Weimer v. Amen
| Decision Date | 01 November 1983 |
| Citation | 870 F.2d 1400 |
| Parties | Claude T. WEIMER, Individually and as Representative of all persons in the same class, Appellants, v. Paul AMEN, in his official capacity as former director of the Department of Banking and Finance of the State of Nebraska, and personally; S.E. Copple; Marvin Copple; Members of the Nebraska Depository Institution Guarantee Corporation; Commerce Savings of Columbus, Inc., Employer of Ken Wellman; First Savings Company, Employer of William Beckman; First National Bank; Norwest Corporation, Owner of First National Bank, Grand Island; Commerce Group, Inc., Owner of Commerce Savings of Columbus, Inc., and Commerce Savings Lincoln, Inc., and Commerce Savings Scottsbluff, Inc., Employer of Douglas Alford; Provident Federal Savings Bank, Owner of Liberty Savings Company; American State Savings Company, Employer of Roy Ashcraft; Federal Deposit Insurance Corporation (FDIC); Commerce Savings Scottsbluff, Inc., Employer of Tim Spoeneman; Liberty Savings Company, Employer of Dennis Applebee; North East Savings and Investment Company, Employer of Herb Hermann; Union Bank and Trust Company, Owner of North East Savings and Investment Company; Marvin Copple, Director NDIGC and officer of Commonwealth from before 1975 until after |
| Court | U.S. Court of Appeals — Eighth Circuit |
Louis M. Thrasher and Robert Gibson, Lincoln, Neb., for appellants.
Gary L. Dolan, Lincoln, Neb., for appellees.
Before JOHN R. GIBSON, Circuit Judge, and PECK * and HENLEY, Senior Circuit Judges.
Claude T. Weimer, both individually and as representative of a class of depositors and holders of other obligations of the failed Commonwealth Savings Bank brought this action under 42 U.S.C. Sec. 1983 against the former Director of the Nebraska Department of Banking and Finance, Paul Amen, members of the Nebraska Depository Insurance Guaranty Corporation (Guaranty), and Marvin and S.E. Copple, former officers of Commonwealth. The suit alleged a conspiracy between Amen and the other defendants to violate Nebraska law, and to fraudulently induce depositors to place their assets in the insolvent Commonwealth Bank. Weimer claimed that the presence of Amen transformed the alleged conspiracy from a matter of state concern to the level of a constitutional tort. Specifically, he claimed violation of both the substantive and procedural aspects of the fourteenth amendment due process clause. The district court 1 granted motions to dismiss for failure to state a claim on which relief could be granted, Fed.R.Civ.P. 12(b)(6), and denied Weimer leave to amend the complaint, leading to the present appeal. Since we believe that even the proposed amended complaint fails to allege any deprivations of Weimer's constitutional rights cognizable under section 1983, we affirm.
This litigation arises out of the failure of the Commonwealth Savings Bank, and the subsequent inability of Guaranty to fulfill its obligations. Weimer and his fellow class members all held accounts and/or other instruments and obligations issued by Commonwealth. Since the district court dismissed under Rule 12(b)(6), we state the facts as alleged in Weimer's two complaints.
In 1976 the state of Nebraska passed the Nebraska Depository Institution Guaranty Corporation Act, Neb.Rev.Stat. Secs. 21-17,127 to 21-17,145 (1987). The purpose of this act was to allow the chartering of local deposit guaranty corporations that member institutions could use in lieu of acquiring federal insurance. Guaranty received a charter under the act in 1978, and several of the named defendants were appointed to its board of directors. Amen was in charge of the Department of Banking and Finance at this time, giving him some regulatory authority over Guaranty, and requiring him to work closely with the defendant board members. Guaranty initially decided to require all member institutions to advertise that all accounts were guaranteed to the amount of $10,000 per account, and enacted an appropriate by-law. At the time this by-law was adopted the guaranty fund was sufficient to cover only 2% of the total deposits involved.
The Commonwealth Savings Bank became a member of Guaranty in August of 1979. Commonwealth was then the largest industrial loan company in Nebraska, with deposits of over $78,000,000. Unfortunately, Commonwealth was also in serious financial trouble as a result of felonious conversions made by Marvin and S.E. Copple, two officers of the bank. Despite the danger to the guaranty fund posed by Commonwealth's instability, Guaranty voted to increase the coverage to $30,000 per account in April of 1980, and to require all members to advertise this fact. The inevitable finally occurred in November of 1983, when Amen declared Commonwealth insolvent and the Department of Banking and Finance became the Receiver. Guaranty's reserves, weak to begin with, had been further depleted in April of that year by improper transfers and pledges to the Copples in the amount of $800,000. Guaranty became insolvent, causing the claimed losses to all depositors and instrument holders.
Weimer's original complaint centered on the theory that Amen and the other defendants had actively conspired to deprive the depositors of their assets by violating Nebraska law. He claimed that Amen violated his statutory duties as Director of the Department of Banking and Finance by failing to safeguard Commonwealth's deposits; specifically, by ignoring his legal duty to report Commonwealth's financial problems, by covering up the illegal conversions of the Copples, and by fraudulently engaging in efforts to induce depositors to retain or increase their deposits with Commonwealth. Weimer additionally claimed that Guaranty's board of directors was fully aware of Commonwealth's financial situation at all times, and that Amen and the board conspired to pass the by-laws requiring member advertising of the guaranty for the express purpose of defrauding depositors.
In considering motions to dismiss the complaint, the district court was willing to assume that Amen and the other defendants had acted under color of state law, and that the depositor's losses constituted a deprivation of property, but it found no violation of due process. Recognizing the holdings of this court with respect to substantive due process, it concluded "whatever the boundaries of the denial of substantive due process rights in this Circuit, the Court finds plaintiffs' complaint herein does not state such a claim." Weimer v. Amen, No. CV-86-L-757, slip op. at 5 (D.Neb. July 2, 1987). Further, it held that since the state of Nebraska had provided adequate post-deprivation remedies to the depositors, the procedural due process claim was barred by Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981) and Hudson v. Palmer, 468 U.S. 517, 104 S.Ct. 3194, 82 L.Ed.2d 393 (1984). The complaint was therefore dismissed.
Weimer then sought leave to file an amended complaint, alleging the same violations of due process, but proceeding upon a new theory. Instead of asserting the illegality of Amen's action, the new complaint characterized the scheme and conspiracy to defraud as involving acts that were intentional, willful and with reckless disregard for Weimer's property. It also alleged that the acts were accomplished with bad faith, knowledge, deliberation and malice, and were an arbitrary exercise of the powers of government to fraudulently deprive the plaintiffs of their property without due process of law. The prestige and power of the state was alleged to have supported the fraudulent inducement to retain deposits. It further claimed the fraud concealed from the plaintiffs the fact that their property was being deprived, which constituted inherently and fundamentally unfair state action. Additional specific allegations concerning the overall scheme and references to specific individuals were added. Additionally, Weimer claimed that the available state remedies were inadequate, particularly in light of the fact that attorney's fees were not available. The district court denied leave to amend, on the grounds that the proposed revisions did nothing to alter the shortcomings of the original pleading, and Weimer appealed.
Weimer argues that since he is basing his procedural due process claims on intentional acts committed by Amen pursuant to an established state procedure, Parratt and Hudson do not apply. 2 These cases provide that for certain claims based on denial of procedural due process there can be no constitutional violation if the state has provided an adequate postdeprivation remedy. Weimer believes these cases to be inapplicable, instead relying on Logan v. Zimmerman Brush Co., 455 U.S. 422, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982) as authority to permit federal relief in this situation.
The distinction between Parratt and Logan is one of loss of property "as a result of a random and unauthorized act by a state employee," Parratt, 451 U.S. at 541, 101 S.Ct. at 1916, and loss caused by the state system itself, Logan, 455 U.S. at 436, 102 S.Ct. at 1158. Parratt involved the negligent loss of a prisoner's property by a state prison guard, and a resulting section 1983 claim by the prisoner claiming violation of procedural due process. Although state remedies were available, the prisoner instead chose to seek federal relief. The Court recognized that since the guard's actions were random, unforeseeable, and unauthorized by state law, the state did not have the opportunity to provide any other process:
the loss is not a result of some established state procedure...
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