     Case: 15-50120   Document: 00513322652      Page: 1   Date Filed: 12/28/2015




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT


                                 No. 15-50120
                                                                United States Court of Appeals
                                                                         Fifth Circuit

                                                                       FILED
                                                                December 28, 2015
MACHETE PRODUCTIONS, L.L.C.,
                                                                  Lyle W. Cayce
                                                                       Clerk
             Plaintiff - Appellant

v.

HEATHER PAGE, in her official capacity as the current Director of the Texas
Film Commission; DAVID MORALES, in his individual capacity,

             Defendants - Appellees


                Appeal from the United States District Court
                     for the Western District of Texas


Before JOLLY, HAYNES, and COSTA, Circuit Judges.
HAYNES, Circuit Judge:
      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
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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 [O]ffice 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
             [O]ffice, in a moving image project. In determining
             whether to act on or deny a grant application, the
             [O]ffice 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. ADMIN. CODE



      1  The regulation states: “Not every project will qualify for a grant. The Texas Film
Commission (Commission) is not required to act on any application and may deny an
application or eventual payment on an application because of inappropriate content or
content that portrays Texas or Texans in a negative fashion, as determined by the
Commission, in a project. In determining whether to act on or deny an application, the
Commission shall consider general standards of decency and respect for the diverse beliefs
and values of the citizens of Texas.” 13 TEX. ADMIN. CODE § 121.4(b).
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§ 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

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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 prospective 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 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.




      2  As Morales had previously filed an answer to the matter on behalf of the
Commission, the magistrate judge assessed the Rule 12(b)(6) motion under Rule 12(c), as a
motion for judgment on the pleadings.
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                              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 (2007) (citations
omitted). Rather, a complaint must contain sufficient factual matter, accepted
as true, to “state a claim to relief that is plausible on its face.” Id. at 570. 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 (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). 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).


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      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, 134 S. Ct. 1876 (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
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 (1997) (citing Will v. Mich. Dep’t of State Police, 491
U.S. 58, 71 (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 (“[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,

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does not evince a present case or controversy and thus cannot establish
standing. See O’Shea v. Littleton, 414 U.S. 488, 495–96 (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). “[E]specially 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 (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




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F.3d 352, 358 (5th Cir. 2003). Accordingly, Machete lacked standing to pursue
his only available federal claims against Page in her official capacity. 3
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, 131 S. Ct. 2074, 2080 (2011) (quoting
Harlow v. Fitzgerald, 457 U.S. 800, 818 (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.



       3 Machete further contends that the district court abused its discretion by failing to
grant Machete leave to amend its complaint. We have affirmed a district court’s denial of
leave to amend due to a plaintiff’s failure to “show[] on appeal . . . any additional facts that
would have precluded the district court from reaching its conclusion.” Rogers v. Boatright,
709 F.3d 403, 411 (5th Cir. 2013). The additional facts that Machete attempts to assert on
appeal are limited to abstract plans for future filmmaking in Texas and thus fail to remedy
the speculative nature of its claim for prospective injunctive relief. Coupled with the fact
that the district court permitted Machete to amend its complaint once before, this leads us to
conclude that the district court did not abuse its discretion in denying Machete leave to
amend its complaint.

       4   Any prospective relief against Morales would fail for the same reasons discussed
regarding Page and for the additional reason that Morales is no longer in a position to affect
the outcome of future Incentive Program applications. Machete’s claims for past relief
against Morales are subject to a qualified immunity analysis because he seeks economic
damages. All other past relief, including a declaration that a grant should have been
awarded, is meaningless as to Morales in his individual capacity, as he is not individually in
a position to award a grant. See Okpalobi v. Foster, 244 F.3d 405, 426–27 (5th Cir. 2001) (en
banc) (noting that for a plaintiff to satisfy standing, the defendant must have the power to
redress the asserted injuries).
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“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 [g]overnment 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
(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.
      A government funding provision will not compromise First Amendment
values as long as it “[does] not silence speakers by expressly threaten[ing]
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 (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 American public”). “[A]lthough the
First Amendment certainly has application in the subsidy context . . . the
[g]overnment 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.       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, or if the subsidy is “manipulated to have a
coercive effect,” Finley, 524 U.S. at 587 (citation omitted).

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       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. 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. 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


       5 The facial challenge does not fare any better for the reason that “[a] facial challenge
to a legislative act is . . . the most difficult challenge to mount successfully, since the
challenger must establish that no set of circumstances exists under which the [a]ct would be
valid.” United States v. Salerno, 481 U.S. 739, 745 (1987). Machete has not met this legal
burden.
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ordinances, existing rules, contractual provisions, or mutually explicit
understandings.” Id. at 936–37. However, “[d]iscretionary 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 (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: 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.   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

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[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.
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 in                 advance of the time that such
communications are to occur.” Alexander v. United States, 509 U.S. 544, 550



       6 Both provisions require that the relevant agency consider the “general standards of
decency and respect for the diverse beliefs and values” of citizens. TEX GOV’T CODE ANN.
§ 485.022(e) (West 2012); Finley, 524 U.S. at 572 (quoting 20 U.S.C. § 954(d)(1)). The
Incentive Program’s statute, however, adds that the Commission may also deny an
application due to “inappropriate content or content that portrays Texas or Texans in a
negative fashion.” TEX GOV’T CODE ANN. § 485.022(e) (West 2012).
       7  Machete also contends that the district court abused its discretion in denying
Machete leave to conduct limited discovery on the issue of qualified immunity. A district
court may defer a ruling on qualified immunity and issue a discovery order only after it
initially determines that the plaintiff alleges facts that, if true, would overcome the defense
of qualified immunity. See Backe, 691 F.3d at 648. As the district court properly concluded
that Machete’s pleadings could not overcome Morales’s qualified immunity, it did not abuse
its discretion in denying Machete leave to conduct limited discovery.
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(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.




       8  We note the inapplicability of the principle outlined in Pennhurst State Sch. & Hosp.
v. Halderman, 465 U.S. 89, 121 (1984), which barred federal courts from exercising pendent
jurisdiction over claims alleging that state officials violated state law in carrying out their
official responsibilities. See Meyers, 410 F.3d at 252 (noting that Pennhurst is inapplicable
when a state voluntarily waives its sovereign immunity by removing from state to federal
court).
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