Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 77 C 3950 - John Powers Crowley, District Judge.
Before Swygert, Circuit Judge, Moore, Senior Circuit Judge,*fn* and Sprecher, Circuit Judge.
Joseph E. Paige appeals from an order entered December 2, 1977 denying his motion for a preliminary injunction and dismissing his complaint for failure to state a claim upon which relief can be granted. The complaint sought to enjoin and restrain the Department of Housing and Urban Development ("HUD") and various officials of HUD from discharging Paige, as of October 28, 1977, from his position as the Area Counsel for the Chicago Area office of HUD.
Until September 29, 1977, appellant Paige had served for twenty years as a government attorney. From 1957 to 1969 he was a trial attorney with the Department of Justice. In 1970 he became an attorney with HUD, and on September 8, 1971 he was appointed Area Counsel for the Chicago office. As such, Paige, a non-veteran, occupied a Schedule A position in the excepted service.*fn1 On September 7, 1977, Elmer C. Binford became Area Director for the Chicago Area Office. Some three weeks later, on September 29, 1977, Binford sent Paige a memorandum advising Paige that he would be terminated not only from his position as Area Counsel, but from all employment at HUD, effective October 28, 1977. The memorandum indicated that Paige had "exhibited inadequate performance" in the areas of "Technical Expertise and Poor Judgment" and "Supervisory Performance".*fn2 After receiving this notice of termination, Paige was informed by the Chief Administrative Officer for the Chicago Office that he had no internal rights of appeal and no right to submit a statement or evidence in his defense.
On October 26, 1977, Paige filed a Motion for a Temporary Restraining Order and a Complaint for Preliminary and Permanent Injunctive Relief. The complaint alleged that Binford's action was arbitrary, capricious and an abuse of power and discretion; that Binford lacked the authority to discharge Paige; and some of the information on which the dismissal was based was falsified; that Paige had a property interest in his position stemming from HUD Handbook 302.2 entitled "Tenure of Attorneys";*fn3 that HUD failed to comply with its own rules that no disciplinary action may be taken against a HUD attorney without first bringing the matter to the attention of the General Counsel, with a possible appeal to the Secretary of HUD; and that because of the harm to Paige's reputation, his liberty interest was violated because he was denied a hearing prior to discharge. Both parties agreed to maintain the status quo until November 28, 1977, when the lower court held a hearing on the preliminary injunction.
At the hearing the court did not examine the merits of Paige's discharge.
"We are not going to go into the merits of the discharge, Mr. Murray (Paige's counsel). I can't see how we can, because it goes to the only question is that it goes to whether he is entitled as I see it the only issue presented to me is, is he entitled to some type of a notice and hearing prior to removal, and some facts may be relevant to that question, but whether he is I don't think the merits of the discharge are proper subject for my consideration." Trans. of Proc. at 8.
The court determined that only one factual question existed, whether there was a reasonable expectation of a hearing. The court stated:
"As I see it, the only factual question that I am going to have to determine is whether there was a reasonable expectation of a hearing, not the other matters, whether he had a right to a hearing, the other matters as to sending him the letter stating the cause, that is a question of law, as I see it. The question of whether the agency followed its internal regulations again is a question of law, not a question of fact." Trans. of Proc. at 17.
The trial judge, over the objection of Paige's counsel, held that all other questions and evidence were irrelevant to the issue he was hearing. Id. at 17-18. Accordingly, Paige introduced various HUD memoranda and manuals concerning the selection of attorneys, disciplinary actions involving attorneys, and responsibilities of attorneys. HUD introduced only one item, an affidavit of the General Counsel of HUD on the issue of whether HUD complied with its own procedures.
On December 2, 1977, the district court entered a Memorandum Opinion and Order denying Paige's Motion for a Preliminary Injunction and dismissing his complaint for failure to state a claim upon which relief could be granted, entering judgment for the defendants. From this judgment Paige appeals.*fn4
On appeal Paige argues that the discharge was in violation of due process because the dismissal without a hearing on the merits violated his property rights in continued employment and his liberty interests because his good name and reputation were at stake. He also argues that the discharge, based on false information, was reviewable as being arbitrary and capricious. Finally, Paige contends that since HUD gave him notice of the reasons behind the discharge, HUD must complete the procedure by giving him a hearing.
The government contends that HUD Handbook 302.2 did not create a tenure system for exempt employees of HUD. It argues that no liberty interest was invoked because any information regarding the firing was not to be made public and the reasons for the firing did not create a stigma on Paige's reputation. The government contends that review is not available for "abuse of discretion" because courts only review agency discretion where the employee is in the competitive service. Finally, the government contends that providing Paige with reasons for his discharge was merely a gratuitous gesture which did not confer upon him any additional rights for a hearing.
For purposes of this appeal, we must determine whether appellant raised a due process claim which would prevent entering a dismissal for failure to state a cause of action.
In recent years, especially since Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970), the Supreme Court has extended the notion of "protected rights" under the due process clause beyond earlier concepts of "liberty" or "property". The Court "has placed great emphasis both on making it possible for those who deal with the government in any way to rely on any clearly announced rules, and also on reducing the helplessness of persons who are in a dependent relationship to government with respect to basic needs". Tribe, American Constitutional Law 515-16 (1977). However, simple employment is not sufficient to create entitlement to continued employment. As stated recently by the District of Columbia Circuit:
"As a threshold requirement the plaintiff in a public employee dismissal case must show that he has either a legitimate entitlement with respect to his job, which would be protected as property under the fifth or fourteenth amendments, or that the dismissal deprives him of a liberty interest protected by those constitutional provisions." ...