Duran v. City of Corpus Christi

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS June 28, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 06-41225
TOMAS DURAN,
Plaintiff-Appellant,
v.
CITY OF CORPUS CHRISTI,
Defendant-Appellee.
--------------------
Appeal from the United States District Court
for the Southern District of Texas
(2:04-CV-500)
--------------------
Before HIGGINBOTHAM, DAVIS, and WIENER, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Tomas Duran appeals from the district court’s grant of summary
judgment for Defendant-Appellee the City of Corpus Christi (“the City”), dismissing Duran’s
§ 1983 First Amendment retaliation claim. Concluding that Duran lacks standing to pursue
his asserted claim, we vacate the judgment of the district court and remand with instructions
to dismiss.
I. FACTS & PROCEEDINGS
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
In 1998, Duran prepared and submitted to the City, on behalf of Entrust, Inc.
(“Entrust”), a proposal to provide third-party claims administration and accounting services
to the City in connection with its health insurance program. In January 1999, Entrust
separately agreed to pay Duran half of all monthly administrative fees that it would receive
if it should be awarded the health plan administration contract (“the Contract”).1 The letter
from Entrust to Duran memorializing this agreement does not precisely identify the services
that Duran had provided or would provide in exchange for his payments.
In February 1999, the City awarded Entrust the Contract, which, inter alia, required
Entrust to appoint a local “coordinator to resolve all problems that may arise during the
length of this Contract.” Entrust selected Duran to serve as that coordinator.2 He did so not
as an employee of Entrust but as an independent contractor.
The instant case stems from a dispute between Entrust and the City over a costly
health insurance claim made by an adult child (“the Child”) of a City employee (“the
Employee”). After Entrust learned of this claim, it relayed the information to Duran in his
capacity as plan coordinator. Duran then informed various City officials of potential
problems with the Child’s claim. According to Duran, he communicated to those officials
his belief that (1) the City should deny the Child’s claim; (2) City officials had fraudulently
manufactured COBRA eligibility for the Child in an attempt to secure reimbursement for her
claim from the reinsurer; (3) the City did not have the authority to pay the Child’s medical
1
Entrust’s eventual payments to Duran averaged $40,000 per
month over the life of the Contract.
2
Duran maintains that City officials “presumed” that he
would serve as the local coordinator, and that the matter was
“briefly discussed” during contract negotiations.
2
bills; and (4) making withdrawals from the City’s self-insured fund to pay the Child’s claim
violated the terms of the health plan. Duran also contends that —— without revealing any
names of employees or plan participants — he prompted a confidential contact at a local
newspaper, the Corpus Christi Caller Times, to look into the disputed claim. The Caller
Times ran several articles exposing the dispute surrounding the Child’s claim. Duran does
not allege that any City official connected him to these articles or even suspected that he had
leaked the information at any time pertinent to this case.
A few months before the Contract was to expire on its own terms, the City issued a
Request for Proposals for health plans administration, health services network, pharmacy
benefits management, and related services. As he had before, Duran prepared and submitted
a proposal on behalf of Entrust. Several other companies, including the eventual successful
bidder, Humana Insurance Company, Inc. (Humana), also submitted proposals. After a team
of City officials and independent consultants evaluated all proposals submitted, the City
awarded the new health plan administration contract to Humana as the bidder that received
the highest ranking from the evaluation team.
Just over a year later, Duran filed the instant § 1983 action,3 alleging, inter alia, that
the City decided not to award the contract to Entrust in retaliation for his protected speech
regarding the Child’s disputed health care claim.
II. ANALYSIS
3
Duran initially asserted multiple claims against multiple
defendants. The district court dismissed all of those claims
pursuant to Fed. R. Civ. P. 12(b). Duran v. City of Corpus
Christi, 2006 WL 1900636 (S.D. Tex. Jul 11, 2006). We affirmed
the district court’s dismissal of all but the instant First
Amendment retaliation claim against the City. Duran v. City of
Corpus Christi, 160 Fed. Appx. 363 (5th Cir. 2005).
3
A. Standard of Review
We review grants of summary judgment de novo, applying the same standard as the
district court.4 Summary judgment is appropriate when there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law.5
B. Standing
The City did not challenge Duran’s standing to assert a First Amendment retaliation
claim based on the City’s nonrenewal of the Entrust contract, either in the district court or
on appeal. Nevertheless, we must raise any perceived jurisdictional issue sua sponte.6 In
preparing to hear this appeal, we perceived some question whether Duran’s injury from
Entrust’s failure to be awarded the new contract was sufficiently “direct” to confer standing.
We instructed the parties to address this issue at oral argument, and having now considered
the merits of their arguments and the applicable law, we conclude that Duran lacks standing
to assert a First Amendment retaliation claim against the City.
1. Direct Standing
Standing, at its “irreducible constitutional minimum,” requires plaintiffs “to
demonstrate: they have suffered an ‘injury in fact’; the injury is ‘fairly traceable’ to the
defendant's actions; and the injury will ‘likely ... be redressed by a favorable decision.’”7
4
Abarca v. Metro. Transit Auth., 404 F.3d 938, 940 (5th
Cir. 2005).
5
Dallas Fire Fighters Ass’n v. City of Dallas, 150 F.3d
438, 440 (5th Cir. 1998).
6
See Henderson v. Stalder, 287 F.3d 374, 379 n.5 (5th Cir.
2002).
7
Public Citizen, Inc. v. Bomer, 274 F.3d 212, 217 (5th Cir.
2001) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555,
4
“[A]n injury in fact [is] an invasion of a legally protected interest which is (a) concrete and
particularized, and (b) actual or imminent, not conjectural or hypothetical.”8 Courts
generally refuse to recognize standing based on economic harm that is merely a consequence
of an injury suffered by another party. For example, corporate shareholders, officers, and
employees cannot pursue personal claims that are based on alleged misconduct towards the
corporation unless they are able to show some “direct” harm to themselves.9
The Supreme Court has recognized the right of independent contractors to bring First
Amendment retaliation claims based on a governmental entity’s nonrenewal of an at-will
contract with that contractor.10 In this case, however, only Entrust was an “independent
contractor” of the City and the Contract was for a term that expired, not one terminable at
560-61 (1992)).
8
Lujan, 504 U.S. at 560.
9
See Pagan v. Calderon, 448 F.3d 16, 28-30 (1st Cir. 2006)
(citations omitted); see also Sw. Suburban Bd. of Realtors, Inc.
v. Beverly Area Planning Ass’n, 830 F.2d 1374 (7th Cir. 1987)
(corporation's employees, officers, stockholders, and creditors
had no injury distinct from corporation and lacked standing to
maintain antitrust suit); A-G-E Corp. v. United States, 968 F.2d
650 (8th Cir. 1992) (employees lacked standing to seek to enjoin
Department of Interior from permitting states to employ resident
preferences in federally funded contracts); Willis v. Lipton, 947
F.2d 998, 1000-01 (1st Cir. 1991) (employee cannot assert RICO
violation for corporate injury even though employee lost
employment as a result of the conspiracy); Warren v. Mfrs. Nat’l
Bank, 759 F.2d 542, 545 (6th Cir. 1985) (employee of corporation
does not have standing to pursue fraud or RICO claim; lost
employment was “merely incidental to the corporation's injury”);
Pitchford v. PEPI, Inc., 531 F.2d 92, 97 (3d Cir. 1975)
(corporate president lacked standing to sue either in his
capacity as a stockholder or as an officer because injuries were
merely derivative of the company's injuries).
10
See Bd. of County Comm'rs v. Umbehr, 518 U.S. 668, 684
(1996).
5
will. Duran had contracted separately with Entrust, not the City, to serve as the local health
plan coordinator, a post that under the Contract Entrust was bound to fill. Thus his putative
injury (potential loss of future fee payments from Entrust if the Contract had been renewed)
is at best only derivative of Entrust’s putative injury from nonrenewal of the Contract.
A similar situation was recently presented to the First Circuit in Pagan v. Calderon.11
In Pagan, a pharmaceutical company (ARCAM), its chief executive officer (CEO), some
minority shareholders, and a consultant with whom the company contracted, brought § 1983
actions against the former governor of Puerto Rico.12 The plaintiffs alleged, inter alia, that
the former governor violated the First Amendment's free association guarantee by improperly
influencing a government lender to reject a loan sought by ARCAM.13 The First Circuit held
that none of the individual plaintiffs had standing to pursue such constitutional claims.
Specifically, the court held that (1) the CEO’s loss of income or employment was merely
incidental to the direct injury inflicted on the corporation,14 (2) the shareholders could not
show that they suffered nonderivative injuries sufficient to deflect the rule that a shareholder
may not sue in his own name for injury sustained by the corporation,15 and (3) the
independent consultant’s alleged injuries were plainly derivative of the harm ascribed to
ARCAM.16
11
448 F.3d 16 (1st Cir. 2006).
12
Id. at 23.
13
Id.14
Id. at 28 n.2.
15
Id. at 28-29.
16
Id. at 30.
6
Notably, the consultant in Pagan contended, exactly as Duran does here, that it was
his protected conduct that precipitated the former governor’s purportedly unconstitutional
mistreatment of the corporation. The First Circuit regarded this contention as irrelevant,
however, and held that “the standing inquiry turns on the plaintiff's injury, not the
defendant's motive . . . [and] the fact that animus toward the agent sparked mistreatment of
the principal does not create an exception to the rule that an agent's section 1983 claim can
flourish only if he alleges that he personally suffered a direct, nonderivative injury.”17 The
Pagan court held that “when a government actor discriminates against a corporation based
on a protected trait of a corporate agent, it is the corporation — and only the corporation —
that has standing to seek redress.”18 This reasoning, which we adopt, applies equally to bar
Duran’s standing.
Like the consultant in Pagan, Duran was not an employee of, or in contractual privity
with, the allegedly retaliatory government actor, here the City. As such, Duran’s injury
(potential loss of his share of the future administrative fees that would have been paid to
Entrust by the City if it had awarded the new Contract) was only a by-product of Entrust’s
failure to receive the contract renewal itself. Here, as in Pagan, “only the corporation . . . has
standing to seek redress.” Duran does not have direct standing to bring a First Amendment
retaliation claim against the City based on its award of renewal to Humana and not to
Entrust.
2. Third-Party Standing
17
Id.18
Id.7
Duran also suggests that, even if he lacks direct standing, he has third-party standing
to bring a First Amendment claim on behalf of Entrust. We disagree, even when we
pretermit answering the obvious question whether Duran did indeed bring this claim “on
behalf of Entrust.”
In addition to the minimum constitutional requirements, the Supreme Court also has
recognized prudential limitations on the set of persons who may invoke the federal judicial
power.19 These prudential considerations, which are self-imposed judicial limits on the
exercise of federal jurisdiction, require that (1) a litigant generally assert his own and not
another's interests; (2) the federal courts not adjudicate mere generalized grievances that are
more appropriately addressed by the representative branches of government; and (3) the
plaintiff's alleged injury arguably fall within the “zone of interests” protected by the law
invoked.20
These prudential limitations are subject, however, to some narrow exceptions. For
example, the Court has recognized the right of litigants to bring actions on behalf of third
parties, provided that three important criteria are present: (1) The litigant must have suffered
an “injury in fact,” giving him or her a “sufficiently concrete interest” in the outcome of the
issue in dispute; (2) the litigant must have a close relationship to the third party; and (3) there
must exist some hindrance to the third party's ability to protect his or her own interests.21
Even if we assume that Duran meets the first two requirements, we can conceive of no
19
Warth v. Seldin, 422 U.S. 490, 499 (1975).
20
Allen v. Wright, 468 U.S. 737, 751 (1984); Warth, 422
U.S. at 499-500.
21
See Powers v. Ohio, 499 U.S. 400, 411 (1991) (citations
omitted).
8
meaningful hindrance (and Duran offers none) to Entrust’s pursuit of its own claim against
the City. Absent that, Duran does not have third-party standing to pursue a claim against the
City on behalf of Entrust.
C. Ad Hominem
Even though our ruling on Duran’s standing precludes our reaching the merits of his
appeal, we pause to note that, even if we had found standing, we would have affirmed the
district court’s grant of summary judgment. The only instances of Duran’s speech clearly
supported by record evidence undisputably occurred “pursuant to his official duties” as local
plan coordinator under the Entrust contract and thus are categorically excluded from First
Amendment protection under the Supreme Court’s recent decision in Garcetti v. Ceballos.22
Moreover, the record is devoid of any evidence that the City’s decision not to renew the
Entrust contract was made in retaliation for any conceivable public speech by Duran. Not
only is the record devoid of probative evidence that he spoke to someone at the newspaper
and thusly provoked its exposé, there is no record evidence that any one in authority at the
City even knew of Duran’s alleged contact with the newspaper. We are satisfied on this
record that the process employed by the City to evaluate the competing bids for the renewal
of its health care administration contract was objective, transparent, and conducted in full
compliance with Texas law.
22
–– U.S. ––, 126 S. Ct. 1951, 1960 (2006) (“[W]hen public
employees make statements pursuant to their official duties, the
employees are not speaking as citizens for First Amendment
purposes, and the Constitution does not insulate their
communications from employer discipline.”) .
9
III. CONCLUSION
For the foregoing reasons, Duran lacks standing to maintain this action under these
circumstances. We therefore VACATE the district court’s grant of summary judgment
dismissing Duran’s First Amendment retaliation claim against the City and REMAND this
action with instructions to the district court to dismiss it.
VACATED and REMANDED with instructions to dismiss.
10