Merritt v. Mackey

• Decision Date: 16 September 1987
• Docket Number: No. 85-4111,85-4111
• Citation: 827 F.2d 1368
• Parties: Knowlton MERRITT, Plaintiff-Appellant, v. John E. MACKEY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1368

827 F.2d 1368

56 USLW 2179

Knowlton MERRITT, Plaintiff-Appellant, v. John E. MACKEY, et al., Defendants-Appellees.

No. 85-4111.

United States Court of Appeals Ninth Circuit.

Argued and Submitted July 8, 1986.

Decided Sept. 16, 1987.

Stephen L. Brischetto, Portland, Or., and Robert D. Dames, Beaverton, Or., for plaintiff-appellant.

Judith D. Kobbervig, Portland, Or., and David Schuman, Salem, Or., for defendants-appellees.

Appeal from the United States District Court for the District of Oregon.

Before WALLACE, FERGUSON and NORRIS, Circuit Judges.

FERGUSON, Circuit Judge:

Knowlton Merritt, a former counselor supervisor at Klamath Alcohol and Drug Abuse, Inc. (KADA), appeals the district court's trial and summary judgment decisions in his civil rights action. He alleges that the defendants, federal and state officials evaluating KADA, and the United States, caused his termination from employment without a hearing, thereby depriving him of liberty and property interests without due process in violation of the Fifth and Fourteenth Amendments. We affirm in part, reverse in part, and remand for a new trial.

I.

Knowlton Merritt began working for KADA as a counselor in 1976. KADA is a private nonprofit corporation providing treatment and support to alcohol and drug abusers. KADA had contracts with both Klamath County and the Indian Health Services ("IHS"), a federal agency, to provide alcohol and drug abuse services.

In 1981 state and federal officials, including defendants John Mackey and Steve Vincent, began evaluating KADA's management. The first evaluations found that KADA violated state regulations, and the final report, in February 1983, threatened the cut off of federal and state funding. Mackey wrote the final report after discussions with his supervisor and a federal contracting officer. The report conditioned further funding of KADA on the requirement that Merritt "must be relieved of his duties at the earliest possible date" and "must not be employed by KADA".

KADA, fearing the loss of funds, fired Merritt on March 17, 1983. Merritt appealed through the existing KADA grievance procedure. KADA informed Vincent and Mackey that its personnel policies gave it the burden of proving the reasons for Merritt's termination and requested such an explanation from them. No explanation was ever provided.

In September 1983 KADA requested Vincent and Mackey to reconsider their order to fire Merritt and to clarify whether KADA could rehire Merritt. Neither Vincent nor Mackey responded. KADA took no further action on Merritt's grievance, and Merritt pursued his grievance no further. Instead, he filed this action under 42 U.S.C. Sec. 1983 and the Fifth Amendment, alleging liberty and property deprivations without due process.

Merritt timely appeals the district court's posttrial decisions that Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), barred his deprivation of property claim against Vincent and Mackey and that qualified immunity protected Vincent and Mackey from liability. He also appeals the district court's grant of summary judgment in favor of Vincent and Mackey on the ground that he did not state a liberty deprivation claim on which relief could be granted, and in favor of the United States on the ground that there is no private right of action under the Oregon criminal statute that prohibits tortious interference with employment.

II.

Whether Merritt had a protected property right in his employment is a mixed question of fact and law. Where a mixed question "involve[s] the exercise of judgment about the values underlying legal principles," it is reviewable de novo. United States v. McConney, 728 F.2d 1195, 1204 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).

To determine whether due process requirements apply to an asserted interest, the court must initially look to the nature of the interest at stake. Board of Regents v. Roth, 408 U.S. 564, 571, 92 S.Ct. 2701, 2706, 33 L.Ed.2d 548 (1972). It is indisputable that an individual may have a protected property interest in private employment. In Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959), the Supreme Court noted that "the right to hold specific private employment and to follow a chosen profession free from unreasonable governmental interference comes within the 'liberty' and 'property' concepts of the Fifth Amendment." Id. at 492, 79 S.Ct. at 1411. See also Phillips v. Bureau of Prisons, 591 F.2d 966, 970 (D.C.Cir.1979); United States v. Briggs, 514 F.2d 794, 798 (5th Cir.1975).

The dissent insists nevertheless that the interest which Merritt asserts is merely that of noninterference with a contractual relationship. Greene makes clear, however, that when a private employee is deprived of his employment through government conduct, the cause of action available to the employee is not merely the right to sue for interference with contractual relationships. ¹ The Court noted:

[R]espondent's actions ... caused substantial injuries, and were they the subject of a suit between private persons, they could be attacked as an invasion of a legally protected right to be free from arbitrary interference with private contractual relationships. Moreover, petitioner has the right to be free from unauthorized actions of government officials which substantially impair his property interests.

360 U.S. at 493 n. 22, 79 S.Ct. at 1412 n. 22 (citation omitted; emphasis added). Thus, where the actions of private individuals operate to deprive an individual of his employment, a suit for interference with private contractual relationships would lie, but where government officials are involved, the nature of the interest at stake in private employment is a property interest.

The inquiry does not end here, however. For the purpose of due process, Merritt must show that he had more than a "unilateral expectation" of continued employment; he must demonstrate a "legitimate claim of entitlement." Roth, 408 U.S. at 577, 92 S.Ct. at 2709. In determining whether there is an entitlement to the benefit in question, we look not to the Constitution but to "existing rules and understandings that stem from an outside source such as state law." Id. Thus, an employee may establish the existence of a property interest in continued employment by demonstrating a reasonable expectation based upon state law, rules or regulations concerning discharge or express or implied promises. Id. KADA's personnel policies stated that permanent employees could be fired only "for cause." Under Oregon law "just cause" policies can form part of the employment contract. See Yartzoff v. Democrat-Herald, 281 Or. 651, 658, 576 P.2d 356 (1978); Kay v. North Lincoln Hospital District, 555 F.Supp. 527, 529-30 (D.Or.1982). We conclude therefore that the district court correctly found that Merritt had a protected property interest in his continued employment with KADA. Thus, the Due Process Clause entitled Merritt to a meaningful hearing at a meaningful time to challenge any deprivation of that interest by the state or federal government. ² Logan v. Zimmerman Brush Co., 455 U.S. 422, 437, 102 S.Ct. 1148, 1158, 71 L.Ed.2d 265 (1982) (citation omitted); Piatt v. McDonald, 773 F.2d 1032, 1036 (9th Cir.1985) (en banc).

That KADA and not the government officials themselves terminated Merritt's employment does not change the nature of his protected property interest. Liability under 42 U.S.C. Sec. 1983 attaches to any person who, under color of state law, "subjects or causes to be subjected" any person to a deprivation of protected rights. In Johnson v. Duffy, 588 F.2d 740 (9th Cir.1978), this court noted that "[t]he requisite causal connection can be established not only by some kind of direct personal participation in the deprivation but also by setting in motion a series of acts by others which the actor knows or reasonably should know would cause others to inflict the constitutional injury." Id. at 743-44; see also Arnold v. International Business Machines Corp., 637 F.2d 1350, 1355 (9th Cir.1981).

As this court pointed out in Castaneda v. U.S. Department of Agriculture, 807 F.2d 1478 (9th Cir.1987), the Supreme Court in O'Bannon v. Town Court Nursing Center, 447 U.S. 773, 100 S.Ct. 2467, 65 L.Ed.2d 506 (1980), explicitly left open the possibility that where the government indirectly yet intentionally injures or affects the legal status of a person by an action taken directly against a private third party, the injured person could maintain a due process challenge against the government. Id. at 789-90 n. 22, 100 S.Ct. at 2477 n. 22. It is clear on the facts before us that Merritt was the actual and intended victim of the agents' coercive dealings with KADA. Merritt therefore states a claim under section 1983 that he was deprived of his property interest in continued employment when the state and federal agents intentionally coerced KADA to fire him.

The district court erroneously concluded that Merritt's right to due process would be satisfied by a postdeprivation remedy, following the Supreme Court's decision in Parratt. The Court in Parratt held that a postdeprivation remedy will satisfy due process when the deprivation is a result of a "random and unauthorized act," because "the loss is not a result of some established State procedure and the State cannot predict precisely when the loss will occur." 451 U.S. at 541, 101 S.Ct. at 1916. Thus, under the Parratt analysis, "the touchstone for predeprivation process is the feasibility of providing such process." Bretz v. Kelman, 773 F.2d 1026, 1031 (9th Cir.1985) (en banc). The premise underlying Parratt is that "where the challenged deprivation is random and unauthorized, it is impracticable or impossible for the state to provide predeprivation process because the governmental machinery cannot foresee or predict random, unauthorized actions." Bretz, 773 F.2d at 1030....