Neu v. Corcoran

• Decision Date: 03 March 1989
• Docket Number: D,No. 725,725
• Citation: 869 F.2d 662
• Parties: Nicholas NEU, Plaintiff-Appellee, v. James P. CORCORAN, Individually and as Superintendent of Insurance of the State of New York, and James W. Randolph, Individually and as Deputy Superintendent of Insurance of the State of New York, Defendants-Appellants. ocket 88-7914.
• Court: U.S. Court of Appeals — Second Circuit

Page 662

869 F.2d 662

Nicholas NEU, Plaintiff-Appellee, v. James P. CORCORAN, Individually and as Superintendent of Insurance of the State of New York, and James W. Randolph Individually and as Deputy Superintendent of Insurance of the State of New York, Defendants-Appellants.

No. 725, Docket 88-7914.

United States Court of Appeals Second Circuit.

Argued Jan. 25, 1989.

Decided March 3, 1989.

August L. Fietkau, Asst. Atty. Gen., (Robert Abrams, Atty. Gen., Lawrence S. Kahn, Deputy Sol. Gen., Frederic L. Lieberman, Asst. Atty. Gen., New York City, on the brief), for defendants-appellants.

Andrew J. Goodman, (Rosner & Goodman, New York City, on the brief), for plaintiff-appellee.

Before NEWMAN, PIERCE, and MAHONEY, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

The principal issue on this appeal is whether qualified immunity shields a state official who defames a private citizen and thereby damages his career opportunities but without depriving the citizen of any legal right or status created by state law. The issue arises on an appeal by James P. Corcoran and James W. Randolph from an order of the District Court for the Southern District of New York (Robert W. Sweet, Judge) denying their motion to dismiss a due process claim brought by Nicholas Neu. Neu v. Corcoran, 695 F.Supp. 1552 (S.D.N.Y.1988). We conclude that appellants are entitled to immunity because our prior cases have not clearly established that appellants' conduct deprived appellee Neu of a liberty interest protected by the due process guarantees of the Fourteenth Amendment. We therefore reverse and remand.

Background

From February 1985 through March 11, 1987, plaintiff appellee Neu was president of American Motor Club, Inc. ("AMC"), a New York corporation engaged in selling prepaid automobile collision contracts to motorists in New York. The New York State Insurance Department filed charges against AMC in 1985, alleging that the company was engaged in the selling of insurance without a license. The Supreme Court of the State of New York upheld the charges in January 1987 and enjoined AMC from continuing its activities in the state. The Court also imposed monetary sanctions on Neu personally. In October 1987, New York's Appellate Division, First Department, affirmed the ruling that AMC was engaged in the unauthorized sale of insurance but reversed the fines against Neu. People v. American Motor Club, Inc., 133 A.D.2d 593, 520 N.Y.S.2d 383 (1st Dep't 1987).

In March 1987, after the state Supreme Court's ruling, Neu began operating similar prepaid collision service companies in California. Neu's complaint in the pending litigation alleges that in June 1987 Corcoran, New York's superintendent of insurance, and Randolph, deputy superintendent, made defamatory remarks about Neu at a convention of insurance commissioners in Chicago. Neu alleges that the New York officials falsely told other commissioners, including California's, that Neu did not honor his contracts, did not repair vehicles, was responsible for driving AMC into bankruptcy, knowingly violated the law, was a swindler, operated a scam in New York, and associated with criminals. Neu further alleges that as a result of those statements, his reputation was ruined and he was forced out of the automobile repair business, which was his sole livelihood. In particular, he alleges that the California Department of Insurance threatened to bring disciplinary action against insurance companies and brokers that engaged in business transactions with Neu's companies and that he was forced to resign from his California companies.

Neu's suit against Corcoran and Randolph was brought in the District Court for the Southern District of New York, pursuant to 42 U.S.C. Sec. 1983 (1982). He alleged that the state officials, without due process, deprived him of a liberty interest by defaming him and casting a stigma on him that foreclosed a range of career opportunities and deprived him of the ability to engage in his occupation. He also brought a pendent state law claim for defamation.

Corcoran and Randolph moved, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss Neu's claim for failure to state a claim upon which relief may be granted and on the basis of official immunity under federal and state law. The District Court issued an order denying the motion. Corcoran and Randolph appeal from the order to the extent that it denied their official immunity defense to the federal claim.

Discussion

1. Appellate Jurisdiction. Although the denial of a motion to dismiss is ordinarily not an appealable "final decision" within the meaning of 28 U.S.C. Sec. 1291 (1982), the "collateral order" doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), has been construed to permit interlocutory appeals from denials of substantial claims of qualified immunity. See Mitchell v. Forsyth, 472 U.S. 511, 524-30, 105 S.Ct. 2806, 2814-18, 86 L.Ed.2d 411 (1985). The entitlement to qualified immunity is an immunity from suit, rather than a mere defense to liability; therefore, it is effectively lost if a case is erroneously permitted to go to trial. Id. at 526, 105 S.Ct. at 2815. An order denying a defense of qualified immunity is immediately appealable however, only where it can be decided as a matter of law and does not turn on disputed questions of fact. Id. at 530, 105 S.Ct. at 2817; Lawson v. Abrams, 863 F.2d 260, 262 (2d Cir.1988); White v. Frank, 855 F.2d 956, 958 (2d Cir.1988).

Neu contends that Corcoran's and Randolph's qualified immunity defense turns on disputed questions of fact and that the case is therefore not ripe for review under the collateral order doctrine. Specifically, he contends that whether appellants' alleged statements actually resulted in foreclosing Neu from engaging in his chosen occupation is a factual question requiring further inquiry in the District Court. We disagree. We think that the validity of appellants' qualified immunity defense to Neu's claims can be decided as a matter of law, accepting Neu's factual allegations as true for purposes of the appeal. We therefore have jurisdiction to review the immunity ruling.

2. Qualified Immunity. Government officials performing discretionary functions are not absolutely immune from liability for civil damages, but they are protected by qualified, or good-faith, immunity. Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). Qualified immunity shields officials from liability for civil damages "insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Id. at 818, 102 S.Ct. at 2738. An official is liable only if the contours of the right he is alleged to have violated are "sufficiently clear that a reasonable official would understand that what he is doing violates that right." Anderson v. Creighton, 483 U.S. 635, 107 S.Ct. 3034, 3039, 97 L.Ed.2d 523 (1987). The very action in question need not previously have been held unlawful, but the unlawfulness must be apparent in light of preexisting law. Id.

Neu alleges that appellants, acting under color of state law, deprived him of a liberty interest without due process by making defamatory statements that led to foreclosure of his ability to engage in his chosen occupation, the auto repair contract business. The District Court concluded that this adequately stated a claim for relief under section 1983. Neu v. Corcoran, 695 F.Supp. at 1555. The District Judge also found that the right to due process under such circumstances had been clearly established by decisions of this Circuit. Id. at 1556. The Court cited two cases for this proposition, Huntley v. Community School Board, 543 F.2d 979 (2d Cir.1976), cert. denied, 430 U.S. 929, 97 S.Ct. 1547, 51 L.Ed.2d 773 (1977), and Baden v. Koch, 799 F.2d 825 (2d Cir.1986), both of which were decided before the alleged defamation took place.

Whether or not the District Court is correct that Neu adequately alleged deprivation of a liberty interest to state a claim for relief under 42 U.S.C. Sec. 1983, a matter we do not decide, we do not agree that Huntley, Baden, or any of our other decisions clearly established in 1987 that appellants' alleged actions constituted a deprivation of a protected liberty interest. Unlike the case at bar, Huntley and Baden both involved defamation of government employees who were allegedly defamed in the course of being dismissed or demoted. To explain why this distinction is significant, we must survey cases in the Supreme Court and in this Circuit explicating the constitutional standards concerning defamation by government officials.

In Wisconsin v. Constantineau, 400 U.S. 433, 91 S.Ct. 507, 27 L.Ed.2d 515 (1971), the Supreme Court considered the constitutionality of a state statute that provided for the posting in liquor stores of a list of persons who tended to become violent after excessive drinking and who were forbidden from purchasing alcohol for one year. The statute did not provide the persons listed with notice or opportunity for a hearing. The Court, finding that the State had attached a "badge of infamy" to the plaintiff, concluded that due process protections were required. Id. at 437, 91 S.Ct. at 510. The Court stated that "[w]here a person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential." Id.

The Court again considered the issue of what constitutes a constitutional deprivation the following year in Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), a case involving a non-tenured teacher at a state university who was not rehired after his one-year contract expired. Roth held that the teacher had no property interest in his job because state law did not guarantee him a right to renew his contract.

In discussing whether the...