WMX Technologies, Inc. v. Miller

Citation80 F.3d 1315
Decision Date08 April 1996
Docket NumberNo. 93-55917,93-55917
Parties96 Cal. Daily Op. Serv. 2375, 96 Daily Journal D.A.R. 3950 WMX TECHNOLOGIES, INC., f/k/a/ Waste Management, Inc., a Delaware corporation; and Waste Management of California, Inc., a California corporation, Plaintiffs-Appellants, v. Edwin L. MILLER, Jr., as District Attorney of San Diego County, California, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Robert H. Friebert and Matthew W. O'Neill, Friebert, Finerty & St. John, S.C., Milwaukee, Wisconsin, and Gerald L. McMahon and David J. Zubkoff, Seltzer, Caplan, Wilkins & McMahon, San Diego, California, for plaintiffs-appellants.

Morris G. Hill, Office of the County Counsel, San Diego, California, for defendant-appellee.

Appeal from the United States District Court for the Southern District of California Judith N. Keep, Chief District Judge, Presiding. No. CV-92-01584-JNK.

Before: HUG, Chief Judge, and FLOYD R. GIBSON, * and HAWKINS, Circuit Judges.

HUG, Chief Judge:

WMX Technologies, Inc. ("WMX"), formerly known as Waste Management, Inc., and its wholly-owned subsidiary, Waste Management of California, Inc. ("Waste Management"), appeal from the district court's Federal Rule of Civil Procedure 12(b)(6) dismissal of their 42 U.S.C. § 1983 suit against San Diego County District Attorney Edwin Miller. Miller allegedly damaged the plaintiffs' business reputation and goodwill by preparing and disseminating a report linking the plaintiffs to organized crime. The plaintiffs sued for declaratory and injunctive relief alleging the deprivation of various property and liberty interests without due process, as well as the violation of their First Amendment rights. The district court dismissed all causes of action. We affirm the judgment of the district court.

BACKGROUND

Waste Management, a wholly-owned subsidiary of WMX, is a business which collects, stores, and disposes of solid and liquid waste. Waste Management proposed the development of a new landfill site in San Diego County, which was experiencing a "landfill crisis." In November 1990, Waste Management filed an application with the San Diego County Board of Supervisors ("Board") seeking the necessary use permits.

In response to the application, the Board unanimously voted to authorize San Diego County Supervisor Susan Golding to request District Attorney Miller to investigate rumors regarding the plaintiffs' alleged connections with organized crime and other possible improprieties. In commencing his investigation, Miller asked WMX to waive any possible liability claims of itself or its subsidiaries, including Waste Management. He also requested WMX to provide access to any documents his office sought and to pay for the costs of the investigation. WMX refused and instead offered to provide access to most documents, waive some liability claims, and pay for part of the investigation. No agreement was reached, and Miller proceeded with his investigation without the waiver of liability and agreement to provide documents.

In April 1992, Miller sent his final report ("the report") to the Board. He also disclosed his report to the press. Section V of the report, entitled "Organized Crime Connections," is the focus of this appeal. It traces the plaintiffs' alleged criminal connections with organized crime, concluding that the plaintiffs are connected to the Mafia.

In response to the report, the plaintiffs sued Miller in his official capacity under 42 U.S.C. § 1983. The complaint alleges that section V damaged the plaintiffs' reputation and business goodwill and that this effect was intended by Miller. According to the complaint, the report's implication of any impropriety by the plaintiffs is false. The complaint states that Miller disclosed copies of

                the report to the press and that the dissemination deprived the plaintiffs of their liberty and property interests without due process of law.   The specific claims for relief alleged in the complaint are
                

1. The defendant deprived the plaintiffs of their business goodwill, a legislatively created property interest in California;

2. The defendant deprived the plaintiffs of liberty by stigmatizing the plaintiffs "plus" distinctly altering their property interest in their business goodwill;

3. The defendant violated Waste Management's First Amendment right to petition the Government;

4. The defendant deprived Waste Management of liberty by stigmatizing it in connection with the exercise of its First Amendment right to petition the Government; and

5. The defendant deprived the plaintiffs of liberty by, in effect, making an official and public adjudication of criminal culpability based on the plaintiffs' alleged involvement with criminal organizations.

The district court entered a Rule 12(b)(6) dismissal of all five causes of action. It dismissed claims one, two, and five with prejudice, but it allowed leave to amend the claims related to alleged First Amendment violations (claims three and four). The plaintiffs chose not to amend and instead to rely on the complaint that was dismissed. The plaintiffs timely appealed.

The district court had jurisdiction pursuant to 28 U.S.C. §§ 1343, 2201. We have jurisdiction under 28 U.S.C. § 1291. Ordinarily, a dismissal without prejudice is not appealable. However, because the plaintiffs elected to stand on the complaint and appeal rather than amend, the district court dismissal is a final appealable order. Carson Harbor Village Ltd. v. City of Carson, 37 F.3d 468, 471 n. 3 (9th Cir.1994) (quoting McGuckin v. Smith, 974 F.2d 1050, 1053 (9th Cir.1992)).

STANDARD OF REVIEW

We review de novo a district court's Rule 12(b)(6) dismissal. Everest & Jennings, Inc. v. American Motorists Ins., 23 F.3d 226, 228 (9th Cir.1994). In reviewing the sufficiency of the claim, we accept all allegations of material fact as true and construe them in the light most favorable to the nonmoving party. Id.

DISCUSSION

"To make out a cause of action under section 1983, plaintiffs must plead that (1) the defendants acting under color of state law (2) deprived plaintiffs of rights secured by the Constitution or federal statutes." Gibson v. United States, 781 F.2d 1334, 1338 (9th Cir.1986). Paragraph 8 of the complaint alleges that Miller acted under color of state law. The question remains whether the plaintiffs properly alleged that they have been deprived of constitutionally protected rights. The procedural due process guarantees of the Fourteenth Amendment apply only when a constitutionally protected liberty or property interest is at stake. Board of Regents v. Roth, 408 U.S. 564, 569, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548 (1972). We look to state law to define the dimensions of protected property interests. Id. at 577, 92 S.Ct. at 2709.

1. Property Interest

We first consider whether the complaint stated a claim that they were deprived of a property interest. The plaintiffs contend that they had a property interest in their business goodwill and that Miller's report deprived them of business goodwill without due process. They argue that because the standing and reputation of a business is a vital part of the goodwill of a business, injury to the standing and reputation of the business becomes a deprivation of the goodwill of the business. The district court concluded that, under the circumstances of this case, the plaintiffs had no protected property interest in obtaining a permit or in their reputation. We agree.

In making this claim, the plaintiffs rely heavily upon this court's decision in Soranno's Gasco, Inc. v. Morgan, 874 F.2d 1310 (9th Cir.1989). In that case, we reviewed a claim for deprivation of property without due process in the context of an alleged injury to business goodwill in California. In Soranno's Gasco, state officials suspended Soranno's Gasco's bulk plant permits and sent letters to its customers informing them that their own permits might be subject to suspension if they continued to receive petroleum from Soranno's Gasco. The plaintiffs filed a section 1983 claim contending that suspension of Soranno's Gasco's permits and notification of its suspension to its customers deprived the plaintiffs of their property interest in business goodwill without due process. Id. at 1313.

We held in Soranno's Gasco that in light of the California statute conferring property status to business goodwill, "[t]he goodwill of one's business is a property interest entitled to protection; the owner cannot be deprived of it without due process." Id. at 1316. Concluding that the plaintiffs had a protected property interest, we ultimately held that a post-deprivation hearing provided adequate due process. Id. at 1318.

Soranno's Gasco, however, does not control this case because in the context of the plaintiffs' allegations their alleged injury to their business goodwill does not go beyond injury to their business reputation. Soranno's Gasco clearly involved more than mere injury to reputation. It involved actual, direct interference with business goodwill by the state through letters sent directly to Soranno's Gasco's customers. The state threatened Soranno's Gasco's customers with suspension of their own permits if they continued to deal with Soranno's Gasco, thereby directly interfering with Soranno's Gasco's "expectation of continued patronage" by those customers.

In contrast, this case only involves defamatory remarks made to the public generally which allegedly injured the plaintiffs' business reputation. This is not sufficient to satisfy the requirement that a constitutionally protected property interest be at stake. Damage to business reputation without more does not rise to the level of a constitutionally protected property interest. See Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976); Siegert v. Gilley, 500 U.S. 226, 111 S.Ct. 1789, 114 L.Ed.2d 277 (1991). Allowing the plaintiffs' claim under these...

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