Easter House v. Felder

• Citation: 879 F.2d 1458
• Decision Date: 04 August 1989
• Docket Number: No. 86-2164,86-2164
• Parties: EASTER HOUSE, an Illinois, not-for-profit corporation, Plaintiff-Appellee, v. Thomas FELDER, Florence McGuire and Joan Satoloe, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1458

879 F.2d 1458

EASTER HOUSE, an Illinois, not-for-profit corporation Plaintiff-Appellee, v. Thomas FELDER, Florence McGuire and Joan Satoloe Defendants-Appellants.

No. 86-2164.

United States Court of Appeals Seventh Circuit.

Argued Nov. 2, 1987.

Reargued En Banc Feb. 9, 1989.

Decided July 11, 1989.

As Corrected Aug. 4, 1989.

Thomas A. Ioppolo, Office of the Atty. Gen., Chicago, Ill., for defendants-appellants.

James R. Figliulo, Foran, Wiss & Schultz, Carl A. Gigante, Chicago, Ill., for plaintiff-appellee.

Before BAUER, Chief Judge, and CUMMINGS, WOOD, Jr., CUDAHY, POSNER, COFFEY, FLAUM, EASTERBROOK, RIPPLE, MANION and KANNE, Circuit Judges.

KANNE, Circuit Judge.

A jury found that in two separate instances the appellants, employees of the Illinois Department of Children and Family Services, acted under color of state law to deprive Easter House, a Chicago-based adoption agency, of property without due process of law. The district court denied the appellants' post-trial motions for judgment notwithstanding the verdict or for a new trial. We reverse and hold that section 1983 is not available to Easter House in the first instance of alleged misconduct because adequate state law remedies provide all of the process which was due and that in the second instance Easter House cannot identify any property interest of which it was deprived under color of state law.

I. BACKGROUND ¹

Easter House is a Chicago-based adoption agency, owned and operated by Seymour Kurtz, and licensed by the Illinois Department of Children and Family Services ("DCFS"). This suit arises from a series of events involving (1) Easter House's application for renewal of its license, (2) its Executive Director's decision to depart while the application was pending and open a rival adoption agency with a similar name, (3) the appellants' decisions, as DCFS employees, to delay action upon Easter House's application for renewal of its license and to expedite action upon the former director's application to start a new agency, and (4) the appellants' decision to order various investigations of Easter House's operating procedures approximately two years later. According to Easter House, the appellants' actions were taken under color of state law and deprived Easter House of identifiable constitutionally-protected property interests in violation of 42 U.S.C. Sec. 1983. As Easter House did below, we will treat its claims as involving two separate conspiracies and set forth the facts supporting each more fully below.

A. The Licensing Conspiracy

Easter House alleged that the appellants conspired with Easter House's former Executive Director to deprive it of, among other things, its operating license. This conspiracy involved two separate and distinct prongs. First, the appellants allegedly acted improperly in delaying action upon Easter House's application for renewal of its license. Second, Easter House contended that the appellants improperly granted a license to Easter House's former Executive Director in an expeditious manner. Easter House claimed that together these two courses of action resulted in a property deprivation in violation of section 1983.

1. Easter House's Application for a Renewal License

Easter House's operating license was scheduled to expire on November 30, 1974. In late November, Easter House began preparing for renewal of that license. Joan Satoloe, a licensing representative assigned to the DCFS's Chicago office, prepared a relicensing study which recommended renewal of Easter House's license for the two-year period beginning December 1, 1974. This recommendation was forwarded to the DCFS's main office in Springfield, Illinois, where the final licensing decisions are made and the licenses ultimately are issued.

While Easter House's application was pending, its Executive Director, Millicent Smith, decided to leave, apparently on less than amicable terms. On December 30, 1974, while Satoloe was on vacation, Smith met with Satoloe's immediate supervisor, Florence McGuire, the licensing supervisor for the DCFS's central district, to tell her of her plans to leave Easter House and start a new adoption agency. ²

At that meeting, Smith described the reasons for her growing disenchantment with Easter House. ³ She informed McGuire that she had been planning to leave Easter House for some time, but had delayed her action until Kurtz, Easter House's owner, had left on a year-end vacation. Apparently, his absence would facilitate her ability to start a rival adoption agency called the Easter House Adoption Agency, Inc. ("Easter House II"). ⁴ She told McGuire that she had decided to use a name closely resembling Easter House and to take Easter House's files ⁵ to ensure that her leaving would not deprive her of the rewards to which she felt entitled based upon her long tenure at Easter House.

After the meeting, McGuire called the DCFS's Springfield office to request a delay in the mailing of Easter House's renewed license. On the following day, December 31, 1974, Smith wrote to Satoloe and Thomas Felder, the chief of the DCFS for the central district, and described the prior day's meeting as well as stressed the importance of rapid action upon Easter House II's charter application. In a letter to McGuire, Smith also indicated that Fran Riley, Easter House's only other trained social worker, had decided to leave Easter House and join Easter House II. Smith also thanked McGuire for withholding Easter House's license. On that same day, Smith wrote to Kurtz resigning her position at Easter House.

After discussing Easter House's situation with McGuire, Felder agreed with McGuire that Easter House's renewed license should remain on hold at the Springfield office. On January 6, 1975, Felder wrote to Kurtz, informing him that the departures of Smith and Riley, Easter House's only trained social workers, had put the agency out of compliance with the DCFS's licensing standards. See DCFS Regulation 5.10 (1970) (requiring child welfare agencies to have at least one employee with a Master of Social Work degree and two years of supervisory experience in social work). He also stated that if Easter House wished to resume operations it would have to reattain minimum standards and reapply for a license. ⁶

Two days after sending the first letter, Felder, upon the advice of a DCFS attorney, wrote a second letter to Kurtz. Felder informed Kurtz that the January 6th letter had been incorrect and that, pursuant to the Illinois Child Care Act of 1969, Easter House would have ten days from receipt of the second letter to request a hearing before the DCFS's refusal to issue a renewed license would become final. However, the second letter did not offer to provide the assistance required by the DCFS's regulations and enforcement manual. See supra note 6.

During the period between the decision to withhold renewal and Kurtz's response, the DCFS received two inquiries about the status of Easter House, one from a lawyer representing prospective clients and one from a social worker interested in applying for the position which Smith previously had held. Both callers were told that Easter House had no license. The DCFS further informed the prospective job applicant that the DCFS was in the process of reviewing Easter House's "entire program." Also during this period, Felder wrote to Judge Comerford, then the Chief Judge dealing with adoptions in Cook County, and notified him that Easter House was no longer licensed to make adoption placements.

Kurtz received both of Felder's letters on January 12, 1975. On January 22, Kurtz wrote to the DCFS, requesting a hearing and a written statement of charges. On February 4, two weeks after he had hired a new Executive Director, Kurtz met with Felder to discuss information which Kurtz had obtained about Smith's new operation and the relicensing of Easter House. At that meeting, Kurtz waived the hearing which had been offered in the January 8th letter after Felder assured him that the absence of proper staff was the only barrier to the issuance of Easter House's license. Soon thereafter, Satoloe visited Easter House and approved the new Executive Director's credentials. On February 19, 1975, Easter House received its renewed license to operate as a child welfare agency during the period from December 1, 1974, through November 30, 1975--in effect, never losing its legal authority to operate as an adoption agency.

2. Easter House II's Charter Application

The alleged conspiracy to deprive Easter House of its license had a second part. Easter House contended below that the DCFS's actions in granting Smith's license for Easter House II were so irregular as to evidence the DCFS's intent to aid Smith in destroying Easter House.

In Illinois, child welfare agencies, such as Easter House and Easter House II, must apply to the Illinois Department of State for a charter which operates essentially as a certificate of incorporation. However, unlike ordinary corporations, child welfare agencies are subjected to charter studies by the DCFS in addition to the usual processing by the Illinois Department of State. According to testimony at trial, charter studies for child welfare agencies are intended to ensure that new agencies would serve the public interest. An ordinary DCFS charter study seeks to determine, among other things, whether an agency will serve a public need and whether the people forming the agency are reputable.

In addition to the charter application, which both the Department of State and the DCFS review, a child welfare agency must submit an application for an initial license directly to the DCFS. The DCFS's investigation undertaken prior to issuing a charter and initial license does not differ significantly from the investigation performed in connection with license renewals. If the DCFS issues a license, either an initial license or a renewed license, it in effect certifies that the child welfare...