Austell v. Sprenger

Decision Date22 August 2012
Docket NumberNo. 11–2792.,11–2792.
PartiesCarmen AUSTELL; T.Y.B.E. Learning Center, Plaintiffs–Appellants v. Kimberly SPRENGER; Kathy Quick; Joseph P. Bindbeutel; Shelley Truesdale; Nimrod T. Chapel Jr., Defendants–Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

OPINION TEXT STARTS HERE

Rufus J. Tate Jr., argued, St. Louis, MO, Anthony D. Gray, on the brief, Clayton, MO, for PlaintiffsAppellants.

Denise Garrison McElvein, AAG, argued, St. Louis, MO, for DefendantsAppellees.

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

RILEY, Chief Judge.

Carmen Austell owned and operated T.Y.B.E. Learning Center, L.L.C. (collectively, TYBE), a daycare center in St. Louis, Missouri. After the Missouri Department of Health and Senior Services (DHS) denied TYBE's license renewal request, TYBE sued several DHS employees and a state administrative law judge, alleging federal civil rights and state law violations. In July 2011, the district court 1 granted summary judgment against TYBE on all claims. TYBE appeals. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I. BACKGROUNDA. Facts

DHS is responsible for licensing and regulating Missouri childcare facilities. SeeMo.Rev.Stat. § 210.221. DHS licenses only those facilities that pass an inspection, and licenses cannot be issued for longer than two years. See id. § 210.221.1(1). A licensed facility must apply to renew its license at least sixty days before the license expires. SeeMo.Code Regs. Ann. tit. 19, § 30–62.052(1). Childcare facilities in Missouri generally may not operate without a license. SeeMo.Rev.Stat. § 210.211.

Before denying a license renewal application, DHS must provide written notice to the licensed facility stating the basis for the proposed denial. SeeMo.Rev.Stat. § 210.245.2. The licensed facility may request a hearing before an administrative hearing commission (commission). See id. If the licensed facility so requests, DHS must file a complaint with the commission within ninety days. See id. DHS may immediately suspend the license if DHS finds “that there is a threat of imminent bodily harm to the children in care.” Id. § 210.245.4. Otherwise, DHS first proposes to suspend or revoke a license, or to deny a license renewal request. See id. § 210.245.2. After DHS has proposed to deny a license renewal request, Missouri law does not state whether a licensed facility may continue to operate under an expired license during the pendency of the administrative review period.

The Missouri administrative code also contains generally applicable licensing dispute resolution provisions. SeeMo.Rev.Stat. §§ 621.015–.250. These provisions apply to multiple agencies, including DHS. See id.§ 621.045. Under these provisions, when a covered entity proposes to revoke, suspend, impair, or fails to renew a business license, the agency or the licensed facility may file a contested case with the commission, and under certain circumstances the licensed facility is entitled to an “initial settlement offer” from the commission. See id. at §§ 621.045.1, 621.045.4(1), 621.120. Missouri law is unclear how the provisions of §§ 621.015–.250 relate with the statutory provisions specifically governing licensed childcare facilities contained in §§ 210.199–.259.

At all relevant times, DHS employed Kathy Quick, Kimberly Sprenger, and Shelley Truesdale (collectively, DHS defendants). Quick served as administrator of the section for childcare regulation; Sprenger was the DHS legal coordinator; and Truesdale was a childcare facility specialist.

TYBE was a licensed childcare facility in the St. Louis area. TYBE predominately served low-income families, for which TYBE received substantial subsidies from the Missouri Department of Social Services (DSS). The Missouri Child Care Resources and Referral Network (MOCCRRN) kept a referral database that referred parents to licensed childcare facilities such as TYBE.

DHS initially licensed TYBE in August 2003. DHS identified significant compliance issues with TYBE as early as September 2004 and held facility review conferences with TYBE in September 2004 and July 2007 to discuss the importance of regulatory compliance. Nevertheless, DHS renewed TYBE's license in 2005 and 2007. DHS inspected TYBE in September and October 2007, July and December 2008, and April 2009, and identified significant compliance issues on each inspection. TYBE timely filed to renew its 2007 license, which expired on July 31, 2009.

On August 24, 2009, DHS notified TYBE, DSS, and MOCCRRN that DHS was denying TYBE's renewal request and TYBE could no longer operate under its former license. The notices stated DHS was

denying the renewal of the license for: (a) exceeding staff child ratios; (b) using unapproved caregivers; (c) exceeding license limitations; (d) failing to supervise children appropriately; (e) recordkeeping non-compliances; (f) failing to follow transportation rules; (g) failing to serve meals according to licensing rules; and (h) failing to provide hygiene supplies in the restrooms.

In response to the notice, DSS halted its subsidy payments to TYBE. DSS also notified parents receiving DSS subsidies to stop placing their children with TYBE, and MOCCRRN removed TYBE from its referral database. TYBE had no opportunity to challenge the proposed denial before the notices went out.

In a letter dated August 26, 2009, TYBE requested an administrative hearing under Mo.Rev.Stat. § 210.245 regarding the denial. On September 2, 2009, TYBE filed a petition for administrative review, pursuant to Mo.Rev.Stat. § 621.120, naming DHS and DSS respondents. DHS moved to dismiss TYBE's § 621.120 petition for lack of jurisdiction. The administrative hearing commissioner, Joseph P. Bindbeutel, granted the motion and dismissed TYBE's complaint.

B. Procedural History

On September 16, 2009, TYBE filed suit in federal district court against Commissioner Bindbeutel, administrative hearing Commissioner Nimrod T. Chapel Jr., Quick, Sprenger, and Truesdale, seeking a temporary restraining order and a preliminary injunction prohibiting DHS from interfering with TYBE's operations until the commission issued a final decision on DHS's proposed denial. TYBE also requested damages under 42 U.S.C. § 1983 and state law, claiming (1) the DHS defendants deprived TYBE of due process by requiring TYBE to cease operating as a childcare facility “prior to the completion of the administrative and/or judicial review process”; (2) the DHS defendants deprived TYBE of due process by failing to make an initial settlement offer to TYBE under Mo. Rev. Stat. § 621.045.4; (3) the DHS defendants and Commissioner Bindbeutel deprived TYBE of due process by interfering with TYBE's right to initiate a hearing under Rev. Mo. Stat. § 621.120; and (4) the DHS defendants tortiously interfered with TYBE's business relationships by announcing to state agencies and TYBE's clients that TYBE was unlicensed and ineligible to provide services or receive subsidy payments.

The district court entered a temporary restraining order on September 21, 2009, and, by consent of the parties, entered a preliminary injunction on October 8, 2009. On March 18, 2010, the commission held a hearing pursuant to Mo.Rev.Stat. § 210.245. The commission denied TYBE's renewal request on January 28, 2011. The district court lifted the preliminary injunction on May 9, 2011, and on July 19, 2011, granted summary judgment to the DHS defendants and Commissioner Bindbeutel on all of TYBE's claims. This appeal followed.

II. DISCUSSION

On appeal, TYBE argues the district court erred in granting summary judgment on its 42 U.S.C. § 1983 due process claims and its state-law tortious interference claim. We review de novo the district court's grant of summary judgment, affirming if “the record, viewed in the light most favorable to the non-moving party, demonstrates that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” S & A Farms, Inc. v. Farms.com, Inc., 678 F.3d 949, 952 (8th Cir.2012) (quoting Morrison Enters., LLC v. Dravo Corp., 638 F.3d 594, 602 (8th Cir.2011)); seeFed.R.Civ.P. 56(a) (amended in 2010 to “genuine dispute”).

A. Due Process Deprivation—Closure Order

TYBE asserts DHS denied TYBE due process by interfering with TYBE's business operations and announcing to third parties that TYBE was operating without a license, before providing TYBE notice and an opportunity to respond. SeeU.S. Const. amend. XIV. In order to sustain a due process claim and overcome qualified immunity, TYBE must demonstrate (1) DHS's actions interfered with TYBE's constitutionally protected liberty or property interest; and (2) the DHS defendants reasonably should have known their actions violated TYBE's clearly established constitutional rights. See Pearson v. Callahan, 555 U.S. 223, 231, 129 S.Ct. 808, 172 L.Ed.2d 565 (2009); Putnam v. Keller, 332 F.3d 541, 546 (8th Cir.2003).2

1. Property Interest

TYBE asserts the DHS defendants unconstitutionally interfered with the property interest TYBE had in its license and the license renewal proceedings. TYBE is entitled to relief only if it has evidence sufficient to prove (1) TYBE had a clearly established constitutionally protected liberty or property interest in the license renewal; and (2) DHS's procedures deprived TYBE of that interest. See Putnam, 332 F.3d at 546.

To have a constitutionally cognizable property interest in a right or a benefit, a person must have “a legitimate claim of entitlement to it.” See Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). The Due Process Clause does not create any property interest; it merely protects property rights arising “from an independent source such as state law.” Id. A property interest arises when state law creates “expectations that are ‘justifiable.’ O'Bannon v. Town Ct. Nursing Ctr., 447 U.S. 773, 796, 100 S.Ct. 2467, 65 L.Ed.2d 506 (...

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