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Runnion v. Girl Scouts of Greater Chi. & Nw. Ind.

United States Court of Appeals, Seventh Circuit

May 8, 2015

MEGAN RUNNION, a minor, through her mother and next friend, EDIE RUNNION, Plaintiff-Appellant,
v.
GIRL SCOUTS OF GREATER CHICAGO AND NORTHWEST INDIANA, Defendant-Appellee

Argued December 10, 2014.

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Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 6066--Harry D. Leinenweber, Judge.

For MEGAN RUNNION, a minor, through her mother and next of friend EDIE RUNNION, Plaintiff - Appellant: Steven Paul Blonder, I, Attorney, Chicago, IL; Marc Charmatz, Attorney, Silver Spring, MD; Barry Charlton Taylor, Attorney, Chicago, IL.

For GIRL SCOUTS OF GREATER CHICAGO AND NORTHWEST INDIANA, Defendant - Appellee: Barbara R. Barreno, Attorney, Chicago, IL; Patrick Scott Casey, Attorney, Chicago, IL.

For UNITED STATES OF AMERICA, Amicus Curiae: Bonnie I. Robin-Vergeer, Attorney, Washington, DC.

Before EASTERBROOK, SYKES, and HAMILTON, Circuit Judges.

OPINION

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Hamilton, Circuit Judge.

This appeal presents substantive issues concerning the scope of the federal Rehabilitation Act's coverage of private organizations (like the Girl Scouts) that receive federal funding. Before addressing the merits, though, we must address some recurring procedural issues involving Federal Rule of Civil Procedure 12(b)(6) dismissals and plaintiffs' opportunities to amend complaints before entry of a final judgment of dismissal. In particular, we focus on how the 2009 amendment to Federal Rule of Civil Procedure 15(a)(1)

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affects amendment practice in district courts.

Plaintiff Megan Runnion was active in a Girl Scout troop run by defendant Girl Scouts of Greater Chicago and Northwest Indiana, which is the largest regional Girl Scout organization in the United States. Megan is deaf. For several years she benefitted from sign language interpreters provided by the Girl Scouts that enabled her to participate fully in the troop's activities. The Girl Scouts then stopped providing interpreters. When her mother complained, Megan's entire troop was disbanded.

Megan alleges that the Girl Scouts violated the Rehabilitation Act by refusing to provide her with sign language services and then by disbanding her troop because her mother complained. The district court ultimately dismissed the case under Rule 12(b)(6), finding that Megan had failed to allege sufficiently that the Girl Scouts are subject to the Rehabilitation Act. Thinking amendment would be futile under its interpretation of the Rehabilitation Act, the district court dismissed the case without leave to amend.

We reverse. We first set out the facts and procedural history of the case, including the substantive issue about the scope of the Rehabilitation Act's coverage. We then turn to the procedural issues and seek to clarify the proper approach to motions for leave to amend complaints. We then resolve the substantive issues under the Rehabilitation Act and conclude that the district court erred by dismissing the entire case without giving plaintiff an opportunity to amend her complaint. The district court corrected that error in part by vacating its judgment but then erred again by refusing to allow a proposed amended complaint that is more than sufficient to state a viable claim for relief.

I. Statutory and Procedural Background

Megan filed her original complaint under the Rehabilitation Act in August 2012 when she was twelve years old. The Rehabilitation Act of 1973 uses the Congressional spending power to protect the rights of individuals with disabilities. Section 504 of the Act provides: " No otherwise qualified individual with a disability in the United States ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance ... ." 29 U.S.C. § 794(a). A person who has been excluded, denied, or discriminated against may sue the recipient of federal funds to enforce her rights. 29 U.S.C. § 794a(a)(2) (incorporating " remedies, procedures, and rights" from Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq. ).

Megan alleged that she has a hearing impairment, that she was otherwise qualified to participate in and to benefit from programs and activities offered by the Girl Scouts, and that the defendant violated the anti-discrimination provisions of the Rehabilitation Act when it stopped providing her with sign language interpreters that she needs to participate in group activities. The decision excluded her from participating in and denied her the benefits of Girl Scout programs and services solely by reason of her disability. Megan also alleged that the Girl Scouts retaliated against her for requesting these services when they disbanded the troop in response to her mother's complaints.

This appeal does not present any question about whether, if the Rehabilitation Act applies to the Girl Scouts, the organization must supply sign-language interpretation. The disputed issue on the merits of this appeal is whether Megan alleged sufficiently that the activities from which

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she was excluded are covered under the Rehabilitation Act by virtue of the Girl Scouts receiving Federal funding. The act forbids discrimination on the basis of disability in any " program or activity" receiving " Federal financial assistance." 29 U.S.C. § 794(a). As relevant here, the Act defines " program or activity" as " all of the operations" of a private organization, 29 U.S.C. § 794(b), if either (i) the private organization " as a whole" receives federal financial assistance, § 794(b)(3)(A)(i), or (ii) the private organization receives some federal funding and " is principally engaged in the business of providing education, health care, housing, social services, or parks and recreation," § 794(b)(3)(A)(ii).[1]

In her initial complaint, Megan alleged without more that the Girl Scouts are " a recipient of federal financial assistance within the meaning of 29 U.S.C. § 794." The Girl Scouts promptly moved to dismiss that complaint under Federal Rules of Civil Procedure 12(b)(1) (lack of subject-matter jurisdiction) and 12(b)(6) (failure to state a claim), arguing that Megan had not alleged sufficiently that they received federal financial assistance and were covered by the Rehabilitation Act. All parties now agree (correctly) that whether the Girl Scouts receive federal financial assistance has no effect on subject-matter jurisdiction and that federal-question jurisdiction under 28 U.S.C. § 1331 is proper. See generally Arbaugh v. Y& H Corp., 546 U.S. 500, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (whether employer falls within the limited definition of an employer covered by Title VII of Civil Rights Act of 1964 is a merits-related determination and does not concern subject-matter jurisdiction). We need not worry further about subject-matter jurisdiction.

In its first decision, issued October 26, 2012, the district court sided with the Girl Scouts in an opinion granting the motion to dismiss under Rule 12(b)(6). The district court found that Megan's original complaint had not alleged with sufficient factual detail that the Girl Scouts received federal financial assistance within the meaning of 29 U.S.C. § 794(b). Though Megan tried to argue that the defendant organization received financial assistance as a whole or was principally engaged in providing education or social services, the district court concluded that she had failed to allege facts supporting either theory.

The conclusion that Megan needed to allege in her complaint facts supporting specific legal theories was problematic, to say the least. Even after Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Federal Rules of Civil Procedure do not require code pleading. Under the old pre-Rules regime of code pleading, plaintiffs were required to plead the elements of a cause of action along with facts supporting each element. 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed.) (describing code pleading as requiring " the pleader [to] set forth the 'facts' constituting a 'cause of action'" ). Under the modern regime of the Federal Rules, the complaint need contain only factual allegations that give the defendant fair notice of the claim for relief and show the claim has " substantive plausibility." Johnson v. City of Shelby, 135 S.Ct. 346, 190 L.Ed.2d 309 (2014) (per curiam). As explained in Johnson :

Petitioners stated simply, concisely, and directly events that, they alleged, entitled

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them to damages from the city. Having informed the city of the factual basis for their complaint, they were required to do no more to stave off threshold dismissal for ...

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