September Newsletter (Issue 09-16)

No Lien on Public Property Except Leasehold Interest

cityplace-6-emailFacts: St. Louis County (County) issued industrial revenue bonds to finance the County’s purchase and development of a property known as Six City Place Drive.  The County authorized, Smurfit-Stone and Cornerstone, to proceed with the “purchase, construction and equipping” of the development, including the entering into contracts and leasing the property to Smurfit-Stone and Cornerstone after it was deeded to the County.

Cornerstone and County also executed a “Lease Agreement” requiring Cornerstone to construct the project “on behalf of the County” and act “as the agent of the County.”  As the County’s agent, the contract required Cornerstone to obtain a payment bond and to promptly notify the County of the imposition of a mechanic’s lien.   Cornerstone deeded the property to the County and on the same day, the County issued the industrial revenue bonds to finance the project.

Clayco, Inc., the general contractor for the project, subsequently entered into a subcontract with Pal’s Glass to supply glass and glazing work.  Pal’s Glass, in turn, entered into a sub-sub-contract with Brentwood Glass for some of this work.  Neither Cornerstone nor any other contractor, involved in the project, obtained a payment bond that would comply with Section 107.170.2, protecting the County from mechanic’s liens.

Brentwood Glass was not paid for some of this work and thereafter served notice of its intent to file a mechanic’s lien, which was served on Cornerstone, not the County.  Having not received payment, Brentwood Glass filed its mechanic’s lien.  The lien listed Cornerstone as the owner of the property and claimed $1,061,464.08 in unpaid work.

Brentwood Glass then filed a petition against Pal’s Glass, Clayco, Cornerstone, and the County, UMB Bank, National City Bank of the Midwest, Paul M. Macon, and Victor Zarilli.  Brentwood Glass asserted a breach of contract claim against Pal’s Glass; a mechanic’s lien claim against all defendants; and an action against the County for allegedly failing to require a payment bond pursuant to section 107.170.  Pal’s Glass admitted to owing $593,261.47 and consented to a judgment against it for that amount and costs.

The defendants filed a motion for summary judgment and the circuit court entered judgment in favor of the defendants.  Brentwood Glass appealed to the Missouri Supreme Court.

Missouri Supreme Court Opinion: With respect to a claim against the County for not obtaining a payment bond under Section 107.170.2 the Court found that the County was protected by sovereign immunity.  While Missouri law protects public property from liens the leasehold interest was subject to the statutory lien for failure to pay mechanics liens under Section 429.010.

“Because the County anticipated circumstances that would end its control over the leasehold, Brentwood Glass was entitled to a mechanic’s lien against Cornerstone’s leasehold interest without violating public policy concerns. Accordingly, Brentwood Glass may have the legal right to perfect its mechanic’s lien against Cornerstone’s leasehold interest.”

County Officials Could Be Liable for Failure to Secure Payment Bond: The Court notes that County officials would have been liable for failure to obtain the payment bond if the Plaintiff had properly pled this claim against County officials.  Brentwood Glass Company, Inc., v. Pal’s Glass Service, Inc., (SC94038, 08/23/16)

Comment Howard: One problem raised by the opinion is the Court’s conclusion that Brentwood Glass was not a contractor under Section 107.170 .1 because Brentwood Glass merely arranged for the services to be provided by others.  The dissent did not think this was the right analysis.  I am not sure how this plays out in future cases but it would seem that if local government is involved in a project where a payment bond is required by statute the local government should require that the payment bond be in place prior to any construction work commencing since public officials are personally liable for not having a payment bond.  Surely, you can expect future lawsuits to include a claim against public officials for individual liability if a payment bond is not procured as required by law.

Compelling Justification Needed To Seal Court Records

r-JUDGE-ROBE-large570Recently, the Eastern District considered the question of whether or not an entire proceeding could be sealed pursuant to a court order and kept secret under the terms of a settlement agreement.  While this case involved private parties the analysis could be of interest to local governmental practitioners.

Analysis:  Article I, Section 14 of the Missouri Constitution states that the courts of justice shall be open to every person.  In addition, Section 476.170 provides that the sitting of every court shall be public and every person may freely attend the same.  Further more, Section 510.200 states that all trials upon the merits shall be conducted in open court.  “This authority further demonstrates the presumption in favor of public court proceedings and records.”

The presumption in favor of openness is recognized by Supreme Court Operating Rule 2, which provides exceptions to the general rule of openness, including an exception for records that are confidential pursuant to court order.  Supreme Court Operating Rule 4.24 sets forth what records are deemed confidential, and a number of exceptions to the presumption of open records have been set forth by the legislature and in the decisions of our courts.  The “…presumption of openness cannot be overcome absent a compelling justification that the records should be closed,” which requires a court to “identify specific and tangible threats to important values in order to override the importance of the public right of access.” Brewer vs. Cosgrove, (ED103503, 08/02/16)

Comment Howard: I thought that the Court’s analysis was concise and very useful.  Assuming that local governmental records have been closed is it necessary to take the additional step of requesting that the records be sealed if they are part of a court case?  All Missouri court records are open unless there is a “compelling justification.” Therefore, in order to protect a record that is closed under the Missouri sunshine law you may need to request in order from the court based upon a compelling justification.

Least Restrictive Means Is Required To Pass Strict Scrutiny Test

megaphone-clip-art-3The United States Supreme Court’s ruling in Reed v. Town of Gilbert continues to wreck havoc with laws as illustrated by a number of recent decisions.  In Free Speech Coalition, Inc. v. Attorney General United States, the Third Circuit withdrew an earlier decision upholding the Child Protection and Obscenity Enforcement Act of 1988 (Act) against a First Amendment claim that record-keeping provisions of the Act violated their right of free speech.  The Act required producers of visual depictions of “actual sexually explicit conduct” to keep “individually identifiable records” documenting the age and identity of each performer.  In light of the intervening decision by the United States Supreme Court in Reed v. Town of Gilbert, the Third Circuit reconsidered its earlier opinion and remanded the current case to the District Court with instructions that it should re-examine the Act to determine if the Act was constitutional by applying strict scrutiny as set forth in Reed v. Town of Gilbert.

The Third Circuit determined under Reed that the Act was not content neutral on its face.  Since it is not neutral it must be examined to determine whether or not it violates the right of free speech by applying the strict scrutiny test.  The earlier decision held that the Act was content neutral thereby allowing application of intermediate scrutiny; however based upon the decision in Reed it was clear that the Act was on its face based on content because it applied to visual depictions of actual sexually explicit conduct.  In order to avoid the application of strict scrutiny, the government asserted, that the secondary effects doctrine established in City of Renton v. Playtime Theaters, applied.  The Third Circuit refused to extend the secondary effects doctrine beyond brick-and-mortar buildings under zoning laws or other regulations that prohibit or limit the number of business based upon the effect that they have on adjoining property.  In remanding the case to the District Court, the Third Circuit determined that the focus of the inquiry should be on whether or not the Act was the least restrictive means to achieve the compelling interest objective.  Free Speech Coalition, Inc., v. Attorney General United States of America, (3rd Cir., 13–3681, 06/08/16)

Comment Howard: The Third Circuit’s opinion in Free Speech Coalition provides an excellent analysis of issues facing local governmental attorneys in this extremely difficult area that is rapidly developing.  Three questions need to be answered.  Is the law content neutral?  If the law is not content neutral, does it serve a compelling interest?  If there is a compelling interest does the law use the least restrictive means to achieve the compelling interest?  Having a working knowledge of this case is important because cases are proliferating, which affect big and small local government entities, which can be brought to their knees by an well-placed lawsuit that is expensive to defend.  Recently, the anti-solicitation ordinance of the City of Tampa, Florida was held to be invalid by federal district court because it was not content neutral and was not the least restrictive means to achieve the compelling interest objective.  Homeless Helping Homeless v. City off Tampa, (8:15cv–1219 T-23AAS), M. D. Fla., 08/05/16)

Deletion of Facebook Citizen Comments On Police Department Facebook Page Raises First Amendment Claim

fb_icon_325x325Recently, IMLA provided its members with a summary of a case (See summary below) involving deletion of comments made by two residents from the Police Department’s Facebook page of Beech Grove, Indiana (City).  The resident’s sued the City in Federal District Court claiming a violation of their First Amendment right of free speech.  The City quickly settled the case for $7412 and revised their Facebook policy.  In looking at the pleadings (see link below), it is easy to see how a city could easily make the same mistake.  If your local government agency allows comments on its Facebook page you may want to review the policy especially with regard to what is permitted, blocking, and deletions.

IMLA SUMMARY BELOW:  City Deletes Criticisms on Facebook and Pays a Price City Facebook Page Editors:  Delete Residents’ Criticisms at Your Peril

 Beech Grove, Indiana recently settled with two residents for $7412 and changed its editorial policies governing postings on the City’s Facebook page.

Kymberly Quick and Deborah Mays-Miller, residents of Beech Grove, alleged First Amendment violations after their comments were deleted from the Facebook pages of the Beech Grove Police Department (PD) and City government.  Quick is a member of a local crime watch group and Mays-Miller is an active follower of the PD’s page.  Both women allege that their comments were deleted and accounts blocked because they had posted messages critical of the police department and city government.

According to the complaint, the police department deleted Quick’s “comment” about a message from the city’s mayor without any explanation for the removal.  In another instance, Mays-Miller posted comments critical of the PD’s responses to resident requests.  The complaint also outlines several other instances where the City has deleted or blocked commentary from the plaintiffs.

Created approximately three years ago, the PD’s Facebook page has provided announcements concerning reported crimes and police response, as well as crime statistics and other local news.  At the beginning of 2016, the City created a separate Facebook page specifically for the City, where it could also post news, announcements, and other information.  Both Facebook pages were publically accessible.  Anyone with access to a Facebook account could “comment” on the City and PD’s posts.  The City also maintains a “terms of use” policy that is accessible from the PD’s page, indicating that comments from other Facebook users may be subject to rejection or removal and that individual users may be blocked if the content of their post fell into one of several categories outlined within the terms of use.

Of particular interest to municipalities around the country is whether or not the deleting and blocking of users on Facebook will be considered to constitute viewpoint censorship.  IMLA will continue to monitor this developing litigation.

“Me To” Evidence Allowed To Show Disparate Discrimination Claim Based On Age

Facts: McGhee, a 54 year-old male, was employed as a press operator at Schreiber’s plant in Clinton, Missouri.  McGhee operated a large commercial printing press, known as a Vision Press.  One of a press operator’s duties is to conduct periodic maintenance and cleaning on the press, which includes cleaning the large steel drum on the inside of the press.  The press is a dangerous machine, capable of causing severe injury or death, and, for that reason, Schreiber’s policies and procedures manual include a “lockout/tagout program,” which every press operator must follow in order to de-energize the press before touching it to clean it.  This method of cleaning prohibits an employee from touching the press drum while it is in motion.  A violation of the lockout/tagout policy is considered a “Group III” violation, for which the consequence is discharge.

On October 5, 2009, McGhee’s supervisor, Chuck Burton, and Human Resources Manager Ken Kephart, received a report from two employees alleging that McGhee was cleaning the drum as it was rotating, which constituted a violation of the inch-safe method.  Burton and Kephart called McGhee into a meeting to discuss the alleged violation.  McGhee denied cleaning the drum while it was moving and offered to demonstrate his cleaning method on the machine.  Burton and another supervisor, Philip Smith, went to the Vision Press with McGhee, where he demonstrated how he cleaned the drum.  At the press, McGhee demonstrated that he cleaned the drum by slowly jogging it forward, then stopped the drum and reached forward with his rag to clean it.  McGhee recalled one of the men saying that someone watching from another vantage point “might misconstrue that as a violation,” when cleaning occurs so soon after the drum stops moving, because there is still a danger that built up “kinetic energy” might cause the “drum to surge.”

The next day, Burton and Kephart issued a “Coaching and Corrective Action Form” to McGhee, noting that he had been given a Group III corrective action, with automatic suspension pending termination, for a lockout/tagout policy violation.  The reason given was that McGhee had been “observed cleaning the drum on the [press] while the drum was in motion and not using the inch [-]safe service method.

Under Schreiber’s review policy, an employee facing termination for a Group III violation may appeal this determination to either the Plant Manager or a “Peer Review Panel.”  McGhee sought review of his Group III corrective action by a peer review panel.  Schreiber’s policy allows a panel to “review management’s actions to ensure that application of policy or practice was followed correctly and consistently.”  A separate panel with different members is used for each panel, which has the authority to grant or deny an appeal, or to modify management’s decision to a lesser punishment. A panel is not allowed to “modify a decision to make it more severe than the original management action.”  A panel can only leave the initial punishment in place or reduce it.

McGhee appealed to the peer review panel, which upheld the termination that was thereafter affirmed by the plant manager.  McGhee then filed a complaint with the Missouri Commission on Human Rights, and then filed suit, alleging that Schreiber had discriminated against McGhee based on his age.

At trial, evidence was presented that the two employees, who initially reported seeing McGhee cleaning the drum, while it was in motion, could not have seen McGhee’s actions from the vantage point where they claimed to have watched him.  In addition, Burton, who was present during McGhee’s demonstration of his cleaning method, testified at trial that he told the panel that McGhee was reaching toward the drum while it was in motion and it looked as though he was going to make contact with it, but Burton reached out and stopped McGhee.

Over Schreiber’s objection, McGhee introduced evidence of six current and former employees of Schreiber who were accused of similar safety violations, four of them under the age of forty, and two over the age of fifty, at the time of their incidents.  The stated intent was to show that, having committed similar safety violations, the four younger employees were treated more favorably than the three (counting McGhee) employees over the age of fifty.  A jury found in favor of McGhee, and the trial court entered a judgment totaling $1,170,030 in damages, costs, and attorneys’ fees, which Schreiber appealed to the Western District.

Western District Opinion: Were the Comparators Similarly Situated?: Schreiber argued that the disciplinary outcomes of comparators offered by McGhee as evidence of discrimination were inadmissible because the comparators were not similarly situated to McGhee.

Same Decision Maker: Schreiber argued that McGhee was not similarly situated to the comparators because different decision makers (Plant Manager or Panels) determined the appropriate punishment for the alleged violation of each of the comparators. Schreiber’s argument was that in order to be similarly situated, the same decision maker must make the final employment decision.  Since different decision makers made the final decision for the comparators the decision makers were not similarly situated to the decision maker for McGhee.  The Western District noted that in “ …the usual case a plaintiff must at least show that the comparators (1) dealt with the same supervisor, (2) were subject to the same standards, and (3) engaged in similar conduct without such differentiating or mitigating circumstances as would distinguish their conduct or the employer’s treatment of them.” The Western District could not find a case that a common decision maker was unequivocally required; furthermore, as long as the distinctions between the decision-makers were not so significant as to render the comparisons useless the requirement of being similarly situated is a fact question for the jury.

Similar Conduct and Standards: The Western District meticulously walks through the facts presented to the jury as related to each of the four employee comparators concluding that the differences were not so significant as to invalidate the comparison to other employees on the grounds that they were not similarly situated.  Deference is given to the jury to make the determination that age was a motivating factor.   McGhee v. Schreiber Foods, Inc., (WD 78744, 08/09/16)                                              

Comment Howard: I thought that the decision was a real stretch with respect to whether or not there was a common decision maker; however, the court managed to pick a thread here and there concluding that there was sufficient evidence to submit the question to a jury.  If you are looking for a case involving disparate treatment where you are comparing treatment of one employee to another this case should be reviewed.  Also, if you are considering the admissibility of “me to” evidence, Cox v. Kansas City Chiefs Football Club, Inc. is the definitive statement of the law in this area.

Search Warrant Not Required To Remove Smoking Meth Lab

bluemethOfficers went to Brown’s trailer with a warrant to arrest him for methamphetamine possession.  Brown answered the door and let the officers inside where they encountered thick, odorless, chemical smoke consistent with operating a meth lab. They arrested Brown, took him outside, and Mirandized him.  Brown admitted that a meth lab was active in his bedroom, but refused to give consent for the officers to search.

One officer left to obtain a search warrant but in the meantime, Deputy Haynes arrived who had investigated hundreds of meth labs.  Haynes recognized the smoke as being from a meth lab and took action because, as he later testified, meth labs are volatile and “need to be gotten out of anywhere they could catch fire.”  Haynes opened the trailer doors, used a fan to ventilate the trailer of dangerous chemical fog, then went in and removed the meth lab, which was still smoking before the search warrant arrived.

Brown did not dispute that an active meth labs present dangers and exigencies justifying warrantless residential searches.  Instead, Brown argued that once the trailer was vented there was no risk of explosion; therefore, “any exigency that had existed terminated and it was unlawful to then search the trailer without a warrant․”  The trial court denied a motion to suppress the evidence based on Brown testimony that an active Meth lab was a danger because it could explode.

Brown was charged with attempting to manufacture a controlled substance; however, the trial court found Brown guilty of manufacturing a controlled substance making a docket entry to reflect his decision, which was later corrected in the judgment to show that he was convicted of attempting to manufacture meth.  Brown argued that the murky liquid recovered from the meth lab pot was not actually Meth.

Court of Appeals Decision: Brown appealed to the Southern District, which upheld the trial court’s decision to not suppress the evidence based upon the officer’s testimony that even after the trailer was ventilated that the smoking meth lab posed a danger.  The Southern District also upheld the judgment because the rendering of a judgment would control over the ministerial act of entering it upon the record.  State of Missouri vs. Brown, (SD34124, 07/19/16)

Sixth Circuit Holds That The FCC Can Not Adopt A Regulation Preempting State Laws That Limit The Right Of Local Government From Providing Internet Service – FCC Decides To Not Appeal Decision

On August 10, 2016, the Sixth Circuit, Court of Appeals held in State of Tennessee v. Federal Communications Commission (6th Cir., 15–3291/3555, 08/10/16) that state laws in Tennessee and North Carolina prohibiting a municipality that operates an electric plant from offering cable services, video services and Internet services outside of its service area were not preempted by Section 706 of the Telecommunication Act.  The decision was based on the lack of a “clear statement” in Section 706 from Congress granting the FCC the authority to intervene between states and municipalities on this issue.

Recently, the FCC announced that it would not appeal the decision by the 6th Circuit.  This decision along with an earlier decision by the United States Supreme Court upholding the Missouri law, prohibiting political subdivisions from offering telecommunications services, leaves Missouri in the dark ages with respect to providing high speed Internet access, which is essential to economic growth for local communities.

Summary of Supreme Court Cases For 2015-2016 Term

For a recent summary of Supreme Court cases pertaining to state and local government by Lisa Sononen click here.