Gradetech, Inc. v. City of San Jose

Background

Gradetech, a California-licensed contractor, contracted with the City of San Jose to construct the Lake Cunningham Bike Park. Gradetech alleged that the City and others changed the project plans, including by enlarging dirt jumps, without providing updated plans. Gradetech sent notices about increased costs and delays and later raised concerns about safety, including the lack of a fence and the need for adequate maintenance.

Gradetech submitted a claim for approximately $1,850,000 in extra costs. The City later determined that Gradetech’s daily extra-work report was inconsistent with its certified payroll records. When Gradetech later bid on the 2019 Minor Streets Projects, the City disqualified it from the contractor pool, citing materially incorrect compensation documentation. The City held a hearing and affirmed the disqualification.

Gradetech and Sam Rivinius sued under 42 U.S.C. § 1983, a federal civil-rights statute, claiming First Amendment retaliation. They also petitioned for a writ of mandamus, meaning a court order requiring a government body to perform a specified act. After earlier pleadings, an appeal, and a Ninth Circuit decision, the plaintiffs filed a third amended complaint. The defendants moved to dismiss the retaliation claim for failure to state a claim and the mandamus petition for lack of jurisdiction.

Materials Considered

The court incorporated three letters into the complaint because they formed the basis of the retaliation claim: Gradetech’s September 20, 2017 letter to the City, the City’s September 29, 2017 response, and Gradetech’s November 15, 2017 letter. The court declined to take judicial notice of six other documents and excluded them from its analysis. Because it considered only the complaint and the incorporated letters, it did not convert the motion to dismiss into a motion for summary judgment.

First Amendment Retaliation Claim

The Ninth Circuit had determined that the earlier complaint did not plausibly allege that Gradetech voiced a genuine public-safety concern and had directed this court to allow an amended retaliation claim. The court found that the third amended complaint adequately alleged that Gradetech expressed public-safety concerns. In particular, the September 20 letter expressed concern about the safety of bike-trail users and identified three ways the City could improve safety.

The court nevertheless found that the complaint did not adequately allege that the safety concerns were genuine public-safety speech rather than part of a private financial and management dispute. Most of Gradetech’s communications concerned changing plans, increased costs, and delays. The City’s response also focused mainly on financial issues. The court concluded that, although Gradetech expressed a safety concern, the concern appeared to be a strategic move in the larger financial dispute and was insufficient to state a First Amendment retaliation claim.

Mandamus Petition

The plaintiffs sought an order requiring the City to rescind Gradetech’s disqualification from the 2019 Minor Streets Projects contractor pool. The defendants argued that the request could not provide relief because the contractor pool no longer existed and the requested order was therefore moot.

The court stated that the petition appeared actionable but found that the plaintiffs failed to demonstrate jurisdiction. The plaintiffs argued that disqualification could affect future bids and that the mandamus request should not be treated as moot at the pleading stage. They also argued that lingering stigma or other adverse effects could preserve the dispute. The court rejected these arguments because the plaintiffs had not included supporting allegations or authority in the complaint and because their petition concerned disqualification, not a later debarment. The court concluded that the plaintiffs lacked standing under the Constitution’s case-or-controversy requirement to seek an order retracting the disqualification.

Disposition

The court granted the defendants’ motion to dismiss the First Amendment retaliation claim for failure to state a claim and granted the defendants’ motion to dismiss the mandamus petition for lack of jurisdiction. The court found that amendment would be futile because the complaint was on its fourth revision. Judge Nathanael M. Cousins ordered that Gradetech and Rivinius’s complaint be dismissed with prejudice.