Economou v. U.S. Dept. of Agriculture

Decision Date23 April 1976
Docket NumberD,No. 749,749
Citation535 F.2d 688
PartiesArthur N. ECONOMOU, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF AGRICULTURE et al., Defendants-Appellees. ocket 75-6050.
CourtU.S. Court of Appeals — Second Circuit

Lewis M. Steel, New York City (Eisner, Levy & Steel, P. C., David C. Buxbaum, New York City, on the brief), for plaintiff-appellant.

Mel P. Barkan, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., S. D. N. Y., Steven Glassman, Asst. U. S. Atty., New York City, of counsel), for defendants-appellees.

Before MANSFIELD, TIMBERS and MESKILL, Circuit Judges.

MANSFIELD, Circuit Judge:

Having long recognized the privilege of judges and legislators as a complete defense to civil damage actions based on their official conduct, see Bradley v. Fisher, 80 U.S. (13 Wall.) 335, 20 L.Ed. 646 (1872) (judges); Tenney v. Brandhove, 341 U.S. 367, 71 S.Ct. 783, 95 L.Ed. 1019 (1951) (legislators), 1 the Supreme Court in recent years has focused more sharply upon the scope of the immunity to be extended to those employed by the executive branch of a government, including state prosecutors, Imbler v. Pachtman, --- U.S. ----, 96 S.Ct. 984, 47 L.Ed.2d 128, 44 U.S.L.W. 4250 (1976); school board members, Wood v. Strickland, 420 U.S. 308, 95 S.Ct. 992, 43 L.Ed.2d 214 (1975); top state officers, Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), and policemen, Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967). This appeal raises the issue with respect to the United States Department of Agriculture, the Commodity Exchange Authority ("CEA" herein), and various officials of these agencies who were sued for damages based on their alleged wrongful and malicious enforcement of the Commodity Exchange Act, 7 U.S.C. §§ 1, et seq., against the plaintiffs. Judge Lloyd F. MacMahon of the Southern District of New York dismissed the damage suit on the ground that the defendants are entitled to absolute immunity from such liability. We affirm the dismissal as to the administrative agencies on the ground that federal jurisdiction over the claims against them is lacking. In all other respects the district court's order is reversed and the case remanded for further proceedings consistent with this opinion.

On February 19, 1970, the Secretary of Agriculture, as a result of a CEA audit of Arthur N. Economou and his trading company, Arthur N. Economou Co., Inc. (collectively referred to as "appellant" herein), issued an administrative complaint pursuant to the Commodity Exchange Act, 7 U.S.C. § 9 ("the Act" herein), alleging that appellant, while a registered futures commission merchant, had failed to maintain the minimum prescribed capital balance for such activity as required by rules promulgated under the Act, see 17 C.F.R. § 1.17, and directing appellant to show cause why his registration should not be revoked. Following another such audit, an amended complaint was issued against appellant on June 22, 1970. After a hearing before a Department of Agriculture hearing examiner, at which appellant appeared pro se, a report adverse to appellant was issued by the examiner on August 17, 1971.

In the meantime, while the examiner's report, to which appellant excepted, was under review by the Judicial Officer of the Department of Agriculture, appellant commenced the present action for $32,000,000 damages in the district court against some 13 defendants, including the Department of Agriculture, Commodity Exchange Authority, the Secretary and Assistant Secretary of Agriculture, various administrators, and officials and auditors of the CEA, and the Chief Hearing Officer and Counsel of the Department of Agriculture. The complaint alleged in substance that defendants, acting outside their discretionary duties and functions, had wrongfully and maliciously instituted the proceedings against him for the purpose of ruining his business reputation, retaliating against him for his previous outspoken criticism of the defendants' activities, and causing harm to his business. Appellant alleged that he had not wilfully violated the Act, that he had not been given notice and an opportunity to correct the alleged violations of CEA rules before the institution of the administrative proceedings against him, that the proceeding should have been terminated since he was no longer engaged in the regulated activity, and that in connection with their prosecution of that proceeding the defendants had knowingly caused deceptive press releases to be issued, which falsely indicated to the public that appellant's financial resources had deteriorated. As a result, the complaint further alleged, some of appellant's customers were no longer willing to do business with him, his credit standing was damaged, and appellant was forced to expend large sums of money to defend himself against the false charges.

The district court twice denied appellant's application for preliminary injunctive relief restraining the CEA enforcement proceeding against him. Thereafter appellant chose to pursue his lawsuit in a desultory fashion, taking little or no action for long periods. While his damage action thus remained dormant, the Agriculture Department's Judicial Officer affirmed the hearing examiner's findings, whereupon appellant petitioned us for review. On March 28, 1974, we granted appellant's petition and set aside the Department's enforcement order on the ground that "the essential finding of willfulness . . . was made in a proceeding instituted without the customary warning letter," rendering it "erroneous on the record taken as a whole, and the sanctions imposed unwarranted," 494 F.2d 519 (2d Cir. 1974).

After another long period of inaction, broken only by the district court's indication that the case might be dismissed for non-prosecution, the defendants' motion to dismiss appellant's second amended complaint was granted by Judge MacMahon on May 22, 1975, on the ground that the defendants were entitled to absolute immunity. From this decision plaintiffs appeal.

DISCUSSION

We need not tarry over the district court's dismissal of appellant's claims against the Department of Agriculture, and the Commodity Exchange Authority, which was clearly correct. Congress has not authorized either entity to be sued in its own name, and thus we lack jurisdiction over them. See Blackmar v. Guerre, 342 U.S. 512, 72 S.Ct. 410, 96 L.Ed. 534 (1952). Nor is there any reason to accept appellant's suggestion that the complaint now be amended to name the United States of America as a defendant, since the " intentional tort" exclusion of the Federal Tort Claims Act, 28 U.S.C. § 2680(h), would deny us jurisdiction over such claims against the United States, even though appellant's claims of malicious prosecution, abuse of process, and libel be cast in constitutional terms. 2 See Peterson v. Weinberger, 508 F.2d 45, 50 (5th Cir. 1975), cert. denied, 423 U.S. 830, 96 S.Ct. 50, 46 L.Ed.2d 47, 44 U.S.L.W. 3201 (1975).

Turning to the claims against the individual defendants, the district court based its dismissal mainly upon principles expressed in the plurality opinion of Justice Harlan in Barr v. Matteo, 360 U.S. 564, 79 S.Ct. 1335, 3 L.Ed.2d 1434 (1959), which we followed in Ove Gustavsson Contracting Co. v. Floete, 299 F.2d 655 (2d Cir. 1962). In Barr v. Matteo, the Supreme Court, by a 5 to 4 vote, held that the Acting Director of the Office of Rent Stabilization, a federal agency, was entitled to an absolute privilege against liability in damages for a defamatory press release issued by him, once it had been established that the action taken "was within the outer perimeter of (his) line of duty," even though his action was not a duty imposed on him but rather an exercise of discretion and was allegedly prompted by malice toward the plaintiff. In an opinion shared by three other justices (Frankfurter, Clark and Whittaker), Justice Harlan reasoned that an absolute privilege was required for the reason

"that officials of government should be free to exercise their duties unembarrassed by the fear of damage suits in respect of acts done in the course of those duties suits which would consume time and energies which would otherwise be devoted to governmental service and the threat of which might appreciably inhibit the fearless, vigorous, and effective administration of policies of government." 360 U.S. at 571, 79 S.Ct. at 1339, 3 L.Ed.2d at 1441.

Recognizing that "there may be occasional instances of actual injustice which will go unredressed," he concluded that such a price is "a necessary one to pay for the greater good," especially since "other sanctions than civil tort suits (are) available to deter the executive official who may be prone to exercise his functions in an unworthy and irresponsible manner," 360 U.S. at 576, 79 S.Ct. at 1342, 3 L.Ed.2d at 1444. Separate dissenting opinions were filed by Chief Justice Warren (in which Justice Douglas concurred) and Justices Brennan and Stewart. Accepting the view that an absolute privilege might attach to intra-agency reports or statements of Cabinet members, Justice Warren concluded that in the case of lesser officials a qualified privilege would suffice to enable them to perform their duties without undue harassment and at the same time protect a victim of their maliciously wrongful conduct.

Concluding that the alleged conduct of the defendants in the present case was "within the outer perimeter of their authority" and involved the exercise of discretion, Judge MacMahon dismissed the complaint on the ground that the defendants were entitled to immunity. Had Barr represented the last word in this evolving area, we might be inclined, as was the district court, to follow it in this case, despite the melange of differing views expressed by various members of the Court on the subject in that case, no one of which commanded a majority. However, the Court has since elucidated its...

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