Allin v. Schuchmann

• Decision Date: 18 April 1995
• Docket Number: Civ. A. No. 91-1431-FGT.
• Citation: 886 F. Supp. 793
• Parties: Catherine E. ALLIN, Plaintiff, v. Tara SCHUCHMANN, Defendant.
• Court: U.S. District Court — District of Kansas

886 F. Supp. 793

Catherine E. ALLIN, Plaintiff, v. Tara SCHUCHMANN, Defendant.

Civ. A. No. 91-1431-FGT.

United States District Court, D. Kansas.

April 18, 1995.

COPYRIGHT MATERIAL OMITTED

Thomas M. Bradshaw, Daniel O. Herrington, Armstrong, Teasdale, Schlafly & Davis, Kansas City, MO, Steven P. Sanders, Armstrong, Teasdale, Schlafly & Davis, St. Louis, MO, for Catherine E. Allin.

Roger D. Stanton, Stinson, Mag & Fizzell, Overland Park, KS, W. Perry Brandt, M. Elizabeth Kirkland, Stinson, Mag & Fizzell, Kansas City, MO, Christopher M. Weil, Weil & Petrocchi, P.C., Dallas, TX, for Tara Schuchmann.

MEMORANDUM AND ORDER

THEIS, District Judge.

Plaintiff has brought this action alleging malicious prosecution and intentional infliction of emotional distress. The matter is before the court on defendant's motion for summary judgment. (Doc. 86). The motion has been extensively briefed, and the court is prepared to rule.

1. Facts

This case arises out of a criminal fraud action brought against officers of Peoples Heritage Savings and Loan Association ("Peoples") in Salina, Kansas, and others alleged to have conspired with those officers to commit the fraud. Among the defendants charged in that case were plaintiff, Catherine Allin, and her then husband, James Cruce,¹ who was the president of and a principal shareholder in Peoples. James Cruce pled guilty to several charges and was sentenced to a term of imprisonment. Plaintiff went to trial and was acquitted.

Tara Schuchmann, a Texas stockbroker, was subpoenaed to testify before the grand jury regarding stock transactions she had conducted for a Drexel, Burnham, Lambert ("Drexel") account held in the name of Catherine Allin. The transactions involved purchases and resales of shares of Ameriwest Financial Corporation ("Ameriwest"). One purchase, made in December 1987, involved over $1 million in Ameriwest stock. Another, involving over $800,000 in Ameriwest stock, was paid for partly in cash and partly by a margin loan from Drexel. Schuchmann testified that all the transactions were made at Allin's direction and that she had discussed with Allin the nature of the transactions, as well as Allin's financial status and investment objectives. Schuchmann testified that she believed Allin to have a net worth of approximately $1.5 million and an annual income of $75,000 and that Allin had told Schuchmann she wanted to speculate in the stock market and was willing to take risks. Schuchmann testified that based on her dealings with Allin, the large stock transactions did not concern her.

Nothing about the stock transactions themselves, as Schuchmann related them, was illegal. However, the government had information that the funds used for the stock transactions were acquired through the fraud against Peoples, and Schuchmann's testimony supplied a critical link in the chain of circumstantial evidence tying Allin to the fraud. Without Schuchmann's testimony, there would have been no evidence presented that Allin knew about or participated in the fraud. There is no evidence that Schuchmann knew about the fraud against Peoples.

Schuchmann was again subpoenaed to testify at trial, where her testimony was the same as her grand jury testimony. The Assistant United States Attorney spoke with Schuchmann immediately before her testimony and had several contacts with Schuchmann's attorney. As stated above, Allin was acquitted of all criminal charges.

According to plaintiff, Schuchmann's testimony before the grand jury and at trial was false and misleading, and she withheld exculpatory information from the prosecutor. Plaintiff contends that at the time of the transactions her net worth was approximately $750,000, and that she never told Schuchmann otherwise. At the time of the transactions, plaintiff was a full-time student working part time as an interior designer and had an annual income of $29,000. Plaintiff denies discussing her investment strategy or objectives with the defendant. Plaintiff contends that it was James Cruce, and not plaintiff, who opened the Drexel account and conducted the stock transactions through Schuchmann and that plaintiff neither authorized nor knew about those transactions. Plaintiff contends further that without the testimony of Schuchmann, no criminal charges would have been brought against plaintiff.

Allin argues that Schuchmann got involved with Cruce's dealings because he had given her a great deal of business and in exchange for his arranging for Schuchmann and her husband to purchase a home at a greatly reduced price through circumvention of banking regulations. Plaintiff contends that Schuchmann gave false testimony in order to protect herself from liability under the securities regulations and to eliminate any suggestion that Schuchmann was involved in the fraud against Peoples. Allin does not contend that Schuchmann was motivated by any particular ill will toward her.

Allin instituted a National Association of Securities Dealers arbitration proceeding, alleging fraud, breach of contract and breach of fiduciary duty against Schuchmann. In the arbitration, Allin alleged that Schuchmann, without plaintiff's permission, transferred some $234,000 from Allin's account into a bank account held by Cruce. The arbitration panel found in favor of Allin and awarded $10, but did not award costs to either party. There was evidence before the arbitration panel that the money taken from Allin's account did not belong to her. The United States District Court for the Northern District of Texas confirmed the award. Cruce v. Schuchmann, 3:93-CV-0768-H (N.D.Tex. May 18, 1993).

2. Summary Judgment Standard

The court is familiar with the standards governing the consideration of a motion for summary judgment. The Federal Rules of Civil Procedure provide that summary judgment is appropriate when the documentary evidence filed with the motion "shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

The burden at the summary judgment stage is similar to the burden of proof at trial in that the court must enter summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact on its claim(s). Rule 56, however, imposes no requirement on the moving party to "support its motion with affidavits or other similar materials negating the opponent's claim." Id. at 323, 106 S.Ct. at 2553 (emphasis in original). Once the moving party has properly supported its motion for summary judgment, the nonmoving party may not rest upon mere allegations or denials, but must set forth specific facts showing a genuine issue for trial, relying upon the types of evidentiary materials contemplated by Rule 56. Fed.R.Civ.P. 56(e). Each party must demonstrate to the court the existence of contested facts on each claim it will have to prove at trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The court reviews the evidence on summary judgment under the substantive law and based on the evidentiary burden the party will face at trial on the particular claim. Anderson, 477 U.S. at 254, 106 S.Ct. at 2513.

3. Malicious Prosecution

Plaintiff alleges that defendant is liable for malicious prosecution because she gave false and misleading testimony to the grand jury and at trial and because she withheld exculpatory evidence while testifying and while talking to the prosecutor before her testimony. Defendant contends that these actions are insufficient to give rise to liability.

Kansas law recognizes a cause of action for malicious prosecution arising out of a criminal proceeding. To maintain such an action, the plaintiff must prove: (1) that the defendant instituted, procured or continued the criminal proceeding of which the complaint is made, (2) that the defendant in so doing acted without probable cause and with malice, (3) that the proceeding terminated in favor of the plaintiff, and (4) that the plaintiff sustained damages. Braun v. Pepper, 224 Kan. 56, 58, 578 P.2d 695 (1978); Thompson v. General Finance Co., Inc., 205 Kan. 76, Syl. ¶ 5, 468 P.2d 269 (1970). In interpreting the elements of malicious prosecution, the court keeps in mind that the cause of action has long been disfavored. See, e.g., Meyers v. Ideal Basic Indus., Inc., 940 F.2d 1379 (10th Cir.1991), cert. denied, 502 U.S. 1058, 112 S.Ct. 935, 117 L.Ed.2d 106 (1992) (applying Oklahoma law); Purvis v. Hamwi, 828 F.Supp. 1479, 1482 (D.Colo.1993); Whittaker v. Duke, 473 F.Supp. 908, 912 (1979); see also W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 119, at 876 (5th ed.1984).

Defendant's motion for summary judgment brings into issue only the first element. It is widely held that to institute, procure, or continue a prosecution requires more than testifying as a prosecution witness. "One who merely responds to requests for information or who testifies as a witness does not, by those acts, institute or continue a proceeding." Whittaker v. Duke, 473 F.Supp. at 910. Liability may result if the defendant testifies in addition to other action, such as investigating...