Regulatory Background Checks & Municipal Liability:
Teo Johnson v. City of Clifton and the Third Circuit’s Clarification of §1983 Limits

Introduction

In Teo Johnson v. City of Clifton, No. 23-2550 (3d Cir. July 7 2025), the United States Court of Appeals for the Third Circuit addressed whether a municipality may be held liable under federal civil-rights statutes for denying a liquor-license transfer after discovering a disqualifying criminal conviction through a routine regulatory background check. The appellants—Teo Johnson, Teo T. Powell, and Zena Powell—argued that the denial and the method by which local officials obtained Johnson’s criminal record violated 42 U.S.C. §§ 1983, 1985, 1986, Title VII, and other provisions. The district court granted summary judgment to the City of Clifton, its police department, and the municipal ABC Licensing Board. The Third Circuit affirmed, elaborating on (1) the reach of Monell liability, (2) the permissibility of accessing sealed convictions for licensing purposes, and (3) the inapplicability of Title VII where no employment relationship exists.

Summary of the Judgment

The Court unanimously affirmed the district court’s judgment, holding:

• No Fourth-Amendment violation occurred because Johnson’s 1995 RICO conviction was statutorily available to licensing authorities despite being “sealed” for most other purposes.
• The appellants failed to identify a municipal policy or custom that was the “moving force” behind any constitutional deprivation, defeating §1983 and §1985 claims under Monell.
• Because the §1985 conspiracy claim failed, the derivative §1986 claim necessarily failed (Rogin principle).
• Title VII was inapplicable; the City, acting solely as a regulator, was not the appellants’ employer.
• Summary judgment was proper and did not violate the Seventh Amendment right to a jury trial.

Analysis

Precedents Cited

• Monell v. Department of Social Services, 436 U.S. 658 (1978) – Foundation for municipal liability under §1983; requires injury caused by a municipal policy or custom.
• Colburn v. Upper Darby Twp., 946 F.2d 1017 (3d Cir. 1991) – “Moving-force” causation standard reiterated.
• Bonenberger v. Plymouth Twp., 132 F.3d 20 (3d Cir. 1997) – Police departments and sub-units cannot be sued separately from the municipality.
• Ray Haluch Gravel Co. v. Central Pension Fund, 571 U.S. 177 (2014) – Unresolved fee petitions do not prevent finality for appellate jurisdiction.
• Becker v. Montgomery, 532 U.S. 757 (2001) – Defective notice of appeal signatures may be cured without dismissing the appeal.
• United States v. Board of Education for School District of Philadelphia, 911 F.2d 882 (3d Cir. 1990) – Regulatory control does not create an employment relationship for Title VII purposes.
• Other supportive cases: Small v. Chao (7th Cir.), Rogin, Estate of Oliva, In re TMI Litig., Spivack.

Legal Reasoning

The panel engaged in a two-level analysis:

1. Existence of a Constitutional Violation
   • The background check was statutorily authorized by N.J. Stat. Ann. §33:1-25.
   • Johnson’s RICO conviction, though generally sealed, fell into an express exception for licensure investigations; thus, obtaining it was lawful.
   • Appellants’ misrepresentation on the application provided an independent ground for denial.
   
2. Municipal Liability Under Monell
   • Even assuming a violation, appellants failed to show a municipal policy or custom.
   • Routine background checks do not, by themselves, constitute an unconstitutional policy.
   • No evidence linked Sergeant Arthur’s alleged conduct to a citywide directive.
   

Because liability under §1983 and §1985 collapsed, derivative §1986 failed. The Court then disposed of the Title VII claim for lack of an employment nexus, and summarily rejected due-process and Ninth-Amendment theories that had not been properly developed on appeal.

Impact

• Regulatory Agencies: The opinion affirms that agencies may access sealed convictions when expressly authorized by statute. This will comfort state ABC boards and similar regulators conducting “fit and character” inquiries.
• Municipal Litigation: Plaintiffs must identify a precise policy or custom, not merely a discretionary act by a single officer, to survive summary judgment.
• Licensing Applicants: Misstatements—however “inadvertent”—can independently justify denial; future applicants will need meticulous accuracy.
• Employment-law Intersection: The case underscores the boundary between regulatory authority and employment relationships, limiting Title VII’s reach.
• Procedural Practice: The decision reiterates the cure-ability of defective notices of appeal (Becker) and clarifies appellate jurisdiction despite unresolved fee petitions (Ray Haluch).

Complex Concepts Simplified

• §1983 Municipal Liability (“Monell Claim”): A city is liable only if an official policy (formal rule) or custom (long-standing practice) causes the violation—not for a lone employee’s wrongdoing.
• “Crime Involving Moral Turpitude”: A crime that gravely violates societal moral standards (e.g., fraud, racketeering). Under New Jersey’s ABC law, such crimes disqualify applicants unless a “disqualification removal order” is obtained.
• Derivative §1986 Claim: Section 1986 imposes liability for knowingly failing to prevent a §1985 conspiracy. If the §1985 claim falls, §1986 necessarily falls too.
• Title VII Employer Requirement: Title VII governs discrimination by an “employer” (≥15 employees, hiring/firing power). A city acting solely as a licensing regulator is not an employer.
• Summary Judgment vs. Jury Trial: Courts may grant judgment without a jury when no genuine dispute of material fact exists; this procedural shortcut does not violate the Seventh Amendment.

Conclusion

Teo Johnson v. City of Clifton reinforces a familiar but often misunderstood principle: municipalities are not insurers against the isolated—or perceived—constitutional missteps of individual officers. Absent a demonstrable policy or custom, §1983 and related conspiracy statutes provide no municipal cause of action. The Third Circuit’s opinion also clarifies that state licensure statutes can validly authorize access to otherwise sealed criminal records, and confirms the limited scope of Title VII when public agencies act in a purely regulatory capacity. Litigants challenging license denials must therefore exhaust state remedies, disclose complete criminal histories, and ground federal claims in well-pleaded municipal practices—not routine, statutorily mandated background checks.