Greenpoint Tactical Income Fund LLC v. Pettigrew

• Decision Date: 27 June 2022
• Docket Number: 21-1411
• Citation: 38 F.4th 555
• Parties: GREENPOINT TACTICAL INCOME FUND LLC, et al., Plaintiffs-Appellants, v. Allen J. PETTIGREW and Darren C. Halverson, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

38 F.4th 555

GREENPOINT TACTICAL INCOME FUND LLC, et al., Plaintiffs-Appellants,

v.Allen J. PETTIGREW and Darren C. Halverson, Defendants-Appellees.

No. 21-1411

United States Court of Appeals, Seventh Circuit.

Argued November 30, 2021

Decided June 27, 2022

Michael Paul Richman, Attorney, Claire Ann Richman, Steinhilber Swanson & Resop, Madison, WI, Olivier H. Reiher, Attorney, Stafford Rosenbaum LLP, for Plaintiffs-Appellants.

Charles A. Guadagnino, Christian R. Larsen, Carter B. Stewart, Attorneys, Office of the United States Attorney, Milwaukee, WI, for Defendants-Appellees.

Before Wood and Hamilton, Circuit Judges.^*

Hamilton, Circuit Judge.

Plaintiffs Greenpoint Tactical Income Fund LLC and its affiliates and managers were the subject of an FBI investigation into suspected fraud, particularly with respect to Greenpoint's asset valuation practices. The investigation led to issuance of a search warrant for plaintiffs' properties and seizure of some assets. Following execution of the warrant, plaintiffs filed this suit against FBI Special Agent Allen Pettigrew and Assistant United States Attorney Darren Halverson. Plaintiffs allege that Agent Pettigrew and AUSA Halverson violated their Fourth Amendment rights by submitting a false and misleading affidavit in support of the search warrant. They seek damages pursuant to Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics , 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). The district court dismissed the suit for failure to state a claim, concluding that plaintiffs were seeking to extend Bivens to a "new context" and that "special factors" counseled hesitation in doing so. Greenpoint Tactical Income Fund v. Pettigrew , No. 20-cv-444, 2021 WL 461560, at *8 (E.D. Wis. Feb. 9, 2021), quoting Ziglar v. Abbasi , ––– U.S. ––––, 137 S. Ct. 1843, 1859, 198 L.Ed.2d 290 (2017). We affirm the district court's dismissal but on different grounds. Even assuming that Bivens can reach the Fourth Amendment violations alleged here, defendant Halverson is entitled to absolute prosecutorial immunity on these claims, and Agent Pettigrew is entitled to qualified immunity on them.

I. Factual and Procedural Background

A. Greenpoint Tactical Income Fund and Its Affiliates

Because the district court dismissed the case for failure to state a claim, we give plaintiffs the benefit of their factual allegations and draw reasonable inferences in their favor. Lax v. Mayorkas , 20 F.4th 1178, 1181 (7th Cir. 2021). Plaintiffs are Greenpoint Tactical Income Fund LLC and several affiliated entities and individuals. Greenpoint is a private investment fund that has over 100 individual investors. Greenpoint invests in various assets, including rare gems and fine minerals, which are the focus of this case. Its wholly-owned subsidiary, plaintiff GP Rare Earth Trading Account, LLC, maintains Greenpoint's assets. Plaintiffs Chrysalis Financial, LLC and Greenpoint Asset Management II, LLC manage Greenpoint and are managed in turn by plaintiffs Christopher Nohl and Michael Hull respectively. Hull also manages an investment advisory firm, plaintiff Bluepoint Investment Counsel, LLC, that was working with Greenpoint in March 2017.

B. The Investigation

In May 2016, the United States Securities and Exchange Commission referred a case it had been working on to FBI Special Agent Allen Pettigrew for further investigation.

At that stage, the targets of the investigation were Bluepoint Investment Counsel and Greenpoint Asset Management LLC. The SEC also notified Agent Pettigrew that Greenpoint itself may have been using "suspicious valuation practices for its assets."

Months later, after investigating the SEC's referral, Agent Pettigrew filed a search warrant application in March 2017 seeking access to plaintiffs' properties and assets. Agent Pettigrew's supporting affidavit explained that he had been investigating Christopher Nohl, Michael Hull, and Patrick Hull for suspected mail and wire fraud.¹ The affidavit asserted that there was probable cause to believe that Nohl and Michael Hull had "engaged in a scheme to defraud investors by systematically overvaluing assets held by the private investment fund that Nohl and ... Hull[ ] manage[d]." Agent Pettigrew asserted that the motive for the scheme was to increase the management fees and profit allocations paid to Nohl and Hull, which were based on the value of Greenpoint's assets.

As further evidence supporting his suspicions, Agent Pettigrew's affidavit included details about the significant profits and financial benefits that Greenpoint, Nohl, and Hull had received in the less than three years of Greenpoint's existence. For example, the affidavit noted that Greenpoint had reported an increase of 313% in the value of its gems and minerals in less than three years. According to the affidavit, that increase was also reflected in claims of over $43.1 million in unrealized gains that were based largely on appraisals. The affidavit also reported that Greenpoint's management, Chrysalis and Greenpoint Asset Management II, received major allocations of money that were based wholly or in large part on these unrealized gains that had been driven by appraisals of gems and minerals. Specifically, by December 2015, Greenpoint's management received at least 15% of every investor dollar and amended the profit distribution structure giving themselves over $6.5 million in additional funds. Those changes also allowed the management to retain even more money without investors receiving much benefit. The affidavit also noted that the distributions and allocations to Greenpoint's management had been based almost entirely on the gem and mineral appraisals that Nohl had solicited.

A federal magistrate judge found probable cause and issued the search warrant. On March 22, 2017, FBI agents executed the warrant at plaintiffs' offices and homes and seized documents, computers, and other items. One unusual feature of this search was that the agents also seized Greenpoint's gems, fine minerals, and other materials. Then the agents and their consultants assessed the values of the gems and minerals. Within a few months, the government returned to plaintiffs all the gem and mineral assets that had been seized during the raid. The criminal investigation ended without criminal charges against any of the plaintiffs or their associates.

C. District Court Proceedings

Plaintiffs filed this lawsuit in March 2020 seeking damages pursuant to Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics , 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), alleging that the search and seizure of their property violated the Fourth Amendment. In the complaint, plaintiffs alleged that Agent Pettigrew "intentionally, knowingly, and recklessly made ... false statements and representations or material omissions" in the search warrant affidavit. Plaintiffs also named Assistant United States Attorney Darren Halverson as a defendant. They claimed that AUSA Halverson "intentionally, knowingly, and recklessly assisted Pettigrew in the preparation and filing of the false statement[s] and representations or material omissions." Plaintiffs' complaint identified six representations in Agent Pettigrew's affidavit that they asserted were false and/or deliberately misleading. Those alleged misrepresentations in the affidavit included:

• that Greenpoint was misleading investors because its offering memorandum "retained its emphasis on investments in distressed real estate assets," even though "the majority of the investment dollars received by [Greenpoint] [were] used to purchase gems and fine minerals;"

• that appraisers James Zigras and William Metropolis did not actually complete the appraisals attributed to them, based on language in the affidavit that the appraisals were "purported to be completed by" those individuals;

• that it was unclear whether Metropolis's appraisals were based on fair market value or some other basis because his reports "did not specify the valuation type for the amount;"

• that Nohl improperly influenced Metropolis's valuation of the assets because Metropolis, in response to Nohl's appraisal request, sent him a note asking for "an idea of what you might need for numbers;"

• that the lack of insurance to cover any of the unrealized gains for GP Rare Earth's gems and minerals was further evidence of plaintiffs' fraudulent scheme; and

• that comments from a former GP Rare Earth officer that he left the company "due to unethical and possible illegal activities" and that the "new inventory was inflated and may be a set up for a claim or misleading investors" provided additional evidence of Greenpoint's illegal practices.

Plaintiffs alleged that they were entitled to relief because defendants' representations caused plaintiffs' properties and assets to be searched and seized without probable cause.

Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. They offered four grounds: (1) there is no viable implied cause of action pursuant to Bivens in the factual context of this case; (2) absolute immunity bars the claims against AUSA Halverson; (3) qualified immunity bars the claims against AUSA Halverson and Agent Pettigrew; and (4) plaintiffs failed to allege plausibly that the warrant affidavit was false and misleading in a material way, that AUSA Halverson violated an actionable court rule, or that the FBI caused improper damage to plaintiffs' property.

Relying on the Supreme Court's analysis in Ziglar v. Abbasi , ––– U.S. ––––, 137 S. Ct. 1843, 198 L.Ed.2d 290 (2017), the district court granted the motion to dismiss, concluding that no Bivens implied cause of action is available here. Greenpoint Tactical Income Fund , 2021 WL 461560, at *1, *14. The court reasoned that plaintiffs were seeking to apply Bivens to a "new context" and that various "special factors" counsel against extending Bivens relief to this case. Id. at *12–14. The court did not...