Opinion ID: 766867
Heading Depth: 2
Heading Rank: 2

Heading: The Due Process Rights

Text: 32 In the first, second, fourth, and fifth claims for relief, Waste Management contends their due process rights were violated. The procedural due process rights of the Fourteenth Amendment apply only when there is a deprivation of a constitutionally protected liberty or property interest. Board of Regents v. Roth, 408 U.S. 564, 569 (1972). The essence of all of these claims is that the Waste Management's reputation was damaged and that under various theories this constituted a deprivation of a protected property or liberty interest without due process of law. 33 The Supreme Court made clear in Paul v. Davis, 424 U.S. 693 (1976) that reputation alone is not an interest protected by the Constitution. The words `liberty and property,'as used in the Fourteenth Amendment do not in terms single out reputation as a candidate for special protection over and above other interests that may be protected by state law. Id. at 701. The Court confirmed in Seigert v. Gilley , 500 U.S. 226, 233-34 (1991) that there is no constitutional protection for the interest in reputation. 34 In Paul v. Davis, Davis had been arrested for shoplifting, but the charge was dismissed. However, the police distributed to area merchants a flyer of active shoplifters with Davis' name and picture in the flyer. Davis brought an action under 42 U.S.C. S 1983 against the police chiefs that had distributed the flyer alleging that their action was under color of state law and deprived him of his constitutional rights. The Court stated, His complaint asserted that the active shoplifter designation would inhibit him from entering business establishments for fear of being suspected of shoplifting and possibly apprehended, and would seriously impair his future employment opportunities. Accepting that such consequences may flow from the flyer in questions, [Davis'] complaint would appear to state a classical claim for defamation, actionable in the courts of virtually every State. Id. at 697. However, the Court held that the defendants in that case were not liable to Davis under S 1983. The Court stated: 35 It is apparent from our decisions that there exists a variety of interests which are difficult of definition but are nevertheless comprehended within the meaning of either `liberty' or `property' as meant in the Due Process Clause. These interests attain this constitutional status by virtue of the fact that they have been initially recognized and protected by state law, and we have repeatedly ruled that the procedural guarantees of the Fourteenth Amendment apply whenever the State seeks to remove or significantly alter that protected status. 36 Id. at 710-11(footnote omitted). 37 The Court then noted two cases where a state right or status was removed or significantly altered, one involving the withdrawal of a driver's license, the other revocation of parole status, and continued. 38 In each of these cases, as a result of the state action complained of, a right or status previously recognized by state law was distinctly altered or extinguished. It was this alteration, officially removing the interest from the recognition and protection previously afforded by the State, which we found sufficient to invoke the procedural guarantees contained in the Due Process Clause of the Fourteenth Amendment. But the interest in reputation alonewhich respondent seeks to vindicate in this action in federal court is quite different from the `liberty' or `property' recognized in those decisions. Kentucky law does not extend to respondent any legal guarantee of present enjoyment of reputation which has been altered as a result of petitioners' actions. Rather, his interest in reputation is simply one of a number which the State may protect against injury by virtue of its tort law, providing a forum for vindi cation of those interests by means of damages actions. And any harm or injury to that interest, even where as here inflicted by an officer of the State, does not result in a deprivation of any `liberty' or `property' recognized by state or federal law, nor has it worked any change of respondent's status as theretofore recognized under the State's laws. For these reasons, we hold that the interest in reputation asserted in this case is neither `liberty' nor`property' guaranteed against state deprivation without due process of law. Id. at 711-12.
39 With regard to the property interests, the Waste Management alleged damage to their business reputation. We assume for purposes of this appeal, that the historical review from 1968 to 1984, under Section V of the Report and its inclusion under the heading, Organized Crime Connections, is damaging to Waste Management's business reputation. Waste Management contends that damaging their reputation is equivalent to depriving them of the goodwill of their business and that business goodwill is a legislatively created property interest in California. 2 40 The California Business & Professions Code, S 14100, provides, the `good will' of a business is the expectation of continued public patronage. California Business & Professions Code, S 14102, provides, the good will of a business is property and is transferable. Essentially, the goodwill of a business is its value as a going concern and is made up of many factors, such as location, patronage of customers, relations with suppliers, experience of employees, effectiveness of management, and many other factors. Reputation is not the equivalent of the goodwill of a business. Damage to reputation may affect the goodwill of a business, just as it may affect the future employability of a person. 41 Paul v. Davis clearly announced that reputation, without more, is not a protected constitutional interest. Davis, the plaintiff, had alleged rather serious damage from erroneously including his name and picture in the police flyer to merchants, naming active shoplifters, both as to future employment possibilities and to the way he would be treated by the merchants. Yet, the Court held that this resulting damage would be appropriate for a state tort action, but not for a S 1983 action. The question then becomes whether damage to reputation is to be treated differently because the damage affects the person's business. Would the result have been different in Paul v. Davis had Davis been the proprietor of a clothing store? Would the damage to his reputation, as it affected his business, be redressable under S 1983, simply because reputation can be classified as affecting the goodwill of hisbusiness? This would be contrary to the basic thrust of Paul v. Davis. 42 In this case, Miller's Final Report did not deprive the Waste Management, Inc., of its goodwill or any state right or status. Arguably it damaged its reputation and could affect its business relations with others and thus the goodwill of the business. This would present a classic case for a state court defamation action, but not an action under S 1983. 43 As the Supreme Court noted, the Fourteenth Amendment is not a font of tort law to be superimposed on whatever systems may already be administered by the States. Paul, 426 U.S. at 701. It stressed, in the context of Paul v. Davis, the extent to which federal law could subsume state tort law if S 1983 were to be construed to allow damage to personal reputation without more to be brought as a federal action. 3 The same is true if damage to the reputation of a business were to be construed as a deprivation of goodwill and thus a proper action under S 1983. Any adverse statement made by a city, county, or state official in the context of considering building permits, licenses, zoning, or similar activities could potentially constitute damage to business reputation and, thus, goodwill. 44 Waste Management relies on our decision in Soranno's Gasco v. Morgan, 874 F.2d 1310 (9th Cir. 1989). There we held that a California statute conferred property status to business goodwill, and that the owner could not be deprived of it without due process. Id. at 1316. Waste Management's reliance on our decision in Soranno's Gasco is misplaced. In that case, county officials suspended Soranno's Gasco's bulk permits and sent letters to Gasco's customers informing them that Gasco's bulk plant permits were suspended and that Gasco could not lawfully deliver gasoline while under suspension. Id. at 1313. The letters also threatened to revoke the customers' permits if the customers continued to receive gasoline from Soranno's Gasco. Id. Soranno's Gasco brought an action under S 1983, alleging that county officials deprived them of their property interest in business goodwill. 45 Waste Management, Inc.'s, alleged injury to their business goodwill does not go beyond injury to its business reputation. Soranno's Gasco clearly involved much more than an injury to the reputation of a business. It involved actual, direct interference with business goodwill by the county officials through letters sent directly to Soranno's Gasco's customers. The county officials threatened to revoke the operating permits of customers who continued to accept deliveries of petroleum from Soranno's Gasco. Id. at 1313. As previously noted, California's statutory definition of goodwill is the expectation of continued public patronage. The county officials directly deprived Soranno's Gascoof the expectation of continued patronage by those customers. 46 In sharp contrast, this case only involves allegedly defamatory remarks made to the county and the public generally that could affect Waste Management's business reputation. This is not sufficient to satisfy the requirement that a constitutionally protected property interest be at stake. As we have noted, damage to the reputation of a business, without more, does not rise to the level of a constitutionally protected property interest. See Paul v. Davis, 424 U.S. at 701 (reputation alone is not property sufficient to invoke the procedural protection of the Due Process Clause). Allowing Waste Management to proceed under S 1983 on a claim of damage to its reputation would constitutionalize the state law tort of defamation and would have the anomalous effect of extending constitutional protection to the reputation of business concerns, while denying the same protection to the reputation of individuals. 4 47
48 Waste Management's second claim for relief alleges that the official stigmatization of the plaintiffs plus the alteration or extinguishment of their statutorily recognized property interest in their business goodwill deprived the plaintiffs of liberty in violation of the Fourteenth Amendment. This claim relies on the stigma-plus test articulated in Paul v. Davis, which requires that the complaint allege that the state action not only caused the stigma of a damaged reputation, but also that the state action deprived the plaintiff of a protected liberty or property interest or a status recognized by the state. Paul v. Davis, 424 U.S. at 712. In this case, the plus alleged is the deprivation of a protected property interest. We held in the previous section that the alleged damage to the Waste Management's business reputation did not amount to the deprivation of a federally protected property interest. Thus, the second claim was properly dismissed. 49
50 Waste Management's fourth claim alleges that Miller injured Waste Management's reputation in connection with its exercise of its right to petition under the First Amendment. This claim again also relies on the stigma-plus  test from Paul v. Davis. Our conclusion in section III A, that Waste Management's application for a major use permit does not invoke the protections of the Petition Clause, eliminates the plus and thus requires the dismissal of their fourth claim for relief. 51
52 Waste Management's fifth claim for relief purports to state a cause of action under Jenkins v. McKeithen, 395 U.S. 411 (1969). The complaint alleges that Miller, in conducting the investigation requested by the Board and reporting his findings to the Board, exercised a function closely akin to making an official and public adjudication of criminal culpability. The report allegedly publicly branded and continues to brand the plaintiffs as connected to organized crime. Waste Management argues that due process entitled them to notice and an opportunity to be heard prior to public dissemination of Miller's Final Report. 53 Jenkins involved a challenge to the constitutionality of aLouisiana statute that created a commission of inquiry to investigate possible violations of criminal laws arising out of labor management relations. Id. at 413-14. The plaintiff brought suit under S 1983, alleging that the commission was an executive trial agency `aimed at conducting public trials concerning criminal law violations' and that its function was publicly to condemn. Id. at 419. The Supreme Court agreed and held that the commission clearly exercised an accusatory function, rather than a purely investigatory function, in that it was meant to supplement and assist the efforts and activities of the several district attorneys, grand juries and other law enforcement officials and agencies . . . . Id. at 414-15. As such, the commission's procedures had to satisfy the minimum requirements of the Fourteenth Amendment. Id. at 428. 54 A similar argument was made in Paul v. Davis, which the Court rejected holding that Jenkins was inapplicable. The Court stated: 55 Indeed, the actions taken by [the defendants] in this case fall far short of the more formalized proceedings of the Commission on Civil Rights established by Congress in 1957, the procedures of which were upheld against constitutional challenge by this Court in Hannah v. Larche, 363 U.S. 420 (1960). There the Court described the functions of the Commission in this language: 56 It does not adjudicate. It does not hold trials or determine anyone's civil or criminal liability. It does not issue orders. Nor does it indict, punish, or impose any legal sanctions. It does not make determinations depriving anyone of his life, liberty, or property. In short, the Commission does not and cannot take any affirmative action which will affect an individual's legal rights. The only purpose of its existence is to find facts which may subsequently be used as the basis for legislative or executive action. Id., at 441 (emphasis supplied). 57 Addressing itself to the question of whether the Commission's `proceedings might irreparably harm those being investigated by subjecting them to public opprobrium and scorn, the distinct likelihood of losing their jobs, and the possibility of criminal prosecutions,' the Court said that even if such collateral consequences were to flow from the Commission's investigations, they would not be the result of any affirmative determinations made by the Commission, and they would not affect the legitimacy of the Commission's investigative function. Id., at 443. 58 Paul v. Davis, 424 U.S. at 706 n.4. 59 Like Paul v. Davis, the present case differs markedly from Jenkins. Miller exercised an investigative function, not an accusatory function, for the County of San Diego. Miller's investigatory role is a far cry from the accusatory commission of inquiry at issue in Jenkins. In this case, the Board requested Miller's investigation to further its legislative determination regarding Waste Management's then-pending application for a major use permit. In its memorandum to Miller, the Board requested that Waste Management's operating record be closely examined, and impartially investigated to see how their record compares with other nationwide firms in the waste industry. Miller's investigation was for the purpose of assisting the Board so that further legislative action could be taken and the Board could approve or deny Waste Management, Inc.'s application. The purpose, like that in Hannah v. Larche, was to find facts which may subsequently be used as a basis for legislative or executive action. See Hannah v. Larche, 363 U.S. at 441. The fifth claim for relief was properly dismissed. IV.