Hallock v. Bonner

• Decision Date: 22 October 2004
• Docket Number: No. 03-6221.,03-6221.
• Citation: 387 F.3d 147
• Court: U.S. Court of Appeals — Second Circuit
• Parties: Susan HALLOCK, Ferncliff Associates, Inc., doing business as Multimedia Technology Center, Plaintiffs-Appellees, v. Robert C. BONNER, Richard Will, Dennis P. Harrison, Margaret M. Jordan, Thomas Virgilio, Unknown Named Agents of United States Customs and Treasury, Unknown Named Agents of United States Department of Justice, Unknown Named Agents of United States Postal Service, Unknown Named Agents of United States Marshals Service, John & Jane Does 1-25, Defendants-Appellants.

387 F.3d 147

Susan HALLOCK, Ferncliff Associates, Inc., doing business as Multimedia Technology Center, Plaintiffs-Appellees, v. Robert C. BONNER, Richard Will, Dennis P. Harrison, Margaret M. Jordan, Thomas Virgilio, Unknown Named Agents of United States Customs and Treasury, Unknown Named Agents of United States Department of Justice, Unknown Named Agents of United States Postal Service, Unknown Named Agents of United States Marshals Service, John & Jane Does 1-25, Defendants-Appellants.

No. 03-6221.

United States Court of Appeals, Second Circuit.

Argued: June 7, 2004.

Decided: October 22, 2004.

Appeal from the United States District Court for the Northern District of New York, David N. Hurd, J.

COPYRIGHT MATERIAL OMITTED

Teal Luthy Miller, Attorney, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C. (Barbara L. Herwig, Attorney, Appellate Staff, Civil Division, United States Department of Justice, Peter D. Keisler, Assistant Attorney General, Civil Division, United States Department of Justice, and Glenn T. Suddaby, United States Attorney for the Northern District of New York, on the briefs), for Defendants-Appellants.

Kenneth M. Sissel, Esq. (Janise L. Miller, on the brief), for Plaintiffs-Appellees.

Before: MINER and RAGGI, Circuit Judges, and MARRERO, District Judge.^*

Judge MARRERO concurs in the majority opinion and in a separate concurring opinion.

MINER, Circuit Judge.

In this action, defendants-appellants, Robert C. Bonner,¹ Richard Will, Dennis P. Harrison, Margaret M. Jordan, and Thomas Virgilio, all employees of the United States Customs Service, sued along with other, "unknown named" agents of the United States Customs Service, the United States Department of the Treasury, the United States Justice Department, and the United States Marshals Service (collectively, the "defendants"), appeal from an order entered in the United States District Court for the Northern District of New York (Hurd, J.). The action was brought by plaintiffs-appellees, Susan Hallock and Femcliff Associates, Inc., d/b/a Multimedia Technology Center (collectively, the "plaintiffs"), under the authority of Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971) [hereinafter "Bivens"], for damages arising from the seizure of plaintiffs' computer equipment in violation of the Fifth Amendment of the United States Constitution.

The same plaintiffs had invoked the Federal Tort Claims Act in a previous action brought against the United States to recover for the same wrongful acts. That action was concluded by a judgment of dismissal for lack of subject matter jurisdiction. The defendants' assertion of that judgment as a bar to the present action was the basis for the motion that culminated in the order giving rise to this appeal. Rejecting the contention that this appeal is taken from a non-appealable interlocutory order, we affirm the determination of the District Court for reasons somewhat different from those given by that court.

BACKGROUND

The background of this case, at least for present purposes, is framed by the allegations of the complaint. Those allegations must be accepted as true at this stage of the litigation because defendants have moved for judgment on the pleadings. See Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir.2001). Accordingly, the background facts that follow are taken from the complaint.

Plaintiff Susan Hallock, who resides with her husband, Richard Hallock, at 194 Ferncliff Road in the Village of Mohawk, Herkimer County, New York, is president and sole stockholder of Ferncliff Associates, Inc., d/b/a Multimedia Technology Center ("Ferncliff"). The corporate address is the same as the home address of the Hallocks. On June 8, 2000, defendants Jordan, Virgilio, and Harrison, along with others, executed at 194 Ferncliff Road a search warrant issued by the United States District Court for the Northern District of New York. The warrant authorized seizure of "all property, contraband, instrumentalities, fruits[,] or evidence of violation of Title 18, United States Code, § 2252 and § 2252A." The cited statutes proscribe activities relating to material involving the sexual exploitation of minors and activities relating to material constituting or containing child pornography.

Pursuant to the search warrant, defendants seized all computer equipment, software data, and hard disk drives located at the Ferncliff Road location. Because of the nature of the data stored on the hard disk drives, the seizure included "all Computer Software Intellectual Property, all [C]omputerized Proprietary Computer Software Design Documents, all Computerized Personal Records, all Computerized Business Records, all Computerized Accounts, Client Files and Business as well as Technological Trade Secrets belonging to Plaintiffs, both primary and archival backups."

Apparently, Richard Hallock was the victim of identity theft, and no evidence of any violation of the cited statutes was found in the materials seized. In any event, no charge of any kind was filed against Richard or Susan Hallock, and the items seized, or what was left of them, were returned to the plaintiffs on December 21, 2000. Proposed agreements acknowledging the receipt of the seized items were presented to the plaintiffs by the United States Attorney for the Northern District of New York. The proposed agreements included a representation by Richard Hallock that the data images in the computers returned were "complete and accurate reproduction[s]" and had "not been altered." The agreements also included a clause whereby Richard Hallock would agree to save harmless the Customs Service, Treasury and Justice Departments, and their agents from any claims relating to the seizure and detention of plaintiffs' property. It appears that Richard Hallock did not execute the proposed agreements.

When Richard Hallock received the computer equipment and hard disk drives on December 21, after the items had been in the custody of the defendants since June 8, he examined the equipment and observed that four of the nine computer systems seized were totally unusable. One of the four was returned to its owner, a client of Ferncliff Associates, Inc., and the loss of the other three resulted in the termination of the plaintiffs' business operations. It also was discovered that five of the hard disk drives seized were so damaged that all stored data were lost. Data previously described as included in the seizure — including documents, records, accounts, files, and trade secrets — had been stored on the hard drives.

In the complaint that we examine on this appeal, plaintiffs allege that "[d]efendants intentionally caused total and permanent damage to the computer equipment resulting in the complete loss of all stored computer data as well as loss of computer equipment, all critical to the continued business operations of [p]laintiffs." Asserting a violation of the Fifth Amendment, plaintiffs seek damages in excess of $4.4 million. The alleged loss and destruction of the plaintiffs' computer equipment was the subject of a previous action brought by plaintiffs against the United States of America under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 1346, and dismissed for lack of subject matter jurisdiction. See Hallock v. United States, 253 F.Supp.2d 361 (N.D.N.Y.2003) [hereinafter "Hallock I"].

In Hallock I, the District Court was confronted with a complaint in which the plaintiffs put forth claims of negligent destruction of property, conversion, negligent bailment, larceny, misfeasance, and personal injury. The FTCA waives the sovereign immunity of the United States to allow civil actions

for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private perso would be liable to the claimant in accordance with the law of the place where the act or omission occurred.

28 U.S.C. § 1346(b)(1).

There are various exceptions to this waiver of sovereign immunity, and it is the following exception, set forth in 28 U.S.C. § 2680(c), which the District Court was constrained to apply in Hallock I: "Any claim arising in respect of ... the detention of any goods, merchandise, or other property by any officer of customs or excise or any other law enforcement officer...." Hallock I, 253 F.Supp.2d at 365 (quoting 28 U.S.C. § 2680(c)) (emphasis removed). Rejecting arguments that the exception applies only to officers performing tax or custom duties and that plaintiffs' claims arose from the seizure rather than the detention of goods, the court in Hallock I granted the motion to dismiss the amended complaint in accordance with the Government's motion filed pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). In its memorandum-decision and order dated March 21, 2003, the District Court concluded as follows: "Pursuant to § 2680(c), plaintiffs are precluded from pursuing their claims under the Federal Tort Claims Act. All of plaintiffs' claims arise out of the detention of their property by agents of the United States, and are therefore barred." 253 F.Supp.2d at 368. A judgment of dismissal was entered shortly thereafter. No appeal was taken from that judgment.

The Bivens action subject of the instant appeal was commenced while the Government's motion to dismiss in Hallock I was pending. Here, the plaintiffs joined as defendants all the government agents and employees alleged to have been involved in the seizure and detention of plaintiffs' property. Defendants' motion for judgment on the pleadings, culminating in Hallock v. Bonner, 281 F.Supp.2d 425 (N.D.N.Y.2003) [hereinafter "Hallock II"], centered on the judgment-bar rule found at 28 U.S.C. § 2676. That statute provides...