                    United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 99-2153
                                  ___________

Eileen Buchholz,                           *
                                           *
       Plaintiff - Appellee,               *
                                           *
       v.                                  *
                                           * Appeal from the United States
George Aldaya; Michael W. O'Connor; * District Court for the
and Mariellen Ross, individually and in * District of South Dakota.
their official capacities with the Farm    *
Service Agency of the United States        *
Department of Agriculture,                 *
                                           *
       Defendants - Appellants,            *
                                      ___________

                            Submitted: October 21, 1999

                                 Filed: April 7, 2000
                                  ___________

Before WOLLMAN, Chief Judge, ROSS and LOKEN, Circuit Judges.
                             ___________

LOKEN, Circuit Judge.

      In 1979, Eileen Buchholz began work as a county-office employee with the
Agricultural Stabilization and Conservation Service (ASCS)1 in South Dakota. In

      1
       When the U. S. Department of Agriculture was reorganized in 1994, the ASCS
became part of the Department’s Consolidated Farm Service Agency. See 7 U.S.C.
§ 6932. In this opinion, we will use the traditional acronym, ASCS.
March 1995, Buchholz was given written notice that she must improve her work
performance in sixty days or be terminated. On July 19, she received a Notice of
Separation, effective August 2, citing her failure to improve. After unsuccessful
administrative appeals, Buchholz commenced this action against the Secretary of
Agriculture and numerous ASCS officials, asserting she is entitled to injunctive relief
and damages under Bivens v. Six Unknown Named Agents of Federal Bureau of
Narcotics, 403 U.S. 388 (1971), because defendants denied her procedural due process
when they terminated her employment without a full evidentiary hearing at which she
could call and cross-examine witnesses. Defendants George Aldaya, Michael
O’Connor, and Mariellen Ross appeal a district court order denying them qualified
immunity on the grounds that Buchholz possessed a constitutionally protected interest
in her employment and the procedures by which she was terminated did not comport
with clearly established due process law. We have jurisdiction over interlocutory
appeals from the denial of qualified immunity. See Johnson v. Jones, 515 U.S. 304,
310-11 (1995); Mitchell v. Forsyth, 472 U.S. 511 (1985). We reverse.

       I. The Nature of ASCS County-Office Employment. Since 1935, many
ASCS operations have been staffed by State, county, and area committees. Under the
present statute, the Secretary of Agriculture appoints the members of the State
committees. Local agricultural producers elect the members of the county and area
committees. The county and area committees appoint county executive directors, who
in turn hire the other county employees under “such regulations as the Secretary
considers necessary.” 16 U.S.C. §§ 590h(b)(5)(A), (B), and (E). Both county
employees such as Buchholz and county executive directors are federal employees, but
they fall outside the federal civil service because of the way they are hired and
appointed. See 5 U.S.C. § 2105(a)(1)(D); 7 C.F.R. §§ 7.21(b)(2), 7.25(b)(1); Krueger
v. Lyng, 927 F.2d 1050, 1054 & n.4 (8th Cir. 1991).

      Part 7 of the Secretary’s regulations, 7 C.F.R. §§ 7.1-7.38, governs the
“Selection and Functions” of ASCS committees. The regulations flatly declare that

                                          -2-
county employees serve “at the pleasure of” the county executive director. 7 C.F.R.
§ 7.25(b)(1). However, the Secretary has also issued a personnel policy manual to
State, county, and area committees, called the 22-PM Handbook, which sets forth
procedures for hiring, disciplining, suspending, and terminating county-office
employees such as Buchholz.

        The regulations deal with the suspension and termination of county-office
employees in a limited fashion. They provide that any committee member or employee
who commits an enumerated offense “shall be” suspended and then terminated. See
7 C.F.R. § 7.28(a). ASCS refers to these as “misconduct” offenses. They are serious
types of malfeasance, such as “incompetence,” fraud, and civil rights violations. The
regulations give the Secretary’s Deputy Administrator, as well as State and county
committees and county executive directors, authority to take such disciplinary action.
See 7 C.F.R. § 7.29. Employees found guilty of such misconduct may appeal, first to
the State committee, and then to the Deputy Administrator, who must conduct a formal,
trial-type hearing at the employee’s request. See 7 C.F.R. §§ 7.30-7.31.

        On the other hand, Part 10 of the 22-PM Handbook deals with the issue of
employee “Separation and Removals” more broadly. It specifies different procedures
for different types of separations, such as “separation for performance,” “separation for
misconduct,” separation of probationary employees, and “RIF separation because of
lack of funds or work.” 22-PM Handbook ¶ 412B. Part 10, Section 4, deals with
separations for misconduct. Consistent with 7 C.F.R. §§ 7.28 and 7.29, these
separations are limited to specified grounds, they must be preceded by careful
investigation and formal suspension, and they may be initiated by State committees and
the Deputy Administrator, as well as by county executive directors. See 22-PM
Handbook ¶¶ 444-448. An employee terminated for misconduct may appeal to the
State committee, which conducts a non-adversary informal hearing, or to the Deputy
Administrator, who must conduct a trial-type formal hearing, as 7 C.F.R. § 7.31
prescribes. See ¶ 451.

                                          -3-
       Part 10, Section 3, deals with separations for performance. These are
termination actions taken by a county executive director “based solely on performance-
related problems.” The employee must be counseled before a performance separation.
See ¶ 432. He or she is entitled to written notice of separation specifying the reasons
for the action and any right of review. See ¶ 4.34. An employee who has served at
least one year has a right to State committee review of the executive director’s adverse
decision. The employee “has the opportunity to show cause why he or she should not
be separated,” but “the formal requirements relating to a review under the removal ‘for
misconduct’ procedure does not apply.” ¶ 4.35F.2 If the State committee upholds a
separation decision, the employee may seek review by the ASCS Area Director, but not
by the Deputy Administrator. See ¶ 4.35H.

       In this case, County Executive Director Ross terminated Buchholz solely for
performance-related problems. Her termination was reviewed informally by State
Executive Director O’Connor and by Northwest Area Director Allen Durick. But
Deputy Administrator Aldaya rejected Buchholz’s demand for a formal trial-type
hearing on the ground that there is no right to such a hearing for performance
separations. It is undisputed that defendants followed the procedures set forth in Part
10, Section 3, of the 22-PM Handbook. Buchholz claims those procedures violate her
constitutional right to procedural due process.

       II. The Qualified Immunity Inquiry. The defendants are government officials.
They are entitled to qualified immunity from Buchholz’s damage claims unless her
termination “violate[d] clearly established statutory or constitutional rights of which a
reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818
(1982). The ultimate qualified immunity question is whether these ASCS defendants
violated clearly established constitutional law by limiting Buchholz to the procedures


      2
      If the termination is based on both performance problems and misconduct, it is
governed by the misconduct procedures in Part 10, Section 4. See ¶ 431.

                                          -4-
prescribed in the agency’s official 22-PM Handbook. Cf. Hopkins v. Saunders, 93
F.3d 522, 525-26 (8th Cir. 1996). But we need not reach that question. When
reviewing a claim of qualified immunity, “the first step is to identify the exact contours
of the underlying right said to have been violated.” County of Sacramento v. Lewis,
523 U.S. 833, 841 n.5 (1998).

       A government employee has a right to procedural due process when termination
will deprive her of a constitutionally protected liberty or property interest. See Board
of Regents v. Roth, 408 U.S. 564, 569-72 (1972). If Buchholz had no such interest in
continued employment, she had no right to procedural due process during termination.
On the other hand, if Buchholz had a protected interest “governed by comprehensive
procedural and substantive provisions giving meaningful remedies against the United
States,” like the federal civil service system, then she has no cause of action under
Bivens. Bush v. Lucas, 462 U.S. 367, 368 (1983); see Schweiker v. Chilicky, 487 U.S.
423 (1988). The two issues are complex and interrelated. If defendants prevail on
either, “it follows a fortiori” they are entitled to qualified immunity. Drake v. Scott,
812 F.2d 395, 399, aff’d on reh’g, 823 F.2d 239 (8th Cir. 1987).

      III. May Terminated ASCS County-Office Employees Sue Under Bivens?
Defendants argue that Buchholz’s right to meaningful administrative remedies, and to
judicial review of the agency’s adverse decision under the Administrative Procedure
Act, 5 U.S.C. §§ 701-706, preclude her action for damages under Bivens. The district
court concluded this contention is barred by our decision in Krueger v. Lyng, 927 F.2d
1050 (8th Cir. 1991), where we held that the Secretary’s entirely administrative
remedial scheme did not reflect a congressional intent to foreclose Bivens actions.
Defendants rely on two subsequent decisions by other circuits that declined to follow
Krueger and held that the right of ASCS county-office employees to seek judicial
review under the APA forecloses a right of action under Bivens. See Miller v. USDA




                                           -5-
Farm Serv. Agency, 143 F.3d 1413 (11th Cir. 1998); Moore v. Glickman, 113 F.3d 988
(9th Cir. 1997).3

       Normally, of course, we are obliged to follow a prior panel decision of this court
such as Krueger. This is arguably one of those exceptional circumstances where a
change in the law renders a prior decision non-binding. Krueger was based upon our
conclusion that Congress had not intentionally denied ASCS county office employees
both full civil service protection and a constitutional tort remedy. See 927 F.2d at
1056-57. After our decision in Krueger, Congress reorganized the Department of
Agriculture. That 1994 legislation specifically stated that the Secretary of Agriculture
“may use interchangeably in local offices of the Agency both Federal employees of the
Department and non-Federal employees of county and area committees.” 7 U.S.C.
§ 6932(e)(1). The legislative history confirms that Congress intentionally preserved
ASCS county employees as a class who can be easily hired, reassigned, or laid off as
conditions warrant. See 140 CONG. REC. H9954-58 (daily ed. Sept. 28, 1994). After
this legislation, Congress’s decision not to grant these employees either civil service
status or a constitutional tort remedy, but instead to confer the more limited statutory
entitlements summarized in Moore, 113 F.3d at 992, can no longer be deemed
inadvertent, so Krueger may no longer be controlling. However, we need not decide
that question, for there is another threshold issue of law that disposes of Buchholz’s
due process claim.

     IV. Does Buchholz Have a Protected Interest in Continued Employment?
The Due Process Clause protects a government employee’s liberty interest. That


      3
        Our opinion in Krueger does not discuss the possible significance of APA
judicial review. Neither party briefed that issue in Krueger. USDA has been
inconsistent on this issue, urging courts in the past to deny APA review because ASCS
county-office employee terminations are committed to agency discretion, but now
arguing there is APA review and it forecloses Bivens damage actions.

                                          -6-
interest is implicated when she is terminated amid charges that “seriously damage [her]
standing and associations in the community.” Roth, 408 U.S. at 573. “The requisite
stigma has generally been found when an employer has accused an employee of
dishonesty, immorality, criminality, racism, and the like.” Winegar v. Des Moines
Indep. Community Sch. Dist., 20 F.3d 895, 899 (8th Cir.), cert. denied, 513 U.S. 964
(1994). On the other hand, “a plaintiff is not deprived of [her] liberty interest when the
employer has alleged merely improper or inadequate performance, incompetence,
neglect of duty or malfeasance.” Ludwig v. Board of Trustees of Ferris State Univ.,
123 F.3d 404, 410 (6th Cir. 1997). In McNeill v. Butz, 480 F.3d 314 (4th Cir. 1973),
the court held that liberty interests were implicated when ASCS county-office
employees were terminated for conduct that amounted to fraud. Consistent with
McNeil, the Secretary’s regulations recognize the need to protect liberty interests by
granting employees accused of misconduct a right to a formal, trial-type hearing on
appeal to the Deputy Administrator. See 7 C.F.R. § 7.31. However, Buchholz does
not argue that a liberty interest was implicated by her termination, and we see no basis
in the record for such a contention.

       The Due Process Clause also protects a government employee’s property interest
in her job. That interest exists only if she has “a legitimate claim of entitlement,” not
merely a “unilateral expectation” of continued employment. Roth, 408 U.S. at 577.
Most federal employees are governed by the Civil Service Reform Act (CSRA), which
provides that a Federal agency may remove an employee “only for such cause as will
promote the efficiency of the service.” 5 U.S.C. § 7513. Accordingly, federal civil
service employees have a legitimate expectancy in continued employment that is a
property interest protected by the right to procedural due process. See Arnett v.
Kennedy, 416 U.S. 134, 151-52 (1974) (plurality opinion), construed in Bishop v.
Wood, 426 U.S. 341, 345 n.8 (1976). See also Gilbert v. Homar, 520 U.S. 924, 929
(1997).




                                           -7-
       ASCS county employees such as Buchholz do not have the property interest
created by the CSRA. The statute under which they are hired, 16 U.S.C. § 590h(b),
is an enabling act that confers no statutory property interest, so Buchholz must establish
a property interest from the ASCS regulations and policies that defined her terms and
conditions of employment. See Winegar, 20 F.3d at 899.

       The regulations flatly declare that county employees serve “at the pleasure of”
the county executive director. 7 C.F.R. § 7.25(b)(1). That language is inconsistent
with the district court’s conclusion that Buchholz could only be removed for cause.
See Arnett, 416 U.S. at 181-82 (White, J., concurring in part and dissenting in part).
Buchholz claims that the termination provisions in 7 C.F.R. §§ 7.28-7.31 limited
defendants to terminating her for cause and therefore conferred a property interest. As
we have explained, those regulations do not limit the reasons for which an ASCS
county-office employee may be fired; they limit an employee’s right to retain her job
by making termination for misconduct mandatory. Because misconduct terminations
protect the government’s interest in the integrity of its operations, they may be initiated
by the Deputy Administrator as well as by the county executive director. Because
termination for misconduct may seriously damage the employee’s reputation and
employment prospects, an employee accused of such misconduct has a right to a trial-
type hearing.

       On the other hand, performance-related terminations are governed by the 22-PM
Handbook. Termination for this reason is initiated by the county executive director.
An employee terminated for this reason has a right to an informal hearing on review by
the State committee, and further informal review by the Area Director. These minimal
procedural requirements are consistent with the declaration in the regulations that
county-office employees work “at the pleasure of” the local executive director. These
procedures encourage county executive directors to manage wisely, but they confer no
property interest for due process purposes. Accord McNeill, 480 F.2d at 320-21.


                                           -8-
       Accordingly, we hold that at the time she was terminated, Buchholz had no
protected interest in her employment as a county-office employee and therefore no
constitutional right to the additional administrative procedures she demanded. The
district court’s Memorandum Opinion and Order dated March 26, 1999, is reversed.
The case is remanded with instructions to dismiss Count I and Count II of plaintiff’s
Second Amended Complaint.4

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




      4
      Buchholz’s Second Amended Complaint also asserted claims under the
Rehabilitation Act of 1973, 29 U.S.C.§ 794, and the Age Discrimination in
Employment Act, 29 U.S.C. §§ 621 et seq. Those claims are not before us.

                                         -9-
