Machete Productions, L.L.C. v. Heather Page

Machete Productions, L.L.C., (“Machete”) appeals the district court’s dismissal on the pleadings of Machete’s claims that a Texas film incentive program was unconstitutional under the First Amendment, Fourteenth Amendment, and Texas Constitution. For the reasons that follow, we AFFIRM the district court’s judgment.

I. Background

The Moving Image Industry Incentive Program (the “Incentive Program”) is a grant program established by the Texas legislature for production companies that produce movies in Texas. See Tex. Gov’t Code Ann. § 485.022(a) (West 2012). The Incentive Program is administered by the Music, Film, Television and Multimedia Office (the “Office”) in order to “promote the development of the film, television, and multimedia industries in [Texas].” Id. §§ 485.002, 485.004(b). The purpose of the Incentive Program is to “increase employment opportunities for Texas industry professionals, tourism and to boost economic activity in Texas cities and the overall Texas economy.” 13 Tex. Admin. Code § 121.1(b)(1).

To qualify for a grant, a production company must meet certain statutory requirements. Tex. Gov’t Code Ann. § 485.023 (West 2012). Even if a production company meets these requirements,

[t]he [OJffice is not required to act on any grant application and may deny an application because of inappropriate content or content that portrays Texas or Texans in a negative fashion, as determined by the [0]ffice, in a moving image project. In determining whether to act on or deny a grant application, the [0]f-fice shall consider general standards of decency and respect for the diverse beliefs and values of the citizens of Texas.

Id. § 485.022(e). The Office assigned administration of the Incentive Program, including development of appropriate procedures, to one of its divisions, the Texas Film Commission (the “Commission”). The Commission implemented the Incentive Program under Chapter 121 of the Texas Administrative Code, which essentially parrots the enabling statute by noting that the Commission may deny an application based on “inappropriate content or content that portrays Texas or Texans in a negative fashion.” 1 13 Tex. *286 Admin. Code § 121.4(b). The regulations also permit the Commission to disqualify a grant application “at any'time if a project does not meet the necessary requirements” or if an application is “incomplete.” Id. § 121.10(a).

According to Machete, the Incentive Program’s former Commissioner, Bob Hudgins, found the standards described in the statute and administrative regulations too difficult to apply, and thus instituted a policy by which a grant would only be denied if a film purported to portray historical events, but did so inaccurately. Machete asserts that few, if any, films were denied funding under this standard.

Machete is a film production company that produced the film at issue, Machete Kills. Machete Kills is the sequel to Machete, a film produced by a separate entity, Machete ChopShop (“ChopShop”). In 2009, ChopShop received preliminary approval for a grant under the Incentive Program for Machete. However, after a political controversy over the film broke out in the summer of 2010, the Commission denied ChopShop’s application for a grant due to “inappropriate content or content that portrays Texas or Texans in a negative fashion.”

Despite this denial, Machete later decided to apply for a grant for Machete Kills. Before Machete submitted its application, Governor Rick Perry’s general counsel, David Morales, communicated to a producer of Machete Kills that the film would never receive an Incentive Program grant due to the perceived political nature and content of the film. Nevertheless, Machete filed an application that projected to meet the spending and employment criteria for a project as outlined by the Incentive Program. Morales, then acting as the designated director of the Commission, denied the application in June of 2012 because of “inappropriate content.”

Machete sued the current and former directors of the Commission in their official and individual capacities in Texas state court. The directors of the Commission then removed to the U.S. District Court for the Western District of Texas.- Machete filed an amended complaint suing Morales in his official and individual capacity under 42 U.S.C. § 1983 for allegedly violating the First and Fourteenth Amendments of the U.S. Constitution. Machete sought prospeptive injunctive relief enjoining the Commission from enforcing the Incentive Program in the future, as well as retrospective injunctive relief ordering the Commission to provide Machete with an Incentive Program grant. It also sought a declaratory judgment pursuant to Chapter 37 of the Texas Civil Practice & Remedies Code that the Incentive Program violated the First Amendment, Fourteenth Amendment, and Article I, Section 8 of the Texas Constitution both facially and as applied to Machete. Additionally, Machete sought economic damages resulting from the unlawful denial of an Incentive Program grant.

Heather Page subsequently replaced Morales as director of the Commission and was substituted as the named defendant in her official capacity, while Morales remained a party in his individual capacity. Both Page and Morales moved to dismiss Machete’s claims for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) and for failure to state a cognizable claim under Rule 12(b)(6). 2 *287 In its response in opposition of the motion to dismiss, Machete requested leave to amend and conduct limited discovery if the district court were to find its complaint deficient in any respect.

A magistrate judge reviewed the motion to dismiss and issued a report and recommendation, which was adopted by the district court and resulted in the dismissal of all of Machete’s claims. Machete timely appealed.

II. Standard of Review

We review de novo a district court’s dispositions under Rule 12(b)(1) and 12(c). Bryant v. Military Dep’t of Miss., 597 F.3d 678, 684 (5th Cir.2010). “A motion brought pursuant to [Rule] 12(c) is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.” Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir.2002) (citation omitted). In reviewing these motions, we accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the nonmovant. Bass v. Stryker Corp., 669 F.3d 501, 506 (5th Cir.2012).

Although Federal Rule of Civil Procedure 8 mandates only that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” this standard demands more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted). Rather, a complaint must eon-tain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955. While this plausibility standard is not a “probability requirement,” it requires a showing of more than “a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). For the purposes of a motion to dismiss, we must take all of the factual allegations in the complaint as true, but we are not “bound to accept as true a legal conclusion couched as a factual allegation.” Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). However, in examining a Rule 12(b)(1) motion, a district court is empowered to find facts as necessary to determine whether it has jurisdiction. See Williamson v. Tucker, 645 F.2d 404, 412-13 (5th Cir.1981).

We review a district court’s denial of leave to amend for an abuse of discretion. Simmons v. Sabine River Auth. La., 732 F.3d 469, 478 (5th Cir.2013), cert. denied, — U.S. -, 134 S.Ct. 1876, 188 L.Ed.2d 912 (2014). We review a district court’s decision on whether to permit limited discovery on qualified immunity issues for an abuse of discretion. See Backe v. LeBlanc, 691 F.3d 645, 649 (5th Cir.2012). We review de novo whether a state is entitled to sovereign immunity. Hale v. King, 642 F.3d 492, 497 (5th Cir.2011).

III. Discussion

A. Machete’s federal claims against Page in her official capacity

Acting in her official capacity for the state of Texas as the director of the Commission, Page concedes that the removal of the case from state to federal *288 court was a voluntary waiver of sovereign immunity. See Meyers ex rel. Benzing v. Texas, 410 F.3d 236, 250 (5th Cir.2005). However, even if a state waives its sovereign immunity, claims seeking monetary relief under “§ 1983 ... do not lie against a [s]tate.” Arizonans for Official English v. Arizona, 520 U.S. 43, 68, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997) (citing Will v. Mich. Dep’t of State Police, 491 U.S. 58, 71, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989)). As a result, Machete’s claims against Page in her official capacity seeking economic damages and retrospective injunctive relief for an Incentive Program grant are barred.

Machete’s claims against Page in her official capacity are thus limited to prospective injunctive and declaratory relief. See Will, 491 U.S. at 71 n. 10, 109 S.Ct. 2304 (“[A] state official in his or her official capacity, when sued for injunctive relief, would be a person under § 1983 because official-capacity actions for prospective relief are not treated as actions against the [s]tate.” (citation omitted)). Machete contends that the district court erred in holding that Machete lacked standing to prevent Page and the Commission from continuing to enforce the Incentive Program’s statute and regulations. In the context of prospective injunctive and declaratory relief, past exposure to illegal conduct, by itself, does not evince a present case or controversy and thus cannot establish standing. See O’Shea v. Littleton, 414 U.S. 488, 495-96, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974). “[T]o obtain injunctive relief, the plaintiff must establish a real and immediate threat that [it] w[ill] again suffer similar injury in the future.” In re Stewart, 647 F.3d 553, 557 (5th Cir.2011) (citation omitted). “[Especially where governmental action is involved, courts should not intervene unless the need for equitable relief is clear, not remote or speculative.” Henschen v. City of Houston, 959 F.2d 584, 588 (5th Cir.1992) (quoting Eccles v. Peoples Bank, 333 U.S. 426, 431, 68 S.Ct. 641, 92 L.Ed. 784 (1948)).

Machete argues that due to the success of the first Machete film and because the director of Machete Kills has a reputation for bringing film projects to Texas, the district court erred in dismissing as too speculative Machete’s claim that it would be subject to an allegedly unlawful denial of an Incentive Program grant in the future. Machete’s argument is unpersuasive; it has not met its burden to establish a need for prospective injunctive or declaratory relief. Machete failed to show any imminent plans to produce another film in the Machete franchise. It also ' failed to show that such a project had any outstanding grant applications with the Commission or that such a project would be denied for allegedly unlawful reasons. By failing to show any concrete and imminent plans for such a film, it failed to establish a “real and immediate threat” that it would be denied an Incentive Program grant in an allegedly unlawful way. See Stewart, 647 F.3d at 557 (citation omitted). Machete’s lack of standing to pursue prospective injunctive relief further prevents us from granting declaratory relief against Page. “Because there is no ongoing injury ... and any threat of future injury is neither imminent or likely, there is not a live case or controversy for this court to resolve and a declaratory judgment would therefore be inappropriate.” Bauer v. Texas, 341 F.3d 352, 358 (5th Cir.2003). Accordingly, Machete lacked standing to pursue its only available federal claims against Page in her official capacity. 3

*289 B. Machete’s claims against Morales in his individual capacity

Machete maintains that the district court erred in determining that qualified immunity barred Machete’s claims against Morales in his individual capacity. 4 To overcome an official’s qualified immunity, a plaintiff must plead facts demonstrating “(1) that the official violated a statutory or constitutional right, and (2) that the right was clearly established at the time of the challenged conduct.” Ashcroft v. al-Kidd, 563 U.S. 731, 131 S.Ct. 2074, 2080, 179 L.Ed.2d 1149 (2011) (quoting Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982)).

1. Machete’s First Amendment claim

Machete argues that Morales applied the Incentive Program to it in a way that discriminated against it on the basis of viewpoint, thus violating its First Amendment rights. Machete’s factual allegations are insufficient to support a claim that Morales violated a clearly established right in this regard. “The [g]overnment can, without violating the Constitution, selectively fund a program to encourage certain activities it believes to be in the public interest, without at the same time funding an alternative program which seeks to deal with the problem in another way. In so doing, the [government has not discriminated on the basis of viewpoint; it has merely chosen to fund one activity to the exclusion of the other.” Rust v. Sullivan, 500 U.S. 173, 193, 196, 111 S.Ct. 1759, 114 L.Ed.2d 233 (1991) (upholding regulations that limited the abortion-related speech of clinics receiving federal funds because they did “not force the ... grantee to give up abortion-related speech; they merely required that the grantee keep such activities separate and distinct” from activities that received government funding). To hold otherwise “would render numerous [g]overnment programs constitutionally suspect.” Id. at 194, 111 S.Ct. 1759.

A government funding provision will not compromise First Amendment values as long as it “[does] not silence speakers by expressly threatenfing] censorship of ideas,” or “introduce considerations that, in practice, would effectively preclude or punish the expression of particular views.” Nat’l Endowment for the Arts v. Finley, 524 U.S. 569, 572, 583, 118 S.Ct. 2168, 141 L.Ed.2d 500 (1998) (upholding a federal grant program requiring the responsible agency to fund artistic pieces only after “taking into consideration general standards of decency and respect for the diverse beliefs and values of the *290 American public”). “[Although the First Amendment certainly has application in the subsidy context ... the [government may allocate competitive funding according to criteria that would be impermissible were direct regulation of speech or a criminal penalty stake.” Id. at 587-88, 118 S.Ct. 2168. Government funding provisions can become unconstitutional conditions if they “effectively prohibit[ ] the recipient from engaging in the protected conduct outside the scope of the [government] funded program,” Rust, 500 U.S. at 197, 111 S.Ct. 1759, or if the subsidy is “manipulated to have a coercive effect,” Finley, 524 U.S. at 587, 118 S.Ct. 2168 (citation omitted).

Machete has not shown that Morales’s denial of an Incentive Program grant “effectively preclude[d] or punish[ed]” Machete from or for holding particular viewpoints in Machete Kills. Id. at 583, 118 S.Ct. 2168. Nor does it appear that the grant denial effectively prohibited Machete from engaging in protected First Amendment activity “outside the scope” of the Incentive Program. Rust, 500 U.S. at 197, 111 S.Ct. 1759. Despite the denial of an Incentive Program grant, Machete Kills was still filmed in Texas, produced, and released. Machete does not dispute that it was free to engage in protected First Amendment activity without the benefit of an Incentive Program grant, and in fact did engage in such activity by making the film. 5 Machete has not shown that it is clearly established that the First Amendment requires a state which has an incentive program like this one to fund films casting the state in a negative light. As such, it cannot show that Morales violated Machete’s clearly established rights in this context. See Ashcroft, 131 S.Ct. at 2080.

2. Machete’s Due Process Clause claims

Similarly unavailing is Machete’s argument that it can recover against Morales individually because it had a property interest in an Incentive Program grant that triggered the protections of the Fourteenth Amendment’s Due Process Clause. “In a section 1983 cause of action asserting a due process violation, a plaintiff must first identify a life, liberty, or property interest protected by the Fourteenth Amendment and then identify a state action that resulted in a deprivation of that interest.” Blackburn v. City of Marshall, 42 F.3d 925, 935 (5th Cir.1995). “Property interests are not created by the Constitution,” but from “independent sources such as state statutes, local ordinances, existing rules, contractual provisions, or mutually explicit understandings.” Id. at 936-37. However, “[discretionary statutes do not give rise to constitutionally protectable interests.” Baldwin v. Daniels, 250 F.3d 943, 946 (5th Cir.2001). “A constitutional entitlement cannot be created — as if by estoppel— merely because a wholly and expressly discretionary state privilege has been granted generously in the past.” Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458, 465, 101 S.Ct. 2460, 69 L.Ed.2d 158 (1981) (emphasis omitted).

Here, the Incentive Program’s statutes and regulations make clear that grants were discretionary. The statute goes beyond merely giving the Commission discretion to reject grant applications: *291 it also specifies that the Commission “is not required to act on any grant application.” Tex. Gov’t Code Ann § 485.022(e) (West 2012). The discretionary nature of the Incentive Program is emphasized in its promulgated rules that stipulate that “[n]ot every project will qualify for a grant.” 13 Tex. Admin. Code § 121.4(b)-. What is more, the Commission also has the discretion to revoke an applicant’s eligibility for funds or require that an applicant refund the distribution of grants if the Commission later determines that an applicant failed to meet the Incentive Program’s requirements. See id. § 121.14. Even viewing the facts in the light most favorable to Machete and assuming that few, if any, Incentive Program grants were previously denied, a property interest is not created merely because funds were “granted generously in the past.” Dumschat, 452 U.S. at 465, 101 S.Ct. 2460. Accordingly, Machete cannot establish that it had a clearly established right to these funds that Morales violated. See Ashcroft, 131 S.Ct. at 2080.

Machete also unsuccessfully asserts that its due process rights were violated due to the vagueness of the Incentive Program’s statute and regulations. The Due Process Clause does protect speakers “from arbitrary and discriminatory enforcement of vague standards,” but “when the [g]overnment is acting as a patron rather than as sovereign, the consequences of imprecision are not constitutionally severe.” Finley, 524 U.S. at 588-89, 118 S.Ct. 2168. Here, the Incentive Program’s funding criteria are not any more imprecise than the criteria found to pass constitutional muster in Finley. 6

Even after viewing the facts in the light most favorable to Machete, we conclude that Morales did not violate Machete’s clearly established rights under the First Amendment or Fourteenth Amendment. 7

C. Machete’s claims under the Texas Constitution

Machete also argues that Morales applied the Incentive Program in a way that violated the Texas Constitution’s free-speech provision and as a result, is due relief from Morales individually and Page in her official capacity. Machete unsuccessfully claims that the denial of an Incentive Program grant was akin to a prior restraint. The Texas Supreme Court has recognized that the Texas Constitution’s free speech provision “provides greater rights of free expression than its federal equivalent” in the context of prior restraints. Davenport v. Garcia, 834 S.W.2d 4, 10 (Tex.1992). However, “[t]he term prior restraint is used to describe administrative and judicial orders forbidding certain communications when issued *292 in advance of the time that such communications are to occur.” Alexander v. United States, 509 U.S. 544, 550, 113 S.Ct. 2766, 125 L.Ed.2d 441 (1993) (citation omitted). Here, Morales did not forbid Machete from filming, producing, or releasing Machete Kills, but merely opted not to subsidize the film with Texas taxpayer funds. Accordingly, the district court did not err in dismissing this claim on the pleadings. 8

IV. Conclusion

For the reasons set forth above, we AFFIRM the district court’s dismissal of Machete’s claims against Page in her official capacity. We further AFFIRM the district court’s dismissal of Machete’s claims against Morales in his individual capacity.