Knowlton Merritt v. John E. MacKey

827 F.2d 1368, 1987 U.S. App. LEXIS 12281, 56 U.S.L.W. 2179

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 16, 1987
• Docket: 85-4111
• Status: Published

Opinions

FERGUSON, Circuit Judge:

Knowlton Merritt, a former counselor supervisor at Klamath Alcohol and Drug Abuse, Inc. (KADA), appeals the district court’s trial and summary judgment decisions in his civil rights action. He alleges that the defendants, federal and state officials evaluating KADA, and the United States, caused his termination from employment without a hearing, thereby depriving him of liberty and property interests without due process in violation of the Fifth and Fourteenth Amendments. We affirm in part, reverse in part, and remand for a new trial.

I.

Knowlton Merritt began working for KADA as a counselor in 1976. KADA is a private nonprofit corporation providing treatment and support to alcohol and drug abusers. KADA had contracts with both Klamath County and the Indian Health Services (“IHS”), a federal agency, to provide alcohol and drug abuse services.

In 1981 state and federal officials, including defendants John Mackey and Steve Vincent, began evaluating KADA’s management. The first evaluations found that KADA violated state regulations, and the final report, in February 1983, threatened the cut off of federal and state funding. Mackey wrote the final report after discussions with his supervisor and a federal contracting officer. The report conditioned further funding of KADA on the requirement that Merritt “must be relieved of his duties at the earliest possible date” and “must not be employed by KADA”.

KADA, fearing the loss of funds, fired Merritt on March 17, 1983. Merritt appealed through the existing KADA grievance procedure. KADA informed Vincent and Mackey that its personnel policies gave it the burden of proving the reasons for Merritt’s termination and requested such an explanation from them. No explanation was ever provided.

In September 1983 KADA requested Vincent and Mackey to reconsider their order to fire Merritt and to clarify whether KADA could rehire Merritt. Neither Vincent nor Mackey responded. KADA took no further action on Merritt’s grievance, and Merritt pursued his grievance no further. Instead, he filed this action under 42 U.S.C. § 1983 and the Fifth Amendment, alleging liberty and property deprivations without due process.

Merritt timely appeals the district court’s posttrial decisions that Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), barred his deprivation of property claim against Vincent and Mackey and that qualified immunity protected Vincent and Mackey from liability. He also appeals the district court’s grant of summary judgment in favor of Vincent and Mackey on the ground that he did not state a liberty deprivation claim on which relief could be granted, and in favor of the United States on the ground that there is no private right of action under the Oregon criminal statute that prohibits tortious interference with employment.

II.

Whether Merritt had a protected property right in his employment is a mixed question of fact and law. Where a mixed question “involve[s] the exercise of judgment about the values underlying legal principles,” it is reviewable de novo. United States v. McConney, 728 F.2d 1195, 1204 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).

To determine whether due process requirements apply to an asserted interest, the court must initially look to the nature of the interest at stake. Board of Regents v. Roth, 408 U.S. 564, 571, 92 S.Ct. 2701, 2706, 33 L.Ed.2d 548 (1972). It is indisputable that an individual may have a protected property interest in private employment. In Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959), the Supreme Court noted that “the right to hold specific private employment and to follow a chosen profession free from unreasonable governmental interference comes within the ‘liberty’ and ‘property’ concepts of the Fifth Amendment.” Id. at 492, 79 S.Ct. at, 1411. See also Phillips v. Bureau of Prisons, 591 F.2d 966, 970 (D.C.Cir.1979); United States v. Briggs, 514 F.2d 794, 798 (5th Cir.1975).

The dissent insists nevertheless that the interest which Merritt asserts is merely that of noninterference with a contractual relationship. Greene makes clear, however, that when a private employee is deprived of his employment through government conduct, the cause of action available to the employee is not merely the right to sue for interference with contractual relationships.¹ The Court noted:

[R]espondent’s actions ... caused substantial injuries, and were they the subject of a suit between private persons, they could be attacked as an invasion of a legally protected right to be free from • arbitrary interference with private contractual relationships. Moreover, petitioner has the right to be free from unauthorized actions of government officials which substantially impair his property interests.

360 U.S. at 493 n. 22, 79 S.Ct. at 1412 n. 22 (citation omitted; emphasis added). Thus, where the actions of private individuals operate to deprive an individual of his employment, a suit for interference with private contractual relationships would lie, but where government officials are involved, the nature of the interest at stake in private employment is a property interest.

The inquiry does not end here, however. For the purpose of due process, Merritt must show that he had more than a “unilateral expectation” of continued employment; he must demonstrate a “legitimate claim of entitlement.” Roth, 408 U.S. at 577, 92 S.Ct. at 2709. In determining whether there is an entitlement to the benefit in question, we look not to the Constitution but to “existing rules and understandings that stem from an outside source such as state law.” Id. Thus, an employee may establish the existence of a property interest in continued employment by demonstrating a reasonable expectation based upon state law, rules or regulations concerning discharge or express or implied promises. Id. KADA’s personnel policies stated that permanent employees could be fired only “for cause.” Under Oregon law “just cause” policies can form part of the employment contract. See Yartzoff v. Democrat-Herald, 281 Or. 651, 658, 576 P.2d 356 (1978); Kay v. North Lincoln Hospital District, 555 F.Supp. 527, 529-30 (D.Or.1982). We conclude therefore that the district court correctly found that Merritt had a protected property interest in his continued employment with KADA. Thus, the Due Process Clause entitled Merritt to a meaningful hearing at a meaningful time to challenge any deprivation of that interest by the state or federal government.² Logan v. Zimmerman Brush Co., 455 U.S. 422, 437, 102 S.Ct. 1148, 1158, 71 L.Ed.2d 265 (1982) (citation omitted); Piatt v. McDonald, 773 F.2d 1032, 1036 (9th Cir.1985) (en banc).

That KADA and not the government officials themselves terminated Merritt’s employment does not change the nature of his protected property interest. Liability under 42 U.S.C. § 1983 attaches to any person who, under color of state law, “subjects or causes to be subjected” any person to a deprivation of protected rights. In Johnson v. Duffy, 588 F.2d 740 (9th Cir.1978), this court noted that “[t]he requisite causal connection can be established not only by some kind of direct personal participation in the deprivation but also by setting in motion a series of acts by others which the actor knows or reasonably should know would cause others to inflict the constitutional injury.” Id. at 743-44; see also Arnold v. International Business Machines Corp., 637 F.2d 1350, 1355 (9th Cir.1981).

As this court pointed out in Castaneda v. U.S. Department of Agriculture, 807 F.2d 1478 (9th Cir.1987), the Supreme Court in O’Bannon v. Town Court Nursing Center, 447 U.S. 773, 100 S.Ct. 2467, 65 L.Ed.2d 506 (1980), explicitly left open the possibility that where the government indirectly yet intentionally injures or affects the legal status of a person by an action taken directly against a private third party, the injured person could maintain a due process challenge against the government. Id. at 789-90 n. 22, 100 S.Ct. at 2477 n. 22. It is clear on the facts before us that Merritt was the actual and intended victim of the agents’ coercive dealings with KADA. Merritt therefore states a claim under section 1983 that he was deprived of his property interest in continued employment when the state and federal agents intentionally coerced KADA to fire him.

The district court erroneously concluded that Merritt’s right to due process would be satisfied by a postdeprivation remedy, following the Supreme Court’s decision in Parratt. The Court in Parratt held that a postdeprivation remedy will satisfy due process when the deprivation is a result of a “random and unauthorized act,” because “the loss is not a result of some established State procedure and the State cannot predict precisely when the loss will occur.” 451 U.S. at 541, 101 S.Ct. at 1916. Thus, under the Parratt analysis, “the touchstone for predeprivation process is the feasibility of providing such process.” Bretz v. Kelman, 773 F.2d 1026, 1031 (9th Cir.1985) (en banc). The premise underlying Parratt is that “where the challenged deprivation is random and unauthorized, it is impracticable or impossible for the state to provide predeprivation process because the governmental machinery cannot foresee or predict random, unauthorized actions.” Bretz, 773 F.2d at 1030. Consequently, as we stated in Piatt, Parratt reaches only situations in which the state administrative machinery did not, and could not, have learned of the deprivation until after it has occurred. Piatt, 773 F.2d at 1036. Thus, the state must provide predeprivation process where the acts complained of are “deliberate, considered, planned or prescribed conduct ... whether or not such conduct is authorized.”³

Vincent’s and Mackey’s conduct occurred as part of an institutionalized practice of evaluating the recipients of government funding. Mackey’s and Vincent’s respective supervisors were aware through ongoing discussions that Mackey and Vincent were planning to coerce KADA into firing Merritt, well before any such action was taken. It would therefore have been practicable for the state and federal authorities to have afforded Merritt some predeprivation process, as Mackey and Vincent’s conduct was not random, even though it was contrary to official policy. Postdeprivation remedies satisfy due process only when the conduct at issue was both unauthorized and random. See Parratt, 451 U.S. at 541, 101 S.Ct. at 1916. The question is whether an injury is sufficiently predictable to make a predeprivation remedy practicable. See Logan, 455 U.S. at 435-36, 102 S.Ct. at 1157-58. Vincent’s and Mackey’s order to KADA to fire Merritt or lose state and federal funding was not random and the authorities could easily predict the injury to Merritt that would result. The district court erred therefore in holding that Parratt barred Merritt’s property interest claim.

III.

Merritt also argues that the district court incorrectly found his property claim against Vincent and Mackey to be barred by qualified immunity. Qualified immunity protects government officials from liability for civil damages “insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982), quoted in Capoeman v. Reed, 754 F.2d 1512, 1513-14 (9th Cir.1985). The district court erred in finding that qualified immunity protected Vincent and Mackey.

Vincent and Mackey are not entitled to qualified immunity protection because their conduct exceeded the scope of their authority and because they violated Merritt’s clearly established constitutional rights. Vincent and Mackey testified that they knew they had no authority to require KADA to fire Merritt. Because they knowingly acted outside the scope of their authority, they are not entitled to qualified immunity.⁴ However, even if we found that Vincent and Mackey acted within the course of their authority, they still would not be entitled to qualified immunity. It is clearly established that state law or an independent source may create a property right in employment protected by the Due Process Clause. Board of Regents v. Roth, 408 U.S. 564, 577-78, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). Both KADA’s personnel procedures and the relevant decisional law clearly established Merritt’s property right in continued employment. When the law is clearly established, as here, the qualified immunity defense fails “since a reasonably competent public official should know the law governing his conduct.” Harlow, 457 U.S. at 818-19, 102 S.Ct. at 2738. Vincent and Mackey should have known that they could not cause Merritt’s summary dismissal without violating his due process rights.

IV.

We review de novo the district court’s grant of summary judgment in favor of the defendants on the plaintiff’s claims alleging deprivation of a liberty interest and tortious interference with employment. See Lojek v. Thomas, 716 F.2d 675, 677 (9th Cir.1983). We affirm. An individual has a liberty interest in employment protected by the Due Process Clause if the dismissal is “for reasons that might seriously damage his standing in the community,” Bollow v. Federal Reserve Bank, 650 F.2d 1093, 1100 (9th Cir.1981), cert. denied, 455 U.S. 948, 102 S.Ct. 1449, 71 L.Ed.2d 662 (1982), or if the dismissal effectively precludes future work in the individual’s chosen profession, Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959). The district court correctly found that, as a matter of law, Merritt’s dismissal did not implicate a protected liberty interest because the stated reasons for his dismissal were not sufficiently serious to stigmatize him. See Bollow, 650 F.2d at 1101 (requisite level of severity evidenced by accusations of moral turpitude). The district court also correctly granted summary judgment on the second ground; Merritt presented no evidence to support his allegations that he was precluded from future counseling employment.

Merritt also alleged that the United States, pursuant to 28 U.S.C. § 1346(b), should be civilly liable for one of its officials who violated a state criminal statute that prohibits the use of force, threats, or intimidation to prevent any person from performing employment or accepting new work. Or.Rev.Stat. § 659.240(1). The statute does not create a private cause of action, and the district court correctly dedined to find one. See Burnette v. Wahl, 284 Or. 705, 588 P.2d 1105, 1109-10 (1978).

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED FOR A NEW TRIAL. The plaintiff may recover costs on appeal.

1 . In Greene, an aeronautical engineer employed ■ by a private manufacturer that produced goods . for the armed services, brought suit against government officials when he was dismissed by his employer following the revocation by the government of his security clearance. Greene is therefore on all fours with the instant case inasmuch as it concerns the interest asserted by a private employee bringing suit against government officials whose conduct caused him to lose his private employment.

2 . The section 1983 claim against Vincent, a state official, arises under the Fourteenth Amendment and the claim against Mackey, a federal official, arises directly under the Fifth Amendment pursuant to Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). Because the two claims require the same analysis, we do not differentiate between them.

3 . The. conclusion of this court in Piatt that the requirement of predeprivation process applies to all deliberate or planned conduct, whether or not that conduct was authorized, reflects the understanding that for Parratt to govern, the conduct complained of must be both unauthorized and random. As the court explained, "[wjhile the [Supreme] Court in Hudson extended Parratt to relatively minor infractions involving random and unauthorized but intentional conduct by state officials, it has refused to endorse the constitutionality of remedial process where the deprivation is not random or where it would have been practicable for the state to provide process before the fact.” 773 F.2d at 1036 (citations omitted).

4 . In procedural due process claims under section 1983 there is an inherent tension in determining whether an agent’s action is sufficiently "authorized" to bring the case under Logan rather than Parratt and yet sufficiently "unauthorized" to remove the cloak of qualified immunity. The tension, however, is more apparent than real. The distinction between Logan and Parratt focuses on whether injury is sufficiently predictable to make a predeprivation remedy practicable. Thus, when a state actor steps outside of his authority so as to deprive individuals of their rights in a way that is known or predictable, the state can practicably provide predeprivation protection from unauthorized conduct. As this court noted in Piatt, the "considerations underlying Parratt are simply inapplicable to deliberate, considered, planned, or prescribed conduct by state officials, whether or not such conduct is authorized." 773 F.2d at 1036 (emphasis added). See also Bretz v. Kelman, 773 F.2d 1026 (9th Cir.1985) (because a conspiracy is not random, Parratt does not apply, even though the conduct may be unauthorized).