Petition — Doran v. Houle

Office - Supreme Court, Us. |

83-1358 FILED

No FES @ 1988

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Supreme Court of the United States

October Term, 1983

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Vv

M. P. DORAN, JAMES A. SCOTT

and JAMES H. BAILEY,

Petitioners,

vs.

F. H. HOULE and JAMES W. GLOSSER,

Respondents.

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PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

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Grecory O. Moraay, P.C.

612 West Beall

Suite #3

Bozeman, Montana 59715

Member of the Bar of

This Court

Cuanninco J. HartTerivus

600 Central Plaza

Suite 408

Great Falls, Montana 59401

Attorneys for Petitioners

Doran, Scott and Bailey

COCKLE PRINTING CO. 251! Douglas St.. Omaha 68102

QUESTIONS PRESENTED FOR REVIEW

Question I.

Can the government, exercising unbridled discretion,

destroy an established business without due process?

Question II.

Can the government on the one hand impose regula-

tions on an established business and then with the other

destroy it through the regulation without affording due

process?

ii

PARTIES TO THIS LITIGATION

Pursuant to Rule 21.1(b), Rules of the Supreme Court

of the United States, Petitioners name the parties to the

litigation: M. P. Doran, James A. Scott and James H.

Bailey petitioners, v. F. H. Houle and James W. Glosser,

respondents.

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TABLE OF CONTENTS

Questions Presented for Review i

Parties to This Litigation ii

Table of Authorities iii

Opinions Below 1

2

2

3

Jurisdiction i ~

Constitutional Provisions and Statutes Involved —_.

Statement of the Case

Argument:

I. Reasons for Granting the Writ 8

A. The Decision of the Court of Appeals

Conflicts with Yick Wo v. Hopkins,

that Unbridled Discretion directed

Exclusively against Particular Persons

where there is no Mandatory Author-

ity is Discriminatory and a Practical

Denial of Due Process 8

B. The Ninth Circuit has altered the

Rules for Review of Facts below Con-

trary to Rule 52 F.R.Civ.P. and an ap-

plicable Decision of this Court ..#+-=-_.—s«_:‘10

C. The Decision of the Court of Appeals

Conflicts with Decisions of the Fourth :

and D.C. Circuit Courts of Appeals 4

* prohibiting Termination of a Business

E. Interest without Due process ..--=-_--—s

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TABLE OF CONTENTS—Continued

Pages

Appendix “A” Ninth Circuit Court of Appeals Opin-

ion November 18, 1983 App. 1

Appendix “B” District Court’s Opinion on Motion

for Summary Judgment App. 12

Appendix “C” Judgment of the Circuit Court No-

vember 18, 1983 App. 27

TABLE OF AUTHORITIES

Cases

Altop v. The City of Billings, 79 Mont. 25, 255

P. 11 (1927) 9

Cella v. U.S., 208 F.2d 783 (1953) ]

City of Santa Clara, California v. Andrus, 572 F.

2d 660 12

Continental Ore Company v. Union Carbide Cor-

poration, 370 U.S. 690, 8 L.Ed.2d 777, 82 S.Ct.

1404 (1962) 11

Crosby Transfer and Storage Corporation v. Froehl-

ke, 480 F.2d 498 (1973) 12, 14

Doran v. Houle, 516 F.Sup. 1231 (1981) _1, 3, 5, 7, 8, 10

Fluor Corporation v. United States ex. rel. Mosher

Steel Company, 405 F.2d 823, 89 S.Ct. 1632, 23

L.Ed.2d 40 (1969)

Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir.

1964)

Hicklin v. Orbeck, 437 U.S. 518, 98 S.Ct. 2482, 57 L.

Ed.2d 397 (1978)

Memphis Light, Gas and Water Division v. Craft,

436 U.S. 1, 98 S.Ct. 1554, 56 L.Ed.2d 3 (1970). _ 10

a

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TABLE OF AUTHORITIES—Continued

Pages

Ohio Bell Telephone Company v. Public Utilities

Commission, 301 U.S. 292 (1937) 10

Patterson v. State Department of Revenue, 171

Mont. 168, 557 P.2d 798 (1976) 9

Shillingford v. Holmes, 634 Fed. 2d 263 (5th Cir.

1981) 10, 11

State v. Gleason, 128 Mont. 485, 277 P.2d 530

(1954) 9

Standard Airlines, Inc. v. Civil Aeronautics Board,

177 F.2d 18 (1949) 14

United States v. United States Gypsum Co., 333

U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1948) 11

Yick Wo v. Hopkins, 118 U.S. 365 (1886) 8

Constitutional Amendments

Fifth Amendment to the United States Constitution... _ «2

Fourteenth Amendment to the United States Con-

stitution . 2, 9

Federal Statutes

5 U.S.C. $ 1002(a)(b) 13

28 U.S.C. 4§1254(1) 2

42 U.S.C. 41983 2, 3

Montana Statutes

82-4203(b) R.C.M. 1947 9

Law Journals

gp nee ag yt pean ete

Law Journal, 861, 903 (1982) 10

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In The |

Supreme Court of the United States

October Term, 1983

".%

of

M. P. DORAN, JAMES A. SCOTT

and JAMES H. BAILEY,

Petitioners,

vs.

F. H. HOULE and JAMES W. GLOSSER,

Respondents.

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PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

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OPINIONS BELOW

The opinion of the Court of Appeals in Doran v. ;

Houle, Opinion filed November 18, 1983, appears as Ap-

pendix “A”. The District Court’s opinion on Motion for ,

Summary Judgment, Doran v. Houle, 516 F.Supp. 1231

(D. Mont. 1981) is attached as Appendix “B”. The judg-

ment of the Circuit Court entered November 18, 1983 is

attached as Appendix “C”.

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JURISDICTION

Petitioners, Doran, Scott and Bailey respectfully re-

quest that a writ of certiorari issue to review the judg-

ment and opinion of the United States Court of Appeals

for the Ninth Circuit entered in this proceeding Novem-

ber 18, 1983. This Court’s jurisdiction is invoked under

28 U.S.C. 1254(1).

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CONSTITUTIONAL PROVISIONS AND STATUTES

INVOLVED

1. The Fifth Amendment to the United States Con-

stitution which in pertinent part provides: “No person

shall be . . . deprived of life, liberty or property, without —

due process of law.”

2. The Fourteenth Amendment to the United States

Constitution which in pertinent part provides: “. . . nor

shall any state deprive any person of life, liberty, or

property without due process of law... .”

3. 42 U.S.C. 1983 which provides that: “Every per-

son who, under color of any statute, ordinance, regula-

tion, custom, or usage, of any State or Territory, sub-

jects, or causes to be subjected, any citizen of the United

States or other person within thee jurisdiction thereof to

the deprivation of any rights, privileges, or immuntities

secured by the Constitution and laws, shall be liable to the

party injured in an action at law, suit in equity, or other

proper proceeding for redress.

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STATEMENT OF THE CASE

Doran, Scott and Bailey, plaintiffs, sued defendants,

Houle and Glosser under 42 U.S.C. 1983 charging them

with conspiracy and wrongful deprivation of civil rights

(liberty and property) in the removal of permits to use

the bruscellosis card test kit without notice or hearing.

Prior to trial the District Court found, on Motion for

Summary Judgment, that there was no liberty interest,

but that there was a property interest in the permit.

Doran v. Howe, 516 F.Supp. 1231 (Dist. Ct. Mont. 1981)

After trial by jury awarding plaintiffs $242,000 in com-

pensatory damages and $30,000 in punitive damages,

Houle and Glosser appealed from the judgment and the

court’s denial of Motions for Judgment NOV. Doran,

Scott and Bailey cross appealed from the court’s refusal

to award attorney’s fees and a stay of execution without

supersedeas bond pending appeal. The Ninth Circuit

Court of Appeals reversed the District Court’s decision

on tlie basis that the plaintiffs had no constitutionally pro-

tected interest in the permits.

Dr. Doran had a substantial investment in the prac-

tice of veterinary medicine in the livestock yard practice

in Great Falls, Montana from 1962 when he purchased the

Great Falls Auction Market practice and equipment from

the veterinarian who controlled the practice. Thereafter,

Dr. Doran further invested in the development of the West-

ern Livestock Market by furnishing the equipment for

blood tests. Dr. Scott and Dr. Bailey joined Dr. Doran

as employees in his practice in 1976.

In 1970 the use of the bruscellosis card test kit be-

came the recognized method of testing animals for bru-

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scellosis. Bruscellosis is a highly contagious and infec-

tious bacterial disease occurring primarily in cattle caus-

ing reproductive failure and the abortion of calves. Bru-

scellosis can also cause undulant fever and other ill effects

in humans.

The bruscellosis card test kit was used in a joint state

and federal program to eradicate bruscellosis. The USDA

made the kit available to individuals in the state through

a permit issued jointly by state and federal officials. The

permit made the kits available to the permit holder from

the USDA. In Great Falls, Montana the program was

implemented in the Great Falls Auction Market and the

Western Livestock Auction Market through administra-

tion of the test by Drs. Doran, Scott and Bailey. The

government supplied the kits and the veterinarians per-

formed the tests on all cattle that came through the yard.

When the test revealed a diseased or suspected diseased

animal the animal was destroyed. Without a negative

result from the test an animal cannot be shipped in inter-

state commerce. The test became the key to the veter-

inary practice in the yards because, although they could

perform other services such as pregnancy tests and vac-

cinations, veterinarians unable to perform the test could

not authorize the transfer of cattle through an auction

market and therefore the buyer or seller would be re-

quired to seek authorization from another veterinarian.

The District Court found:

“Prior to November 1977 Plaintiffs were author-

cont Acggalh gel 9 — Egy soem al en-p-angthane

bruscellosis card test. (Eyen though plaintiffs’ card

5

dent, state and federal officials continued to provide

the card test kits and otherwise treat plaintiffs as if

their permits had not expired. There is-no real dis-

pute to this, and accordingly the court will view the

permits as being renewed.) On November 28, 1977

defendant, Glosser, the state official, without notice

or hearing suspended plaintiffs’ authority to perform

card tests and had the card test kit impounded. (Al-

though not substantiated in the record, the reason for

Glosser’s decision centered around a rumor that plain-

tiffs may have released cattle for interstate move-

ment suspected of being infected with bruscellosis.)

By suspending plaintiffs’ authority to administer the

card tests, plaintiffs were put in the same position

as other accredited state deputy veterinarians except

that they no longer could perform these rapid screen-

ing tests. Thus, although plaintiffs could still con-

tinue their private practice in livestock markets, plain-

tiffs contend that the removal of the permit in effect

destroyed their livestock yard practice because they

could no longer rapidly screen for bruscellosis.

“Tt wasn’t until May of 1978 that plaintiffs were

afforded a hearing with the Montana Department of

Livestock to contest the charges and revocation. As

a result of the hearing, the Board of Livestock voted

to reinstate plaintiffs’ card test authority and di-

rected defendant Glosser to sign the permits. De-

fendant Glosser signed the permits, but when the per-

mits were presented to the federal official, Mr. Houle,

he refused to co-sign the permits. Plaintiffs continue

to be deprived of their permits.

“Defendants are unable to point to any laws or

regulations governing the issuance or revocation of

the permits. The only authority comes from a “Memo-

randum of Understanding” between the Montana De-

partment of Livestock and the Veterinary Services

USDA, dated August 7, 1973. The m

while authorizing the use of the kits, does not set

forth any procedures for the issuance or revocation

of the card test permit.”

Doran v. Houle, 516 F.Supp. at page 1233.

Accordingly, the District Court held that the rela-

tionship between the state and Doran, Scott and Bailey,

veterinarians who had administered the card test for the

state created a specialized veterinary practice and a busi-

ness which is dependent upon the continued use of the

test.

‘‘The question here is whether the plaintiffs had

an ext ctation of entitlement for the continued use

of these permits sufficient to create a property in-

terest. Neither side can point to specific statutes

or regulations dealing with the issuance or revoca-

tion of card test permits. There exists only a ‘‘Mem-

orandum of Understanding’’ between the federal and

state officials which authorizes the state to jointly

issue these card test permits to qualifying state dep-

uty veterinarians such as plaintiffs.

‘‘Except perhaps for emergency health situa-

tions, defendants are unable to point to convincing

authority which unmistakenly commits the decision

to revoke these permits to the unbridled discretion

of these officials. While it may be true that the own-

ership of the test kits rests solely with the federal ea

government, nothing here indicates that Congress

or the state intended to give defendants discretion |

so broad that there is no law to apply and that plain-

tiffs only safeguard to the removal of these permits <

would be the good nature of these officials. See, od

Pence v. Kleppe, 529 F.2d at 140, (9th Cir. 1976); Y

compare Jacobson v. Hannifin, 627 F.2d 177, 180

(9th Cir. 1980). It appears that the state deputy

veterinarians who have held card test permits for

several years past rely on their continued right to

use their tests in stockyard practice at least as much

as Alaska natives rely on their continued use of land,

see Pence v. Kleppe, 529 F.2d 135, 140-41 (9th Cir.

1976), or as tenants of a HUD project rely on con-

tinued low income housing, see Geneva Tower Ten-

7

ants Org. v. Federated Mortgage Investors, 504 F.2d

483 (9th Cir. 1974), or as welfare recipients rely on

continued welfare benefits, see Goldberg v. Kelly, 397

U.S. 254 (1970), or as qualifying unemployed indi-

viduals rely upon unemployment, see, Sherbert v.

Verner, 374 U.S. 398 (1963). The court helds that

a protectable property interest is created where the

government issues permits which have the effect of

creating a specialized veterinary practice.

The government cannot om the one hand create

a business which is dependent upon a permit and

then with the other destroy it by revoking the aw.

thorizing permits without first affording sufficient

due process. See, Standard Airlines, Inc. v. Civil

Aeronautics Board, 177 F.2d 18 (D.C. 1949); Gon

zalez v. Freeman, 334 F.2d 570 (D.C. 1964).’’ Doran

v. Howe, 516 F.Supp. at 1234-35 (Emphasis Added.)

The Ninth Circuit argument did not address the Dis-

trict Court’s findings but instead found it was not bound

by them and therefore it conducted an independent re-

view of the plaintiff’s claim. Doran v. Houle, opinion,

page 5, lines 6-15.

The appeals court decision is not based upon # re-

versal of the District Court’s determination of a special-

ized veterinary practice but instead focuses on the gov-

ernment’s unrestricted discretion over the kits and fur-

ther on the Appeals Court’s failure to see any direct evi-

dence of a mutually explicit understanding. Doran opin-

ion, page 10, lines 11-17.

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ARGUMENT

I. Reasons For Granting the Writ

A. The Decision of the Court of Appeals Con-

flicts with Yick Wo v. Hopkins, that Unbrid-

led Discretion directed Exclusively against

Particular Persons where there is no Manda-

tory Authority is Discriminatory and a Prac-

tical Denial of Due Process.

There is no law compelling a person to have a per-

mit before he may perform the card test nor any law

giving unrestricted discretion over all matters involving

card test permits. It is therefore apparent there is no

law giving either the state or the federal government

discretionary authority to revoke its use or unrestricted

discretion over future enjoyment of the interest. To

allow the Ninth Circuit Opinion to stand will seriously

erode the principles set down in the landmark case of

Yick Wo v. Hopkins, 118 U.S. 365 (1886).

Doran, Scott and Bailey were unique in that all other

permit holders in the eradication program were employed

by the state and worked exclusively at auction markets.

Doran, opinion, page 3, lines 22-24. Doran, Scott and

Bailey performed the same services as those employees

in the eradication program, but received no compensa-

tion from the state for administering the tests. As pri-

vate practitioners they earned their living by serving

clients who required their ability to perform the test to

ship cattle in interstate commerce. Their right to con-

tinue their means of living is fundamental. Hicklin v.

Orbeck, 437 U.S. 518, 98 S.Ct. 2482, 57 L.Ed.2d 397 (1978).

9

Unfettered discretion directed so exclusively against

particular persons warrants and requires the conclusion

that, whatever the authority, it is applied with a mind

so unequal and oppressive as to amount to a practical

denial of due process and equal protection. ©

‘*For the very idea that one man may be com-

pelled to hold his life, or the means of living, or any

material right essential to the enjoyment of life at

the mere will of another, seems to be intolerable in

any country where freedom prevails as being the

essence of slavery itself.” Yick Wo v. Hopkins, 118

U.S. 356, 369 (1886).

See also Altop v. The City of Billings, 79 Mont. 25,

255 P. 11 (1927) where the Montana Supreme Court recog-

nizes the rule that an ordinance which vests unbridled

discretion and arbitrary power in public officials is in-

valid; State v. Gleason, 128 Mont. 485, 277 P.2d 530 (1954)

where the state requiring photographers to be licensed

gave the licensing board unlimited authority in choosing

who was qualified and held to be therefore, authority

which is arbitrary and capricious and without constitu-

tional logic in violation of the Montana Constitution and

the Fourteenth Amendment.

Every agency in the State of Montana is required

to adopt rules of practice setting forth the nature and

requirements of all formal and informal procedures. 82-

4203(b) R.C.M. 1947. Failure to do so makes the act in-

valid. Patterson v. State Dept. of Rev., 171 Mont. 168,

557 P.2d 798 (1976).

In the instant case the revocation is without author-

ity but allegedly necessary to the convenience of the ad-

ministration. Administrative convenience or even neces-

sity cannot override the constitutional requirements of

. due process. Cella v. U.S., 208 F.2d 783, 798 (7th Cir.

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1953); Accord Ohio Bell Telephone Company v. Public

Utilities Commission, 301 U.S. 292, 304 (1937).

In the issuance and control over the permits, the

government has a monopoly. There is no alternative to

processing the change of ownership of cattle in the live-

stock market. Due process is “to balance the power of

government over the individual’s life.’’ See Terrell,

Property and Due Process, 70 Georgetown Law Journal,

861, 903 (1982).

If permitted to stand, this case will permit unbridled

discretion of administrators without any authority. This

cannot be the basis of a government of laws not of men.

B. The Ninth Circuit has altered the Rules for

Review of Facts below Contrary to Rule 52

F.R.Civ.P. and an applicable decision of this

Court.

The Court of Appeals, relying on Memphis Light, Gas

and Water Division v. Craft, 436 U.S. 1, 98 S.Ct. 1554, 56

L.Ed.2d 3 (1970) and Shillingford v. Holmes, 634 Fed.2d

263, 265-66 (5th Cir. 1981) declared it was not bound by

the District Court’s prior determination and conducted an

independent review of plaintiffs’ claim. Doran, opinion,

page 5, lines 6-15.

In so doing the Court of Appeals ignored the Dis-

trict Court’s findings that the use of the kit by the gov-

ernment in a program to eradicate brusceilosis created

a specialized practice of veterinary medicine and thus

the plaintiffs’ yard practice was dependent upon the per-

mit. The facts found by the trial court are subject to

appraisal by the Appeals Court only under the clearly

erroneous rule, Federal Rules of Civil Procedure, Rule

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52. United States v. United States Gypsum Co., (1948)

333 U.S. 364, 394-95, 68 S. Ct. 525, 92 L.Ed. 746; Fluor

Corp. v. United States ex. rel Mosher Steel Co., (CA 9th,

1969) 405 F.2d 823, cert. denied (1969) — U.S. —, 89

S. Ct. 1632, 23 L.Ed. 2d 40. These findings of the Dis-

trict Court must be viewed in their strongest light in

favor of those opposing and must be given the advantage

of every fair and reasonable intendment. Continental

Ore Company v. Union Carbide Corporation, 370 U.S.

690 (1962) 8 L.Ed.2d 777, 82 S.Ct. 1404.

While the Court of Appeals may conduct an inde-

pendent review of the legal conclusions drawn from those

facts, it must accept the facts found by the trial court

unless clearly erroneous. Shillingford, supra, at page

265. If the Doran decision stands it will become prece-

dent in the Ninth Circuit to further ignore the standard

for review of facts on appeal.

C. The Decision of the Court of Appeals Conflicts

with Decisions of the Fourth and D.C. Circuit

Courts of Appeals Prohibiting termination of

a business interest without due process.

The valid business property interest arises from an

understanding between the parties as shown by the dura-

tion of the permit, the historical conduct of the parties

* under the permit and the reliance by the government on

the private practice of veterinary medicine to implement

the bruscellosis eradication program as well as on the

imposition of the permit on an already established live-

stock yard practice. Due process is required as a matter

of state and federal law.

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The Ninth Cireuit recognized the principle that an

agency cannot terminate a business interest without af-

fording due process. City of Santa Clara, California v. An-

drus, 572 F.2d 660 at page 675, citing Gonzalez v. Freeman,

334 F.2d 570 (D.C. Cir. 1964) and Crosby Transfer and

Storage Corporation v. Froehlke, 480 F.2d 498 (4th, 173).

Gonzalez, swpra, arises out of the debarring of con-

tractors from doing business with the Commodity Credit

Corporation. The District of Columbia Circuit Court re-

fused to permit termination of the contractor’s right to

do business with the Commodity Credit Corporation with-

out notice and an opportunity to be heard in the following

language:

“Congress has made no explicit provision for de-

barring contractors doing business with Commodity

Credit. The question presented is whether commodity

Credit is powerless to terminate business relations

with irresponsible defaulting or dishonest contrac-

tors. Notwithstanding its severe impact upon a con-

tractor, debarment is not intended to punish but is

a necessary ‘means for accomplishing the congress-

ional purpose’ of Commodity Credit to ‘aid in the de-

velopment of foreign markets for, agricultural com-

modities.’ 62 Stat. 1072 (1948), 15 U.S.C. §714¢(f)

(1958). Without such power to deal with irrespon-

sible bidders and contractors, the efficiency of Com-

modity Credit’s operations would be severely impaired.

See L. P. Stewart & Bro., Inc. v. Bowles, 322 U.S. 398,

406, 64 S.Ct. 1097, 88 L.Ed. 1350 (1944). We conclude

that such a power is inherent and necessarily inci-

dental to the effective administration of the statutory

scheme. Cf. Commodity Credit Corp. v. Worthington,

263 F.2d 178 (4th Cir.) cert. denied, 359 U.S. 1012, 79

S.Ct. 1148, 3 L.Ed.2d 1036 (1959). But to the debar-

ment power there attaches an obligation to deal with

13

uniform minimum fairness as to all. Cf. Yick Wo v.

Hopkins, 118 U.S. 356, 6 S.Ct. 1064, 30 L.Ed. 220

(1886).” (Emphasis added) Gonzalez, supra, at page

576-577.

Thereafter the D.C. Circuit found that no regu-

lations had been established by Appellees authorizing or

governing debarment for misuse of official inspection cer-

tificates relating to the commodities exported by Appel-

lants. After citing in full 5 U.S.C. 1002(a)(b) the court

made the following statement:

“The command of the Administrative Procedure

Act is not a mere formality. Those who are called

upon by the government for a countless variety of

goods and services are entitled to have notice of the

standards and procedures which regulate these rela-

tionships. Neither appellants nor others similarly

situated can turn to any official source for guidance

as to what acts will precipitate a complaint of mis-

conduct, how charges will be made, met or refuted,

and what consequences will flow from misconduct if

found. In the contractual relationship shown by this

record an experienced businessman could reasonably

anticipate that some agency action might well be tak-

en as a result of misuse of inspection certificates, but

he could only speculate as to the nature of the action

and the processes by which it would be effected. This

condition does not accord with the provisions of the

Administrative Procedure Act. On this record there

is neither the appearance nor the reality of fairness

in the process by which debarment of appellants was

accomplished. Disqualification from bidding or con-

tracting for five years directs the power and prestige

of government at 4 particular person and, as we have |

shown, may have a serious economic impact on that -

person. Such debarment cannot be left to administra- ;

tive improvisation on a case-by-case basis. The gov-

ernmental power must be exercised in accordance with

accepted basic legal norms. Considerations of basic

14

fairness require administrative regulations establish-

ing standards for debarment and procedures which

will include notice of specific charges, opportunity to

present evidence and to cross-examine adverse wit-

nesses, all culminating in administrative findings and

conclusions based wpon the record so made.” (Em-

phasis added) Gonzalez, swpra, at page 578.

In Crosby, supra, the Fourth Circuit enjoined the Sec-

retary of the Army from enforcing a “four carrier” regu-

lation which prevented Crosby from representing more

than four carriers. In doing so the court interpreted the

agency’s regulation in accordance with the agency’s ad-

ministrative practice in applying the same. Crosby, supra,

pages 501-502. The court found no rules of procedure

governing the debarment of Crosby from future govern-

ment contracts and held: “The Service’s failure to state

and publish its procedures justified the district court’s

conditional injunctive relief.” Crosby, supra, page 508.

There are no cases which are four square with the

instant case. However, the parallels of the following case

are obvious.

In Standard Airlines, Inc. v. Ciwil Aeronautics Board,

177 F.2d 18 (D.C. 1949) the court considered the suspen-

sion of the air carrier’s registration without a hearing.

There was no statute or law requiring a hearing prior to

suspension. After finding that the airline had a substan-

tial investment in equipment and business essential to

commercial transportation, the court found that suspen-

sion for any considerable time would damage the carrier’s

business and stated:

“So the problem before us concerns the statutory

and constitutional rights of one who has a substantial

15

property investment acquired in dependence upon a

Government permit which is subject to immediate sus-

pension at any time. What are the requirements of

the statute and of due process of law in such a sit-

uation?

“The controlling practicality, in our view, is that

the suspension would destroy property, not a license

property but investment and business property. The

Government cannot make a business dependent upon a

permit and make an otherwise unconstitutional re-

quirement a condition to the permit. That principle

applies to mail privileges. An administrative agency

cannot make an otherwise invalid proviso a condition

to the grant of a permit. We think the same principles

apply here.” Standard Airlines, supra, at page 20.

The already established business of veterinary medi-

cine in the livestock yard depended upon the permit. The

Ninth Circuit’s decision permits destruction of the prop-

erty interest in the livestock yard veterinary practice (in-

vestment and business property) without statutory author-

ity. To allow the circuit court’s decision to stand would

leave the circuits in conflict and create substantial uncer-

tainty in business relationships with the government.

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CONCLUSION

For all of the foregoing reasons, a Writ of Certiorari

should issue to review the judgment and opinion of the

Ninth Circuit.

Respectfully submitted this 3rd day of February, 1984.

App. 1

APPENDIX “A”

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NOS. CA 82-3445

82-3457

82-3465

D.C. NO. CV-79-14-GF

M. P. DORAN, JAMES A. SCOTT and

JAMES H. BAILEY,

Plaintiffs-Appellees,

Cross-Appellants,

vs.

F. H. HOULE and JAMES W. GLOSSER,

Defendants-Appellants,

Cross-Appellees.

On Appeal from the United States District Court

for the District of Montana

The Honorable Paul Hatfield, District Judge, Presiding

Argued and Submitted June 7, 1983

OPINION

(Filed November 18, 1983)

Before: ANDERSON and FLETCHER, Circuit Judges,

and TAYLOR’, District Judge

TAYLOR, District Judge:

Three Montana veterinarians brought an action under -

42 U.S.C. §1983 against two government officials, Dr.

* The Honorable Fred M. Taylor, United States District Judge,

District of Idaho, sitting by designation.

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App. 2

Glosser who was employed by the state of Montana, and

Dr. Houle who was employed by the federal government.

The complaint alleged a conspiracy to deprive plaintiffs

of certain government issued permits without due process

of law. The permits in question, which were part of a

joint federal-state disease eradication program, allowed

the holder to perform a specific test for brucellosis in

cattle. Plaintiffs obtained a substantial judgment follow-

ing a jury trial and defendants appealed. We reverse on

the basis that plaintiffs had no constitutionally protected

interest in the permits.

OVERVIEW

Brucellosis is a highly contagious and infectious bac-

terial disease. It occurs primarily in cattle, causing re-

productive failure and the abortion of calves. Testimony

at trial indicated that, by comparison, brucellosis is pres-

ently a greater threat to ranchers than anthrax or hoof-

and-mouth disease. Brucellosis can also cause undulant

fever and other ill effects in humans.

Montana is particularly vulnerable to this disease as

cattle ranching is a major industry in the state. The De-

partment of Livestock is the state agency directly respon-

sible for monitoring and protecting the health of Mon-

tana’s cattle population.

The federal government, acting through the United

States Department of Agriculture (USDA), is also in-

volved in regulating animal welfare. See 21 U.S.C. §§111,

114 (1976). One of the steps taken by the federal govern-

ment to prevent the spread of brucellosis is a requirement _

that cattle moved interstate be tested and certified as

oS

«iad

App. 3

“brucellosis-free”. See Department of Agriculture Regu-

lations, 9 CFR, Part 78, subpart B (1983).

There are a number of different tests which can be

used to detect the presence of brucellosis in cattle. This

case deals with the permits to perform a particular diag-

nostic test, the “card test”. The principal advantage of

the ecard test is its ability to quickly and reliably deter-

mine whether a particular animal does not have brucel-

losis. This makes it particularly suitable for use at auc-

tion markets where cattle are assembled and sold prior to

interstate shipment.

The card test is performed on a blood sample which

can be drawn by any licensed veterinarian. If the test

results are negative, the animal’ is considered to be free

of the disease and may be shipped across state lines. If

the results are positive, additional tests are required to

be certain the animal is not infected. In the interim, the

suspect animal is placed in quarantine until followup tests

can be completed.

The card test itself is owned by the federal govern-

ment. The USDA has for many years issued permits to

qualified veterinarians. These permit holders have never

been allowed to charge cattle owners for performing the

test, although as licensed veterinarians they may charge

for drawing the necessary blood sample.

In 1973, alerted by a resurgence of brucellosis in Mon-

tant, the USDA and the Montana Department of Livestock

agreed to cooperate in an aggressive joint-eradication pro-

gram. The basic parameters of the program were set

forth in two government memoranda: a federal Veterin-

App. 4

ary Services Memorandum and a joint federal-state Mem-

orandum of Understanding.

All three plaintiffs applied for and were issued card

test permits in 1976, pursuant to this joint federal-state

program. At that time, Drs. Bailey and Scott had re-

cently joined Dr. Doran’s practice as salaried associates.

Dr. Doran had been practicing veterinary medicine in

Great Falls for approximately twenty-five years and had

previously held a card test permit. Plaintiffs were unique

in that all other permit holders in Montana were employed

by the state and worked exclusively at auction markets.

The dispute which culminated in this action began

with the discovery in November, 1977, that two cows card

tested by plaintiffs and found to be suspect had been re-

leased from quarantine prior to a final determination of

their health by the Montana State Laboratory. On No-

vember 28, 1977, Dr. Glosser, the State Veterinarian for

the Department of Livestock, orally notified plaintiffs that

their permits were being terminated as a result of their

failure to control the two suspect animals and their prior

history of permit violations. A letter confirming the ter-

mination was mailed two days later.

Plaintiffs, who thought the termination unjustified,

made no serious effort to appeal Dr. Glosser’s decision un-

til January, 1978, when they attempted to present their

case before the Department of Livestock’s Board of Di-

rectors. The Board Chairman advised plaintiffs they

would need to make a formal request for a hearing. Such

a request was made, but not until March 6, 1978. The

matter was set to be heard in April. At plaintiffs’ re-

quest, the hearing was subsequently postponed until May.

App. 5

In the meantime, one of the Board’s staff attorneys pre-

sented plaintiffs with a three page letter explaining the

reasons for Dr. Glosser’s termination of their card test

authority.

In May, the Board voted to reinstate the three per-

mits. However, because of a subsequent federal investi-

gation into the quarantine breach and changes in Depart-

ment of Livestock policy regarding re-issuance of card test

permits to private veterinarians, plaintiffs were unable to

have their permit authority reinstated.

Plaintiffs then filed this action alleging that Dr. Glos-

ser and Dr. Houle, an employee of the USDA, conspired to

deprive plaintiffs of their constitutionally protected liberty

and property interests without due process of law. Follow-

ing summary judgment motions, the district court deter-

mined, inter alia, that a property interest did exist in the

card test permits.' Doran v. Houle, 516 F.Supp. 1231,

1234 (D. Mont. 1981). The case proceeded to trial where

a jury awarded plaintiffs compensatory and punitive dam-

ages totaling $272,000.

MERI'VS

The threshold issue in this case is whether a consti-

‘ tutionally protected property interest was implicated. Al-

though the answer to the question of whether a property

interest was present necessarily depends on the facts in

this case, it remains a legal issue requiring an interpreta-

tion of the federal Constitution. Memphis Light, Gas and

Water Division v. Craft, 436 U.S. 1, 98 S.Ct. 1554, 56 L.Ed.

2d 30 (1978). Therefore, we are obligated to conduct an

independent review of plaintiffs’ claim and are not bound

App. 6

by the district court’s prior determination. See Shilling-

ferd v. Holmes, 634 F.2d 263, 265-66 (5th Cir. 1981).

The Supreme Court in Board of Regents of State

Colleges v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d

548 (1972) made it clear that property interests protected

by procedural due process are not restricted to a few

rigid, technical forms. Rather, the constitutional concept

of property embraces a broad, although not infinite, range

of interests. Id. at 571-72; Perry v. Sindermann, 408 U.S.

593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972); see

generally C. Reich, The New Property, 73 Yale L.J. 733

(1964).

To have a property interest in any government benefit,

a person must have more than an abstract need or desire

for it; he must have a legitimate claim of entitlement.

Roth, 408 U.S. at 577, 92 S.Ct. at 2709. Plaintiffs contend

they have such a legitimate claim, while defendants argue

that any expectation of continued entitlement was entirely

unilateral.

A legitimate claim of entitlement cannot be premised

on the Constitution itself, but must be derived from some

independent source in either state or federal law. Jd. In

the immediate case, there were no statutes or regulations

establishing administrative standards for issuing or re-

voking card test permits. Cf. Mathews v. Eldridge, 424

U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976) (social secur-

ity disability benefits). Nor was there an express contract

granting a right to continued possession. Cf. Lynch v.

United States, 292 U.S. 571, 54 S.Ct. 840 (1934) (war risk

insurance policies).

The absence of a specific statute, regulation or writ-

ten contract in this case does not necessarily foreclose

App. 7

the possibility that a property interest might have been

created, although the absence of such formal sources is

“highly relevant” to the due process question. Sinderman,

408 U.S. at 602, 92 S.Ct. at 2699-700. The Supreme Court

has declared that a legitimate claim of entitlement can

also be based on the conduct and representations of gov-

ernment officials when their actions lead to the creation

of a “mutually explicit understanding”. Jd. at 601, 92 S.

Ct. at 2699.

The record shows that the card test program in Mon-

tana was jointly administered and regulated by the USDA

and the Montana Department of Livestock. The permits

were issued to qualified veterinarians in accordance with

the policies outlined in Veterinary Services Memorandum

No. 551.16 and the joint federal-state Memorandum of

Understanding. The Veterinary Services Memorandum

merely describes basic federal policy concerning use of

the card test and offers general guidelines for establish-

ing “({a]n annual permit system”. [emphasis added]. The

joint federal-state memorandum, which outlines the per-

mit system in Montana, is just as cursory. The permits

themselves, similarly, do not refer to any specific proe:d-

ures for obtaining a renewal or challenging a cancellation

decision, although each permit includes a specific date of

issuance and expiration.

Each of these documents—the federal Veterinary

Services Memorandum, the joint federal-state Memoran-

dum of Understanding and the individual permits—in-

cluded the following statement:

Annually, prior to renewal of the permit, the permit

holder may be required to . . . conduct and interpret

the card test on standardized check test serums... .

{emphasis added]

App. 8

In this case, all three permits had expired at least

eight months prior to the time Dr. Glosser terminated

plaintiffs’ card test authority. On appeal, plaintiffs main-

tain that because the administering agencies failed to en-

force the permit expiration dates the permits should be

considered reissued. The facts do not support such a con-

clusion. Plaiatiffs have not cited any testimony or evi-

dence in the record which would indicate the state and

federal agencies intended such a result or, by their actions,

would have led a reasonable person to conclude that the

permits had been renewed. Had plaintiffs applied for re-

newal but received no response from the government, it

might have been possible to find that the permits had been

reissued for another year. However, plaintiffs never made

such a request; they simply ignored the renewal require-

ment and continued to perform the federally owned test.

Therefore, to the extent plaintiffs retained any authority

beyond the permit deadlines, that authority was held at

the sufferance and will of the officials charged with ad-

ministering the permit program in Montana. See Otten

v. San Francisco Hotel Owners Assoc. 74 Cal.App.2d 341,

168 P.2d 739 (1946) (nonrenewal of expired service con-

tract).

Where the government, as the source of the interest

in question, retains unrestricted discretion over future

enjoyment of the interest, the interest is not a protected 1

entitlement. Bishop v. Wood, 426 U.S. 341, 344-47, 96 S.

Ct. 2074, 48 L.Ed.2d 684 (1976). Thus, if the permits were

held at the will of the governments administering the per-

mit program in Montana, it is axiomatic that plaintiffs

can make no legitimate claim to continued possession.

Even if the annual permits had been implicitly reis-

sued in this situation, it is apparent that the joint eradi-

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App. 9

cation program was designed to give the state and federal

governments unrestricted discretion over all matters in-

volving card test permits. There were, for example, no

published criteria for choosing among qualified appli-

eants or specific standards for determining whether to

renew a previously issued permit. Cf. Roth, 408 U.S. at

578 (no property interest, where no standards and criteria

for reemployment).

Indeed, the very nature of the joint eradication pro-

gram suggests that the administering agencies were to re-

tain complete discretion in regard to card test permits.

The program was created in response to the danger posed

by the outbreak of a highly contagious disease which could

have a potentially devastating effect on the economy and

health of the state. Under these circumstances and with-

out any affirmative statements to the contrary, it is rea-

sonable to conclude that the operation of the program, in-

cluding control over the card test permits, was left to the

discretion of the responsible government officials. The

absence of regulations governing permit issuance and can-

cellation can thus be seen as reflecting the need for flex-

ibility inherent in this type of government program.

There is, finally, no direct evidence to support the

existence of a mutually explicit understanding. The argu-

ments offered to advance the existence of such an under-

standing in this case are not premised on anything the

Montana Department of Livestock or USDA did, but on

what they failed to do. Plaintiffs do not claim that any

agency or official affirmatively represented that existing

permit holders would be entitled to retain their authority

indefinitely, or even beyond the first year. Instead, plain-

tiffs rely on arguments describing the governments’ lack

App. 10

of action, including the failure to enforce the permit ex-

piration dates, establish permit renewal procedures and

expressly provide that the permits could be removed at

the discretion of government officials. Neglecting to en-

force the permit expiration dates in this single instance

cannot reasonably be said to have created a long-standing

practice of ignoring the permit renewal requirement and

there certainly is nothing which approaches a “common

law” of reissuance in this case. See Bollow v. Federal Re-

serve Bank of San Francisco, 650 F.2d 1093, 1099 (9th Cir.

1981) ; see also Roth, 408 U.S. at 578, n. 16. There is, for ex-

ample, no evidence that the expiration dates of other per-

mits were ignored or that the government agencies in this

case were even aware that the plaintiffs’ permits had ex-

pired. The mere fact a person has received a government

benefit in the past, even for a considerable length of time,

does not, without more, rise to the level of a legitimate

claim of entitlement. Bollow, 650 F.2d at 1099.

Similarly, the absence of regulations governing the

permit program does not lead to the conclusion that the

state and federal governments intended to create a right

to continued entitlement. Rather, it tends to support the

conclusion that plaintiffs held only a unilateral hope that

the agencies would continue to recognize their authority

in the future. See Arena Del Rio, Inc. v. Gonzalis, 704

F.2d 27 (1st Cir. 1983).

In conelusion, it is evident from the record the: plain-

tiffs’ card test authority was held subject to the unre-

stricted discretion of those government officials admin-

istering the joint eradication program. Nothing has been

shown which indicates the existence of an agreement con-

tradicting the governments’ discretion and securing for

App. 11

plaintiffs a legitimate expectation of continued entitle-

ment.

After fully reviewing the record in this case, we con-

clude that the jury’s verdict was premised upon an er-

roneous legal conclusion regarding the scope of protected

property under the due process clauses of the fifth and

fourteenth amendments to the Constitution. Accordingly,

we must vacate and remand the case to the district court

with instructions to dismiss plaintiffs’ action for failure

to state a proper claim for relief under 42 U.S.C. § 1983.

This result makes it unnecessary to discuss or decide any

of the several additional issues raised by the parties on

appeal.

FOOTNOTE

'The district court also determined that defendants’

actions did not violate plaintiffs’ liberty interests. Doran

v. Howe, 516 F.Supp. at 1235. Plaintiffs, on appeal, indi-

rectily question this finding. We see no error in the dis-

trict court’s decision regarding plaintiffs’ alleged liberty

interest. See, Bishop v. Wood, 426 U.S. 341, 348-49, 96 S.

Ct. 2074, 48 L.Ed.2d 684 (1976).

re:

App. 12

APPENDIX “B”

M. P. DORAN, JAMES A. SCOTT, and

JAMES H. BAILEY,

Plaintiffs,

Vv.

F. H. HOULE and JAMES W. GLOSSER,

Defendants.

No. CV-79-14-GF.

United States District Court,

D. Montana,

Great Falls Division.

June 25, 1981.

Veterinarians filed action alleging that the revoca-

tion of their permits to perform the brucellosis card test

was wrongful. The defendants filed a motion for summary

judgment. The District Court, Hatfield, J., held that: (1)

the revocation of the veterinarians’ permits to perform

the brucellosis card test without any notification of spe-

cific charges or an opportunity to present evidence in re-

buttal improperly terminated an otherwise invalid busi-

ness property interest; (2) the summary recovation of

the permits did not violate the veterinarians’ liberty in-

terest, since the assumably false reasons for the revocation

were not made public; and (3) the issues of whether the

administrator of the Department of Agriculture, Animals

and Plant Health Inspection Service was entitled to a de- )

fense of qualified immunity and whether various parties.

conspired to revoke the permits were substantial issues

of material fact, precluding summary judgment.

Motion for summary judgment denied in part.

App. 13

1. Constitutional Law 277(1)

Property interest in benefit protected by due process

clause results from legitimate claim of entitlement created

and defined by independent source, such as state or fed-

eral law. U.S.C.A.Const. Amends. 5, 14.

2. Constitutional Law 287.2(5)

For purposes of action by veterinarians challenging

revocation of permits to perform brucellosis card test, pro-

tectible property interest was created when government

issued permits which had effect of creating specialized

veterinary practice. U.S.C.A. Const. Amends. 5, 14.

3. Constitutional Law 287.2(1) °

Government cannot on the one hand create a business

which is dependent on a permit and then with the other

destroy it by revoking the authorizing permits without

first affording sufficient due process. U.S.C.A.Const.

Amends. 5, 14.

4. Constitutional Law 287.2(5)

Revocation of veterinarians’ permits to perform brnu-

cellosis card test without notice and hearing constituted

denial of due process, since veterinarians should have been

notified of specific charges and given opportunity to pre-

sent evidence in rebuttal and receipt of reasons for rev-

ocation. U.S.C.A. Const. Amends. 5, 14.

5. Constitutional Law 287.2(5)

Summary revocation of veterinarians’ permits to per-

form brucellosis card test did not violate veterinarians’

App. }4

liberty interest where there was no allegation that state or

federal government publicly stated the assumably false

reasons for the revocation of card test permit. U.S.C.A.

Const. Amends. 5, 14.

6. Civil Rights 13.8(1)

Government official is not immune from liability if he

knew or reasonably should have known that action he took

within his sphere of official responsibility would violate

constitutional rights of a plaintiff; qualified in.munity is

based on reasonable grounds and good-faith belief. 42

U.S.C.A. § 1983; U.S.C.A.Const. Amends. 5, 14.

7. Cwil Rights 13.13(1)

Burden remains on official claiming immunity for

functions performed in his official capacity to demonstrate

that his conduct was justified by objectively reasonable

belief that it was lawful. 42 U.S.C.A. § 1983; U.S.C.A.

Const. Amends. 5, 14.

8. Federal Civil Procedure 2491.5

In action by veterinarians challenging revocation of

permits to perform brucellosis card test, issue of whether

administrator of Department of Agriculture, Animal and

Plant Health Inspection Service was entitled to qualified

immunity was substantial issue of material fact, preclud-

ing summary judgment. Fed.Rules Civ.Proc. Rule 56(c),

28 U.S.C.A.

9. Federal Civil Procedure 2491.5

In action by veterinarians challenging revocation of

permits to perform brucellosis card test, issue of whether

App. 15

federal administrators conspired to violate veterinarians’

constitutional rights was substantial issue of material fact,

precluding summary judgment. Fed.Rules Civ.Proc. Rule

56(c), 28 U.S.C.A.

Gregory O. Morgan, Bozeman, Mont., for plaintiffs.

Robert T. O’Leary, U, S. Atty., C. Richard Anderson,

Asst. U. S. Atty., Butte, Mont., for defendant Houle.

Jack L. Lewis, Jardine, Stephenson, Blewett & Weav-

er, Great Falls, Mont., for defendant Glosser.

MEMORANDUM

HATFIELD, District Judge.

Veterinarians Doran, Scott and Bailey brought suit

against F’. H. Houle, an administrator of the United States

Department of Agriculture, Animal and Plant Health In-

spection Service, and against Jaines W. Glosser, an ad-

ministrator of the Montana Department of Livestock.

Plaintiffs brought the action pursuant to 42 U.S.C. § 1983:

Jurisdiction is based on 28 U.S.C. § 1343 and § 1331.

Plaintiffs claim that these two administrators together

wrongfully revoked permits to perform the brucellosis card

test for the brucellosis program testing in Montana. Plain-

tiffs allege that defendants revoked their permits without

notice or a hearing which violated their rights of proced-

ural due process and equal protection. Plaintiffs claim

an infringement of a liberty and property interest as set

out in Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701,

33 L.Ed.2d 548 (1972).

Before the court are defendants’ motions for summary

judgment pursuant to Rule 56(c), Fed.R.Civ.P. For the

app. 16

reasons contained herein the motions will be denied in part

and granted in part.

FACTS

Drs. Doran, Scott and Bailey had established a veter-

inary practice in a livestock yard in Great Falls, Montana.

All three are licensed veterinarians authorized to practice

veterinary medicine as provided by Montana and Federal

law. All were deputy state veterinarians for the State of

Montana. As part of the practice all three had yearly

permits issued by the government for the use of the brucel-

losis card test kit. As such they may perform various

official tuberculosis and brucellosis tests on animals, per-

form contagious disease contro!, and write health certifi-

cates necessary for interstate shipment of cattle.

Brucellosis is a transmittable infectious bacterial dis-

east found primarily in cattle, the early detection of which

is vital to the shipment of cattle from a stockyard. One

method for detecting this disease involves the drawing of

a blood sample which is then analyzed by the State Labo-

ratory located in Bozeman, Montana. Another method is

the brucelloisis card test kit. It is a rapid screening pro-

cedure used only in the stockyard market to confirm that

an animal does not have brucellosis. If the test results

are negative an animal may be sold through the market

and shipped without the four to five day delay which en-

sues if the results are sent back from the State Labora-

tory.

The kits are the exclusive property of the federal gov-

ernment and cannot be used without their express per-

mission.

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ke

App. 17

Prior to November, 1977, plaintiffs were authorized

by state and federal officials to perform the brucellosis

card test.! On November 28, 1977, defendant Glosser, the

state official, without notice or hearing suspended plain-

tiffs’ authority to perform card test and had the card

test kit impounded.? By suspending plaintiffs’ authority

to administer the card tests, plaintiffs were put in the same

position as other accredited state deputy veterinarians ex-

cept that they no longer could perform these rapid screen-

ing tests. Thus, although plaintiffs could still continue

their private practice in livestock markets, plaintiffs con-

tend that the removal of the permit in effect destroyed

their livestock yard practice because they could no longer

rapidly sereen for brucellosis.

It wasn’t until May of 1978 that plaintiffs were af-

forded a hearing with the Montana Department of Live-

stock to contest the charges and revocation. As a result

of the hearing the Board of Livestock voted to reinstate

plaintiffs’ card test authority and directed defendant Glos-

ser to sign the permits. Defendant Glosser signed the per-

mits, but when the permits were presented to the federal

official, Mr. Houle, he refused to co-sign the permits.

Plaintiffs continue to be deprived of their permits.

1. Even though plaintiffs’ test permits expired by their own

terms one year after they were issued (in this case January

through March of 1976) and prior to the November, 1977 in-

state and federal als continued to provide the

card test kits and otherwise treat plaintiffs as if their permits

had not expired. There was no real dispute as to this, and

accordingly the court will view the permits as being renewed.

Although not substantiated in the record, the reason for

2.

Glosser’s decision centered around a rumor that plaintiffs

have released cattle for interstate movement suspected

of being infected with brucellosis.

App. 18

Defendants are unable to point to any laws or regu-

lations governing the issuance or revocation of the permits.

The only authority comes from a “memorandum of under-

standing” between the Montana Department of Livestock

and the Veterinary Services, USDA, dated August 7, 1973.

The memorandum, while authorizing the use of the kits,

does not set forth any procedures for the issuance or revo-

cation of the card test permit.

Plaintiffs assert three bases for recovery. First, that

the use of these permits was a government benefit suffi-

cient to create a property interest so as to invoke the con-

stitutional protections of due process. Second, that their

reputations were damaged by the revocation which violates

a protectable liberty interest. And third, that defendants

engaged in an unlawful conspiracy to deprive plaintiffs

of their constitutional rights.

Defendants argue that plaintiffs have neither suffi-

cient “property” or “liberty” interest in the continued use

of these permits and that therefore summary judgment

ought to be granted in favor of them. In addition, defend-

ant Houle argues that he is protected by the qualified im-

munity doctrine as set forth in Scheuer v. Rhodes, 416 U.S.

232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) and Butz v. Econo-

mou, 438 U.S. 478, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978).

Under Rule 56(c), Fed.R.Civ.P., summary judgment

is proper only where there is no genuine issue of any ma-

terial fact, or where “viewing the evidence and the infer-

ences which may be drawn therefrom in the light most fa-

vorable to the adverse party, the movant is clearly entitled

to prevail as a matter of law.” Yaezie v. Olney, Levy,

Kaplan & Tenner, 593 F.2d 100, 102 (9th Cir. 1979). An

App. 19

examination of the facts and legal claims suggests sum-

mary judgment is appropriate only to the liberty interest

claim.

Plaintiffs’ principal claim is that the state and federal

government officials denied them due process in the man-

ner in which they revoked their card test permits. There

is no dispute that plaintiffs’ permits were revoked without

notice or hearing. However, in order to invoke the pro-

tection of the due process clause plaintiffs, as existing per-

mittees of the card test, must show that they have a suffi-

cient property or liberty interest protected by the due

process clause.

PROPERTY INTEREST

The test for identifying a sufficient property interest

is not clearly defined. In Board of Regents v. Roth, 408

U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972),

the Court stated:

. . . To have a property interest in a benefit, a per-

son clearly must have more than an abstract need or

desire for it. He must have more than a unilateral

expectation of it. He must, instead, have a legitimate

claim of entitlement to it. It is a purpose of the an-

cient institution. of property to protect those claims

upon which people rely in their daily lives, reliance

that must not be arbitrarily undermined. It is a pur-

pose of the constitutional right to a hearing to provide

an opportunity for a person to vindicate those claims.

Property interests, of course, are not created by the

Constitution. Rather, they are created and their di-

mensions are defined by existing rules or understand-

ings that stem from an independent source such as

state law—rules or understandings that secure certain

benefits and that support claims of entitlement to

those benefits.

App. 20

See also, Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694,

33 L.Ed.2d 570 (1972).

[1] These and other cases make clear that “a prop-

erty interest in a benefit protected by the due process

clause results from a legitimate claim of entitlement cre-

ated and defined by an independent source, such as state

or federal law.” See Russell v. Landrieu, 621 F.2d 1037,

1040 (9th Cir. 1980).

{[2] The question here is whether plaintiffs had an

expectation of entitlement for the continued use of these

permits sufficient to create a property interest. Neither

side can point to specific statutes or regulations dealing

with the issuance or revocation of card test permits. There

exists only a “memorandum of understanding” between the

federal and state officials which authorizes the State to

jointly issue these card test permits to qualifying state

deputy veterinarians such as plaintiffs.

Except perhaps for emergency health situations, de-

fendants are unable to point to convincing authority which

unmistakenly commits the decision to revoke these permits

to the unbridled discretion of these officials. While it may

be true that the ownership of the test kits rests solely with

the federal government, nothing here indicates the Con-

gress of the State intended to give defendants discretion

so broad that there is no law to apply and that plaintiffs’

only safeguard to the removal of these permits would be

the good nature of these officials. See, Pence v. Kleppe,

529 F.2d 135 at 140 (9th Cir. 1976) ; cf., Jacobson v. Hanni-

fin, 627 F.2d 177, 180 (9th Cir. 1980). It appears that state

deputy veterinarians who have held card test permits for

several years past rely on their continued right to use the

App. 21

test in their stockyard practice at least as much as Alaska

natives rely on their continued use of land, see, Pence v.

Kleppe, 529 F.2d 135, 140-141 (9th Cir. 1976), or as tenants

of a HUD project rely on continued low-income housing,

see, Geneva Tower.Tenants Org. v. Federated Mortgage

Investors, 504 F.2d 483 (9th Cir. 1974), or, as welfare re-

cipients rely on continued welfare benefits, see, Goldberg

v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970),

or as qualifying unemployed individuals rely on unemploy-

ment compensation, see, Sherbert v. Verner, 374 U.S. 398,

83 S.Ct. 1790, 10 L.Ed.2d 965 (1963). The court holds that

a protectable property interest is created where the gov-

ernment issues permits which have the effect of creating

a specialized veterinary practice.

[3] The government cannot on the one hand create a

business which is dependent upon a permit and then with

the other destroy it by revoking the authorizing permits

without first affording sufficient due process. See, Stand-

ard Airline, Inc. v. Civil Aeronautics Board, 177 F.2d 18

(D.C. 1949); Gonzalez v. Freeman, 334 F.2d 570 (D.C.

1964).

[4] Since it has been determined that due process

applies here, the question remains what process is due.’

See, Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593,

2600, 33 L.Ed.2d 484 (1972). While the requirement of

3. Both parties argue the applicability or inapplicability of

both the Montana Administrative Procedures Act, §§ 2-4-101

M.C.A., et . and the Federal Administrative Procedures

fo BB 5 usc. § 551, et seq. The court need not determine

of procedural rights under these

Acts apply her ieee is neither the nce nor the

pee Bia ee revoked

App. 22

due process of law depends on several factors such as the

interest protected, the risk of loss, and the governmental

interest, see, Mathews v. Eldridge, 424 U.S. 319, 335, 96

S.Ct. 893, 903, 47 L.Ed.2d 18 (1976); Goss v. Lopez, 419

U.S. 565, 95 S.Ct. 729, 42 L.Ed.2d 725 (1975); Goldberg

v. Kelly, 397 U.S. 254, 263, 90 S.Ct. 1011, 1018, 25 L.Ed.2d

287 (1970), the fundamental elements of due process—no-

tice and hearing—were lacking when defeudants withdrew

the permits and refused to reinstate. Considerations of

basic fairness required that plaintiffs be notified of spe-

cific charges and an opportunity to present evidence in

rebuttal and receipt of the reasons for revocation. In

this court’s view the suspension of these card test permits

in this manner improperly terminated an otherwise valid

business property interest.

LIBERTY INTEREST

[5] The court now turns to an examination of wheth-

er defendants’ summary revocation of the permits vio-

lated plaintiffs’ liberty interest within the meaning of the

Fifth or Fourteenth Amendment. Plaintiffs claim that

their reputations were damaged when defendants termi-

nated their right to conduct this type of brucellosis test.

Plaintiffs assert the termination is an adverse reflection

on théir business competence.

Le]

As this court recognized in B.G.M. Enterprises v.

Harris, 482 F.Supp. 1073, 1078 (D.Mont.1980), the “notion

of liberty, while imprecise, distinguishes between a stigma

of moral turpitude, which infringes the liberty interest,

and a charge of incompetence .. . which does not.” [cita-

tions omitted]

es

App. 23

Even if business reputation is protected by a liberty

interest, see, B.G.M. Enterprises, supra, generally a per-

son’s interest in his “good name, reputation, honor or in-

tegrity” is not impaired unless the reasons for termina-

tion are made public. See, Bishop v. Wood, 426 U.S. 341,

96 S.Ct. 2074, 48 L.Ed.2d 684 (1976); Haimowitz v. Uni-

versity of Nevada, 579 F.2d 526, 529 (9th Cir. 1978) ; Stret-

ten v. Wadsworth Veterans Hospital, 537 F.2d 361, 365-

366 (9th Cir, 1976). Plaintiffs do not allege that the state

or federal government publicly stated the assumably false

reasons for revocation of the card test permits. Thus,

absent public disclosure, there can be no charge that plain-

tiffs’ “standing and associations in the community” were

seriously damaged.* Roth, supra, 408 U.S. at 573, 92 S.Ct.

at 2707. Thus, without more plaintiffs are precluded from

recovery on this basis and summary judgment shall be

entered in favor of defendants on this claim.

QUALIFIED IMMUNITY

Defendants argue that even if there is a protectable

property interest which invokes the due process clause,

the defense of qualified immunity as explained in Scheuer

v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90

(1974), and Butz v. Economou, 438 U.S. 478, 98 S.Ct. 2894,

57 L.Ed.2d 895 (1978) is available. These two cases recog-

nize the doctrine that federal and state executive officials

enjoy a qualified immunity for functions performed in

4. See, Davis v. Oregon State University, 591 F.2d 493, 498

(9th Cir. 1978). There the court held that an untenured pro-

fessor’s liberty interest in his good name and reputation was

not impaired where reasons for his dismissal were not made

public.

App. 24

their official capacity and which varies according to the

scope of discretion, the responsibility of the office and the

surrounding circumstances.

[6] In Scheuer, supra, the Court stated “[i]t is the

existence of reasonable grounds for the belief formed at

the time and in light of all circumstances, coupled with

good-faith belief, that affords the basis for qualified im-

munity of executive officers for acts performed in the

course of official conduct.” 416 U.S. at 247-248, 94 S.Ct.

at 1691-92. A government official is not immune from

liability “if he knew or reasonably should have known that

the action he took within his sphere of official responsi-

bility would violate the constitutional rights” of a plain-

tiff. Wood v. Strickland, 420 U.S. 308, 322, 95 S.Ct. 992,

1000, 43 L.Ed.2d 214 (1975); O’Connor v. Donaldson, 422

U.S. 563, 95 S.Ct. 2486, 45 L.Ed.2d 396 (1975). In short,

qualified immunity is based on reasonable grounds and

good-faith belief.

[7] The burden remains with the official claiming

immunity to demonstrate “that his conduct was justified

by an objectively reasonable belief that it was lawful.”

Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 1924,

64 L.Ed.2d 572 (1980); see also, Butz v. Economou, 438

U.S. 478, 507, 98 S.Ct. 2894, 2911, 57 L.Ed.2d 895 (1978).

[8] The court cannot conclude with certainty based

on the affidavits and evidence submitted for this summary’

judgment motion that defendant Houle is entitled to quali-

fied immunity. Rather, there exists material issues of fact

which goes to Houle’s scope of discretion, responsibilities,

good-faith belief, and the circumstances as they appeared

_ at the time he refused to sign the permits. See, Morri-

App. 25

son v. Jones, 607 F.2d 1269, 1274 (9th Cir. 1979); cf.,

Mosher v. Saalfeld, 589 F.2d 438 (9th Cir. 1978). Thus,

summary judgment on this basis is inappropriate.

CONSPIRACY

(9] Plaintiffs also claim that defendants and another

federal administrator conspired to violate plaintiffs’ con-

stitutional rights. Plaintiffs claim that Glosser, Houle

and an agent of the United States Department of Agri-

culture, Robert Morgan, acted in consort to deprive them

of their otherwise entitled permits to conduct brucellosis

tests. Plaintiffs basically claim that various conversations

took place among these three, the substance of which is,

at this time, rather vague.

Although defendants submit affidavits by various

officials of the United States Department of Agriculture,

including Mr. Morgan, those affidavits raise in the court’s

view questions of material fact which would best be left

for resolution at the trial level. Those questions of fact

include various dates affiants communicated with Houle,

the reasons for not signing the permits after the Board

of Livestock’s recommendation to reinstate the same, and

the reasons for other card test permits being signed while

the federal government was conducting an investigation

as to the State’s use of these permits. While this court

recognizes that more than vague conclusionary allegations

are required to state a conspiracy claim, see, Mosher v.

Saalfeld, 589 F.2d 438, 441 (9th Cir. 1978), nevertheless

the facts upon which plaintiffs rely should be more fully

developed at trial.

In sum, the court concludes that under the facts as

found by the court, there has been an unconstitutional de-

App. 26

nial of due process under the Fifth and Fourteenth

Amendments by reason of the summary revocation of the

plaintiffs’ permits. However, the court can find no basis

for a liberty interest claim. Therefore, in addition to the

conspiracy claim the issue remaining for trial is the quali-

fied immunity defenses.

Accordingly, defendants’ motion for summary judg-

ment are therefore denied in part and granted in part.

An appropriate order shall issue.

App. 27

APPENDIX “C”

UNITED STATES COURT OF APPEALS

For the Ninth Circuit

82-3445

82-3457

82-3465

No Sita

DC CV 79-14 PGH

M. P. DORAN, JAMES A. SCOTT, and

JAMES H. BAILEY,

Plaintiffs-Appellees,

Cross-Appellants,

vs.

F. H. HOULE and JAMES W. GLOSSER,

Defendants-Appellants,

Cross-Appellees.

JUDGMENT

(Filed December 16, 1983)

APPEAL from the United States District Court for

the..GREAT FALLS__District of. MONTANA.

THIS CAUSE came on to be heard on the Transcript

of the Record from the United States District Court for

the.._GREAT FALI._District of MONTANA __and

was duly submitted.

ON CONSIDERATION WHEREOF, It is now here

judgment of the said District Court in this Cause be, and

hereby is_.vacated_and remanded.

Filed and entered__November 18, 1983__.