Robert A. Lashbrook and Katherine D. Lashbrook v. D. James Oerkfitz, Individually and as Commissioner of Crystal Lake Park District, David Phelps, Individually and as Commissioner of Crystal Lake Park District, Candisanne Reedy, Individually and as Commissioner of Crystal Lake Park District

Citations: 65 F.3d 1339; 1995 U.S. App. LEXIS 24600Docket: 94-3377

Court: Court of Appeals for the Seventh Circuit; August 30, 1995; Federal Appellate Court

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Robert A. Lashbrook, formerly the Director of the Crystal Lake Park District, and his wife, Katherine D. Lashbrook, were removed from their positions and housing associated with Lashbrook's employment. The United States Court of Appeals for the Seventh Circuit upheld the district court’s dismissal of their claims, stating that no federal or state law rights were violated. The court conducted a de novo review of the dismissal under Federal Rule of Civil Procedure 12(b)(6), affirming that the plaintiffs failed to establish any set of facts that could support their claims.

Lashbrook had been employed as the Director starting in 1985 under a two-year contract that was renewed. He was terminated on July 15, 1993, approximately two and a half months before the contract's expiration. The contract stipulated that termination could only occur for cause, defined as felony conviction or failure to perform duties, or by mutual agreement. If terminated for cause, Lashbrook was entitled to seven days' notice and a hearing; if terminated without cause, he was entitled to compensation through the end of the contract term or for six months, whichever was shorter. The court noted that the procedural aspects of the contract were not adhered to in this case, but ultimately found no legal basis for the Lashbrooks' claims.

Amendments to the Contract require written consent from both parties and include provisions for automatic renewal based on the appropriation of sufficient funds. The Contract will renew annually unless either party provides at least 60 days' notice before the term ends. In 1989, while Lashbrook was under contract, the Park District introduced a personnel policy manual (PPM), which clarified that it is not an employment contract and that policies are subject to change at the Board's discretion. The PPM allows full-time employees to apply for housing provided by the Park District; the Lashbrooks resided in such housing starting in Spring 1991. Following Lashbrook's termination, Katherine sought to continue living in the housing, but her request was denied when the Park District decided to convert the property for recreational use.

The PPM stipulates that Department Heads, with the Director's approval, may dismiss employees for just cause, and employee tenure depends on acceptable conduct and performance. Upon his termination, Lashbrook was reportedly performing adequately, had no felony convictions, and was not notified prior to his dismissal or given a hearing. His termination was publicly announced, with comments from commissioners suggesting a need for a new direction in the Park District. Lashbrook's termination was not unanimous, and he was paid through the end of his Contract term.

The Lashbrooks filed a six-count second amended complaint against the Park District and its commissioners, with four counts brought by Lashbrook and two by Katherine. Count I claims Lashbrook was deprived of a property right in continued employment without due process, asserting that this right arose from: 1) an automatic renewal provision in his Contract; 2) the Personnel Policy Manual (PPM) creating a contractual basis for continued employment; 3) the PPM as a government rule or regulation; and 4) the PPM establishing a de facto re-employment system. Count II alleges deprivation of a liberty interest in reputation due to the firing. Count III asserts breach of contract based on the Contract itself, while Count IV claims breach based on an alleged contract from the PPM. Count V is a retaliation claim related to Lashbrook's termination and Katherine's housing request following a lawsuit threat. Count VI alleges gender and marital status discrimination against Katherine for the rejection of her housing request.

The district court dismissed all claims except Katherine's gender discrimination claim. For Count I, the court found no legitimate property interest in Lashbrook’s employment since the Contract allowed non-renewal by either party, and the PPM explicitly stated it was not an employment contract. Count II was dismissed as the discharge did not sufficiently affect Lashbrook’s reputation. Count V was dismissed due to the lack of a property interest in the Park District property, as the Lashbrooks had only a month-to-month tenancy, and the PPM's disclaimer negated any claimed interest. Additionally, the retaliation claim was dismissed for not addressing matters of public concern. Counts III and IV were also dismissed, reaffirming that the Contract allowed non-renewal and that the PPM did not constitute a contract under state law.

Lashbrook's claim for a property interest in continued employment hinges on several theories outlined in Count I, which are grounded in state law. Property interests can arise from explicit contracts or employee handbooks, potentially establishing enforceable rights or binding obligations. 

Lashbrook's first argument relies on the "automatic renewal" provision of his Contract, which allows either party to refuse renewal with a sixty-day notice. This provision negates any reasonable expectation of continued employment, especially since the Park District informed Lashbrook of its intent not to renew on July 16, 1993, well before the contract expiration on September 30, 1993. Thus, there are no facts that could support his claim under this theory.

His second argument involves the Personnel Policy Manual (PPM). In a related case, Miller v. Crystal Lake Park Dist., it was determined that the PPM could not create a constitutionally protected property interest due to a disclaimer. Although Lashbrook disputes this and cites Perman v. ArcVentures, arguing the PPM should be enforceable, he has an express contract governing his employment, distinguishing his case from those of previous plaintiffs. Lashbrook asserts that the PPM grants rights to continued employment despite the Contract’s explicit non-renewal terms. For the PPM to override the Contract, it must either be an enforceable modification or clarify ambiguous terms of the Contract as parol evidence.

The PPM cannot serve as an enforceable modification of the Contract due to its explicit terms, which state that any amendments must be in writing and signed by both parties. Since neither party signed the PPM and there is a lack of consideration, the alleged amendment is invalid. Lashbrook's argument that his continued work after the PPM constituted acceptance is flawed, as he was already obligated to work under the Contract, meaning his actions do not constitute new consideration.

Additionally, even if the PPM were considered a modification, Lashbrook's claim to a property interest fails under the standards established in Duldulao. The PPM's statement regarding dismissal for just cause is permissive and does not create enforceable rights for Lashbrook, who is the Director. Statements about tenure contingent on conduct and performance do not apply to him in this context. 

Furthermore, the PPM is not admissible as parol evidence to clarify the Contract's terms due to the absence of ambiguity in the non-renewal provision, which clearly states the conditions for renewal and notice requirements. As such, the PPM does not create a protected property interest, leading to the dismissal of Count I.

A government regulation or rule can create a property interest independent of state contract law, provided it has "binding force." However, the policy manual (PPM) in question does not impose binding obligations on the Park District, failing to establish a protected property interest for Lashbrook's employment. Previous case law, specifically Miller, reinforces that disclaimers in the PPM undermine any legal status for its promises, as Lashbrook has no viable response to these disclaimers. The PPM does not create a mutually binding obligation necessary for a legitimate claim of entitlement. Additionally, Lashbrook cannot assert that the PPM forms a de facto re-employment or tenure system since it lacks the requisite "mutually explicit understanding" about continued employment, as it is merely a guide subject to revisions and interpretations by the Park District. Consequently, without a recognized property interest, Lashbrook's due process claim is invalid, leading to the affirmation of the dismissal of Count I.

Lashbrook alleges that his termination from the Park District infringed upon his liberty interest in his good name and reputation by falsely portraying him as incompetent. According to case law, a liberty interest is compromised when an individual’s reputation is harmed by charges related to immorality, dishonesty, or similar issues, or when the state imposes a stigma that limits future opportunities. However, mere termination or a label of incompetence does not constitute such an infringement. The court noted that while involuntary termination carries some stigma, it must significantly hinder future employment in the same field, and the government must have disseminated damaging information to the public.

Lashbrook claimed that the Park District publicly announced his firing and made statements to the press, which were reported in the local media. However, these statements did not damage his reputation, as they merely suggested he was inadequate for the new direction the board intended. The request for Lashbrook to vacate his office was also deemed insufficient to support a liberty interest claim without additional evidence demonstrating that the circumstances made it nearly impossible for him to find new employment.

Regarding Lashbrook's state law claims for breach of contract, the court upheld the dismissal of these claims. The contract allowed for his discharge with payment through the term's end and permitted non-renewal with proper notice. Lashbrook acknowledged he received the required payment and notice, negating any basis for his breach of contract claims. Consequently, the court affirmed the dismissal of both the liberty interest claim and the state law breach of contract claims.

The court ruled that the PPM (Personnel Policy Manual) did not satisfy contract law requirements, as Lashbrook failed to allege any factual basis for consideration. Lashbrook, obligated to continue working post-PPM issuance, could not use his work continuation as consideration for any claimed additional benefits from the PPM, leading to the affirmation of the dismissal of Count IV. 

Regarding retaliation claims by Robert and Katherine Lashbrook against the Park District for exercising First Amendment rights, the court found that their complaints did not address matters of public concern. Robert alleged retaliation via threats of eviction from Park District housing, while Katherine claimed retaliation through denial of housing despite her eligibility. The court noted that disputes between employer and employee typically do not qualify as public concerns, especially when the complaints are personal. 

The court further analyzed whether the Lashbrooks had adequately alleged harm from the termination of their tenancy and Katherine's housing request denial. Their month-to-month tenancy could be terminated with thirty days’ notice under Illinois law, which the Park District followed, thus not infringing on any continuing rights of the Lashbrooks. The PPM could not grant Robert any contractual rights due to lack of acceptance or consideration. For Katherine, while it remained unclear if she had an express contract when the PPM was issued, she was considered an at-will employee, making her continuation of work an acceptance and consideration for any PPM promises.

The key issue is whether the Private Placement Memorandum (PPM) contained clear promises that would lead a reasonable person to believe an offer was made. The PPM includes a prominent disclaimer and states that the commissioners have the authority to change or interpret its terms. The language regarding housing is non-mandatory and indicates that a separate agreement is required before occupancy. Thus, the PPM merely expresses an intent to negotiate housing availability and lacks definitive promises. Consequently, since neither Katherine nor Robert Lashbrook has provided facts supporting a right to reside or continue residing in the housing, they lack grounds for a retaliation claim. The district court's dismissal of the Lashbrooks' First Amended Complaint is affirmed, with the dismissal of Katherine's marital status discrimination claim not being appealed. Although the PPM might have been referenced in the Contract, it was adopted after the Contract was executed, and thus does not apply. Additionally, the PPM clearly distinguishes the Director's role within the organization, noting that appointed employees report directly to the Park District Board of Commissioners, while other employees report to the Director or their designees.