Knowlton Merritt v. John E. MacKey

WALLACE, Circuit Judge,

dissenting:

I join only part IV, which affirms a portion of the district court judgment. I dissent from part II. I conclude that the majority incorrectly defines the interest which Merritt alleges is protected by the due process clauses, and applies Parratt v. Taylor, 451 U.S. 527 , 101 S.Ct. 1908 , 68 L.Ed.2d 420 (1981) (Parratt), without proper regard for its meaning or for its interpretation in our subsequent cases. I also conclude that Merritt's due process claim does not allege the deprivation of a protected interest and that, in any case, post-deprivation remedies would afford him due process. I would therefore affirm the judgment on these grounds and would not reach the qualified immunity issue considered in part III of the majority opinion.

I

To state a claim for relief under 28 U.S.C. § 1983 or under Bivens v. Six Unknown Named Agents, 403 U.S. 388 , 91 S.Ct. 1999 , 29 L.Ed.2d 619 (1971), a plaintiff must allege that a government actor deprived him of his constitutional rights. Merritt alleges that state and federal governmental employees deprived him of his right to due process under the fourteenth and fifth amendments. The right to due process is a right to procedural protection — usually notice and some kind of hearing — before the government deprives one of a protected property or liberty interest. Merritt’s action thus hinges on the existence of such an interest.

A.

The majority claims that Merritt had a protected property interest in his specific private employment. Maj. op. at [1369-1370]. It relies for this conclusion on two passages from the Supreme Court’s opinion in Greene v. McElroy, 360 U.S. 474 , 79 S.Ct. 1400 , 3 L.Ed.2d 1377 (1959) (Greene). The second of these passages tells us nothing regarding whether Merritt had a property interest in his specific private job. It merely states that parties “ha[ve] the right to be free from unauthorized actions of government officials which substantially impair [their] property rights.” Id. at 493 n. 22, 79 S.Ct. at 1412 n. 22. It does not tell us when such property rights subject to impairment exist.

This leaves us with the first passage from Greene which states 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 *1375 S.Ct. at 1411 . I would not dispute that proposition to the extent that, as the Supreme Court has subsequently made clear, a person’s “right to follow a chosen trade or profession,” though not his right to hold a particular job, represents a protected liberty interest. See Cafeteria & Restaurant Workers Union, Local 437 v. McElroy, 367 U.S. 886, 895-96 , 81 S.Ct. 1743, 1749 , 6 L.Ed.2d 1230 (1961) (Cafeteria Workers). However, I cannot accept the quoted passage as authority for the different proposition put forth by the majority that with only a unilateral expectation of keeping his job, a person automatically has a protected property interest in retaining that job. The passage simply does not stand for this novel assertion. Nor do I see how the quotation of this passage in the other two cases cited by the majority, Phillips v. Bureau of Prisons, 591 F.2d 966, 970 (D.C.Cir.1979), and United States v. Briggs, 514 F.2d 794, 798 (5th Cir.1975), helps the majority’s argument. In each case, the court quoted the passage from Greene in the context of a discussion of the effect that a governmental action could have on the plaintiff’s ability to obtain employment at all or to follow a particular profession. Thus, the government’s action had implicated a protected liberty interest. See Cafeteria Workers, 367 U.S. at 895-96 , 81 S.Ct. at 1749 . There is nothing in either case about a property interest in retaining a particular job. Thus, I disagree with the majority’s argument in footnote I that this case is “on all fours” with Greene . The plaintiff in Greene had been deprived not only of the job he had, but of the security clearance necessary to pursue his career at all. See Greene, 360 U.S. at 475-76, 493 , 79 S.Ct. at 1403, 1412 . Greene therefore clearly involves a liberty interest, and cannot be “on all fours” with the case before us, where no such interest is implicated.

There are several reasons why I find the passage from Greene upon which the majority relies to determine that Merritt had a property interest in continued employment insufficient to support this proposition. First, the passage itself is dicta. It occurs in the midst of the discussion of contentions raised by the petitioner which the Court ultimately determined it need not address. See id. at 493 , 79 S.Ct. at 1412 . Nor, insofar as the passage relates to property interests rather than liberty interests, was it necessary to the resolution of the case. The issue in Greene , as the Court framed it, involved a “security clearance program under which affected persons may lose their jobs and may be restrained in following their chosen professions” without the benefit of adversarial hearing. Id. (emphasis added). The right to follow a certain profession is a liberty interest. See Cafeteria Workers, 367 U.S. at 895-96 , 81 S.Ct. at 1749 . Greene clearly was decided on the basis of the Court’s determination that the government had interfered with a liberty interest, not with a property interest.

Even if the passage upon which the majority relies were not dicta, I cannot believe that the Supreme Court intended this passage to represent the broad and novel statement regarding the existence of a property interest in every individual job that the majority now asserts it does. “Property interests,” the Supreme Court has reminded us, “are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.” Board of Regents v. Roth, 408 U.S. 564, 577 , 92 S.Ct. 2701, 2709 , 33 L.Ed.2d 548 (1972) (Roth). But in the passage upon which the majority relies, the Supreme Court made no reference to any source of law outside the Constitution that could arguably have created a property right in an individual job. Instead, the Court merely cited a string of cases all of which, with the possible exception of Slochower v. Board of Education, 350 U.S. 551 , 76 S.Ct. 637 , 100 L.Ed. 692 (1956), dealt with governmental interference with an individual’s freedom to follow a particular profession —something we know to be a constitutionally protected liberty interest. I suggest it is unreasonable to believe that the Court in Greene relied on some extra-constitutional source of law as the basis for the broad property interest that the majority finds in this case without so much as mentioning it. Thus, I am forced to conclude that the *1376 Supreme Court meant no more in the passage in question than that, given the existence of a property interest in an individual job, unreasonable government interference with this interest offends the fifth amendment’s guarantee of due process of law. But whether a property interest exists in the first place will have to be determined by a source of law independent of the Constitution. In this case, that source must apparently be state law. Therefore, we should next determine whether Oregon law gave Merritt a protected property interest in his individual job.

Whether state law gives Merritt a property interest is a more difficult issue, resolution of which must be guided by Paul v. Davis, 424 U.S. 693 , 96 S.Ct. 1155 , 47 L.Ed.2d 405 (1976) (Paul). In Paul , the Court held that the government had not deprived Paul of a property interest protected by the due process clause although government action had caused damage to Paul’s reputation. Id. at 711-12 , 96 S.Ct. at 1165 . The Court distinguished Wisconsin v. Constantineau, 400 U.S. 433 , 91 S.Ct. 507 , 27 L.Ed.2d 515 (1971) (Constantineau ), where government action had damaged a person's reputation and caused her to be barred from buying liquor. The Court observed that in both cases, the plaintiff had suffered damage to reputation, an interest protected by state tort law. Nevertheless, the Court held that this interest was not property under the due process clause. Paul, 424 U.S. at 711-12 , 96 S.Ct. at 1165 . Only in Constantineau did the government deprive the plaintiff of a right granted by the state — the right to buy liquor. Id. at 708-09, 96 S.Ct. at 1164 . Therefore, only in the latter case was the plaintiff deprived of a protected interest. Id. at 711-12 , 96 S.Ct. at 1165 . Therefore, in order to determine whether Merritt has a protected property interest in his job, we must determine whether his continued enjoyment of that job is a right granted by the State of Oregon or merely an interest which Oregon’s tort law protects.

The majority omits this essential determination and ignores the explicit teachings of Paul . Instead, it cites Roth for the proposition that “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 promise.” Maj. op. at [1371]. There are two fundamental problems with this proposition, however. First, Roth nowhere asserts it. Roth merely states the proposition’s inverse — that someone who had no basis in state law for an expectation of continued employment could not possibly have a property right in his continued employment. Roth, 408 U.S. at 577 , 92 S.Ct. at 2709 . But it is a well known principle of logic that a statement need not be true merely because its inverse is true. Second, even if Roth did assert that the existence of any state law or rule “concerning discharge or express or implied promise” created a protected property right in continued employment, then it would appear that, insofar as this statement referred to an interest protected only by state tort law rather than to an actual right granted by the state, it has been overruled by Paul . Application of Paul’s test to the Oregon law relating to Merritt’s interest in his job is a step we cannot omit if we are to determine whether or not Merritt’s interest is a protected property interest.

The district court held on the basis of Yartzoff v. Democrat-Herald Publishing Co., 281 Or. 651 , 576 P.2d 356 (1978) (Yartzoff), and Kay v. North Lincoln Hospital District, 555 F.Supp. 527, 529-30 (D.Or.1982) (Kay), that the presence of a clause in Merritt’s employment contract providing that he could be fired only for cause “gave him a property interest in continued employment.” I disagree. Yartzoff merely held that summary judgment for the defendant in the plaintiff’s wrongful discharge action was improper where a jury could reasonably infer that “just cause” termination provisions in the employer’s policy handbook constituted part of the plaintiff’s employment contract. There is nothing in the case about any state law right to continued employment; the case merely involves an unresolved factual issue in a simple tort action. Yartzoff properly stated that it is well-established under Oregon law that “in the absence of a contract *1377 or statute to the contrary, an employer may discharge an employee at any time and for any cause.” Yartzoff, 281 Or. at 654 , 576 P.2d at 359 . The plaintiff in Yartzoff pointed to no state statute extending to her “any legal guarantee of present enjoyment of [her continued employment].” Rather, the state had merely provided a tort law mechanism for protecting Yartzoff’s interest in continued employment from injury. Thus, applying the test of Paul to the interest asserted in this case, it is clear that any injury to that interest “d[id] not result in a deprivation of any ... ‘property’ recognized by state or federal law.” Paul, 424 U.S. at 712 , 96 S.Ct. at 1166 .

The court in Kay , in contrast, held explicitly that Oregon’s law relating to “just cause” policies forming part of an employment contract create a “property interest” in continued employment. Kay, 555 F.Supp. at 529-30 . In so doing, the court relied on Roth and Yartzoff , but, as shown above, neither case supports this conclusion. More importantly, Kay completely ignored the Supreme Court’s Paul test, with its distinction between a right granted by the state and an interest protected only by state tort law. While I agree that Oregon’s law relating to just cause policies as forming part of an employment contract impinge upon an employee’s interest in continued employment, I can see no basis for holding that this interest is one created by a state granted right. Rather, it is merely an interest protected by state tort law. As such, under Paul , it is not a property interest.

Thus, because Merritt has shown no basis in state law for the conclusion that Oregon grants its citizens a right to continued employment, I conclude that Merritt’s interest in retaining his position was merely one protected by state tort law and not a property right. I suggest that to hold Merritt’s interest is “property” within the meaning of the due process clause is not only to ignore the Supreme Court’s message in Paul , but to trivialize the Constitution.

B.

The majority cites our recent decision in Castaneda v. United States Department of Agriculture, 807 F.2d 1478 (9th Cir.1987) (Castaneda), in which we pointed out that the Supreme Court in O’Bannon v. Town Court Nursing Center, 447 U.S. 773 , 789-90 n. 22, 100 S.Ct. 2467 , 2477 n. 22, 65 L.Ed.2d 506 (1980) (O’Bannon), had left open the question of “the possibility that where the government indirectly yet intentionally injures or affects the legal status of a person by action taken directly against a private third party, the injured person can maintain a due process challenge against the government.” See Castaneda, 807 F.2d at 1480 n. 4. This obviously is not precedent; the Court merely observed that the issue has not been decided. In dicta, O’Bannon did state that “if the Government were acting against one person for the purpose of punishing or restraining another, the indirectly affected individual might have a constitutional right to some sort of hearing.” O’Bannon, 447 U.S. at 789 -90 n. 22, 100 S.Ct. at 2477 n. 22. Whatever the precedential effect that this observation might have, it is of no relevance in the case before us.

The record does not reveal any evidence that the governmental agents acted for the “purpose of punishing or restraining” Merritt. The only evidence in the record shows that the agents’ purpose was to assure that KADA complied with state and federal standards for outpatient alcohol treatment services. The open question, therefore, is not before us. It is interesting, however, that O’Bannon distinguished, in dicta, cases involving “the direct relationship between a public employer and its employees” — where protected property interests exist — from cases “concerning the right of an employee who loses his job as a result of government action directed against a third party.” O’Bannon, 447 U.S. at 788 -89 n. 21, 100 S.Ct. at 2477 n. 21. Merritt’s case clearly falls into the latter group.

I would hold, therefore, that the right of noninterference with contracts is not an interest protected by the due process clauses. See also Rutledge v. Arizona Board *1378 of Regents, 660 F.2d 1345 , 1353 (9th Cir.1981) (holding that a verbal assault, although tortious, does not deprive a plaintiff of a protected interest) (Rutledge), affd sub nom. Kush v. Rutledge, 460 U.S. 719 , 103 S.Ct. 1483 , 75 L.Ed.2d 413 (1983); cf. Corbitt v. Andersen, 778 F.2d 1471 , 1481 n. 3 (10th Cir.1985) (dicta) (Bohanon, J., dissenting) (doubting whether section 1983 provides a remedy for the tort of intentional interference with prospective contractual relation).

II

Even if the governments’ acts did implicate the due process clauses in this case, Parratt establishes that due process may be satisfied by a post-deprivation remedy. I first analyze whether post-deprivation remedies could be adequate in this case, and then consider whether any such remedies are in fact available here.

A.

To determine whether post-deprivation remedies provide adequate process, we undertake two related inquiries. First, we consider the extent to which the government acknowledged, ratified, or promoted the act of deprivation. Parratt distinguishes action that is an “established state procedure” from action that is “unauthorized.” 451 U.S. at 541 , 101 S.Ct. at 1916 . A post-deprivation remedy provides inadequate process for a governmental act prescribed by rule or regulation, but provides adequate process for an act that is completely unauthorized. Second, even if the act was unauthorized, post-deprivation remedies may be inadequate nonetheless if the government could have provided a “meaningful hearing before the deprivation took place.” See id. We therefore should consider whether the government could have readily foreseen the deprivation and provided a timely hearing or, instead, whether the deprivation was “random” and of such a nature that the government could not “predict precisely when the loss w[ould] occur.” Id. Although those two inquiries are closely related, considering each of them separately enhances clarity.

1.

The record does not indicate that interfering with a private employee’s relationship with his employer was an established policy, practice, or custom of either the state or federal government. If anything, the record shows that this interference was unauthorized. The state and federal regulations that guide government employees in this situation imply that such interference was improper. Merritt argues that the conduct of both individual defendants was unauthorized and that the two were defying “express and clear limitations” on their authority. Indeed, the majority itself declares Mackey’s and Vincent’s action to be “contrary to official policy.” Majority op. supra at 1372.

The majority observes that “Vincent’s and Mackey’s conduct occurred as part of an institutionalized practice of evaluating the recipients of government funding.” Majority op. supra at 1372. This fact, however, is of no relevance to determining whether the challenged conduct was an established state practice. It is not the evaluation but the interference that is the basis of the action. Almost all government actions occur “as part of an institutionalized practice.” In Parratt , for example, the challenged conduct was part of the institutionalized practice of delivering prisoners’ mail. Parratt, 451 U.S. at 530 , 100 S.Ct. at 1910 . Nevertheless, losing a prisoner’s mail — the challenged deprivation of property — was not an established state practice. Id. at 541, 101 S.Ct. at 1916 . Similarly, in Hudson v. Palmer, 468 U.S. 517, 533 , 104 S.Ct. 3194, 3203 , 82 L.Ed.2d 393 (1984) (Hudson), the Court found that destroying a prisoner’s property while ransacking a prison cell was “unauthorized” although this destruction occurred as part of the established practice of searching for contraband in a government institution. Classifying conduct as arising in an institutional context does not make it any easier to determine whether the conduct was an established state practice or, instead, unauthorized.

The majority also observes that Mackey and Vincent had informed their immediate *1379 supervisors about their recommendation that KADA terminate Merritt to comply with its government contracts. Majority op. at [1372]. This fact, however, does not render the government agents’ actions an “established” government practice. An act does not become “authorized” by the government simply because a supervisor is aware of the act. See, e.g., Parratt, 451 U.S. at 530 , 537 n. 3, 541, 101 S.Ct. at 1910 , 1913 n. 3, 1916 (alleged actions of a prison warden and prison hobby manager did not constitute an established state practice); Rutledge, 660 F.2d at 1352 (actions of head football coach at a state university did not amount to an established state practice requiring predeprivation process). Nothing in the record indicates that Mackey’s and Vincent’s direct supervisors set policy, determined guidelines, or established practices of any kind. Indeed, the two supervisors apparently were bound by the same regulations and guidelines that governed Mackey and Vincent.

The majority opinion contains one other sentence relating to the question of authorization. The majority quotes language from our decision in Piatt v. MacDougall, 773 F.2d 1032, 1036 (9th Cir.1985) (en banc) (Piatt), that Parratt does not apply to “deliberate, considered, planned, or prescribed conduct ... whether or not such conduct is authorized.” As quoted, this language implies that because Vincent’s and Mackey’s decision was “deliberate, considered, or planned,” an inquiry into whether the practice was authorized is irrelevant. This proposition, however, is unsound. First, Piatt’s holding is the far narrower proposition that alleging challenged conduct to be a “matter of consistent policy” is sufficient to withstand attack on Parratt grounds. 773 F.2d at 1034 . As alleged, the conduct in Piatt was authorized by state policy, 773 F.2d at 1034 ; therefore, Parratt does not apply to the conduct, whether deliberate or not. The language quoted by the majority is thus clearly dicta. Even more importantly, the dicta in Piatt is directly contrary to the Supreme Court’s holding in Hudson, 468 U.S. at 533 , 104 S.Ct. at 3203 (holding that Parratt does apply to intentional conduct if the conduct is unauthorized). We should follow the Supreme Court.

2.

The second inquiry for determining if post-deprivation remedies provide adequate process — whether the conduct was predictable or random — is addressed by the majority in only cursory fashion. The majority states that because Vincent and Mackey had consulted with their supervisors “[i]t would therefore have been practicable for the state and federal authorities to have afforded Merritt some predeprivation process.” Majority op. supra at 1372. If the majority means by this that, because the two supervisors could have predicted the injury, the two governments also could have predicted it, then the majority plainly conflicts with Parratt . “Whether an individual employee himself is able to foresee a deprivation is simply of no consequence. The controlling inquiry is solely whether the state is in a position to provide for predeprivation process.” Hudson, 468 U.S. at 534 , 104 S.Ct. at 3204 . That is, the controlling inquiry is whether the deprivation could have been predicted by what the majority labels “the state administrative machinery.” Majority op. supra at 1371.

The majority is wrong, I suggest, in failing to appreciate that a single supervisor at the lowest level in the bureaucratic hierarchy does not constitute this “administrative machinery.” Nothing in the record indicates that Mackey, Vincent, or either of their immediate supervisors held positions permitting them to set policy or determine when hearings should or should not be provided. In fact, the “administrative machinery” for both the state and federal government had promulgated administrative procedures to guide the conduct of the agents responsible for overseeing contractors such as KADA. See, e.g., 41 U.S.C. §§ 401-420 , 601-613; 41 C.F.R. §§ 1 et seq. (1983); Or.Rev.Stat. §§ 279.011-279.990 (1983); Or.Admin.R. §§ 127-40-010 to 127-40-090 (1983). No one contends that the job descriptions of the two supervisors included the authority to modify or extend those regulations.

If, instead, the majority has some other individuals in mind when it refers to the *1380 “state and federal authorities” who should have afforded Merritt process, the majority does not identify these authorities by name or description. Furthermore, the record does not indicate — nor does Merritt contend — that any such “authorities” were aware of Vincent’s and Mackey’s conduct.

The majority addresses the question of whether the government actors’ conduct was “random” solely by way of conclusion. We are told, twice, that “Mackey and Vincent’s conduct was not random” but we are never told why. Majority op. supra at 1372. The record does not indicate that Mackey and Vincent’s conduct was a continuing problem, or one that past experience had shown was likely to recur. In fact, the record indicates that this incident was unique: “[i]t never came up before.”

Furthermore, I find no evidence in the record that this unique occurrence was the sort of situation either government could have predicted in advance. They had no contractual or regulatory relationship with Merritt. How could the state or federal government predict that they might need a set of procedures to guide their employees when dealing with parties who had no dealings with the government? Merritt’s real complaint may be that his employer did not avail itself of the existing procedural protections. Merritt has no standing, however, to raise his employer’s rights. The majority simply fails to point to any evidence supporting its assertion that this incident was “not random.”

I conclude, therefore, that post-deprivation remedies, if available, provide due process in this case because the conduct of the governmental agents was neither an established state practice nor predictable even though unauthorized.

B.

The final issue, which the majority does not reach, is whether post-deprivation remedies are in fact available to Merritt. As regards Vincent, the state employee, a state tort action alleging intentional interference with a contractual relationship was available and was, in fact, pleaded. A post-deprivation remedy was thus clearly available.

Whether adequate remedies are available against Mackey, the federal employee, or against the United States is more problematic. Merritt could have brought the same state tort claim against Mackey that he brought against Vincent. Therefore, Merritt did have some post-deprivation remedy against Mackey. This remedy, however, is provided by a different sovereign, Oregon. Assuming a state tort remedy could satisfy federal due process, it seems unlikely that Merritt could bring a state law tort claim against the United States. The Federal Tort Claims Act excludes from its waiver of sovereign immunity actions for intentional interference with contract. See 28 U.S.C. § 2680 (h). The parties did not adequately address, either in the district court or on appeal, the issue of a federal post-deprivation remedy. I would therefore remand this issue for further proceedings, were it critical to our decision.

Ill

The governments did not deprive Merritt of an interest protected by the due process clauses. I would therefore affirm the judgment of the district court. Moreover, post-deprivation remedies would provide due process and were available, at least with respect to the state employee.