7th Cir. 1987).

Under this analysis, Beischel’s notice claims are barred.

As we noted above, she filed suit in the circuit court for

Waukesha County where she obtained a temporary re-

straining order delaying the hearing on the nonrenewal of

her contract. The order was issued following a hearing at

which the judge indicated that he could “draw a distinction .

. . between termination and failing to renew,” hinting that

the District policy was not applicable and the restraining

order would therefore not harm anyone. Because the judge

was considering a temporary restraining order, however, he

did not make a finding in that regard. He indicated that he

would allow the parties to brief the issue. That the briefing

never occurred does not change the fact that Beischel

brought her claims regarding notice to the state circuit

court. She clearly could have obtained a finding on whether

the policy provisions regarding termination of a contract

apply in this situation—and, perhaps more importantly,

whether they supersede the notice provisions in the state

statute and in her contract. Perhaps fearing the direction in

which the state court judge was leaning, she did not do that

Nos. 03-2182 & 03-2327 7

and instead seeks to litigate the notice issue in this case.

She argues that the issues were not ripe at the time the

request for a restraining order was filed—that they did not

ripen until the hearing was held. That argument may save

her other claims, but it cannot save the claims regarding

notice. Beischel chose her forum and was required to

litigate the notice issue in that forum.

We move, then, to the claims regarding the nonrenewal

hearing. Beischel alleges that the actions of the school

board members deprived her “of her liberty interests and

property interests without due process of law . . . .” The

most seriously contested claim is whether the board was an

impartial decisionmaker at Beischel’s hearing. Beischel

argues that the board did not have the appearance of

impartiality because it simultaneously was complainant,

prosecutor, witness, and judge. In addition, some members,

she contends, felt personally attacked by her and some

made prehearing statements that created a impermissible

risk of partiality. She adds that the board attorney was

overly active in the hearing process.

Although the School District does not vigorously press the

issue, we will first examine whether Beischel has a property

interest in the renewal of her contract, which would in turn

require due process protections. To have a protectable

property interest, a plaintiff must show a legitimate claim

of entitlement, not just a hopeful expectation. Board of

Regents v. Roth, 408 U.S. 564 (1972). We look to independ-

ent sources, such as state law, to determine the scope of a

property interest. Dixon v. City of New Richmond, 334 F.3d

691 (7th Cir. 2003). Beischel’s claim comes from her

contract, which in turn references the state law we have

just been discussing. Her contract says that “[r]enewal and

non-renewal of this contract shall be governed by Sec.

118.24(6) and (7) Wisconsin statutes.” The question is

whether § 118.24 Wis. Stat. confers a property interest in

her continued employment.

8 Nos. 03-2182 & 03-2327

Under Wisconsin law, we have said, a dichotomy exists

between employment “at-will” and employment which can

be terminated only “for cause.” The latter receives due pro-

cess protections. Flynn v. Kornwolf, 83 F.3d 924 (7th Cir.

1996). A statute can confer a protected property interest on

an employee, as § 62.13(5) did for Wisconsin police officers

and firefighters. Larson v. City of Tomah, 193 Wis. 2d 225

(1995); Schultz v. Baumgart, 738 F.2d 231 (7th Cir. 1984).

Section 62.13(5) requires “just cause” for terminations.

The problem in this case is that § 118.24 and Beischel’s

contract seem to make her case fall between the two poles

set up in Wisconsin law. Does the contract give Beischel a

legitimate expectation of continued employment? We have

found no case based on Wisconsin law which gives us a

definitive answer.

Under Illinois law, in a similar fact situation, we have

chosen to pass the question as to whether a property

interest exists and go directly to the issue of the adequacy

of the procedures. In Crim v. Board of Education of Cairo

School District No. 1, 147 F.3d 535 (7th Cir. 1998), a su-

perintendent was told his contract would not be renewed.

He requested a hearing. At the hearing he was not allowed

to question board members as witnesses. In his subsequent

due process claim, he said that the board deprived him of a

property interest because state law required that his

contract be renewed automatically unless the board gave

notice, stated the reasons, and afforded him a hearing. We

found that there was no need to decide whether the statute

creates a cognizable property interest for purposes of the

federal due process clause because he received all the

process to which he was due.

In contrast, another Illinois case, Head v. Chicago School

Reform Board of Trustees, 225 F.3d 794 (7th Cir. 2000),

involved the nonrenewal of a principal’s contract. We found

that his contract made it absolutely clear that the principal

Nos. 03-2182 & 03-2327 9

had no expectation of renewal and that the Illinois School

Code did not override the contract. His contract

was exceptionally clear. It said, “This Agreement, including

and not withstanding the procedures set forth herein, shall

expire at the end of its stated term and shall not grant or

create any contractual rights or other expectancy of contin-

ued employment beyond the term of this Agreement.” At

802. Beischel’s contract contains no such explicit language.

Despite the somewhat gray area in which we find our-

selves, we are convinced that under Wisconsin law Beischel

did not have a legitimate expectation that her employment

would continue beyond the 2-year term of her contract.

There are no statutory limitations as to the bases on which

the nonrenewal decision can rest. In Hohmeier v. Leyden

Community High Schools District 212, 954 F.2d 461 (7th

Cir. 1992), we noted that “[t]he Supreme Court has held

that regulations must contain ‘explicitly mandatory lan-

guage,’ i.e., specific directives to the decisionmaker that if

the regulations’ substantive predicates are present, a

particular outcome must follow, in order to create a liberty

interest. Kentucky Dept. of Corrections v. Thompson, 490

U.S. 454, 463, 109 S. Ct. 1904, 1910, 104 L. Ed. 2d 506

(1989). We found these principles equally applicable to the

analysis of alleged property interests. See Wallace v.

Robinson, 940 F.2d 243, 246-47 (7th Cir.1991) (en banc).”

Even if Beischel had a property interest, however, her due

process rights were not violated. Her claim that they have

been grows out of the procedure set out in § 118.24 Wis.

Stat. That statute contemplates that the school board is the

body that hires and fires district employees. In doing so, it

must comply with certain procedures, such as the notice

requirements we just discussed. In addition, the law

provides that the employee “has the right to a hearing be-

fore the board prior to being given written notice of refusal

to renew the contract.” The statute then sets the school

board up as the body which both considers nonrenewal and

10 Nos. 03-2182 & 03-2327

ultimately decides following a hearing whether a contract

will be renewed. The board complied with the statutory

requirements, but Beischel nevertheless contends due

process requires that an outside decisionmaker hear her

case.

We disagree. Withrow v. Larkin, 421 U.S. 35 (1975), in-

volved whether a doctor’s license should be suspended for

allowing an unlicensed doctor to perform abortions in his

clinic. The Court said that it was not a violation of due

process to have the administrative agency, which inves-

tigated the complaint, also act as the decisionmaker. Re-

ferring to a bevy of examples, the Court summarized, “our

cases, although they reflect the substance of the problem,

offer no support for the bald proposition . . . that agency

members who participate in an investigation are disquali-

fied from adjudicating.” At 52. Exceptions to that proposi-

tion exist if the adjudicator has a pecuniary interest in the

outcome or if he has been the “target of personal abuse or

criticism from the party before him.” At 47.

Those principles were applied directly to Wisconsin school

boards in Hortonville Joint School District No. 1 v.

Hortonville Education Association, 426 U.S. 482 (1976),

which involved a teachers’ strike which violated state law.

When teachers were ordered to return to work, some did

not, and the board decided to conduct disciplinary hearings

for those remaining on strike. The issue the Court consid-

ered was “whether School Board members, vested by state

law with the power to employ and dismiss teachers, could,

consistent with the Due Process Clause of the Fourteenth

Amendment, dismiss teachers engaged in a strike prohib-

ited by state law.” At 483-84. The teachers contended that

because the board had manifested personal bitterness

toward the teachers and had been engaged in negotiating

with them, it would be a violation of their right to an

impartial decisionmaker for the board to conduct the

hearing. The teachers analogized their case to the revoca-

Nos. 03-2182 & 03-2327 11

tion of parole in Morrissey v. Brewer, 408 U.S. 471 (1972),

in which someone not involved in the case was required as

the decisionmaker. In rejecting the analogy, the Court

noted that under Wisconsin law a school board has broad

power over the management of the property and affairs of

the school district and is the only body vested with the

power to employ and dismiss teachers. In that situation, the

board could, consistent with due process concerns, conduct

the hearing and render a decision. The Court said:

State law vests the governmental, or policymaking,

function exclusively in the School Board and the State

has two interests in keeping it there. First, the Board is

the body with overall responsibility for the governance

of the school district; it must cope with the myriad day-

to-day problems of a modern public school system

including the severe consequences of a teachers’ strike;

by virtue of electing them the constituents have de-

clared the Board members qualified to deal with these

problems, and they are accountable to the voters for the

manner in which they perform. Second, the state

legislature has given to the Board the power to employ

and dismiss teachers, as a part of the balance it has

struck in the area of municipal labor relations; altering

those statutory powers as a matter of federal due

process clearly changes that balance. Permitting the

Board to make the decision at issue here preserves its

control over school district affairs, leaves the balance of

power in labor relations where the state legislature

struck it, and assures that the decision whether to

dismiss the teachers will be made by the body responsi-

ble for that decision under state law.

At 495-96.

In our case, the Stone Bank school board, having the

same powers and duties as those held by the Hortonville

board, was considering whether to renew the contract of its

12 Nos. 03-2182 & 03-2327

top administrator. Before it could finally decide what to do,

it had to give Beischel notice and allow her an opportunity

to present her case for renewal. The board heard her case

for 12 hours through the night, and its attorney facilitated

the hearing process. Through this ordeal, there is no in-

dication that Beischel did not have every opportunity to

plead her case and attempt to convince the board to renew

her contract.

But the question remains whether there was something

so unusual in this case that the board was biased to an

extent that allowing it to make the decision was a viola-

tion of the Due Process Clause. As we said, the Withrow

Court held that actual bias might arise if an adjudicator

has a pecuniary interest in the outcome or has been a target

of personal abuse from the party before him. No board

member had a pecuniary interest in the outcome of this

hearing. Beischel contends, though, that certain board

members felt that they were a target of personal abuse from

her. Board members Amy Lentz, Susan Musche, and

Kasimatis answered yes to a question whether they felt

personally attacked by Beischel for disagreeing with her.

However, their explanations of the attacks are less than

compelling. Lentz said Beischel personally attacked her

by saying she was “inappropriately confrontational with

teaching staff and had a history of being banned from a

previous school.” Musche felt Beischel had “questioned her

character and motives” by saying she had “blindsided” her

on an issue and by accusing her of inappropriately ordering

textbooks for her own children whom she home-schooled.

Kasimatis also felt “blindsided” and said Beischel acted “out

of a personal agenda.” We are not convinced that these

generalized statements can, as a matter of law, overcome

the presumption that the board members were carrying out

their duties with honesty and integrity.

As the Court also said in Withrow:

The contention that the combination of investiga-

tive and adjudicative functions necessarily creates an

Nos. 03-2182 & 03-2327 13

unconstitutional risk of bias in administrative adjudica-

tion has a much more difficult burden of persuasion to

carry. It must overcome a presumption of honesty and

integrity in those serving as adjudicators; and it must

convince that, under a realistic appraisal of psychologi-

cal tendencies and human weakness, conferring investi-

gative and adjudicate powers on the same individuals

poses such a risk of actual bias or prejudgment that the

practice must be forbidden if the guarantee of due

process is adequately implemented.

At 47.

It is surely a strange posture Beischel finds herself in—

arguing, in effect, that school board members cannot judge

her fairly because she has been sufficiently abusive to them

as to make them biased. It could hardly be desirable to

encourage employees to use personal abuse as a tactical

choice in an attempt to disqualify a board and get in its

place an alternative decisionmaker. And while we are on

the subject, we are also somewhat bewildered by Beischel’s

choice at the hearing to question the school board members

at length—throughout the night, in fact. It is hard to see

how such questioning was designed to convince them that

her contribution to the school district supported the renewal

of her contract.

As the cases show, it is not an easy matter to overcome

the presumption of “honesty and integrity.” Nor should it be

here. Wisconsin Statutes charge school boards with the

duty of hiring school district administrators. The school

board is accountable to the voters of the district for the

decisions it makes. For the board to delegate its statutory

responsibility and its obligation to the voters in any but the

most compelling circumstances could be seen as passing the

buck on one of the most important, and perhaps difficult,

decisions it is charged with making. The board was not

required to recuse itself from this spat and turn its author-

14 Nos. 03-2182 & 03-2327

ity over to an “independent adjudicator,” unaccountable to

the voters of the Stone Bank School District.

Finally, Beischel asserts what seems to be a separate

claim that the board violated her liberty interest by a press

release after the hearing. It stated in part that “Beischel

has demonstrated a pattern of . . . providing misinformation

to community and board members so many times now that

there is a loss of trust and credibility, not only for the board

but a segment of our community as well . . . .”

A person has no cognizable liberty interest in his reputa-

tion; consequently, allegations which merely damage one’s

reputation do not implicate a liberty interest. See Paul v.

Davis, 424 U.S. 693 (1976). This is true even when a

statement causes serious impairment of one’s future em-

ployment. Hojnacki v. Klein-Acosta, 285 F.3d 544 (7th Cir.

2002). But when a state actor attacks a person’s good name

in a manner that makes it “virtually impossible” for the

person to find new employment, that person’s liberty

interest to pursue his occupation is infringed. Townsend

v. Vallas, 256 F.3d 661 (7th Cir. 2001). The alleged de-

famatory statements must be false statements of fact.

Strasburger v. Bd. of Educ. of Hardin County, 143 F.3d 351

(7th Cir. 1998). In such a case, a hearing is required. Doyle

v. Camelot Care Centers, Inc., 305 F.3d 603 (7th Cir. 2002).

What we have here are the conclusions reached by the

board after a hearing. They are not the sort of statements

giving rise to a deprivation of a liberty interest.

In short, Beischel’s claims cannot be sustained. The

decision of the district court, insofar as it resolved issues in

Beischel’s favor, is REVERSED and the case is REMANDED for

the entry of an order granting judgment to the defendants.

Nos. 03-2182 & 03-2327 15

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—2-29-04