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Neu v. Corcoran

decided: March 3, 1989.

NICHOLAS NEU, PLAINTIFF-APPELLEE,
v.
JAMES P. CORCORAN, INDIVIDUALLY AND AS SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK, AND JAMES W. RANDOLPH, INDIVIDUALLY AND AS DEPUTY SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK, DEFENDANTS-APPELLANTS



Appeal from an order of the District Court for the Southern District of New York (Robert W. Sweet, Judge) denying a motion to dismiss, on grounds of qualified immunity, a suit alleging defamation by state officials.

Newman, Pierce and Mahoney, Circuit Judge.

Author: Newman

JON O. NEWMAN, Circuit Judge.

The principal issue on this appeal is whether qualified immunity shields a state official who defames a private citizen and thereby damages his career opportunities but without depriving the citizen of any legal right or status created by state law. The issue arises on an appeal by James P. Corcoran and James W. Randolph from an order of the District Court for the Southern District of New York (Robert W. Sweet, Judge) denying their motion to dismiss a due process claim brought by Nicholas Neu. Neu v. Corcoran, 695 F. Supp. 1552 (S.D.N.Y. 1988). We conclude that appellants are entitled to immunity because our prior cases have not clearly established that appellants' conduct deprived appellee Neu of a liberty interest protected by the due process guarantees of the Fourteenth Amendment. We therefore reverse and remand.

Background

From February 1985 through March 11, 1987, plaintiff-appellee Neu was president of American Motor Club, Inc. ("AMC"), a New York corporation engaged in selling prepaid automobile collision contracts to motorists in New York. The New York State Insurance Department filed charges against AMC in 1985, alleging that the company was engaged in the selling of insurance without a license. The Supreme Court of the State of New York upheld the charges in January 1987 and enjoined AMC from continuing its activities in the state. The Court also imposed monetary sanctions on Neu personally. In October 1987, New York's Appellate Division, First Department, affirmed the ruling that AMC was engaged in the unauthorized sale of insurance but reversed the fines against Neu. People v. American Motor Club, Inc., 133 A.D.2d 593, 520 N.Y.S.2d 383 (1st Dep't 1987).

In March 1987, after the state Supreme Court's ruling, Neu began operating similar prepaid collision service companies in California. Neu's complaint in the pending litigation alleges that in June 1987 Corcoran, New York's superintendent of insurance, and Randolph, deputy superintendent, made defamatory remarks about Neu at a convention of insurance commissioners in Chicago. Neu alleges that the New York officials falsely told other commissioners, including California's, that Neu did not honor his contracts, did not repair vehicles, was responsible for driving AMC into bankruptcy, knowingly violated the law, was a swindler, operated a scam in New York, and associated with criminals. Neu further alleges that as a result of those statements, his reputation was ruined and he was forced out of the automobile repair business, which was his sole livelihood. In particular, he alleges that the California Department of Insurance threatened to bring disciplinary action against insurance companies and brokers that engaged in business transactions with Neu's companies and that he was forced to resign from his California companies.

Neu's suit against Corcoran and Randolph was brought in the District Court for the Southern District of New York, pursuant to 42 U.S.C. § 1983 (1982). He alleged that the state officials, without due process, deprived him of a liberty interest by defaming him and casting a stigma on him that foreclosed a range of career opportunities and deprived him of the ability to engage in his occupation. He also brought a pendent state law claim for defamation.

Corcoran and Randolph moved, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss Neu's claim for failure to state a claim upon which relief may be granted and on the basis of official immunity under federal and state law. The District Court issued an order denying the motion. Corcoran and Randolph appeal from the order to the extent that it denied their official immunity defense to the federal claim.

Discussion

1. Appellate Jurisdiction. Although the denial of a motion to dismiss is ordinarily not an appealable "final decision" within the meaning of 28 U.S.C. § 1291 (1982), the "collateral order" doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949), has been construed to permit interlocutory appeals from denials of substantial claims of qualified immunity. See Mitchell v. Forsyth, 472 U.S. 511, 524-30, 86 L. Ed. 2d 411, 105 S. Ct. 2806 (1985). The entitlement to qualified immunity is an immunity from suit, rather than a mere defense to liability; therefore, it is effectively lost if a case is erroneously permitted to go to trial. Id. at 526. An order denying a defense of qualified immunity is immediately appealable, however, only where it can be decided as a matter of law and does not turn on disputed questions of fact. Id. at 530; Lawson v. Abrams, 863 F.2d 260, (2d Cir. 1988); White v. Frank, 855 F.2d 956, 958 (2d Cir. 1988).

Neu contends that Corcoran's and Randolph's qualified immunity defense turns on disputed questions of fact and that the case is therefore not ripe for review under the collateral order doctrine. Specifically, he contends that whether appellants' alleged statements actually resulted in foreclosing Neu from engaging in his chosen occupation is a factual question requiring further inquiry in the District Court. We disagree. We think that the validity of appellants' qualified immunity defense to Neu's claims can be decided as a matter of law, accepting Neu's factual allegations as true for purposes of the appeal. We therefore have jurisdiction to review the immunity ruling.

2. Qualified Immunity. Government officials performing discretionary functions are not absolutely immune from liability for civil damages, but they are protected by qualified, or good-faith, immunity. Harlow v. Fitzgerald, 457 U.S. 800, 73 L. Ed. 2d 396, 102 S. Ct. 2727(1982). Qualified immunity shields officials from liability for civil damages "insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Id. at 818. An official is liable only if the contours of the right he is alleged to have violated are "sufficiently clear that a reasonable official would understand that what he is doing violates that right." Anderson v. Creighton, 483 U.S. 635, 107 S. Ct. 3034, 3039, 97 L. Ed. 2d 523 (1987). The very action in question need not previously have been held unlawful, but the unlawfulness must be apparent in light of preexisting law. Id.

Neu alleges that appellants, acting under color of state law, deprived him of a liberty interest without due process by making defamatory statements that led to foreclosure of his ability to engage in his chosen occupation, the auto repair contract business. The District Court concluded that this adequately stated a claim for relief under section 1983. Neu v. Corcoran, 695 F. Supp. at 1555. The District Judge also found that the right to due process under such circumstances had been clearly established by decisions of this Circuit. Id. at 1556. The Court cited two cases for this proposition, Huntley v. Community School Board, 543 F.2d 979 (2d Cir. 1976), cert. denied, 4 ...


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