Rawle’s Reports

Rawle’s Reports, Jan. 2015: Pennsylvania, Appellate—First Amendment Decision

PENNSYLVANIA: Appellate—First Amendment Decision

by Angela M. Heim and John C. McMeekin II

John C. McMeekin II, a partner in Rawle & Henderson LLP’s Philadelphia office, represented members of Pennsylvania’s Underground Storage Tank Indemnification Board in a case filed in federal court by a remediation contractor and its owner claiming that they lost a government contract in retaliation for constitutionally protected activity in violation of the First Amendment of the U.S. Constitution.

Austin James Associates, Inc. (“AJA”), a contractor, was hired by ICF Incorporated, LLC (“ICF”), a third-party administrator, to investigate claims made to the Underground Storage Tank Indemnification Fund (“Tank Fund”) and to provide technical services in relation to those claims.  The contract between AJA and ICF included a conflict-of-interest clause which prohibited AJA from “represent[ing] a client in regard to a claim against [the Tank Fund]….” Notwithstanding the conflict-of-interest clause, AJA also entered into contracts with private property owners to provide remediation services for fuel leaks from underground storage tanks.

In September, 2003, AJA contracted with property owners (“the Mussers”) to remediate the site of a 1997 fuel leak.   In October, 2003, the Mussers and the Tank Fund reached a final settlement whereby the Tank Fund paid $1.208 million to settle the claim in exchange for a full release of claims against the Tank Fund.  The settlement proceeds, which were based on a remediation estimate provided by AJA, were forwarded by the Mussers to AJA to compensate AJA for its remediation work.  However, the remediation work cost significantly more than AJA had estimated and, subsequently in 2011, the Mussers, with the direct assistance of AJA, filed another claim with the Tank Fund claiming that there was another leak in 1999, which itself cost $1 million to remediate.  The Tank Fund denied the second claim on the ground that it was included within the scope of the 2003 release.  Since AJA had violated the conflict-of-interest clause in its contract with ICF by representing the Mussers in its claim against the Tank Fund, the contract was not renewed.

AJA filed a lawsuit against ICF and the members of the Underground Storage Tank Indemnification Board in the U.S. District Court for the Eastern District of Pennsylvania claiming that its First Amendment rights were violated in retaliation for assisting the Mussers in regard to their claim against the Tank Fund.  AJA claimed that their assistance to the Mussers involved a matter of public concern, namely protecting the public from fuel spills, and, therefore, was constitutionally protected.

The defendants filed motions seeking to dismiss the First Amendment claims on the ground that the activity at issue did not involve a matter of “public concern.”  Specifically, the defendants argued that AJA’s involvement in the Mussers’ claims against the Tank Fund was not within the scope of its contract with ICF and/or its role in providing services to the Tank Fund in response to claims made against it.  Rather, AJA was acting solely within its capacity as a private contractor seeking payment for the additional remediation work it had performed pursuant to its own contract with the Mussers, none of which was constitutionally protected.  The district court granted the motions and dismissed the claims, and AJA appealed.

On November 19, 2014, the Court of Appeals for the Third Circuit issued its opinion and judgment affirming the district court’s dismissal of the claims against the Board members and ICF. In its opinion, the Third Circuit panel, which consisted of Chief Judge McKee and Circuit Judges Greenaway and Krause, explained that the First Amendment “protection shields government contractors from adverse employment actions that result from speech on matters of public concern.” To successfully plead a retaliation claim under the First Amendment, a plaintiff must allege constitutionally protected conduct, retaliatory action sufficient to deter a person of ordinary firmness from exercising his or her constitutional rights, and a causal link between the two.  In order to determine whether such conduct or speech by a government contractor is constitutionally protected, the courts utilize a three-part test: (1) whether the contractor spoke as a private citizen rather than as a public contractor; (2) whether the speech involved a matter of “public concern” as opposed to a personal or private interest; and (3) whether adequate justification existed for treating the contractor differently from a member of the general public as a result of the contractor’s speech. The panel held that AJA could not meet the second or third prongs of the three-part test.

First, the panel stated that the speech at issue, namely the prosecution of the Mussers’ appeal against the Tank Fund, did not address a matter of public concern.  Specifically, the panel stated: “While there is, of course, a public interest in the ability of businesses to apply to and then appeal the decision of a state agency without repercussion, it is of no public concern that a contractor of that agency … funds and prosecutes a million-dollar claim against the agency on behalf of its private client.”  In so holding, the panel implicitly acknowledged that AJA’s own pecuniary interest, not its contract with ICF, was the impetus for assisting the Mussers in prosecuting the 2011 claim against the Tank Fund.

Second, the panel stated that “the Tank Fund, a state agency that provides seven-figure claim payments and relies on expert opinions to make decisions about those claims, had ample justification for treating [AJA] differently than members of the general public by hewing to a strong conflict-of-interest policy.”  The panel recognized that even if the speech involved a matter of public concern, state employers are permitted to restrict such speech if there is a legitimate governmental interest involved, such as avoiding actual or perceived conflicts of interest.  In sum, the panel stated that while the speech at issue “‘manage[d] to brush ever so gently against a matter of public concern’, it was the private contractual concern of a business, which violated a sensible conflict-of-interest policy” and, therefore, the district court properly dismissed the First Amendment claim.

Carl D. Buchholz, III, and Angela M. Heim of Rawle & Henderson’s Appellate Section, worked on the appeal on behalf of the members of the Underground Storage Tank Indemnification Board.

Austin James Associates, Inc. & Curtis M. Herman v. Underground Storage Tank Indemnification Board et al

John C. McMeekin II represents clients as local, national and trial counsel in environmental, toxic and mass torts product and related class actions, products liability, insurance coverage and aviation litigation.  He graduated magna cum laude from the University of Baltimore School of Law.  John is admitted to practice in Pennsylvania, New Jersey and Maryland and related U.S. District Courts. He has been published in professional and law review journals on a variety of topics related to toxic tort and environmental litigation. His significant cases can be found in the BNA Law Reports and Law 360.  He is a past Chair of the ABA TIPS Toxic Tort & Environmental Law Committee and International Law Committee, Chair of the Philadelphia Bar Association Environmental and Toxic Tort Law Committee, and serves as Revenue Officer and a member of the ABA TIPS Council.  He is a member of the firm’s Executive Committee and Chair of the Aviation practice group.

John can be reached directly at: (215) 575-4324 • jmcmeekin@rawle.com

Angela M. Heim, Of Counsel to Rawle & Henderson, concentrates her practice on insurance coverage matters, professional liability and civil litigation.  Angela graduated from Penn State University in 1990 with a degree in Business Logistics and an emphasis in Economics. Prior to attending law school, she worked for a computer software company specializing in software for home nursing agencies and physicians’ offices. In 1995, Angela graduated from the University of Pittsburgh School of Law and began her practice of law at Rawle & Henderson LLP.

Angela can be reached directly at:  (215) 575-4241 • aheim@rawle.com

Carl D. Buchholz, III, is Chair of the Maritime, Insurance Coverage and Appellate Sections. His federal appellate practice includes an argument before the United States Supreme Court as well as numerous arguments before the U.S. Court of Appeals for the Third Circuit. His state appellate practice includes seven arguments before the Pennsylvania Supreme Court, as well as over 35 oral arguments before the Pennsylvania Commonwealth Court and Pennsylvania Superior Court.  From 2006–2012, Carl served as a member of the Disciplinary Board of the Supreme Court of Pennsylvania, including a term as Board Chair.  Prior to his appointment to the Disciplinary Board, Carl served a six-year term as Chair and Board Member of the Pennsylvania Lawyers Fund for Client Security. In 2010, the Pennsylvania Supreme Court designated Carl as Chair of the Disciplinary Board.  He has been rated AV Preeminent and has been selected as a Pennsylvania Super Lawyer for the last 11 years.

Carl can be reached directly at: (215) 575-4235 • cbuchholz@rawle.com

FALK PHOTO EXHIBIT

Eric K. Falk, a partner in the Pittsburgh office of Rawle & Henderson LLP, is having an exhibit of his photography featured in the lobby of the United States District Court House for the Western District of Pennsylvania from December 2014 through February 2015.  Eric is an avid amateur photographer who is particularly interested in natural and man-made architecture.  He has his own webpage: https://prime.500px.com/ericfalk1959.  In addition, his work is scheduled to be shown in April 2015 at a boutique gallery in Pittsburgh. 

Eric focuses his practice on defending companies in toxic tort litigation.  He is currently a member of the DRI Toxic Tort Committee and is a former chair of the DRI Industrywide Litigation Committee.  He received his J.D. in 1984 from the University of Pittsburgh School of Law and his B.S. with Honors in 1981 from the American University in Washington, D.C.  He is admitted to practice in Pennsylvania and West Virginia as well as the U.S. District Court for the Western District of Pennsylvania, the U.S. District Courts for the Southern and Northern Districts of West Virginia, and the U.S. Court of Appeals for the Fourth Circuit.  He was selected as a 2013 Top Rated Lawyer in Mass Torts by Martindale-Hubbell, and he has been rated AV Preeminent by Martindale-Hubbell from 2005 to 2015.

Eric can be reached directly at: (412) 261-5708 • efalk@rawle.com

  RRV19N1.pdf