CA1: 1983 and the injured corporation

Pagán v. Calderón. No. 05-1811. Guess what folks – it is a Puerto Rican political discrimination case under 42 USC § 1983. But this one is interesting, as it involves some of that newfangled corporate law stuff. I promise.   

In short, only the corporation can sue for its injuries, and the governor didn’t really injure the corporation in a constitutional manner.  Keep reading.

In this case, a company argues that the governor acted to reject a loan to a company for political reasons. Shareholders (who sometimes guaranteed the companies loans). of the company also sue. The governor to dismiss, arguing qualified immunity. District Court denies, and interlocutory review is sought.

As to standing, as most know, shareholders can rarely sue for injuries to the corporation on behalf of themselves. The court holds that the shareholders did not all edge a "particularized, nonderivative injury that might deflect application of the usual shareholder standing rule." See Bishay v. Am. Isuzu Motors, Inc., 404 F.3d 491, 495 (1st Cir. 2005) (our coverage here); and Diva's Inc. v. City of Bangor, 411 F.3d 30, 42 (1st Cir. 2005) (our coverage here). There is some discussion of exceptions to this rule which are not applicable. For the same reasons, the court holds that these plaintiffs – who are also creditors – don’t have creditor standing. For about the same reason, the claims of an executive (who was also a "kingpin" in the out-of-favor party) fail, because "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 he alleges that he personally suffered a direct, nonderivative injury." (Citing Potthoff v. Morin, 245 F.3d 710, 717 (8th Cir. 2001).)

As to the claims of the actual corporation, the court notes that, of course, there is no heightened pleading requirement in a civil rights case. But, there substantive due process claims fail, because granting a loan was a completely discretionary activity. The equal protection claims fail because since it did not base its claim on procedural irregularities, "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." Finally, nothing about the governor’s behavior was shocking enough to merit any exceptions to the general rule.