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Coleman v. Labor and Industry Review Commission of State of Wisconsin

United States Court of Appeals, Seventh Circuit

June 16, 2017

Tracey Coleman, Plaintiff-Appellant,
Labor and Industry Review Commission of the State of Wisconsin, Defendant-Appellee.

          Argued November 2, 2016

         Appeal from the United States District Court for the Eastern District of Wisconsin. No. 15-CV-984 - William E. Duffin, Magistrate Judge.

          Before Wood, Chief Judge, and Posner and Williams, Circuit Judges.

          WOOD, Chief Judge.

         Seeking to proceed without prepayment of fees, Tracey Coleman brought a pro se suit against the Labor and Industry Review Commission of the State of Wisconsin (Commission). At the same time as he submitted his affidavit of indigence, see 28 U.S.C. § 1915(a)(1), he filed a document indicating that he consented to have a magistrate judge decide the case. 28 U.S.C. § 636(c)(1). The magistrate judge dismissed the suit and entered a final judgment before the Commission was even served, and thus before it had any occasion either to consent to or to refuse the option of proceeding before the magistrate judge. Coleman appealed, and we recruited counsel to assist him. The question before us is whether a plaintiff's consent alone can give a magistrate judge the necessary authority to resolve a case on the basis that the complaint fails to state a claim upon which relief can be granted, in a case that otherwise requires an Article III judge. We conclude that the answer is no: only consent by both (or all) parties will suffice, and so we must remand this case for further proceedings.


         ABM Industries hired Coleman in February 2014, and assigned him to work at Carmen High School. It fired him less than three weeks later because it believed that he had sexually harassed a school employee. Coleman responded by filing a pro se suit against ABM and Carmen in federal district court; he asserted that the real reason he was fired was racial discrimination. The suit ended more or less amicably with a stipulated dismissal on October 31. Coleman also sought relief from the state Commission's Equal Rights Division. That effort came to naught. On July 22, 2015, an administrative law judge dismissed Coleman's case because he had failed to meet certain deadlines. Coleman then turned back to federal court. He filed a second pro se suit on August 18, this time contending that the Commission had denied him due process and requesting permission to proceed in forma pauperis (IFP). See 28 U.S.C. § 1915. This was when he filed his consent to proceed before the magistrate judge.

         The magistrate judge took up the matter immediately. He found that Coleman's request to proceed IFP was financially supported, but he ordered Coleman to submit an amended complaint because the initial version failed to "offer any details that could plausibly present a federal cause of action." The new complaint proved similarly deficient, and so the magistrate judge dismissed Coleman's case and entered final judgment. In so doing, he relied on the instruction in 28 U.S.C. § 1915(e)(2) that calls for "the court" to "dismiss the case at any time if the court determines that ... (B) the action ... (ii) fails to state a claim on which relief may be granted." Here's the rub: because the Commission had not yet been served, the magistrate judge was proceeding with the consent of only one of the litigants. Coleman filed a timely appeal from the final judgment, as permitted by 28 U.S.C. § 636(c)(3). Our appellate jurisdiction is secure. The important question on appeal relates to jurisdiction at the district-court level, where the case was resolved by a magistrate judge who had not received permission from "the parties" (plural) to act.



         Article III vests the "judicial power" in "one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish." U.S. CONST, art. Ill. § 1. It preserves the impartiality of those courts through two key safeguards: life tenure and salary protection. Wellness Int'l Network, Ltd. v. Sharif, 135 S.Ct. 1932, 1938 (2015). The Supreme Court has insisted that core judicial functions may not be given to persons who lack these Article III protections, unless all affected parties consent. See, e.g., Wellness, 135 S.Ct. at 1942, 1949 (Article I judge may adjudicate a case if the litigants validly consent); Stern v. Marshall, 564 U.S. 462, 482 (2011) (Article III did not permit the bankruptcy court to enter final judgment on a counterclaim); Nguyen v. United States, 539 U.S. 69, 77-78, 80 (2003) (panel of court of appeals judges could not include an Article I territorial judge); N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 76 (1982) (assignment by Congress to bankruptcy judges of authority to adjudicate all civil proceedings "related to" bankruptcy violated Article III).

         The case before us presents one aspect of that problem: may an Article I judge dismiss an action for failure to state a claim on which relief can be granted, if that dismissal is part of the initial screening that occurs in IFP cases and thus takes place before the defendants are served? Although the statute does not say this in so many words, we have understood section 1915(e) to "direct[] courts to screen all complaints filed with requests to proceed IFP." Luevano v. Wal-Mart Stores, Inc., 722 F.3d 1014, 1022 (7th Cir. 2013). It instructs "the court" to "dismiss the case at any time" if, among other things, the action "fails to state a claim on which relief may be granted." 28 U.S.C. § l9l5(e)(2)(B)(ii). The magistrate judge in our case followed that command and entered a final judgment for the as-yet-unserved defendant. We must decide whether this was permissible.


         We begin with the pertinent language of the Magistrate Judges Act:

(c) Notwithstanding any provision of law to the contrary-
(1) Upon the consent of the parties, a full-time United States magistrate judge ... may conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in the case, when specially designated to exercise such jurisdiction by the district court or courts he serves.

28 U.S.C. § 636(c)(1). Valid consent is not optional; it is "essential to upholding § 636(c)'s constitutionality against arguments that it improperly vests the judicial power of the United States in non-Article III judges." Kalan v. City of St. Francis, 274 F.3d 1150, 1152 (7th Cir. 2001). But although the consent requirement is carved in stone, the identity of "the parties" whose permission section 636(c)(1) demands is less clear. Is it all of the parties? Some of the parties? Only any party who must be before the court for purposes of the ruling in question?

         The circuits have come to different conclusions about this question, and unfortunately, so have we. The Fifth Circuit, in Neals v. Norwood, 59 F.3d 530, 532 (5th Cir. 1995), and our opinion in Hains v. Washington, 131 F.3d 1248, 1249 & n.2 (7th Cir. 1997) (per curiam), take the position that an unserved defendant is not one of the "parties" for purposes of section 636(c)(1), and thus the defendant's consent is not required in order to permit a magistrate judge to issue a dispositive order when screening a complaint for IFP purposes. On the other side, the Eighth Circuit, in Henry v. Tri-Services, Inc., 33 F.3d 931, 933 (8th Cir. 1994), and our court in Geaney v. Carlson, 776 F.2d 140, 142 (7th Cir. 1985), hold that the magistrate cannot finally dispose of the case, on screening or otherwise, without the defendant's consent.

         No matter what the rules concerning consent are, there is a substantial role for the magistrate judge to play in the screening process. Under the rule of Needs and Hains, the magistrate judge enters a final judgment on the case, while under the approach of Henry and Geaney, he evaluates the complaint, takes any nondispositive actions that are appropriate (e.g., further investigation of indigence), and recommends an action for the district court. See § 636(b)(1)(C). If the action recommended is dismissal, the district court can enter that final judgment (after considering any properly filed objections) without bothering the defendants. Under either view, to the extent that section 1915(e)(2) involves nondispositive issues, such as the truthfulness of the allegation of poverty, nothing in the Magistrate Judges' Act prevents the magistrate judge from resolving the issue. That is because a conclusion that the plaintiff is not indigent does not foreclose further legal proceedings-it just means that the plaintiff must pony up the required filing fee. See 28 U.S.C. § 636(b)(1) (authorizing magistrate judges to perform a wide variety of non-dispositive matters).

         Before turning to the question whether the consent of the plaintiff alone suffices, a quick review of the screening process is in order. Until April 26, 1996, section 1915 did not cover failures to state a claim. All the statute then said, with respect to any kind of screening, was that the court "may dismiss the case if the allegation of poverty is untrue, or if satisfied that the action is frivolous or malicious." 28 U.S.C. § 1915(d) (1995). It was during the pre-1996 era that the Supreme Court decided Neitzke v. Williams, 490 U.S. 319, 320 (1989), which raised the question "whether a complaint filed in forma pauperis which fails to state a claim under Federal Rule of Civil Procedure 12(b)(6) is automatically frivolous within the meaning of 28 U.S.C. § 1915(d) [1989])." Underscoring the fact that there is some distance between the total lack of merit connoted by the word "frivolous" and a failure to state a claim, the Court concluded that the answer was no. The justices found it "evident that the failure-to-state-a-claim standard of Rule 12(b)(6) and the frivolousness standard of § 1915(d) were devised to serve distinctive goals, and that while the overlap between these two standards is considerable, it does not follow that a complaint which falls afoul of the former standard will invariably fall afoul of the latter." Id. at 326. Nothing in Rule 12(b)(6), the Court said, "confines its sweep to claims of law which are obviously insupportable." Id. at 327. This is because the functions of Rule 12(b)(6) and section 1915(d) are different. The latter statute permitted (then as now) judges to "pierce the veil of the complaint's factual allegations and dismiss those claims" whose factual contentions are so baseless that they are properly considered to be frivolous. Id.

         The pre-1996 regime was still in place when the Supreme Court decided Denton v. Hernandez, 504 U.S. 25 (1992). There the Court underscored that a dismissal for frivolousness under the IFP statute leaves the complainant free to pay the filing fee and try again. Id. at 34. At the time, however, it was still impossible for a district court to dismiss an IFP request for failure to state a claim (or any other merits-based reason). Denton's holding must therefore be understood as addressing only the grounds for dismissal that were possible at the time.

         The number of such grounds expanded dramatically in 1996. Concerned with the ballooning number of IFP requests, particularly though not exclusively from prisoners, Congress decided to enhance the courts' screening powers. It did so in the Prison Litigation Reform Act, which added to section 1915 an expanded set of reasons that would support dismissal "at any time" (including during preliminary screening). Those reasons are as follows: (1) the allegation of poverty is untrue; (2) the action or appeal is frivolous or malicious; (3) the action fails to state a claim on which relief may be granted; or (4) the action seeks monetary relief against a defendant who is immune from such relief. 28 U.S.C. § 1915(e)(2) (2017). See Prison Litigation Reform Act of 1995, Pub. L. 104-134, 110 Stat. 1327 (1996); Hutchinson v. Spink, 126 F.3d 895, 899-901 (7th Cir. 1997) (discussing the 1996 amendments and anticipating some of the problems that could arise if a case is dismissed for failure to state a claim without the defendants' knowledge).

         Under the current regime, at the time a person files a complaint in which she seeks permission to proceed IFP, she must also submit an affidavit setting forth all of her assets and demonstrating that she is unable to pay the required fees. The date on which that complaint is filed or properly mailed, if the plaintiff is a prisoner, is considered to be the date when the suit "commences" for purposes of Federal Rule of Civil Procedure 3. See, e.g., Jones v. Bertrand, 171 F.3d 499, 500-02 (7th Cir. 1999); see generally 4 Charles Alan Wright, Arthur R. Miller & Adam N. Steinman, Federal Practice and Procedure § 1052 at 224-25 (4th ed. 2015). If the plaintiff ultimately is found not to be eligible for IFP status and then fails to pay the filing fee, the case is subject to dismissal on that basis, but the failure to pay does not mean that the case never started. See Farzana K. v. Ind. Dep't of Educ, 473 F.3d 703, 707 (7th Cir. 2007).


         We are now ready to turn to Coleman's case. We address three questions: whether a dismissal under section l9l5(e)(2)(B)(ii) must be treated as a full-fledged dismissal on the merits; what it takes to signify consent; and whether a defendant who has not yet been served is one of ...

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