Lisa D. Unger v. National Residents Matching Program Temple University of the Commonwealth System Temple University Hospital Paul Boehringer, Individually and as President of Temple University Hospital Martin Goldberg, Individually and as Dean of Temple University Medical School Richard Redmond, Individually and as Assistant to the President in Charge of the Residency Program Leon Malmud, Individually and as Vice President of Temple University Hospital Peter Liacouris, in His Capacity as President of Temple University and Ex-Officio Member of the Temple University Board of Trustees and Richard Kozera, Individually and as an Officer of Temple University Hospital

Citation: 928 F.2d 1392Docket: 90-1385

Court: Court of Appeals for the Third Circuit; April 26, 1991; Federal Appellate Court

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Lisa D. Unger appealed a decision from the United States District Court for the Eastern District of Pennsylvania, which dismissed her claim under 42 U.S.C.A. § 1983 for alleged deprivation of due process rights under the Fourteenth Amendment. The district court ruled that her complaint did not present a valid claim under Federal Rule of Civil Procedure 12(b)(6). 

In early February 1989, Temple University and Temple University Hospital announced the closure of their dermatology residency program, effective June 30, 1990. Unger, who had been accepted into the program on October 5, 1988, was notified on February 10, 1989, that she could not start her residency due to the program's termination. Unger had applied to the residency through the National Resident Matching Program, which pairs applicants with hospitals based on mutual preferences. The Matching Program's structure ensures that students can only enroll in one residency, and hospitals are limited to a specific number of students based on capacity. Unger's situation arose from the abrupt decision to discontinue the program just five months before her planned enrollment, leaving her and others without options for their medical training. The court ultimately affirmed the district court's dismissal of her claim.

Unger initiated a lawsuit on June 14, 1989, in the United States District Court for the Eastern District of Pennsylvania against the Matching Program, Temple University, its Hospital, and several officials, alleging violations under 42 U.S.C.A. Secs. 1983 and 1985, as well as state law claims. On July 19, 1989, she voluntarily dismissed the Matching Program from the case. Temple University and the other defendants subsequently moved to dismiss the federal claim for failure to state a claim (Fed. R. Civ. P. 12(b)(6)). The district court agreed, ruling that count one failed to state a claim and entered judgment in favor of the defendants. It dismissed the state law claims without prejudice, allowing Unger to refile them in state court.

Unger appealed, contending that the district court erred in determining that she did not establish a property or liberty interest sufficient to support her claim of procedural due process violations, and that she had received all due process required. She also asserted that the district court did not assume her allegations to be true or draw reasonable inferences in her favor and should have allowed her to amend her complaint before dismissal. The appellate court has jurisdiction under 28 U.S.C.A. Sec. 1291 and reviewed the dismissal under the plenary standard, accepting the complaint's factual allegations as true. The scope of dismissal under Rule 12(b)(6) is limited to instances where no relief could be granted under any conceivable set of facts. The court will review the denial of leave to amend for abuse of discretion.

Count one of Unger's complaint alleges that Temple violated her constitutional rights under the 14th Amendment and 42 U.S.C. §§ 1983 and 1985. However, Unger abandoned her claim under § 1985 during oral arguments, and her appeal focuses solely on § 1983. This statute holds individuals liable for depriving U.S. citizens of constitutional rights under state authority. Unger contends that Temple acted under state law when it terminated its graduate medical residency in dermatology, violating her procedural due process rights under the Fourteenth Amendment, while explicitly renouncing any claim based on substantive due process.

The Fourteenth Amendment prohibits states from depriving individuals of life, liberty, or property without due process. To assess this, a two-stage analysis is required: first, determining if the claimed interests fall within the Amendment's protections, and second, identifying the required due process procedures. Unger argues that the district court erred by dismissing her complaint without recognizing a sufficient liberty or property interest.

Citing *Robb v. City of Philadelphia*, the court noted that dismissals at the pleadings stage should only occur if no facts could support the plaintiff's claim. The analysis then considers whether Unger's complaint asserted a protected liberty interest. The Supreme Court has defined "liberty" broadly, encompassing rights beyond mere physical freedom, including the right to engage in common occupations and pursue happiness. In *Board of Regents v. Roth*, the Court clarified that procedural due process claims arise only when a state's action could seriously damage an individual's community standing, which was not established in Roth's case.

The Supreme Court stated that the State University did not impose a stigma or disability on the respondent that would limit his employment opportunities, noting that the university did not bar him from seeking public employment elsewhere. The Court emphasized that not being rehired from one job does not equate to a deprivation of liberty, as the individual remains free to seek other employment. In the district court's ruling on Unger's complaint, it determined that she did not allege a cognizable liberty interest under the Fourteenth Amendment. Although the discontinuation of Temple's dermatology residency program was inconvenient for Unger, her complaint did not demonstrate serious damage to her community standing or impose a stigma that would restrict her educational opportunities. Conversely, Unger claimed she believed she could have secured a position in another residency program if financial assistance had been available, which further undermined her assertion of a protected liberty interest.

The question then turned to whether Unger had a protected property interest. Property interests are typically defined by existing laws or agreements rather than the Constitution itself. Unger argued two property interests: one in the pursuit of her graduate medical education and another in a contract with Temple arising from her participation in the Matching Program. The district court did not reject the claim of a property interest in the residency program outright but concluded that even if such an interest existed, Unger had no Fourteenth Amendment right to a hearing. The Supreme Court's previous rulings established that to possess a property interest, an individual must have more than a mere desire or expectation; they must have a legitimate claim of entitlement. Unger also cited multiple cases to support her claim of a property interest in her graduate medical education.

Cases involving universities that took academic or disciplinary actions against currently enrolled students, such as Ewing and Horowitz, are distinguished from the matter at hand. The Supreme Court in these cases acknowledged, without ruling, that enrolled students might possess a property interest in their education. However, Unger’s assertion of a property interest in her graduate medical education is dismissed as it lacks a contractual basis. Unger’s expectation, deemed abstract, fails to meet the threshold established by the Supreme Court in Roth, which concluded that a mere expectation is insufficient for Fourteenth Amendment protection.

Unger also claims that her participation in the Matching Program formed a contract with Temple, prompting an examination of whether this contract confers a property interest protected under the Fourteenth Amendment. It is established that contracts with state entities can create property rights under this amendment, as recognized in Perry v. Sindermann. Nevertheless, not all state contracts are guaranteed to provide such protections. 

The issue of where to delineate this boundary was addressed in Reich v. Beharry, where a special prosecutor’s claim against the county for non-payment under a contract was dismissed. The court affirmed that, while state contract law can create property interests deserving of procedural due process, not every contractual interest qualifies. The potential for federal courts to adjudicate numerous state contract claims would undermine the fundamental aims of the due process clause, thus supporting a more restrictive interpretation of property interests derived from contracts.

In Reich, the court established that not all contracts with governmental entities confer a property right under the Fourteenth Amendment's due process protections. This conclusion aligns with the views of five other courts of appeals, which have examined when a contractual right transitions into a constitutionally protected property right. For instance, in Yatvin v. Madison Metro. Sch. Dist., the Seventh Circuit affirmed that the due process clauses do not guarantee federal remedies for every breach of contract involving state or federal agencies. The court distinguished between "mere" contractual rights and property rights that arise from contracts, citing that a tenured professor's job, protected under the Fourteenth Amendment due to his tenure contract, exemplifies a property right. 

Furthermore, in San Bernardino Physicians' Servs. Medical Group v. County of San Bernardino, the Ninth Circuit acknowledged that while deprivation of contractual rights may give rise to claims under section 1983, not all interference with contract expectations qualifies for such claims, emphasizing the impracticality of converting every breach of contract into a federal issue. Although state law may provide legal rights through contracts, federal constitutional law determines whether these rights constitute a "legitimate claim of entitlement" under the Due Process Clause. The document also references agreement among the First, Second, and Fifth Circuits on the necessity of distinguishing contractual rights and cautions against automatically classifying all contractual interests as constitutional rights, especially when they do not relate to a recognized status beyond being a government contractor.

Two types of contract rights are identified as property protected under the Fourteenth Amendment, based on Supreme Court and circuit court precedents. The first type pertains to contracts that confer protected status, such as welfare benefits or tenure, which imply extreme dependence or permanence. The second type involves contracts that include a provision allowing termination only for cause. In this case, Unger does not possess either type of contract right, nor does her complaint present a viable alternative. She claims a valid contract was formed with Temple University for a dermatology residency, but fails to allege that the contract contained a for-cause termination provision or that it conferred any protected status. While Unger’s admission to the residency program is acknowledged, it is noted that her claim for entitlement does not hold against Temple's termination of the program. Consequently, it is determined that Unger has not alleged that her termination deprived her of any protected entitlement under the Fourteenth Amendment, relegating her potential claims to state law remedies. The concurrence suggests that Unger has not adequately alleged a breach of contract, yet agrees she has stated enough to survive a motion to dismiss, although uncertainty remains regarding the contract's support for her claims. The court emphasizes that while the specific contract details are not fully provided, Unger’s allegations regarding a breach must be accepted as true for the purposes of this decision.

The district court determined that Unger’s complaint did not sufficiently establish a protected property interest under the Fourteenth Amendment, making it unnecessary to assess whether she received adequate due process. Unger argued that the court failed to accept all facts in her favor during the dismissal of her claim. However, the court correctly applied the standard for such motions, which requires accepting the complaint’s facts and reasonable inferences as true, as reiterated in Markowitz. Temple's attempt to introduce additional favorable facts about the financial reasons for the closure of its dermatology program during the dismissal process was inappropriate, as those facts were not included in Unger’s complaint. The court noted that Unger did not specify reasons for the program's closure and the letter informing her of the discontinuation did not mention financial reasons. Unger contended that the district court relied on Temple's reasons for the closure, but the court's opinion did not support this assertion. After reviewing Unger’s complaint, the court found no error in dismissing her case, confirming that it had applied the correct standard and refrained from considering Temple's additional claims.

Unger contends that the district court abused its discretion by not allowing her to amend her complaint before dismissing it for failure to state a claim. She references Rotolo v. Borough of Charleroi, which mandates that civil rights complaints containing vague allegations should be liberally permitted to amend under Federal Rule of Civil Procedure 15(a). However, the court found Unger’s complaint to be clear and comprehensible, having provided ample opportunity for her counsel to argue her property and liberty interests in Temple's dermatology program. The court noted that, while some of Unger's assertions contained "conclusory language," the overall allegations were understandable. The dismissal was based not on vagueness, but on the failure to demonstrate a cognizable claim under the law. Unger's attempt to claim a violation of her due process rights under the Fourteenth Amendment was unsuccessful because she did not adequately allege a protected property or liberty interest related to her admission to the program. Consequently, the court affirmed the dismissal of Unger’s constitutional claim with prejudice and her state law claims without prejudice. Circuit Judge Stapleton concurred with the judgment but noted that he did not find it necessary to decide if Unger's complaint could have raised due process issues had different allegations been made regarding the program's continuity.

Unger claims a valid contract was established with the Hospital, University, and NRMP when she signed an Agreement (Exhibit 'A') obligating her to complete her Dermatology residency solely at the institution to which she was matched. Under this contract, she agreed to attend the Hospital if matched there, with NRMP matching her to that institution in return for the Hospital providing an accredited program. However, the complaint, when examined, does not support an unconditional promise from Temple to provide three years of education, as Exhibit A does not indicate such a commitment. Despite asserting there were additional contracts, Unger failed to identify any other source granting her the right to compel Temple to maintain its program. Consequently, even if a contractual relationship existed, it does not establish a due process violation, as Unger could not demonstrate any breach of contract resulting in deprivation. Temple is acknowledged as a state actor due to its relationship with the Commonwealth of Pennsylvania. The court concludes that since Unger has not shown deprivation of a protected interest, it does not need to evaluate the implications of recent Supreme Court rulings regarding due process and post-deprivation remedies.