Court Opinion

ID: 3040085
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:02:13.920778+00
Date Added: 2024-06-11T12:05:38.442541
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

FLECK AND ASSOCIATES, INC., an             
Arizona corporation,                             No. 05-15293
                Plaintiff-Appellant,               D.C. No.
                v.                            CV-04-01118-PHX-
PHOENIX, CITY OF, an Arizona                         DGC
municipal corporation,                             OPINION
               Defendant-Appellee.
                                           
         Appeal from the United States District Court
                  for the District of Arizona
         David G. Campbell, District Judge, Presiding

                 Submitted December 8, 2006*
                   San Francisco, California

                    Filed December 22, 2006

    Before: Dorothy W. Nelson, Robert E. Cowen,** and
             Marsha S. Berzon, Circuit Judges.

                 Opinion by Judge D. W. Nelson

   *This panel unanimously finds this case suitable for decision without
oral argument. See Fed. R.App. P. 34(a)(2).
   **The Honorable Robert E. Cowen, Senior United States Circuit Judge
for the Third Circuit, sitting by designation.

                                19683
              FLECK AND ASSOCIATES v. PHOENIX       19685

                        COUNSEL

Paul Gattone, Tucson, Arizona, for the appellant.
19686             FLECK AND ASSOCIATES v. PHOENIX
James H. Hays, Assistant City Attorney, Phoenix, Arizona,
for the appellee.

                              OPINION

D. W. NELSON, Senior Circuit Judge:

   This is a challenge, based on the constitutional right of pri-
vacy, to an ordinance prohibiting the operation of “live sex
act” businesses in Phoenix, Arizona (“Phoenix” or “the city”).
Appellant Fleck and Associates, Inc. (“Fleck”) runs such an
establishment and appeals the district court’s order dismissing
its complaint with prejudice.1 The district court correctly
determined Fleck lacked standing to assert any cognizable pri-
vacy rights under the allegations in its complaint. However,
the court improperly proceeded to reach the merits of the
underlying suit, determining that Fleck’s customers could not
state a claim for relief under any conceivable set of facts.
Because Fleck lacked standing to assert either its own puta-
tive privacy rights or the interests of its customers, the district
court lacked subject matter jurisdiction and should have dis-
missed the complaint on that ground alone. We therefore dis-
approve of the district court’s undertaking on the merits and
hereby vacate the district court’s order and remand with
instructions to dismiss the complaint without prejudice.

      FACTUAL AND PROCEDURAL BACKGROUND2

  Fleck is a for-profit corporation that operates Flex, a gay
men’s social club in Phoenix, Arizona. The club limits access
to adults who have purchased “memberships” on a yearly,
  1
    Fleck & Assocs., Inc. v. City of Phoenix, 356 F. Supp. 2d 1034 (D.
Ariz. 2005).
  2
    For the purpose of reviewing the motion to dismiss for want of stand-
ing, all factual representations are drawn from Fleck’s complaint and
assumed to be true. See Warth v. Seldin, 422 U.S. 490, 501 (1975).
               FLECK AND ASSOCIATES v. PHOENIX            19687
semi-yearly, or daily basis. Many people enter the club by
purchasing daily passes. Customers can rent private dressing
rooms for an additional fee. Sexual activities take place in the
dressing rooms and in other areas of the club.

  In 1998, the city banned “live sex act business[es]” defined
as those “in which one or more persons may view, or may
participate in, a live sex act for a consideration.” PHOENIX,
AZ., CODE § 23-54(B)(3) & (C). In January 2004, police offi-
cers entered Flex, searched its office, questioned two employ-
ees and detained them overnight. Fleck has been threatened
with similar actions.

   On June 2, 2004, Fleck filed suit in the District of Arizona
seeking injunctive and declaratory relief on the ground the
above-described governmental conduct “violated the privacy
rights of Plaintiff as well as the members and users of their
[sic] facility in violation of the Due Process Clause as codi-
fied in the Fifth and Fourteenth Amendments.” The complaint
did not allege Fleck suffered any injury other than the inva-
sion of its supposed privacy interests. Fleck and Associates,
Inc. was the only named plaintiff.

   The city filed a motion to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(1) and (6). On February 15, 2005,
the district court granted the motion, ordered the complaint
dismissed with prejudice, and entered judgment for the city.
The court treated the complaint as raising two distinct claims,
one predicated on an invasion of the rights of Fleck’s custom-
ers (“the customers’ claim”) and another based on the inva-
sion of Fleck’s rights as a corporation (“the corporate claim”).

   The court correctly found Fleck lacked standing to assert
the rights of its customers. However, the court also opted, “in
the interest of judicial economy,” Fleck & Assocs. Inc., 356
F. Supp. 2d at 1039 n.4, to discuss the merits, deciding that
“the privacy rights of Fleck’s members . . . do not exist in
Fleck’s public social club.” Id. at 1041. The district court
19688                FLECK AND ASSOCIATES v. PHOENIX
therefore dismissed the customers’ claim on the alternative
grounds that Fleck lacked standing to bring it or that it failed
as a matter of law given the nature of the right to privacy.
Because Fleck lacked standing to assert its customers’ rights,
the district court lacked subject matter jurisdiction over the
claim and should have dismissed on that basis without dis-
cussing the merits.

   As to the second claim, the court held Fleck enjoyed stand-
ing to assert its own rights as a corporation. Id. at 1038. The
court did not, however, identify what those corporate rights
might have been. Instead, it immediately proceeded to hold
that Fleck lacked any cognizable privacy rights and dismissed
for failure to state a claim. Id. at 1039, 1041. Because Fleck
failed to allege the invasion of any cognizable corporate right,
it similarly lacked standing to raise the corporate claim.
Therefore, this claim should also have been dismissed for lack
of subject matter jurisdiction.

                             DISCUSSION

I.    Standard of Review

  Whether a party lacks standing is a legal issue subject to de
novo review. Hong Kong Supermarket v. Kizer, 830 F.2d
1078, 1080 (9th Cir. 1987).

II.       Standing

     A.    “Traditional” (Non-Associational) Standing

   Standing doctrine involves “ ‘both constitutional limita-
tions on federal-court jurisdiction and prudential limitations
on its exercise.’ ” Kowalski v. Tesmer, 543 U.S. 125, 128-29
(2004) (quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)).
The constitutional aspect inquires “whether the plaintiff has
made out a ‘case or controversy’ between himself and the
defendant within the meaning of Art[icle] III” by demonstrat-
                FLECK AND ASSOCIATES v. PHOENIX             19689
ing a sufficient personal stake in the outcome. Warth, 422
U.S. at 498. The prudential limitations, in contrast, restrict the
grounds a plaintiff may put forward in seeking to vindicate his
personal stake. Id. at 499. Most important for our purposes is
that “a litigant must normally assert his own legal interests
rather than those of third parties.” Phillips Petroleum Co. v.
Shutts, 472 U.S. 797, 804 (1985) (citations omitted).

   [1] The constitutional limitations require a litigant to allege
“(1) a threatened or actual distinct and palpable injury to
[himself]; (2) a fairly traceable causal connection between the
alleged injury and the . . . challenged conduct; and (3) a sub-
stantial likelihood that the requested relief will redress or pre-
vent the injury.” Hong Kong Supermarket, 830 F.2d at 1081
(citations omitted).

   [2] The first of these elements, sometimes described as “in-
jury in fact,” necessitates a showing of “an invasion of a
legally protected interest” that “affect[s] the plaintiff in a per-
sonal and individual way.” Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 & n.1 (1992). A plaintiff seeking to invoke
federal court jurisdiction must plead that he has suffered some
cognizable injury to make the threshold showing of a case or
controversy. Vt. Agency of Natural Res. v. United States ex
rel. Stevens, 529 U.S. 765, 771 (2000) (“[T]he Art[icle] III
judicial power exists only to redress or otherwise to protect
against injury to the complaining party.” (quoting Warth, 422
U.S. at 499)).

   Fleck has failed to plead an injury in fact. According to the
complaint, the only harm that has allegedly befallen Fleck &
Associates Inc. is that its “privacy rights” were violated when
the city “criminalized private, consensual homosexual sexual
acts” by enacting and enforcing § 23-54. However, as the dis-
trict court correctly held, corporations have no such privacy
rights. Since Fleck has not alleged the invasion of any cogni-
zable right, it has failed to establish the “irreducible constitu-
tional minimum of standing.” Lujan, 504 U.S. at 560.
19690           FLECK AND ASSOCIATES v. PHOENIX
   [3] “[C]orporations can claim no equality with individuals
in the enjoyment of a right to privacy.” United States v. Mor-
ton Salt Co., 338 U.S. 632, 652 (1950); see also Browning-
Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 284
(1989) (O’Connor, J., concurring in part, dissenting in part)
(“[A] corporation has no . . . right to privacy.”). More gener-
ally, a corporation is not entitled to “ ‘purely personal’ guar-
antees” — those rights that have historically been granted to
protect individuals. First Nat’l Bank of Boston v. Bellotti, 435
U.S. 765, 778 n.14 (1978). An analysis of the “nature, history,
and purpose,” id., of the constitutional guarantee at issue dem-
onstrates that it is “purely personal” and therefore incapable
of being claimed by a corporation.

   Fleck squarely identifies the source of its supposed right as
the liberty guarantee described in Lawrence v. Texas, 539
U.S. 558 (2003). The Lawrence Court, however, was con-
cerned with “the autonomy of the person” to make choices
about intimate relationships free from governmental stigmati-
zation or sanction. Id. at 574. “At the heart of liberty is the
right to define one’s own concept of existence, of meaning, of
the universe, and of the mystery of human life.” Id. (quoting
Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 851
(1992)). The Lawrence Court held that due process requires
“respect for [the petitioners’] private lives [such that t]he
State cannot demean their existence or control their destiny by
making their private sexual conduct a crime.” Id. at 578.

   [4] It is hard to imagine a constitutional guarantee that
could be more inherently personal and therefore unavailable
to a corporate entity, “an artificial being, invisible, intangible,
and existing only in contemplation of law.” Dartmouth Col-
lege v. Woodward, 17 U.S. (4 Wheat.) 518, 636 (1819). Cor-
porations are not self-defining autonomous creatures worthy
of respect and dignity in the relevant sense. Neither do they
have private lives, let alone “private lives in matters pertain-
ing to sex” as Fleck would have it. Because the right to pri-
vacy described in Lawrence is purely personal and
                   FLECK AND ASSOCIATES v. PHOENIX                    19691
unavailable to a corporation, Fleck failed to allege an injury
in fact sufficient to make out a case or controversy under Arti-
cle III.

   Nevertheless, Fleck claims that the “inherently personal
right of homosexual sexual activity is central to the function
and operation of [its] facility,” and that this somehow means
Fleck has a liberty interest protected by the due process clause
to run a “facility devoted to providing a safe location for
homosexuals to express their sexuality.” Essentially, Fleck
argues that it has a right to facilitate the exercise of the admit-
tedly personal “right of homosexual sexual activity.”

   [5] This argument is really just a claim that Fleck should
be allowed to champion the liberty interests of its customers.
Under traditional standing doctrine, a party meeting the con-
stitutional requirements of injury, causation, and redressi-
bility, may, on rare occasions, “act[ ] as [an] advocate[ for]
the rights of third parties,” Craig v. Boren, 429 U.S. 190, 195
(1976), if he can overcome the prudential rule limiting the
grounds for relief. However, exceptions to the prudential rule
presuppose a litigant who has already met the constitutional
requirements. See Kowalski, 543 U.S. at 128-29 (reiterating
that constitutional standing limits are separate and distinct
from prudential rule against asserting third-party rights).
Since Fleck has failed to allege a cognizable personal injury,
the prudential limits on “third-party standing” are beside the
point.3
  3
    Even if Fleck had alleged an “injury in fact” and the other constitution-
ally required elements of standing, it could not rely on the interests of its
customers under the allegations in the complaint. Exceptions to the pru-
dential rule are disfavored and a party seeking to champion the rights of
third persons must demonstrate that, “[f]irst, [it] has a ‘close’ relationship
with the person who possesses the right . . . [and s]econd . . . there is a
‘hindrance’ to the possessor’s ability to protect his own interests.” Kowal-
ski, 543 U.S. at 130 (citations omitted). Fleck has alleged neither condi-
tion.
19692           FLECK AND ASSOCIATES v. PHOENIX
  B.    Associational Standing

   [6] Under the doctrine of “associational” or “representa-
tional” standing an organization may bring suit on behalf of
its members whether or not the organization itself has suf-
fered an injury from the challenged action. Hunt v. Wash.
State Apple Adver. Comm’n, 432 U.S. 333, 342-44 (1977).
The district court directed most of its standing analysis to this
doctrine and correctly held that Fleck has no associational
standing to assert the rights of its customers. Fleck & Assocs.
Inc, 356 F. Supp. 2d at 1036-38.

   To obtain associational standing, the entity must show that
(1) at least one of its members would have standing to sue in
his own right, (2) the interests the suit seeks to vindicate are
germane to the organization’s purpose, and (3) neither the
claim asserted nor the relief requested requires the participa-
tion of individual members in the lawsuit. United Food &
Commercial Workers Union Local 751 v. Brown Group, Inc.,
517 U.S. 544, 553 (1996) (citing Hunt, 432 U.S. at 343).

   [7] Fleck’s complaint fails to demonstrate associational
standing. First, Fleck does not have any “members” in the
sense required by the doctrine. Associational standing is
reserved for organizations that “express the[ ] collective views
and protect the[ ] collective interests” of their members. Hunt,
432 U.S. at 345. Here, the allegations in the complaint make
clear that “members” of Flex are merely customers. Fleck
does not allege that its customers in any way have come
together to form an organization for their mutual aid and ben-
efit. Cf. Int’l Union, United Auto., Aerospace, & Ag. Imple-
ment Workers of Am. v. Brock, 477 U.S. 274, 290 (1986)
(“[T]he doctrine of associational standing recognizes that the
primary reason people join an organization is often to create
an effective vehicle for vindicating interests that they share
with others.”). Second, the purpose of the “association” here
(Fleck & Associates, Inc.) is to turn a profit. Fleck’s suit seeks
to vindicate the putative privacy interests of its customers.
                   FLECK AND ASSOCIATES v. PHOENIX                    19693
This is clearly not germane to the purpose of the organization.
Cf. Id. at 286 (where union’s constitution announced goal of
establishing social and unemployment insurance funded by
government and private employers, suit seeking to vindicate
union members rights’ under Trade Act of 1974 was germane
to organizational purpose); Hunt, 432 U.S. at 344 (association
created for purpose of protecting and promoting Washington
state apple industry may seek to vindicate its members’ com-
mercial interests).

III.   Conclusion

   [8] As presently constituted, the complaint fails to demon-
strate that Fleck suffered a distinct and palpable injury to any
cognizable corporate right. In addition, Fleck does not have
associational standing to assert the rights of its customers.
Therefore, under the allegations in the complaint, the district
court lacked subject matter jurisdiction over the entirety of
Fleck’s complaint and erred by reaching the merits.4 We
therefore vacate the district court’s order and remand with
instructions to dismiss without prejudice. See Steel Co. 523
U.S. at 94 (if court lacks jurisdiction it is powerless to reach
  4
    Fleck contends alternatively that even if it lacks “formal” standing to
sue, this court should reach the merits on the theory that the constitutional
issue presented is gravely important. Aside from the fact that Fleck cites
no authority for this position, it neglects that standing is an aspect of sub-
ject matter jurisdiction and that, no matter how important the issue, a court
lacking jurisdiction is powerless to reach the merits under Article III of the
Constitution. See Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 110
(2001). Fleck also complains that because the city’s motion to dismiss
challenged standing on the ground that Fleck was allegedly not licensed
to transact business in Arizona, the district court impermissibly went “be-
yond the scope of the limited Motion to Dismiss in order to craft a basis
upon which to contrive a basis [sic] for granting the Motion.” Of course,
since standing is an aspect of subject matter jurisdiction, the district court
was free to reach the issue sua sponte and was free to find that Fleck
lacked standing for reasons other than those put forward by the city. See
Fed. R. Civ. P. 12(h)(3); Steel Co. v. Citizens for Better Env’t, 523 U.S.
83, 95 (1998).
19694          FLECK AND ASSOCIATES v. PHOENIX
the merits); FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 235
(1990); Brereton v. Bountiful City Corp., 434 F.3d 1213,
1216-20 (10th Cir. 2006) (dismissal for want of standing must
be “without prejudice”).

  VACATED AND REMANDED with instructions.