1 United States Court of Appeals,

Fifth Circuit.

No. 95-50067

Summary Calendar.

The STATE OF TEXAS, Plaintiff,

v.

Jesse THOMPSON, Defendant-Third Party Plaintiff-Appellee,

v.

Chris HANGER and Benny Fisher, Third Party-Defendants-Appellants.

Dec. 8, 1995.

Appeal from t he United States District Court for the Western

District of Texas.

Before KING, SMITH and BENAVIDES, Circuit Judges.

PER CURIAM:

The sole is sue in this interlocutory appeal is whether the

magi strate judge properly denied appellants' motion for summary

judgment based upon qualified immunity. We reverse in part and

dismiss in part.

FACTUAL AND PROCEDURAL BACKGROUND

The genesis of this controversy is a state court action filed

by the State of Texas s eeking injunctive relief against appellee

Jesse Thompson. Thompson is a licensed aerial applicator of

chemicals. The State of Texas sought to compel Thompson to

relinquish application records to assist in an i nvestigation of

citizen complaints about crop damage. In response, Thompson filed

a counterclaim asserting, inter a lia, a § 1983 action against1 By agreement of the parties, the magistrate judge granted

judgment in favor of Perry leaving only the claims against Fisher

and Hanger.

2 Commissioner of the Texas Agriculture Department Rick Perry, 1 Chris

Hanger, and Benny Fisher. This counterclaim led to the removal of

the case to federal district court.

Thompson's § 1983 claim grew out of an investigation by the

Texas Department of Agriculture ("TDA") into cotton crop damage in

Bogota, Texas. Thompson alleges that Fisher, the TDA investigator

handling the complaint, engaged in a "crusade" telling former and

potential customers that Thompson was a habitual law violator who

should not be allowed to continue in business. Thompson alleges

t hat Hanger, then assistant general counsel to TDA, was a

participant in this campaign by personal ly communicating to

Thompson's customers false assertions concerning Thompson's

habitual violations. Thompson contends that as a result of this

defamation, he was forced out of business and into bankruptcy, thus

depriving him of a liberty interest.

Fisher and Hanger moved for summary judgment on the § 1983

claim based upon qualified immunity. By agreement, the matter was

heard by the magistrate judge. Following a hearing, the court

d enied the motion. This interlocutory appeal ensued pursuant to

Mitchell v. Forsyth, 472 U.S. 511, 530, 105 S.Ct. 2806, 2817-18, 86

L.Ed.2d 411 (1985).

DISCUSSION

W e review a denial of summary judgment based upon qualified

immunity in a § 1983 action de no vo under well-established3

standards. S ee Reese v. Anderson, 926 F.2d 494, 498 (5th

Cir.1991). Summary judgment is proper if, when viewing the

evidence in the light most favorable to the nonmovant, the moving

party establishes that there is no genuine issue as to any material

fact and that it is entitled to judgment as a matter of law.

Fraire v. City of Arlington, 957 F.2d 1268, 1273 (5th Cir.1992),

cert. denied, --- U.S. ----, 113 S.Ct. 462, 121 L.Ed.2d 371.

The first step in assessing a claim of qualified immunity is

to ascertain whether the plaintiff has alleged the violation of a

clearly established constitutional right. Siegert v. Gilley, 500

U.S. 226, 231, 111 S.Ct. 1789, 1792-93, 114 L.Ed.2d 277 (1991).

Allegations of damage to one's reputation or the impairment of

future employment prospects fail to state a claim of denial of a

constitutional right. I d. at 233-34, 111 S.Ct. at 1793-94.

However, damage to an individual's reputation as a re sult of

defamatory statements made by a state actor, accompanied by an

infringement of some other interest, is actionable under § 1983.

See Paul v. Davis, 424 U.S. 693, 710-12, 96 S.Ct. 1155, 1164-66, 47

L.Ed.2d 405 (1976). We have described this as a

"stigma-plus-infringement" test. S an Jacinto Sav. & Loan v. Kacal,

928 F.2d 697, 701 (5th Cir.19 91). To meet the stigma prong, a

plaintiff must show that the stigma was caused by concrete, false

f actual assertions by a state actor. I d. To establish the

infringement prong, a plaintiff must show that the state sought to

remove or significantly alter a life, liberty, or property interest

recognized and protected by state law or one of the incorporated4

provisions of the Bill of Rights. I d. at 701-02. Appellants

c oncede that there are material issues of fact concerning the

stigma p rong, but contend that Thompson cannot meet the

infringement prong. Fisher and Hanger maintain that the

deprivations alleged by T hompson are outside the scope of those

deprivations stat ing a viable liberty interest claim under the

Fourteenth Amendment.

In this case, Thompson asserts a liberty interest in

operating his business as an aerial applicator. This Court

recognizes that there is a liberty interest in operating a

legitimate business. I d. at 702; s ee Pogue v. City of Dallas, No.

93-1881, slip op. at 11-1 2, 1994 WL 574733 (5th Cir. Oct. 14,

1994). Appellants argue that Kacal is distinguishable contending

that their actions do not rise to the level of state action in that

case. In K acal, sum mary judgment evidence reflected that the

police had a plan to shut-down a video arcade by harassing

customers with the specific intent of discouraging patronage. 928

F.2d at 699. This plan included physically blocking the entrance

to discourage customers, verbal harassment, and unlawful automobile

searches. I d

. at 699-700. Fisher and Hanger maintain that for

Kacal to control, Thompson must show that they physically prevented

people from using Thompson's services or that their activities were

so widespread that none of Thompson's customers would use him.

However, Kacal is not so narrow as to embrace only those

situations where there are physical acts or complete cessation of

business. Rather, in K acal we held that the plaintiff could5

succeed in a § 1983 claim by showing that the officers, acting

under color of law, "sought to remove or significantly alter" the

plaintiff's liberty and property interests in operati on of a

bus iness. I d. at 704. In this case, Thompson's allegation is

similar to the one in Kacal —state actors, Fisher and Hanger, had a

plan to put Thompson out of business by telling customers that he

was a habitual law-breaker. Therefore, to avoid summary judgment

it is sufficient for Thompson to show that Fisher and Hanger's

actions were the direct cause of the fail ure of Thompson's

business. S ee id. at 704; P ogue, No. 93-1811, slip op. at 11.

Due to the state of the summary judgment evidence, the outcome of

this appeal differs for each appellant.

As for Fisher, is sues of material fact exist regarding

whether Fisher's factual representations to third parties resulted

in the loss of Thompson's business. The summary judgment evidence

is conflicting. While past customers of Thompson stated in their

depositions that they would use Thompson notwithstanding Fisher's

statements, Thompson himself has sworn that he has lost business as

a result of the comments and has been unable to remain financially

viable because he cannot maintai n sufficient client base. In

addition, one former customer stated that he did not believe that

area farmers would use Thompson again. Whether Fisher's comments

directly caused Thompson to lose his business is a material fact

issue. Since disputed factual issues material to qualified

immunity are present, the denial of summary judgment sought on the

basis of qualified immunity is not appealable. H ale v. Townley, 452 The court's order does not reflect the grounds for granting

the motion to strike. Presumably, the magistrate judge accepted

the grounds Hanger asserted in his motion to strike. That is,

the proffered evidence was an excerpt from a deposition in an

unrelated case to which Hanger was not a party. He did not have

notice of the deposition or opportunity to cross-examine the

deponent.

3 Thompson's complaint also alleges that Hanger communicated

with the Federal Aviation Administration concerning suspension of

his flight privileges and that Hanger drafted a criminal

complaint for Fisher against Thompson. The only summary judgment

evidence concerning these two allegations comes from Hanger's own

affidavit. Hanger explained that it was agency practice to make

a courtesy referral to the FAA and that to his knowledge no

action was taken by the FAA. As for the criminal complaint, he

stated that he drafted the complaint after learning that Thompson

had threatened Fisher with physical violence in the presence of a

local deputy sheriff. This criminal complaint, however, was

never filed. Consequently, there is no summary judgment evidence

that these two actions had any effect on Thompson's business.

6 F.3d 914, 918 (5th Cir.1995).

Hanger's appeal, however, resolves d ifferently. Thompson

alleges that Hanger also participated in the defamation campaign by

contacting potential customers. Hanger submitted a sworn affidavit

that he did not specifically recall contacting Thompson's

customers. Thompson's only summary judgment evidence as to

Hanger's alleged false communication s was stricken by the

magistrate judge. 2 It is well-settled that the nonmoving party may

not rest upon mere allegations, but must designate specific facts

showing the existence of a genuine issue for trial. A nderson v.

Liberty Lobby, 477 U.S. 242, 250, 256-57, 106 S.Ct. 2505, 2511,

2514- 15, 91 L.Ed.2d 202 (1986). In the absence of any competent

summ ary judgment evidence to support Thompson's claim against

Hanger, the denial of the summary judgment motion must be

reversed. 37 CONCLUSION

We DISMISS Fisher's appeal from the denial of summary judgment

based on qualified immunity for lack of jurisdiction. We REVERSE

the magistrate judge's denial of summary judgment f or Hanger on

qualified immunity. This case is REMANDED to the court for further

proceedings consistent with this opinion.