Marshall v. Kleppe

• Decision Date: 20 April 1981
• Docket Number: No. 78-1481,78-1481
• Parties: Donald J. MARSHALL, aka Don Marshall, an Individual; DJM Productions, Inc., a Corporation, Plaintiffs-Appellants, v. Thomas KLEPPE, Administrator of the Small Business Administration, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1217

637 F.2d 1217

Donald J. MARSHALL, aka Don Marshall, an Individual; DJM Productions, Inc., a Corporation, Plaintiffs-Appellants, v. Thomas KLEPPE, Administrator of the Small Business Administration, Defendant-Appellee.

No. 78-1481.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 4, 1979.

Decided Aug. 19, 1980.

As Modified on Denial of Rehearing April 20, 1981.

Neal T. Wiener, Los Angeles, Cal., for plaintiffs-appellants.

Philip S. Malinsky, Asst. U. S. Atty., Los Angeles, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before GOODWIN and WALLACE, Circuit Judges, and FITZGERALD, ^* District Judge.

WALLACE, Circuit Judge:

Marshall and DJM Productions, Inc. (DJM) appeal from the district court's order granting judgment on the pleadings in favor of the Administrator of the Small Business Administration (SBA Administrator). The case involves claims of Marshall, a black, and DJM that the SBA Administrator, for racially discriminatory reasons, cancelled an SBA minority business loan authorization issued to DJM. The district court ruled that DJM's corporate causes of action were deficient because (1) corporations cannot state a claim alleging civil rights violations and (2) the SBA Administrator's actions regarding loan determinations are discretionary, and hence not reviewable. The district court rejected Marshall's claims on the grounds that (1) Marshall, an individual stockholder, could not maintain a personal suit to recover damages incurred by the corporation, and (2) that Marshall's personal injury claims were barred by the two-year statute of limitations contained in 28 U.S.C. § 2401(b). We reverse.

I

DJM and Marshall allege that on May 13, 1971, the SBA Administrator executed and delivered to them a loan authorization obligating the SBA to loan DJM $60,000. This loan authorization was obtained pursuant to the SBA's minority businesses program. See 15 U.S.C. § 637(a). The authorization was subject to numerous conditions, including requirements that DJM obtain a $60,000 life insurance policy on Marshall's life, with the SBA named as beneficiary; a loan guarantee to be signed by Marshall personally; and that "(p)rior to each disbursement on account of the Loan, District Director shall be in receipt of evidence satisfactory to him in his sole discretion, that there has been no Adverse Change . . . in the financial or any other condition of Borrower, which would warrant withholding or not making any such disbursement . . .."

Marshall and DJM allege that they performed all the conditions of the loan authorization, but that on July 23, 1971, they were notified by the SBA Administrator that the loan to DJM would be cancelled. Marshall and DJM claim that the SBA Administrator's nonperformance caused them to suffer loss of good will and insolvency, to be unable to repay sums borrowed in reliance upon the SBA loan authorization, and to be unable to meet "obligations of the business." In addition, Marshall claims that he incurred personal injuries requiring medical treatment for an ulcer contracted as a result of the discriminatory denial of the loan.

II

We first consider the SBA Administrator's contentions that the district court correctly dismissed DJM's causes of action on the alternative grounds that corporations cannot state a claim alleging civil rights violations, and that the SBA's actions constituted unreviewable discretion.

A

The SBA Administrator's first argument is that DJM cannot assert a civil rights claim under the Fifth Amendment. We disagree. DJM and Marshall base their claims for damages directly on the due process clause of the Fifth Amendment, ¹ and allege that 28 U.S.C. § 1331(a) provides federal court jurisdiction. After the Supreme Court's recent decision in Davis v. Passman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979), there is no longer any doubt that an individual may assert a private cause of action for damages, based on an alleged violation of the Fifth Amendment's due process clause, against a federal official. See id. at 248, 99 S.Ct. at 2278. See also Jacobson v. Tahoe Regional Planning Agency, 566 F.2d 1353, 1358-59 (9th Cir. 1977), rev'd in part and aff'd in part on other grounds sub nom. Lake Country Estates Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 99 S.Ct. 1171, 59 L.Ed.2d 401 (1979); Bennett v. Campbell, 564 F.2d 329, 332 (9th Cir. 1977). Cf. Butz v. Economou, 438 U.S. 478, 486, 98 S.Ct. 2894, 2900, 57 L.Ed.2d 895 (1978) ("Bivens established that compensable injury to a constitutionally protected interest could be vindicated by a suit for damages invoking the general federal question jurisdiction of the federal court . . .."); Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 397, 91 S.Ct. 1999, 2005, 29 L.Ed.2d 619 (1971) (individual may rest private damages action on Fourth Amendment). Such claims may be brought in federal court pursuant to 28 U.S.C. § 1331(a). Davis v. Passman, supra, 442 U.S. at 244, 99 S.Ct. at 2276. We think that a private cause of action under the Fifth Amendment for damages may also be asserted by DJM, even though it is a corporation.

It has long been clear that corporations are "persons" protected by the equal protection and due process clauses of the Fourteenth Amendment. Grosjean v. American Press Co., 297 U.S. 233, 244, 56 S.Ct. 444, 446, 80 L.Ed. 660 (1936); Pierce v. Society of Sisters, 268 U.S. 510, 535, 45 S.Ct. 571, 573, 69 L.Ed. 1070 (1925); California Diversified Promotions, Inc. v. Musick, 505 F.2d 278, 283 (9th Cir. 1974). For example, courts have frequently reviewed claims by corporations that state regulations adversely affecting their business activities discriminate in violation of the equal protection clause. See, e. g., Williamson v. Lee Optical of Oklahoma, Inc., 348 U.S. 483, 75 S.Ct. 461, 99 L.Ed. 563 (1955); Railway Express Agency, Inc. v. New York, 336 U.S. 106, 69 S.Ct. 463, 93 L.Ed. 533 (1949); Pennsylvania Bank & Trust Co. v. Hanisek, 426 F.Supp. 410 (W.D.Pa.1977). The Supreme Court's "approach to Fifth Amendment equal protection claims has always been precisely the same as to equal protection claims under the Fourteenth Amendment." Weinberger v. Wiesenfeld, 420 U.S. 636, 638 n.2, 95 S.Ct. 1225, 1228 n.2, 43 L.Ed.2d 514 (1975). See Buckley v. Valeo, 424 U.S. 1, 93, 96 S.Ct. 612, 670, 46 L.Ed.2d 659 (1976) (per curiam). In light of the parallel treatment of Fifth and Fourteenth Amendment equal protection claims, we see no reason why corporations should not be accorded the same protection from federal equal protection violations as they are from state violations.

In Davis v. Passman, supra, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846, the Supreme Court stated:

At least in the absence of "a textually demonstrable constitutional commitment of (an) issue to a coordinate political department," Baker v. Carr, 369 U.S. 186, 217, (82 S.Ct. 691, 710, 7 L.Ed.2d 663) (1962), we presume that justiciable constitutional rights are to be enforced through the courts. And, unless such rights are to become merely precatory, the class of those litigants who allege that their own constitutional rights have been violated, and who at the same time have no effective means other than the judiciary to enforce these rights, must be able to invoke the existing jurisdiction of the courts for the protection of their justiciable constitutional rights.

Id. at 242, 99 S.Ct. at 2275. DJM has alleged that the SBA Administrator violated its constitutional rights. Counsel for DJM informs us that DJM's entire contractual relationship with the SBA Administrator was predicated on DJM's eligibility for the minority businesses program. ² It claims to have suffered financial injury due to racial discrimination directed at both itself and Marshall, its black owner and proprietor. A corporation may suffer injury, actionable under the Fifth Amendment, from unlawful discrimination against its officers and directors in their corporate capacities, or against it because its officers or directors are members of minority groups. While corporate constitutional rights are not necessarily coextensive with the constitutional rights of individuals, see First Nat'l Bank of Boston v. Bellotti, 435 U.S. 765, 778 n.14, 98 S.Ct. 1407, 1416, 55 L.Ed.2d 707 (1978), it is indisputable that the Fifth Amendment shields corporate as well as individual property against federal action in violation of the Due Process clause. See, e. g., Smyth v. Ames, 169 U.S. 466, 522, 18 S.Ct. 418, 424, 42 L.Ed. 819 (1898). Like the plaintiff in Davis v. Passman, supra, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846, DJM is a "person" protected by the Fifth Amendment who claims that its "rights under the Amendment have been violated, and that (it) has no effective means other than the judiciary to vindicate these rights." Id. at 243, 99 S.Ct. at 2276 (footnote omitted). Under these circumstances, Davis teaches that DJM has stated a valid cause of action for government discrimination in violation of the Fifth Amendment.

Once DJM's cause of action is admitted, we must also conclude, following Davis, that DJM may seek damages to redress its injuries. See id. at 248, 99 S.Ct. at 2278. No rationale would justify withholding damages relief from corporations which are otherwise entitled to sue while extending such relief to individuals. We therefore find that DJM may assert its Fifth Amendment damages claims.

B

We next examine the government's contention that the SBA Administrator's decision to cancel the DJM loan authorization was an action "committed to agency discretion by law" within the meaning of the Administrative Procedure Act, 5 U.S.C. § 701(a)(2), and thus is unreviewable. We have considered the range of agency actions which section 701(a)(2) insulates from judicial review on several recent occasions. We have stated:

Judicial reviewability of...