DANIEL PAGÁN ET AL. v. SILA MARÍA CALDERÓN, IN HER INDIVIDUAL CAPACITY
No. 05-1811
United States Court of Appeals For the First Circuit
May 16, 2006
Selya, Circuit Judge, Hansen, Senior Circuit Judge, and Lynch, Circuit Judge.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Daniel R. Domínguez, U.S. District Judge]
Guillermo F. DeGuzmán, with whom DeGuzmán & Gierbolini Law Offices, P.S.C. was on brief, for appellees.
*Of the Eighth Circuit, sitting by designation.
The underlying action involves multiple plaintiffs and multiple defendants (although Sila María Calderón, in her individual capacity, is the only defendant before us). The plaintiffs’ overarching claim is that Calderón, then the governor of Puerto Rico, improperly influenced the decision of a government lender to reject a loan sought by the main plaintiff, ARCAM Pharmaceutical Corporation. On the defendants’ motions to dismiss, see
I. BACKGROUND
Because this is an interlocutory appeal from the denial of a
ARCAM, a corporation chartered under the laws of Puerto Rico, was formed in 2000 for the purpose of engaging in the manufacture of pharmaceutical products. Its principal shareholder and chief executive officer is plaintiff Ernesto Vilanova Vélez (Vilanova). Plaintiffs Cristino Agosto Reyes, Martin Souto, and Christopher Molina (collectively, the guarantors) are minority shareholders. Vilanova and the guarantors have, from time to time, personally guaranteed certain of ARCAM‘s corporate debts.
Shortly after its formation, ARCAM paid $4,500,000 to acquire land and buildings in Hormigueros, Puerto Rico (the Property) as a site for manufacturing pharmaceutical products. To fund this transaction, finance improvements, and secure operating capital, ARCAM obtained a $10,000,000 loan from Westernbank. In exchange, it granted Westernbank a first mortgage on the Property. The complaint alleges that, despite the relatively modest purchase price, the Property actually was worth $24,000,000.
In the general elections of November 2000, the voters chose Calderón, running under the banner of the Popular Democratic Party (PDP), to succeed Rosselló. The upshot was that a PDP administration supplanted an NPP administration. The new regime launched a number of investigations into the performance of persons close to Rosselló. In the wake of one such probe, the Calderón administration filed criminal charges against Pagán, alleging bid-rigging. See
During the year 2002, Pagán assisted ARCAM in efforts to upgrade its plant, obtain manufacturing equipment, and secure federal Food and Drug Administration approval for its product line. In addition, Pagán represented ARCAM in third-party negotiations and before various administrative agencies. Through those
By mid-2002, ARCAM had secured two pharmaceutical manufacturing contracts and had developed a purified water production line. Launching these ventures required access to new capital. To that end, ARCAM requested a $5,000,000 commercial loan from Banco de Desarrollo Económico para Puerto Rico (BDE), a government-sponsored banking institution that had been created to promote the “development of the private sector of the economy of Puerto Rico” by making capital available to firms “whose economic activity has the effect (directly or indirectly) of substituting imports.”
The complaint further alleges that, as a result of its failure to garner supplemental financing, ARCAM fell behind on its manufacturing obligations and was threatened with the loss of its pharmaceutical contracts. Out of desperation, it recast the $5,000,000 loan proposal and, in May of 2003, resubmitted it. BDE asked for more information, which ARCAM supplied. While Vilanova still could not convince Westernbank to subordinate its first mortgage, he volunteered that he would personally guarantee the new borrowing.
Throughout the deliberative process, ARCAM repeatedly reminded BDE that it was in immediate danger of losing its hard-won contracts without an infusion of new money. BDE‘s board of directors initially harkened to this entreaty and recommended approval of ARCAM‘s renewed application. But that was not the final word: Pellot and Faría, doing Calderón‘s bidding, twisted arms to bring about BDE‘s rejection of the renewed loan request. The complaint attributes this refusal to “the discriminatory
ARCAM‘S failure to obtain financing rendered the company‘s business moribund. It has ceased operations, remains unsure if it can salvage its pharmaceutical contracts, and is uncertain whether it will be able to resume operations.
Left in these dire straits, the plaintiffs — ARCAM, Vilanova, Pagán, and the guarantors — filed suit in the United States District Court for the District of Puerto Rico.1 Their complaint, brought pursuant to
Calderón filed a motion to dismiss, contending that the complaint failed to state any cognizable federal claim against her and that, in any event, the doctrine of qualified immunity barred the relief sought against her (money damages). The plaintiffs opposed the motion.
On March 30, 2005, the district court granted Calderón‘s motion in part and denied it in part. See D. Ct. Op. at 8. Specifically, the court dismissed the First Amendment claims brought by ARCAM, Vilanova, and the guarantors — claims premised on the plaintiffs’ right to associate with Pagán (an NPP kingpin). Id. at 3. The court also dismissed the plaintiffs’ procedural due process claims. Id. at 5. Shifting gears, the court cited the plaintiffs’ allegations that Calderón‘s politically discriminatory animus toward Pagán was the root cause of BDE‘s refusal to accommodate the loan request and declined to dismiss Pagán‘s First Amendment claim. Id. at 3-4. For much the same reason, it allowed the various plaintiffs’ substantive due process and equal protection claims to stand. Id. at 6. In making these latter rulings, the court explicitly rejected Calderón‘s qualified immunity defense, without prejudice, however, to its reassertion on a better developed record. Id. at 7. This timely appeal ensued.
We pause at the outset to clarify certain matters related to our jurisdiction and to the parties’ standing.
A. Appellate Jurisdiction.
This is an interlocutory appeal in which Calderón assigns error to the district court‘s rejection of her qualified immunity defense vis-à-vis Pagán‘s First Amendment claim and the plaintiffs’ collective substantive due process and equal protection claims. The other rulings made by the district court in its opinion of March 30, 2005 are not before us. Accordingly, we take no view of them.
Although our appellate jurisdiction typically is limited to the review of final orders and judgments, see
B. Standing.
A federal court must satisfy itself as to its jurisdiction, including a plaintiff‘s Article III standing to sue, before addressing his particular claims, regardless of whether the litigants have raised the issue of standing. See Orr v. Orr, 440 U.S. 268, 271 (1979); Juidice v. Vail, 430 U.S. 327, 331 (1977); see also Warth v. Seldin, 422 U.S. 490, 498 (1975) (explaining that standing is a threshold issue in every federal case). The standing inquiry is both plaintiff-specific and claim-specific. Thus, a reviewing court must determine whether each particular plaintiff is entitled to have a federal court adjudicate each particular claim that he asserts. Allen v. Wright, 468 U.S. 737, 752 (1984); Donahue v. City of Boston, 304 F.3d 110, 116 (1st Cir. 2002). Only if a particular plaintiff has standing to pursue a particular claim will the court proceed to assess the application of the qualified immunity doctrine to that claim.
Standing involves a collocation of constitutional requirements and prudential concerns. See Valley Forge Christian Coll. v. Ams. United For Separation of Church & State, Inc., 454 U.S. 464, 471 (1982). The Constitution confines federal courts to the adjudication of actual cases and controversies. See
The first of these prerequisites deals with harm. The plaintiff must adequately allege that he “suffered or is threatened by [an] injury in fact to a cognizable interest.” Save our Heritage, Inc. v. FAA, 269 F.3d 49, 55 (1st Cir. 2001). An injury in fact is one that is concrete and particularized, on the one hand, and actual or imminent (as opposed to conjectural or hypothetical), on the other hand. Lujan, 504 U.S. at 560. In turn, a particularized injury is one that “affect[s] the plaintiff in a personal and individual way.” Id. at 560 n.1.
The second prerequisite deals with causation (what some courts have called “traceability“). To meet this requirement, the plaintiff must adequately allege that the asserted injury is causally connected to the challenged conduct. Id. at 560. This causal connection must be demonstrable; in other words, it “cannot be overly attenuated.” Donahue, 304 F.3d at 115.
In addition to these Article III prerequisites, prudential concerns ordinarily require a plaintiff to show that his claim is premised on his own legal rights (as opposed to those of a third party), that his claim is not merely a generalized grievance, and that it falls within the zone of interests protected by the law invoked. Ramírez, 438 F.3d at 98; N.H. Right to Life Political Action Comm. v. Gardner, 99 F.3d 8, 15 (1st Cir. 1996). These prudential considerations, though important, are not as inexorable as their Article III counterparts. See, e.g., United States v. AVX Corp., 962 F.2d 108, 116 (1st Cir. 1992) (recognizing associational standing exception).
Against this backdrop, we proceed to consider the issue of standing plaintiff by plaintiff and claim by claim.
1. ARCAM. In the mix of claims that are before us, two are ARCAM‘s: its substantive due process and equal protection claims (its other claims against Calderón were dismissed below and are not implicated in this appeal). As to these claims, ARCAM easily passes through both the Article III and prudential standing screens.
In theory at least, BDE‘s refusal to grant ARCAM the loan for which it applied constitutes an injury in fact (a loss of financing) particular to the corporation. Inasmuch as ARCAM alleges
Prudential considerations also counsel in favor of finding a of standing. Here, ARCAM is seeking to protect its own rights. Moreover, the alleged misconduct culminated in a particularized event (the denial of the loan), and the effects of that misconduct are sufficiently tangible.
2. Vilanova and the guarantors. Vilanova and the guarantors are before us in regard to substantive due process and equal protection claims (as was true of ARCAM, their other claims against Calderón were dismissed below and are not implicated in this appeal). These four plaintiffs premise their right to recover on their status as shareholders and creditors of ARCAM.2 Pertinently, the complaint alleges that ARCAM was unable to fulfill its contractual obligations when it did not receive the requested loan,
As a general rule, a corporation and its shareholders are distinct juridical persons and are treated as such in contemplation of law. See In re Dein Host, Inc., 835 F.2d 402, 405 (1st Cir. 1987). In terms of standing, this separateness has led to the tenet that “[a]ctions to enforce corporate rights or redress injuries to [a] corporation cannot be maintained by a stockholder in his own name . . . even though the injury to the corporation may incidentally result in the depreciation or destruction of the value of the stock.” Id. at 406 (citation and internal quotation marks omitted); see Bishay v. Am. Isuzu Motors, Inc., 404 F.3d 491, 495 (1st Cir. 2005) (noting the general rule that only the corporation, a receiver, or a stockholder acting derivatively in the corporation‘s name may sue to redress an injury to the corporation). The tenet holds true even if the shareholder is the sole owner of the corporation‘s stock. See Diva‘s Inc. v. City of Bangor, 411 F.3d 30, 42 (1st Cir. 2005); In re Dein Host, 835 F.2d at 406.
To be sure, there are exceptions to virtually every general rule and the rule that a shareholder cannot sue in his own name for an injury sustained by the corporation is not ironclad.
The fact that the complaint contains a demand for emotional distress damages (which, presumably, were incurred by the individual plaintiffs and not by ARCAM) is insufficient to confer individual standing on any of the stockholders. After all, the complaint does not suggest that this injury is anything but derivative of ARCAM‘s failure to receive the loan. It is, therefore, squarely within the proscription of the shareholder standing rule. See Bellows v. Amoco Oil Co., 118 F.3d 268, 277 n.27 (5th Cir. 1997) (holding that shareholder had no individual standing to sue for emotional distress when that distress was simply a consequence of the corporation‘s direct injury).
This brings us to the plaintiffs’ status as creditors of ARCAM (by which they apparently mean either that ARCAM owes them money that it will now be unable to repay or that they are exposed
In the case at hand, any injury related to either the plaintiffs’ foregone loans or their contingent liability for ARCAM‘s debts is simply derivative of the direct injury to ARCAM (the loss of incremental financing). This type of harm is insufficient to confer creditor standing. See Guides, 295 F.3d at 1073 (rejecting the premise that one‘s status as a guarantor confers standing “to assert an individual claim against a third party where that harm is derivative of that suffered by the corporation“); Stein v. United Artists Corp., 691 F.2d 885, 896 (9th Cir. 1982) (concluding that a corporation‘s guarantors lack standing when their alleged injuries “reflect the injury to the corporation, which forced it to default on the loans“); see also SAS of P.R., Inc. v. P.R. Tel. Co., 48 F.3d 39, 45 (1st Cir. 1995).
The short of it is that where, as here, the corporation incurs the only direct injury from the alleged misconduct, the corporation (in the absence of special circumstances, not present here) is the only proper party to bring suit for that injury. It
3. Pagán. Three of Pagán‘s claims against Calderón are before us: his First Amendment, substantive due process, and equal protection claims. We conclude that he lacks standing to pursue any of them.
Pagán asserts injury in fact on the basis that Calderón‘s meddling with ARCAM‘s loan request was driven by political animus aimed squarely at him. This assertion is wide of the mark: the standing inquiry turns on the plaintiff‘s injury, not the defendant‘s motive. Thus, 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. See Guides, 295 F.3d at 1072-73 (holding that corporation alone had standing to pursue claim that lease sought by corporation was denied because of employee-shareholder‘s race); Potthoff, 245 F.3d at 717-18 (holding that employee lacked standing to assert section 1983 claim when government agency terminated corporation‘s lease because of employee‘s criticism of the mayor). In other words, 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
In an effort to detour around this roadblock, Pagán maintains that he stood to benefit from ARCAM‘s success and, thus, was injured personally when the business cratered for want of financing. Relatedly, he maintains that, as a consultant, he depended on ARCAM‘s viability to earn his living. These allegations are insufficient to cloak Pagán with standing. It is not enough for the agent to allege an injury that is qualitatively different from that suffered by the principal; rather, the agent must allege an injury that does not derive from the injury to the principal. See Bellows, 118 F.3d at 276-77. The injuries that Pagán alleges are plainly derivative of the ascribed harm to ARCAM.
That ends this aspect of the matter. Because the complaint contains no allegation that Pagán suffered any nonderivative injury, he lacks standing to assert any of the section 1983 claims that are at issue here.
Our exegesis into standing disposes of all the claims presently on appeal save for ARCAM‘s substantive due process and equal protection claims against Calderón. The lingering question, then, is whether the district court erred in refusing to dismiss either or both of those claims on the ground of qualified immunity. In answering that question, we employ de novo review of the district court‘s decision, assume the truth of the complaint‘s factual allegations (but not its unsupported conclusions and animadversions), and draw all reasonable inferences therefrom in ARCAM‘s favor. See Limone, 372 F.3d at 42-43.
Qualified immunity is a judge-made doctrine created to limit the exposure of public officials to damages actions, thereby fostering the effective performance of discretionary functions in the public sector. Harlow v. Fitzgerald, 457 U.S. 800, 807 (1982). The reach of this doctrine is long, but not infinite. It protects all but “the plainly incompetent [and] those who knowingly violate the law.” Malley v. Briggs, 475 U.S. 335, 341 (1986). As that exclusion has been interpreted, the doctrine does not shield public officials who, from an objective standpoint, should have known that their conduct was unlawful. Davis v. Scherer, 468 U.S. 183, 193 (1984); Surprenant v. Rivas, 424 F.3d 5, 14 (1st Cir. 2005).
Relying on Supreme Court precedent, see, e.g., Saucier v. Katz, 533 U.S. 194, 200-02 (2001), we have developed a three-step
Our consideration of this issue proceeds on the premise that there is no heightened pleading requirement in civil rights cases. Educadores Puertorriqueños en Acción v. Hernández, 367 F.3d 61, 66-67 (1st Cir. 2004). The complaint need do no more than satisfy the basic notice pleading requirements of the Civil Rules.
In this instance, the conduct of which ARCAM complains implicates section 1983, which imposes liability on officials acting under the color of state law who infringe the federally-secured rights of private parties.6 ARCAM charges that Calderón, acting under color of law as the governor of Puerto Rico, violated its substantive due process and equal protection rights when she improperly influenced BDE‘s review of ARCAM‘s loan application. We conclude that ARCAM has failed to allege facts adequate to support either charge (and that, therefore, Calderón is entitled to qualified immunity).
A. Substantive Due Process.
The Due Process Clause of the
ARCAM is in error when it posits that it can prevail on its substantive due process claim either by showing that Calderón‘s conduct was conscience-shocking or by showing that her conduct deprived it of a protected liberty or property interest. This disjunctive proposition is incorrect. Where, as here, a plaintiff‘s substantive due process claim challenges the specific acts of a state officer, the plaintiff must show both that the acts were so egregious as to shock the conscience and that they deprived him of a protected interest in life, liberty, or property. See Rivera v. Rhode Island, 402 F.3d 27, 34 (1st Cir. 2005) (stating that “[i]t is not enough to claim the governmental action shocked the conscience” but that a plaintiff must also show a deprivation of a protected interest). Consequently, “conscience-shocking conduct is an indispensable element of a substantive due process challenge to executive action.” DePoutot v. Raffaelly, 424 F.3d 112, 118 n.4 (1st Cir. 2005).
The case law contains some helpful generalizations. We know, for example, that in order to shock the conscience, conduct must at the very least be “extreme and egregious,” id. at 118, or, put another way, “truly outrageous, uncivilized, and intolerable,” Hasenfus v. LaJeunesse, 175 F.3d 68, 72 (1st Cir. 1999). We also know that “[m]ere violations of state law, even violations resulting from bad faith,” do not invariably amount to conscience-shocking behavior. DePoutot, 424 F.3d at 119. Rather, conscience-shocking behavior “must be stunning.” Amsden, 904 F.2d at 754 n.5.
Here, ARCAM contends that Calderón transgressed its substantive due process rights when, through Pellot and Faría, she exerted undue influence over BDE‘s directors so that they would deny
When the Puerto Rico legislature created BDE, it granted the board of directors the power to exercise broad discretion in determining whether to grant or deny certain loans.
We have held, with a regularity bordering on the monotonous, that the substantive due process doctrine may not, in the ordinary course, be invoked to challenge discretionary permitting or licensing determinations of state or local decisionmakers, whether those decisions are right or wrong. See, e.g., Collins v. Nuzzo, 244 F.3d 246, 251 (1st Cir. 2001); Nestor Colon, 964 F.2d at 45; Amsden, 904 F.2d at 757-58; Creative Env‘ts, Inc. v. Estabrook, 680 F.2d 822, 829 (1st Cir. 1982). While we have “left the door slightly ajar for . . . truly horrendous situations,” Nestor Colon, 964 F.2d at 45, any permit or license denial, no matter how unattractive, that falls short of being “truly horrendous” is unlikely to qualify as conscience-shocking.
This standard is rigorous but necessary. A lesser standard would run the unacceptable risk of “insinuat[ing] the oversight and discretion of federal judges into areas traditionally reserved for state and local tribunals,” id., and would dash “any hope of maintaining a meaningful separation between federal and state jurisdiction,” Creative Env‘ts, 680 F.2d at 831.
The decided cases are instructive by negative implication. They present illustrations of conduct which, though disquieting and in many instances unlawful, has been held not to violate the substantive due process guarantee. ARCAM‘s complaint that BDE, at Calderón‘s urging, denied it a loan for which it qualified falls well within the mine-run of these cases. We conclude, therefore, that the mere withholding of the loan, simpliciter, cannot support a constitutional claim.
ARCAM attempts to distinguish this case from the mine-run on the basis of Calderón‘s discriminatory or retaliatory animus. That attempt is unavailing. Substantive due process is an inappropriate avenue of relief when the governmental conduct at issue is covered by a specific constitutional provision. See
That closes the book on this claim. Since ARCAM‘s allegations of political discrimination and retaliation are covered by the
B. Equal Protection.
The equal protection guarantee of the
As said, this case is most analogous to cases of denials of benefits such as licenses or permits. That particular model of
Where applicable state law vests the decisionmaker with discretionary authority to award or withhold a state benefit, a plaintiff who grounds an equal protection claim on the denial of that benefit faces a steep uphill climb. See PFZ Props., Inc. v. Rodriguez, 928 F.2d 28, 32 (1st Cir. 1991) (explaining that a denied applicant‘s allegations of differential treatment resulting from the decisionmaker‘s illegitimate motives do not normally amount to an equal protection violation). In benefit-denial cases, a plaintiff can succeed only if he shows that (i) he was treated differently than other similarly situated supplicants and (ii) the differential treatment resulted from a gross abuse of power, invidious discrimination, or some other fundamental procedural unfairness.9 See, e.g., id.; Creative Env‘ts, 680 F.2d at 832 n.9. Even an arbitrary, bad-faith denial of a benefit in derogation of state law, without more, will not cross the constitutional threshold needed for
This is a high hurdle, but its height makes eminently good sense. Otherwise, a disappointed applicant for a state or local benefit could manufacture a constitutional claim by the simple expedient of alleging differential treatment. Were that the rule, the correctness of every state or local benefit denial would become a federal case.
With this infrastructure in place, we turn to ARCAM‘s complaint to see if its allegations suffice to state a cognizable equal protection claim. We think not.
ARCAM attempts to show differential treatment through its allegation that BDE granted the loan application of another entity, Pollos Picú. Although this allegation arguably suffices, for pleading purposes, to establish that BDE treated another loan applicant differently, ARCAM has pleaded no facts to indicate that Pollos Picú was a similarly situated borrower. See Redondo-Borges v. U.S. Dep‘t of Hous. & Urban Dev., 421 F.3d 1, 9 (1st Cir. 2005) (holding unsupported conclusory allegations insufficient to withstand Rule 12(b)(6) motion to dismiss). Indeed, the only comparator contained in the complaint indicates a dissimilarity; ARCAM avers that Pollos Picú “was undergoing extremely difficult financial conditions,” which it concedes was “quite opposite to the positive projections and financial securities presented by ARCAM.”
In all events, there is a more basic reason why ARCAM‘s equal protection claim does not pass constitutional muster: its allegations fail to satisfy the second half of the relevant equal protection test. Its complaint offers no allegations indicating that the disparate treatment which it bemoans resulted from a gross abuse of power, invidious discrimination, or fundamentally unfair procedures. We explain briefly.
By like token, ARCAM does not base its equal protection claim on procedural irregularities or some associated unfairness. Any such claim is, therefore, waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990). At any rate, there is nothing in the facts alleged to indicate the sort of fundamentally unfair procedural rigamarole that might support an equal protection claim.10
Of course, the complaint makes crystal clear ARCAM‘s frustration with both the amount of information that BDE requested
This leaves the first category: gross abuse of power. We have equated this concept with the “shocks the conscience” concept used in substantive due process cases. See Baker, 230 F.3d at 474. The record makes manifest that ARCAM cannot succeed on this theory.
According to ARCAM, the alleged abuse of power is Calderón‘s supposed intervention to ensure that BDE would deny the loan (purportedly as a reprisal for Pagán‘s political views and activities). To the extent that a plaintiff challenging a discretionary decision to deny a benefit claims to be entitled to redress based on allegations of unconstitutional political discrimination or retaliation, he cannot rely on the Equal Protection Clause but, rather, must bring his claim under the specific provisions of the
This principle is dispositive here. In point of fact, ARCAM brought a
IV. CONCLUSION
We need go no further. To summarize, ARCAM is the only plaintiff that asserts any direct injury resulting from Calderón‘s alleged misconduct. The claims of Pagán, Vilanova, and the guarantors that are before us on appeal must, therefore, fail for lack of standing. And while ARCAM enjoys standing to pursue its allegations of substantive due process and equal protection violations, those allegations do not state viable constitutional claims (and, thus, do not survive scrutiny under the first part of the tripartite qualified immunity test). Consequently, we reverse the district court‘s denial of Calderón‘s motion to dismiss on the basis of qualified immunity and remand the case to the district court for further proceedings consistent with this opinion.
Reversed and remanded.