Wheeler v. Cosden Oil and Chemical Co.

• Decision Date: 18 June 1984
• Docket Number: No. 82-1711,82-1711
• Citation: 734 F.2d 254
• Parties: D.C. WHEELER and John Thedford Sims, Plaintiffs-Appellants, v. COSDEN OIL AND CHEMICAL CO., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 254

734 F.2d 254

79 A.L.R.Fed. 883

D.C. WHEELER and John Thedford Sims, Plaintiffs-Appellants, v. COSDEN OIL AND CHEMICAL CO., et al., Defendants-Appellees.

No. 82-1711.

United States Court of Appeals Fifth Circuit.

June 18, 1984.

Rehearing and Rehearing En Banc Denied Oct. 25, 1984.

John H. Green, Odessa, Tex., for plaintiffs-appellants.

Maxwell, Godwin & Carlton, Donald E. Godwin, J. Richard Tubb, Dallas, Tex., for Cosden, American, Tate, Weeks, Thomas and Long.

Joe Mattox, Atty. Gen., Sharon Gillespie, Asst. Atty. Gen., Philip Durst, Austin, Tex., for Farr.

Appeal from the United States District Court for the Northern District of Texas.

Before GEE, RANDALL, and JOHNSON, Circuit Judges.

GEE, Circuit Judge:

On this appeal from a Rule 12 dismissal, we are asked to determine whether the district court erred in holding that plaintiffs fail to state a claim actionable under 42 U.S.C. Sec. 1983 and in dismissing their pendent state claims. This case requires us to reconsider, in light of recent Supreme Court decisions, our earlier holding in Shaw v. Garrison, 467 F.2d 113 (5th Cir.1972), that an action lies under Sec. 1983 for malicious prosecution without probable cause in a state proceeding. We conclude that Shaw remains valid. We conclude as well that plaintiffs have stated a cause of action for arrest and imprisonment without probable cause, one of a type that this Court has repeatedly held cognizable under Sec. 1983 as a deprivation of rights guaranteed by the Fourth Amendment. See, e.g., Reeves v. City of Jackson, 608 F.2d 644 (5th Cir.1979). Since we reverse and hold that plaintiffs do state a federal cause of action, we remand to the district court to reconsider whether the pendent state claims should be joined in these federal proceedings. ¹

Background

In mid-1980, plaintiffs D.C. Wheeler and John Thedford Sims contracted with Cosden Oil and Chemical Company (Cosden) and American Petrofina, Inc. (Fina) to sell oil to Cosden and Fina from the W.B. Currie lease in Howard County, Texas. Pursuant to state regulation, Wheeler had previously obtained from the Texas Railroad Commission authorization to produce 76 barrels of oil per day from the lease.

In late October, Archie Farr, an agent of the Railroad Commission, began an investigation of Wheeler and Sims' oil production activities. According to plaintiffs' allegations, Farr met with Texas Ranger Thomas Almond to request his help in conducting the investigation and ultimately in bringing criminal charges against Wheeler and Sims. Farr told Almond that the Currie lease was incapable of producing the quantity of oil reported by plaintiffs and that he concluded plaintiffs were either falsifying records or bringing in stolen oil, thereby defrauding Cosden and Fina.

Acting under the statutory authority to inspect oil lease property and related records granted to the Railroad Commission under Texas law, ² Farr entered the Currie lease several times without a search warrant--but, according to plaintiffs, failed to discover any incriminating evidence. Farr and agents of Cosden and Fina then installed a drop meter on the pipeline at a point outside the Currie lease in order to measure the amount of oil coming off plaintiff's property. The pipeline itself is owned by Cosden. Plaintiffs allege that before installing the drop meter they tampered with it so as to cause it to register less oil flowing through the pipe than was actually being carried.

Based allegedly on information collected from the meter and other allegedly false information provided by Farr and the corporate defendants, Almond obtained an arrest warrant for Sims on a felony theft charge. Sims was taken into custody on January 5, 1981, and was released later that day after posting bond. In late March, Wheeler and Sims were indicted by a Howard County grand jury for felony attempted theft. ³ Wheeler was arrested on a writ of capias on April 10, 1981; he posted bond and was released later that day. Wheeler and Sims were tried and acquitted.

Wheeler and Sims then brought suit against Cosden, Fina, Farr, and individual agents of Cosden and Fina who allegedly participated in the investigation that led to their arrest and prosecution. Under the umbrella of section 1983, they allege unreasonable search and seizure as well as general claims of due process and equal protection violations. ⁴ They also brought a pendent state claim for malicious prosecution. The district court dismissed the various Sec. 1983 claims for failure to state a cause of action and dismissed the pendent state claim without prejudice. Plaintiffs appeal.

The Section 1983 Claims: Search and Seizure, Malicious

Prosecution, False Arrest and Imprisonment

In reviewing the district court's dismissal on a Rule 12 motion of plaintiffs' various claims under Sec. 1983, we apply the generous standard of Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957): it must appear beyond doubt that plaintiffs can prove no set of facts in support of their claims which would entitle them to relief. See, e.g., Jones v. United States, 729 F.2d 326 at 327, 330 (5th Cir.1984).

Since liability under Sec. 1983 is predicated on the deprivation of rights secured by the Constitution or federal law, we must first determine whether any of the defendants' alleged acts deprived the plaintiffs of federally guaranteed rights. We construe the complaint to assert Sec. 1983 claims for unreasonable search and seizure, prosecution without probable cause, and arrest and imprisonment without probable cause. We review the potential merits of each of these claims in turn.

Search and Seizure Claims

Plaintiffs' allegations of unreasonable search and seizure are based on the warrantless searches of the oil lease property and on the installation of the drop meter. As for the searches, we agree with the district court that plaintiffs' application for authorization to produce oil from the lease charged them with constructive notice of the Texas statutes under whose authority Farr entered the lease, ⁵ and constituted implicit agreement to abide by the statutory provisions, including consent to such entry and search as is alleged. ⁶ By conceding, at oral argument, that the authorization statutes are constitutional, plaintiffs have effectively abandoned any argument that these searches violated their Fourth Amendment rights. We conclude that the district court properly dismissed the plaintiffs' allegations regarding the warrantless searches of their property for failure to state a constitutional deprivation.

Plaintiffs' allegations that the installation of the meter by Farr ⁷ and agents of the corporate defendants violate their Fourth Amendment rights is similarly lacking in merit. Even if the search itself was illegal, plaintiffs lack standing to challenge it since they have not asserted any property rights in the pipeline, the oil flowing through it, or the land on which the meter was located. Rakas v. Illinois, 439 U.S. 128, 134, 99 S.Ct. 421, 425, 58 L.Ed.2d 387 (1978) (illegal search of third party's property does not alone confer on person aggrieved standing to challenge search as violation of Fourth Amendment rights). ⁸

Malicious Prosecution

Plaintiffs contend that Farr's alleged malicious misrepresentations to Almond give rise to a cause of action under Sec. 1983 for malicious prosecution. As far as we can determine, this Circuit has not considered and ruled on this question since the panel decision in Shaw v. Garrison, 467 F.2d 113 (5th Cir.), cert. denied, 409 U.S. 1024, 93 S.Ct. 467, 34 L.Ed.2d 317 (1972) which enjoined a state prosecution for perjury on the ground that it was brought "in bad faith"--i.e. without probable cause. The opinion in Shaw approaches the question by asking whether such a prosecution itself satisfied the requirement of "irreparable injury" to enjoin state proceedings set out in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and concludes that since such a prosecution violated "a federal right to be free from bad faith prosecutions," it did satisfy Younger. Shaw, 467 F.2d at 119-121.

Thus the law of the Circuit; the question we face today is whether the holding in Shaw survived the Supreme Court's intervening decision in Gerstein v. Pugh, 420 U.S. 103, 95 S.Ct. 854, 43 L.Ed.2d 54 (1975). ⁹ We conclude that it did.

Our inquiry whether the Fourteenth Amendment requires the states to make a determination of probable cause to prosecute begins at the long-established doctrine that the grand jury clause of the Fifth Amendment does not apply to the states. Hurtado v. California, 110 U.S. 516, 4 S.Ct. 111, 28 L.Ed. 232 (1883). Hurtado itself, however, holds simply that the grand jury institution is not essential to the due process secured by the Fourteenth Amendment, 110 U.S. at 520, 4 S.Ct. at 113, and is silent on the issue whether the process used by the state in deciding whether to prosecute must incorporate a neutral determination of probable cause or, indeed, any determination at all. From the manner in which the Court framed the issue in Hurtado and from references in that opinion to the preservation of "the right of personal liberty," it can be argued that Hurtado rests on an assumption that any procedure adopted by the states to replace the grand jury would perform an equivalent function--to protect persons accused from being "harassed or destroyed by prosecutions founded only upon private malice or popular fury," Hurtado 110 U.S. at 521, 4 S.Ct. at 113 ¹⁰--and that, therefore, prosecution without probable cause would violate Fourteenth Amendment due process rights. As we have noted, an earlier panel of this Circuit has held squarely that "there is a federal right to be free from bad faith prosecutions." Shaw v. Garrison, 467 F.2d 113 (5th Cir.1972).

Can the argument that the Fourteenth Amendment due process clause incorporates a right to a determination of probable cause to prosecute in...