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Grigsby & Associates, Inc. v. City of Shreveport

United States District Court, W.D. Louisiana, Shreveport Division

February 14, 2018





         Before the Court is Defendants, City of Shreveport (“the City”), Oliver Jenkins, Michael Corbin, Jeff Everson (collectively referred to as “City Council Defendants”), Terri Anderson-Scott, and Julie Glass's (collectively referred to as “City Attorney Defendants”), Federal Rule of Civil Procedure 12(b)(6) Motion to Dismiss (Record Document 55) Plaintiff, Grigsby & Associates, Inc.'s (“GAI”), allegations in its Complaint (Record Document 1) of federal constitutional violations under 42 U.S.C. §§ 1981, 1983, and 1985 and state law claims for breach of contract, fraud, unfair trade practices, defamation, and malicious prosecution by Defendants. GAI also seeks declaratory and preliminary and permanent injunctive relief. For the reasons which follow, Defendants' Rule 12(b)(6) Motion to Dismiss is GRANTED.


         GAI initiated the present action on July 19, 2014. See Record Document 1. In its Complaint, GAI named the City, the City Council Defendants, who were members of the Shreveport City Council at the time the alleged actions took place, and the City Attorney Defendants, who were the City Attorney and the Assistant City Attorney for the City. See id. at 4, ¶¶ 5-10. The Defendants argue that the claims lodged against them by GAI are prescribed on the face of the complaint, others are barred by absolute and qualified immunity, and the balance state no cognizable claim against any of the Defendants. See Record Document 55-1 at 7.

         The present action involves a contract entered into between GAI and the City and certain decisions made and resolutions enacted by the Shreveport City Council, specifically, the City Council Defendants. In December 2007, GAI contracted with the City to provide financial advisory services relating primarily to the restructuring of the City's multiple interest rate swaps and adjustable rate bonds, which had potential losses to the City's general fund of over $100 million. See Record Document 1 at ¶¶ 11-12. As a result of entering into the contract with GAI, GAI saved the City $159 million over a four-year period. See id. at ¶ 13. After achieving such success, the City tasked GAI with developing a financial plan to secure new money for citywide capital improvements. See id. at ¶15. In order to finance such improvements, it was necessary to issue bonds backed by property or ad valorem taxes, which required voter approval. See id. at ¶17. On December 14, 2010, the City Council unanimously approved Resolution 277 (the financial plan with revisions) that was now subject to the State Bond Commission approval and voter approval. See id. at ¶ 22. The State Bond Commission and voters approved the three propositions contained in Resolution 277. See id. at ¶¶ 23-24.

         On July 12, 2011, the City received a low bid of 3.9% interest, which was the lowest interest rate of any long term bond issue. See id. at ¶ 27. In response, the City Council passed Resolution 69 approving the sale of bonds to the low bidder and designated the executive office (the Mayor) to pay fees/expenses. See id. at ¶¶ 28 and 31. Pursuant to this delegation and authorization by the City Council, in the form approved by the City Attorney Defendants, the Mayor informed the Bond Trustee to pay GAI $166, 887.67 in fees and expenses. See id. at ¶ 33. Furthermore, the City Attorney Defendants attested to the fact that the executive office had the power to pay such fees when it issued an opinion concluding such. See id. at ¶ 36. However, allegedly at the request of the City Council Defendants, the City Attorney Defendants later reversed their legal position on this matter in order to appease the City Council Defendants. See id. at ¶¶ 39 and 62-64.

         Shortly after issuing the bonds, the City Council Defendants required the City's internal auditor to investigate GAI. See id. at ¶ 37. After reviewing the work performance, invoices, and billing of GAI, the audit revealed the work was done in accordance with the contract. See id. at ¶ 38. However, allegedly dissatisfied with the internal auditor's report, the City Council Defendants passed a resolution in order to secure an outside firm to investigate GAI. See id. at ¶ 42. The law office of Laborde & Neuner was retained by the City Council. Laborde & Neuner, among other things, was tasked with investigating matters relating to the City's contract with GAI and audit all payments made to GAI under the current contract. See Record Document 55-4 at 1. In order to assist with the investigation, Laborde & Neuner worked in close consultation with Postlewhite & Netterville, an accounting firm, who conducted an in-depth review of payments made under the contract. See Record Document 55-4 at 1. Following review of GAI's responses to the questions posed by the investigative team, the team published a report (“Neuner Report”) stating that there was $677, 333 of questionable expenses. Id. at ¶¶ 43-44. Furthermore, the Neuner Report concluded, among other things, that “1) [GAI] failed to maintain and provide adequate documentation of its services to justify payment by the City, 2) [GAI] billed for services that may not have been compliant with the Contract, and 3) some payments to [GAI] were not properly approved.” Record Document 55-4 at 2. GAI alleges that the Neuner Report was “maliciously misrepresented” by the City Council Defendants and others in the local media as an “audit” which discovered wrongdoing by GAI in order to cast GAI in a false light and undermine its business. See id. at ¶¶ 45-46. Furthermore, GAI alleges that the Neuner Report was materially inaccurate, and a false and misleading reading of the contract terms and provisions. See id. at ¶ 55-56. The finding in the Neuner Report concerning the questionable fees/expenses was rebutted by GAI when it filed an administration response clarifying that it had performed its duties properly and that there were no contractual violations with the City Council. See id. at ¶¶ 47-49. The executive branch also prepared a response that was filed with the City Council stating that the so called “questionable expenses” were contrived and found that the City owed GAI for the billed work. Id. at ¶ 57.

         However, the responses to the Neuner Report were allegedly never acknowledged by the City Council Defendants or by a formal resolution terminating the “investigation, ” which according to GAI, evidenced that the Neuner Report was simply a “hit piece.” Id. at ¶ 50. GAI alleges that the Defendants' motive behind the investigation was to conjure up evidence to fire GAI without cause because GAI was an African-American financial advisory firm. See id. at ¶ 52. Furthermore, the City Council Defendants also allegedly wanted to choose the financial advisor to be used by the Mayor, which purportedly violated the City Charter. See id. However, the contract executed between the City and GAI provided that “[t]he city has and reserves the right to suspend, terminate or abandon the execution of any work by [GAI] without cause at any time upon giving to [GAI] written notice.” Record Document 55-2 at 4. Moreover, the contract stated that if the City decided to terminate the contract with GAI without cause, GAI would be entitled to payment only for work completed through the date of termination. Id.

         In June of 2013, the City Council passed several ordinances amending the 2013 budgets for various city funds that prohibited payments for financial advisory services, unless a contract with the person or entity providing such services was approved by the City Council prior to the services being provided. See id. at ¶¶ 58 and 71. GAI alleges the amendments to the ordinances were racially motivated. The City subsequently sued GAI in the First Judicial District Court of Caddo Parish, Louisiana, in February 2014 to recover $53, 450.17 due to overpayment for the GAI's services. GAI alleges that the filing of this suit by the City Attorney Defendants allowed the Defendants to constructively terminate the contract, which was allegedly always the City Council Defendants' goal. By filing suit against GAI, the City was now able to dispose of GAI as its financial advisor due to a litigation conflict. See id. at ¶ 70. That state court suit remains pending.


         I. Pleading Standards and the Rule 12(b)(6) Standard

         Rule 8(a)(2) of the Federal Rules of Civil Procedure governs the requirements for pleadings that state a claim for relief, requiring that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The standard for the adequacy of complaints under Rule 8(a)(2) is now a "plausibility" standard found in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), and its progeny. Under this standard, "factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555-56, 127 S.Ct. at 1965. If a pleading only contains "labels and conclusions" and "a formulaic recitation of the elements of a cause of action, " the pleading does not meet the standards of Rule 8(a)(2). Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009) (citation omitted).

         Federal Rule of Civil Procedure 12(b)(6) allows parties to seek dismissal of a party's pleading for failure to state a claim upon which relief may be granted. Courts must accept all allegations in a complaint as true. See Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. However, “the complaint must contain either direct allegations on every material point necessary to sustain a recovery ... or contain allegations from which an inference fairly may be drawn that evidence on these material points will be introduced at trial.” Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995) (citation omitted). Moreover, “conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Id. at 975, (quoting Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir.1993)). Courts considering a motion to dismiss under Rule 12(b)(6) are only obligated to allow those complaints that are facially plausible under the Iqbal and Twombly standard to survive such a motion. See Iqbal, 556 U.S. at 678-79, 129 S.Ct. at 1949, see also Twombly, 550 U.S. at 555, 127 S.Ct. at 1965. If the complaint does not meet this standard, it can be dismissed for failure to state a claim upon which relief can be granted. See id. Such a dismissal ends the case "at the point of minimum expenditure of time and money by the parties and the court." Twombly, 550 U.S. at 558, 127 S.Ct. at 1966.

         In deciding a Rule 12(b)(6) motion to dismiss, a court generally "may not go outside the pleadings." Colle v. Brazos Cty., Tex., 981 F.2d 237, 243 (5th Cir. 1993). However, a court may also rely upon "documents incorporated into the complaint by reference and matters of which a court may take judicial notice" in deciding a motion to dismiss. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008); see Fed.R.Evid. 201. GAI argues that that the contract, internal audit report, Neuner Report, the city ordinances, resolution 120 of 2013, and the state court petition cannot be reviewed by the Court in deciding this present Motion to Dismiss because they were not attached to GAI's Complaint. However, the Fifth Circuit has noted approvingly that various other circuits have allowed “[d]ocuments that a defendant attaches to a motion to dismiss to be considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to her claim.” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000) (citing Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)). GAI's Complaint contains numerous references to the documents attached to the Defendants' Motion to Dismiss. Furthermore, the Court finds those documents central to GAI's complaint because GAI relies on those documents to state claims for breach of contract, fraud, unfair trade practices, defamation, malicious prosecution, declaratory and preliminary and permanent injunctive relief, and discrimination based on race under 42 U.S.C. §§ 1981, 1983, and 1985. Clearly, those documents attached to the present Motion to Dismiss are central to GAI's claims; otherwise, GAI would not have referenced those documents in its Complaint with such abundance.

         Moreover, GAI in its Opposition to the Defendants' Motion to Dismiss argues the wrong legal standard for Rule 12(b)(6) motions. See Record Document 59 at 8. The standard GAI relies on was set forth in Conley v. Gibson, where the Supreme Court held that a district court should not dismiss a complaint for failure to state a claim “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 355 U.S. 41, 45, 78 S.Ct. 99, 102 (1957). GAI cited to a Fifth Circuit case, Lowrey v. Texas A & M Univ. Sys., 117 F.3d 242, 247, that relied on the Supreme Court's decision in Conley. However, the Conley decision was abrogated by the Supreme Court in Twombly. See 550 U.S. at 563, 127 S.Ct. at 1969. Accordingly, as indicated supra, the correct standard is a plausibility standard set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), and its progeny.

         II. Federal Law Claims

         In the present action, GAI alleges that the Defendants violated the equal protection clause of the Fourteenth Amendment in passing legislation that would prohibit GAI, an African-American financial advisory firm, from continuing its contractual obligation with the City. See Record Document 1 at 41. GAI argues that the Defendants should be held liable under 42 U.S.C. §§ 1981, 1983, and 1985. See id. However, there is a disagreement between the parties over ...

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