Court Opinion

ID: 50817
Source: CourtListenerOpinion
Date Created: 2010-04-26 00:58:11+00
Date Added: 2024-06-11T17:18:57.339607
License: Public Domain

United States Court of Appeals
                                                                                   Fifth Circuit
                                                                                F I L E D
               IN THE UNITED STATES COURT OF APPEALS                              June 28, 2007
                        FOR THE FIFTH CIRCUIT
                                                                             Charles R. Fulbruge III
                                                                                     Clerk

                                       No. 06-41225

TOMAS DURAN,

                                                                        Plaintiff-Appellant,

v.

CITY OF CORPUS CHRISTI,

                                                                       Defendant-Appellee.

                                    --------------------
                       Appeal from the United States District Court
                           for the Southern District of Texas
                                     (2:04-CV-500)
                                    --------------------

Before HIGGINBOTHAM, DAVIS, and WIENER, Circuit Judges.

PER CURIAM:*

       Plaintiff-Appellant Tomas Duran appeals from the district court’s grant of summary

judgment for Defendant-Appellee the City of Corpus Christi (“the City”), dismissing Duran’s

§ 1983 First Amendment retaliation claim. Concluding that Duran lacks standing to pursue

his asserted claim, we vacate the judgment of the district court and remand with instructions

to dismiss.

                             I. FACTS & PROCEEDINGS

       *
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
       In 1998, Duran prepared and submitted to the City, on behalf of Entrust, Inc.

(“Entrust”), a proposal to provide third-party claims administration and accounting services

to the City in connection with its health insurance program. In January 1999, Entrust

separately agreed to pay Duran half of all monthly administrative fees that it would receive

if it should be awarded the health plan administration contract (“the Contract”).1 The letter

from Entrust to Duran memorializing this agreement does not precisely identify the services

that Duran had provided or would provide in exchange for his payments.

       In February 1999, the City awarded Entrust the Contract, which, inter alia, required

Entrust to appoint a local “coordinator to resolve all problems that may arise during the

length of this Contract.” Entrust selected Duran to serve as that coordinator.2 He did so not

as an employee of Entrust but as an independent contractor.

       The instant case stems from a dispute between Entrust and the City over a costly

health insurance claim made by an adult child (“the Child”) of a City employee (“the

Employee”). After Entrust learned of this claim, it relayed the information to Duran in his

capacity as plan coordinator. Duran then informed various City officials of potential

problems with the Child’s claim. According to Duran, he communicated to those officials

his belief that (1) the City should deny the Child’s claim; (2) City officials had fraudulently

manufactured COBRA eligibility for the Child in an attempt to secure reimbursement for her

claim from the reinsurer; (3) the City did not have the authority to pay the Child’s medical

       1
       Entrust’s eventual payments to Duran averaged $40,000 per
month over the life of the Contract.
       2
       Duran maintains that City officials “presumed” that he
would serve as the local coordinator, and that the matter was
“briefly discussed” during contract negotiations.

                                              2
bills; and (4) making withdrawals from the City’s self-insured fund to pay the Child’s claim

violated the terms of the health plan. Duran also contends that —— without revealing any

names of employees or plan participants — he prompted a confidential contact at a local

newspaper, the Corpus Christi Caller Times, to look into the disputed claim. The Caller

Times ran several articles exposing the dispute surrounding the Child’s claim. Duran does

not allege that any City official connected him to these articles or even suspected that he had

leaked the information at any time pertinent to this case.

       A few months before the Contract was to expire on its own terms, the City issued a

Request for Proposals for health plans administration, health services network, pharmacy

benefits management, and related services. As he had before, Duran prepared and submitted

a proposal on behalf of Entrust. Several other companies, including the eventual successful

bidder, Humana Insurance Company, Inc. (Humana), also submitted proposals. After a team

of City officials and independent consultants evaluated all proposals submitted, the City

awarded the new health plan administration contract to Humana as the bidder that received

the highest ranking from the evaluation team.

       Just over a year later, Duran filed the instant § 1983 action,3 alleging, inter alia, that

the City decided not to award the contract to Entrust in retaliation for his protected speech

regarding the Child’s disputed health care claim.

                                       II. ANALYSIS

       3
       Duran initially asserted multiple claims against multiple
defendants. The district court dismissed all of those claims
pursuant to Fed. R. Civ. P. 12(b). Duran v. City of Corpus
Christi, 2006 WL 1900636 (S.D. Tex. Jul 11, 2006). We affirmed
the district court’s dismissal of all but the instant First
Amendment retaliation claim against the City. Duran v. City of
Corpus Christi, 160 Fed. Appx. 363 (5th Cir. 2005).

                                               3
A.     Standard of Review

       We review grants of summary judgment de novo, applying the same standard as the

district court.4 Summary judgment is appropriate when there is no genuine issue of material

fact and the moving party is entitled to judgment as a matter of law.5

B.     Standing

       The City did not challenge Duran’s standing to assert a First Amendment retaliation

claim based on the City’s nonrenewal of the Entrust contract, either in the district court or

on appeal. Nevertheless, we must raise any perceived jurisdictional issue sua sponte.6 In

preparing to hear this appeal, we perceived some question whether Duran’s injury from

Entrust’s failure to be awarded the new contract was sufficiently “direct” to confer standing.

We instructed the parties to address this issue at oral argument, and having now considered

the merits of their arguments and the applicable law, we conclude that Duran lacks standing

to assert a First Amendment retaliation claim against the City.

       1.      Direct Standing

       Standing, at its “irreducible constitutional minimum,” requires plaintiffs “to

demonstrate: they have suffered an ‘injury in fact’; the injury is ‘fairly traceable’ to the

defendant's actions; and the injury will ‘likely ... be redressed by a favorable decision.’”7

       4
       Abarca v. Metro. Transit Auth., 404 F.3d 938, 940 (5th
Cir. 2005).
       5
       Dallas Fire Fighters Ass’n v. City of Dallas, 150 F.3d
438, 440 (5th Cir. 1998).
       6
            See Henderson v. Stalder, 287 F.3d 374, 379 n.5 (5th Cir.
2002).
       7
       Public Citizen, Inc. v. Bomer, 274 F.3d 212, 217 (5th Cir.
2001) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555,

                                              4
“[A]n injury in fact [is] an invasion of a legally protected interest which is (a) concrete and

particularized, and (b) actual or imminent, not conjectural or hypothetical.”8 Courts

generally refuse to recognize standing based on economic harm that is merely a consequence

of an injury suffered by another party. For example, corporate shareholders, officers, and

employees cannot pursue personal claims that are based on alleged misconduct towards the

corporation unless they are able to show some “direct” harm to themselves.9

       The Supreme Court has recognized the right of independent contractors to bring First

Amendment retaliation claims based on a governmental entity’s nonrenewal of an at-will

contract with that contractor.10 In this case, however, only Entrust was an “independent

contractor” of the City and the Contract was for a term that expired, not one terminable at

560-61 (1992)).
       8
            Lujan, 504 U.S. at 560.
       9
       See Pagan v. Calderon, 448 F.3d 16, 28-30 (1st Cir. 2006)
(citations omitted); see also Sw. Suburban Bd. of Realtors, Inc.
v. Beverly Area Planning Ass’n, 830 F.2d 1374 (7th Cir. 1987)
(corporation's employees, officers, stockholders, and creditors
had no injury distinct from corporation and lacked standing to
maintain antitrust suit); A-G-E Corp. v. United States, 968 F.2d
650 (8th Cir. 1992) (employees lacked standing to seek to enjoin
Department of Interior from permitting states to employ resident
preferences in federally funded contracts); Willis v. Lipton, 947
F.2d 998, 1000-01 (1st Cir. 1991) (employee cannot assert RICO
violation for corporate injury even though employee lost
employment as a result of the conspiracy); Warren v. Mfrs. Nat’l
Bank, 759 F.2d 542, 545 (6th Cir. 1985) (employee of corporation
does not have standing to pursue fraud or RICO claim; lost
employment was “merely incidental to the corporation's injury”);
Pitchford v. PEPI, Inc., 531 F.2d 92, 97 (3d Cir. 1975)
(corporate president lacked standing to sue either in his
capacity as a stockholder or as an officer because injuries were
merely derivative of the company's injuries).
       10
            See Bd. of County Comm'rs v. Umbehr, 518 U.S. 668, 684
(1996).

                                              5
will. Duran had contracted separately with Entrust, not the City, to serve as the local health

plan coordinator, a post that under the Contract Entrust was bound to fill. Thus his putative

injury (potential loss of future fee payments from Entrust if the Contract had been renewed)

is at best only derivative of Entrust’s putative injury from nonrenewal of the Contract.

       A similar situation was recently presented to the First Circuit in Pagan v. Calderon.11

In Pagan, a pharmaceutical company (ARCAM), its chief executive officer (CEO), some

minority shareholders, and a consultant with whom the company contracted, brought § 1983

actions against the former governor of Puerto Rico.12 The plaintiffs alleged, inter alia, that

the former governor violated the First Amendment's free association guarantee by improperly

influencing a government lender to reject a loan sought by ARCAM.13 The First Circuit held

that none of the individual plaintiffs had standing to pursue such constitutional claims.

Specifically, the court held that (1) the CEO’s loss of income or employment was merely

incidental to the direct injury inflicted on the corporation,14 (2) the shareholders could not

show that they suffered nonderivative injuries sufficient to deflect the rule that a shareholder

may not sue in his own name for injury sustained by the corporation,15 and (3) the

independent consultant’s alleged injuries were plainly derivative of the harm ascribed to

ARCAM.16

       11
            448 F.3d 16 (1st Cir. 2006).
       12
            Id. at 23.
       13
            Id.
       14
            Id. at 28 n.2.
       15
            Id. at 28-29.
       16
            Id. at 30.

                                               6
       Notably, the consultant in Pagan contended, exactly as Duran does here, that it was

his protected conduct that precipitated the former governor’s purportedly unconstitutional

mistreatment of the corporation. The First Circuit regarded this contention as irrelevant,

however, and held that “the standing inquiry turns on the plaintiff's injury, not the

defendant's motive . . . [and] the fact that animus toward the agent sparked mistreatment of

the principal does not create an exception to the rule that an agent's section 1983 claim can

flourish only if he alleges that he personally suffered a direct, nonderivative injury.”17 The

Pagan court held that “when a government actor discriminates against a corporation based

on a protected trait of a corporate agent, it is the corporation — and only the corporation —

that has standing to seek redress.”18 This reasoning, which we adopt, applies equally to bar

Duran’s standing.

       Like the consultant in Pagan, Duran was not an employee of, or in contractual privity

with, the allegedly retaliatory government actor, here the City. As such, Duran’s injury

(potential loss of his share of the future administrative fees that would have been paid to

Entrust by the City if it had awarded the new Contract) was only a by-product of Entrust’s

failure to receive the contract renewal itself. Here, as in Pagan, “only the corporation . . . has

standing to seek redress.” Duran does not have direct standing to bring a First Amendment

retaliation claim against the City based on its award of renewal to Humana and not to

Entrust.

       2.      Third-Party Standing

       17
            Id.
       18
            Id.

                                                7
       Duran also suggests that, even if he lacks direct standing, he has third-party standing

to bring a First Amendment claim on behalf of Entrust. We disagree, even when we

pretermit answering the obvious question whether Duran did indeed bring this claim “on

behalf of Entrust.”

       In addition to the minimum constitutional requirements, the Supreme Court also has

recognized prudential limitations on the set of persons who may invoke the federal judicial

power.19 These prudential considerations, which are self-imposed judicial limits on the

exercise of federal jurisdiction, require that (1) a litigant generally assert his own and not

another's interests; (2) the federal courts not adjudicate mere generalized grievances that are

more appropriately addressed by the representative branches of government; and (3) the

plaintiff's alleged injury arguably fall within the “zone of interests” protected by the law

invoked.20

       These prudential limitations are subject, however, to some narrow exceptions. For

example, the Court has recognized the right of litigants to bring actions on behalf of third

parties, provided that three important criteria are present: (1) The litigant must have suffered

an “injury in fact,” giving him or her a “sufficiently concrete interest” in the outcome of the

issue in dispute; (2) the litigant must have a close relationship to the third party; and (3) there

must exist some hindrance to the third party's ability to protect his or her own interests.21

Even if we assume that Duran meets the first two requirements, we can conceive of no

       19
            Warth v. Seldin, 422 U.S. 490, 499 (1975).
       20
       Allen v. Wright, 468 U.S. 737, 751 (1984); Warth, 422
U.S. at 499-500.
       21
       See Powers v. Ohio, 499 U.S. 400, 411 (1991) (citations
omitted).

                                                8
meaningful hindrance (and Duran offers none) to Entrust’s pursuit of its own claim against

the City. Absent that, Duran does not have third-party standing to pursue a claim against the

City on behalf of Entrust.

C.     Ad Hominem

       Even though our ruling on Duran’s standing precludes our reaching the merits of his

appeal, we pause to note that, even if we had found standing, we would have affirmed the

district court’s grant of summary judgment. The only instances of Duran’s speech clearly

supported by record evidence undisputably occurred “pursuant to his official duties” as local

plan coordinator under the Entrust contract and thus are categorically excluded from First

Amendment protection under the Supreme Court’s recent decision in Garcetti v. Ceballos.22

Moreover, the record is devoid of any evidence that the City’s decision not to renew the

Entrust contract was made in retaliation for any conceivable public speech by Duran. Not

only is the record devoid of probative evidence that he spoke to someone at the newspaper

and thusly provoked its exposé, there is no record evidence that any one in authority at the

City even knew of Duran’s alleged contact with the newspaper. We are satisfied on this

record that the process employed by the City to evaluate the competing bids for the renewal

of its health care administration contract was objective, transparent, and conducted in full

compliance with Texas law.

       22
       –– U.S. ––, 126 S. Ct. 1951, 1960 (2006) (“[W]hen public
employees make statements pursuant to their official duties, the
employees are not speaking as citizens for First Amendment
purposes, and the Constitution does not insulate their
communications from employer discipline.”) .

                                             9
                                     III. CONCLUSION

       For the foregoing reasons, Duran lacks standing to maintain this action under these

circumstances. We therefore VACATE the district court’s grant of summary judgment

dismissing Duran’s First Amendment retaliation claim against the City and REMAND this

action with instructions to the district court to dismiss it.

VACATED and REMANDED with instructions to dismiss.

                                               10