Cybernet, LLC v. David

Decision Date02 November 2018
Docket NumberNo. 7:16-CV-16-RJ,7:16-CV-16-RJ
PartiesCYBERNET, LLC and ALADDIN REAL ESTATE, LLC, Plaintiffs, v. JONATHAN DAVID, in his personal capacity and his official capacity as District Attorney for the 13th Prosecutorial District of North Carolina, JAMES MCVICKER, in his personal capacity and his official capacity as Sheriff of Bladen County, North Carolina, and TRAVIS DEAVER, in his personal capacity and his official capacity as a Deputy Sheriff of Bladen County, North Carolina, Defendants.
CourtU.S. District Court — Eastern District of North Carolina

JONATHAN DAVID, in his personal capacity and his official capacity as District Attorney for the 13th Prosecutorial District of North Carolina,
JAMES MCVICKER, in his personal capacity and his official capacity as Sheriff of Bladen County, North Carolina,
and TRAVIS DEAVER, in his personal capacity and his official capacity as a Deputy Sheriff of Bladen County, North Carolina, Defendants.

No. 7:16-CV-16-RJ


November 2, 2018


This matter comes before the court on the motions for summary judgment of Defendant Jonathan David [DE-87] and Defendants James McVicker and Travis Deaver [DE-91]. All responsive briefing is complete, and the matters are ripe for disposition. For the reasons set forth below, the motions for summary judgment are allowed as to the federal claims and the court declines to exercise jurisdiction over the state law claims, which are remanded to Bladen County Superior Court.


Cybernet, LLC ("Cybernet") and Aladdin Real Estate, LLC ("Aladdin") (collectively, "Plaintiffs") filed a verified complaint in the Superior Court of Bladen County against Jonathan

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David, the District Attorney for the 13th Prosecutorial District of North Carolina ("David" or the "District Attorney"), James McVicker, the Sheriff of Bladen County ("McVicker" or "Sheriff McVicker"), and Travis Deaver ("Deaver"), a Deputy Sheriff of Bladen County, asserting claims for conversion, declaratory judgment, takings under the United States and North Carolina Constitutions, and deprivation of federal constitutional rights under 42 U.S.C. § 1983, all stemming from the alleged destruction of Plaintiffs' property during the execution of search warrants by the Bladen County Sheriff's Office (the "BCSO"). [DE-1-1]. Sheriff McVicker and Deaver (collectively, the "Sheriff Defendants") removed the action to this court [DE-1] and filed an answer to the complaint [DE-5], and David filed a motion to dismiss [DE-12]. The parties consented to the jurisdiction of a magistrate judge to conduct all proceedings in the case in accordance with 28 U.S.C. § 636(c) and Fed. R. Civ. P. 73. [DE-25 through -28].

The court allowed in part David's motion to dismiss and dismissed Plaintiffs' takings claim under the United States Constitution and individual capacity takings claim under the North Carolina Constitution but allowed to proceed Plaintiffs' official capacity takings claim under the North Carolina Constitution and individual capacity claims for conversion, declaratory judgment, and violation of 42 U.S.C. § 1983. [DE-31]. David then filed a motion for summary judgment [DE-32] and Plaintiffs filed a motion for entry of default against David [DE-42], both of which were denied [DE-55]. The court entered a scheduling order providing for two phases of discovery—Phase I focusing on Defendants' liability and immunity defenses, and Phase II focusing on all remaining issues should immunity not be case dispositive. [DE-58]. After the completion of Phase I discovery, Defendants filed the instant motions seeking summary judgment on all remaining claims.

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The undisputed facts, as well as the disputed facts viewed in the light most favorable to Plaintiffs, are summarized as follows. Cybernet operated two stores, "Big Aladdin" and "Little Aladdin" (collectively, the "stores"), that offered internet sweepstakes promotions to the public. Compl. [DE-1-1] ¶¶ 9-11. The stores are located in in Dublin, Bladen County, North Carolina, and are in separate buildings that are across the street from one another. Id. ¶¶ 9-10. Cybernet leased the space for the stores from Aladdin, which owns the buildings. Id. ¶ 12. Jeffrey Smith ("Smith") owns Aladdin, Holly Smith (together with Jeffrey Smith, "the Smiths") owns Cybernet, and both have some role in operating the stores, with Holly Smith acting as an operations manager and Jeffrey Smith maintaining the equipment and paying bills. Id. ¶¶ 12-14; Dep. of Jeffrey Smith ("Smith Dep.") [DE-94-2] at 32:16-33:13.

In the fall of 2014, James McVicker was running for sheriff of Bladen County and met with Smith to discuss a potential campaign contribution. Dep. of James McVicker ("McVicker Dep.") [DE-94-4] at 30:25-31:15; Smith Dep. [DE-97-9] at 59:1-8, 90:8-20. Smith gave McVicker a campaign contribution that was later returned so that it could be resubmitted in another manner not traceable to the Smiths. Smith Dep. [DE-97-9] at 90:21-93:17, 140:4-142:14. Smith also explained to McVicker how the promotions at the stores worked and why he believed they were legal, and Smith offered to allow McVicker to view the stores and to demonstrate the promotions offered. McVicker Dep. [DE-97-8] at 38:9-41:17, Interrog. No. 14 & Answer [DE-97-26]. McVicker was ultimately elected sheriff and, after he took office, he received complaints from some local residents about the stores. McVicker Dep. [DE-94-4] at 76:10-77:3.

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The District Attorney for Bladen County also had concerns regarding the legality of the sweepstakes promotions offered at the stores, and, in January 2013, he authored a memorandum to law enforcement regarding the enactment of N.C. Gen. Stat. § 14-306.4, Electronic machines and devices for sweepstakes prohibited, effective January 3, 2013. [DE-95-15]. The memorandum addressed the state of case law regarding the sweepstakes statute, the roles of the various branches of government and law enforcement related to the statute, the duty of prosecutors to advise law enforcement but to refrain from giving advisory opinions to gaming establishments or their attorneys, potential remedies, and notice to video gaming businesses regarding the new law. Id. The District Attorney's Office subsequently prosecuted Smith in 2014, related to a sweepstakes promotion in Bladen County, resulting in a hung jury. 2d Decl. of Jeffrey Smith ("2d Smith Decl.") [DE-96-2] ¶ 13.

In March 2015, Sheriff McVicker and Captain Jeffery Tyler of the BCSO met with members of the Cumberland County Sheriff's Office ("CCSO") and the Bladen County District Attorney's Office (the "District Attorney's Office"), including David and Glenn Emery (an Assistant District Attorney), regarding a potential investigation to determine whether the stores were violating any gaming laws. June 10, 2015 Report of Jeffrey Tyler ("Tyler Report") [DE-94-5]; Dep. of Jeffrey Tyler ("Tyler Dep.") [DE-94-6] at 25:2-25. Sheriff McVicker appointed Tyler to lead the investigation. McVicker Dep. [DE-94-4] at 73:20-75:12. Neither Sheriff McVicker, nor anyone else involved in the investigation, including any member of the District Attorney's Office, informed Smith the stores were under investigation or ever took him up on his offer to demonstrate how the promotions worked. Id. at 84:16-85:9; Tyler Dep. [DE-94-6] at 33:1-20. Instead, Tyler utilized an undercover officer, David Borresen from the CCSO, to investigate

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because Borresen and the CCSO had specialized gambling training and experience with similar investigations. Dep. of David Borresen ("Borresen Dep.") [DE-94-7] at 20:17-23:18, 24:17-25:4; Tyler Dep. [DE-94-6] at 23:25-24:16; McVicker Dep. [DE-94-4] at 75:17-76:9. Borresen went to the stores in an undercover capacity on May 4 and 8, 2015 and played some of the games offered. Borresen Reports [DE-94-8, -9]. At a May 18, 2015 meeting with members of the BSCO, the CCSO, and Emery, it was decided that Borresen would visit the stores another time before seeking search warrants [DE-97-15], and he did so on May 26, 2015 [DE-94-10].

After Borresen's final undercover operation, Tyler decided to apply for search warrants for both Big Aladdin and Little Aladdin. Tyler Dep. [DE-95-11] at 86:4-19. Tyler prepared search warrant applications, incorporating some, but not all, of the information from Borresen's reports, and sought review of the applications from Borresen and Ronnie Mitchell, a Cumberland County attorney who advised Sheriff McVicker, the BCSO, and the CCSO on legal matters. Id. at 87:7-16; Tyler Dep. [DE-97-10] at 104:14-113:21. On May 28, 2015, a North Carolina Superior Court judge issued search warrants for Big Aladdin and Little Aladdin, which authorized the seizure of items including, but not limited to, gaming machines and other devices as defined in N.C. Gen. Stat. § 14-306.1A, financial proceeds from the operations of illegal gaming, related documents, photographs, videos, and electronic media, and other fruits or instrumentalities of the crime. [DE-97-16, -18].

On the morning of May 29, 2015, the BCSO held an operational briefing prior to executing the search warrants, at which Tyler distributed a memorandum containing, among other things, a reminder to "*** Be professional, remember people are watching and cameras will be everywhere. ***." [DE-94-12]; Dep. of Morgan Johnson ("Johnson Dep.") [DE-94-13]

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at 101:10-102:12, 114:23-115:5. Sheriff McVicker was present for a portion of the meeting, reminded his deputies to be professional, McVicker Dep. [DE-94-4] at 111:14-113:6, but also told them to "take every [f***ing] thing out," Decl. of Randy Deaver ("Randy Deaver Decl.") [DE-98-2] ¶ 6.1 Subsequently, Tyler held a staging meeting near the stores, at which several members of the BCSO, Emery, and Scott Pait (an investigator for the District Attorney's Office) were present, but Sheriff McVicker did not attend. McVicker Dep. [DE-94-4] at 117:18-118:1; Dep. of Chad Britt ("Britt Dep.") [DE-94-1] at 14:14-15:11; Dep. of Glenn Emery ("Emery Dep.") [DE-85-1] at 149:1-150:19.2 The search warrants were then executed, with Tyler, Morgan Johnson of the BCSO, Borresen, and Lieutenant Jenkins of the CCSO overseeing the collection of evidence. Britt Dep. [DE-94-1] at 34: 1-10; Borresen Dep. [DE-94-7] at 155:12-25. The stores were secured, security cameras were redirected upward and...

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