Unpublished Disposition, 876 F.2d 896 (9th Cir. 1989)

MEMORANDUM^* 

Appellant Julius Engel appeals the district court's order granting appellees' motion for summary judgment and denying his motion for summary judgment in his 42 U.S.C. § 1983 (1982) action against the City of Stockton (City) and Officers Ralph Womack and Ralph Tribble (governmental defendants), and Law Enforcement Psychological Services, Inc. (LEPS), Michael Roberts, the principal of LEPS, and Dr. Richard Wihera, an employee of LEPS (private defendants). Engel brought this action as a result of the governmental defendants' decision to reject his application for a position as a police officer based on the psychological evaluation and recommendation of Dr. Wihera. He alleges claims under the first and fourteenth amendments as well as a pendent state-law claim. He also appeals the district court's order setting aside an entry of default against LEPS and Roberts. We affirm both orders.

BACKGROUND

In December 1985 Engel applied for the position of police officer with the Stockton City Police Department (Department). Although he passed the written examination, his application was rejected, in part, based on the recommendation of psychologist Dr. Wihera who performed a psychological evaluation of Engel as part of a background check conducted by the Department. Dr. Wihera recommended that Engel's application be rejected based on a written test and an interview of Engel. Engel was denied access to the psychological report. Engel unsuccessfully petitioned the Stockton Civil Service Commission to overturn the City's rejection of his application.

Engel filed this action on February 3, 1987, alleging a deprivation of his property and liberty interests without due process and a claim under the first amendment. He maintains that Dr. Wihera's refusal to release his test results prevented him from adequately preparing for the Commission hearing, thus denying him due process. Engel further alleges that the records stigmatized his reputation, depriving him of his liberty interest in future employment without due process. In support of his first amendment claim, Engel contends that defendants' reliance on Engel's supposed "mental unsuitability" was a pretext for denying him employment when the actual reason was premised on "factors such as Plaintiff's filing lawsuits or grievances, sexual orientation, and other unknown factors being withheld from Plaintiff." Engel also alleges a state-law claim of conversion against the private defendants.

On March 20, 1987, the clerk entered a default against LEPS and Roberts. Engel subsequently filed a motion for default judgment, and LEPS and Roberts moved to set aside the default. The motions were referred to a U.S. Magistrate who recommended that LEPS and Robert's motion be granted. Engel failed to file any objections to the Magistrate's recommendation, and on October 20, 1987, the district court adopted the Magistrate's recommendation. Appellees filed a motion to dismiss or in the alternative for summary judgment on August 19, 1987, and on the following day Engel filed a motion for summary judgment. The court denied Engel's motion and granted appellees' motion on the federal claims. The court dismissed the state-law claim without prejudice under United Mine Workers of America v. Gibbs, 383 U.S. 715 (1966). We have jurisdiction under 28 U.S.C. § 1291.

ANALYSIS

Engel contends that the district court abused its discretion in setting aside the default entry against LEPS and Roberts. The court reviews a district court's decision to set aside an entry of default for abuse of discretion. Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1391 (9th Cir. 1988). Engel's failure to object to the magistrate's factual findings waives the right to contest those findings on appeal. United States v. Remsing, No. 88-3007, slip op. 871, 876 (9th Cir. Jan. 31, 1989) (quoting Orand v. United States, 602 F.2d 207, 208 (9th Cir. 1979)); United States v. Bernhardt, 840 F.2d 1441, 1445 (9th Cir.) cert. denied, 109 S. Ct. 389 (1988); Britt v. Simi Valley Unified School Dist., 708 F.2d 452, 454 (9th Cir. 1983).

Fed. R. Civ. P. 55(c) provides that a district court may set aside an entry of default " [f]or good cause shown," and that " [i]f a judgment of default has been entered, [the court] may likewise set it aside in accordance with Rule 60(b)...." This court has held that "when considering a motion to set aside a default entry, the parallels between granting relief from a default entry and a default judgment encourage utilizing the list of grounds for relief provided in Rule 60(b)...." Hawaii Carpenters' Trust Funds v. Stone, 794 F.2d 508, 513 (9th Cir. 1986). Under Rule 60(b), a default judgment will not be disturbed if "(1) the defendant's culpable conduct led to the default; (2) the defendant has no meritorious defense; or (3) the plaintiff would be prejudiced if the judgment is set aside." Albright, 862 F.2d at 1392. The Rule 60(b) grounds are to be liberally interpreted when applied to a motion for relief from an entry of default. Stone, 794 F.2d at 513.

The Magistrate found that LEPS and Roberts demonstrated the existence of a meritorious defense to the action, that their neglect in responding to the complaint was excusable because of the confusion over which of two insurance policies provided a duty to defend, and that no substantial prejudice would result to plaintiff by vacating the default. The district court did not abuse its discretion in adopting the magistrate's recommendation and in setting aside the entry of default. The district court's decision to grant summary judgment in favor of defendants demonstrates a meritorious defense, and Engel makes no attempt to demonstrate any prejudice that would result if the default is vacated. Additionally, defendants' conduct leading to the default does not rise to the level of "culpable conduct."

A district court's grant of summary judgment is reviewed de novo. Brady v. Gebbie, 859 F.2d 1543, 1551 (9th Cir. 1988). Summary judgment is proper if the record, viewed in the light most favorable to the non-moving party, shows that no genuine issues of material fact exist and that the moving party was entitled to judgment as a matter of law. Id.

Engel contends that the district court erred in granting defendants' motion for summary judgment on his claims that he was deprived of his constitutionally protected right to property and liberty without due process.

Property Interest

Engel must show that he has a property interest entitling him to due process, and that he was deprived of that interest without due process. Knudson v. City of Ellensburg, 832 F.2d 1142, 1145 (9th Cir. 1987). Engel alleges that he has a property interest in his psychological records. He contends that he was deprived of his interest in the psychological records without due process because without them he was unable to prepare adequately for his appearance before the Civil Service Commission on May 15, 1986.² 

Property interests are not created by federal constitutional law, but "are created and their dimensions defined by existing rules or understandings that stem from an independent source such as state law...." Board of Regents v. Roth, 408 U.S. 564, 577 (1972); see Brady, 859 F.2d at 1547-48. Engel bases his alleged property right to the psychological reports on Cal. Health & Safety Code Sec. 25252(a) (West 1984) (repealed in 1988 and reenacted as Cal. Health & Safety Code Sec. 1795 (West Supp.1989)), which provides in relevant part: " [A]ny adult patient of a health care provider ... shall be entitled to inspect patient records upon presenting to the health care provider a written request therefor...." Section 25252(a) does not apply to Engel, however, because neither Dr. Wihera nor LEPS is a "health care provider" as defined under section 25251. LEPS does not constitute a "health facility," "clinic," or "home health care agency" under subsections (a) (1)-(3), and "licensed psychologist" is not included under subsections (a) (4)-(10). Section 25252(a) is therefore inapplicable and does not entitle Engel access to his records.

The district court properly concluded that the holding in Coffee v. McDonnell-Douglas Corp., 8 Cal. 3d 551, 503 P.2d 1366, 105 Cal. Rptr. 358 (1972), is inapposite to this case. The Coffee court held that an employer must exercise due care once it decides to evaluate a prospective employee's fitness for a particular job. This holding has no bearing on whether a prospective employee has a property right to medical records created as part of a pre-employment examination. Engel has therefore failed to establish a property interest in the psychological report.³ 

Liberty Interest

Engel also alleges that the district court erred in dismissing his claim that he was denied his liberty interest in future employment without due process. He contends that his "reputation has been seriously impugned and stigmatized" by Dr. Wihera's report, and that the report will effectively preclude him from securing future employment as a police officer because a prospective department will have access to Dr. Wihera's report.

The procedural protection of due process attendant to a liberty interest claim is not triggered unless "1) the accuracy of the charge is contested; 2) there is some public disclosure of the charge; and 3) the charge is made in connection with termination of employment." Brady, 859 F.2d at 1552 (quoting Matthews v. Harney County, Or., School Dist. No. 4, 819 F.2d 889, 891 (9th Cir. 1987)). The district court concluded that Engel failed to offer any evidence that the City's reason for rejecting his application was ever publicly disclosed. On appeal, Engel contends that the fact that the report would be circulated to prospective employers is sufficient to satisfy the publication requirement.

Even assuming a question of fact exists whether the accuracy of Dr. Wihera's report is contested and whether there has been or will be some public disclosure of the contents of the report, there is no question that the report or its contents are unconnected with the "termination of employment". Engel was never employed by the Department and consequently never terminated; the decision of which he complains is the Department's rejection of his application for employment. Engel presents no case which holds that the liberty interest he asserts is available to a prospective employee who has been denied a job. Indeed, the Supreme Court's decision in Paul v. Davis, 424 U.S. 693 (1976), counsels against characterizing any alleged damage to Engel's reputation as a liberty interest under the due process clause. Id. at 571 (" [R]eputation alone, apart from some more tangible interests such as employment, is [n]either "liberty" or "property" by itself sufficient to invoke the procedural protection of the Due Process Clause."); see also Codd v. Velger, 429 U.S. 624, 628 (1977) (per curiam) ("Only if the employer creates and disseminates a false and defamatory impression about the employee in connection with his termination is ... a hearing required."). Summary judgment was therefore properly granted on Engel's liberty interest claim.

The district court failed to analyze Engel's first amendment claim. Contrary to the defendants' contention, the complaint adequately states a first amendment claim. It is, however, without merit. Engel contends that the report's finding of mental unsuitability was used as a pretext by the City for denying him employment; he claims the actual reason his application was rejected was to discourage his practice of filing lawsuits and grievances.

In Pickering v. Board of Education, 391 U.S. 563 (1968), the Supreme Court held that an individual's exercise of his "right to speak on issues of public importance may not furnish the basis for his dismissal from public employment." Id. at 574. "Whether an employee's speech involves a matter of public concern is a question of law," which must be determined by "looking at its content, form, and context in light of the entire record." Roth v. Veteran's Admin., 856 F.2d 1401, 1405 (9th Cir. 1988) (citing Connick v. Myers, 461 U.S. 138, 147-48 (1983)).

Neither the grievance filed by Engel nor the litigation he initiated was remotely connected with an issue of public concern. His grievance involved a miscalculation of overtime pay by a previous employer, and his litigation involved a claim brought in the Sacramento Municipal Court against two doctors--one doctor refused to extract Engel's wife's teeth because the other failed to send him an extraction order. Engel's first amendment claim must therefore be rejected.

Because summary judgment was properly granted as to the federal claims, the court did not abuse its discretion in dismissing the state-law claim without prejudice under Gibbs. Carnegie-Mellon Univ. v. Cohill, 108 S. Ct. 614, 618-19 & 619 n. 7 (1988).

CONCLUSION

The judgment of the district court is AFFIRMED.