Sherwin Manor Nursing Center, Inc. v. McAuliffe

• Decision Date: 06 October 1994
• Docket Number: No. 93-2625,93-2625
• Citation: 37 F.3d 1216
• Parties: Medicare & Medicaid Guide P 42,760 SHERWIN MANOR NURSING CENTER, INC., Plaintiff-Appellant, v. Judith McAULIFFE; Charles DeCuirre; Yolanda Pepper; JoAnn Serpico; Fay Chin; and Patricia Best, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1216

37 F.3d 1216

Medicare & Medicaid Guide P 42,760

SHERWIN MANOR NURSING CENTER, INC., Plaintiff-Appellant, v. Judith McAULIFFE; Charles DeCuirre; Yolanda Pepper; JoAnn

Serpico; Fay Chin; and Patricia Best,

Defendants-Appellees.

No. 93-2625.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 11, 1994.

Decided Oct. 6, 1994.

Howard M. Hoffman, James W. Marks, Holleb & Coff, Chicago, IL, Nathan Lewin (argued) and Niki Kuckes, Miller, Cassidy, Larroca & Lewin, Washington, DC, for plaintiff-appellant.

Gary L. Starkman (argued), and Mary L. Smith, Ross & Hardies, Chicago, IL, for defendant-appellee.

Before CUDAHY and FLAUM, Circuit Judges, and SHARP, District Judge. ^*

CUDAHY, Circuit Judge.

Sherwin Manor Nursing Center, Inc. (Sherwin), alleges that Illinois state licensing officials falsely cited the facility and discriminated against it because Sherwin's owners are Jewish. It contends that the officials' actions denied Sherwin both the equal protection of the laws in violation of the Fourteenth Amendment and interfered with its right to the free exercise of religion in violation of the First Amendment. The district court dismissed Sherwin's Sec. 1983 complaint for failure to state a claim. We reverse.

I.

Sherwin is a licensed long-term nursing care facility, owned and operated by orthodox Jews and serving a primarily Jewish clientele. Historically, Sherwin had always garnered high marks in the annual licensure and certification survey by the Illinois Department of Public Health (Department). In December 1991, however, the defendants--six surveyors from the Department--purported to find multiple violations based on a two-week survey of the facility. The defendants then compiled a 124-page report, most of which included, Sherwin claims, "false, fabricated and meritless findings." Complaint p 34. According to Sherwin, the defendants erroneously found that Sherwin's facility lacked no-smoking signs, that its records were unavailable, that it lacked a quality assurance program, that its facility was "thick" with soil and smelled of urine, that the menu did not provide a varied diet because it did not include pork and that residents were not given a program of activities. The report noted 28 federal violations and at least 40 state violations. The submission of the allegedly biased survey immediately triggered the initiation of federal decertification proceedings.

Sherwin contends that the findings were based not on fact but on the surveyors' religious prejudice. Sherwin alleges, as evidence of the defendants' anti-Semitic animus, that the defendants made the following insulting and offensive statements:

"They are Jews, you can't trust them."

"She's a Jew and a liar--you can't trust her."

"These Jews, they hire Pollacks who can't read or speak English."

"These Jews, they don't tell anyone they have a Kosher kitchen."

"They are terrible, vicious, rotten people."

At the conclusion of the survey, Sherwin and its attorneys met with the supervising representatives of the Department and presented taped, documentary and photographic evidence establishing that most of the defendants' findings were erroneous. ¹ (As alleged, Sherwin thereby bypassed the opportunity to respond in writing to the Department's Quality Assurance Division.) The Department then withdrew 73 pages of the surveyors' findings, unconditionally renewed Sherwin's state license and recommended to the federal authorities that Sherwin be unconditionally recertified. All findings that would have comprised state violations were withdrawn, as were all serious federal violations.

On October 2, 1992, Sherwin filed a two-count complaint under 42 U.S.C. Sec. 1983 and Sec. 1985(3) seeking, on each count, actual damages, punitive damages, costs and attorneys' fees. Sherwin based these claims on theories of due process, equal protection, free exercise and conspiracy. The district court on March 31, 1993, dismissed the complaint under Fed.R.Civ.P. 12(b)(6), holding that Reichenberger v. Pritchard, 660 F.2d 280 (7th Cir.1981), and Easter House v. Felder, 910 F.2d 1387 (7th Cir.1990) (en banc), cert. denied, 498 U.S. 1067, 111 S.Ct. 783, 112 L.Ed.2d 846 (1991), required dismissal. Most critically, the district court found that Sherwin had not suffered an actual constitutional injury. The court noted that Sherwin had not experienced any business interruption as a result of the surveyors' actions. Its operating license and federal certification remained intact, and most of the alleged violations were withdrawn by the Department. Memorandum of March 31, 1993 at 8. The court also noted that the only tangible injury suffered by Sherwin was the cost of defending itself before the Quality Assurance Division of the Department, which according to the court did not rise to the level of a constitutional injury "in a valid Sec. 1983 claim." Id. ² Absent a showing of injury, the court held that the legal fees and costs incurred by Sherwin were not recoverable as compensatory damages.

Sherwin then moved under Rule 59(e) to amend the order dismissing the complaint, asking the district court to reconsider the equal protection and free exercise claims. The court denied the motion, underscoring again the absence of an injury of constitutional magnitude. The court also concluded that Sherwin had not shown that it was treated differently than other similarly situated facilities since violations lodged against nursing homes were automatically reviewed by the Department and this review provided all with a level playing field.

Sherwin, in its appeal of the district court's dismissal, has discarded its due process theories and instead relies upon the equal protection, free exercise and Sec. 1985(3) conspiracy claims.

II.

We review the grant of a motion to dismiss de novo, accepting "the truth of all well-pleaded allegations and making all possible inferences in favor of the plaintiff." Wroblewski v. City of Washburn, 965 F.2d 452, 453 (7th Cir.1992) (quoting Prince v. Rescorp Realty, 940 F.2d 1104, 1106 (7th Cir.1991)). Dismissal is not warranted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). Further, a court may not, in cases under Sec. 1983, apply a pleading standard that is more stringent than the notice pleading required by the Federal Rules. Leatherman v. Tarrant County Narcotics Unit, --- U.S. ----, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993).

A. Deprivation of Constitutional Magnitude

The crux of the district court's analysis under each of the three theories before us on appeal is that Sherwin's claims failed to demonstrate injuries of "constitutional magnitude." Without such an injury, the court reasoned, Sherwin could not recover attorneys' fees as compensatory damages. See Reichenberger, 660 F.2d at 285 ("legal fees expended by the plaintiffs in the administrative proceedings cannot qualify as a constitutional injury absent a showing of deprivation of constitutional magnitude"). As indicated, the district court purported to base its reasoning on our decisions in Easter House and Reichenberger. In Easter House, a private adoption agency brought a Sec. 1983 action against a former employee and officials of a state licensing agency, alleging a conspiracy to deprive it of its operating license. Easter House's only alleged injuries were the cost of answering the questions of the licensing agency and of making files available to it. Easter House, 910 F.2d at 1407. We concluded that neither of these "injuries" rose to the level of a procedural due process deprivation, holding that a party cannot maintain a Sec. 1983 action for denial of procedural due process if the alleged violations are committed by state employees acting in a "random and unauthorized" manner and adequate state remedies are available. Id. at 1408.

In Reichenberger the plaintiffs owned nightclubs that featured nude dancing, and the defendants, a minister and a member of the Common Council, allegedly conspired to eliminate the nude dancing. The complaint asserted that the defendants attempted to interfere in various municipal administrative proceedings in order to revoke the plaintiffs' liquor licenses or to make the cost of renewing the licenses prohibitively expensive. Id. at 282. As a result, the plaintiffs alleged both an abridgment of their free speech rights and a procedural due process claim--in that they were deprived of a property interest without due process. ³ The Reichenberger court, however, found that the complaint did not allege either a procedural due process or a First Amendment injury, since the plaintiffs' expressive and business activities were not interrupted or curtailed and since the defendants' opposition to Reichenberger's activities did not require the plaintiffs to respond to inquiries to which they were not otherwise required to respond. Thus, we affirmed the dismissal of the complaint, noting the plaintiffs' "threshold inability to allege injury or deprivation of constitutional rights." Id. at 288. Reichenberger stands for the proposition that impermissibly motivated government conduct that does not cause "injury" is not actionable. ⁴ Therefore, an individual who is required to respond to inquiries to which everyone else, in ordinary course, is also required to respond has not suffered a constitutional injury of any kind, even if the relevant government actor makes the customary inquiry animated by impermissible prejudice.

By dismissing the complaint because Sherwin never lost its license or certification and because Sherwin took advantage of a post-survey remedy, the district court, it appears, mistakenly blurred the distinction between procedural due process injuries and other constitutional injuries. The Fourteenth Amendment prohibits the states from depriving "any person of life, liberty, or...