Brown v. Nationsbank Corp.

• Citation: 188 F.3d 579
• Decision Date: 08 September 1999
• Docket Number: No. 97-41214,97-41214
• Parties: (5th Cir. 1999) DALE A. BROWN; ET AL Plaintiffs, DALE A. BROWN; R. SCOTT SATTERWHITE; ANTHONY P. HODGSON Plaintiffs-Appellants, v. NATIONSBANK CORPORATION; ET AL Defendants, NATIONSBANK CORPORATION; JODIE JONES; CONN & COMPANY; SOUTHERN TECHNOLOGIES DIVERSIFIED, L.P.; HAL FRANCIS, also known as John Clifford; JOSEPH CARROLL, also known as Joe Carson; HILTON HOTELS; LEISURE HOSPITALITY MANAGEMENT COMPANY doing business as Sheraton Hotel-Astrodome; UNITED STATES OF AMERICA Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 579

188 F.3d 579 (5th Cir. 1999)

DALE A. BROWN; ET AL Plaintiffs, DALE A. BROWN; R. SCOTT SATTERWHITE ANTHONY P. HODGSON Plaintiffs-Appellants, v. NATIONSBANK CORPORATION; ET AL Defendants,

NATIONSBANK CORPORATION; JODIE JONES; CONN & COMPANY; SOUTHERN TECHNOLOGIES DIVERSIFIED, L.P.; HAL FRANCIS, also known as John Clifford; JOSEPH CARROLL, also known as Joe Carson; HILTON HOTELS; LEISURE HOSPITALITY

MANAGEMENT COMPANY doing business as Sheraton Hotel-Astrodome; UNITED STATES OF AMERICA Defendants-Appellees.

No. 97-41214

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

September 8, 1999

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Texas Before DAVIS, STEWART, and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Dale A. Brown, R. Scott Satterwhite, and Anthony P. Hodgson brought claims against the United States, federal agents, and private businesses who assisted federal agents in an undercover operation designed to detect contract procurement fraud in the space industry. The district court dismissed all claims against the government, federal agents, and private defendants. Brown, Satterwhite, and Hodgson appeal. We AFFIRM.

I. FACTS

Dale A. Brown, R. Scott Satterwhite, and Anthony P. Hodgson ("Appellants") owned and operated two respected and successful Houston-based corporations called TerraSpace, Inc. and TerraSpace Technology, Inc. The companies provided high-tech engineering and management services to the private and government sectors. TerraSpace, Inc. received several engineering and management contracts for services to the private sector. TerraSpace Technology was successful in securing engineering and software development contracts with aerospace firms and were awarded a multi-million dollar Space Shuttle software development contract.

In the Fall of 1991, the Federal Bureau of Investigation began a sting operation, called Operation Lightning Strike, designed to uncover contract procurement fraud and other illegal activity committed in the aerospace community. The undercover operation targeted employees of the National Aeronautic and Space Administration and aerospace contractors doing business with NASA. Both the NASA Office of the Inspector General ("OIG") and the Defense Contractor Investigative Service ("DCIS") participated in the sting.

In May, 1992, FBI Special Agent James H. Francis, posing as a wealthy investor named John Clifford, initiated contact with Appellants Brown, Satterwhite, and Hodgson. Clifford told Appellants that he owned a Maryland-based company called Eastern Tech Manufacturing Company ("ETMC") and that he wanted to find a Houston-based aerospace firm to form a partnership with ETMC in order to gain contracts with NASA and its contractors. Appellants were not targets of the sting operation, but were selected by the FBI as entities that could be used in order to gain access to the aerospace community. Appellants were unaware that they and their companies were being set up by the FBI as tools of deception in an undercover operation.

Clifford represented to Appellants that he wanted to develop a miniature medical device, a "lithotripter," that astronauts could use to pulverize kidney stones while in space. Clifford suggested that his company, ETMC, would provide technology and facilities for the development of the lithotripter. Further, Clifford contended that the device would be developed into a multi-tissue ultrasonic imaging system.

In July 1992, as the plans for the lithotripter developed, Clifford offered Brown a job as the Chief Financial Officer and Vice-President of Marketing of another company ostensibly owned by Clifford, called Space, Inc. As the Vice-President, Brown was offered a monthly salary of $5,000.00 plus expenses. Brown was to receive his salary through yet another one of Clifford's illusionary companies, Southern Technologies Diversified, L.P. ("STD"). Clifford directed Brown to perform a number of activities for Space, Inc. From August of 1992 to March of 1993, Brown made numerous presentations as the Chief Financial Officer and Vice-President of Marketing of Space and he spent time merging financial summaries of Clifford's businesses with Space. To further gain Appellants' confidence and trust, Clifford promised to lend them millions in venture capital for their companies.

As the Operation developed, the FBI enlisted the assistance of several private companies to legitimize and lend credibility to its fictitious business enterprises. During the summer of 1992, Nationsbank provided financial information via telephone to Brown's business associate, Neil Jackson, about Clifford and Clifford's business partner, Joe Carson (FBI agent Joseph Carroll). Nationsbank informed Jackson that Clifford and Carson had accounts with Nationsbank totaling one hundred thirty (130) million dollars and a one million dollar line of credit. In June and July, 1992, Dun & Bradstreet provided favorable information via telephone and fax about the FBI's front company, STD. In July, 1992, Conn & Company also provided favorable financial information via telephone regarding STD.

By October, 1992, the Operation had developed its facilities for the production of the lithotripters. Larry Seiler, a Vice-President of ETMC, flew Brown to Columbia, Maryland to view ETMC's facilities and to learn about the manufacture of lithotripters. At this time, ETMC persuaded Brown that it had the capability to develop a product called the Printed Wiring Assembly Robotic Tinning System ("PWARTS"), for which it represented it intended to negotiate a future contract with the Tobyhanna U.S. Army base. In the following months, ETMC represented, via fax and telephone, various plans to develop other devices such as a digital pager, infrared sensors, and mine detectors.

In 1992 and 1993, Appellants worked hundreds of hours and spent large amounts of money bidding on projects. Appellants also introduced Clifford to managers at NASA and aerospace companies, including Rockwell, Lockheed, IBM, Loral, Boeing, General Electric, McDonnell Douglas, Martin Marietta, and others. Ultimately, Space submitted several successful bids on contracts.

In December, 1992, Clifford and Carson offered Brown an opportunity to develop a multi-million dollar hotel and dive resort in the Bahamas, called "The Isle of Gold." Persuading Brown to leave his job in the aerospace industry, Clifford and Carson promised him a large salary, excellent fringe benefits, and a personal plane. Because of this opportunity, Brown dissolved his business relationship with Satterwhite and Hodgson and made extensive arrangements to leave the country and sell his home.

On February, 26, 1993, Clifford told Jackson, Brown's associate, that a procurement officer from the U.S. Army's Tobyhanna base would be arriving in Houston. Clifford directed Jackson to "entertain" the procurement officer and told Jackson to enlist Brown's assistance. On March 4, 1993, Brown and Jackson went to the Hilton Hotel at Hobby Airport in Houston. In the parking lot, Jackson provided Brown with a sealed envelope containing "entertainment funds," and told Brown to deliver the envelope to the procurement officer's hotel room. As Brown delivered the envelope to a man in the hotel, the FBI recorded the transaction, using audio and visual recording equipment in the room.

Six months later, on August 4, 1993, Brown learned that there was no miniature lithotripter device and that Clifford and Carson were government undercover agents. Attempting to convince Brown to work as an unpaid undercover informant to set up stings, the FBI agents physically and psychologically intimidated Brown. On numerous occasions throughout August and September, 1993, the agents questioned Brown for multiple hours without the presence of an attorney and detained him against his will. Brown was threatened with prosecution of twenty-one different crimes, which could result in sixty years imprisonment and over a million dollars in fines. The FBI agents also questioned Satterwhite on at least one occasion for approximately two hours.

In May, 1994, the FBI abandoned Operation Lightning Strike. A few months later, in August 1994, a federal grand jury indicted Brown for one count of offering a $500 bribe to a public official. The first trial resulted in a mistrial. The United States declined to retry the case and later dismissed the indictment against Brown.

II. PROCEEDINGS

On January 6, 1996, Appellants presented claims to the FBI, the OIG, and the DCIS for injuries suffered from the undercover operation. On February 22, 1996, Appellants brought this suit in the United States District Court for the Southern District of Texas.

A. Claims

Appellants made claims against the United States, through the actions of the FBI, OIG, and DCIS agents, under the Federal Torts Claim Act ("FTCA") for abuse of process, malicious prosecution, assault, intentional infliction of emotional distress, false imprisonment, and invasion of privacy.

Appellants made Bivens¹ claims against FBI agents Francis, Carroll, Jean Barrett Yetman, Michelle Wyckoff, and Sheila Chadwick for due process and Fifth Amendment violations.

Appellants also alleged violations of the federal Racketeering and Corrupt Organizations Act ("RICO"), 18 U.S.C. 1961-1968, by Nationsbank, Conn & Company, Dun & Bradstreet, Southern Technologies Diversified, Eastern Tech Manufacturing Corporation, various employees of these private businesses, and FBI agents Carroll, Francis, and Yetman.

Finally, Appellants brought state law claims for: civil conspiracy against ETMC, Nationsbank, Dun & Bradstreet, Conn & Company, Hilton Hotels Corporation, various employees of the private companies and FBI agents Carroll, Francis, and Yetman; invasion of privacy claims against Hilton Hotels and Leisure Hospitality Management Company doing business as Sheraton Hotel-Astrodome; and interference...