Thomas-Lazear v. F.B.I.

• Decision Date: 11 July 1988
• Docket Number: No. 87-5695,THOMAS-LAZEAR,87-5695
• Citation: 851 F.2d 1202
• Parties: Judith; Steven R. Reed; European Overseas Bank Limited, Plaintiffs-Appellants, v. FEDERAL BUREAU OF INVESTIGATION, Defendant, and John Shockey; Robert Kilbane, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1202

851 F.2d 1202

Judith THOMAS-LAZEAR; Steven R. Reed; European Overseas Bank Limited, Plaintiffs-Appellants, v. FEDERAL BUREAU OF INVESTIGATION, Defendant and John Shockey; Robert Kilbane, Defendants-Appellees.

No. 87-5695.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 5, 1988.

Decided July 11, 1988.

Randolph M. Hammock, Chelski, Hammock & Hedges, Los Angeles, Cal., for plaintiffs-appellants.

Donna R. Eide, Asst. U.S. Atty., Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before TANG, FLETCHER and PREGERSON, Circuit Judges.

TANG, Circuit Judge:

Thomas-Lazear, Reed, and European Overseas Bank, Ltd. (EOBL) appeal summary judgment for federal defendants Shockey and Kilbane in their Bivens action. Appellants contend that federal officials conspired to defame them by making false statements to banking officials in the Marshall

Islands, leading to a denial of their request for an extension of their banking license in violation of due process. The district court granted summary judgment on the ground that the Appellants had no liberty or property interest in the bank license and alternatively the United States federal officials were entitled to qualified immunity. We affirm.

BACKGROUND

In June 1984, Judith Thomas-Lazear and Steven Reed purchased EOBL from the W.F.I. Corporation under an agreement providing that if the Government of the Marshall Islands changed its banking laws "during the pendency of an application or after the purchase of the Bank" such change would be binding on the purchaser and not grounds for rescission.

In December 1984, the Republic of the Marshall Islands adopted emergency Off-Shore Banking Rules and Regulations which provided that licenses issued under the old rules would expire on February 28, 1985, and that any bank that had not applied for a renewal license would be considered dissolved as of that date. Banking Regs. Sec. VI(1). Thomas-Lazear submitted her renewal application on January 23, 1985. She asked for an extension until July 1, 1985 to comply with the regulation requiring capital of $250,000. Banking Regs. Sec. VIII. On April 29, 1985 the Marshall Islands Registrar of Corporations advised her that he had denied her application.

Thomas-Lazear, Reed and EOBL filed suit against (among others) Shockey, an attorney for the Comptroller of Currency, Department of Treasury, and Kilbane, an FBI agent in charge of the South Seas Off-Shore Banking and White Collar Crime Division. The claims relevant to this appeal are that Shockey and Kilbane exerted political and economic pressures on officials of the Republic of the Marshall Islands to persuade them to revoke EOBL's bank charter, and that they defamed Thomas-Lazear and Reed in the process. These actions allegedly violated Thomas-Lazear's and Reed's fifth amendment rights to due process.

The Appellants sought to file a third amended complaint to add the United States as a party and to assert claims of invasion of privacy (false light) and negligent infliction of emotional distress. The district court held these claims were barred by 28 U.S.C. Sec. 2680(h) and denied the motion. The district court granted summary judgment on the claims against federal officials Shockey and Kilbane. Thomas-Lazear and Reed timely appeal.

DISCUSSION

I. Summary Judgment--Property or Liberty Interest

A grant of summary judgment is reviewed de novo. T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 629-30 (9th Cir.1987). Summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). A material fact is one that is relevant to an element of a claim or defense whose existence might affect the outcome. T.W. Elec. Serv., 809 F.2d at 630. If the moving party demonstrates the absence of a genuine issue of fact, see Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552-2553, 91 L.Ed.2d 265 (1986), the opposing party may not rely on mere allegations in the pleadings, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 289 & n. 19, 88 S.Ct. 1575, 1593 & n. 19, 20 L.Ed.2d 569 (1968).

It is clear that the violation of constitutional rights by federal agents gives rise to a federal cause of action against the officials for damages. Bivens v. Six Unknown Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). The key question in this case is whether the Appellants had a property or liberty interest in the bank license. We conclude that they did not.

Supreme Court decisions indicate that a protected property interest exists only when there is a legitimate claim of entitlement beyond a "mere subjective 'expectancy.' " Perry v. Sinderman, 408 U.S. 593, 603, 92 S.Ct. 2694, 2700, 33 L.Ed.2d 570 (1972). The claim of entitlement may arise from an independent source in state or federal law, Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972), or from a mutually explicit understanding created by the representations of government officials, Perry, 408 U.S. at 601-602, 92 S.Ct. at 2700. Thomas-Lazear and the Government disagree about the proper interpretation of the Off-Shore Banking Regulations and the "informal assurances" given to Thomas-Lazear as to the perpetual operation of EOBL.

When regulations establish standards for issuing and revoking licenses a constitutionally protected property interest may arise. See Doran v. Houle, 721 F.2d 1182, 1185 (9th Cir.1983), cert. denied, 466 U.S. 950, 104 S.Ct. 2152, 80 L.Ed.2d 538 (1984). But if the government which is the source of the interest in question retains unrestricted discretion over future enjoyment of the interest there is no protected entitlement. See Bishop v. Wood, 426 U.S. 341, 344-47, 96 S.Ct. 2074, 2077-78, 48 L.Ed.2d 684 (1976); Goodisman v. Lytle, 724 F.2d 818, 820 (9th Cir.1984).

There is no question that the International Bank Purchase Agreement clearly states that the laws of the Marshall Islands could change at any time and that the new laws would be binding on the purchaser. What is disputed is which sections of the December 1984 regulations applied to Thomas-Lazear's application.

The Off-Shore Regulations say that corporations with licenses must make renewal applications by February 28, 1985 and that they must meet all requirements of section VII as well as file financial statements dated within four months prior to the last day of February. Banking Regs. Sec. VI(2). This section gives no standards for the decision of the Registrar on the renewal application. Compare Section IV(1) (an initial license may be denied if "the Registrar is of the opinion that it would not be in the public interest that the license should be granted" and he "need not give any reason for so refusing") with Section XI (under the new licensing scheme, when there is a decision to suspend or revoke a license the Registrar must give notice of intent to revoke, specifying the grounds and giving the licensee an opportunity to submit written objections).

Thomas-Lazear maintains that the review process guaranteed by section XI should have applied to her application for renewal of an existing license, and that under that scheme the Registrar did not have unbridled discretion. If there is not unbridled discretion there may be a property right. See Bishop, 426 U.S. at 345, 96 S.Ct. at 2077; Goodisman, 724 F.2d at 820. The Government contends Thomas-Lazear was seeking a new license and the Registrar has the absolute discretion of section IV, and thus the regulations do not give rise to a property right under Bishop.

In fact, Thomas-Lazear sought renewal of an existing license and the applicable procedures are in section VI, which does not state a standard or limitation on the Registrar's discretion. Section VI(6) does say, however, that a bank that makes a timely renewal application "may continue to operate until such time as the Registrar issues a new license or advises the rejection of the application" (emphasis added). This leads us to conclude that all old licenses expired on February 28, 1985 and that only new licenses existed thereafter--licenses that could be granted or denied solely at the Registrar's discretion under section IV.

Thomas-Lazear did not have a protected property interest in the license based on the Off-Shore Banking Regulations.

Thomas-Lazear also claims she relied on representations of Raymond Carter (then Registrar of Corporations), Toke Saweg (the government representative on the bank's board of directors), and officers of W.F.I. Corp. that EOBL had the right to perpetual existence, and that her reliance created a protected property interest. This argument is without merit. These individuals had no authority to bind the Marshall Islands, with the exception of the Registrar who held office for only a limited term. Further, reliance on such statements is not reasonable when the purchase agreement puts the purchaser on notice that laws may change and will be binding, and the laws in fact do change. Thus, we conclude that Thomas-Lazear did not have a protected property interest based on any official assurances.

Thomas-Lazear has also failed to make out a claim of deprivation of a liberty interest. See Paul v. Davis, 424 U.S. 693, 709-710, 96 S.Ct. 1155, 1164, 47 L.Ed.2d 405 (1976). She and Reed have not made a showing of any injury to reputation or their ability to earn a living. See Roth, 408 U.S. at 573, 92 S.Ct. at 2707 (unless employment termination foreclosed freedom to take...