Opinion ID: 2708803
Heading Depth: 4
Heading Rank: 1

Heading: Wexford Health Sources, Inc.

Text: We consider first the claim against the Wexford corporation itself. The question posed here is how § 1983 should be applied to a private corporation that has contracted to provide essential government services—in this case, health care for prisoners. The answer under controlling precedents of this court is clear. Such a private corporation cannot be held liable under § 1983 unless the constitutional violation was caused by an unconstitutional policy or custom of the corporation itself. Respondeat superior liability does not apply to private corporations under § 1983. E.g., Iskander v. Village of Forest Park, 690 F.2d 126, 128 (7th Cir. 1982). Because Shields has no Nos. 12-2746 and 13-1143 11 evidence of an unconstitutional policy or custom of Wexford itself, these precedents doom his claim against the corporation. For reasons we explain below, however, Iskander and our cases following it on this point deserve fresh consideration, though it would take a decision by this court sitting en banc or pursuant to Circuit Rule 40(e), or a decision by the Supreme Court to overrule those decisions. We start with the background of § 1983 and the Supreme Court cases relevant to the issue, then turn to circuit court decisions, and finally discuss reasons to question those circuit decisions and adopt a different approach for private corporations. The law now codified as 42 U.S.C. § 1983 was enacted as part of the Civil Rights Act of 1871, also known as the Ku Klux Klan Act, to provide a private right of action against persons acting under color of state law who violated constitutional rights. See 17 Stat. 13, § 1. The statute provides in relevant part: “Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress … .” The 42nd Congress enacted the law as part of a series of steps to protect freed slaves and their supporters from abuses of local and state government power in the Reconstruction era. The statute was not used often until the Supreme Court held in Monroe v. Pape, 365 U.S. 167, 183 (1961), that § 1983 12 Nos. 12-2746 and 13-1143 could provide a federal remedy for constitutional violations even if the defendant’s action also violated state law and even if a state remedy was available. After Monroe, § 1983 became the most important vehicle for enforcing federal constitutional rights against state and local governments and their agents. Monroe also held, however, that a local government was not a “person” that could be sued under § 1983. 365 U.S. at 187–92. Most defendants under § 1983 are public employees, but private companies and their employees can also act under color of state law and thus can be sued under § 1983. E.g., Wyatt v. Cole, 504 U.S. 158, 161–62 (1992); Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 937 (1982). In a case involving a private company, the Supreme Court took for granted that the corporate defendant would be liable under § 1983 for a constitutional tort committed by its employee. In Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970), a woman sued both a police officer and a private corporation under § 1983 for race discrimination. The plaintiff was a white teacher who had entered a restaurant in Mississippi with several African American students. She had been refused service and was then arrested when she left the restaurant. The Supreme Court reversed summary judgment for the restaurant and explained that the plaintiff could recover from the restaurant if she could prove “that a Kress employee, in the course of employment, and a Hattiesburg policeman somehow reached an understanding to deny Miss Adickes service in the Kress store, or to cause her subsequent arrest because she was a white person in the company of Negroes.” 398 U.S. at 152. In other words, the Court indicated that a private corporation could be held liable under § 1983 on a theory of respondeat Nos. 12-2746 and 13-1143 13 superior liability. Interestingly, Adickes was decided at a time when a municipal government could not be held liable at all under § 1983. For present purposes, the next pivotal decision was Monell v. Department of Social Services, 436 U.S. 658 (1978). Monell first overruled Monroe in part and held that a local government could be sued as a person under § 1983. Id. at 690. The Court then considered the issue of respondeat superior liability under § 1983, and held that “respondeat superior is not a basis for rendering municipalities liable under § 1983 for the constitutional torts of their employees.” Id. at 663 n.7. The Court held instead that a local government could be held liable under § 1983 only if the government’s own policy or custom had caused the violation. Id. at 694. In a number of decisions since Monell, our court has applied the Monell standard to private corporations. We said it first in Iskander: “Moreover, just as a municipal corporation is not vicariously liable upon a theory of respondeat superior for the constitutional torts of its employees, [Monell, 436 U.S. at 694], a private corporation is not vicariously liable under § 1983 for its employees’ deprivations of others’ civil rights.” 690 F.2d at 128; see also Gayton v. McCoy, 593 F.3d 610, 622 (7th Cir. 2010); Rodriguez v. Plymouth Ambulance Service, 577 F.3d 816, 822 (7th Cir. 2009); Woodward v. Correctional Medical Services of Illinois, Inc., 368 F.3d 917, 927 (7th Cir. 2004). All other circuits that 14 Nos. 12-2746 and 13-1143 have addressed the issue have reached the same conclusion, extending the Monell standard to private corporations.2 Such a unified phalanx of decisions from our own and other circuits is entitled to considerable respect. Upon closer examination, however, there are substantial grounds to question the extension of the Monell holding for municipalities to private corporations. A close look at the reasoning of Monell provides no persuasive reason to extend its holding to private corporations. Monell gave two reasons for barring respondeat superior liability for municipalities under § 1983. First, the Court focused on the language of § 1983, which imposes liability on a person who “shall subject, or cause to be subjected,” any person to a deprivation of Constitutional rights: The italicized language [of causation] plainly imposes liability on a government that, under color of some official policy, “causes” an employee to violate another’s constitutional rights. At the same time, that language cannot be easily read to impose liability vicariously on 2 See Iskander, 690 F.2d at 128; Rojas v. Alexander’s Dept. Store, Inc., 924 F.2d 406, 408–09 (2d Cir. 1990); Powell v. Shopco Laurel Co., 678 F.2d 504, 506 (4th Cir. 1982); Street v. Corrections Corp. of America, 102 F.3d 810, 818 (6th Cir. 1996); Lux v. Hansen, 886 F.2d 1064, 1067 (8th Cir. 1989); Tsao v. Desert Palace, Inc., 698 F.3d 1128, 1139 (9th Cir. 2012); DeVargas v. Mason & Hanger-Silas Mason Co., 844 F.2d 714, 723 (10th Cir. 1988); Harvey v. Harvey, 949 F.2d 1127, 1129–30 (11th Cir. 1992). See also Lyons v. National Car Rental Systems, Inc., 30 F.3d 240, 246 (1st Cir. 1994); Defreitas v. Montgomery County Corr. Facility, 525 Fed. Appx. 170, 176 (3d Cir. 2013). Nos. 12-2746 and 13-1143 15 governing bodies solely on the basis of the existence of an employer-employee relationship with a tortfeasor. Indeed, the fact that Congress did specifically provide that A’s tort became B’s liability if B “caused” A to subject another to a tort suggests that Congress did not intend § 1983 liability to attach where such causation was absent. 436 U.S. at 692. Second, the Court concluded that the legislative history of the Civil Rights Act of 1871 showed that Congress did not intend to impose respondeat superior liability on municipalities. Id. at 693. The Court focused on a rejected proposal known as the Sherman Amendment. Directed at Ku Klux Klan activity in the Reconstruction-era South, the amendment would have held a municipality liable for the torts of private citizens not under the municipality’s control, and thus would have imposed in essence a generalized duty to keep the peace. See 436 U.S. at 692–94 & n.57. The amendment was rejected largely due to concerns about its constitutionality. See id. at 678–79. The Monell Court seems to have concluded that if the 1871 Congress rejected the Sherman Amendment on constitutional grounds, then it similarly would have thought that respondeat superior liability for municipalities was unconstitutional, so respondeat superior liability for municipalities must be implicitly barred under § 1983. See id. at 693. While the Court’s discussion is opaque, it was clearly focused on municipalities and did not consider private corporations, such as in Adickes v. Kress. 16 Nos. 12-2746 and 13-1143 The rejection of respondeat superior liability for municipalities in Monell has been the subject of extensive analysis and criticism. See Board of County Com’rs v. Brown, 520 U.S. 397, 430–37 (1997) (Breyer, J., dissenting) (calling for reconsideration of Monell rejection of respondeat superior liability); City of Oklahoma City v. Tuttle, 471 U.S. 808, 834–44 (1985) (Stevens, J., dissenting) (same); see also, e.g., Jack M. Beermann, Municipal Responsibility for Constitutional Torts, 48 DePaul L. Rev. 627 (1999); Peter H. Schuck, Municipal Liability Under Section 1983: Some Lessons from Tort Law and Organization Theory, 77 Geo. L.J. 1753 (1989); Larry Kramer and Alan O. Sykes, Municipal Liability Under Section 1983: A Legal and Economic Analysis, 1987 S. Ct. Rev. 249 (1987); Susanah M. Mead, 42 U.S.C. § 1983 Municipal Liability: The Monell Sketch Becomes a Distorted Picture, 65 N.C. L. Rev. 517 (1987); Karen M. Blum, From Monroe to Monell: Defining the Scope of Municipal Liability in Federal Courts, 51 Temple L.Q. 409 (1978). (A reader of these critiques will find citations to many more.) These commentators have pointed out many critical problems with Monell’s conclusion that respondeat superior claims against municipalities are not permitted under § 1983. Perhaps the most important criticism to emerge from this literature is that Monell failed to grapple with the fact that respondeat superior liability for employers was a settled feature of American law that was familiar to Congress in 1871, when § 1983 was enacted. Congress therefore enacted § 1983 against the backdrop of respondeat superior liability, and presumably assumed that courts would apply it in claims against corporations under § 1983. Cf. Smith v. Wade, 461 U.S. 30, 38–45 Nos. 12-2746 and 13-1143 17 (1983) (considering common law in 1871 to decide standard for punitive damages under § 1983); Carey v. Piphus, 435 U.S. 247, 257–59 (1978) (considering common law in 1871 to decide that actual injury is needed to recover compensatory damages under § 1983); see generally Jack M. Beermann, A Critical Approach to Section 1983 With Special Attention to Sources of Law, 42 Stanford L. Rev. 51, 66–73 (1989). The Court’s reliance on the Sherman Amendment is also problematic. The rejection of the proposal to hold municipalities liable for actions of private citizens it could not control says little about whether a municipality should be held liable for constitutional torts committed by its own employees acting within the scope of their employment. (More about this below, when we discuss reasons not to extend the Monell holding to private corporations.) Finally, the Court gave only cursory and tentative treatment to the strongest foundation for respondeat superior liability: an employer should be held responsible for the torts of employees whose actions it can control and from whose actions it profits. See 436 U.S. at 694 & n.58. Given these flaws on the surface of its reasoning, Monell is probably best understood as simply having crafted a compromise rule that protected the budgets of local governments from automatic liability for their employees’ wrongs, driven by a concern about public budgets and the potential extent of taxpayer liability. Of course, the critiques of Monell’s rejection of respondeat superior liability for municipalities have not yet persuaded the Supreme Court to reconsider that rule. Given our position in 18 Nos. 12-2746 and 13-1143 the judicial hierarchy, then, we are bound to follow Monell as far as municipal liability is concerned. We need not extend that holding, however, to the quite different context of private corporate defendants. As noted, respondeat superior liability, which makes employers liable for their employees’ actions within the scope of their employment, is an old and well-settled feature of American law. See, e.g., Restatement (3d) of Agency §2.04 (2006); Kerl v. Dennis Rasmussen, Inc., 682 N.W.2d 328, 334 (Wis. 2004) (Sykes, J.) (respondeat superior “has been well-settled in the law of agency for perhaps as long as 250 years.”); Sword v. NKC Hospitals, Inc., 714 N.E.2d 142, 147–48 (Ind. 1999); Adames v. Sheahan, 909 N.E.2d 742, 754–55 (Ill. 2009). It is often justified through a deterrence theory. E.g., Kerl, 682 N.W.2d at 336. Employers are less likely than employees to be judgment-proof and thus are more likely to be deterred by potential liability. Id. Plus, while potential liability for a single tort may not be enough to cause an employee to take more care, the specter of massive aggregate liability might spur the employer to take precautions. Employers are in the better position to take costeffective measures to avoid causing injury and can absorb the costs of those precautions more easily than their individual employees. Id. All of this suggests that making employers liable for their employees’ torts may result in less tortious behavior overall. We should not insulate employers from respondeat superior liability under § 1983 without powerful reasons to do so. The text of § 1983 does not foreclose respondeat superior liability for corporations. “Cause” has many legal meanings, but it generally refers to proximate causation, which is Nos. 12-2746 and 13-1143 19 something broader than immediate, direct causation. See National Union Fire Ins. Co. v. Mead Johnson & Co., LLC, 735 F.3d 539, 547 (7th Cir. 2013); United States v. Laraneta, 700 F.3d 983, 990 (7th Cir. 2012). The requirement of causation certainly does not generally preclude respondeat superior liability for a given tort. See Dobbs’ Law of Torts § 425 (2d ed); Kerl, 682 N.W.2d at 334; Sword, 714 N.E.2d at 147–48; Adames, 909 N.E.2d at 754–55. The causation requirement affects whether an individual employee can be found liable for a wrong in the first place, not whether his or her wrong can be imputed to the employer under respondeat superior. Courts routinely applying respondeat superior liability to corporations do not ask whether the corporation “caused” the wrong by its employee. They ask instead only whether the employee was acting within the scope of employment. The Monell Court’s interpretation of the legislative history of the Civil Rights Act of 1871 similarly does not indicate that Congress rejected the idea of respondeat superior liability for corporations. The rejected Sherman Amendment, which the Monell Court relied on to reject respondeat superior liability for municipalities, would have made a “county, city, or parish” vicariously liable for acts of violence committed by private citizens. Monell, 436 U.S. at 667. The amendment was designed to make municipalities vicariously liable for violence and property damage inflicted by the Ku Klux Klan, regardless of whether the municipality knew of the Klan’s planned activity in advance or had the power to stop it. Id. at 667–68. That proposition simply is not analogous to imposing liability on private corporations for the tortious behavior of their own employees acting within the scope of employment. Nothing in 20 Nos. 12-2746 and 13-1143 the Monell treatment of the legislative history bars respondeat superior liability for corporations. Other Supreme Court decisions also do not require the extension of Monell to this new context. Monell itself said nothing about whether its new “policy or custom” standard would apply to private companies sued under § 1983. Nor did Monell even mention Adickes’ almost reflexive application of respondeat superior liability to a private company under § 1983. Adickes remains good law, see Lugar, 457 U.S. at 930–31 (quoting Adickes’ discussion of private liability under § 1983 at length and with approval), so current Supreme Court precedent seems to support rather than reject respondeat superior liability for private corporations under § 1983. Further, since Monell, the Supreme Court has never held that a private corporation may take advantage of the Monell standard that applies to local governments. That suggests that we should treat a private corporation like any other “person” who causes a constitutional violation and that respondeat superior liability should apply. Moreover, in the related context of qualified immunity under § 1983, the Court has distinguished between employees of municipalities and employees of private corporations. In both Richardson v. McKnight, 521 U.S. 399, 412 (1997), and Wyatt v. Cole, 504 U.S. 158, 167–68 (1992), the Supreme Court based its conclusion on grounds of both history and policy, focusing on differences between private actors and governments. Despite a long history of private corporations performing state functions, there is no tradition of providing immunity to their employees. Richardson, 521 U.S. at 405. Further, unlike municipalities, private corporations are subject to market Nos. 12-2746 and 13-1143 21 pressures, which provide a set of incentives entirely different from those imposed by the democratic process. Id. at 409–11. The conditions under which private corporations compete and provide government services are thus materially different from those affecting municipalities. Id. Due to these differences, private prison employees are barred from asserting qualified immunity from suit under § 1983. Id. at 412. The Court’s reasoning in Richardson and Wyatt suggests that we should not foreclose respondeat superior liability against private corporations under § 1983. Private prison employees and prison medical providers have frequent opportunities, through their positions, to violate inmates’ constitutional rights.3 It is also generally cheaper to provide sub-standard care than it is to provide adequate care. Private prisons and prison medical providers are subject to market pressures. Their employees have financial incentives to save money at the expense of inmates’ well-being and constitutional rights. The unavailability of qualified immunity for these employees is a deterrent against such conduct, but respondeat superior liability for the employer itself is likely to be more effective at deterring such actions. Insulating private corporations from respondeat superior liability significantly reduces their incentives to control their employees’ tortious behavior and to ensure respect for 3 Although Richardson involved a private prison, some circuits (including our own) have applied Richardson to private medical providers, holding that they are similarly barred from asserting immunity under § 1983. See, e.g., Currie v. Chhabra, 728 F.3d 626, 631–32 (7th Cir. 2013) (affirming denial of qualified immunity for private health care providers for jail); McCullum v. Tepe, 693 F.3d 696 (6th Cir. 2012); Jensen v. Lane County, 222 F.3d 570 (9th Cir. 2000); Hinson v. Edmond, 192 F.3d 1342 (11th Cir. 1999). 22 Nos. 12-2746 and 13-1143 prisoners’ rights. The results of the current legal approach are increased profits for the corporation and substandard services both for prisoners and the public. So the Supreme Court has not directly said whether Monell applies to private corporations, and there are powerful reasons to say no. Yet we and all other circuits that have considered the question have said yes. Why? It’s not easy to say. Our opinion in Iskander and virtually all of the circuit opinions after Monell simply cite one or more prior cases that all seem to trace back to the terse Fourth Circuit opinion in Powell v. Shopco Laurel Co., 678 F.2d 504 (4th Cir. 1982). The relevant portion of that opinion said in full: In Monell v. New York City Department of Social Services, 436 U.S. 658 (1978), the Supreme Court held that a municipal corporation cannot be saddled with section 1983 liability via respondeat superior alone. We see this holding as equally applicable to the liability of private corporations. Two aspects of Monell exact this conclusion. The Court found section 1983 evincing a Congressional intention to exclude the imposition of vicarious answerability. For a third party to be liable the statute demands of the plaintiff proof that the former “caused” the deprivation of his Federal rights. 436 U.S. at 691–92. Continuing, the Court observed that the policy considerations underpinning the doctrine of respondeat superior insufficient to warrant integration of that doctrine into the statute. Id. at 694. No element of the Court’s ratio decidendi Nos. 12-2746 and 13-1143 23 lends support for distinguishing the case of a private corporation. 678 F.2d at 506. There are good reasons to question the Powell conclusion. It overlooked the fact that Monell was focused on the Sherman Amendment, which would have imposed liability for mere failure to prevent harm caused by private citizens, not employees controlled by an employer. It also overlooked the fact that respondeat superior liability was already a well established part of the common law in 1871, so Congress could reasonably have expected the courts to apply the doctrine under § 1983. Perhaps most important, the Powell opinion simply overlooked the Monell Court’s special solicitude for municipalities and their budgets. These omissions counsel against adopting the Powell court’s conclusion. For all of these reasons, a new approach may be needed for whether corporations should be insulated from respondeat superior liability under § 1983. Since prisons and prison medical services are increasingly being contracted out to private parties, reducing private employers’ incentives to prevent their employees from violating inmates’ constitutional rights raises serious concerns. Nothing in the Supreme Court’s jurisprudence or the relevant circuit court decisions provides a sufficiently compelling reason to disregard the important policy considerations underpinning the doctrine of respondeat superior. And in a world of increasingly privatized state 24 Nos. 12-2746 and 13-1143 services, the doctrine could help to protect people from tortious deprivations of their constitutional rights.4 If the Monell policy/custom standard did not apply here, we would reverse the district court’s grant of summary judgment for Wexford. Shields has offered evidence showing that the corporation was responsible for his health care. As an entity, the company knew of his injury, its severity, the need for surgery, and the complete failure of physical therapy. (Recall the therapist’s note that Shields had to stop the therapy because of pain.) Wexford nevertheless failed to ensure that Shields received the surgery he needed to avoid permanent impairment of his shoulder. These facts would support respondeat superior liability for Wexford and would lead us to reverse summary judgment for Wexford on that ground. The facts in this case are also an excellent example of the problems generated by barring respondeat superior liability for corporations under § 1983. On the facts before us, it appears that Wexford structured its affairs so that no one person was 4 For more detailed critiques of the extension of Monell to private corporations, and for more detailed reviews of the policy considerations and the nuances in the case law, see Richard Frankel, Regulating Privatized Government Through § 1983, 76 U. Chi. L. Rev. 1449 (2009), and Barbara Kritchevsky, Civil Rights Liability of Private Entities, 26 Cardozo L. Rev. 35 (2004); see also Jack M. Beermann, Why Do Plaintiffs Sue Private Parties Under Section 1983?, 26 Cardozo L. Rev. 9, 27 (2004). As just one example of additional problems, the Monell policy/custom rule is difficult to apply to a private corporation. How does a court identify the relevant final policymaker in a corporation? Is it the CEO, the board of directors, the shareholders? What if the corporation is a subsidiary of another? See Kritchevsky, 26 Cardozo L. Rev. at 56–60. Nos. 12-2746 and 13-1143 25 responsible for Shields’ care, making it impossible for him to pin responsibility on an individual. If respondeat superior liability were available, Wexford could not escape liability by diffusing responsibility across its employees, and prisoners would be better protected from violations of their constitutional rights. In view of these considerations, we have considered the possibility of circulating an opinion overruling Iskander and its progeny on this point for consideration by the entire court under Circuit Rule 40(e). Since Shields has not asked us to overrule those cases and Wexford has not had occasion to brief the issue, we have decided not to take that approach. A petition for rehearing en banc would provide an opportunity for both sides to be heard on this issue, and our decision is of course subject to review on certiorari. For now, this circuit’s case law still extends Monell from municipalities to private corporations. Iskander, 690 F.2d at 128; Gayton, 593 F.3d at 622; Rodriguez, 577 F.3d at 822. To recover against Wexford under our current precedent, Shields must offer evidence that his injury was caused by a Wexford policy, custom, or practice of deliberate indifference to medical needs, or a series of bad acts that together raise the inference of such a policy. Woodward, 368 F.3d at 927. Shields attempts to proceed by showing a series of bad acts. He argues that mistakenly referring him to the wrong doctor (and failing to detect or correct that mistake), combined with failing to promptly discipline and eventually replace Dr. Migliorino, shows that Wexford was deliberately indifferent to his medical needs. 26 Nos. 12-2746 and 13-1143 Such isolated incidents do not add up to a pattern of behavior that would support an inference of a custom or policy, as required to find that Wexford as an institution/ corporation was deliberately indifferent to Shields’ needs. See Palmer v. Marion County, 327 F.3d 588, 596 (7th Cir. 2003) (“proof of isolated acts of misconduct will not suffice; a series of violations must be presented to lay the premise of deliberate indifference”); Cornfeld v. Consolidated High School Dist. No. 230, 991 F.2d 1316, 1326 (7th Cir. 1993) (requiring “a pattern or series of incidents of unconstitutional conduct” in the absence of an explicit policy). Under our existing case law, summary judgment was properly granted for Wexford on this claim.