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Poulsen v. Cache Valley Transit District

United States District Court, D. Utah

June 13, 2019

JAMES POULSEN, Plaintiff,
v.
CACHE VALLEY TRANSIT DISTRICT and TODD BEUTLER, in his individual capacity, Defendants.

          MEMORANDUM DECISION AND ORDER

          DALE A. KIMBALL UNITED STATES DISTRICT JUDGE.

         This matter is before the court on Defendants Cache Valley Transit District and Todd Beutler's Partial Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The court held a hearing on the Motion on May 14, 2019. At the hearing, Defendants were represented by Bradley R. Blackham, and Plaintiff was represented by Jason D. Haymore. The court took the matter under advisement. The court considered carefully the memoranda and other materials submitted by the parties, as well as the law and facts relating to the Motion. Now being fully advised, the court issues the following Memorandum Decision and Order granting Defendants' Partial Motion to Dismiss.

         BACKGROUND

         Cache Valley Transit District (“CVTD”) is a local district under Title 17B of the Utah Code. CVTD provides local public transportation in the Cache Valley area of northern Utah. Todd Beutler (“Beutler”) is the General Manager of CVTD. In August 2010, CVTD hired James Poulsen (“Poulsen”), and he eventually became an Operations Supervisor over Driver Development & Safety Services. In 2012, Poulsen overheard CVTD's Chief Financial Officer, Curtis Roberts (“Roberts”), speak to someone on the telephone about a home mortgage refinance through Mountain America Credit Union (“Mountain America”). Approximately one month after that telephone call, Mountain America attended a CVTD employee meeting and offered credit union memberships to CVTD's employees. Then, years later in February 2018, Poulsen told Beutler that he believed that Roberts had received a benefit on his home mortgage refinance because of his position with CVTD. Approximately five days after that conversation, Poulsen received a written warning for failure to work as directed. Within ten days of receiving the written warning, Plaintiff learned that a complaint had been made against him for (1) establishing a hostile work environment and (2) spreading misinformation about Roberts. On February 28, 2018, CVTD terminated Poulsen's employment.

         When CVTD terminated Poulsen's employment, it gave him no reason for the termination. Rather, it explained that no reason was required. Yet, the CVTD Employee Handbook contains a section that states that “[a]ll formal forms of discipline will be communicated to the employee through a Disciplinary Notice, ” which would be “[d]elivered personally, whenever possible, to the employee being disciplined, or [b]y certified mail.” Poulsen never received a Disciplinary Notice regarding the allegations against him, and he was never given an opportunity to be heard prior to his termination. On April 12, 2018, Poulsen, by counsel, sent a letter to each member of CVTD's administrative control board in which he demanded to be reinstated and claimed that CVTD had violated his due process rights. On April 23, 2018, CVTD responded to Poulsen's letter by rejecting both his claims and request for reinstatement.

         Poulsen commenced the instant suit on September 6, 2018. On January 30, 2019, Poulsen filed an amended complaint alleging five causes of action: (1) violation of 42 U.S.C. § 1983 for deprivation of a property interest without due process; (2) a declaratory judgment declaring Poulsen's status as a merit employee; (3) violation of Utah Code § 67-21-1(1)(a) (the Utah Whistleblower Act); (4) breach of contract; and (5) breach of the implied covenant of good faith and fair dealing.[1] Poulsen claims that CVTD was required to either comply with the merit-based system of personnel administration established by Utah Code § 17B-1-801 or create a personnel system that provides for the implementation of merit principles pursuant to Utah Code § 17B-1-803. Because sections 801 and 803[2] create a merit system of employment, Poulsen claims that he had a property interest in his continued employment that entitled him to some level of due process. Further, Poulsen contends that while CVTD did establish a personnel system with employment policies and procedures, that system did not implement merit principles. Instead, the CVTD Employee Handbook states that all CVTD positions are “at-will.” Furthermore, Poulsen claims that CVTD breached certain provisions in its Employee Handbook by failing to provide him with a Disciplinary Notice before his termination, and that he was terminated in retaliation for having reported Roberts' alleged unlawful activity to Beutler.

         DISCUSSION

         Defendants move to dismiss Poulsen's first three causes of action: (1) violation of 42 U.S.C. § 1983 for deprivation of a property interest without due process; (2) a declaratory judgment declaring Poulsen's status as a merit employee; and (3) violation of the Utah Whistleblower Act.[3] “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Dorf v. Bjorklund, 531 Fed.Appx. 836, 837 (10th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “[A]ll well-pleaded factual allegations in the complaint are accepted as true and viewed in the light most favorable to the nonmoving party.” Acosta v. Jani-King of Oklahoma, Inc., 905 F.3d 1156, 1158 (10th Cir. 2018) (quoting Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006)). Nevertheless, “mere ‘labels and conclusions,' and ‘a formulaic recitation of the elements of a cause of action' will not suffice; a plaintiff must offer specific factual allegations to support each claim.” Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         A. Section 1983 Claim for Deprivation of a Property Interest

         “An entity sued under section 1983 is subject to liability only when its official policies or customs are responsible for deprivation of rights protected by the Constitution.” Guinn v. Jeffco Combined Courts, 537 Fed.Appx. 790, 791 (10th Cir. 2013). For a plaintiff to establish that he or she has “been deprived of a property interest without due process” in violation of the Constitution, the plaintiff “must first prove that he [or she] had a property interest.” Palmer v. City of Monticello, 731 F.Supp. 1503, 1506 (D. Utah 1990), aff'd, 31 F.3d 1499 (10th Cir. 1994). In the context of employment, the “United States Supreme Court has defined such a property interest as requiring a legitimate expectation in ‘continued employment.'” Judkins v. Jenkins, 996 F.Supp.2d 1155, 1165 (D. Utah 2014) (citing Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 538 (1985)). The Constitution, though, does not create a property interest in continued public employment. Kingsford v. Salt Lake City Sch. Dist., 247 F.3d 1123, 1128 (10th Cir. 2001). “Rather, a property interest in continued public employment must ‘stem from an independent source such as state law.'” Id. (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972)). “State law sources for property interests can include statutes, municipal charters or ordinances, and express or implied contracts.” Id.

         Once an employee has identified a state law source, that employee holds a property interest in continued employment only if under that source, he or she “has a legitimate claim of entitlement to-not merely a unilateral expectation of-continued employment.” Carnes v. Parker, 922 F.2d 1506, 1510 (10th Cir. 1991) (quoting Roth, 408 U.S. at 577) (quotation marks omitted). But “[a]n entitlement to continued employment only arises” when the state law source “place[s] substantive restrictions on a government actor's discretion to make personnel decisions, such as when a city's policies specify that an employee can only be terminated for cause.” Judkins, 996 F.Supp.2d at 1165 (quotation marks omitted). Put differently, a for-cause termination requirement “places a substantive restriction on the employer's discretion to dismiss the employee, and the employee therefore has a legitimate claim of entitlement to continued employment.” Id. On the other hand, employees that can be terminated by their employer at will “carr[y] no vested property interest in continued employment.” Palmer, 731 F.Supp. at 1506. An employee's status, therefore, is an important determination when analyzing whether that employee has a property interest in continued employment. See Coleman v. Utah State Charter Sch. Bd., 673 Fed.Appx. 822, 828 (10th Cir. 2016) (“At-will employees lack a property interest in continued employment.”).

         In this case, Poulsen identifies two statutes as the source of his claimed property interest:

         Utah Code Ann. § 17B-1-801 and § 17B-1-803. Section 801 provides:

A merit system of personnel administration for the local districts of the state, their departments, offices, and agencies, except as otherwise ...

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