MCCLAIN v. CAUSEY

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

DALLAS R. MCCLAIN, )

)

Plaintiff, )

)

v. ) 1:20-CV-695

)

JEFFREY A. TRENDEL, In His )

Individual Capacity; JOHN CABLE, In )

His Individual Capacity; STEVE )

BRYANT, In His Individual Capacity; )

and MARTY SUMNER, In His )

Individual Capacity, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, District Judge.

The plaintiff, Dallas McClain, moves for leave to file an amended complaint

asserting a Fourth Amendment claim. Because the amended complaint fails to state a

claim on which relief can be granted, it would be futile to grant the motion.

Procedural History

In his original complaint, Mr. McClain brought eight causes of action against

employees and officials of the North Carolina Departments of Insurance and Justice

based on regulatory actions taken against Cannon Surety, LLC, a bail bond surety

business in which Mr. McClain claims an indirect ownership interest. The Court granted

the defendants’ motion to dismiss as to the three federal causes of action and declined to

exercise supplemental jurisdiction over the remaining state claims. See Doc. 19 at 14.

The Court deferred entering judgment for 14 days to give Mr. McClain an

opportunity to amend the complaint to add more factual detail and specificity to his

§ 1983 claim based on the Fourth Amendment. See id. at 14–15. Pursuant to Fed. R.

Civ. P. 15(a), Mr. McClain timely moved to amend the complaint. Doc. 20. The

proposed complaint reasserts his § 1983 Fourth Amendment claim and various state tort

claims arising out of the search of Cannon’s business premises, naming four state

employees in their individual capacities as defendants. Doc. 20-1. The defendants

object, contending that the amendment would be futile. Doc. 22.

Discussion

Federal Rule 15(a)(2) allows a party to amend its pleading over objection with

leave of the court, and “[t]he court should freely give leave when justice so requires.”

Fed. R. Civ. P. 15(a)(2). Courts may deny leave to amend a pleading if the amendment

would be futile. Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). A proposed

amendment is futile “if the claim it presents would not survive a motion to dismiss.”

Save Our Sound OBX, Inc. v. N.C. Dep’t of Trans., 914 F.3d 213, 228 (4th Cir. 2019); see

Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995).

A. Fourth Amendment Claim

Mr. McClain alleges that when the defendants executed a state court seizure order

at Cannon’s business premises, they exceeded the scope of the order by taking and

keeping his personal property. Doc. 20-1 at ¶¶ 41, 61, 74. This warrantless seizure, he

asserts, violated his Fourth Amendment rights to be secure in his papers and effects

against unreasonable searches and seizures.

1. Allegations of the Proposed Amended Complaint

Mr. McClain alleges the following material facts, which the Court summarizes and

takes as true for purposes of this motion.

In September 2017, the Department of Insurance filed a verified petition for an

order of rehabilitation and seizure order of Cannon Surety, LLC. Id. at ¶ 17. The

Department asserted that Cannon was a licensed surety, that it was failing to comply with

applicable state laws and requirements, and that there was reasonable cause to believe

that many financial irregularities threatened Cannon’s solvency and endangered the

policyholders, creditors, and the public. See id. at ¶ 17 (citing Doc. 20-1 at pp. 24–53).

Pursuant to N.C. Gen. Stat. § 58-30-65, the Wake County Superior Court issued a seizure

order authorizing DOI to take possession and control of “the premises occupied by

[Cannon] for transaction of its business,” and “all of the property, books, accounts,

documents, and other records” of Cannon. Id. at ¶ 19, pp. 57–58.

On September 28, 2017, the defendants came to Cannon’s business premises to

execute the seizure order. Id. at ¶ 33. Mr. McClain owns 75% of Premier Judicial

Consultants, LLC, which owns 100% of Cannon. Id. at ¶¶ 24–25. Premier’s offices were

in the same space. Id. at ¶¶ 30–32. Mr. McClain and other employees and agents of

Cannon and Premier were present. Id. at ¶¶ 35, 43. The offices were large, consisting of

approximately 10,000 square feet and 21 rooms. Id. at ¶ 47. The defendants required

Mr. McClain and others to remain in a conference room during the search. Id. at ¶ 43.

The defendants and others filled approximately 80 boxes with items of property

from the premises. Id. at ¶ 51. During the day, Mr. McClain told the defendants that

certain items, unidentified in the complaint, belonged to him and not to Cannon, but the

defendants nonetheless placed these objects in the boxes for removal. Id. at ¶¶ 55, 57.

The defendants removed the 80 boxes from the premises, id. at ¶ 51, without preparing an

inventory. Id. at ¶ 59. They have not provided Mr. McClain with an inventory of the

items seized from the premises. Id. at ¶ 53.

Along with Cannon’s property, the defendants took away many items of Mr.

McClain’s personal property, including computers, smart phones, cameras, a motorized

coupon dispenser, hard drives, televisions, a drone quadcopter, a CD/DVD replicator,

business signs, badges, pocketknives, keys, sunglasses, collectibles associated with a

Wyndham marketing campaign, and software “written specifically for the bail industry.”

See id. at ¶ 61. They also seized and took away personal documents such as Mr.

McClain’s mail, personal tax records, and records relating to other businesses run by Mr.

McClain. Id.

A little over two months after the search, unidentified DOI personnel allowed Mr.

McClain to retrieve some of his personal items. Id. at ¶ 60. Despite his repeated requests

to the defendants to return the many other personal items, id. at ¶ 64, they have not been

returned and remain in the possession of the defendants and the Department of Insurance.

Id. at ¶¶ 60, 65.

2. Overview of Applicable Law

The Fourth Amendment, made applicable to the States by the Fourteenth

Amendment, Ker v. California, 374 U.S. 23, 30 (1963), provides in pertinent part that the

“right of the people to be secure in their persons, houses, papers, and effects, against

unreasonable searches and seizures, shall not be violated.” U.S. CONST. amend. IV. By

its terms, the amendment applies to both searches and seizures. Soldal v. Cook Cty., Ill.,

506 U.S. 56, 63 (1992). A seizure of property “occurs when there is some meaningful

interference with an individual's possessory interests in that property.” Id. (cleaned up).

To prevail on a § 1983 unlawful seizure claim, a plaintiff must prove that the

government unreasonably seized property. Id. at 71; see Bishop v. Cnty. Of Macon¸620

F. App’x 148, 149 (4th Cir. 2015) (unpublished). In this, as in other contexts, the

reasonableness determination reflects a “careful balancing of governmental and private

interests.” Soldal, 506 U.S. at 71 (quoting New Jersey v. T.L.O., 469 U.S. 325, 341

(1985)). When officers seize items pursuant to a court order, a showing of

unreasonableness is “a laborious task indeed.” Id.

This is particularly so because government actors, like the defendants here, are

entitled to qualified immunity from civil liability if their conduct does not violate clearly

established constitutional rights. Trulock v. Freeh, 275 F.3d 391, 399 (4th Cir. 2001). In

deciding whether a state employee is entitled to qualified immunity, the Court determines

(1) whether the facts alleged or shown by the plaintiff establish a violation of a

constitutional right and (2) whether that right was “clearly established” at the time of the

defendant’s alleged misconduct. Pearson v. Callahan, 555 U.S. 223, 232 (2009).

The Fourth Amendment requires a search or seizure order to “particularly

describe[e]” the “things to be seized.” U.S. CONST. amend. IV. This rule applies to

search warrants issued in the criminal law context and to orders, like the one here, issued

in the regulatory context. New York v. Burger, 482 U.S. 691, 699 (1987); Camara v.

Mun. Court of San Francisco, 387 U.S. 523, 534 (1967). When there is a warrant or

court order, the government is not entitled to a general “exploratory rummaging in a

person’s belongings” and must confine the seizure to authorized items. United States v.

Dargan, 738 F.3d 643, 647 (4th Cir. 2013) (cleaned up).

“The scope of a search conducted pursuant to a warrant is defined objectively by

the terms of the warrant and the evidence sought, not by the subjective motivations of an

officer.” United States v. Williams, 592 F.3d 511, 522 (4th Cir. 2010) (cleaned up). The

terms of the warrant are not to be interpreted in a “hypertechnical” manner. Id. at 519

(quoting United States v. Robinson, 275 F.3d 371, 380 (4th Cir. 2001)). Rather, they

should be read with a “commonsense and realistic” approach, United States v.

Ventresca, 380 U.S. 102, 108 (1965), to avoid turning a search warrant into a

“constitutional straight jacket.” United States v. Phillips, 588 F.3d 218, 223 (4th Cir.

2009). “While the constitutional protection cannot demand perfection, any tolerance of

imperfection does not give officers free rein to ransack and take what they like.”

Williams, 592 F.3d at 520 (cleaned up).

3. Analysis

a. The Initial Seizure

The state court seizure order explicitly authorized the defendants, acting on behalf

of the Commissioner of the DOI, “to take possession and control of all of the property,

books, accounts, documents, and other records” of Cannon “and of the premises occupied

by [Cannon] for the transaction of its business.” Doc. 20-1 at 57. To state the obvious,

anything seized that was within the scope of this court order was not illegally seized and

there was no constitutional violation. To state the equally obvious flip side, court orders

and warrants do not authorize seizure of items that are not described or identified within

the terms of the order or warrant.

All of Mr. McClain’s personal property that he asserts was unlawfully seized was

located on Cannon’s business premises at the time of the seizure and, with the possible

exception of his sunglasses, would reasonably and objectively appear to be covered by

the order. Persons executing court seizure orders are only required to act reasonably, not

perfectly, in the execution of those orders. Williams, 592 F.3d at 519–20. Computers,

smart phones, cameras, a motorized coupon dispenser, hard drives, television monitors, a

CD/DVD replicator, business signs, and software “written specifically for the bail

industry” are the kinds of property that would be likely to belong to a surety bail bond

business, see Doc. 20-1 at ¶ 61, and seizure was specifically authorized by the court

order. Id. at 57 (authorizing seizure of all records stored by electronic means and all

“property”).

Similarly, the court order authorized the Commissioner to take possession of all

“books, papers, records, data bases, printouts and computations,” belonging to Cannon.

Id. at ¶ 19, pp. 57–58. Given Mr. McClain’s role in the business, the nature of the

financial irregularities at issue, and the fact that these records were found on Cannon’s

business premises, seizure of the mounds of paper records was appropriate—at least until

the defendants could determine whether the documents belonged to Cannon or some

other entity or person. Williams, 592 F.3d at 519–20 (“When a search requires review of

a large collection of items such as papers, it is certain that some innocuous documents

will be examined . . . to determine whether they are, in fact, among those papers

authorized to be seized.” (cleaned up)); Phillips, 588 F.3d at 227 (holding that it was

reasonable for officers to believe they had authority to seize similarly titled documents

that were later found to be outside the terms of their warrant).

And the court order authorized seizure of all “property” belonging to Cannon,

which could easily cover miscellaneous items such as keys, the drone, pocketknives,

badges, and collectibles. Doc. 20-1 at ¶ 61. The only item Mr. McClain identifies that

would not immediately appear covered by the court order is a pair of sunglasses, and

even those might have been purchased with Cannon funds, given the underlying financial

improprieties alleged and verified. See id. at p. 38 ¶¶ 55–57 (alleging inadequacies of

Cannon’s financial records), p. 39 ¶¶ 59–61 (alleging that multiple persons had access to

Cannon debit cards, with little oversight of purchases and that checks were written

without requiring receipts showing a business purpose).

In view of the verified petition’s allegations of financial irregularities, including

the likelihood that Cannon funds were used to buy items for personal and not business

use, see, e.g., id. at p. 39, it was objectively reasonable for the defendants to believe that

all of the seized items were purchased or owned by Cannon and therefore covered by the

seizure order.

“Reasonableness does not, by definition, entail perfection;” it requires “some

latitude for honest mistakes.” Phillips, 588 F.3d at 227 (quoting Maryland v. Garrison,

480 U.S. 79, 87 (1987)); see also Maciariello v. Sumner, 973 F.2d 295, 298 (4th Cir.

1992) (“Officials are not liable for bad guesses in gray areas; they are liable for

transgressing bright lines.”), cert. denied sub nom. Maciariello v. City of Lancaster, 506

U.S. 1080 (1993). Based on “the information available to the [defendants] at the time of

the search” as set forth in the proposed amended complaint, the defendants acted

reasonably in their seizure of the personal property Mr. McClain says belongs to him.

Phillips, 588 F.3d at 227.

Mr. McClain contends that his vocal objections throughout the seizure and the

clear labelling of files and notebooks as containing documents unrelated to Cannon or as

belonging to him personally should have given the defendants notice that they were

taking property that did not belong to Cannon. Doc. 20-1 at ¶¶ 57, 64. The defendants

were not required to accept such labels at face value, nor were they required to accept as

true Mr. McClain’s assertions of personal ownership, especially when many of the items

could easily have belonged to Cannon. See Williams, 592 F.3d at 522 (“Surely, the

owner of a computer, who is engaged in criminal conduct on that computer, will not label

his files to indicate their criminality.”). Moreover, the court order relied on the verified

petition, which contained extensive indicators of fraud and misuse of business funds for

non-business expenses. The proposed amended complaint, which incorporates the

verified petition and court order, shows that the defendants acted in an objectively

reasonable manner when they interpreted the court order broadly in determining whether

financial documents and property belonged to Cannon.

Mr. McClain says in his brief that the “Defendants knew the Court’s ex parte

order itself, was based upon false information.” Doc. 23 at 9. This allegation does not

appear in the proposed complaint1 and “[i]t is well-established that parties cannot amend

their complaints through briefing.” So. Walk at Broadlands Homeowner’s Ass’n, Inc. v.

OpenBand at Broadlands, LLC, 713 F.3d 175, 184 (4th Cir. 2013). And in any event,

conclusory assertions are insufficient to meet the high threshold needed to overcome

qualified immunity on a theory that the underlying warrant was defective. See

Messerschmidt v. Millender, 565 U.S. 535, 547–48 (2012) (nothing the high threshold to

overcome qualified immunity on a theory that the underlying warrant was defective).

Mr. McClain also relies on the Supreme Court’s decision in Malley v. Briggs, 475

U.S. 335, 345 (1986), throughout his brief for multiple propositions that the case does not

seem to support. See, e.g., Doc. 23 at 8–10. In Malley, the Supreme Court rejected an

argument that the act of applying for a warrant is per se objectively reasonable if the

applying officer believes that the facts alleged in her affidavit are true. Malley, 475 U.S.

at 345. The Court explained that an officer applying for a warrant may not simply “rely

on the judgment of a judicial officer in finding that probable cause exists and hence

issuing the warrant.” Id. Instead, the officer must “exercis[e] reasonable professional

judgment” in deciding whether to apply for the warrant in the first place in order to

“minimize [the] danger” of an unlawful arrest. Id. at 345–46.

1 Mr. McClain claims in his reply brief that his “amended complaint plainly alleges” this

point, Doc. 23 at 9, but the only paragraph he cites in support refers to an allegation from the

verified petition describing Cannon’s inability to make good on certain state bonds. Doc. 20-1 at

p. 43 ¶ 80. Whether or not the Court was obliged to search through the proposed complaint’s 70

pages to locate this allegation, see generally, Vannoy v. Federal Reserve Bank, 827 F.3d 296,

302 n. 4 (4th Cir. 2016), the Court did look. If this based-on-false-information claim is buried

somewhere in the proposed amended complaint, the Court did not see it.

Here, Mr. McClain does not allege that any of the four defendants applied for the

seizure order. See Doc. 20-1 at ¶ 17 (alleging that DOI Commissioner Mike Causey filed

the petition for rehabilitation and seizure). He alleges that one of the defendants, Mr.

Trendel, executed a “Verification to the Seizure Order,” id. at ¶ 18, but he makes no

allegation that Mr. Trendel failed to exercise reasonable professional judgment in

executing that verification. To the extent that Mr. McClain relies on Malley for a

different proposition, his argument is unclear.

The facts as alleged do not show a constitutional violation, as all of the items

seized were objectively covered by the court order authorizing the seizure. The

defendants had no constitutional duty to accept Mr. McClain’s assertions of personal

ownership given the scope of the order, the location of the seized items on Cannon’s

business premises, and the underlying reasons for the seizure order. The defendants

would be entitled to qualified immunity on this claim if the proposed amended complaint

were to be filed, so the amendment would be futile.

b. The Continuing Possession

Mr. McClain makes the separate contention that the “continued possession of

property invalidly seized is a continuing deprivation.” Doc. 23 at 9–10; Doc. 20-1 at ¶

74. Mr. McClain has cited no case law to show that the continued retention of lawfully

seized property violates a clearly established right under the Fourth Amendment. The

Court’s own review of the cases show that the Fourth Amendment right that Mr. McClain

asserts was violated here was not clearly established, for reasons explained in Tinsley v.

Wight, No. 7:09-2455-SB, 2012 WL 5305980, at *10 (D.S.C. Mar. 28, 2012) (finding

defendants were entitled to qualified immunity on Fourth Amendment claim for

continuing retention of property and collecting cases).2

The Court need not determine whether the continued possession of Mr. McClain’s

property constitutes a separate violation of the Fourth Amendment. It is enough to say

that the law is not clearly established as to Mr. McClain’s purported right and that the

defendants would be entitled to qualified immunity on this aspect of the proposed claim

for that reason.

B. Remaining State Claims

As the Court stated in its original order, see Doc. 19 at 13–14, the district courts of

the United States are courts of limited subject matter jurisdiction. Exxon Mobil Corp. v.

Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). Their original jurisdiction is limited by

the Constitution and by congressional statute. Id. Once a district court has established

original jurisdiction over at least one claim, it has supplemental jurisdiction over any

additional claims that are part of the same case or controversy. 28 U.S.C. § 1367(a). A

district court may decline to exercise supplemental jurisdiction if it has dismissed all

2 The Court has no obligation to undertake legal research that a litigant has chosen not to

present. See Cathey v. Wake Forest Univ. Baptist Med. Ctr., 90 F. Supp. 3d 493, 509 (M.D.N.C.

2015). But the Supreme Court has noted in dicta that if items are seized that are later determined

not to be covered by the court order, the government should promptly return them. See Andresen

v. Maryland, 427 U.S. 463, 482 n.11 (1976). So, the Court did spend some time going down

various rabbit holes to be sure it was fairly evaluating this claim. Without writing a law review

article about the uncertain nature of this claim, many circuits have held that the due process

clause is at issue for such claims, not the Fourth Amendment, as the discussion in Tinsley shows.

See, e.g., Tinsley, 2012 WL 5305980 at *12. And even when outright personal theft is alleged,

which it was not here, courts have often found qualified immunity for Fourth Amendment

claims. See generally Saunders v. Baltimore City Police Dep't, No. CV CCB-19-551, 2020 WL

1505697, at *4 (D. Md. Mar. 30, 2020) (collecting cases where theft was alleged and qualified

immunity was appropriate but declining to dismiss case on specific facts alleged).

claims over which it has original jurisdiction. Jd. § 1367(c)(3). Because Mr. McClain’s

Fourth Amendment claim would be futile if filed, the Court would also decline to

exercise supplemental jurisdiction over the remaining state tort claims.

It is ORDERED that the motion to amend, Doc. 20, is DENIED.

This the 1st day of April, 2021.

UNITED STATES 6 a.

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