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Johnson v. Morales

United States Court of Appeals, Sixth Circuit

January 7, 2020

Rita R. Johnson, Plaintiff-Appellant,
Timothy Morales; Dennis Jordan; City of Saginaw, Defendants-Appellees.

          Argued: October 16, 2018

          Appeal from the United States District Court for the Eastern District of Michigan at Bay City. No. 1:17-cv-12405-Thomas L. Ludington, District Judge.


          Philip L. Ellison, OUTSIDE LEGAL COUNSEL PLC, Hemlock, Michigan, for Appellant.

          Robert A. Jordan, O'NEILL, WALLACE & DOYLE, P.C., Saginaw, Michigan, for Appellees.

         ON BRIEF:

          Philip L. Ellison, OUTSIDE LEGAL COUNSEL PLC, Hemlock, Michigan, for Appellant.

          Robert A. Jordan, Gregory W. Mair, O'NEILL, WALLACE & DOYLE, P.C., Saginaw, Michigan, for Appellees.

          Before: COLE, Chief Judge; WHITE and NALBANDIAN, Circuit Judges.




         Plaintiff Rita Johnson challenges the suspension of her business license by Defendants City of Saginaw, City Manager Timothy Morales, and City Human Resources Director Dennis Jordan. Morales issued Johnson a notice to immediately suspend all commercial activities at her restaurant. This came after persons unaffiliated with Johnson or her restaurant began shooting at it one night. Jordan upheld the suspension in a hearing where he served as the hearing officer. And an appeal panel later upheld his decision. Johnson eventually filed this action in the district court, alleging several constitutional violations. She now appeals the district court's order dismissing her case for failure to state a claim and denying her leave to amend her complaint. For the following reasons, we AFFIRM in part, REVERSE in part, and REMAND.[1]


         Rita Johnson owns and operates Rita's Southern Soul Café in the City of Saginaw, Michigan ("City").[2] One evening, Johnson rented her restaurant to a private party. For unknown reasons, individuals unaffiliated with her or the party emerged from a vehicle that night and began shooting at the restaurant. According to Johnson, no guest of the restaurant instigated the shooting. Nor did the shooting "ha[ve] [anything] to do with the commercial activities of [her] business." (R. 15-1, Proposed Second Am. Compl. at PageID #250 ¶ 17.) Although police were called during the shooting, they never apprehended any of the shooters. But Saginaw Police Chief Robert Ruth opined that the incident may have "involve[d] gangs from the 'southside' and 'northside' of Saginaw." (Id. ¶ 21.)

         Less than two days after the shooting, City Manager Timothy Morales issued Johnson a notice ordering the suspension of all business activity related to her restaurant. Morales issued the suspension order under section 110.06(F) of Saginaw's Code of Ordinances. Section 110.06(F) allows the city manager to immediately suspend any license or permit issued by the City if he considers the suspension necessary and "in the interest of the public health, morals, safety, or welfare[.]" Saginaw, Mich., Code of Ordinances § 110.06(F) (2018).

         The suspension order listed the following non-exclusive reasons for suspending Johnson's license:

1. Serious and violent criminal activity generated by the operation of this establishment;
2. The aforementioned serious and violent criminal activity has resulted in significant injury to persons and damage to property;
3. The aforementioned serious and violent criminal activity has occurred as recently as Saturday, May 6, 2017;
4. The aforementioned serious and violent criminal activity constitutes a hazardous condition contrary to the health, morals, safety and welfare of the public;
5. Failure to maintain adequate security to prevent or discourage unlawful behavior[.]

(R. 15-1, Proposed Second Am. Compl. at PageID #265 (alterations omitted).)

         The order also informed Johnson that a hearing would occur three days later, where she would have to "show cause" as to why her license should not remain suspended or revoked. (Id. at PageID #251 ¶¶ 33-36.) A little over two months after the hearing, Human Resources Director Dennis Jordan issued a decision upholding the suspension of Johnson's license. But Johnson believed she did not receive a fair administrative process. So she filed a complaint in the district court alleging that Defendants had violated several of her constitutional rights.

         Johnson then amended her complaint to include additional factual allegations and another count against Defendants. She also filed a motion for a temporary restraining order and, alternatively, a motion for a preliminary injunction to prevent Morales from sitting on the appeal panel expected to review Jordan's decision. The district court denied that motion. Later, Defendants moved to dismiss Johnson's complaint for failure to state a claim.

         After the district court denied Johnson's motion for equitable relief, she filed her administrative appeal. The appeal panel, which did not turn out to include Morales, held a hearing where it affirmed Jordan's decision upholding the suspension of her license. The very next day, Johnson filed a motion for leave in the district court to amend her complaint again. And roughly two months later, the district court granted Defendants' motion to dismiss and denied Johnson's motion to amend her complaint on futility grounds.

         This appeal followed.


         We review the district court's grant of Defendants' motion to dismiss de novo. Beydoun v. Sessions, 871 F.3d 459, 464 (6th Cir. 2017) (citing Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir. 2006)). Because the district court denied Johnson's motion to file a second amended complaint on futility grounds, we review that decision de novo. Id. (citing Colvin v. Caruso, 605 F.3d 282, 294 (6th Cir. 2010)). Several of Johnson's claims overlap both complaints; we analyze those claims before we analyze the claims unique to her proposed second amended complaint.



         In Count I of Johnson's first amended complaint and Count IV of her proposed second amended complaint, Johnson alleges that the City and Jordan violated her due process rights by having Jordan serve as the hearing officer at her initial administrative hearing. Her argument rests on a "command influence theory," which she articulates as follows: "[I]mmediate subordinates are not 'neutral and detached' enough to satisfy due process when called upon to review an immediate boss's decision." (Johnson's Opening Br. at 18.) According to Johnson's theory, Jordan was not "neutral and detached" enough to serve as her hearing officer. (Id. at 10.) This is because he was sitting in review of his immediate supervisor's decision to suspend her license.

         Federal due process "guarantees 'an absence of actual bias' on the part of a judge." Williams v. Pennsylvania, 136 S.Ct. 1899, 1905 (2016) (quoting In re Murchison, 349 U.S. 133, 136 (1955)). But we apply an objective standard in evaluating whether the government has fulfilled that guarantee. Id. So in reviewing claims of actual bias, we "ask[] not whether a judge harbors an actual, subjective bias, but instead whether, as an objective matter, the average judge in his position is likely to be neutral, or whether there is an unconstitutional potential for bias." Id. (internal quotation marks omitted). Moreover, claims of bias "must overcome a presumption of honesty and integrity in those serving as adjudicators[.]" Withrow v. Larkin, 421 U.S. 35, 47 (1975).

         Johnson traces the origins of her theory to two state court decisions: State ex rel. Ellis v. Kelly, 112 S.E.2d 641 ( W.Va. 1960) and Mayer v. Montgomery County, 794 A.2d 704 (Md. Ct. Spec. App. 2002).[3] We examine both in turn.

         In Kelly, West Virginia's Department of Motor Vehicles ("Department") suspended a used car dealer's license after the Department's commissioner investigated the dealership and found that the dealer had breached certain record-keeping requirements. 112 S.E.2d at 642. The Department later held a hearing on the suspension. Id. at 643. There, the deputy commissioner served as the hearing officer and the commissioner testified before the deputy. Id. West Virginia's Supreme Court of Appeals held that this violated due process. The court found:

It can hardly be contended that the commissioner, in the making of the investigation and in testifying before the deputy commissioner appointed by him and responsible to him, beyond any reasonable probability, did not become biased and prejudiced in the matter being heard. It would seem to be beyond human experience and expectation for impartiality to result where the officer is the investigator, prosecutor, witness and trier of the facts.

Id. at 644.

         But it was essential to the court's analysis that "the commissioner personally conducted the investigation and personally testified before his deputy." See id. at 643. In contrast, Johnson alleges neither that Morales testified at her hearing nor that he investigated her business. Johnson's argument hinges on her allegations that Morales issued the suspension order, selected Jordan to serve as the hearing officer, and is Jordan's immediate supervisor. Because Morales was not the "investigator, prosecutor, witness and trier of the facts" in Johnson's case, Kelly is inapposite.

         The second case Johnson relies on, Mayer, involved a county police sergeant who sought a promotion to the rank of lieutenant. 794 A.2d at 706. The sergeant filed a grievance after he was denied the promotion. And a county director denied his grievance through a written "Step II" response. Id. at 708. Then, the County Administrative Officer ("CAO") designated a subordinate of the director to conduct a "Step III" hearing. So the sergeant requested a different hearing officer. Id. He argued that the subordinate "would be loath to render a decision adverse to that of her superior and therefore would not be impartial, or at least would not appear to be impartial." Id. The CAO denied the sergeant's request for a different hearing officer. And the subordinate denied the grievance. Id. at 709. So the sergeant appealed. Yet the Maryland Court of Special Appeals concluded that "the CAO's appointment was contrary to the governing laws . . . ." Id. at 717.

         But those "governing laws" did not refer to the Due Process Clause. Instead, they referred to the county's "governing [] laws, regulations, or procedures," which the court cited at the beginning of its analysis. Id. at 709, 711-12.[4] Indeed, the sergeant's argument was "that the fairness requirements of the applicable Montgomery County personnel laws and procedures were [not] satisfied in his grievance . . . ." Id. at 711-12 (emphasis added). That said, part of the court's reasoning relied on Kelly, which analyzed federal due process. See id. at 712-13. Yet the court distinguished the sergeant's case from various federal due process cases that the county cited in its brief. See id. at 714-15. At the very least, it does not appear as though the court was exclusively interpreting the Due Process Clause when it ruled for the sergeant.

         Even assuming the contrary, Mayer would still be inapt. Mayer held that "when . . . the Step III hearing officer is a subordinate of the Step II responder, there is a substantial likelihood that the hearing officer[] . . . will not render an impartial decision[.]" Id. at 714. But it was critical to the court's decision that both the Step II and Step III officers were adjudicators. See id. And it was on that basis that the court distinguished another case: Consumer Prot. Div. Office of Att'y Gen. v. Consumer Publ'g Co., Inc., 304 Md. 731, 763 (Md. 1985). There, "the mere fact that both the prosecutorial and adjudicatory functions occurred within the Attorney General's Office was not a due process violation and, in fact, those . . . who participated in the investigation and filing of charges did not participate in the adjudicatory phase of the case." Mayer, 794 A.2d at 714. In the sergeant's case, "by contrast, . . . a subordinate was called upon to pass judgment on the correctness . . . of his superior's decision resolving a grievance." Id. (emphasis added).

         Unlike the Step III hearing officer in Mayer, Jordan did not review an adjudication. Rather, he reviewed an enforcement action taken by Morales-the suspension of Johnson's business license. And Mayer said that such a blend of executive and adjudicative functions within an agency does not violate due process. More importantly, the Supreme Court held as much. See Withrow, 421 U.S. at 95. Johnson asks us to find that due process precludes agency adjudicators from reviewing the executive actions of their direct supervisors. But that position is unsupported by either our precedent or the Supreme Court's. And the two state court cases Johnson directs us to do not support her theory. We therefore hold that Jordan's participation in Johnson's hearing as the hearing officer did not present an unconstitutional risk of bias.


         In Count I of Johnson's first amended complaint and Count VI of her proposed second amended complaint, Johnson lodges another due process claim against Jordan and the City. She argues that Jordan should have recused himself because one of the City's attorneys at her hearing, Gregory Mair, had represented Jordan in another case. In that case (unrelated to Johnson's), a police officer sued Jordan and other City officials, alleging that they discriminated against him because of his race and disabilities. See Ramirez v. City of Saginaw, No. 10-13408-BC, 2011 WL 6309158 (E.D. Mich. Dec. 15, 2011).

         Johnson cites just one case, Morrissey v. Brewer, 408 U.S. 471 (1972), supporting her argument. But Morrissey did not address this issue, and Johnson does not explain its relevance in her brief. And this circuit held that a school board did not violate due process when one of its attorneys acted as the hearing officer in a suspension hearing that it commenced against a school superintendent. See Prichard v. Lafferty, 974 F.2d 1338, 1992 WL 205659, at *4 (6th Cir. 1992) (table). There, we said that "[n]either [the hearing officer's] familiarity with the situation nor his relationship to the Board per se disqualified him." Id.

         Here, there is even less potential for bias since Jordan was not himself an attorney for the City-one of the City's attorneys had merely represented him in an unrelated case six years before. See also Dell v. Bd. of Educ., Twp. High Sch. Dist. 113, 32 F.3d 1053, 1065-66 (7th Cir. 1994) (holding that a school district did not violate due process where its law firm had represented the hearing officer's employer); James v. Indep. Sch. Dist. No. I-050 of Osage Cty., 448 Fed.Appx. 792, 798 (10th Cir. 2011) (holding that members of a school board did not violate due process where the board's law firm paid for the hearing officer in a termination hearing). Given that Johnson fails to articulate why Mair's representation violated her due process rights, and the relevant case law we have found goes against her, we hold that the district court did not err in dismissing this claim.[5]


         In Count II of Johnson's first amended complaint and Count VII of her proposed second amended complaint, Johnson alleges that the City and Morales violated her procedural due process rights by suspending her business license before granting her a chance to be heard.

         The Fourteenth Amendment prohibits states from depriving individuals of life, liberty, or property without due process of law. U.S. Const. amend. XIV, § 1. When evaluating a claim alleging a property deprivation without due process, we first determine whether due process applies. See Morrissey, 408 U.S. at 481. If it does, we then determine what process is due. See id. Johnson's interest in her business license is enough to invoke due process protection. See Bell v. Burson, 402 U.S. 535, 539 (1971); United Pet Supply, Inc. v. City of Chattanooga, 768 F.3d 464, 486 (6th Cir. 2014). So we consider whether due process entitled her to a pre-suspension hearing.

         It is the general rule that due process "requires some kind of a hearing before the State deprives a person of liberty or property." Zinermon v. Burch, 494 U.S. 113, 127 (1990) (collecting cases). But there are exceptions to this rule. For example, "we have held that the failure to provide a pre-deprivation hearing does not violate due process in situations where a government official reasonably believed that immediate action was necessary to eliminate an emergency situation and the government provided adequate post-deprivation process." United Pet Supply, 768 F.3d at 486 (collecting cases); see also Spinelli v. City of New York, 579 F.3d 160, 170 (2d Cir. 2009). And under the Parratt doctrine, "[c]ourts may dismiss a procedural due process claim if the state provides an adequate postdeprivation remedy" and the following conditions apply: "(1) the deprivation was unpredictable or 'random'; (2) the predeprivation process was impossible or impracticable; and (3) the state actor was not authorized to take the action that deprived the plaintiff of property or liberty." Daily Servs., LLC v. Valentino, 756 F.3d 893, 907 (6th Cir. 2014) (quoting Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir. 1995) (per curiam)).

         None of these exceptions apply to Johnson's case. Defendants do not contend that the decision to suspend Johnson's license was a "random" or "unauthorized" act. And Johnson specifically disputes that, at the time of the suspension, any type of emergency or exigent circumstance required the immediate suspension of her license.

         But relevant here, we have said that "[t]he failure to provide a hearing prior to a license or permit revocation does not per se violate due process." United Pet Supply, 768 F.3d at 488 (citing Barry v. Barchi, 443 U.S. 55, 65-66 (1979)). Thus, the balancing test from Mathews v. Eldridge, 424 U.S. 319 (1976), determines whether the government must provide some type of hearing before suspending a business license. See Spinelli, 579 F.3d at 170.

         The Mathews test weighs three factors:

First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

424 U.S. at 335 (citing Goldberg v. Kelly, 397 U.S. 254, 263-71 (1970)).

         The Private Interest. The Supreme Court has long recognized that an individual may have a significant interest in maintaining a license. See, e.g., Burson, 402 U.S. at 539 ("Once licenses are issued . . . their continued possession may become essential in the pursuit of a livelihood."). More generally, the Court has "repeatedly recognized the severity of depriving someone of his or her livelihood." FDIC v. Mallen, 486 U.S. 230, 243 (1988).

         In Cleveland Board of Education v. Loudermill, for example, a security guard sued the Cleveland Board of Education ("Board") for dismissing him after it discovered that he had falsely stated on his job application that he had never been convicted of a felony. 470 U.S. 532, 535 (1985). The Court held that the Board violated the security guard's due process rights by not providing him a "pretermination opportunity to respond" to the charges against him. Id. at 547. In so holding, the Court noted that "the significance of the private interest in retaining employment cannot be gainsaid" and ...

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