A sprinkler contractor who sued a local fire marshal and fire commissioner over the denial of a permit has survived a motion for summary judgment in US District Court for the Northern Mariana Islands. Double A Corporation filed suit earlier this year against Anthony Babauta, a fire inspector for Commonwealth of the Northern Mariana Islands Department of Fire and Emergency Medical Services, and Fire Commissioner Claudio K. Norita.
The suit claims that Babauta and Norita violated Double A’s due process rights by wrongfully refusing to grant a permit, and then refusing to allow it an opportunity for a hearing on the denial. As explained in the ruling issued today:
- On November 3, 2017, Proper Grand CNMI LLC agreed to pay Double A $410,150 to install fire sprinklers in a building complex it owned.
- Between December 2017 and January 2018, Thomas Salas, a business consultant for Double A, joined by Double A’s Project Manager Antonie S. Santos repeatedly met with Babauta to obtain an installation permit.
- At the initial meeting, Babauta informed Salas that only contractors on an approved list could receive permits.
- Salas responded that, if that was the case, Double A would apply to be on the list.
- Babauta then instructed Santos to bring him Double A’s credentials.
- Salas returned with various certifications and other documents supporting Double A’s application.
- Babauta glanced at the papers and said he would look into it.
- When Salas came a third time to check on the status of Double A’s application, Babauta told him that Double A would not receive a permit for the Proper Grand project or any other in the future.
- Babauta added that the Fire Department had discovered a defect in a fire alarm Double A previously installed on a different project, and that he had confirmed with Commissioner Norita the decision never to issue Double A any permits.
- Salas next went to Norita directly.
- Norita stated that he would follow Babauta’s decision and that Double A would not receive any future permits due to the prior installation error.
- The complaint further alleges that Babauta and Norita offered as an alternate justification for denying the permit that Double A failed an oral test imposed on the spot, although Salas’s declaration does not mention this test.
- Consequently, Proper Grand hired a substitute contractor and Double A lost the $410,150 deal.
- In addition, the owner of a nearby hotel notified Double A that the Fire Department advised him Double A could not do any installation work for him.
- Were it not for that advice, the hotel owner would have hired Double A.
- On March 22, 2019, Double A brought this lawsuit asserting two causes of action under 42 U.S.C. § 1983.
- First, Double A claims that Defendants, acting under color of state law, deprived it of a property interest—the installation permit3—without due process of law.
- Second, Double A also claims deprivation of a liberty interest—the freedom to perform lawful work for hire—again under color of state law and without due process.
Babauta and Norita filed a motion for summary judgment claiming they had qualified immunity and because Double A lacked a sufficient liberty and/or property interest necessary to create a due process issue.
- The Court … begins by asking whether the installation permit created liberty and property interests protected by the Due Process Clause, which would require Defendants to give Double A due process before denying the permit.
- Although the Due Process Clause does not confer an absolute right to engage in any occupation, it does compel the state to give procedural due process before altering or extinguishing a previously-existing right to engage in a lawful occupation.
- “Although the precise contours of that liberty interest remain largely undefined . . . the line of authorities establishing the liberty interest ‘all dealt with a complete prohibition of the right to engage in a calling,’ and not merely a ‘brief interruption’ in one’s ability to pursue an occupation or profession.”
- Defendants, recharacterizing Double A’s alleged liberty interest as the freedom to contract with Proper Grand, argue that there are no “protected liberty interests in the ability to contract.”
- They have, it seems, fallen into the trap of confusing procedural with substantive due process.
- The Due Process Clause guarantees both substantive and procedural protections.
- “Although a literal reading of the Clause might suggest that it governs only the procedures by which a State may deprive persons of liberty . . . the Clause has been understood to contain a substantive component as well, one barring certain government actions regardless of the fairness of the procedures used to implement them.”
- Double A does not argue that installing a fire sprinkler system is a fundamental right that Defendants could not deny to anyone under any circumstance.
- Rather, Double A only claims Defendants violated the Due Process Clause in the manner by which they denied its application.
- Indeed, the Supreme Court explicitly identified the freedoms to contract and pursue an occupation as liberty interests that states cannot take away without procedural due process.
- Defendants’ next argument is equally problematic. They contend that the Due Process Clause protects only the liberty interests of natural persons (i.e., human beings) rather than corporations like Double A.
- Double A had a valid liberty interest in pursuing its occupation of installing fire sprinklers, which it could not do without the permit that only a fire official such as Defendants Babauta and Norita could grant.
- Ensuring that an application conforms with the code is a standard for the official to follow, not an award of discretion. The code’s use of the imperative, combined with a clear standard for the official to follow, amounts to a statutory entitlement. Therefore, Double A had a valid property interest in obtaining the installation permit.
- Because Defendants deprived Double A of a liberty and property interest, the Court must next determine whether the procedures used were constitutionally adequate.
- Viewing the disputed facts most favorably to Double A, as the Court must do on summary judgment, Defendants did not give even minimal due process. At the very least, they could not deny the permit without notifying Double A of their reasons and offering a meaningful opportunity to respond.
- Defendants rebuffed Double A’s inquiries and gave only a terse, verbal rationale that they denied the permit due to a past installation error involving “speaker wire.”
- That explanation was inadequate because it did not include any corresponding legal basis for denying the application on those grounds. Defendants did not inform Double A of any section of fire code or other law empowering them to consider past installation errors when reviewing an application. And lacking that information, Double A faced a significant obstacle when responding to them.
Finally the court concluded Double A had alleged the violation of a “clearly established” constitutional right, and as such neither defendant was entitled to qualified immunity. Here is a copy of the decision.