Duncan v. Norton

• Decision Date: 20 June 1997
• Docket Number: Civil Action No. 96-WY-2653-CB.
• Parties: Norman Eugene DUNCAN, Plaintiff, v. Gale A. NORTON, Attorney General for the State of Colorado, and Diana R. Maurer Schatz, Assistant Attorney General for the State of Colorado, in their official capacities only. Defendants.
• Court: U.S. District Court — District of Colorado

974 F.Supp. 1328

Norman Eugene DUNCAN, Plaintiff, v. Gale A. NORTON, Attorney General for the State of Colorado, and Diana R. Maurer Schatz, Assistant Attorney General for the State of Colorado, in their official capacities only. Defendants.

Civil Action No. 96-WY-2653-CB.

United States District Court, D. Colorado.

June 20, 1997.

Michael W. Gross, Arthur M. Schwartz, Gary Michael Kramer, Arthur M. Schwartz, P.C., Denver, CO, for Plaintiff.

Jan M. Zavislan, Attorney Gen. Office, Denver, CO, for Defendant.

ORDER ADOPTING MAGISTRATE'S RECOMMENDATION DISMISSING PLAINTIFF'S COMPLAINT

BRIMMER, District Judge.

This matter comes before the Court upon Defendants' motion to dismiss and Plaintiff's cross-motion for summary judgment. On April 1, 1997, United States Magistrate Judge Patricia A. Coan entered the Recommendation of United States Magistrate Judge recommending that Defendants' motion to dismiss should be granted in part and denied in part, Plaintiff's cross-motion for summary judgment should be denied, and Plaintiff's Complaint should be dismissed without prejudice.

The Court, having reviewed the materials on file and being fully advised in the premises, now ADOPTS Magistrate Coan's Recommendation. For the reasons stated in the Recommendation, the Court ORDERS that Defendants' motion to dismiss is GRANTED IN PART and DENIED IN PART, Plaintiff's motion for summary judgment is DENIED, and Plaintiff's Complaint is DISMISSED WITHOUT PREJUDICE.

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

COAN, United States Magistrate Judge.

This matter is before the court on Defendants' Motion to Dismiss and Plaintiffs Cross-Motion for Summary Judgment. Orders of reference under 28 U.S.C. § 636(b) and Fed.R.Civ.P. 72 referred this case to the undersigned magistrate judge on February 4, 1997 and March 5, 1997 to issue recommendations on the motions. The court heard oral argument on March 10, 1997. For the reasons discussed below, it is recommended that plaintiffs motion be denied and that defendants' motion be granted in part and denied in part.

I.

Unless stated otherwise, the following relevant facts were stipulated to in the January 17, 1997 case management order.

The Colorado Attorney general is charged with enforcing the provisions of the Colorado Consumer Protection Act, 6-1-101, C.R.S., et seq. (1992 Repl. Vol.)("CCPA"). Under § 6-1-108, C.R.S., the Attorney General is empowered to issue subpoenas to require the attendance of witnesses or the production of documents, and to conduct hearings relating to investigations under the CCPA. The CCPA provides a grant of use immunity to individuals who are compelled to testify by subpoena. § 6-1-111(1), C.R.S.

Defendants allege that since the spring of 1996, the Attorney General's office has been conducting an ongoing investigation into a series of pyramid schemes promoted throughout the Colorado Front Range. Motion to Dismiss, p. 2, ¶ 3. During the course of their investigation, defendants obtained information which led them to believe that plaintiff might have been involved in promoting a pyramid scheme. Id., p. 2, ¶ 4.

On or about October 11, 1996, plaintiff was served with a subpoena from defendant Schatz compelling him to produce requested documents and to testify under oath about his involvement with a group known as the "Networking Club" or "Friends Helping Friends." Plaintiff complied with the subpoena and testified under oath on October 25, 1996 about activities relating to the Networking Club. Before plaintiff was placed under oath, defendant Schatz advised him that the information he provided pursuant to the subpoena could not be used against him in a criminal prosecution, but could be used against him in a civil enforcement action.

Plaintiff thereafter received a letter from defendant Schatz, dated November 4, 1996, along with an enclosed draft complaint and a proposed "Stipulated Final Judgment and Permanent Injunction." The letter apprised plaintiff that if he did not execute the stipulated final judgment on or before November 18, 1996, the Colorado Attorney General's office would file a civil enforcement action against him in state court. Plaintiff did not execute the stipulated final judgment.

Plaintiff filed the instant 42 U.S.C. § 1983 action on November 15, 1996, seeking an injunction against defendants to prevent them from using his prior compelled testimony under the investigatory subpoena to obtain § 6-1-112(1) penalties against him in a subsequent civil enforcement action, on the grounds that such action by the defendants would deprive him of his Fifth, Sixth, Ninth and Fourteenth Amendment rights under the United States Constitution. Plaintiffs original complaint also sought a declaration that § 112(1) of the CCPA, as applied to him, is unconstitutional, and requested an award of damages.¹

The Colorado Attorney General filed a complaint against plaintiff in Adams County District Court, Case No. 96-CV-2326: State ex rel. Norton v. Duncan, on December 12, 1996, seeking, among other remedies, civil penalties against Mr. Duncan, under § 6-1-112(1), C.R.S., for violations of the CCPA. Mr. Duncan filed an answer to that complaint on January 31, 1997 in which he stated, as an affirmative defense, that the action violated his rights under the Fifth, Sixth and Fourteenth Amendments to the United States Constitution.

II.

Summary judgment is proper under Fed. R.Civ.P. 56(c) where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

There are no genuine issues of material fact in dispute. The dispositive motions concern a question of law: whether defendants' action in seeking civil monetary penalties against plaintiff in the pending state CCPA enforcement proceeding violates his Fifth Amendment privilege against self-incrimination.

III.

Defendants have moved to dismiss plaintiffs complaint on the ground that § 112(1) of the CCPA permits a civil sanction to be assessed against a defendant in a civil enforcement proceeding; therefore, because the penalty at issue is civil, rather than criminal, neither the statutory use immunity afforded to plaintiff, nor his Constitutional rights, have been violated by the use of his prior compelled testimony in the state action. Defendants argue in the alternative that the court should abstain from accepting jurisdiction of the instant action, under Pullman² or Younger³ abstention principles, because the same issues are the subject of related actions which are currently pending in state court.

Plaintiff has moved for summary judgment on the ground that defendants cannot lawfully seek § 112(1) penalties against him in the civil enforcement proceeding because the penalties sought are actually criminal, rather than civil in nature; therefore, seeking such penalties through the use of plaintiffs prior compelled testimony would violate the § 111(1) use immunity provision under which plaintiff testified in the investigatory proceeding. Plaintiff also argues that defendants' use of his prior immunized testimony violates his Fifth Amendment privilege against self-incrimination because defendants did not advise him, in the investigatory hearing, that he could refuse to testify.

§ 6-1-111 (1) of the CCPA states:

Any testimony obtained by the attorney general or a district attorney pursuant to compulsory process under this article [§ 6-1-108] or any information derived directly or indirectly from such testimony shall not be admissible in evidence in any criminal prosecution against the person so compelled to testify. The provisions of this subsection (1) shall not be construed to prevent any law enforcement officer from independently producing or obtaining the same or similar facts, information, or evidence for use in any criminal prosecution.

§ 6-1-112(1) provides:

Any person who violates or causes another to violate any provision of this article shall forfeit and pay to the general fund of this state a civil penalty of not more than two thousand dollars for each such violation. For purposes of this subsection (1), a violation of any provision shall constitute a separate violation with respect to each consumer or transaction involved; except that the maximum civil penalty shall not exceed one hundred thousand dollars for any related series of violations. In addition, the attorney general may recover costs and attorney fees in any civil enforcement action when the attorney general successfully enforces the provisions of the CCPA. § 6-1-113, C.R.S.

A.

The Fifth Amendment to the United States Constitution provides that no person "shall be compelled in any criminal case to be a witness against himself." The Fifth Amendment privilege against self-incrimination may be invoked not only when an individual is a defendant in a criminal trial, but also in any civil or criminal proceeding where his answers to questions might incriminate him in a future criminal proceeding. Allen v. Illinois, 478 U.S. 364, 368, 106 S.Ct. 2988, 2991-92, 92 L.Ed.2d 296 (1986)(quotations and citations omitted).

A state may properly compel testimony under a statutory grant of immunity which grants protection against self-incrimination which is "coextensive" with the protection provided by the Fifth Amendment, i.e., a statutory provision which precludes the use of state-compelled testimony in a later criminal prosecution against the witness. Kastigar v. United States, 406 U.S. 441, 453, 92 S.Ct. 1653, 1661, 32 L.Ed.2d 212 (1972). Thus, plaintiffs Fifth Amendment privilege against self-incrimination is violated if, during the state civil enforcement proceeding, the Attorney General's office uses plaintiffs previously compelled testimony to impose civil penalties...