Lazy Y Ranch Ltd v. Behrens

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

LAZY Y RANCH LTD, 
Plaintiff-Appellee,
v. No. 07-35315
TRACY BEHRENS; MARILYN
HOWARD; KEITH JOHNSON; JIM  D.C. No.
CV-06-00340-MHW
RISCH; LAWRENCE WASDEN;
OPINION
WINSTON WIGGINS; BEN YSURSA;
DOES 1-20; GEORGE BACON,
Defendants-Appellants.

Appeal from the United States District Court
for the District of Idaho
Mikel H. Williams, Magistrate Judge, Presiding

Argued and Submitted
August 7, 2008—Seattle, Washington

Filed September 26, 2008

Before: Harry Pregerson, William C. Canby, Jr., and
Cynthia Holcomb Hall, Circuit Judges.

Opinion by Judge Hall

13783
 LAZY Y RANCH LTD v. BEHRENS 13787

COUNSEL

Clay R. Smith, Deputy Attorney General, Boise, Idaho, for
the defendants-appellants.

Laurence J. Lucas, Boise, Idaho, for the plaintiff-appellee.
13788 LAZY Y RANCH LTD v. BEHRENS
OPINION

HALL, Circuit Judge:

I. INTRODUCTION

This case arises from Lazy Y Ranch’s attempt to lease
grazing lands from the State of Idaho. The leases were auc-
tioned by the State and although Lazy Y was the high bidder,
the leases ultimately were awarded to other parties. Lazy Y
filed a complaint under 42 U.S.C. § 1983, alleging that vari-
ous state officials violated the Equal Protection Clause when
they rejected its bids. In particular, Lazy Y alleged that the
officials discriminated against Lazy Y because it (1) has per-
ceived ties to conservationists; and (2) is a Washington corpo-
ration that was attempting to enter the Idaho grazing market.

Defendants moved to dismiss the complaint under Federal
Rule of Civil Procedure 12(b)(6), contending that Lazy Y
failed to state an Equal Protection claim and, alternatively,
that they were entitled to qualified immunity. Defendants’
motion relied on various documents indicating they had artic-
ulated a legitimate reason for rejecting Lazy Y’s bids —
namely, that leasing to Lazy Y would involve increased
administrative costs because the lands were unfenced and cat-
tle could wander onto adjoining property. The district court
struck most of Defendants’ extraneous documents and ulti-
mately denied their motion to dismiss. This interlocutory
appeal followed, with Defendants relying on the collateral
order doctrine as a basis for appellate jurisdiction.

As we explain below, Lazy Y has properly alleged that
Defendants violated its rights under the Equal Protection
Clause, and also that they violated clearly established law. We
therefore affirm.
 LAZY Y RANCH LTD v. BEHRENS 13789
II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Complaint and Unchallenged Extraneous
Documents

The following facts come from allegations in Lazy Y’s first
amended complaint and the few extraneous documents that
the district court considered as part of Defendants’ motion to
dismiss.

1. Overview of Idaho Endowment Lands

The lands Lazy Y tried to lease are known as “endowment
lands.” Endowment lands are controlled by the Idaho State
Board of Land Commissioners, also called the “Land Board.”
Idaho Const., Art. IX § 7. The Land Board must “carefully
preserve[ ]” the endowment lands and manage them “in such
manner as will secure the maximum long-term financial
return to the institution to which [the land is] granted.” Id. § 8.
The Land Board has designated the lands at issue here to be
leased to private entities for the benefit of public schools.

Under state law, leases on public school endowment lands
may not exceed 10 years (subject to exceptions not relevant
here). Idaho Code § 58-307(1). At the beginning of every cal-
endar year, the Idaho Department of Lands (“IDL”) gives
public notice of all 10-year leases that are expiring on Decem-
ber 31 of that year and offers new 10-year leases to qualified
members of the public. When the IDL receives more than one
qualified application for the same lease, the IDL “shall . . .
auction off and lease the land to the applicant who will pay
the highest premium bid therefore.” Id. § 58-310(1). The
IDL’s auction is not necessarily final, however, as the Land
Board has the power to overturn it. See id. § 58-310(4).

2. Lazy Y’s Bids

In response to an IDL notice in early 2005, Lazy Y applied
for leases on nine grazing lands. With one exception, the prior
13790 LAZY Y RANCH LTD v. BEHRENS
lessees also applied for the new leases, as did some third par-
ties. Given the competing applications, Defendant Tracy
Behrens, who was then the IDL Range Program Manager,
notified applicants that auctions would be held and that they
should submit management proposals addressing various
environmental concerns. Lazy Y obtained a “resource assess-
ment” from the IDL to ensure that its proposals were consis-
tent with IDL’s concerns, and timely submitted the proposals.
The proposals indicated that Lazy Y would improve environ-
mental conditions on the land.

Lazy Y alleges that it first experienced unfair treatment on
June 1, 2005, when Behrens told it that its management pro-
posals did not adequately address IDL’s concerns and would
need to be modified. According to Lazy Y, the IDL had rou-
tinely leased endowment land to other parties without requir-
ing more specific grazing management proposals than Lazy
Y’s. Lazy Y also alleges that the proposals of existing lessees
would have led to land damage that IDL sought to avoid and
that Lazy Y’s proposals addressed. Behrens singled out Lazy
Y’s proposals, Lazy Y says, because the IDL and Land Board
believed that Lazy Y was connected to conservationists who
have sought to improve state land management.

After Lazy Y submitted new proposals, the parties further
disputed their adequacy, and Behrens at one point suggested
that Lazy Y might not be familiar with the applicable proce-
dures because it was “not from Idaho.” Lazy Y responded that
its president was an Idaho resident and that it was fully
licensed to do business in Idaho. Eventually, IDL accepted the
proposals as complete.

In August 2005, the IDL scheduled auctions for five of the
leases.1 Lazy Y was the high bidder for all five. According to
1
No auction was scheduled for one lease because Lazy Y was the only
applicant. Two other leases were initially not auctioned because they had
“creditable improvements” such as fences or other infrastructure for which
the prior lessee could claim a financial interest. The ninth lease was never
set for auction despite a competing bidder.
 LAZY Y RANCH LTD v. BEHRENS 13791
Lazy Y, however, an agent for prior lessees named Wally
Butler orchestrated efforts to deprive Lazy Y of the leases by
appealing the auctions.2 The appeals allegedly were on the
verge of being denied by IDL staff, but before staff could act,
Defendant and IDL Director Winston Wiggins unilaterally
invalidated the auctions. Wiggins said he did so because —
as a result of an administrative error — IDL staff had inadver-
tently failed to circulate Lazy Y’s management proposals to
competing bidders before the auctions. Lazy Y alleges that
Wiggins’s justification was a pretext, again to cover discrimi-
nation based on Lazy Y’s perceived connection to conserva-
tionists and out of a desire to protect prior lessees from
competition.3

After a delay of several months, during which the prior les-
sees continued to use the grazing lands, the Land Board ulti-
mately approved Wiggins’s decision to void the auctions. In
February 2006, the Land Board scheduled new auctions for
the five leases, as well as a sixth for which no auction had
previously been conducted because of disputes over improve-
ments on the land. The six auctions were held in June 2006,
and Lazy Y was again the high bidder on each one. Lazy Y’s
winning bids totaled $5,825.

This time, none of the competing bidders appealed the auc-
tion results. However, Wiggins put the leases on the Land
Board’s agenda for August 8, 2006. Six days before the Land
Board met, Behrens recommended that it deny Lazy Y’s
leases because taking them from the prior lessees would pre-
2
Lazy Y’s complaint also included claims against Butler, but the district
court dismissed them without prejudice, and those claims are not at issue
here.
3
As evidence of the pretext, Lazy Y alleges that Wiggins voided the
auctions without providing any notice to Lazy Y, and also that the circula-
tion requirement does not appear in any statute, rule or regulation. These
assertions are contradicted, however, by a June 2005 memo to Lazy Y that
included an informal IDL policy established in 2001 that competing appli-
cants would receive each other’s management proposals before bidding.
13792 LAZY Y RANCH LTD v. BEHRENS
sent a “significant increase in administrative costs.” As stated
in an IDL staff memo provided on August 2, 2006, the
increased costs would result because the lands covered by the
leases “constitute only a portion of larger grazing allotments”
that were not divided by fences, and the previous lessees —
in each case the second highest bidders — had grazing rights
on the adjacent land. The memo cited increased costs associ-
ated with inspecting the sites to ensure that cattle from adja-
cent lands would not “drift” onto the unfenced endowment
lands. The memo estimated that Lazy Y’s plans would entail
increased administrative costs of approximately $45,000 over
the ten-year terms of the six leases. This purported increase
would dwarf the $675 total by which Lazy Y’s bids exceeded
the bids of the second highest bidders.

The August 2, 2006 memo was the first time the IDL had
ever mentioned increased administrative costs associated with
new lessees. According to Lazy Y, this justification was pre-
textual, and suggested that Defendants should never have
opened the leases for public bidding since the only parties
who could avoid increased management costs were the prior
lessees. In attacking the assertion of increased administrative
costs, Lazy Y claims:

(1) Defendants failed to establish their prior
administrative costs;

(2) Defendants failed to establish that additional
inspections would really be required;

(3) Defendants’ assertion of increased costs for
staff time was belied because they were not
planning to hire additional staff;

(4) The vast majority of endowment lands leased
for grazing are isolated parcels within larger
grazing allotments, so Defendants’ manage-
ment costs already reflect that fact;
 LAZY Y RANCH LTD v. BEHRENS 13793
(5) Other than in connection with past efforts by
conservationists to obtain state grazing leases,
Defendants have rarely if ever cited similar
concerns to deny a state lease;

(6) The IDL regularly loses money on endowment
lands because its administrative costs outstrip
the modest revenues from leases;

(7) The IDL rarely undertakes the supervision nec-
essary to ensure that other grazing lessees com-
ply with management requirements for land
preservation;

(8) Defendants ignored the possibility that the
denial of Lazy Y’s lease would lead to litiga-
tion costs.

Lazy Y also alleges that the “administrative costs” rationale
appeared after Behrens, Wiggins, and IDL Assistant Director
George Bacon spoke with representatives of the local live-
stock industry in meetings that excluded Lazy Y.

In response to the eleventh-hour assertion of administrative
costs, Lazy Y wrote to Wiggins on August 3, 2006, offering
to “provide additional fencing and/or pay for additional
administrative costs incurred, up to $30,000 over the course
of the new ten-year leases, or such additional amount as may
be shown as reasonably necessary.” Notwithstanding Lazy
Y’s additional offer, the Land Board denied Lazy Y all six
leases at its August 2006 meeting, and instead awarded them
to the second highest bidders. Lazy Y alleges that the Board
members — Idaho Governor Jim Risch, Secretary of State
Ben Ysursa, Superintendent of Schools Marilyn Howard,
Attorney General Lawrence Wasden, and State Controller
Keith Johnson — summarily dismissed its offer to cover
increased costs, thus evidencing their discriminatory treat-
ment of Lazy Y.
13794 LAZY Y RANCH LTD v. BEHRENS
Lazy Y filed its complaint on August 28, 2006, and quickly
amended it to include similar allegations concerning denial of
a seventh lease in September 2006. The first amended com-
plaint seeks damages and injunctive relief.

B. Defendants’ Motion to Dismiss and Challenged
Extraneous Documents

Defendants moved to dismiss the first amended complaint
under Rule 12(b)(6), arguing that Lazy Y failed to state an
Equal Protection claim and that they enjoyed qualified immu-
nity from the claims for damages. In support of the motion,
Defendants submitted the June 2005 memo from Behrens to
Lazy Y, which included various IDL documents related to
grazing plan requirements. Defendants also submitted ten
other exhibits: (1) minutes and transcripts of the February
2006, August 2006, and September 2006 Land Board meet-
ings (six total documents); (2) IDL memoranda submitted at
each of the three meetings (three total documents); and (3) an
August 3, 2006, letter from Lazy Y to Wiggins.

Magistrate Judge Williams, acting as the district court with
the consent of the parties, considered (1) the June 2005 memo
from Behrens to Lazy Y, (2) the August 2006 IDL memoran-
dum, and (3) the August 2006 letter from Lazy Y to Wiggins.
The relevant portions of these documents are referenced
above.

On motion by Lazy Y, the district court struck Defendants’
other exhibits. The exhibits related to the February 2006
meeting indicate that Wiggins told the Land Board that the
IDL’s failure to circulate Lazy Y’s proposals was an adminis-
trative error. They also reflected Board members accepting
Wiggins’s explanation and agreeing that new auctions were a
fair solution.

The stricken August 2006 meeting transcripts reflect
Defendant Bacon, then the IDL assistant director, telling the
 LAZY Y RANCH LTD v. BEHRENS 13795
Land Board that the lands at issue lacked internal fences and
would be difficult to graze as separate units. Bacon also told
the Land Board that the second highest bidders leased or
owned the adjacent properties — arrangements that ostensibly
avoided the need for fencing. Superintendent Howard said she
believed that Lazy Y’s offer of compensation to cover
increased administrative costs should not be considered
because it was “beyond the . . . expectations at the time of
auction.” Controller Johnson said he agreed and questioned
whether even $30,000 would cover the costs of fencing off
the grazing lands. Governor Risch said he agreed with John-
son. The Board voted unanimously to deny the leases.

To the same effect are the stricken materials concerning the
September 2006 Land Board meeting, where the Board
awarded the seventh lease to the second highest bidder. The
IDL recommended rejecting Lazy Y’s bid because of
increased administrative costs, which it represented were
approximately $14,000 over ten years. After counsel for Lazy
Y offered to reimburse IDL up to $25,000 or provide appro-
priate fencing, the Board expressed concern that this would be
inadequate, and voted unanimously to grant the leases to the
second highest bidders.

Although the district court struck most of Defendants’
exhibits, it ruled that even considering all of them, Defen-
dants’ motion to dismiss lacked merit. The motion was there-
fore denied. Defendants timely appealed.

III. JURISDICTION

We begin by briefly addressing Lazy Y’s suggestion that
we lack appellate jurisdiction over this interlocutory appeal.
Lazy Y argues that (1) Defendants’ attacks on the order deny-
ing the motion to dismiss exceed the scope of the “collateral
order” doctrine upon which they allege jurisdiction, and (2)
the order granting Lazy Y’s motion to strike documents is
unappealable under any doctrine. We disagree.
13796 LAZY Y RANCH LTD v. BEHRENS
[1] In general, a party is entitled only to a single appeal, to
be “deferred until final judgment has been entered.” See Digi-
tal Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 868
(1994). However, under the collateral order doctrine, a litigant
may appeal from a “narrow class of decisions that do not ter-
minate the litigation, but must, in the interest of achieving a
healthy legal system, nonetheless be treated as final.” Id. at
867 (internal quotations and citations omitted). To be appeal-
able under the collateral order doctrine, a district court deci-
sion must (1) be “conclusive,” (2) “resolve important
questions completely separate from the merits,” and (3) “ren-
der such important questions effectively unreviewable on
appeal from final judgment in the underlying action.” Id.

[2] Because qualified immunity is immunity from suit itself
and not merely a defense to liability, orders denying qualified
immunity may be immediately appealable under the collateral
order doctrine, including orders denying a motion to dismiss.
See Mitchell v. Forsyth, 472 U.S. 511, 526-27 (1985). Such
an order is reviewable to the extent that it raises an issue of
law. See id. at 528; Batzel v. Smith, 333 F.3d 1018, 1026 (9th
Cir. 2003).

[3] Here, contrary to Lazy Y’s suggestion, we do not con-
strue Defendants’ appeal to depend on “their version of the
facts.” Rather, Defendants argue that Lazy Y’s allegations of
pretext and animus are irrelevant under Equal Protection law,
because they have articulated legitimate reasons for rejecting
Lazy Y’s bids. In other words, Defendants argue that their
articulated purposes end the inquiry and mean that Lazy Y’s
claims of actual improper motives fail to establish an Equal
Protection violation. They also argue that Lazy Y brings
“class of one” claims that are either incognizable or not
clearly established in the context of public contracting. These
are contentions of law. See Armendariz v. Penman, 75 F.3d
1311, 1316-17 (9th Cir. 1996) (en banc).

[4] Moreover, whether Defendants’ exhibits should have
been considered is essentially a legal question, and the order
 LAZY Y RANCH LTD v. BEHRENS 13797
granting the motion to strike was simply part of the Rule
12(b)(6) analysis, as the district court resolved that motion
solely to establish the record for the motion to dismiss. See
Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (discuss-
ing when extraneous documents could be considered on a
motion to dismiss), overruled on other grounds by Galbraith
v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). We
see no reason to treat the order striking documents as separate
from the order denying the motion to dismiss. We conclude
that we have jurisdiction to review both orders.

IV. STANDARD OF REVIEW

We review de novo the district court’s denial of a motion
to dismiss on qualified immunity grounds. Jensen v. City of
Oxnard, 145 F.3d 1078, 1082 (9th Cir. 1998). To survive a
motion to dismiss for failure to state a claim, the plaintiff
must allege “enough facts to state a claim to relief that is plau-
sible on its face.” Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955,
1974 (2007); see Fed. R. Civ. P. 12(b)(6). In general, the
inquiry is limited to the allegations in the complaint, which
are accepted as true and construed in the light most favorable
to the plaintiff. Sprewell v. Golden State Warriors, 266 F.3d
979, 988 (9th Cir. 2001). However, we need not accept as true
allegations contradicting documents that are referenced in the
complaint or that are properly subject to judicial notice. See
id.; Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d
895, 899-900 (9th Cir. 2007).

V. ANALYSIS

A. The Motion to Strike

Defendants contend the district court abused its discretion
in striking their exhibits because the exhibits were either ref-
erenced in the complaint, or judicially noticeable. Defendants
appear correct, see United States v. Ritchie, 342 F.3d 903, 908
(9th Cir. 2003); Branch, 14 F.3d at 453-54, particularly
13798 LAZY Y RANCH LTD v. BEHRENS
because they do not offer the extraneous documents for their
truth, but to show their articulated rationales for denying Lazy
Y the leases. However, we need not decide the issue because
we conclude, as the district court did, that Defendants’ motion
to dismiss lacks merit even if each extraneous document is
considered.

B. The Motion to Dismiss

[5] The Supreme Court has recently reiterated the familiar
two-part analysis for claims of qualified immunity:

In resolving questions of qualified immunity, courts
are required to resolve a threshold question: Taken
in the light most favorable to the party asserting the
injury, do the facts alleged show the officer’s con-
duct violated a constitutional right? This must be the
initial inquiry. If, and only if, the court finds a viola-
tion of a constitutional right, the next, sequential step
is to ask whether the right was clearly established in
light of the specific context of the case.

Scott v. Harris, 127 S.Ct. 1769, 1774 (2007) (citations, quota-
tion marks, and alteration omitted). We consider each inquiry
in turn.

1. Equal Protection Violation

[6] “The purpose of the equal protection clause of the Four-
teenth Amendment is to secure every person within the
State’s jurisdiction against intentional and arbitrary discrimi-
nation, whether occasioned by express terms of a statute or by
its improper execution through duly constituted agents.” Vil-
lage of Willowbrook v. Olech, 528 U.S. 562, 564 (2000) (per
curiam) (citations and quotation marks omitted). In cases like
this one involving rational basis review, a state actor’s classi-
fication comports with the Equal Protection Clause so long as
it is “rationally related to a legitimate state interest.” E.g.,
 LAZY Y RANCH LTD v. BEHRENS 13799
Pennell v. City of San Jose, 485 U.S. 1, 14 (1988). Under this
standard, a “State may not rely on a classification whose rela-
tionship to an asserted goal is so attenuated as to render the
distinction arbitrary or irrational.” City of Cleburne v. Cle-
burne Living Center, 473 U.S. 432, 446 (1985).

[7] “The first step in equal protection analysis is to identify
the [defendants’] classification of groups.” Country Classic
Dairies, Inc. v. State of Montana, Dep’t of Commerce Milk
Control Bureau, 847 F.2d 593, 596 (9th Cir. 1988). “To
accomplish this, a plaintiff can show that the law is applied
in a discriminatory manner or imposes different burdens on
different classes of people.” Freeman v. City of Santa Ana, 68
F.3d 1180, 1187 (9th Cir. 1995). Here, the substance of Lazy
Y’s complaint is that Defendants made the bidding process
more cumbersome and ultimately denied its leases because
they discriminated on the basis of whether a bidder was a con-
servationist (or a perceived conservationist) and new to the
Idaho grazing market. Lazy Y also alleges that Defendants
discriminated in favor of the prior lessees.

In support of their motion to dismiss, Defendants argue that
Lazy Y fails to state an Equal Protection claim because (1)
they have offered a legitimate purpose for denying the leases
to which their actions rationally relate, and (2) Lazy Y’s
claims amount to a “class of one” theory that is not cogniza-
ble in the context of competitive public contracting. Defen-
dants are incorrect.

a. Sufficiency of a Proffered Rational Basis, Even if
Pretextual

(1). Defendants Offer No Reason For Treating
Conservationists Differently From Other Bidders

[8] The first flaw in Defendants’ argument is that they have
only put forth a rationale for denying Lazy Y’s leases; they
have not offered a rational basis for classifying based on
13800 LAZY Y RANCH LTD v. BEHRENS
whether a lease applicant is a conservationist, as Lazy Y
alleges. As Defendants note, the Supreme Court has often
indicated that rational basis review should not inquire into the
actual purpose of the challenged classification. See FCC v.
Beach Communications, Inc., 508 U.S. 307, 315 (1993);
United States R.R. Retirement Bd. v. Fritz, 449 U.S. 166, 179
(1980)); see also Heller v. Doe, 509 U.S. 312, 321 (1993) (a
classification “must be upheld against equal protection chal-
lenge if there is any reasonably conceivable state of facts that
could provide a rational basis for the classification” (citation
and quotation marks omitted)); Minnesota v. Clover Leaf
Creamery Co., 449 U.S. 456, 463-64 (1981) (rejecting argu-
ment that state had to demonstrate an empirical basis for its
classification).4 However, these cases do not require us to
accept Defendants’ characterization of what classification
they made. In Beach Communications, for example, there was
no dispute over what line Congress had drawn: it drew “a dis-
tinction between [cable television] facilities that serve sepa-
rately owned and managed buildings and those that serve one
or more buildings under common ownership or management,”
with only the latter being exempt from regulation. 508 U.S.
at 309. The question was whether this distinction survived
rational basis review. See id. In analyzing whether it did, the
Court noted that “because we never require a legislature to
articulate its reasons for enacting a statute, it is entirely irrele-
vant for constitutional purposes whether the conceived reason
for the challenged distinction actually motivated the legisla-
ture.” Id. at 315 (emphasis added).

[9] Here, by contrast, the nature of the classification — i.e.,
what line Defendants drew — is at the center of the dispute.
4
Lazy Y argues that the Supreme Court cases cited above are distin-
guishable because they involve legislative rather than executive decision-
making. However, the Equal Protection Clause applies equally to execu-
tive and legislative action. See Nordlinger v. Hahn, 505 U.S. 1, 16 n.8
(1992); see also Immigration Assistance Project of L.A. County Fed’n of
Labor v. INS, 306 F.3d 842, 872 (9th Cir. 2002) (rejecting argument that
distinguished executive action from legislative action).
 LAZY Y RANCH LTD v. BEHRENS 13801
Lazy Y alleges that Defendants classified on the basis of
whether the bidder was associated with conservationists, and
pleads numerous facts that, if proven, would tend to establish
this theory.5 Though Defendants assert that they classified
only on the basis of the costs associated with prospective les-
sors’ management plans, nothing in the cases they cite
requires us to accept their explanation. Similarly, while
administrative costs might be a valid reason to deny a bidder
a lease, it simply does not offer a basis for treating conserva-
tionists differently from other bidders.

The Supreme Court’s opinion in Olech illustrates this point.
In Olech, the plaintiff alleged that her town had demanded a
33-foot easement in exchange for access to the water supply,
while the easements asked of others were only 15 feet. 528
U.S. at 563. The Court did not ask whether there was a ratio-
nal basis for the village asking for a 33-foot easement from
one of its citizens. See id. at 565. Rather, the Court noted the
plaintiff’s allegations that there was no rational reason why
she had to provide a larger easement than her neighbors’. The
allegation of irrational differential treatment properly stated
an Equal Protection claim. See id.

[10] Similar to Olech, the question here is not simply
whether administrative costs were a rational reason for deny-
ing Lazy Y’s bid. In short, Lazy Y’s claims suggest that
5
For example, Lazy Y alleges that “[o]ther than in connection with past
efforts by conservationists to obtain state grazing leases . . . Defendants
have rarely if ever cited [increased administrative costs] to deny other par-
ties a lease.” Also pertinent are Lazy Y’s claims that Defendants (1)
required more specific grazing proposals for Lazy Y than it did for com-
peting bidders; (2) inexplicably failed to circulate Lazy Y’s proposals to
other bidders in violation of their procedures; (3) regularly loses money
on endowment lands because its administrative costs outstrip the modest
revenues from leases; (4) failed to notify Lazy Y that the parcels were not
manageable units before bidding, contrary to a requirement in its opera-
tions manual; and (5) delayed disclosure of the costs concern until just six
days before the August 2006 Land Board meeting.
13802 LAZY Y RANCH LTD v. BEHRENS
administrative costs only matter in some cases — i.e., when
the high bidder is a conservationist. The real question is
whether there is a rational basis for this distinction. On this
record, there is not.

(2). Supreme Court and Circuit Law Allows Some
Inquiry Into the Rationale for the Classification

[11] Moreover, even where the nature of the classification
is clear, subsequent case law has not rigidly interpreted the
cases Defendants cite. The Supreme Court has cautioned that
“even the standard of rationality . . . must find some footing
in the realities of the subject addressed by the legislation.”
Heller, 509 U.S. at 321; accord Immigration Assistance Proj-
ect, 306 F.3d at 872 (quoting Heller). Consistent with this
admonition, our circuit has allowed plaintiffs to rebut the facts
underlying defendants’ asserted rationale for a classification,
to show that the challenged classification could not reason-
ably be viewed to further the asserted purpose. For example,
in Lockary v. Kayfetz, homeowners challenged a city’s mora-
torium on new water hookups, which the city claimed was
needed due to a water shortage. 917 F.2d 1150, 1155-56 (9th
Cir. 1990). Because the plaintiffs introduced evidence that
there was no water shortage at all, their Equal Protection
claim survived summary judgment even under rational basis
review. Id. Similarly, in Parks v. Watson, a developer claimed
a city violated its Equal Protection rights when it required the
developer to relinquish a well before it could build. 716 F.2d
646, 654-55 (9th Cir. 1983). The city asserted three reasons
for the demand: “(1) [the developer]’s noncompliance with
the City’s request that it submit conceptual drawings of the
[project], (2) a concern over the problem of public access, and
(3) a desire to acquire [the developer]’s geothermal wells for
the City’s proposed geothermal heating district.” Id. at 654.
We found factual disputes as to whether the developer failed
to submit drawings and whether there was actually a concern
over access, and found that a bare desire to take the develop-
er’s wells was not a legitimate interest. Id. at 654-55.
 LAZY Y RANCH LTD v. BEHRENS 13803
[12] Additionally, we have stated that “in an equal protec-
tion claim based on selective enforcement of the law, a plain-
tiff can show that a defendant’s alleged rational basis for his
acts is a pretext for an impermissible motive.” Engquist v. Or.
Dep’t of Agric., 478 F.3d 985, 993 (9th Cir. 2007) (emphasis
added); (citing Squaw Valley Dev. Co. v. Goldberg, 375 F.3d
936, 944 (9th Cir. 2004)).

[13] Here, Lazy Y attacks the premise that increased
administrative costs could rationally result from its leases.
Among other things, Lazy Y claims that the IDL “rarely
undertakes the supervision necessary to ensure that other
grazing lessees comply with management requirements for
land preservation.” Read in the light most favorable to Lazy
Y, this allegation suggests that Defendants may never have
intended to police the grazing lands at all, and therefore
would never actually have incurred increased costs if Lazy Y
was the lessee.6 And some of Lazy Y’s claims amount to alle-
gations of “selective enforcement,” such as the claim that
Defendants required more specific grazing proposals from
Lazy Y than they did for other parties.

[14] In sum, we reject Defendants’ contention that their
administrative costs rationale necessarily defeats Lazy Y’s
claim. Lazy Y alleges that administrative costs have been
raised only to deny leases to conservationists. It also alleges
6
Lazy Y’s other attacks on the administrative costs rationale are less
availing. The allegation that no costs would result simply because Defen-
dants had not proposed to hire additional staff ignores the possibility that
existing staff would be diverted from other projects and would incur
increased travel costs. And it is irrelevant that denying Lazy Y’s leases
might have led to litigation costs. Moreover, we agree that Lazy Y’s offers
to cover additional administrative costs do not mean it was irrational to
reject its bids. The August 2006 memo estimated increased costs of
$45,000 if the leases went to Lazy Y. Lazy Y offered to pay $30,000 and
whatever other costs were shown to be “reasonably necessary.” Defen-
dants could rationally have wished to avoid debates about what costs were
“reasonably necessary.”
13804 LAZY Y RANCH LTD v. BEHRENS
that Defendants would not actually have incurred additional
costs at all, and raised them only out of bias against conserva-
tionists and market newcomers. These allegations suffice to
state an Equal Protection claim even under rational basis
review. See Lockary, 917 F.2d at 1155-56.

b. Class of One

In addition to relying on their administrative costs ratio-
nale, Defendants also argue that Lazy Y has asserted a “class
of one” claim, which should be deemed incognizable in the
context of competitive bidding for public leases. We disagree
with Defendants’ characterization of Lazy Y’s claims.

[15] The “class of one” theory was recognized in Olech,
and is unusual because the plaintiff in a “class of one” case
does not allege that the defendants discriminate against a
group with whom she shares characteristics, but rather that
the defendants simply harbor animus against her in particular
and therefore treated her arbitrarily. See N. Pacifica LLC v.
City of Pacifica, 526 F.3d 478, 486 (9th Cir. 2008) (“When
an equal protection claim is premised on unique treatment
rather than on a classification, the Supreme Court has
described it as a ‘class of one’ claim.” (citing Olech, 528 U.S.
at 564)). Such circumstances state an Equal Protection claim
because, if a state actor classifies irrationally, the size of the
group affected is constitutionally irrelevant. Olech, 528 U.S.
at 564.

As Defendants recognize, this court has held that plaintiffs
cannot bring “class of one” cases challenging public employ-
ment decisions, because: (1) “the government as employer has
broader powers than the government as regulator, [so] the
scope of judicial review is correspondingly restricted; (2) “the
need for judicial review under equal protection ‘is especially
thin’ given the number of other legal protections” for public
employees; (3) and applying equal protection “to forbid arbi-
trary or malicious firings . . . would completely invalidate the
 LAZY Y RANCH LTD v. BEHRENS 13805
practice of public at-will employment.” Engquist, 478 F.3d at
994-95. The Supreme Court affirmed this ruling and adopted
this rationale. Engquist v. Or. Dep’t of Agriculture, 128 S.Ct.
2146, 2151-57 (2008). Analogizing the public bidding context
to the public employment context addressed in Engquist,
Defendants ask us to hold that the “class of one” theory does
not apply.

[16] The problem with this argument, however, is that Lazy
Y does not rely on a class of one theory. Lazy Y alleges
repeatedly that Defendants treated it differently based on its
perceived association with conservationists and because it
was a newcomer to Idaho grazing markets. In other words,
Lazy Y’s claims are not premised on “unique treatment” but
on “a classification;” therefore, we need not decide whether
the class of one theory would be cognizable in this context.
See N. Pacifica, 526 F.3d at 486.

Accordingly, Plaintiffs have stated an Equal Protection
claim.

2. Clearly Established Right

[17] The second inquiry in a qualified immunity case is
whether the constitutional violation the plaintiff has alleged is
clearly established. See Scott, 127 S.Ct. at 1774. Here, Defen-
dants argue Lazy Y has not alleged such a violation, but they
rely on the contention that Lazy Y brings a “class of one”
claim. As we explained above, we disagree with this charac-
terization. We view the complaint as relying on the principle
that government actors may not draw irrational or arbitrary
classifications. This principle is clearly established, see, e.g.,
Hydrick v. Hunter, 500 F.3d 978, 999 (9th Cir. 2007), so
Defendants are not entitled to qualified immunity.

VI. CONCLUSION

The district court’s denial of Defendants’ Rule 12(b)(6)
motion is AFFIRMED and the matter is REMANDED for
further proceedings.