Simpson v. Brown Cnty.

• Decision Date: 26 June 2017
• Docket Number: No. 16-2234,16-2234
• Citation: 860 F.3d 1001
• Parties: John SIMPSON, Plaintiff-Appellant, v. BROWN COUNTY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

860 F.3d 1001

John SIMPSON, Plaintiff-Appellant,

v.BROWN COUNTY, et al., Defendants-Appellees.

No. 16-2234

United States Court of Appeals, Seventh Circuit.

Argued February 14, 2017

Decided June 26, 2017

Robert Gerald Black, Attorney, Naperville, IL, for Plaintiff–Appellant.

Ian L. Stewart, Attorney, Stephenson Morow & Semler, Indianapolis, IN, for Defendants–Appellees.

Before Rovner, Williams, and Hamilton, Circuit Judges.

Hamilton, Circuit Judge.

This appeal presents a classic test of procedural due process. As the case comes to us, we must assume that a county board revoked a man's professional license without giving him prior notice or an opportunity to be heard.

The case arises from Brown County, Indiana, where the rolling hills and brilliant fall foliage draw over a million visitors each year, and where the natural beauty has been the subject of countless paintings, including those of T.C. Steele, a noted American Impressionist. Rural Brown County is home to just about 15,000 residents, or fewer than fifty people per square mile. With such a sparse population, most families and businesses depend on septic systems to dispose of wastewater. Plaintiff John Simpson installed and repaired septic systems in the county until June 14, 2013, when his license to do so was revoked by the Brown County Board of Health.

Simpson then brought this action under 42 U.S.C. § 1983 against Brown County, the Brown County Health Department, and the Brown County Board of Health (collectively, "the County"). Simpson alleged he was deprived of property without due process of law and sought compensatory damages for his loss of income. After prolonged procedural fencing over the pleadings, the district court dismissed Simpson's operative complaint under Federal Rule of Civil Procedure 12(b)(6). The district court's theory was that post-deprivation remedies under state law, such as common-law judicial review, satisfied the Fourteenth Amendment's due process requirement and that Simpson had not availed himself of such remedies. Simpson appeals that decision. Taking Simpson's allegations as true, we hold (1) that Simpson has plausibly alleged that he was denied the pre-deprivation notice and hearing he was due; and (2) that even if the evidence ultimately shows the County had some basis for summary action, the County has not shown there is an adequate post-deprivation remedy under state law, whether in the form of common-law judicial review or anything other. We reverse and remand for further proceedings.

I. Factual and Procedural Background

Plaintiff John Simpson owns Monroe, LLC, a septic installation company based in Brown County. Simpson previously held a license to install and repair septic systems. He was told his license was revoked in a letter sent by County Health Officer Paul Page on June 14, 2013.

Two weeks earlier, on May 31, 2013, Page had sent Simpson a corrective action letter demanding that he immediately repair the septic system on Simpson's mother's property. In that letter, Page threatened that if Simpson did not make the necessary repairs to the septic system, Page would request legal action through the county prosecutor's office and "may request an executive meeting of the Health Board to recommend that [Simpson's] license to install septics be rescinded." Without apparent further process or an opportunity for Simpson to be heard, Page followed through on that threat with his June 14 letter: "Based on the findings our Health Board members approved the removal of your name from our list of approved septic contractors." The letter did not inform Simpson of any law or regulation he had violated, and it did not identify any opportunities for administrative or judicial review.¹

At the time, septic installation and repair licenses were governed by a county ordinance.² The ordinance provided in section 501: "Any person engaged in ... the installation or repair of sewage disposal systems within Brown County shall submit an application to the Health Officer to have his name placed on the County Register." The procedures for removal of a septic installer from the register were described in section 503. That section broadly delegated the power of license revocation to the Health Officer, who could remove any person or firm that had demonstrated "inability or unwillingness to comply with these rules and requirements." The affected party could re-apply for a license after one year, and if the Health Officer still deemed him unable or unwilling to "comply," then the installer might be removed from the register permanently.

Simpson brought this suit in October 2013 alleging that his removal from the list of licensed septic installers deprived him of a protected property interest without due process of law. After two rounds of amendments to the complaint, the district court granted the County's Rule 12(b)(6) motion to dismiss and dismissed the case with prejudice in 2014. Relying on the balancing test from Mathews v. Eldridge , 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), the district court held that Simpson was not entitled to pre-deprivation remedies because the County's interest in protecting public health outweighed "the potential value of affording [Simpson] additional procedures prior to revocation." Simpson v. Brown County , No. 1:13-cv-01660-TWP-TAB, 2014 WL 4840768, at *3 (S.D. Ind. Sept. 29, 2014). The court had erroneously assumed that Simpson had an adequate post-deprivation remedy under Indiana Code § 13-15-7-3, which authorizes the state's Office of Environmental Adjudication to review certain environmental permit revocations. As the district court acknowledged a year later in granting in part Simpson's subsequent Rule 59(e) motion, § 13-15-7-3 has no bearing on a county-level revocation of a septic installer's license. See Simpson v. Brown County , No. 1:13-cv-01660-TWP-TAB, 2015 WL 5775513, at *3, 7, 9 (S.D. Ind. Sept. 30, 2015).

The district court corrected its mistake but then held for the first time that Simpson had alleged a "random and unauthorized" deprivation of his license, such that the County had no duty to provide pre-deprivation process. Id. at *5. The court granted Simpson leave to amend his complaint again, but only if he could "plead sufficient facts to [show] that he actually pursued all available post-deprivation remedies or sufficiently explain the specific reasons that the available post-deprivation remedies were inadequate." Id. at *9.

In his third amended complaint, Simpson cited the septic ordinance, though he had no obligation to do so. See Johnson v. City of Shelby , 574 U.S. ----, 135 S.Ct. 346, 346, 190 L.Ed.2d 309 (2014) ("Federal pleading rules call for ‘a short and plain statement of the claim showing that the pleader is entitled to relief’; they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.") (citation omitted); Avila v. CitiMortgage, Inc. , 801 F.3d 777, 783 (7th Cir. 2015) ("plaintiffs are not required to plead specific legal theories"), citing King v. Kramer , 763 F.3d 635, 642 (7th Cir. 2014). Simpson argued that the revocation of his license occurred pursuant to section 503 of the county ordinance and that, far from "random and unauthorized" conduct, the revocation was a "predictable abuse of broadly delegated uncircumscribed power." Simpson argued he was thus entitled to pre-deprivation procedures and received none. Alternatively, Simpson argued that state law afforded him no adequate post-deprivation remedy.

The district court rejected Simpson's arguments, chiding him for "attempting to re-litigate the previously decided issue of pre-deprivation due process" and adding that he failed to plead that he had taken advantage of the one post-deprivation remedy available to him under state law in the form of common-law judicial review. Simpson v. Brown County , No. 1:13-cv-01660-TWP-TAB, 2016 WL 1700370, at *4–5 (S.D. Ind. Apr. 27, 2016). The court dismissed the action with prejudice. Simpson appeals.

II. Analysis

We review de novo the district court's dismissal for failure to state a claim. Tamayo v. Blagojevich , 526 F.3d 1074, 1081 (7th Cir. 2008). In doing so, we construe the operative third amended complaint in the light most favorable to Simpson, accepting as true all well-pled facts and drawing all reasonable inferences in his favor. Id.

Before addressing the substance of the procedural due process issues in this appeal, we pause to address the pleading posture. Though the actions giving rise to Simpson's claim were undertaken by County employees—principally Paul Page and the members of the Board of Health—the defendants in this suit are all County entities (the County itself and its Board of Health and Health Department). Such municipal governments cannot be held liable for damages under 42 U.S.C. § 1983 on a theory of respondeat superior for constitutional violations committed by their employees. They can, however, be held liable for unconstitutional municipal policies or customs. Monell v. Dep't of Social Services , 436 U.S. 658, 690–91, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978) ; Glisson v. Indiana Dep't of Corrections , 849 F.3d 372, 378–79 (7th Cir. 2017) (en banc) (explaining theories of Monell liability). Monell issues have not been part of this appeal thus far; we assume that Simpson is alleging the septic ordinance was unconstitutional, at least to the extent it failed to provide for due process of law, and that he was injured by officials carrying out that ordinance so as to trigger Monell liability.

A. Notice and Opportunity to be Heard Before the Deprivation

1. Due Process Basics

Procedural due process in constitutional law generally involves a familiar line of inquiry: (1) is there a property or liberty interest protected by due process; and (2) if so, what process is due, and when must that process be made available?

Simpson was deprived of a protected property interest. Government-issued licenses to perform...