Branch v. Tunnell, 93-35144

• Decision Date: 12 January 1994
• Docket Number: No. 93-35144,93-35144
• Parties: Jerry L. BRANCH, Valenna Branch, Colby Branch, Plaintiffs-Appellants, v. Dale L. TUNNELL, Individually and as Special Agent of Bureau of Land Management, State of Montana, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 449

14 F.3d 449

62 USLW 2473

Jerry L. BRANCH, Valenna Branch, Colby Branch, Plaintiffs-Appellants, v. Dale L. TUNNELL, Individually and as Special Agent of Bureau

of Land Management, State of Montana, Defendant-Appellee.

No. 93-35144.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 15, 1993.

Decided Jan. 12, 1994.

Robert J. Waller, Waller & Womack, P.C. and Gary G. Broeder, Veeder & Broeder, P.C., Billings, MT, for plaintiffs-appellants.

Richard A. Olderman, Frank W. Hunger, Asst. Atty. Gen., Lorraine I. Gallinger, U.S. Atty., and Barbara L. Herwig, Atty., Civ. Div., Dept. of Justice, Washington, DC, for defendant-appellee.

Appeal from the United States District Court for the District of Montana.

Before: LAY, ^* THOMPSON, and RYMER, Circuit Judges.

RYMER, Circuit Judge:

Three years ago, we reversed the district court's holding that the Bivens ¹ complaint filed by plaintiffs Jerry L. Branch and his daughters Valenna and Colby Branch (collectively, Branch) could survive a motion to dismiss premised on the defense of qualified immunity. Branch v. Tunnell, 937 F.2d 1382 (9th Cir.1991) (Branch I ). Branch alleged that defendant Dale L. Tunnell, a Special Agent with the Interior Department's Bureau of Land Management (BLM), violated Branch's Fourth Amendment rights by knowingly or recklessly misleading the magistrate judge in an affidavit for warrants to search Branch's home and business. We held that a district court must apply a "heightened pleading standard" in Bivens or Sec. 1983 cases where the defendant's subjective intent is an element of the plaintiff's constitutional tort. Id. at 1386.

In the interim, several events of note have taken place. Branch returned to the district court and filed an amended complaint, which Tunnell met with another motion to dismiss. The district court granted the motion, finding that Branch had failed to allege specific facts tending to show that Tunnell either knew or should have known of allegedly false statements in the affidavit. After the district court issued its ruling, the Supreme Court, in Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, --- U.S. ----, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993), held that a federal court may not apply a heightened pleading standard to a complaint alleging municipal liability under Sec. 1983.

Branch appeals, arguing that the district court erred in applying the heightened pleading standard, and that even if the district court applied that standard correctly, we must overrule Branch I in light of Leatherman. We disagree with Branch on both counts. Branch's amended complaint fails to meet the standard we articulated in Branch I. Because the Court in Leatherman expressly stated it was not deciding whether federal courts may employ a heightened pleading standard in qualified immunity cases, we are bound by our holding in Branch I. We have jurisdiction, 28 U.S.C. Sec. 1291, and we affirm the district court's judgment.

I

In 1986, the Montana Department of Revenue (MDOR) audited various oil and gas field operators to determine whether they were paying the proper amount of production taxes to the State. Among the entities MDOR audited was Branch Oil and Gas (Branch Oil); Branch is the president of Branch Oil, and he owns 50% of the corporation's stock.

After conducting these audits, MDOR requested internal records from companies that purchased natural gas from the field operators. On May 29, 1987, MDOR lodged such a request with Aloe Ventures Gathering System (Aloe Ventures), a joint venture in which Branch Oil is the managing partner and owns a 42.95% interest, and which purchases gas from Branch Oil. A dispute arose concerning the scope of MDOR's request. Citing confidentiality provisions in certain of its records, Aloe Ventures asked MDOR to explain the relevance of the items requested.

In April 1987, Tunnell began investigating whether Branch and Branch Oil were avoiding royalty payments on federal natural gas leases. Pursuant to the Mineral Lands Leasing Act (Act), 30 U.S.C. Secs. 181-287, the Secretary of the Interior leases federal oil and gas reserves to private parties such as Branch Oil. In exchange for its lease, the private party pays to the federal government a royalty; the royalty is calculated according to the price the private party receives from its purchasers for the oil or gas it extracts. The Secretary has broad powers to audit and investigate lessees to ensure compliance with the Act's royalty provisions. Id. Secs. 1711(a), 1717(a). The State (vis-a-vis MDOR) calculates its tax on oil and gas producers in a similar manner.

Before investigating Branch Oil, Tunnell had been involved in the investigation of an entity known as Western Reserves, Inc. The BLM suspected that Western Reserves had set up a shell corporation and sold to it natural gas at a below-market price, thereby yielding lower royalty and tax calculations. The Western Reserves investigation eventually led to the filing of criminal charges.

Tunnell suspected that the Branch Oil-Aloe Ventures arrangement was similar to the unlawful operation he'd investigated at Western Reserves. Specifically, Tunnell believed that Branch Oil and Aloe Ventures negotiated for the price of gas in a less-than-arms-length transaction, that Branch Oil would underprice the gas it sold to Aloe Ventures, and that Aloe Ventures, in turn, would resell the gas to other purchasers at a significantly higher price. Tunnell believed that the Aloe Ventures profit yield included income upon which Branch Oil's federal lease royalties should have been calculated. At some point during his investigation, Tunnell learned from MDOR officials of the ongoing dispute between MDOR and Aloe Ventures concerning the document request.

On July 15, 1987, Tunnell filed with a United States magistrate judge an application for warrants to search Branch's home and place of business. Tunnell's four-page warrant affidavit set forth the evidence he claimed to have obtained in the course of investigating the alleged royalty-evasion scheme. Tunnell attributed much of the information in his affidavit to Peter Donnelly, a revenue agent with MDOR. The magistrate judge issued the warrants, and federal agents executed them on the following day, July 16, 1987. Neither federal nor state authorities ever filed criminal charges against Branch, Branch Oil, or Aloe Ventures.

Branch filed this Bivens action on June 22, 1988, alleging a violation of his Fourth Amendment right to be free from unreasonable searches. Branch alleged a conspiracy between the BLM and MDOR to obtain the documents that Aloe Ventures refused to produce; Branch further alleged that Tunnell's warrant affidavit was a mere pretext to secure those documents. Tunnell thereafter moved to dismiss the complaint on the ground that Branch's complaint failed to overcome Tunnell's qualified immunity. The district court denied the motion, and Tunnell appealed.

We reversed and remanded. Following the lead of the District of Columbia Circuit, see, e.g., Siegert v. Gilley, 895 F.2d 797, 801-02 (D.C.Cir.1990), aff'd on other grounds, 500 U.S. 226, 111 S.Ct. 1789, 114 L.Ed.2d 277 (1991), we adopted a "heightened pleading standard" for Bivens and Sec. 1983 cases where the defendant is entitled to assert the qualified immunity defense and where her or his knowledge or intent is an element of the plaintiff's constitutional tort:

[I]n order to survive a motion to dismiss, plaintiffs must state in their complaint nonconclusory allegations setting forth evidence of unlawful intent. The allegations of facts must be specific and concrete enough to enable the defendants to prepare a response, and where appropriate, a motion for summary judgment based on qualified immunity.

Branch I, 937 F.2d at 1386 (quotation marks omitted). In the context of Branch's claim that Tunnell had deceived the magistrate judge in the course of obtaining the warrants, we held that this new standard obligated Branch to point to specific portions of the affidavit that Branch alleged were false; to allege "some facts" showing that Tunnell was aware (or should have been aware) of those statements' falsity; and to allege that the statements were necessary to the magistrate judge's probable cause finding. Id. at 1387. We determined that Branch's complaint fell short of this mark and therefore remanded the case to the district court so Branch could amend the complaint in conformity with the new standard. Id. at 1388.

Branch then filed an amended complaint. This complaint identifies 11 alleged falsehoods in Tunnell's affidavit, and lists seven facts that, according to Branch, demonstrate that Tunnell knew or should have known that those statements were false. Branch also alleges that those false statements were necessary to the magistrate judge's finding of probable cause to issue the warrants.

Tunnell moved to dismiss the amended complaint, arguing that Branch had failed to meet the heightened pleading standard. The district court granted the motion, holding that, although Branch met the first prong of the Branch I test by listing specific falsehoods in Tunnell's warrant affidavit, he failed to allege facts showing that Tunnell knew or should have known the statements were false. Branch filed this timely appeal.

II

We consider first Branch's argument that his complaint was sufficient to survive Branch I 's heightened pleading standard. At bottom, Branch's constitutional claim is that Tunnell deceived the magistrate judge in procuring the search warrants. In Branch I, we held that the heightened pleading standard requires a plaintiff bringing such a claim to satisfy three requirements:

[A] plaintiff's complaint must contain nonconclusory allegations that the defendant knowingly included false statements in the affidavit or did so with reckless disregard. That is, he must "point out specifically the portion of the warrant affidavit that is...