1 United States Court of Appeals,

Fifth Circuit.

No. 95-50401

Summary Calendar.

Gerald ROLF; Cris Moravec; Al Moravec; Joe Hazelwood; Tom

Culbertson; Tony Garza; and J.J. Arzola, Plaintiffs-Appellants,

v.

CITY OF SAN ANTONIO; San Antonio Water System; Nelson Wolff,

official and individual capacity, Frank Wing, official and

individual capacity; Roger Perez, official and individual

capacity; Helen Ayala, official and individual capacity; Juan F.

Solis, III, official and individual capacity; Weir Labatt; Bill

Thornton, official and individual capacity; Yolanda Vera, official

and individual capacity; Nelda Weatherly, official and individual

capacity; Sam Lopez, official and individual capacity; Philip

Barship, official and individua l capacity; and Clarence R.

McGowan, official and individual capacity, Defendants-Appellees.

Feb. 5, 1996.

Appeal from t he United States District Court for the Western

District of Texas.

Before POLITZ, Chief Judge, and DUHÉ and PARKER, Circuit Judges.

POLITZ, Chief Judge:

Ger ald Rolf, Cris Moravec, Al Moravec, Joe Hazelwood, Tom

Culbertson, Tony Garza, and J.J. Arzola, owners of a fractional

share of 3.5 acres in Bexar County, Texas, appeal the district

court's order dismiss ing their claims against the City of San

Antonio, the San Antonio Water System , and various officials in

their individual and official capaciti es. We affirm in part,

vacate in part, and remand.

Background

Appellants are a group of landowners who opposed the

construction of the Applewhite Re servoir in San Antonio, Texas.1 The district court's order refers to facts pled in earlier

complaints but omitted from the second amended complaint. Those

factual allegations were not appropriate for consideration because

t he second amended complaint supersedes the earlier complai nts.

Jackson v. City of Beaumont Police Dept., 958 F.2d 616 (5th

Cir.1992).

2 They manifested their opposition, in part, by purchasing a 3.5 acre

tract of land, which was planned for inclusion in the project, and

designating it as an "ecological laboratory." Further, they made

publi c comments at city council meetings, city water board

meetings, new s conferences, and rallies in opposition to the

Applewhite project and in favor of limiting the terms of office for

the mayor and members of the city council. Additionally, they

collected more than 72,000 signatures to force an election on a

proposed initiative ordinance requiring the City of San Antonio to

abandon the project and limiting the terms of the mayor and members

of the council. The voters approved the initiative ordinance and

the city council abandoned the project.

The second amended complaint 1 alleges that appellees continued

to seek condemnation of appellants' 3.5 acre tract, but did not

seek condemnation of similarly situated lands. Further, the second

amended c omplaint alleges that this disparate treatment was

motivated by appellants' opposition to the Applewhite project and

their political stance on term limits.

Appellants' second amended complaint alleges that: (1) their

property was taken without just compensation, (2) they were denied

due process of law, (3) their land was targeted for condemnation in

retaliation for exercising first amendment ri ghts, (4) they were2 Attached to the motion to dismiss was a copy of an ordinance

passed by the San Antonio City Council. Appellees maintain that

this court should treat the district court's order as a grant of

summary judgment under Rule 56 rather than a Rule 12(b) dismissal

because a matter outside the pleadings was considered. S ee

Fed.R.Civ.P. 12(b). There is no indication that the district court

gave notice to the parties as required; thus, we treat the court's

dismissal order as grounded on Rule 12(b) rather than Rule 56. S ee

Norman v. McCotter, 765 F.2d 504 (5th Cir.1985).

3 See Fed.R.Civ.P. 12(b)(1).

4 See Fed.R.Civ.P. 12(b)(6).

5 Samaad v. City of Dallas, 940 F.2d 925 (5th Cir.1991).

3 denied equal protection of the la w, and (5) the condemnation

proceedings violated state law.

The district court dismissed the action on various gr ounds. 2

First, the court held that the just compensation and due process

claims were not ripe. 3 Second, the court held that appellants

failed to state a just compensation claim, a due process claim, and

a n equal protection claim. 4 Third, the court held that appellees

were entitled to qualified immunity for the claims brought against

them in their individual capacities. Finally, the court dismissed

the supplemental state law claims because it had dismissed all of

the federal causes of action. Appellants challenge each of the

court's holdings as well as the court's previous order denying them

leave to file a third amended complaint.

Analysis

A. Subject matter jurisdiction

Appellants claim that their property was taken without just

compensation. The takings clause of the fifth amendment, made

applicable to the states through the fourteenth amendment, 5 directs6 U.S. Const. Amend. V.

7 Samaad (citing Williamson County Regional Planning Comm'n v.

Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126

(1985)).

8 Id. at 934 (emphasis in original).

9 Id.

1 0 Westgate, Ltd. v. State of Texas, 843 S.W.2d 448 (Tex.1992).

Accord Kirby Forest Indus. v. United States, 467 U.S. 1, 104 S.Ct.

2187, 81 L.Ed.2d 1 (1984). K irby indicates that the appellants

have failed to state a claim that their property was taken without

just compensation.

11 Id.

4 that "private property [shall not] be taken for public use, without

just compensation. " 6 A just compensation claim is not ripe, that

is, there is no justiciable case or controversy, until the claimant

unsuccessfully has sought compensation from the state, unless that

state's procedures are inadequate. 7 State procedures are

inadequate when they " almost certainly will not justly compensate

the claimant." 8 A state's procedure is adequate even though its

law is unsettled whether the claimant would be entitled to

compensation. 9

The Texas Supreme Court recently held that, in a case such as

this, a claimant does not state an inverse cond emnation claim

u nless there has been a direct restriction on the use of the

property. 10 Appellants have not alleged a direct restriction on the

use of their land.

The Texas Supreme Court, however, exp ressly reserved the

question whether a plaintiff states an inverse condemnation claim

b y alleging bad faith. 1 1 Because the second amended complaint12 See Samaad.

13 Williamson County.

14 See Fed.R.Civ.P. 12(b)(1).

15 Blackburn v. City of Marshall, Tex., 42 F.3d 925 (5th

Cir.1995).

1 6 Ra nkin v. City of Wichita Falls, Tex., 762 F.2d 444 (5th

Cir.1985).

17 Id.

5 alleges bad faith, it is unsettled whether appellants are entitled

to compensation un der Texas law. Accordingly, the just

compensation claim is not ripe. 12 For the same reason, any alleged

due process violation relating to the alleged taking of property is

premature. 13

The district court properly dismissed appellants' claims that

their property was taken without just compensation and without due

process of law. 14

B. Failure to state a claim upon which relief can be granted

We review the district court's dismissal of a claim under

Rule 12(b)(6) de novo, 15 accepting all well pleaded averments as

true and viewing them in the light most favorable to the

plaintiff. 16 Dismissal is not proper unless it appears, based

solely on the pleadings, that the plaintiff can prove no set of

facts in support of the claim(s) warranting relief. 17

1. Speech claim

Appell ees contend, and the district court held, that

appellants failed to state a first amendment retaliation claim. To

establish such a claim, a plaintiff must prove: (1) defendants18 Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S.

274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977).

1 9 Soranno's Gasco, Inc. v. Morgan, 874 F.2d 1310, 1314 (9th

Cir.1989) (internal citations and quotations omitted).

2 0 Appellees do not maintain, as a grounds for affirmance, that

they were not acting under color of state law.

2 1 See New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710,

11 L.Ed.2d 686 (1964).

6 were acting under color of state law; (2) the plaintiff's

activities were protected under the first amendment; and (3) the

p laintiff's exercise of the protected right was a substantial or

motivating factor for defendant's actions. 18 "It is clear that

state action designed to retaliate agains t and chill political

expression strikes at the heart of the First Amendment." 19

The second amended complaint properly states a claim against

appellees for retaliating against appellants for engaging in first

amendment activities. First, the second amended complaint alleges

that appellees acted under color of state law. 20 Next, the second

amended complaint clearly alleges that appellants engaged in first

amendment activity; it cannot be gainsaid that speaking out in

opposition to a government policy is protected activity. 21 Finally,

the second amended complaint alleges that appellees' actions toward

appellants were motivated by appellants' protected activity. The

second amended complaint supports that assertion with an allegation

that only appellants' property was targeted for condemnation. For

these reasons, the district court's ord er dismissing the first

amendment retaliation claim is inappropriate and must be vacated.

2. Due process claim22 Blackburn, 42 F.3d at 935.

2 3 See McIntyre v. Ohio Elections Comm'n,

--- U.S. ----, 115

S.Ct. 1511, 131 L.Ed.2d 426 (1995) (liberty includes first

amendment rights).

2 4 The second amended complaint does not clearly allege another

protected liberty interest.

2 5 Q utb v. Strauss, 11 F.3d 488 (5th Cir.1993), cert. denied,

--- U.S. ----, 114 S.Ct. 2134, 128 L.Ed.2d 864 (1994) (citing City

of Cleburne v. Cleburne Living Ctr., Inc., 473 U.S. 432, 105 S.Ct.

3249, 87 L.Ed.2d 313 (1985)).

26 Id.

7 "In a section 1983 cause of action asserti ng a due process

violation, a plaintiff must first identify a life, liberty, or

p roperty interest protected by the Fourteenth Amendment and then

identify a state action that resulted in a deprivation of that

interest." 22 The second amended complaint alleges that appellees

acted under color of state law to deprive appellants of their

liberty interest in speech. 23 Accordingly, appellants have stated

a claim for a violation of substantive due process. 24

3. Equal protection claim

The equal protection clause of the fourteenth amendment is

essentially a mandate that all persons similarly situated must be

treated alike. 25 We may conduct an equal protection inquiry only

"if the challenged government action clas sifies or distinguishes

between two or more relevant groups." 26 Under the equal protection

analysis, we apply different standards of review depending upon the

right or classification implicated. If a classification

disadvantages a "suspect cla ss" or impinges upon a "fundamental27 Id.

28 Duckett v. City of Cedar Park, Tex., 950 F.2d 272, 279 (5th

Cir.1992) (quoting Anders on v. Creighton, 483 U.S. 635, 638, 107

S.Ct. 3034, 3038, 97 L.Ed.2d 523 (1987)).

29 Id.

8 right," the classification is subject to st r ict scrutiny. 27

Otherwise, we apply the less stringent " rational basis" review.

A ppellants' second amended complaint alleges that they have been

treated differently than similarly situated individuals.

Accordingly, the district court erred by dismissing the equal

protection claim at this stage of the litigation.

C. Qualified immunity

Qualified immunity "shields certain public officials

performing discretionary functions from civil damage liability if

"their actions could reasonably have been thought consistent with

the rights they are alleged to have violated.' " 28 The protection

afforded by this defense turns on the objective legal

reasonableness of the defendant's conduct examined by reference to

clearly established law. 29 Accordingly, we must determine whether

a reasonable public official would have known that his or her

conduct was illegal.

Accepting as true all well pleaded allegations, r easonable

public officials would have understood that their actions violated

appellants' clearly established constit utional right to be free

from retaliation for exercising their first amendment right to free

speech. Similarly, reasonable officials would have understood that

their actions deprived appellants of their clearly established3 0 Chitimacha Tribe of Louisiana v. Harry L. Laws Co., Inc., 690

F.2d 1157, 1163 (5th Cir.1982), cert. denied, 464 U.S. 814, 104

S.Ct. 69, 78 L.Ed.2d 83 (1983).

3 1 State of Louisiana v. Litton Mortgage Co., 50 F.3d 1298,

1302-03 (5th Cir.1995) (internal citations and quotations omitted).

9 liberty interest in speech, and that the alleged differential

treatment denied them equal p rotection of the law. Accordingly,

the district court erred by determining, at this stage in the

litigation, that appellees, in their individual capacities, were

entitled to qualified immunity.

D. Leave to amend

"Rule 15(a) evinces a bias in favor of granting leave to

amend," when justice so requires. 30 "A decision to grant leave is

within the discretion of the court, although if the court lacks a

substant ial reason to deny leave, its discretion is not broad

enough t o permit denial." 3 1 In exercising its discretion a court

may consider undue delay, bad faith, dilatory motive, prejudice to

the other party, and the futility of the proposed amendments.

The district court's order does not state its reasons for

denying leave. Our review of the record reveals no substantial

reason to deny leave to amend. Appellants should have been granted

leave to file an amended complaint.

E. Supplemental jurisdiction

Finally, the district court's order dismissing the

supplemental state law claims mu st now be vacated because the

assigned justification, i.e., lack of a federal question, no longer

appertains.10

The judgment of the district court is AFFIRMED IN PART,

VACATED IN PART, AND REMANDED.