Lott Johnson v. Sonny Perdue , 862 F.3d 712 ( 2017 )

United States Court of Appeals
For the Eighth Circuit
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No. 15-3962
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Lott Johnson
lllllllllllllllllllll Plaintiff - Appellant
v.
Sonny Perdue,1 Secretary, Department of Agriculture; Mark Petty; Linda Newkirk;
James Culpepper, III; Hendra Woodfork; Chana Thompson; John and Jane Does
lllllllllllllllllllll Defendants - Appellees
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Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
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Submitted: January 11, 2017
Filed: July 6, 2017
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Before SMITH, Chief Judge, KELLY, Circuit Judge, and SIPPEL, District Judge.2
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KELLY, Circuit Judge.
1
Sonny Perdue has been appointed to serve as Secretary of the United States
Department of Agriculture, and is substituted as respondent pursuant to Federal Rule
of Appellate Procedure 43(c).
2
The Honorable Rodney W. Sippel, Chief United States District Judge for the
Eastern District of Missouri, sitting by designation.
Lott Johnson is an African American farmer who operates and manages 79
acres of farmland in Lonoke County, Arkansas. He brings claims against the
Secretary of the United States Department of Agriculture (USDA) and five USDA
employees, alleging racial discrimination, retaliation, and conspiracy regarding his
loan applications, servicing requests, and the application of administrative offsets to
collect on a defaulted loan. The district court dismissed the complaint with prejudice,
and this appeal followed. We affirm in part, reverse in part, and remand for further
proceedings.
I. Background
This is the third time Johnson has brought claims alleging the USDA
discriminated and retaliated against him with regard to his loans. In 2010, Johnson
filed a complaint with the USDA’s Office of the Assistant Secretary for Civil Rights
(the Office). In a Final Agency Decision under 7 C.F.R. § 15d and the Equal Credit
Opportunity Act (ECOA), 15 U.S.C. § 1691 et seq., the Office found that Johnson
proved the USDA racially discriminated against him when it withdrew his Farm
Service Agency (FSA) loan application, delayed processing his FSA loan application
and servicing requests, and denied him primary loan servicing. It also found the
USDA retaliated against him based on a prior discrimination complaint he filed with
the Office when it improperly accelerated his outstanding debt and withdrew his loan
application. The Final Agency Decision denied several other retaliation claims based
on Johnson’s prior discrimination complaint, all of his retaliation claims based on his
status as a Pigford claimant,3 and one additional race discrimination claim. The
Office awarded Johnson $13,440 in economic damages; $35,000 for stress,
humiliation, and depression; and $9,780 in debt relief on his FSA loans.
3
In 2001, Johnson was a prevailing plaintiff in the class action Pigford v.
Glickman, 206 F.3d 1212 (D.C. Cir. 2000), which alleged that the USDA racially
discriminated in its allocation of farm loans between 1983 and 1997, id. at 1214.
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In 2012, Johnson filed a complaint in federal court and ultimately named the
Secretary and five USDA employees as defendants (hereinafter, Johnson I). Like his
complaint with the Office, his amended federal complaint was based on alleged
discrimination and retaliation in loan applications, loan servicing requests, and
application of administrative offsets. The district court dismissed the claims against
the Secretary based on res judicata due to the Office’s Final Agency Decision; and
dismissed the claims against the individual defendants for failure to effect timely
service, preclusion by the Office’s comprehensive remedial scheme, and failure to
state a claim. The court entered final judgment, dismissing the case without
prejudice, in September 2014. Johnson initially appealed the judgment, but later
voluntarily dismissed the appeal, choosing to refile his claims instead.
On March 23, 2015, Johnson refiled his amended federal complaint with minor
changes concerning the dates of the alleged wrongful actions and adding conspiracy
allegations (hereinafter, Johnson II). The complaint was filed against the Secretary
of the USDA and the same five USDA employees—Mark Petty, Linda Newkirk,
James Culpepper, III, Hendra Woodfork, and Chana Thompson—all in their official
and individual capacities. It stated claims for violations of the ECOA; violations of
due process, equal protection, and retaliation under Bivens v. Six Unknown Named
Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971); and conspiracy pursuant
to 42 U.S.C. § 1985(3). The defendants moved to dismiss and the district court
granted the motions, concluding the the ECOA claims were barred by res judicata
based on the Office’s Final Agency Decision; the ECOA claims were barred by
collateral estoppel due to Johnson I’s resolution of the res judicata issue; the Bivens
claims were precluded by the Office’s comprehensive remedial scheme; the Bivens
claims against defendants in their official capacity were barred by sovereign
immunity; the claims against the Secretary in his individual capacity were
insufficiently pleaded; and the conspiracy claim was insufficiently pleaded. The
district court dismissed the complaint with prejudice and this appeal followed.
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As to the Secretary, Johnson appeals only the dismissal of his ECOA claim.
As to the individual defendants, Johnson appeals the dismissal of his ECOA claims,
his Bivens claims against them in their individual capacities, and his conspiracy
claim.
II. Discussion
We review the district court’s grant of a motion to dismiss de novo. See Laase
v. Cty. of Isanti, 638 F.3d 853, 856 (8th Cir. 2011). Johnson argues the district court
improperly transformed defendants’ motions to dismiss into motions for summary
judgment by considering a document outside the pleadings, namely the Office’s Final
Agency Decision. The district court properly considered the Final Agency Decision
because it is embraced by the allegations in the complaint, is a matter of public
record, and its authenticity has not been questioned. See Ashanti v. City of Golden
Valley, 666 F.3d 1148, 1151 (8th Cir. 2012) (“[D]ocuments necessarily embraced by
the complaint are not matters outside the pleading” and “include documents whose
contents are alleged in a complaint and whose authenticity no party questions”
(internal quotations omitted)); see, e.g., Johnson v. Vilsack (Curtis Johnson), 833
F.3d 948, 951 n.4 (8th Cir. 2016) (approving of the district court’s consideration of
the Office’s Final Agency Decision on a motion to dismiss).
A. ECOA Claims
1. Preclusion
The district court dismissed Johnson’s ECOA claims against all defendants as
barred by res judicata based on the Office’s Final Agency Decision, or, in the
alternative, by collateral estoppel based on the Johnson I court’s resolution of the
same res judicata issue. Johnson appeals both conclusions.
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After the district court entered judgment in Johnson II, we issued our decision
in Curtis Johnson. Like Johnson here, Curtis Johnson received a partially favorable
decision from the Office pursuant to a complaint alleging that FSA’s denials of his
debt settlement applications were racially discriminatory. 833 F.3d at 952–53. He
subsequently filed a lawsuit in federal court stating ECOA, Bivens, and conspiracy
claims against the Secretary and eleven USDA employees, many of whom are
defendants in the present action. Id. at 953. The district court dismissed the ECOA
claims in part on the grounds that they were precluded by the Office’s administrative
proceedings. Id. We reversed, concluding that “a final agency decision by the USDA
resolving a complaint under 7 C.F.R. Pt. 15d using the administrative procedures
currently in effect does not result in claim preclusion.” Id. at 958. We reached this
decision after reviewing the Office’s procedures and finding that there was no
opportunity for discovery, “no procedure for questioning evidence submitted by the
opposing party, much less an evidentiary hearing,” and “no avenue for seeking
judicial review of [the Office]’s final decisions.” Id. at 955. We found that these
procedures were “too bare bones to bar future federal-court litigation.” Id. at 957.4
In light of Curtis Johnson, we cannot agree with the district court’s conclusions
that Johnson’s ECOA claims are barred by res judicata and collateral estoppel. As
to res judicata, the Secretary and individual defendants argue that Johnson’s ECOA
claims were properly dismissed because res judicata bars relitigation of the claims
previously decided by the Office. After the parties in this case completed briefing the
issue, Curtis Johnson established that the Office’s Final Agency Decision on
Johnson’s ECOA claim does not bar his subsequent federal ECOA claim. Id. at 958.
4
The Office’s decision on Lott Johnson’s administrative complaint was issued
on the same day as its decision on Curtis Johnson’s complaint. See Curtis Johnson,
833 F.3d at 952. There is no evidence in the record that Lott Johnson was subject to
different or additional procedures than those in Curtis Johnson.
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Only the Secretary pursues the argument that collateral estoppel bars Johnson’s
ECOA claim because the res judicata issue was actually litigated and decided in
Johnson I.5 See Robinette v. Jones, 476 F.3d 585, 589 (8th Cir. 2007) (setting out the
elements of collateral estoppel as requiring, inter alia, that the issue was “actually
litigated in the prior action” and was “determined by a valid and final judgment”
(quoting Anderson v. Genuine Parts Co., 128 F.3d 1267, 1273 (8th Cir. 1997))).
However, given our subsequent decision in Curtis Johnson, the Secretary’s argument
cannot prevail because “collateral estoppel extends only to contexts in which . . .
applicable legal rules remain unchanged.” Montana v. United States, 440 U.S. 147,
158 (1979) (internal quotation omitted); accord Ginters v. Frazier, 614 F.3d 822, 827
(8th Cir. 2010). At the time of Johnson I, it was still an open question in this circuit
whether a Final Agency Decision by the Office could have res judicata effect, and the
district court there decided such preclusion was permissible. Subsequently, in Curtis
Johnson, we stated that a decision by the Office could not bar subsequent federal
litigation. 833 F.3d at 958. This change in the applicable legal rules prevents the
application of collateral estoppel in the present case. See Ginters, 614 F.3d at 827
(holding that collateral estoppel did not apply where an intervening Supreme Court
decision “constitute[d] a significant change in controlling legal principles”). We
certainly do not fault the Johnson II court for applying collateral estoppel to the
Secretary, as it had no way to know of our forthcoming decision in Curtis Johnson.
Nonetheless, “we find it would not be in the interest of judicial economy” to remand
this case back to the district court in order for it to “consider the recent change in
controlling principles of law.” Id.
Accordingly, we reverse the district court’s conclusions that Johnson’s ECOA
claims are barred by res judicata and collateral estoppel.
5
The individual defendants do not raise the collateral estoppel argument. In
any event, collateral estoppel could not apply to them because they did not litigate the
res judicata issue in Johnson I, and the district court expressly declined to resolve its
applicability to them.
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2. Failure to State a Claim
The individual defendants alternatively argue that Johnson’s ECOA claim was
properly dismissed because he failed to allege all necessary elements. The district
court did not reach this argument. Because the issue was fully briefed, addresses a
pure question of law, and, like the preclusion question, is resolved by Curtis Johnson,
we take up the individual defendants’ alternative argument that the ECOA claim is
insufficiently pleaded. See Union Pac. R.R. v. Bhd. of Locomotive Eng’rs &
Trainmen Gen. Comm of Adjustment, 558 U.S. 67, 79 (2009) (court may address an
“alternative ground” when it “presents a pure question of law that th[e] Court can and
should resolve without need for remand” (alternation in original) (internal quotation
omitted)); Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928, 936 (8th Cir.
2012) (“Whether a complaint states a cause of action is a question of law which we
review on appeal de novo.”).
The individual defendants argue that the complaint fails to sufficiently allege
that any of them qualifies as a “creditor” under the ECOA. A “creditor” is defined
in the ECOA as “any person who regularly extends, renews, or continues credit,”
including any person who “arranges for” or “participates” in such credit decisions.
15 U.S.C. § 1691a(e). The ECOA’s implementing regulations further define a
creditor as “a person who, in the ordinary course of business, regularly participates
in a credit decision, including setting the terms of the credit.” 12 C.F.R. § 202.2(l).
Addressing several of the same defendants, Curtis Johnson found that allegations
identical to those here were sufficient. 833 F.3d at 958. “We think it can fairly be
inferred from their job titles” as “a Farm Loan Manager, a Farm Loan Officer, or a
Farm Loan Chief” that four of the individual defendants “meet the relevant
definitions of ‘creditor.’” Id. “It is plausible to suppose that individuals holding
these positions will, in the ordinary course of business, regularly participate in a
credit decision.” Id. As to the final individual defendant, Linda Newkirk, the State
Executive Director of the Arkansas FSA office, we conclude the complaint
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sufficiently alleges that she arranged for and set the terms of Johnson’s loan in that
it contends she “initiated administrative offsets and notified Plaintiff that they
intended to intercept any federal payments due him and to apply those monies to his
delinquent debt.” See 15 U.S.C. § 1691a(e); 12 C.F.R. § 202.2(l); Curtis Johnson,
833 F.3d at 958 (concluding that allegations regarding Linda Newkirk were sufficient
to infer her status as a creditor where they stated “she was the one to provide a letter
denying Johnson’s debt settlement applications”). Thus, the complaint includes
sufficient allegations from which one could plausibly infer that the individual
defendants qualified as creditors under the ECOA. In sum, the individual defendants
have not demonstrated that Johnson failed to state an ECOA claim against them.6
B. Bivens Claims
Johnson argues that the district court erred in dismissing his Bivens claims
against the individual defendants in their individual capacities because his
constitutional claims are not barred by a comprehensive remedial scheme. We agree.
“[T]he remedial scheme here—the Part 15d process—was not created at the explicit
direction of Congress, but rather by the USDA through regulation. . . . When a
remedial scheme is created entirely by regulation, it does not preclude a Bivens
claim.” Curtis Johnson, 833 F.3d at 959 (internal citation omitted) (citing Krueger
v. Lyng, 927 F.2d 1050, 1055 (8th Cir. 1999) and Carpenter’s Produce v. Arnold, 189
F.3d 686, 689 (8th Cir. 1999)).
6
In a single sentence, the individual defendants also argue that the complaint
does not allege that Johnson was qualified for credit that he was denied. See Rowe
v. Union Planters Bank of Se. Mo., 289 F.3d 533, 535 (8th Cir. 2002) (stating that the
elements of a prima facie ECOA claim include, inter alia, that plaintiff “applied for
and was qualified for a loan”). Johnson alleges that he had previously been approved
for an operating loan in March 2009 “as well as operating loans in previous years,”
leading to the reasonable inference that he was qualified when he applied again in
2010 and 2011.
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C. Conspiracy Claims
Johnson appeals the district court’s conclusion that his conspiracy claim
against the individual defendants must be dismissed because the complaint “makes
no factual allegations indicating an agreement between the defendants to violate his
constitutional rights.” To state a claim for conspiracy under 42 U.S.C. § 1985(3),
“the plaintiff must allege with particularity and specifically demonstrate with material
facts that the defendants reached an agreement.” City of Omaha Emps. Betterment
Ass’n v. City of Omaha, 883 F.2d 650, 652 (8th Cir. 1989). The complaint includes
no facts suggesting the individual defendants reached an agreement; instead, it relies
on conclusory allegations that the defendants conspired “through mutual decisions
and correspondence” and “acted in concert and with a mutual understanding.”
Because Johnson was unable to “point[] to at least some facts which would suggest
that appellees reached an understanding to violate [his] rights,” he has not sufficiently
alleged a conspiracy. Jensen v. Henderson, 315 F.3d 854, 862 (8th Cir. 2002).
III. Conclusion
For the foregoing reasons, we reverse the district court’s dismissal of Johnson’s
ECOA claim as to all defendants and his Bivens claims as to the individual
defendants in their individual capacities, and we affirm the district court’s dismissal
of the conspiracy claim. We remand for further proceedings consistent with this
order.
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