United States Court of Appeals
For the First Circuit
No. 05-1811
DANIEL PAGÁN ET AL.,
Plaintiffs, Appellees,
v.
SILA MARÍA CALDERÓN, IN HER INDIVIDUAL CAPACITY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Selya, Circuit Judge,
Hansen,* Senior Circuit Judge,
and Lynch, Circuit Judge.
Susana I. Peñagaricano-Brown, Assistant Solicitor General,
with whom Salvador J. Antonetti-Stutts, Solicitor General, Mariana
Negrón-Vargas and Maite D. Oronoz-Rodríguez, Deputy Solicitors
General, were on brief, for appellant.
Guillermo F. DeGuzmán, with whom DeGuzmán & Gierbolini Law
Offices, P.S.C. was on brief, for appellees.
May 16, 2006
__________
*Of the Eighth Circuit, sitting by designation.
SELYA, Circuit Judge. This interlocutory appeal follows
the entry of an order denying, in relevant part, a public
official's motion to dismiss based on qualified immunity. See
Pagán v. Calderón, No. 04-1296, slip op. at 7 (D.P.R. Mar. 30,
2005) (D. Ct. Op.). It raises significant questions concerning the
doctrine of standing and the prosecution of claims of political
discrimination.
The underlying action involves multiple plaintiffs and
multiple defendants (although Sila María Calderón, in her
individual capacity, is the only defendant before us). The
plaintiffs' overarching claim is that Calderón, then the governor
of Puerto Rico, improperly influenced the decision of a government
lender to reject a loan sought by the main plaintiff, ARCAM
Pharmaceutical Corporation. On the defendants' motions to dismiss,
see Fed. R. Civ. P. 12(b)(6), the district court rendered a mixed
decision. To the extent that Calderón's denied motion rested on
the ground of qualified immunity, she appealed. See Mitchell v.
Forsyth, 472 U.S. 511, 530 (1985) (allowing interlocutory appeals
of certain denials of qualified immunity). For the reasons that
follow, we conclude that no plaintiff other than ARCAM has standing
to pursue the appealed federal claims asserted against Calderón.
Moreover, we conclude that, with respect to those claims, ARCAM has
failed adequately to plead a violation of its constitutional
rights. Accordingly, we reverse the challenged rulings, direct the
-2-
district court to grant Calderón's motion for dismissal, and remand
for further proceedings consistent with this opinion.
I. BACKGROUND
Because this is an interlocutory appeal from the denial
of a Rule 12(b)(6) motion to dismiss grounded on qualified
immunity, we — like the lower court — must accept as true the
factual averments of the plaintiffs' complaint. See Limone v.
Condon, 372 F.3d 39, 42 (1st Cir. 2004).
ARCAM, a corporation chartered under the laws of Puerto
Rico, was formed in 2000 for the purpose of engaging in the
manufacture of pharmaceutical products. Its principal shareholder
and chief executive officer is plaintiff Ernesto Vilanova Vélez
(Vilanova). Plaintiffs Cristino Agosto Reyes, Martin Souto, and
Christopher Molina (collectively, the guarantors) are minority
shareholders. Vilanova and the guarantors have, from time to time,
personally guaranteed certain of ARCAM's corporate debts.
Shortly after its formation, ARCAM paid $4,500,000 to
acquire land and buildings in Hormigueros, Puerto Rico (the
Property) as a site for manufacturing pharmaceutical products. To
fund this transaction, finance improvements, and secure operating
capital, ARCAM obtained a $10,000,000 loan from Westernbank. In
exchange, it granted Westernbank a first mortgage on the Property.
The complaint alleges that, despite the relatively modest purchase
price, the Property actually was worth $24,000,000.
-3-
Early on, ARCAM retained plaintiff Daniel Pagán as a
consultant. Pagán had occupied various high-ranking positions in
the administration of Governor Pedro Rosselló. As a result, Pagán
became known as a political insider and a strong supporter of the
reigning New Progressive Party (NPP).
In the general elections of November 2000, the voters
chose Calderón, running under the banner of the Popular Democratic
Party (PDP), to succeed Rosselló. The upshot was that a PDP
administration supplanted an NPP administration. The new regime
launched a number of investigations into the performance of persons
close to Rosselló. In the wake of one such probe, the Calderón
administration filed criminal charges against Pagán, alleging bid-
rigging. See P.R. Laws Ann. tit. 33, § 4353a. Although a local
court eventually dismissed the charges, the plaintiffs envision
this unwarranted prosecution as emblematic of the "political witch-
hunt and persecution policy implemented by defendant Calderón and
her administration against individuals politically affiliated
[with] the NPP and/or . . . the administration of Governor Pedro
Rosselló."
During the year 2002, Pagán assisted ARCAM in efforts to
upgrade its plant, obtain manufacturing equipment, and secure
federal Food and Drug Administration approval for its product line.
In addition, Pagán represented ARCAM in third-party negotiations
and before various administrative agencies. Through those
-4-
endeavors, Pagán became publicly identified with ARCAM and top-
echelon members of the PDP acquired knowledge of Pagán's ties to
the company.
By mid-2002, ARCAM had secured two pharmaceutical
manufacturing contracts and had developed a purified water
production line. Launching these ventures required access to new
capital. To that end, ARCAM requested a $5,000,000 commercial loan
from Banco de Desarrollo Económico para Puerto Rico (BDE), a
government-sponsored banking institution that had been created to
promote the "development of the private sector of the economy of
Puerto Rico" by making capital available to firms "whose economic
activity has the effect (directly or indirectly) of substituting
imports." P.R. Laws Ann. tit. 7, § 611a(a). To assist BDE in
fulfilling that mandate, the Puerto Rico legislature gave it the
power to "loan money, with or without collateral, to any person,
firm, corporation or other private organization when such loans are
to be used to promote the government's purpose of developing the
economy of Puerto Rico." Id. § 611b(d). The legislature tasked
BDE's board of directors with administering and exercising this
power. Id. § 611d(a). Upon receiving ARCAM's loan proposal, BDE
requested amplitudinous information about ARCAM's finances and
operations. After analyzing that data, BDE conditioned its
approval of the loan on ARCAM's ability to convince Westernbank to
subordinate the first mortgage on the Property that collateralized
-5-
its earlier $10,000,000 loan. ARCAM was unable to secure
Westernbank's assent to this condition. BDE thereupon refused to
make the loan despite ARCAM's assurance that it had obtained
"equivalent" concessions from Westernbank. The complaint alleges
that two BDE hierarchs, Vilma Pellot and Antonio Faría (both of
whom were PDP stalwarts) played influential roles in bringing about
the demise of the anticipated loan.
The complaint further alleges that, as a result of its
failure to garner supplemental financing, ARCAM fell behind on its
manufacturing obligations and was threatened with the loss of its
pharmaceutical contracts. Out of desperation, it recast the
$5,000,000 loan proposal and, in May of 2003, resubmitted it. BDE
asked for more information, which ARCAM supplied. While Vilanova
still could not convince Westernbank to subordinate its first
mortgage, he volunteered that he would personally guarantee the new
borrowing.
Throughout the deliberative process, ARCAM repeatedly
reminded BDE that it was in immediate danger of losing its hard-won
contracts without an infusion of new money. BDE's board of
directors initially harkened to this entreaty and recommended
approval of ARCAM's renewed application. But that was not the
final word: Pellot and Faría, doing Calderón's bidding, twisted
arms to bring about BDE's rejection of the renewed loan request.
The complaint attributes this refusal to "the discriminatory
-6-
policies, instructions and/or misguided strategies of defendant
Calderón against individuals associated [with] the former NPP
administration; in this particular case aimed against plaintiff
Pagán."
ARCAM's failure to obtain financing rendered the
company's business moribund. It has ceased operations, remains
unsure if it can salvage its pharmaceutical contracts, and is
uncertain whether it will be able to resume operations.
Left in these dire straits, the plaintiffs — ARCAM,
Vilanova, Pagán, and the guarantors — filed suit in the United
States District Court for the District of Puerto Rico.1 Their
complaint, brought pursuant to 42 U.S.C. § 1983, alleges, inter
alia, that numerous defendants (including BDE, Pellot, Faría, and
Calderón) violated the free association guarantee of the First
Amendment, the due process guarantee of the Fourteenth Amendment,
and the equal protection guarantee of the Fourteenth Amendment in
turning down ARCAM's loan application. The complaint also alleges
that BDE took this action notwithstanding ARCAM's in-hand contracts
and the offer of a personal guarantee, while in the same time frame
1
The spouses and conjugal partnerships of each of the
aforementioned individuals joined as plaintiffs. Because those
claims are wholly derivative, we refer for simplicity's sake only
to the named plaintiffs. Our decision with respect to each
individual is, of course, binding on his spouse and conjugal
partnership.
-7-
it granted a loan to Pollos Picú, an entity that was experiencing
extremely difficult financial conditions.
Calderón filed a motion to dismiss, contending that the
complaint failed to state any cognizable federal claim against her
and that, in any event, the doctrine of qualified immunity barred
the relief sought against her (money damages). The plaintiffs
opposed the motion.
On March 30, 2005, the district court granted Calderón's
motion in part and denied it in part. See D. Ct. Op. at 8.
Specifically, the court dismissed the First Amendment claims
brought by ARCAM, Vilanova, and the guarantors — claims premised on
the plaintiffs' right to associate with Pagán (an NPP kingpin).
Id. at 3. The court also dismissed the plaintiffs' procedural due
process claims. Id. at 5. Shifting gears, the court cited the
plaintiffs' allegations that Calderón's politically discriminatory
animus toward Pagán was the root cause of BDE's refusal to
accommodate the loan request and declined to dismiss Pagán's First
Amendment claim. Id. at 3-4. For much the same reason, it allowed
the various plaintiffs' substantive due process and equal
protection claims to stand. Id. at 6. In making these latter
rulings, the court explicitly rejected Calderón's qualified
immunity defense, without prejudice, however, to its reassertion on
a better developed record. Id. at 7. This timely appeal ensued.
-8-
II. JUSTICIABILITY
We pause at the outset to clarify certain matters related
to our jurisdiction and to the parties' standing.
A. Appellate Jurisdiction.
This is an interlocutory appeal in which Calderón assigns
error to the district court's rejection of her qualified immunity
defense vis-à-vis Pagán's First Amendment claim and the plaintiffs'
collective substantive due process and equal protection claims.
The other rulings made by the district court in its opinion of
March 30, 2005 are not before us. Accordingly, we take no view of
them.
Although our appellate jurisdiction typically is limited
to the review of final orders and judgments, see 28 U.S.C. § 1291,
that limitation sometimes is relaxed when a public official, qua
defendant, unsuccessfully asserts a qualified immunity defense in
a pretrial motion. In broad-brush terms, the denial of such a
motion is appealable without awaiting the entry of final judgment
to the extent that the immunity issue is a purely legal one, not
requiring either resolution of conflicting facts or an examination
of the district court's conclusion that a genuine issue of material
fact exists. Valdizán v. Rivera-Hernandez, ___ F.3d ___ , ___ (1st
Cir. 2006) [No. 05-2215, slip op. at 3] (citing Johnson v. Jones,
515 U.S. 304, 318 (1995)). Because Calderón's appeal fits snugly
within that integument, we have jurisdiction to entertain it. See,
-9-
e.g., Vélez-Díaz v. Vega-Irizarry, 421 F.3d 71, 77 (1st Cir. 2005);
Limone, 372 F.3d at 43.
B. Standing.
A federal court must satisfy itself as to its
jurisdiction, including a plaintiff's Article III standing to sue,
before addressing his particular claims, regardless of whether the
litigants have raised the issue of standing. See Orr v. Orr, 440
U.S. 268, 271 (1979); Juidice v. Vail, 430 U.S. 327, 331 (1977);
see also Warth v. Seldin, 422 U.S. 490, 498 (1975) (explaining that
standing is a threshold issue in every federal case). The standing
inquiry is both plaintiff-specific and claim-specific. Thus, a
reviewing court must determine whether each particular plaintiff is
entitled to have a federal court adjudicate each particular claim
that he asserts. Allen v. Wright, 468 U.S. 737, 752 (1984);
Donahue v. City of Boston, 304 F.3d 110, 116 (1st Cir. 2002). Only
if a particular plaintiff has standing to pursue a particular claim
will the court proceed to assess the application of the qualified
immunity doctrine to that claim.
Standing involves a collocation of constitutional
requirements and prudential concerns. See Valley Forge Christian
Coll. v. Ams. United For Separation of Church & State, Inc., 454
U.S. 464, 471 (1982). The Constitution confines federal courts to
the adjudication of actual cases and controversies. See U.S.
Const. art. III, § 2, cl. 1; Allen, 468 U.S. at 750. An actual
-10-
case or controversy exists when the party seeking to invoke the
court's jurisdiction (normally, the plaintiff) has a "personal
stake in the outcome" of the claim asserted. Baker v. Carr, 369
U.S. 186, 204 (1962). To satisfy the personal stake requirement,
the plaintiff must pass a tripartite test. See Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560-61 (1992); Ramírez v. Ramos, 438
F.3d 92, 97 (1st Cir. 2006).
The first of these prerequisites deals with harm. The
plaintiff must adequately allege that he "suffered or is threatened
by [an] injury in fact to a cognizable interest." Save our
Heritage, Inc. v. FAA, 269 F.3d 49, 55 (1st Cir. 2001). An injury
in fact is one that is concrete and particularized, on the one
hand, and actual or imminent (as opposed to conjectural or
hypothetical), on the other hand. Lujan, 504 U.S. at 560. In
turn, a particularized injury is one that "affect[s] the plaintiff
in a personal and individual way." Id. at 560 n.1.
The second prerequisite deals with causation (what some
courts have called "traceability"). To meet this requirement, the
plaintiff must adequately allege that the asserted injury is
causally connected to the challenged conduct. Id. at 560. This
causal connection must be demonstrable; in other words, it "cannot
be overly attenuated." Donahue, 304 F.3d at 115.
-11-
The third prerequisite is redressability. The plaintiff
must adequately allege that a favorable result in the litigation is
likely to redress the asserted injury. Lujan, 504 U.S. at 561.
In addition to these Article III prerequisites,
prudential concerns ordinarily require a plaintiff to show that his
claim is premised on his own legal rights (as opposed to those of
a third party), that his claim is not merely a generalized
grievance, and that it falls within the zone of interests protected
by the law invoked. Ramírez, 438 F.3d at 98; N.H. Right to Life
Political Action Comm. v. Gardner, 99 F.3d 8, 15 (1st Cir. 1996).
These prudential considerations, though important, are not as
inexorable as their Article III counterparts. See, e.g., United
States v. AVX Corp., 962 F.2d 108, 116 (1st Cir. 1992) (recognizing
associational standing exception).
Against this backdrop, we proceed to consider the issue
of standing plaintiff by plaintiff and claim by claim.
1. ARCAM. In the mix of claims that are before us, two
are ARCAM's: its substantive due process and equal protection claims
(its other claims against Calderón were dismissed below and are not
implicated in this appeal). As to these claims, ARCAM easily passes
through both the Article III and prudential standing screens.
In theory at least, BDE's refusal to grant ARCAM the loan
for which it applied constitutes an injury in fact (a loss of
financing) particular to the corporation. Inasmuch as ARCAM alleges
-12-
that this refusal stemmed from Calderón's strong-arming of the board
of directors, the injury is traceable to the challenged conduct.
The redressability element is satisfied because a favorable judicial
decision on this claim would redress the injury by compensating
ARCAM for the harm it suffered.
Prudential considerations also counsel in favor of a
finding of standing. Here, ARCAM is seeking to protect its own
rights. Moreover, the alleged misconduct culminated in a
particularized event (the denial of the loan), and the effects of
that misconduct are sufficiently tangible.
2. Vilanova and the guarantors. Vilanova and the
guarantors are before us in regard to substantive due process and
equal protection claims (as was true of ARCAM, their other claims
against Calderón were dismissed below and are not implicated in this
appeal). These four plaintiffs premise their right to recover on
their status as shareholders and creditors of ARCAM.2 Pertinently,
the complaint alleges that ARCAM was unable to fulfill its
contractual obligations when it did not receive the requested loan,
2
Vilanova is also an ARCAM employee. However, he does not
claim to have suffered any cognizable injury in that capacity. At
any rate, the general rule is that an employee does not have
standing to sue when the alleged misconduct is directed at the
corporation for which he worked and, therefore, the employee's loss
of income or employment is merely incidental to the direct injury
inflicted upon the corporation. See, e.g., Willis v. Lipton, 947
F.2d 998, 1000-01 (1st Cir. 1991); Warren v. Mfrs. Nat'l Bank, 759
F.2d 542, 545 (6th Cir. 1985); see also SAS of P.R., Inc. v. P.R.
Tel. Co., 48 F.3d 39, 45 (1st Cir. 1995). That appears to be the
situation here.
-13-
that it is unsure if its contracts can be salvaged, that it has shut
down its operations, and that it has no future prospects for
reopening. The stockholder claims presumably operate from the
premise that this reversal of fortune has depreciated the value of
the plaintiffs' stock.
As a general rule, a corporation and its shareholders are
distinct juridical persons and are treated as such in contemplation
of law. See In re Dein Host, Inc., 835 F.2d 402, 405 (1st Cir.
1987). In terms of standing, this separateness has led to the tenet
that "[a]ctions to enforce corporate rights or redress injuries to
[a] corporation cannot be maintained by a stockholder in his own
name . . . even though the injury to the corporation may
incidentally result in the depreciation or destruction of the value
of the stock." Id. at 406 (citation and internal quotation marks
omitted); see Bishay v. Am. Isuzu Motors, Inc., 404 F.3d 491, 495
(1st Cir. 2005) (noting the general rule that only the corporation,
a receiver, or a stockholder acting derivatively in the
corporation's name may sue to redress an injury to the corporation).
The tenet holds true even if the shareholder is the sole owner of
the corporation's stock. See Diva's Inc. v. City of Bangor, 411
F.3d 30, 42 (1st Cir. 2005); In re Dein Host, 835 F.2d at 406.
To be sure, there are exceptions to virtually every
general rule — and the rule that a shareholder cannot sue in his own
name for an injury sustained by the corporation is not ironclad.
-14-
A shareholder, for example, may be able to bring an action if he
sustains an injury that "is peculiar to him alone, and [that] does
not fall alike upon other stockholders." Roeder v. Alpha Indus.,
Inc., 814 F.2d 22, 30 (1st Cir. 1987) (citations and internal
quotation marks omitted); accord Guides, Ltd. v. Yarmouth Group
Prop. Mgmt., Inc., 295 F.3d 1065, 1072 (10th Cir. 2002). The case
law also suggests that there may be room for an exception if it is
absolutely inconceivable that the corporation itself would pursue
a claim for the misconduct. See, e.g., Kavanaugh v. Ford Motor Co.,
353 F.2d 710, 717 (7th Cir. 1965) (allowing shareholder standing in
a case in which the alleged malefactor owned all of the
corporation's voting stock). Here, however, the complaint does not
allege that any of the individual shareholders sustained a
particularized, nonderivative injury that might deflect application
of the usual shareholder standing rule3 or that any other exception
pertains. To cinch matters, not only have Vilanova and the
guarantors, qua shareholders, sued to redress an injury to the
corporation, but the corporation itself also has sued, in the same
complaint and on the same theories, for the same harm. In such
circumstances, section 1983 affords no right of action to the
3
In this regard, the complaint merely states that, as
shareholders, Vilanova and the guarantors have "rights and
liabilities towards" ARCAM and that they have "a tangible and
intangible property interest in the benefits and profits" of ARCAM.
Any injury based on how Calderón's conduct impacted these interests
is merely derivative of ARCAM's alleged injury.
-15-
individual shareholders. See Diva's, 411 F.3d at 42 (holding that
shareholder who failed to allege any injury separate from the injury
to the corporation lacked standing to bring a § 1983 claim);
Potthoff v. Morin, 245 F.3d 710, 717 (8th Cir. 2001) (explaining
that an individual shareholder's section 1983 claim "can survive
only if he has alleged that he personally has suffered a direct,
nonderivative injury"); Flynn v. Merrick, 881 F.2d 446, 450 (7th
Cir. 1989) ("Filing suit under 42 U.S.C. § 1983 does not diminish
the requirement that the shareholder suffer some individual, direct
injury.").
The fact that the complaint contains a demand for
emotional distress damages (which, presumably, were incurred by the
individual plaintiffs and not by ARCAM) is insufficient to confer
individual standing on any of the stockholders. After all, the
complaint does not suggest that this injury is anything but
derivative of ARCAM's failure to receive the loan. It is,
therefore, squarely within the proscription of the shareholder
standing rule. See Bellows v. Amoco Oil Co., 118 F.3d 268, 277 n.27
(5th Cir. 1997) (holding that shareholder had no individual standing
to sue for emotional distress when that distress was simply a
consequence of the corporation's direct injury).
This brings us to the plaintiffs' status as creditors of
ARCAM (by which they apparently mean either that ARCAM owes them
money that it will now be unable to repay or that they are exposed
-16-
to a contingent liability because the denial of the BDE loan
rendered ARCAM unable to satisfy other debts). That status does not
alter the decisional calculus. As is the case with shareholders,
creditors do not have standing to sue in their personal capacities
unless the alleged misconduct causes harm to them separate and
distinct from the injury inflicted upon the debtor corporation. See
Ashland Oil, Inc. v. Arnett, 875 F.2d 1271, 1280 (7th Cir. 1989).
In the case at hand, any injury related to either the
plaintiffs' foregone loans or their contingent liability for ARCAM's
debts is simply derivative of the direct injury to ARCAM (the loss
of incremental financing). This type of harm is insufficient to
confer creditor standing. See Guides, 295 F.3d at 1073 (rejecting
the premise that one's status as a guarantor confers standing "to
assert an individual claim against a third party where that harm is
derivative of that suffered by the corporation"); Stein v. United
Artists Corp., 691 F.2d 885, 896 (9th Cir. 1982) (concluding that
a corporation's guarantors lack standing when their alleged injuries
"reflect the injury to the corporation, which forced it to default
on the loans"); see also SAS of P.R., Inc. v. P.R. Tel. Co., 48 F.3d
39, 45 (1st Cir. 1995).
The short of it is that where, as here, the corporation
incurs the only direct injury from the alleged misconduct, the
corporation (in the absence of special circumstances, not present
here) is the only proper party to bring suit for that injury. It
-17-
follows inescapably that neither Vilanova nor the guarantors have
standing to proceed with their Fourteenth Amendment claims.
3. Pagán. Three of Pagán's claims against Calderón are
before us: his First Amendment, substantive due process, and equal
protection claims. We conclude that he lacks standing to pursue any
of them.
Pagán asserts injury in fact on the basis that Calderón's
meddling with ARCAM's loan request was driven by political animus
aimed squarely at him. This assertion is wide of the mark: the
standing inquiry turns on the plaintiff's injury, not the
defendant's motive. Thus, 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. See Guides, 295 F.3d at 1072-73 (holding
that corporation alone had standing to pursue claim that lease
sought by corporation was denied because of employee-shareholder's
race); Potthoff, 245 F.3d at 717-18 (holding that employee lacked
standing to assert section 1983 claim when government agency
terminated corporation's lease because of employee's criticism of
the mayor). In other words, 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
-18-
he alleges that he personally suffered a direct, nonderivative
injury.4 Potthoff, 245 F.3d at 717.
In an effort to detour around this roadblock, Pagán
maintains that he stood to benefit from ARCAM's success and, thus,
was injured personally when the business cratered for want of
financing. Relatedly, he maintains that, as a consultant, he
depended on ARCAM's viability to earn his living. These allegations
are insufficient to cloak Pagán with standing. It is not enough for
the agent to allege an injury that is qualitatively different from
that suffered by the principal; rather, the agent must allege an
injury that does not derive from the injury to the principal. See
Bellows, 118 F.3d at 276-77. The injuries that Pagán alleges are
plainly derivative of the ascribed harm to ARCAM.
That ends this aspect of the matter. Because the complaint
contains no allegation that Pagán suffered any nonderivative injury,
he lacks standing to assert any of the section 1983 claims that are
at issue here.
4
This does not mean, of course, that there are no exceptions
to the general rule that a plaintiff must allege a nonderivative
injury. There is, for example, an exception for associational
standing. This exception allows an association, which has not
itself suffered injury, to premise its standing to bring suit on
its members' injuries so long as the interests at stake are germane
to the association's purpose and the suit does not require member
participation. See AVX Corp., 962 F.2d at 116. That exception has
no bearing here.
-19-
III. QUALIFIED IMMUNITY
Our exegesis into standing disposes of all the claims
presently on appeal save for ARCAM's substantive due process and
equal protection claims against Calderón. The lingering question,
then, is whether the district court erred in refusing to dismiss
either or both of those claims on the ground of qualified immunity.
In answering that question, we employ de novo review of the district
court's decision, assume the truth of the complaint's factual
allegations (but not its unsupported conclusions and
animadversions), and draw all reasonable inferences therefrom in
ARCAM's favor. See Limone, 372 F.3d at 42-43.
Qualified immunity is a judge-made doctrine created to
limit the exposure of public officials to damages actions, thereby
fostering the effective performance of discretionary functions in
the public sector. Harlow v. Fitzgerald, 457 U.S. 800, 807 (1982).
The reach of this doctrine is long, but not infinite. It protects
all but "the plainly incompetent [and] those who knowingly violate
the law." Malley v. Briggs, 475 U.S. 335, 341 (1986). As that
exclusion has been interpreted, the doctrine does not shield public
officials who, from an objective standpoint, should have known that
their conduct was unlawful. Davis v. Scherer, 468 U.S. 183, 193
(1984); Surprenant v. Rivas, 424 F.3d 5, 14 (1st Cir. 2005).
Relying on Supreme Court precedent, see, e.g., Saucier v.
Katz, 533 U.S. 194, 200-02 (2001), we have developed a three-step
-20-
algorithm for the determination of whether a state actor is entitled
to qualified immunity. See Limone, 372 F.3d at 44. In sequential
order, "[w]e consider (i) whether the plaintiff's allegations, if
true, establish a constitutional violation; (ii) whether the
constitutional right at issue was clearly established at the time of
the putative violation; and (iii) whether a reasonable officer,
situated similarly to the defendant, would have understood the
challenged act or omission to contravene the discerned
constitutional right."5 Id. Thus, a court called upon to review a
denied Rule 12(b)(6) motion premised on qualified immunity
ordinarily should consider, as a first step, whether the facts set
forth in the complaint, taken in the light most congenial to the
complaining party, adequately allege that the defendant violated a
federally-secured right. As we explain below, ARCAM cannot satisfy
this requirement.
Our consideration of this issue proceeds on the premise
that there is no heightened pleading requirement in civil rights
cases. Educadores Puertorriqueños en Acción v. Hernández, 367 F.3d
61, 66-67 (1st Cir. 2004). The complaint need do no more than
satisfy the basic notice pleading requirements of the Civil Rules.
5
There is some debate about whether our approach to qualified
immunity issues should be collapsed from three steps into two. See
Higgins v. Penobscot County Sheriff's Dep't, ___ F.3d ___, ___ (1st
Cir. 2006) (Howard, J., concurring) [No. 05-2375, slip op. at 11].
Here, however, ARCAM's claims fail at the first step, so the number
of succeeding steps is irrelevant.
-21-
Centro Medico del Turabo, Inc. v. Feliciano de Melecio, 406 F.3d 1,
5 (1st Cir. 2005). That standard, however, still requires that the
complaint "set forth minimal facts as to who did what to whom, when,
where, and why." Educadores, 367 F.3d at 68; accord Aponte-Torres
v. Univ. of P.R., ___ F.3d ___, ___ (1st Cir. 2006) [No. 05-1534,
slip op. at 6-7].
In this instance, the conduct of which ARCAM complains
implicates section 1983, which imposes liability on officials acting
under the color of state law who infringe the federally-secured
rights of private parties.6 ARCAM charges that Calderón, acting
under color of law as the governor of Puerto Rico, violated its
substantive due process and equal protection rights when she
improperly influenced BDE's review of ARCAM's loan application. We
conclude that ARCAM has failed to allege facts adequate to support
either charge (and that, therefore, Calderón is entitled to
qualified immunity).
A. Substantive Due Process.
The Due Process Clause of the Fourteenth Amendment
prohibits a state from depriving a person of "life, liberty, or
property, without due process of law." U.S. Const. amend. XIV, § 1.
This guarantee has both substantive and procedural components. The
substantive due process guarantee functions to protect individuals
6
For purposes of section 1983, Puerto Rico is the functional
equivalent of a state. Redondo-Borges v. U.S. Dep't of Hous. &
Urban Dev., 421 F.3d 1, 7 (1st Cir. 2005).
-22-
from particularly offensive actions on the part of government
officials, even when the government employs facially neutral
procedures in carrying out those actions. Daniels v. Williams, 474
U.S. 327, 331 (1986). The substantive due process guarantee does
not, however, serve as a means of constitutionalizing tort law so as
to "impos[e] liability whenever someone cloaked with state authority
causes harm." County of Sacramento v. Lewis, 523 U.S. 833, 848
(1998).
ARCAM is in error when it posits that it can prevail on
its substantive due process claim either by showing that Calderón's
conduct was conscience-shocking or by showing that her conduct
deprived it of a protected liberty or property interest. This
disjunctive proposition is incorrect. Where, as here, a plaintiff's
substantive due process claim challenges the specific acts of a
state officer, the plaintiff must show both that the acts were so
egregious as to shock the conscience and that they deprived him of
a protected interest in life, liberty, or property. See Rivera v.
Rhode Island, 402 F.3d 27, 34 (1st Cir. 2005) (stating that "[i]t is
not enough to claim the governmental action shocked the conscience"
but that a plaintiff must also show a deprivation of a protected
interest). Consequently, "conscience-shocking conduct is an
indispensable element of a substantive due process challenge to
executive action." DePoutot v. Raffaelly, 424 F.3d 112, 118 n.4
(1st Cir. 2005).
-23-
There is no scientifically precise formula for determining
whether executive action is — or is not — sufficiently shocking to
trigger the protections of the substantive due process branch of the
Fourteenth Amendment. See Nestor Colon Medina & Sucesores, Inc. v.
Custodio, 964 F.2d 32, 45 (1st Cir. 1992) (referring to the inquiry
as "virtually standardless"). Accordingly, the analysis will vary
with the subject matter and the circumstances. See Rivera, 402 F.3d
at 36; Amsden v. Moran, 904 F.2d 748, 754 n.5 (1st Cir. 1990). It
is, therefore, unsurprising that the requisite inquiry involves "a
comprehensive analysis of the attendant circumstances before any
abuse of official power is condemned as conscience-shocking."
DePoutot, 424 F.3d at 119.
The case law contains some helpful generalizations. We
know, for example, that in order to shock the conscience, conduct
must at the very least be "extreme and egregious," id. at 118, or,
put another way, "truly outrageous, uncivilized, and intolerable,"
Hasenfus v. LaJeunesse, 175 F.3d 68, 72 (1st Cir. 1999). We also
know that "[m]ere violations of state law, even violations resulting
from bad faith," do not invariably amount to conscience-shocking
behavior. DePoutot, 424 F.3d at 119. Rather, conscience-shocking
behavior "must be stunning." Amsden, 904 F.2d at 754 n.5.
Here, ARCAM contends that Calderón transgressed its
substantive due process rights when, through Pellot and Farìa, she
exerted undue influence over BDE's directors so that they would deny
-24-
ARCAM's loan request. It asseverates that her discriminatory animus
against the former NPP administration in general and Pagán (a
leading NPP factotum) in particular sparked this skulduggery. This
abuse of political power, ARCAM says, was so raw as to shock the
conscience. We do not agree.
When the Puerto Rico legislature created BDE, it granted
the board of directors the power to exercise broad discretion in
determining whether to grant or deny certain loans. P.R. Laws Ann.
tit. 7, §§ 611b(d), 611d(a). Given this framework, we think that
our analysis of ARCAM's claim logically should be informed by the
standards elucidated in the case law involving denied permits and
licenses. We look to those cases to guide our inquiry into whether
ARCAM's allegations, even if true, cross the substantive due process
threshold. In doing so, however, we remain mindful of the
admonition that we should be "reluctant to expand the concept of
substantive due process." Collins v. City of Harker Heights, 503
U.S. 115, 125 (1992).
We have held, with a regularity bordering on the
monotonous, that the substantive due process doctrine may not, in
the ordinary course, be invoked to challenge discretionary
permitting or licensing determinations of state or local
decisionmakers, whether those decisions are right or wrong. See,
e.g., Collins v. Nuzzo, 244 F.3d 246, 251 (1st Cir. 2001); Nestor
Colon, 964 F.2d at 45; Amsden, 904 F.2d at 757-58; Creative Env'ts,
-25-
Inc. v. Estabrook, 680 F.2d 822, 829 (1st Cir. 1982). While we have
"left the door slightly ajar for . . . truly horrendous situations,"
Nestor Colon, 964 F.2d at 45, any permit or license denial, no
matter how unattractive, that falls short of being "truly
horrendous" is unlikely to qualify as conscience-shocking.
This standard is rigorous but necessary. A lesser
standard would run the unacceptable risk of "insinuat[ing] the
oversight and discretion of federal judges into areas traditionally
reserved for state and local tribunals," id., and would dash "any
hope of maintaining a meaningful separation between federal and
state jurisdiction," Creative Env'ts, 680 F.2d at 831.
The decided cases are instructive by negative implication.
They present illustrations of conduct which, though disquieting and
in many instances unlawful, has been held not to violate the
substantive due process guarantee. ARCAM's complaint that BDE, at
Calderón's urging, denied it a loan for which it qualified falls
well within the mine-run of these cases. We conclude, therefore,
that the mere withholding of the loan, simpliciter, cannot support
a constitutional claim.
ARCAM attempts to distinguish this case from the mine-run
on the basis of Calderón's discriminatory or retaliatory animus.
That attempt is unavailing. Substantive due process is an
inappropriate avenue of relief when the governmental conduct at
issue is covered by a specific constitutional provision. See S.
-26-
County Sand & Gravel Co. v. Town of S. Kingstown, 160 F.3d 834, 835
(1st Cir. 1998) ("When a specific provision of the Constitution
protects individuals against a particular kind of [misconduct] by
government actors, individuals seeking redress . . . must assert
their claims under that particular constitutional rubric instead of
invoking the more generalized notion of substantive due process.");
accord Lewis, 523 U.S. at 843; Graham v. Connor, 490 U.S. 386, 395
(1989). Thus, to the extent that ARCAM relies on charges that
Calderón's actions were driven by political motives, it has no
substantive due process claim at all. It is the First Amendment,
not the Fourteenth Amendment, that guards individuals against state-
sponsored acts of political discrimination or retaliation. See,
e.g., Ruiz-Casillas v. Camacho-Morales, 415 F.3d 127, 134 (1st Cir.
2005); Nestor Colon, 964 F.2d at 46.
That closes the book on this claim. Since ARCAM's
allegations of political discrimination and retaliation are covered
by the First Amendment, those allegations cannot serve as a basis
for a substantive due process claim.7 See Nestor Colon, 964 F.2d at
46 (holding infirm a substantive due process claim based on alleged
retaliation for plaintiff's political views); cf. Collins, 244 F.3d
at 251-52 (affirming dismissal of substantive due process claim
7
To the extent that ARCAM's complaint might be construed as
alleging misconduct outside the scope of the First Amendment (say,
misconduct based on personal antipathy), it would fare no better.
See, e.g., Collins, 244 F.3d at 251; Amsden, 904 F.2d at 751, 757.
-27-
predicated on allegations of unconstitutional retaliation in denial-
of-licensure case). We add only that the application of this
prophylactic rule depends only on whether a specific constitutional
provision addresses the type of conduct at issue; it does not depend
on a prediction that the complaining party will be successful in
pursuing a claim under the applicable provision, nor does it depend
on a conclusion that the party has a valid claim thereunder. See,
e.g., Albright v. Oliver, 510 U.S. 266, 273-75 (1994).
Consequently, it does not matter that the district court dismissed
ARCAM's First Amendment claim.8
B. Equal Protection.
The equal protection guarantee of the Fourteenth Amendment
prohibits the state from "deny[ing] any person within its
jurisdiction the equal protection of the laws." U.S. Const. amend.
XIV, § 1. With reference to a governmental action, this language
has been interpreted to mean that "all persons similarly situated
should be treated alike." City of Cleburne v. Cleburne Living Ctr.,
Inc., 473 U.S. 432, 439 (1985). Its protections extend to both
legislative and executive conduct. See Sioux City Bridge Co. v.
Dakota County, 260 U.S. 441, 445 (1923).
As said, this case is most analogous to cases of denials
of benefits such as licenses or permits. That particular model of
8
As stated earlier, the dismissal of ARCAM's First Amendment
claim is not now before us.
-28-
equal protection analysis, which we describe below, is what we apply
here.
Where applicable state law vests the decisionmaker with
discretionary authority to award or withhold a state benefit, a
plaintiff who grounds an equal protection claim on the denial of
that benefit faces a steep uphill climb. See PFZ Props., Inc. v.
Rodriguez, 928 F.2d 28, 32 (1st Cir. 1991) (explaining that a denied
applicant's allegations of differential treatment resulting from the
decisionmaker's illegitimate motives do not normally amount to an
equal protection violation). In benefit-denial cases, a plaintiff
can succeed only if he shows that (i) he was treated differently
than other similarly situated supplicants and (ii) the differential
treatment resulted from a gross abuse of power, invidious
discrimination, or some other fundamental procedural unfairness.9
See, e.g., id.; Creative Env'ts, 680 F.2d at 832 n.9. Even an
arbitrary, bad-faith denial of a benefit in derogation of state law,
without more, will not cross the constitutional threshold needed for
9
Although a few of our earlier equal protection cases intimate
a less demanding standard, see, e.g., Yerardi's Moody St. Rest. &
Lounge, Inc. v. Bd. of Selectman, 878 F.2d 16, 21 (1st Cir. 1989),
our jurisprudence has evolved. In recent years, we routinely have
applied the more stringent standard articulated above. See, e.g.,
SFW Arecibo, Ltd. v. Rodríguez, 415 F.3d 135, 142 (1st Cir. 2005);
Collins, 244 F.3d at 251; Baker v. Coxe, 230 F.3d 470, 474 (1st
Cir. 2000); Nestor Colon, 964 F.2d at 44; PFZ Props., 928 F.2d at
32. While this formulation may not be appropriate in all equal
protection cases, it is the proper standard in all cases in which
a plaintiff premises an equal protection claim on a discretionary
decision denying a state or local benefit.
-29-
an equal protection claim. Baker v. Coxe, 230 F.3d 470, 474 (1st
Cir. 2000).
This is a high hurdle, but its height makes eminently good
sense. Otherwise, a disappointed applicant for a state or local
benefit could manufacture a constitutional claim by the simple
expedient of alleging differential treatment. Were that the rule,
the correctness of every state or local benefit denial would become
a federal case.
With this infrastructure in place, we turn to ARCAM's
complaint to see if its allegations suffice to state a cognizable
equal protection claim. We think not.
ARCAM attempts to show differential treatment through its
allegation that BDE granted the loan application of another entity,
Pollos Picú. Although this allegation arguably suffices, for
pleading purposes, to establish that BDE treated another loan
applicant differently, ARCAM has pleaded no facts to indicate that
Pollos Picú was a similarly situated borrower. See Redondo-Borges
v. U.S. Dep't of Hous. & Urban Dev., 421 F.3d 1, 9 (1st Cir. 2005)
(holding unsupported conclusory allegations insufficient to
withstand Rule 12(b)(6) motion to dismiss). Indeed, the only
comparator contained in the complaint indicates a dissimilarity;
ARCAM avers that Pollos Picú "was undergoing extremely difficult
financial conditions," which it concedes was "quite opposite to the
positive projections and financial securities presented by ARCAM."
-30-
In a context in which the directors' discretionary decision to grant
or deny a loan depends on a myriad of imbricated factors (e.g., the
applicant's balance sheet, financial history, past performance,
business plan, prospects, management, and available collateral), it
is difficult to imagine how an equal protection plaintiff could
prove that two loan applicants at opposite ends of the spectrum were
similarly situated. This is especially true when the lender is
obligated, by statute, to speculate about such imprecise factors as
the applicant's potential for bolstering the local economy and the
likelihood that subsidization will result in a diminished need for
imports. See Nordlinger v. Hahn, 505 U.S. 1, 10 (1992) (suggesting
that to state a viable equal protection claim, a plaintiff must show
that it sustained disparate treatment compared to a person that is
alike in "all relevant respects"). When, as in this case, the
complaint contains not so much as an inkling of the basis for a
claim of similarity, the plaintiff will have fallen short of
carrying its modest burden under Rule 12(b)(6).
In all events, there is a more basic reason why ARCAM's
equal protection claim does not pass constitutional muster: its
allegations fail to satisfy the second half of the relevant equal
protection test. Its complaint offers no allegations indicating
that the disparate treatment which it bemoans resulted from a gross
abuse of power, invidious discrimination, or fundamentally unfair
procedures. We explain briefly.
-31-
The second and third categories are easily set aside.
ARCAM's allegations do not implicate "invidious discrimination" as
that phrase is used in our equal protection lexicon. Invidious
discrimination means discrimination based on suspect or quasi-
suspect classifications (such as race or gender). See Nestor Colon,
964 F.2d at 44; PFZ Props., 928 F.2d at 32. Such classifications
trigger heightened scrutiny for equal protection purposes. City of
Cleburne, 473 U.S. at 440-41. The universe of suspect or quasi-
suspect classifications does not encompass legislative
classifications, such as classifications premised on political
affiliation. See Vieth v. Jubelirer, 541 U.S. 267, 293 (2004).
Consequently, ARCAM's allegations of political discrimination and
retaliation are not allegations of invidious discrimination. See
Nestor Colon, 964 F.2d at 44; PFZ Props., 928 F.2d at 32.
By like token, ARCAM does not base its equal protection
claim on procedural irregularities or some associated unfairness.
Any such claim is, therefore, waived. See United States v. Zannino,
895 F.2d 1, 17 (1st Cir. 1990). At any rate, there is nothing in
the facts alleged to indicate the sort of fundamentally unfair
procedural rigamarole that might support an equal protection claim.10
Of course, the complaint makes crystal clear ARCAM's
frustration with both the amount of information that BDE requested
10
We add, moreover, that Calderón — the sole defendant before
us — had no direct responsibility for BDE's procedures.
-32-
in order to process the loan application and the subordination
condition. There is nothing fundamentally unfair, however, about
these demands. It is hard to believe that any responsible financial
institution would loan $5,000,000 to an unproven borrower without
requiring the submission of detailed background information. To
this, we add the obvious: there is nothing unconscionable (or even
untoward) about a bank demanding that a borrower post significant
collateral as a condition to obtaining a multi-million-dollar loan.
Cf. P.R. Laws Ann. tit. 7, § 611b(d) (authorizing BDE's board of
directors to require the pledging of collateral as a precondition to
granting loans).
This leaves the first category: gross abuse of power. We
have equated this concept with the "shocks the conscience" concept
used in substantive due process cases. See Baker, 230 F.3d at 474.
The record makes manifest that ARCAM cannot succeed on this theory.
According to ARCAM, the alleged abuse of power is
Calderón's supposed intervention to ensure that BDE would deny the
loan (purportedly as a reprisal for Pagán's political views and
activities). To the extent that a plaintiff challenging a
discretionary decision to deny a benefit claims to be entitled to
redress based on allegations of unconstitutional political
discrimination or retaliation, he cannot rely on the Equal
Protection Clause but, rather, must bring his claim under the
specific provisions of the First Amendment. See Rosenfeld v. Egy,
-33-
346 F.3d 11, 15 (1st Cir. 2003) (rejecting equal protection claim
premised on allegations of retaliatory refusal to grant a license
because the claim substantially overlapped with the plaintiff's
First Amendment claim); Nestor Colon, 964 F.2d at 45 (finding
"little basis or justification for applying equal protection
analysis" in such a situation because the First Amendment already
protects individuals against unconstitutional political
discrimination and retaliation).
This principle is dispositive here. In point of fact,
ARCAM brought a First Amendment claim bottomed on the same
allegations. That is telling — and the fact that the lower court
dismissed that claim is neither material to our analysis nor before
us on this appeal. As is true in the substantive due process
context, this rule does not depend on the likely success of the
plaintiff's First Amendment claim; so long as his allegations of
political discrimination fit within the contours of the First
Amendment, they are, a fortiori, insufficient to ground a claim that
the politically-inspired misconduct violated equal protection
guarantees. See Ruiz-Casillas, 415 F.3d at 134 (holding that an
appellant's equal protection claim, which was premised on
allegations of political discrimination, "flounders, as it is a mere
restatement of [her] failed First Amendment claim").
-34-
The bottom line is that ARCAM's allegations about
Calderón's untoward influence over BDE's decisionmaking do not
suffice to state a viable equal protection claim.
IV. CONCLUSION
We need go no further. To summarize, ARCAM is the only
plaintiff that asserts any direct injury resulting from Calderón's
alleged misconduct. The claims of Pagán, Vilanova, and the
guarantors that are before us on appeal must, therefore, fail for
lack of standing. And while ARCAM enjoys standing to pursue its
allegations of substantive due process and equal protection
violations, those allegations do not state viable constitutional
claims (and, thus, do not survive scrutiny under the first part of
the tripartite qualified immunity test). Consequently, we reverse
the district court's denial of Calderón's motion to dismiss on the
basis of qualified immunity and remand the case to the district
court for further proceedings consistent with this opinion.
Reversed and remanded.
-35-