Trust and Inv. Advisors, Inc. v. Hogsett, IP 92-C-334.
| Decision Date | 08 April 1993 |
| Docket Number | No. IP 92-C-334.,IP 92-C-334. |
| Citation | 830 F. Supp. 463 |
| Parties | TRUST AND INVESTMENT ADVISORS, INC., Plaintiff, v. Joseph H. HOGSETT, Secretary of State of Indiana, and Miriam Smulevitz Dant, Indiana Securities Commissioner, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
Thomas Withrow, O. Wayne Davis, B. Keith Shake, Henderson Daily Withrow & Devoe, Indianapolis, IN, for plaintiff.
Roy White, Deputy Atty. Gen., Office of Atty. Gen., Indianapolis, IN, for defendants.
ENTRY
The defendants have filed a motion to dismiss the plaintiff's complaint and a motion for attorney's fees. The parties have fully briefed those motions, and based on the Court's review of the record and the parties' filings, the motion to dismiss is GRANTED and the motion for fees is DENIED.
Trust & Investment Advisors, Inc. (hereinafter referred to as TIA) is a financial investment company. In early 1991, defendant Miriam Smulevitz Dant, the Indiana Securities Commissioner, initiated an administrative investigation of Robert W. Rousey, who was either an independent contractor for TIA (according to TIA) or a TIA employee (according to the defendants). Over time, Dant's investigation uncovered that Rousey had committed securities fraud and bilked Indiana investors out of approximately $300,000. (Rousey was eventually convicted and sentenced to serve a prison term of eight years.)
As part of Dant's investigation, Dant also investigated TIA; more specifically, whether TIA had failed to supervise Rousey's activities at TIA with due care. By the following year, Dant had completed her investigation, and on February 18, 1992, sent a letter to TIA's attorneys, in which, according to TIA's characterizations, Dant made certain "findings and conclusions" and accused TIA of failing to supervise Rousey with due care.1
TIA claims that an Administrative Complaint was thereafter filed, but not before Chief Deputy Commissioner Joan Moore Mernitz2 had engaged in an ex parte review of the evidence gathered against TIA and issued an Order to Show Cause, stating that "grounds exist under the Indiana Securities Act, IC 23-2-1, to suspend or revoke the investment advisor registration of TIA ... and that this order is in the public interest." TIA also claims that Dant, adding injury to insult, publicly stated her conclusions about TIA's wrongful conduct, and in so doing, injured TIA's reputation and business.
In response, TIA filed this lawsuit against Dant and Hogsett under 42 U.S.C. § 1983, claiming that the defendants violated its constitutionally protected right to a full and fair hearing. In Count One of its complaint, TIA seeks a declaration that the defendants' actions were unconstitutional and invalid, an injunction prohibiting the defendants from further unconstitutional conduct, and attorney's fees "incurred by virtue of Defendants' wrongful actions complained of herein." In Count Two, TIA seeks money damages flowing from Dant's alleged "unconstitutional and illegal actions, and her public dissemination of same." Count Two is against Dant in her individual capacity only.
An administrative hearing before the appointed trier of fact, Raymond Hafsten, is currently pending.3
The defendants move to dismiss TIA's complaint on the grounds that defendant Dant is entitled to quasi-judicial immunity, citing Butz v. Economu, and that this court must abstain from interfering in the ongoing state proceeding, citing Younger v. Harris. In response to that motion, TIA argues that the defendants are not entitled to absolute immunity because judicial-like safeguards are not present; Count One seeks declaratory and injunctive relief only; Dant's actions were not "judicial acts," because "she was the investigator"; and the Indiana Securities Act's grant of immunity is unconstitutional. TIA argues that neither are the defendants entitled to qualified immunity, because Count One is for declarative and injunctive relief and Dant had to have known that she was violating TIA's clearly established rights. TIA also asserts that Claim One against Hogsett survives the defendants' motion to dismiss under Ind.Code §§ 23-2-1-15 and 23-2-1-16(e), and that since there is no adequate state remedy and Count One is for monetary relief, abstention in this instance is improper.
Absolute immunity, "justified and defined by the functions it protects and serves, not by the person to whom it attaches," Forrester v. White, 484 U.S. 219, 227, 108 S.Ct. 538, 544, 98 L.Ed.2d 555 (1988), shields a judge from damages liability for actions taken in the exercise of his or her judicial capacity. Stump v. Sparkman, 435 U.S. 349, 98 S.Ct. 1099, 55 L.Ed.2d 331 (1978).4 This sweeping form of immunity has been extended to executive branch officials who perform quasi-judicial functions, including those who preside over administrative adjudicatory proceedings, Butz v. Economou, 438 U.S. 478, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978) or perform prosecutorial functions "intimately associated with the judicial phase of the criminal process." Imbler v. Pachtman, 424 U.S. 409, 96 S.Ct. 984, 47 L.Ed.2d 128 (1976); accord Burns v. Reed, ___ U.S. ___, 111 S.Ct. 1934, 114 L.Ed.2d 547 (1991).
A state prosecutor performing investigative or administrative functions, is only entitled to assert qualified immunity, not absolute immunity. Houston v. Partee, 978 F.2d 362, 365 (7th Cir.1992) (citing Burns and Auriemma v. Montgomery, 860 F.2d 273, 277-8 (7th Cir.1988), cert. denied, 492 U.S. 906, 109 S.Ct. 3215, 106 L.Ed.2d 565 (1989).5 The defense of qualified immunity protects government officials performing discretionary functions unless their conduct violated clearly established statutory or constitutional rights of which a reasonable person would have known. Anderson v. Creighton, 483 U.S. 635, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987). Therefore, in determining whether an official is entitled to qualified immunity, a court must determine whether the challenged actions were objectively reasonable in light of the rights of the parties involved and whether the rights allegedly violated were clearly established at the time of events in question. Hedge v. County of Tippecanoe, 890 F.2d 4 (7th Cir.1989); Alvarado v. Picur, 859 F.2d 448 (7th Cir.1988).
The court accepts (and agrees with) TIA's characterization that Dant was performing as "Dant the investigator" in this instance. However, Dant's investigation and the dissemination of her conclusions about whether TIA had failed to supervise Rousey with due care are acts cloaked in qualified immunity. Buckley v. Fitzsimmons, 952 F.2d 965 (7th Cir.1992) (). The claim that Dant broadcasted her conclusions regarding TIA's guilt is, at best, one for defamation, which under Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976), is not a constitutional wrong. Buckley v. Fitzsimmons, 952 F.2d at 967; see Somerset House, Inc. v. Turnock, 900 F.2d 1012 (7th Cir.1990). Although TIA claims that Dant prejudged TIA and failed to afford TIA a full and fair hearing before coming to the conclusion that TIA had committed a violation of law, that claim also fails to state a constitutional wrong. Somerset House, Inc. v. Turnock, 900 F.2d at 1015-18. TIA has not, as of the date of this Entry, been adjudicated guilty or liable, nor has TIA been fined or sanctioned. TIA has simply not been deprived of a significant protected property interest at the hands of the Indiana Securities Division or Commissioner Dant.
In investigating whether TIA failed to properly supervise Rousey, Dant was carrying out one of the duties she was obligated to perform as the Indiana Securities Commissioner. She had no reason, therefore, to believe that those actions violated TIA's constitutional rights. TIA has failed to allege facts which, if proven, would demonstrate that Dant's actions were objectively unreasonable or violated TIA's clearly established rights. Dant is thus entitled to qualified immunity. Because Count Two fails to state a claim upon which relief can be granted against Dant individually, it must be dismissed.
In the alternative, the court concludes that Dant is entitled to absolute immunity. Three factors have particular importance in determining whether absolute immunity bars a suit:
Houston v. Partee, 978 F.2d 362, 367 (7th Cir.1992); Mother Goose Nursery Schools, Inc. v. Sendak, 770 F.2d 668, 671 (7th Cir. 1985). Based on these factors, to the extent Dant was a hearing officer and is being sued for acts committed in the performance of her duties as a state official engaged in the adjudication of state regulatory matter, the court concludes that Dant is entitled to quasi-judicial immunity. Mother Goose Nursery Schools, Inc. v. Sendak, 770 F.2d at 671 (); see Reed v. Village of Shorewood, 704 F.2d 943, 952 (7th Cir.1983); Coghlan v. Chapman, No. 91-2325, 1992 WL 97937 *3, 1992 U.S.App. LEXIS 11129 at *8-9.
TIA does not allege that there was or is any agreement between Dant and Raymond Hafsten. Read liberally, the complaint charges that the administrative trier of fact (either Dant or Hafsten) holds a pre-hearing belief or attitude about TIA's culpability. "But holding a prior opinion about a case is not a non-judicial act; indeed, it is no act at all." Scott v. Schmidt, 773 F.2d 160, 164 (7th Cir.1985). As stated in Scott:
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Trust & Inv. Advisers, Inc. v. Hogsett
...the underlying investigation. On March 27, 1992, defendants filed their motion to dismiss TIA's suit. The motion was granted on April 8, 1993, 830 F.Supp. 463. This appeal II. Standard of Review Our review of the district court's dismissal of Count II on immunity grounds is clearly de novo.......