Goldstein v. Galvin

• Citation: 719 F.3d 16
• Decision Date: 10 June 2013
• Docket Number: No. 12–2184.,12–2184.
• Parties: Phillip GOLDSTEIN, Plaintiff, Appellant, v. William F. GALVIN, Secretary of the Commonwealth of Massachusetts, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

719 F.3d 16

Phillip GOLDSTEIN, Plaintiff, Appellant,

v.William F. GALVIN, Secretary of the Commonwealth of Massachusetts, Defendant, Appellee.

No. 12–2184.

United States Court of Appeals,First Circuit.

June 10, 2013.

Andrew Good, with whom Philip G. Cormier and Good & Cormier were on brief, for appellant.

Pierce O. Cray, Assistant Attorney General, with whom Martha Coakley, Attorney General, was on brief, for appellee.

Before TORRUELLA, SELYA and LIPEZ, Circuit Judges.

SELYA, Circuit Judge.

A hoary proverb teaches that large oaks from little acorns grow. That is a natural progression. This case, however, features a less natural progression: an obscure violation of a state securities regulation, not especially egregious in itself, has led to a litigation extravaganza—an extravaganza that pits a prominent hedge fund operator against a state official with broad regulatory authority over the securities industry. This appeal is the latest (but, we fear, not necessarily the last) chapter in the tale.

The matter before us turns on allegations in the plaintiff's amended complaint that the state official used his oversight powers to retaliate unlawfully against the plaintiff for his opposition to what he deems excessive regulation of the securities industry. The case raises a farrago of interesting questions about the scope and extent of the immunities afforded to state officials whose duties encompass both adjudicatory and prosecutorial functions. The district court resolved these questions against the plaintiff and dismissed the action. Goldstein v. Galvin, No. 10–10139, 2012 WL 4481206, at *2–4 (D.Mass. Sept. 28, 2012). After careful consideration, we affirm.

I. BACKGROUND

Plaintiff-appellant Phillip Goldstein is a principal of Bulldog Investors General Partnership, a hedge fund business. By his own description, the plaintiff is “an outspoken public critic of excessive regulation of hedge funds.” He takes particular pride in having invalidated a bothersome federal securities rule. See Goldstein v. SEC, 451 F.3d 873 (D.C.Cir.2006).

Defendant-appellee William F. Galvin, an elected official, is the Secretary of the Commonwealth of Massachusetts. Under state law, the Secretary is charged with oversight of the local securities industry. SeeMass. Gen. Laws ch. 110A, § 406(a). The plaintiff alleges that, in retaliation for his anti-regulatory stance, the Secretary “induced prosecutorial advocates in the Enforcement Section of the Massachusetts Securities Division to” prosecute an administrative complaint against him. The administrative complaint (which named as respondents the plaintiff and other individuals and entities) was filed on January 31, 2007. It charged the respondents with violating the Massachusetts Uniform Securities Act (the Act), Mass. Gen. Laws ch. 110A, § 301, by offering unregistered securities for sale in Massachusetts. Although the Secretary did not sign the complaint—it was signed instead by four of his minions in the Enforcement Section—the Secretary is charged with enforcing the Act and can delegate that authority to others. See id. § 406(a); see also id.ch. 9, § 10A.

In answering the administrative complaint, the respondents interposed a number of affirmative defenses, including a defense premised on the First Amendment. During the course of the administrative proceeding, the hearing officer ruled that the First Amendment issue was not in play and rejected the other affirmativedefenses. The acting director of the Securities Division adopted the hearing officer's findings, decided that the respondents had violated the Act, ordered them to cease and desist, and imposed a fine.

The respondents sought judicial review. Their efforts were unsuccessful. See Bulldog Investors Gen. P'ship v. Sec'y of the Commonwealth ( Bulldog I ), 457 Mass. 210, 929 N.E.2d 293, 303 (2010). Like the administrative proceeding itself, that review did not encompass the First Amendment issue. Id. at 301–02.

During the pendency of the proceedings described above, the respondents (including the plaintiff) filed a separate action in a Massachusetts state court in an attempt to vindicate their First Amendment rights. See Bulldog Investors Gen. P'ship v. Sec'y of the Commonwealth ( Bulldog II ), 460 Mass. 647, 953 N.E.2d 691 (2011). This action, brought pursuant to 42 U.S.C. § 1983 against the Secretary in his official capacity, challenged “the constitutionality of the [state] regulations that prohibit general solicitation and advertising by anyone offering unregistered securities,” which allegedly infringed upon the respondents' “constitutional[ ] entitle[ment] to maintain their Web site and communicate with any interested person.” Id. at 700. The Massachusetts courts, up to and including the Supreme Judicial Court, rejected these section 1983 claims. Id. at 718.

Before the dust had settled (that is, while Bulldog I and Bulldog II were still pending on appeal in the state court system), the plaintiff commenced another section 1983 action. This action, filed in the federal district court, alleged that the Secretary had (i) induced the Enforcement Section to deviate from normal investigatory practices and charging standards; (ii) induced the Enforcement Section to file the administrative complaint; and (iii) gone out of his way to announce, on his website, that “Secretary Galvin Charges Phillip Goldstein and Bulldog Investors for unregistered securities offering.” The district court dismissed the suit, concluding that the defendant was absolutely immune with respect to the prosecution of the enforcement action and qualifiedly immune with respect to the website announcement. See Goldstein, 2012 WL 4481206, at *2–3.

This timely appeal ensued. Because the district court dismissed the complaint on immunity grounds, we review de novo. Coggeshall v. Mass. Bd. of Regist. of Psychologists, 604 F.3d 658, 662 (1st Cir.2010). In that endeavor, we take as true the well-pleaded facts set forth in the plaintiff's amended complaint. See SEC v. Tambone, 597 F.3d 436, 438 (1st Cir.2010) (en banc).

II. CLAIM PRECLUSION

The Secretary argues that the doctrine of claim preclusion barred the maintenance of the underlying action. This argument hinges on the preclusive effect of Bulldog II.

When a federal court considers the preclusive effect of an earlier state court judgment, it must apply that state's preclusion principles. See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); see also28 U.S.C. § 1738. This remains true even when the new case poses a quintessentially federal question. See Geiger v. Foley Hoag LLP Ret. Plan, 521 F.3d 60, 66 (1st Cir.2008). Accordingly, we look here to Massachusetts preclusion principles.

Under Massachusetts law, “[c]laim preclusion makes a valid, final judgment conclusive on the parties and their privies, and prevents relitigation of all matters that were or could have been adjudicated in the action.” Kobrin v. Bd. of Regist. in Med., 444 Mass. 837, 832 N.E.2d 628, 634 (2005) (internal quotation marks omitted). Three elements must be satisfied to trigger the application of this doctrine: the parties to the prior and present actions must either be identical or in privity; the causes of action must arise out of the same nucleus of operative fact; and the prior action must have produced a final judgment on the merits. See id. In this instance, our inquiry begins and ends with the first element.

In Bulldog II, suit was brought against the Secretary in his official capacity. Here, however, the suit is against the Secretary in his individual capacity. This distinction is critically important.

“[O]fficial-capacity suits generally represent only another way of pleading an action against an entity of which an officer is an agent....” Monell v. Dep't of Soc. Servs. of N.Y., 436 U.S. 658, 690 n. 55, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). In other words, “an official-capacity suit is, in all respects other than name, to be treated as a suit against the entity.” Kentucky v. Graham, 473 U.S. 159, 166, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985). This means, of course, that a public official, sued only in his official capacity, is a proxy for the government entity that employs him and is in privity with that entity. See Town of Seabrook v. New Hampshire, 738 F.2d 10, 11 (1st Cir.1984) (per curiam). The situation is quite different when an official is sued in his individual capacity. By definition, such a suit takes aim at the individual, not the government entity with which he is associated. Such a defendant is, therefore, not considered to be in privity with the government entity. See, e.g., Conner v. Reinhard, 847 F.2d 384, 395 (7th Cir.1988).

The flipside of this coin is that a person sued in his official capacity is a different party, in contemplation of law, than the same person sued in his individual capacity. It follows inexorably that a person sued only in his official capacity is neither identical to, nor in privity with, the same person sued in his individual capacity. See Mitchell v. Chapman, 343 F.3d 811, 823 (6th Cir.2003); Andrews v. Daw, 201 F.3d 521, 526 (4th Cir.2000); Howell Hydrocarbons, Inc. v. Adams, 897 F.2d 183, 188 (5th Cir.1990); Willner v. Budig, 848 F.2d 1032, 1034 n. 2 (10th Cir.1988) (per curiam); Conner, 847 F.2d at 395–96;Gregory v. Chehi, 843 F.2d 111, 119–21 (3d Cir.1988); Headley v. Bacon, 828 F.2d 1272, 1279 (8th Cir.1987); Roy v. City of Augusta, 712 F.2d 1517, 1521–22 (1st Cir.1983); see alsoRestatement (Second) of Judgments § 36(2). The upshot is that a person who is sued in one capacity (whether official or individual) cannot assert a defense of claim preclusion in a later action in which he is sued in a different capacity.

We conclude, therefore, that “an official who has litigated [a claim] in his official capacity is not precluded from relitigation in his personal capacity.” 18A Charles Alan Wright et al., Federal Practice and...