Spec's Family Partners, Ltd. v. Nettles

• Decision Date: 25 August 2020
• Docket Number: No. 19-20661,19-20661
• Citation: 972 F.3d 671
• Parties: SPEC'S FAMILY PARTNERS, LIMITED, Plaintiff—Appellant, v. The Executive Director of The Texas Alcoholic Beverage Commission, Adrian Bentley NETTLES, ex officio; Dexter K. Jones; Emily E. Helm; Judith L. Kennison; Matthew Edward Cherry, Defendants—Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

972 F.3d 671

SPEC'S FAMILY PARTNERS, LIMITED, Plaintiff—Appellant,

v.The Executive Director of The Texas Alcoholic Beverage Commission, Adrian Bentley NETTLES, ex officio; Dexter K. Jones; Emily E. Helm; Judith L. Kennison; Matthew Edward Cherry, Defendants—Appellees.

No. 19-20661

United States Court of Appeals, Fifth Circuit.

FILED August 25, 2020

Albert Thomas Van Huff, Morgan Kay Abels, Anna Hanna, Attorney, Monshaugen & Van Huff, P.C., Houston, TX, for Plaintiff - Appellant

Michael Abrams, Henry Carl Myers, Acting Assistant Attorney General, Office of the Attorney General, General Litigation Division, Austin, TX, for Defendants - Appellees Executive Director of the Texas Alcoholic Beverage Commission, Adrian Bentley Nettles, Dexter K. Jones, Judith L. Kennison, Matthew Edward Cherry

Christopher D. Hilton, Assistant Attorney General, Office of the Attorney General, Financial Litigation & Charitable Trusts Division, Austin, TX, Henry Carl Myers, Acting Assistant Attorney General, Office of the Attorney General, General Litigation Division, Austin, TX, for Defendant - Appellee Emily E. Helm

Before Davis, Graves, and Duncan, Circuit Judges.

Stuart Kyle Duncan, Circuit Judge:

Spec's Family Partners sued officials in the Texas Alcoholic Beverage Commission ("TABC") after TABC investigated Spec's and brought a largely unsuccessful administrative action against it. We must decide whether the district court correctly concluded that various forms of immunity required dismissal of Spec's’ claims. We affirm in part, reverse in part, and vacate in part.

I.

Because the district court dismissed this case under Federal Rule of Civil Procedure 12(b)(1), we take the factual allegations in the complaint as true. See Wooten v. Roach , 964 F.3d 395, 402 (5th Cir. 2020).

This case arises out of an investigation and administrative proceedings by TABC against Spec's Family Partners ("Spec's"). The key individual players are Dexter Jones, Chief of Audit and Investigations for TABC; Emily Helm, former TABC General Counsel; Judith Kennison, TABC Deputy General Counsel; and Matthew Cherry, a TABC attorney.

Spec's operates stores across Texas under the name Spec's Wines, Spirits & Finer Foods. In late 2012 or early 2013, TABC received a complaint that Spec's was engaged in various violations of state law and regulations, so it began investigating. The investigation lasted approximately three years. While the investigation was ongoing, TABC invited Spec's officials to a meeting at which settlement was discussed. TABC demanded over $8 million from Spec's to resolve violations allegedly uncovered during the investigation. Spec's declined.

After its investigation ended in February 2016, TABC issued Spec's a Notice of Violation letter alleging Spec's had violated various laws and regulations. TABC filed the letter with the Texas State Office of Administrative Hearings ("SOAH"), which began administrative proceedings against Spec's. In the SOAH action, TABC sought cancellation or suspension of all 164 permits related to Spec's stores. In the alternative, TABC sought civil penalties of up to $713,050,000.

While the SOAH case was pending, Spec's continued to submit applications to TABC. It applied for two new store permits and one change-of-address permit for an existing store. TABC placed administrative holds on all three applications, and then protested them with the SOAH. TABC also refused to grant regular renewals of existing Spec's licenses while the SOAH proceedings were pending.

The SOAH consolidated TABC's three protests with the original Spec's case. Ultimately, the SOAH Administrative Law Judges ("ALJs") ruled in Spec's’ favor on every allegation except one involving a credit law violation. For that violation, the ALJs recommended a warning. They also recommended that the three protested applications be granted.

Spec's then sued several TABC officials (collectively, "Defendants") in federal court, bringing claims under 42 U.S.C. § 1983, the Sherman Act, and state law. It also sought declaratory relief under 28 U.S.C. § 2201, and injunctive relief under Ex parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). Finally, it sought a declaration that Defendants’ acts were ultra vires .

The district court granted Defendants’ motion to dismiss, reasoning Defendants were entitled to various forms of immunity. First, it held Defendants enjoyed absolute immunity from the § 1983 claims. Second, it concluded that sovereign immunity barred the injunctive and declaratory claims against Defendants in their official capacities. Third, it held the Sherman Act claims were barred by state-action immunity. Finally, having dismissed all of Spec's’ federal claims, the court declined to exercise supplemental jurisdiction over its remaining state law claim. Spec's timely appealed.

II.

We review dismissal of Spec's’ claims de novo . See Williams ex rel. J.E. v. Reeves , 954 F.3d 729, 734 (5th Cir. 2020). "In determining immunity, we accept the allegations of the plaintiffs’ complaint as true." Singleton v. Cannizzaro , 956 F.3d 773, 779 (5th Cir. 2020) (cleaned up). We review the district court's decision not to exercise supplemental jurisdiction for abuse of discretion. Brookshire Bros. Holding, Inc. v. Dayco Products, Inc. , 554 F.3d 595, 601–02 (5th Cir. 2009).

III.

Spec's’ arguments regarding absolute immunity fall into two groups. First, Spec's argues that Defendants are not entitled to immunity from claims that they took wrongful acts while the SOAH case was proceeding: namely, placing holds on Spec's’ applications, protesting those applications, and refusing to issue regular permit renewals.¹ Second, Spec's contends that Defendants are not immune from its claims that, as part of their investigation, they intentionally procured false testimony to use against Spec's in settlement negotiations and during the SOAH proceedings.

The district court ruled that absolute immunity shields Defendants from both claims. We agree that Defendants enjoy absolute immunity from the claims regarding their allegedly wrongful acts taken while the SOAH case was proceeding. But we disagree that Defendants are absolutely immune from the claim that they intentionally concealed information from a TABC auditor during the investigation. We therefore affirm in part and reverse in part the district court's judgment on this issue.

A.

"[P]rosecutors are absolutely immune from liability under § 1983 for their conduct in ‘initiating a prosecution and in presenting the State's case’ insofar as that conduct is ‘intimately associated with the judicial phase of the criminal process.’ " Burns v. Reed , 500 U.S. 478, 486, 111 S.Ct. 1934, 114 L.Ed.2d 547 (1991) (citations omitted) (quoting Imbler v. Pachtman , 424 U.S. 409, 431, 96 S.Ct. 984, 47 L.Ed.2d 128 (1976) ); see also Wooten , 964 F.3d at 407. Similarly, "executive branch officials, when participating in a federal administrative agency's adjudicative process, are entitled to absolute immunity because they perform functions comparable to those of judges and prosecutors." Beck v. Tex. State Bd. of Dental Examiners , 204 F.3d 629, 634 (5th Cir. 2000). This principle extends to state agency officials. See id. ; see also O'Neal v. Miss. Bd. of Nursing , 113 F.3d 62, 65 (5th Cir. 1997). In assessing whether those officials qualify for absolute immunity, we apply a nonexhaustive list of factors from the Supreme Court's decision in Butz v. Economou , 438 U.S. 478, 512, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978). See Disraeli v. Rotunda , 489 F.3d 628, 631 (5th Cir. 2007). Those factors include:

(1) the need to assure that the individual can perform his functions without harassment or intimidation;

(2) the presence of safeguards that reduce the need for private damages actions as a means of controlling unconstitutional conduct;

(3) insulation from political influence;

(4) the importance of precedent;

(5) the adversary nature of the process; and

(6) the correctability of error on appeal.

Id. (citing Beck , 204 F.3d at 634 ). "No one factor is controlling." Id.

B.

Spec's’ complaint alleges that, while TABC's original SOAH case was proceeding, Defendants² wrongfully placed holds on three permit applications, protested those applications, and refused to renew existing permits. Applying the Butz factors, we conclude that, in taking those actions, Defendants were acting in a prosecutorial role and are entitled to absolute immunity from these claims.

First, we examine "the need to assure that the [Defendants] can perform [their] functions without harassment or intimidation." Id. Defendants are tasked under Texas law with comprehensively regulating the alcoholic beverage industry. See TEX. ALCO. BEV. CODE § 5.31.³ TABC officials must be allowed to "make these decisions free from the threat of incurring personal liability for every decision they" make. Beck , 204 F.3d at 636 (quoting O'Neal , 113 F.3d at 66 ). As evidenced by this case, the duties TABC performs, especially when bringing enforcement against potentially noncompliant businesses, are "likely to arouse the ire of targeted individuals." Disraeli , 489 F.3d at 632.

Second, we look for "the presence of safeguards that reduce the need for private damages actions as a means of controlling unconstitutional conduct." Id. at 631. Spec's alleges that the combined SOAH proceedings included discovery, hearings, and written decisions—all characteristics of judicial proceedings. See id. at 633 (finding sufficient safeguards in, inter alia , requirements of a hearing, evidence, and written decision); Beck , 204 F.3d at 635 (looking to similar safeguards); O'Neal , 113 F.3d at 66 (same). Taking these allegations as true, we conclude that procedural safeguards were both available and applied in this case.

Third, we examine TABC's insulation from political influence. Disraeli , 489 F.3d at 631. Under Texas law, TABC is "composed of five members, who are appointed by the governor with the advice and consent of the senate."...