Carmen Austell v. Kimberly Sprenger

United States Court of Appeals

For the Eighth Circuit

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No. 11-2792

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Carmen Austell; T.Y.B.E. Learning Center

lllllllllllllllllllll Plaintiffs - Appellants

v.

Kimberly Sprenger; Kathy Quick; Joseph P. Bindbeutel; Shelley Truesdale;

Nimrod T. Chapel Jr.

lllllllllllllllllllll Defendants - Appellees

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Appeal from United States District Court

for the Eastern District of Missouri - St. Louis

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Submitted: April 17, 2012

Filed: August 22, 2012

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Before RILEY, Chief Judge, MELLOY and GRUENDER, Circuit Judges.

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RILEY, Chief Judge.

Carmen Austell owned and operated T.Y.B.E. Learning Center, L.L.C.

(collectively, TYBE), a daycare center in St. Louis, Missouri. After the Missouri

Department of Health and Senior Services (DHS) denied TYBE’s license renewal

request, TYBE sued several DHS employees and a state administrative law judge,

alleging federal civil rights and state law violations. In July 2011, the district court1

granted summary judgment against TYBE on all claims. TYBE appeals. Having

jurisdiction under 28 U.S.C. § 1291, we affirm.

I. BACKGROUND

A. Facts

DHS is responsible for licensing and regulating Missouri childcare facilities.

See Mo. Rev. Stat. § 210.221. DHS licenses only those facilities that pass an

inspection, and licenses cannot be issued for longer than two years. See id.

§ 210.221.1(1). A licensed facility must apply to renew its license at least sixty days

before the license expires. See Mo. Code Regs. Ann. tit. 19, § 30-62.052(1).

Childcare facilities in Missouri generally may not operate without a license. See Mo.

Rev. Stat. § 210.211.

Before denying a license renewal application, DHS must provide written notice

to the licensed facility stating the basis for the proposed denial. See Mo. Rev. Stat.

§ 210.245.2. The licensed facility may request a hearing before an administrative

hearing commission (commission). See id. If the licensed facility so requests, DHS

must file a complaint with the commission within ninety days. See id. DHS may

immediately suspend the license if DHS finds “that there is a threat of imminent

bodily harm to the children in care.” Id. § 210.245.4. Otherwise, DHS first proposes

to suspend or revoke a license, or to deny a license renewal request. See id.

§ 210.245.2. After DHS has proposed to deny a license renewal request, Missouri

law does not state whether a licensed facility may continue to operate under an

expired license during the pendency of the administrative review period.

1

The Honorable Carol E. Jackson, United States District Judge for the Eastern

District of Missouri.

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The Missouri administrative code also contains generally applicable licensing

dispute resolution provisions. See Mo. Rev. Stat. § 621.015-.250. These provisions

apply to multiple agencies, including DHS. See id. § 621.045. Under these

provisions, when a covered entity proposes to revoke, suspend, impair, or fails to

renew a business license, the agency or the licensed facility may file a contested case

with the commission, and under certain circumstances the licensed facility is entitled

to an “initial settlement offer” from the commission. See id. at §§ 621.045.1,

621.045.4(1), 621.120. Missouri law is unclear how the provisions of § 621.015-.250

relate with the statutory provisions specifically governing licensed childcare facilities

contained in § 210.199-.259.

At all relevant times, DHS employed Kathy Quick, Kimberly Sprenger, and

Shelley Truesdale (collectively, DHS defendants). Quick served as administrator of

the section for childcare regulation; Sprenger was the DHS legal coordinator; and

Truesdale was a childcare facility specialist.

TYBE was a licensed childcare facility in the St. Louis area. TYBE

predominately served low-income families, for which TYBE received substantial

subsidies from the Missouri Department of Social Services (DSS). The Missouri

Child Care Resources and Referral Network (MOCCRRN) kept a referral database

that referred parents to licensed childcare facilities such as TYBE.

DHS initially licensed TYBE in August 2003. DHS identified significant

compliance issues with TYBE as early as September 2004 and held facility review

conferences with TYBE in September 2004 and July 2007 to discuss the importance

of regulatory compliance. Nevertheless, DHS renewed TYBE’s license in 2005 and

2007. DHS inspected TYBE in September and October 2007, July and December

2008, and April 2009, and identified significant compliance issues on each

inspection. TYBE timely filed to renew its 2007 license, which expired on July 31,

2009.

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On August 24, 2009, DHS notified TYBE, DSS, and MOCCRRN that DHS

was denying TYBE’s renewal request and TYBE could no longer operate under its

former license. The notices stated DHS was

denying the renewal of the license for: (a) exceeding staff child ratios;

(b) using unapproved caregivers; (c) exceeding license limitations;

(d) failing to supervise children appropriately; (e) recordkeeping non-

compliances; (f) failing to follow transportation rules; (g) failing to

serve meals according to licensing rules; and (h) failing to provide

hygiene supplies in the restrooms.

In response to the notice, DSS halted its subsidy payments to TYBE. DSS also

notified parents receiving DSS subsidies to stop placing their children with TYBE,

and MOCCRRN removed TYBE from its referral database. TYBE had no

opportunity to challenge the proposed denial before the notices went out.

In a letter dated August 26, 2009, TYBE requested an administrative hearing

under Mo. Rev. Stat. § 210.245 regarding the denial. On September 2, 2009, TYBE

filed a petition for administrative review, pursuant to Mo. Rev. Stat. § 621.120,

naming DHS and DSS respondents. DHS moved to dismiss TYBE’s § 621.120

petition for lack of jurisdiction. The administrative hearing commissioner, Joseph P.

Bindbeutel, granted the motion and dismissed TYBE’s complaint.

B. Procedural History

On September 16, 2009, TYBE filed suit in federal district court against

Commissioner Bindbeutel, administrative hearing Commissioner Nimrod T. Chapel

Jr., Quick, Sprenger, and Truesdale, seeking a temporary restraining order and a

preliminary injunction prohibiting DHS from interfering with TYBE’s operations

until the commission issued a final decision on DHS’s proposed denial. TYBE also

requested damages under 42 U.S.C. § 1983 and state law, claiming (1) the DHS

defendants deprived TYBE of due process by requiring TYBE to cease operating as

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a childcare facility “prior to the completion of the administrative and/or judicial

review process”; (2) the DHS defendants deprived TYBE of due process by failing

to make an initial settlement offer to TYBE under Mo. Rev. Stat § 621.045.4; (3) the

DHS defendants and Commissioner Bindbeutel deprived TYBE of due process by

interfering with TYBE’s right to initiate a hearing under Rev. Mo. Stat. § 621.120;

and (4) the DHS defendants tortiously interfered with TYBE’s business relationships

by announcing to state agencies and TYBE’s clients that TYBE was unlicensed and

ineligible to provide services or receive subsidy payments.

The district court entered a temporary restraining order on September 21, 2009,

and, by consent of the parties, entered a preliminary injunction on October 8, 2009.

On March 18, 2010, the commission held a hearing pursuant to Mo. Rev. Stat.

§ 210.245. The commission denied TYBE’s renewal request on January 28, 2011.

The district court lifted the preliminary injunction on May 9, 2011, and on July 19,

2011, granted summary judgment to the DHS defendants and Commissioner

Bindbeutel on all of TYBE’s claims. This appeal followed.

II. DISCUSSION

On appeal, TYBE argues the district court erred in granting summary judgment

on its 28 U.S.C. § 1983 due process claims and its state-law tortious interference

claim. We review de novo the district court’s grant of summary judgment, affirming

if “the record, viewed in the light most favorable to the non-moving party,

demonstrates that there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law.” S & A Farms, Inc. v. Farms.com, Inc., 678

F.3d 949, 952 (8th Cir. 2012) (quoting Morrison Enters., LLC v. Dravo Corp., 638

F.3d 594, 602 (8th Cir. 2011)); see Fed. R. Civ. P. 56(a) (amended in 2010 to

“genuine dispute”).

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A. Due Process Deprivation - Closure Order

TYBE asserts DHS denied TYBE due process by interfering with TYBE’s

business operations and announcing to third parties that TYBE was operating without

a license, before providing TYBE notice and an opportunity to respond. See U.S.

Const. amend. XIV. In order to sustain a due process claim and overcome qualified

immunity, TYBE must demonstrate (1) DHS’s actions interfered with TYBE’s

constitutionally protected liberty or property interest; and (2) the DHS defendants

reasonably should have known their actions violated TYBE’s clearly established

constitutional rights. See Pearson v. Callahan, 555 U.S. 223, 231 (2009); Putnam v.

Keller, 332 F.3d 541, 546 (8th Cir. 2003).2

1. Property Interest

TYBE asserts the DHS defendants unconstitutionally interfered with the

property interest TYBE had in its license and the license renewal proceedings. TYBE

is entitled to relief only if it has evidence sufficient to prove (1) TYBE had a clearly

established constitutionally protected liberty or property interest in the license

renewal; and (2) DHS’s procedures deprived TYBE of that interest. See Putnam, 332

F.3d at 546.

To have a constitutionally cognizable property interest in a right or a benefit,

a person must have “a legitimate claim of entitlement to it.” See Bd. of Regents of

2

TYBE argues the district court committed reversible error by predicating its

summary judgment decision on an argument the movants did not raise—namely, that

TYBE lacked a protectable interest because its license had expired. See Mayer v.

Countrywide Home Loans, 647 F.3d 789, 793-94 (8th Cir. 2011) (Bye, J., dissenting).

We need not resolve this argument. The district court also decided the DHS

defendants were protected by qualified immunity because TYBE failed to

demonstrate the DHS defendants violated a clearly established constitutional right.

The DHS defendants raised this defense in their motion for summary judgment, and

we decide this case on that basis.

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State Colleges v. Roth, 408 U.S. 564, 577 (1972). The Due Process Clause does not

create any property interest; it merely protects property rights arising “from an

independent source such as state law.” Id. A property interest arises when state law

creates “expectations that are ‘justifiable.’” O’Bannon v. Town Ct. Nursing Ctr., 447

U.S. 773, 796 (1980) (quoting Vitek v. Jones, 445 U.S. 480, 489 (1980)). No

property interest arises where the statutory claim to a benefit is “too ephemeral and

insubstantial.” Id. (quoting Meachum v. Fano, 427 U.S. 215, 228 (1976)) (internal

quotation marks omitted).

TYBE has not demonstrated it had a clearly established property interest in

renewal of its license. Under Missouri law, a licensed entity may have a property

interest in an existing valid license, which may not “be impaired, suspended, or

revoked” without due process. Mo. Real Estate Comm’n v. Rayford, 307 S.W.3d

686, 692 (Mo. App. 2010); see ARO Sys. v. Supervisor of Liquor Control, 684

S.W.2d 504, 507 (Mo. App. 1984) (recognizing sanctions impairing the licensed

entity’s use of a valid liquor license implicate due process protections); Crum v. Mo.

Dir. of Revenue, 455 F. Supp. 2d 978, 986 (W.D. Mo. 2006) (determining revocation

of a physician’s license implicated due process protections). Missouri law is less

clear when it comes to license renewal proceedings. See, e.g., Zenco Dev. Corp. v.

City of Overland, 843 F.2d 1117, 1118-19 (8th. Cir. 1988) (holding the district court

did not err in determining a licensed entity had no due process rights attendant to

liquor license renewal proceedings under Missouri law); State ex rel. Garrett v.

Randall, 527 S.W.2d 366, 373 (Mo. 1975) (en banc); Vaughn v. Ems, 744 S.W.2d

542, 547-48 (Mo. Ct. App. 1988); State ex rel. Payton v. City of Riverside, 640

S.W.2d 137, 142 (Mo. Ct. App. 1982). TYBE has not cited, nor have we found, any

statutes or cases establishing that licensed facilities have a property interest in a

license renewal under Missouri law.

We have decided analogous cases under the laws of other states. Our cases

indicate this is a highly context-specific inquiry we decide on a case-by-case basis.

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Compare Stauch v. City of Columbia Heights, 212 F.3d 425, 429-30 (8th Cir. 2000)

(deciding the district court did not err in finding a licensed rental unit operator had

a protected property interest in license renewal where Minnesota law required the

licensing authorities to renew “if: (1) [the licensed entity] completed an application

form; (2) paid the registration fee; and (3) the property had been inspected within the

previous two years”), with Movers Warehouse, Inc. v. City of Little Canada, 71 F.3d

716, 719 (8th Cir. 1995) (declaring a licensed bingo hall operator had no protected

property interest in license renewal where the municipal code gave licensing

authorities unfettered discretion to deny a license renewal application).

The standard for renewing a daycare license in Missouri falls somewhere

between these precedents. DHS only may deny a license renewal application for

cause. See Mo. Rev. Stat. § 210.245(2) (requiring DHS to state the basis for a license

denial); Mo. Code Regs. Ann. tit. 19, § 30-62.052(4) (“Upon determination of the

applicant’s continued compliance with state statutes and licensing rules for group

daycare homes and daycare centers, an official license shall be granted for up to two

(2) years.”).

However, the applicable statutes and regulations governing DHS’s licensing

determination are broad, subjective, and give the department substantial discretion

to determine violations. See Mo. Rev. Stat. § 210.221.1(2) (providing DHS may

“deny, suspend, place on probation or revoke the license of such persons as fail to

obey the provisions of sections 210.201 to 210.245 or the rules and regulations made

by [DHS]”). DHS regulations for the operation of childcare facilities are extensive,

governing everything from fire safety and disaster preparedness, see Mo. Code Regs.

Ann. tit. 19, § 30-62.087-.090, to nutrition and food service, health care, and medical

examination reporting requirements, see id. §§ 30-62.122, .192-.202. While many of

these requirements are relatively specific and objective, others are entirely subjective.

See, e.g., id. §§ 30-62.082(1)(A) (“The premises shall be safe and suitable for the care

of children”), 30-62.102(1)(A) (“Day care personnel shall be of good character and

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intent and shall be qualified to provide care conducive to the welfare of children”).

DHS has far greater discretion to deny license renewal applications than did the

licensing agency in Stauch, where we recognized a property interest in license

renewal. See Stauch, 212 F.3d at 429-30.

The DHS defendants reasonably could have concluded TYBE had no

constitutionally protected property interest in the renewal of its license, and such a

conclusion entitles them to qualified immunity. See Ambrose v. Young, 474 F.3d

1070, 1077 (8th Cir. 2007) (explaining, public officials are entitled to qualified

immunity unless their actions “violate clearly established statutory or constitutional

rights of which a reasonable person would have known”) (quoting Harlow v.

Fitzgerald, 457 U.S. 800, 818 (1982)) (internal quotation marks omitted). “Officials

are not liable for bad guesses in gray areas; they are liable for transgressing bright

lines.” Id. (quoting Davis v. Hall, 375 F.3d 703, 712 (8th Cir. 2004)) (internal

quotation marks omitted).

Qualified immunity is particularly appropriate in this instance because the DHS

defendants were operating under conflicting statutory directives. DHS was required

under Mo. Rev. Stat. § 210.245(2) to give TYBE notice and, upon TYBE’s request,

a hearing. However, TYBE’s license expired on July 31, 2007, and Mo. Rev. Stat.

§ 210.211.1 explicitly prohibited TYBE from operating a childcare facility without

a license “in effect.” Once TYBE’s license expired, DHS could not provide TYBE

with pre-deprivation notice—the license expired by operation of law—while

simultaneously enforcing the licensing requirement. We cannot say the DHS

defendants’ attempt to resolve this foggy statutory conflict was constitutionally

unreasonable.

2. Liberty Interest

TYBE also claims the DHS defendants violated TYBE’s liberty interest in its

reputation by disclosing to third parties the non-renewal decision and announcing

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TYBE had violated the laws and regulations governing licensed childcare facilities.

We recognized in Kloch v. Kohl, 545 F.3d 603, 607-09 (8th Cir. 2008), that injury

to a licensed professional’s reputation is insufficient to sustain a due process liberty

claim. See Conn. Dep’t of Public Safety v. Doe, 538 U.S. 1, 6-7 (2003). “Rather,”

we explained, “a plaintiff must demonstrate that he has been deprived of some benefit

to which he has a ‘legitimate claim of entitlement.’” Kloch, 545 F.3d at 607 (quoting

Roth, 408 U.S. at 577). As discussed above, it was reasonable for the DHS

defendants to conclude, after TYBE’s license expired, TYBE was unlicensed and

subject to closure. If TYBE had a legitimate claim of entitlement to operate during

the revocation review period, this right was not clearly established, and any injury to

TYBE’s reputation, by itself, would not trigger any protectable liberty interest. The

DHS defendants are entitled to qualified immunity regarding the challenged

statements.

B. Due Process Deprivation - Failure to Make a Settlement Offer

TYBE claims the DHS defendants deprived TYBE of due process by failing

to make an “initial settlement offer” to TYBE in conjunction with the license denial

review proceedings, as required by Mo. Rev. Stat. § 621.045.4(1).

TYBE erroneously concludes it had a property interest in receiving a settlement

offer. We previously stated,

If a state law gives me the right to a certain outcome in the event of the

occurrence of certain facts, I have a right, by virtue of the Fourteenth

Amendment, to whatever process is due in connection with the

determination of whether those facts exist. This is not at all the same

thing as saying that the federal Constitution guarantees me all rights

created or conferred upon me by state law. Such a doctrine would turn

every state-law violation into a substantive due process claim, a result

that would obliterate completely the distinction between state law and

the federal Constitution.

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Bagley v. Rogerson, 5 F.3d 325, 328 (8th Cir. 1993). Even assuming TYBE had a

state law right to a settlement offer, there was no constitutionally cognizable property

interest in the offer itself. The settlement offer is a state conferred procedural

safeguard which is not enforceable under the federal Constitution’s Due Process

Clause. See id.

D. Deprivation of Right to Judicial Process

TYBE argues the DHS defendants and Commissioner Bindbeutel3 interfered

with TYBE’s constitutional due process right to judicial process when Quick moved

to dismiss TYBE’s § 610.120 administrative complaint and Commissioner Bindbeutel

granted the motion. TYBE argues the dismissal of its complaint was “the equivalent

of denying them an opportunity to be heard upon their claimed right[s].” Logan v.

Zimmerman Brush Co., 455 U.S. 422, 429-30 (1982) (quoting Boddie v. Connecticut,

401 U.S. 371, 380 (1971)) (internal quotation marks omitted). TYBE further claims

the DHS defendants are liable because Quick’s motion to dismiss “subverted TYBE’s

procedural due process rights.”

The constitutional right to judicial process is violated when the state

“destroy[s] a property interest without first giving the putative owner an opportunity

to present his claim of entitlement.” Logan, 455 U.S. at 434. TYBE had a full and

fair opportunity to adjudicate all of its claims. TYBE’s claims were addressed on the

3

TYBE seeks only “prospective, permanent injunctive relief” to prevent

Commissioner Bindbeutel and his successors from dismissing future § 610.120

complaints filed by TYBE or anyone else. We lack jurisdiction over this claim

because it is not ripe. An issue is ripe for review only where there is “a real,

substantial controversy between parties having adverse legal interests, a dispute

definite and concrete, not hypothetical or abstract.” Neb. Pub. Power Dist. v.

MidAmerican Energy Co., 234 F.3d 1032, 1037-38 (8th Cir. 2000) (quoting Babbitt

v. United Farm Workers Nat’l Union, 442 U.S. 289, 298 (1979)) (internal quotation

marks omitted). This “dispute” is, at this time, purely “hypothetical [and] abstract,”

and not ready for our review.

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merits in the administrative review proceeding initiated by DHS under § 210.245. An

administrative law judge, other than Commissioner Bindbeutel, accepted written

arguments from the parties, presided over a hearing on TYBE’s claims, and issued a

twenty-eight page opinion addressing the merits of TYBE’s claims. TYBE was not

deprived of any due process rights by Quick’s motion to dismiss TYBE’s complaint.

E. Tortious Interference with Business Expectancy

TYBE claims Quick and Sprenger tortiously interfered with TYBE’s business

expectancy. TYBE alleges Quick and Sprenger showed a “callous and reckless

disregard for [TYBE]’s business expectancy” when DHS issued the notice of denial,

interfering with TYBE’s business relationship with DSS and MOCCRRN.

TYBE’s tortious interference claim fails as a matter of law. In Missouri,4

public officials exercising discretionary duties, as opposed to ministerial duties, are

entitled to official immunity from suit for “all discretionary acts” unless the officials

acted “in bad faith or with malice,” which ordinarily requires “actual intent to cause

injury.” State ex rel. Twiehaus v. Adolf, 706 S.W.2d 443, 446-47 (Mo. 1986) (en

banc).

[T]he decision as to whether a public official’s acts are discretionary or

ministerial must be determined by the facts of each particular case after

weighing such factors as the nature of the official’s duties, the extent to

which the acts involve policymaking or the exercise of professional

expertise and judgment, and the likely consequences of withholding

immunity.

Kanagawa v. State by and through Freeman, 685 S.W.2d 831, 836 (Mo. 1985) (en

banc); see also Southers v. City of Farmington, 263 S.W.3d 603, 610 (Mo. 2008) (en

4

“We apply Missouri law to [TYBE]’s state-law claims,” which come under our

“supplemental jurisdiction.” Walker v. Barrett, 650 F.3d 1198, 1203 (8th Cir. 2011);

see also 28 U.S.C. § 1367.

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banc) (explaining discretionary duties are those that require the application of

reasoned decision-making, whereas ministerial functions are “of a clerical nature . . .

perform[ed] . . . without regard to [the official’s] judgment or opinion concerning the

propriety of the act to be performed”) (quoting Kanagawa, 685 S.W.2d at 836).

In this case, Quick’s and Sprenger’s actions were discretionary, not ministerial.

This is not a “clerical” task capable of being performed “without regard to [Quick’s

and Sprenger’s] judgment or opinion.” Southers, 263 S.W.3d at 610. Decisions

regarding how or when to enforce a perceived license violation “involve

policymaking [and] the exercise of professional expertise and judgment,” and

withholding official immunity would likely hamper DHS’s license enforcement

actions in the future. Kanagawa, 685 S.W.2d at 836.

On appeal, TYBE has made no effort to demonstrate Quick and Sprenger acted

“in bad faith or with malice” and with “actual intent to cause injury” required to

overcome official immunity. See Twiehaus, 706 S.W.2d at 446-47. Nor did TYBE

make this argument in opposing the DHS defendants’ summary judgment motions

below. It is far from clear on this record that TYBE’s allegations and evidence would

support a finding of bad faith or malice, and particularly an actual intent to injure

TYBE. The Missouri Supreme Court has affirmed a claim’s dismissal where the

plaintiff failed to demonstrate the public official’s bad faith and therefore the plaintiff

could not overcome official immunity. See Charron v. Thompson, 939 S.W.2d 885,

887 (Mo. 1996) (en banc). Quick and Sprenger are entitled to official immunity.5

5

We reject TYBE’s argument that official immunity does not apply because

Quick’s and Sprenger’s actions were not within their legitimate discretion because

they violated the Constitution. In Southers, the Missouri Supreme Court, sitting en

banc, clarified that public employees do not lose official immunity merely because

their discretionary actions violated statutory duties or formal department policies.

Southers, 263 S.W.3d at 614-17. We believe the Missouri courts would apply this

rule to alleged constitutional violations as well.

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TYBE argues the district court committed reversible error by granting summary

judgment based on an issue not addressed in the DHS defendants’ motion for

summary judgment. However, “we may uphold a grant of summary judgment for any

reason supported by the record, even if it differs from the reason given by the district

court.” Watson v. O’Neill, 365 F.3d 609, 614 (8th Cir. 2004). “This power should

normally be exercised only where the issue is one of law, no factual questions are

outstanding that might affect its resolution, and there is no reason to believe that we

would benefit from giving the opportunity to the District Court to address the

question in the first instance.” Reeder v. Ks. City Bd. of Police Comm’rs, 733 F.2d

543, 548 (8th Cir. 1984); see also Johnson v. Sawyer, 120 F.3d 1307, 1316 (5th Cir.

1997) (“Although we can affirm a summary judgment on grounds not relied on by the

district court, those grounds must at least have been proposed or asserted in that court

by the movant.”).

At summary judgment, the DHS defendants argued they were entitled to

official immunity because TYBE failed to demonstrate they acted in bad faith or with

malice, citing Southers, Kanagawa, and Twiehaus. TYBE had a full and fair

opportunity to address this argument, but did not do so. Cf. Mayer v. Countrywide

Home Loans, 647 F.3d 789, 792 & n.5 (8th Cir. 2011) (affirming summary judgment

for reasons different than those relied upon by the district court where the non-

moving party had the opportunity to address the issue in the district court). The

district court did not err.

III. CONCLUSION

We affirm the district court’s summary judgment.

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