Opinion
No. 3-00-CV-1469-R
July 22, 2002
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Defendants J.D. Collett and Jeffrey Ramirez have filed separate motions for summary judgment in this civil rights case. For the reasons stated herein, both motions should be denied.
Defendant Roberto Molina also filed a motion for summary judgment. However, at oral argument, counsel for plaintiff agreed to dismiss all claims against Molina with prejudice. This moots consideration of Molina's summary judgment motion.
I.
This is a civil rights action arising out of the indictment, arrest, and trial of Ronald A. Hamilton on federal gambling charges. The facts of the case are set forth at length in United States v. Truesdale, 152 F.3d 443 (5th Cir. 1998). Succinctly stated, Hamilton was associated with Richard Jones, the head of an international sports wagering service variously known as Spectrum or World Sportsbook. These companies maintained offshore offices in the Dominican Republic and Jamaica to avoid potential criminal liability under domestic gambling laws. Customers placed bets at these foreign locations through toll-free numbers set up by Jones. Although some of the numbers terminated at locations in the Dallas area, these "information only" lines were not used to accept bets.
Before a customer could place a bet, he would be required to open an account with World Sportsbook by wiring money via Western Union or sending it by Federal Express. Hamilton and James Truesdale, another Jones associate, would pick up wire transfers from the Western Union office and deposit the money in various bank accounts in the Dallas-Fort Worth area. Payoffs to winners were made from accounts at local banks belonging to Hamilton and Truesdale. In addition to their direct involvement with Jones, Hamilton and Truesdale maintained their own sports information telephone lines that promoted World Sportsbook by advertising the wagering service and giving out information-only toll-free numbers. In exchange for this advertisement, Hamilton and Truesdale received 50% of the profits derived from customers brought in to World Sportsbook as a result of the ads.
On June 18, 1993, a joint task force consisting of federal and state law enforcement agents moved to shut down the World Sportsbook operation in Dallas. J.D. Collett, a Dallas police officer, and Jeffery Ramirez, an FBI agent, were members of this task force. As part of their investigation, agents obtained a warrant to search Hamilton's residence. The warrant was issued, in part, based on representations made by Collett in a sworn affidavit that Hamilton had an elaborate telephone system in his Dallas home consisting of 30 or more lines that were used to accept illegal bets. While executing this warrant, a call came in from a person asking for the line on a sporting event. FBI Agent Roberto Molina answered the call and offered to take a bet. However, no bet was placed. Agents also seized a tally sheet of bets placed with World Sportsbook and a list of bettors from Hamilton's residence.
On or about June 23, 1993, Collett and Ramirez testified before a Dallas County Grand Jury that Hamilton was guilty of operating an illegal bookmaking business. In particular, Collett told the grand jury that it was a crime under Texas law to place bets with World Sportsbook by telephone in Jamaica and the Dominican Republic, countries where gambling was legal. Based on this testimony, Hamilton was indicted on state gambling charges. However, the indictment was dismissed after the U.S. Attorney decided to pursue federal charges against Hamilton, Truesdale, and Jones. Collett and Ramirez testified to the same facts before a federal grand jury in the summer of 1996. In his testimony, Ramirez stated that while executing a warrant at Hamilton's residence, agents received a phone call from individuals who wanted to place illegal bets or wagers.
On August 2, 1996, Hamilton and his associates were indicted for conspiring to engage in illegal gambling activity, operating an illegal gambling business, and money laundering. Following a jury trial, Hamilton was acquitted of conspiracy but convicted on several counts of illegal gambling and money laundering. Punishment was assessed at 15 months confinement and a $7,500 fine. On appeal, the Fifth Circuit reversed both convictions, finding that the government had "no direct evidence supporting its contention that appellants engaged in illegal bookmaking in Texas." Truesdale, 152 F.3d at 450. A judgment of acquittal was entered in favor on Hamilton upon remand to the district court.
Hamilton now sues Collett and Ramirez for civil rights violations under 42 U.S.C. § 1983 and its federal counterpart, Bivens v. Six Unknown Named Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). He accuses the defendants of false arrest and malicious prosecution in violation of the Fourth and Fourteenth Amendments to the United States Constitution. Collett and Ramirez filed a motion to dismiss the complaint for failure to state a claim and on grounds of qualified immunity. Their motions were denied on April 12, 2001. After the parties conducted limited discovery, Collett and Ramirez filed separate motions for summary judgment. The motions have been fully briefed and are ripe for determination.
II.
Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Thurman v. Sears, Roebuck Co., 952 F.2d 128, 131 (5th Cir.), cert. denied, 113 S.Ct. 136 (1992). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matter of Gleasman, 933 F.2d 1277, 1281 (5th Cir. 1991).
A movant who does not have the burden of proof at trial must point to the absence of a genuine fact issue. Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The burden then shifts to the non-movant to show that summary judgment is not proper. Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir. 1992). The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 113 S.Ct. 82 (1992). All evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993). However, conclusory statements, hearsay, and testimony based on conjecture or subjective belief are not competent summary judgment evidence. Topalian, 954 F.2d at 1131.
III.
Ramirez argues that Hamilton cannot maintain a civil rights action for false arrest and malicious prosecution because he was arrested pursuant to a valid warrant and prosecuted under an indictment returned by a federal grand jury. In addition, both Collett and Ramirez contend that Hamilton cannot prove the elements of his civil rights claims or overcome their qualified immunity defense. The court will address each argument in turn.
A.
Ramirez first maintains that Hamilton cannot establish lack of probable cause — an essential element of false arrest and malicious prosecution — because he was arrested pursuant to a valid warrant issued by an independent judicial officer and prosecuted under an indictment returned by a federal grand jury. "It is well settled that if facts supporting an arrest are placed before an independent intermediary such as a magistrate or grand jury, the intermediary's decision breaks the chain of causation for false arrest, insulating the initiating party." Taylor v. Gregg, 36 F.3d 453, 456 (5th Cir. 1994). The same rule applies to malicious prosecution actions where an indictment is returned by a grand jury. See Rodriguez v. Ritchey, 556 F.2d 1185, 1191 (5th Cir. 1977), cert. denied, 98 S.Ct. 894 (1978). However, this presupposes that the independent intermediary has been presented with all the facts and not been misled by law enforcement officials. "[A]ny misdirection of the magistrate or the grand jury by omission or commission perpetuates the taint of the original official behavior." Hand v. Gary, 838 F.2d 1420, 1426 (5th Cir. 1988).
The Ninth Circuit relied on Hand in addressing an argument similar to the one raised by Ramirez in this case. In Harris v. Roderick, 126 F.3d 1189 (9th Cir. 1997), cert. denied, 118 S.Ct. 1051 (1998), the plaintiff brought a Bivens action against various federal marshals for conspiracy to use excessive force in violation of his Fourth Amendment rights. The plaintiff was indicted and subsequently acquitted on charges of murder and assaulting federal officers during the infamous shoot-out at Ruby Ridge. In the civil case, plaintiff alleged that two of the marshals concocted a false story about what had happened in the gunfight in order to conceal their own wrongdoing and repeated these falsehoods in official documents and in their grand jury and trial testimony. The marshals moved to dismiss the Bivens action on the ground that the arrest warrant and grand jury indictment established probable cause for plaintiff's arrest and prosecution on criminal charges. The district court rejected this argument and the Ninth Circuit affirmed. In its opinion, the appellate court noted:
The argument here is, in essence, that if a conspiracy to lie is so successful that on the basis of the lies a grand jury finds probable cause, the conspirators become immunized for the constitutional injury they have caused. We disagree. In Hand v. Gary, the Fifth Circuit examined the question whether state actors could assert immunity from liability for malicious prosecution simply because an indictment was obtained, regardless of the circumstances surrounding its return. The Hand court concluded that a finding of probable cause that is "tainted by the malicious actions of the government officials involved" does not preclude a claim against the officials involved. We adopt the Hand reasoning.
Id. at 1198. See also White v. Frank, 855 F.2d 956, 961-62 (2d Cir. 1988) (holding that presumption of probable cause from an indictment may be overcome by evidence that the indictment was the product of fraud or perjury).
Here, Hamilton has presented some evidence that Collett and Ramirez made false statements to judicial officers and grand jurors concerning his involvement in illegal gambling activities. This breaks the chain of causation and may subject the defendants to civil liability. Accordingly, Ramirez is not entitled to summary judgment on this ground.
B.
Collett and Ramirez further argue that there are no genuine issues of material fact with respect to Hamilton's false arrest and malicious prosecution claims.
1.
In order to establish a constitutional claim of false arrest, Hamilton must prove that Collett and Ramirez knowingly provided false information to secure an arrest warrant or provided false information in reckless disregard of the truth. Freeman v. County of Bexar, 210 F.3d 550, 553 (5th Cir.), cert. denied, 121 S.Ct. 318 (2000), citing Franks v. Delaware, 438 U.S. 154, 171, 98 S.Ct. 2674, 2684, 57 L.Ed.2d 667 (1978). The court then must determine whether the warrant would establish probable cause without the allegedly false information. Id.; see also Burge v. Parish of St. Tammany, 187 F.3d 452, 481 (5th Cir. 1999).
Lack of probable cause is also an essential element of malicious prosecution. Goodson v. City of Corpus Christi, 202 F.3d 730, 740 (5th Cir. 2000); Pete v. Metcalfe, 8 F.3d 214, 219 (5th Cir. 1993). In determining whether probable cause exists, the critical inquiry is whether defendants were confronted "with existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts and the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted." Gordy v. Burns, ___ F.3d ___, 2002 WL 1310375 at *4 (5th Cir. Jun. 17, 2002), quoting Kerr v. Lyford, 171 F.3d 330, 340 (5th Cir. 1999). See also Piazza v. Mayne, 217 F.3d 239, 246 (5th Cir. 2000) (probable cause in malicious prosecution case requires basis for officer to believe to a "fair probability" that crime has been committed).
2.
Hamilton was arrested and indicted on both state and federal gambling charges, but prosecuted only on the federal charge. The state indictment charged Hamilton with operating an "illegal bookmaking" operation. (Ramirez App. at 95). Under Texas law, "bookmaking" is defined as:
(1) to receive and record or to forward more than five bets or offers to bet in a period of 24 hours;
(2) to receive and record or to forward bets totaling more than $1000 in a period of 24 hours; or
(3) a scheme by three or more persons to receive, record, or forward offers to bet.
TEX. PENAL CODE. ANN. § 47.01(2)(A)-(C) (Vernon 1989). The state indictment was dismissed after federal authorities expressed their intent to prosecute Hamilton on related charges. (Ramirez App. at 96; Collett App. at 14). Thereafter, Hamilton was indicted by a federal grand jury for conspiring to engage in illegal gambling activity, operating an illegal gambling business, and money laundering. (Hamilton App. at 131-44). Federal law defines an "illegal gambling business" as a gambling business which:
(1) is a violation of the law of the State or political subdivision in which it is conducted;
(2) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and
(3) has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.18 U.S.C. § 1955(a); see also United States v. Heacock, 31 F.3d 249, 252 (5th Cir. 1994). The federal money laundering statute prohibits any financial transaction involving the proceeds of unlawful activity in order to "conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of the specified unlawful activity." 18 U.S.C. § 1956(a)(1)(B)(i). As the Fifth Circuit recognized in Truesdale, an essential element of both the federal gambling and money laundering charges is that Hamilton "engaged in illegal bookmaking in Texas." Truesdale, 152 F.3d at 448 (emphasis added). The appellate court ultimately concluded that no such evidence was presented in the criminal trial. Thus, in order to subject Collett and Ramirez to civil liability for initiating his arrest and prosecution, Hamilton must show that these defendants fabricated evidence or knowingly misled the prosecuting authorities as to the nature and extent of his gambling activities in Texas.
The record is replete with such evidence. In his affidavit in support of the state search warrant, Collett stated that he placed over 200 wagers with World SportsBook and that "Hamilton and the listed accomplices were operating the illegal sports bookmaking operation from Dallas, Texas." (Ramirez App. at 92; Collett App. at 11). While executing the warrant at Hamilton's residence, Collett said that "bets were taken over his telephone from players who could not get through on the regular betting lines . . ." (Hamilton App. at 147). Ramirez gave similar testimony before a federal grand jury. (Ramirez App. at 105; Collett App. at 22). However, other evidence in the record suggests that the agents knew that Hamilton never conducted any illegal gambling activities in Texas. (Hamilton App. at 178-83, 207-08). In his deposition, Collett was asked:
Q: [W]here was the place where the bookmaking bets were being accepted?
A: Till I actually sent off or called the toll free number that was on there or wherever I got the toll free number and talked to the people, I didn't know where it was at. I talked to someone on the phone when I called the number, and they advised that it was — they was located — they moved twice during the investigation. They were located someplace in the islands. I can't recall where it was.
Q: Was it Jamaica or the Dominican Republic or both of them?
A: I think that probably during the investigation it was probably both. I can't recall exactly where it was at, you know, like I stated.
(Ramirez App. at 6). Although Collett went on to explain that he believed Hamilton was running the bookmaking operation from his home, he based this testimony on the assumption that the 800 numbers he called to place bets in an undercover capacity terminated in Texas. (Id. at 8-9). When pressed, Collett finally admitted that he "didn't know exactly where the bets were being taken." (Id. at 9). This belated concession is inconsistent with Collett's prior statements and grand jury testimony.
Moreover, there is compelling evidence that no bets were taken by agents while executing the search warrant at Hamilton's residence. Roberto Molina, the FBI agent who allegedly accepted this bet over the telephone, was asked at his deposition:
Q: Did you ever at any time tell anybody there was a bet?
A: No, I'd never told anyone that there was actually — a bet had taken place.
Q: All right. Did you ever tell Ramirez that there was a bet?
A: That a bet had taken place? No.
Q: Did you discuss the contents of Exhibit 8A with Mr. Ramirez?
A: Yes, I did. As a matter of fact, from my best recollection, he was standing in the room when the phone call took place.
Exhibit 8A is an FBI 302 Statement by Molina describing the contents of a telephone call he answered at Hamilton's residence while executing the search warrant. According to Molina:
On June 18, 1993, while conducting a search of a residence located at 9719 Van Dyke, Dallas, Texas, Special Agent ROBERTO MOLINA of the Dallas Federal Bureau of Investigation (FBI), answered an in coming phone call at approximately 6:05 pm from an individual named HARRY BAUT. BAUT requested to know "what's the line". BAUT was asked which team he wanted the line on. BAUT said Houston. BAUT was told that the line was Houston by two. BAUT stated that he did not believe that the line was Houston by two and asked if he had the right phone number. BAUT was told that he did have the right phone number and asked if he wanted to place a bet. BAUT stated that he did want to place a bet, but he wanted to know what the line was. BAUT was told that we were very busy at the time and someone would return his call. BAUT agreed and gave his phone number as (717) 735-8855. BAUT also gave his account number as 5005. No further attempts were made to contact BAUT.
(Hamilton App. at 153).
Q: So you discussed it with him right afterwards.
A: Yes.
Q: Did you tell him right afterwards, "I just made a bet"?
A: No, I did not.
Q: So it's clear in your mind that it would not have been possible for Mr. Ramirez to walk away from reading the 302 or walk away from what took place on June 18th, '93, in Mr. Hamilton's home after you spoke with Mr. Baut — for him to walk away with the belief that a bet had taken place; is that fair?
A: That is fair.
(Id. at 90) (emphasis added).
The court finds that this evidence, viewed in the light most favorable to plaintiff, creates a genuine issue of material fact as to whether Collett and Ramirez had reason to believe to a "fair probability" that Hamilton was conducting an illegal gambling operation in Texas. Piazza, 217 F.3d at 246. This fact was critical to establishing probable cause for obtaining a search warrant and prosecuting Hamilton for violating 18 U.S.C. § 1955(a). Consequently, summary judgment is not proper on this ground.
3.
In a related argument, Ramirez contends that Hamilton is precluded from asserting a false arrest or malicious prosecution claim because the district court denied his request for attorney's fees under the Hyde Amendment, Pub.L. No. 105-119, § 617, 111 Stat. 2440, 2519 (1997), reprinted in 18 U.S.C. app. § 3006A. See United States v. Truesdale, No. 3-96-CR-261-D (N.D. Tex. Dec. 22, 1998), aff'd, 211 F.3d 898 (5th Cir. 2000). The court rejects this argument for three reasons. First, to the extent that Ramirez relies on the doctrine of collateral estoppel, he has not raised this affirmative defense in his answer. FED. R. Civ. P. 8(c); Mozingo v. Correct Manufacturing Corp., 752 F.2d 168, 172 (5th Cir. 1985) (collateral estoppel is affirmative defense which, if not pled, is considered waived). Second, Hamilton points out that he was unaware of certain crucial evidence at the time he filed his request for attorney's fees in the criminal case. In particular, Hamilton did not know that Ramirez had falsely testified before the grand jury that an agent accepted a bet while executing a search warrant at Hamilton's residence. (Hamilton App. at 186; Ramirez App. at 105). Third, the elements of a claim for attorney's fees under the Hyde Amendment and a cause of action for false arrest or malicious prosecution are different. The Hyde Amendment authorizes the district court to award reasonable attorney's fees and litigation expenses to a prevailing defendant in a criminal case upon proof that "the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances make such an award unjust." 18 U.S.C. app. § 3006A. Although Ramirez suggests that these standards are equivalent to a finding of probable cause, he cites no authority to support such an argument. The court declines to grant summary judgment on this basis.
C.
Finally, Collett and Ramirez argue that there is no evidence their conduct violated a clearly established constitutional right or that their actions were objectively unreasonable. As a result, both defendants seek summary judgment on the grounds of qualified immunity.
1.
Law enforcement officials are immune from suit for discretionary acts performed in good faith while acting within the scope of their authority unless their conduct violates a "clearly established statutory or constitutional right of which a reasonable person would have known." Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982). The Supreme Court has clarified the analytical structure under which a claim of qualified immunity should be addressed. See Siegert v. Gilley, 500 U.S. 226, 231-33, 111 S.Ct. 1789, 1793, 114 L.Ed.2d 277 (1991). First, the court must determine "whether the plaintiff's allegations, if true, establish a constitutional violation." Hope v. Pelzer, ___ U.S. ___, 122 S.Ct. 2508, 2514, ___ L.Ed.2d ___ (2002); Saucier v. Katz, 533 U.S. 194, 121 S.Ct. 2151, 2156, 150 L.Ed.2d 272 (2001); Siegert, 111 S.Ct. at 1793. If the plaintiff sufficiently alleges the violation of a constitutional right, the court must decide whether that right was clearly established at the time of the alleged violation and whether the conduct of the officer was objectively unreasonable under the circumstances. Siegert, 111 S.Ct. at 1789.
A constitutional right is clearly established if "the contours of that right [are] sufficiently clear that a reasonable official would understand that what he is doing violates that right." Hope, 122 S.Ct. at 2515, quoting Anderson v. Creighton, 483 U.S. 635, 640, 107 S.Ct. 3034, 3039, 97 L.Ed.2d 523 (1987). While this does not require proof that the specific conduct in question has previously been held unlawful in "fundamentally similar" or "materially similar" cases, officials are still entitled to "fair warning" that their conduct violates a constitutional right. Id. at 2515-16, citing United States v. Lanier, 520 U.S. 259, 269, 117 S.Ct. 1219, 1226-27, 137 L.Ed.2d 432 (1997). Thus, the salient question is whether the state of the law at the time gives officials "fair warning" that their conduct is unconstitutional. Id.
2.
The court has determined that Hamilton has sufficiently stated a claim against Collett and Ramirez for violating his rights under Fourth and Fourteenth Amendments by providing false and misleading information which resulted in his arrest and prosecution on federal gambling charges. At the time this investigation began in 1992, the prohibition against using false evidence to obtain a criminal conviction was clearly established by the Supreme Court. Pyle v. State of Kansas, 317 U.S. 213, 216, 63 S.Ct. 177, 178-79, 87 L.Ed.2d 214 (1942). See also Young v. Biggers, 938 F.2d 565, 570 n. 9 (5th Cir. 1991) (fabrication of evidence against innocent defendant violates clearly established constitutional right); Kerr, 171 F.3d at 339 (constitutional right to be free from malicious prosecution established since at least 1990); Duckett, 950 F.2d at 278 (clearly established right to be free from illegal arrest); Reyes v. Sazan, ___ F. Supp.2d ___, 2002 WL 987385 at *2 (E.D. La. May 10, 2002), citing Devereaux v. Abbey, 263 F.3d 1070, 1075 (9th Cir. 2001) (fabrication of evidence to support probable cause determination violates clearly established federal law). Thus, Collett and Ramirez had "fair warning" that the conduct alleged by Hamilton was unlawful.
Although both defendants argue that their actions were objectively reasonable under the circumstances, there are simply too many disputed facts regarding their knowledge of Hamilton's bookmaking activities in Texas to permit this case to be disposed of on summary judgment. This is not to say that Collett and Ramirez are not entitled to qualified immunity as a matter of substantive law. Rather, the issue will have to be resolved at trial. Garris v. Rowland, 678 F.2d 1264, 1270 (5th Cir.), cert. denied, 103 S.Ct. 143 (1982) (jury must resolve controverted facts relied on to show probable cause before controlling legal principles are applied). See also Enlow v. Tishomingo County, Mississippi, 962 F.2d 501, 510 (5th Cir. 1992) (same).
RECOMMENDATION
The summary judgment motions filed by Defendants J.D. Collett and Jeffrey Ramirez should be denied in their entirety.