Spec's Family Partners, Ltd. v. The Executive Director of the Texas Alcoholic Beverage Commission

Southern District of Texas

ENTERED

UNITED STATES DISTRICT COURT August 29, 2019

SOUTHERN DISTRICT OF TEXAS David J. Bradley, Clerk

HOUSTON DIVISION

SPEC’S FAMILY PARTNERS, LTD., §

§

Plaintiff, §

VS. § CIVIL ACTION NO. 4:18-CV-02670

§

THE EXECUTIVE DIRECTOR OF THE §

TEXAS ALCOHOLIC BEVERAGE §

COMMISSION, et ail, §

§

Defendants. §

ORDER

Before the Court are Texas Alcoholic and Beverage Commission officials—the

Defendants—Adrian Bentley Nettles (Executive Director of TABC), Dexter K. Jones (Chief of

Audit and Investigations), Emily E. Helm (former General Counsel for TABC), Judith L.

Kennison (TABC attorney), and Matthew Edward Cherry’s (TABC attorney) Motion to Dismiss

(Doc. #15), Plaintiff Spec’s Family Partners, Ltd.’s (“Plaintiff”) Response (Doc. #28), and

Defendant’s Reply (Doc. #32). After considering the parties’ arguments, submissions and

applicable legal authority, the Court grants Defencants’ Motion to Dismiss.

I. Background

This case arises out of an administrative enforcement action prosecuted by the Texas

Alcoholic Beverage Commission (“TABC”) agairst Plaintiff. Plaintiff alleges that the fifty-three

charges brought against it were “wrongfully and maliciously pursued,” that the administrative

enforcement action brought by TABC against Plaintiff “should have never been filed,” and that it

caused “tremendous expense and economic loss” to Plaintiff. Doc. #3 at 1; Doc. #28 at 1.

In late 2012, early 2013, industry participents complained of misconduct by Plaintiff. As

a result, TABC investigated aspects of Plaintiff's business and concluded that Plaintiff violated

numerous applicable Texas regulations. TABC -nitiated a formal case at the State Office of

Administrative Hearings (““SOAH”) in February 2013. In the SOAH case, TABC sought to

cancel or suspend 164 of Plaintiffs retail package store permits. Doc. #3 at 6. Plaintiff alleges

that Defendants “wrongfully withheld permits” fo: new stores across Texas and refused to renew

Plaintiffs permits for existing stores during the administrative enforcement action. Jd at 2.

Plaintiff believes that Defendants did this in order to “coerce an unjustified multi-million dollar

settlement” from Plaintiff. /d.; Doc. #28 at 1.

The two-week SOAH hearing was conducted in front of a panel of three administrative

law judges. Doc. #3 at 10-30. After the evidentiary hearing, the panel of judges concluded that

TABC had not met its burden with respect to any of the charges against Plaintiff except “one

credit law violation.” /d. at 9. Plaintiff now claims that the charges against it were “groundless”

and Defendants were the cause of Plaintiff's economic losses. Doc. #28 at 2. Plaintiff asserts

numerous complaints concerning the actions of TABC officials during the initiation of the

enforcement action and the enforcement hearing. Doc. #3 at 10-30. Specifically, Plaintiff alleges

that the conduct of the TABC officials involved in the administrative enforcement proceedings

violated its Fourth, Fifth, and Fourteenth Amendment rights under 42 U.S.C. § 1983. /d. at 1,

30-33.

Plaintiff further argues that “TABC’s allegations were based on false testimony from a

TABC witness” and that it was deprived of both procedural and substantive due process. /d. at 9,

30. Furthermore, Plaintiff brings state law claims for malicious prosecution. /d. at 35-38.

Plaintiff requests that this Court issue a declaratory judgment and provide injunctive relief to

prevent TABC from “ever again engaging in the same or similar abusive tactics in the future.”

Id. at 2. Plaintiff is also seeking just compensation for the losses and damages it suffered as a

result of the enforcement action. Jd. Lastly, Plaintiff alleges that TABC violated the Sherman

Antitrust Act (The Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1 et seq.) and seeks a

declaratory judgment that Texas Alcoholic Beverage Code § 102.01(a)(7) is a per se violation of

the Sherman Antitrust Act. Doc. #3 at 2; 38-40.

Defendants move to dismiss this case for failure to state a claim and for failure to

overcome TABC and its’ officials’ immunity from suit under Fed. R. Civ. P. 12(b)(6) and Fed.

R. Civ. P. 12(b)(1). Defendants argue that Plaintiff's claims should be dismissed pursuant to

Eleventh Amendment sovereign immunity, and that the individual Defendants are entitled to

both absolute immunity and qualified immunity. The issue before the Court is whether Plaintiff's

allegations concerning the administrative enforcement proceedings are appropriate in light of

Defendants’ assertion of various immunities from suit.

II. Legal Standards

A. Motion to Dismiss 12(b)(1) and 12(b)(6)

A district court must dismiss a case when the plaintiff fails to establish subject-matter

jurisdiction. Fed. R. Civ. P. 12(b)(1). “When a Rule 12(b)(1) motion is filed in conjunction with

other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before

addressing any attack on the merits.” Ramming v. United States, 281 F.3d 158, 161 (Sth Cir. 2001).

However, dismissal based on lack of subject-matter jurisdiction does not constitute a determination

of the claim on its merits, and does not prevent a plaintiff from pursuing the claim in a court that

has proper jurisdiction. Jd.

A motion to dismiss is the proper vehicle to assert a claim of absolute immunity. See

Imbler v. Pachtman, 424 U.S. 409, 416 (1976) (prosecutorial immunity); Mowbray v. Cameron

County, 274 F.3d 269, 276, 279 (5th Cir. 2001) (prosecutorial immunity and witness immunity).

The Supreme Court has stated that a defendant properly invoking immunity is entitled to dismissal

even before discovery. Behrens v. Pelletier, 516 U.S. 299, 306 (1996).

Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief may be

granted.” Fed. R. Civ. P. 12(b)(6). “Under the 12(b)(6) standard, all well-pleaded facts are viewed

in the light most favorable to the plaintiff, but plaintiffs must allege facts that support the elements

of the cause of action in order to make out a valid claim.” City of Clinton v. Pilgrim’s Pride Corp.,

632 F.3d 148, 152-53 (5th Cir. 2010). “To survive a Rule 12(b)(6) motion to dismiss, a complaint

‘does not need detailed factual allegations,’ but must provide the plaintiff's grounds for entitlement

to relief—including factual allegations that when assumed to be true ‘raise a right to relief above

the speculative level.’” Cuvillier v. Taylor, 503 F.3d 397, 401 (Sth Cir. 2007) (citing Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a complaint must contain sufficient factual

matter, accepted as true, to ‘state a claim to relief <hat is plausible on its face.’” Ashcroft v. Iqbal,

556 USS. 662, 674 (2009) (quoting Twombly, 550 U.S. at 570).

B. Eleventh Amendment Sovereign Immunity

The Eleventh Amendment to the Unitec. States Constitution has been interpreted to

preclude suit against a state government by citizens of that state unless the state has waived its

immunity or Congress has abrogated the state’s irnmunity. Kimel v. Florida Bd. of Regents, 528

U.S. 62, 73 (2000); Aguilar v. Tex. Dept. of Criminal Justice, 160 F.3d 1052, 1054 (Sth Cir.

1998). This protection extends to state agencies and departments and applies regardless of the

type of relief sought. Pennhurst State Sch. & Hosv. v. Halderman, 465 U.S. 89, 100 (1984); see

also Florida Dept. of Health & Rehabilitative Services v. Florida Nursing Home Assn., 450 U.S.

147 (1981); Ford Motor Co. v. Department of Treasury, 323 U.S. 459 (1945). The Supreme

Court articulated a narrow exception for cases against state officials in their official capacity

seeking injunctive or declaratory relief. Ex parte Young, 209 U.S. 123, 159-160 (1908).

Specifically, individual state defendants—e.g., the director of a state agency—are not subject to

Eleventh Amendment immunity if (i) the individual defendant is sued in his or her “official

capacity,” and (ii) plaintiff seeks only prospective injunctive relief from the individual defendant.

See Aguilar v. Tex. Dep’t of Criminal Justice, 160 F.3d 1052, 1054 (Sth Cir. 1998) (emphasis

added).

C. Absolute Immunity

“A prosecutor is absolutely immune for initiating and pursuing a criminal prosecution,

for actions taken in her role as ‘advocate for the state’ in the courts, or when her conduct is

‘intimately associated with the judicial phase’” of the process. Loupe v. O’Bannon, 824 F.3d

534, 539 (5th Cir. 2016) (citations omitted). [T]he Supreme Court has recognized that executive

branch officials, when participating in a federal administrative agency’s adjudicative process, are

entitled to absolute immunity because they perforn functions comparable to those of judges and

prosecutors. Beck v. Texas State Bd. of Dental Examiners, 204 F.3d 629, 634 (Sth Cir. 2000)

(citing Butz v. Economou, 438 U.S. 478, 512-13 (1978)). The acts of an advocate “in preparing

for the initiation of judicial proceedings or for trial, and which occur in the course of his role as

an advocate for the State, are entitled to the protections of absolute immunity.” Buckley v.

Fitzsimmons, 509 U.S. 259, 273 (1993).

Il. Analysis

A. The Eleventh Amendment bars suit against the state agency and its officials

The Plaintiff sued TABC—a Texas state agency responsible for regulating, inspecting,

and taxing the production, sale, and use of alcoholic beverages within the state—and its officials.

“Absent waiver, neither a State nor agencies actiag under its control may ‘be subject to suit in

federal court.”” Puerto Rico Aqueduct and Sewe. Authority v. Metcalf & Eddy, Inc., 506 U.S.

139, 144 (1993) (quoting Welch v. Texas Dept. of Highways and Public Transportation, 483 U.S.

468, 480 (1987)). Additionally, “Congress has not abrogated state sovereign immunity under 42

US.C. § 1983.” Raj v. Louisiana. Univ., 714 F.3d 322, 328 (Sth Cir. 2013) (citing Quern v.

Jordan, 440 U.S. 332, 342 (1979)) (cleaned up). It is undisputed that TABC is a political

subdivision of the state of Texas and that it has not waived its immunity from this lawsuit. See

Aquinaga v. Tex. Alcohol & Beverage Comm’n, 98 F. App’x 328, 330 (Sth Cir. 2004).

Accordingly, TABC is immune from suit in this Court under the Eleventh Amendment.

Therefore, as to Plaintiff's 42 U.S.C. § 1983 claims against TABC, the Court finds it lacks

subject-matter jurisdiction under Fed. R. Civ. P. 12(b)(1) because claims against TABC are

barred by Eleventh Amendment sovereign immunity.'! Similarly, to the extent that Plaintiff

brought claims against TABC officials in their official capacity, they too are entitled to sovereign

immunity from suit for damages under the Eleventh Amendment.

Additionally, Plaintiff alleged declarato-y and injunctive relief against the TABC

officials in their official capacity. “A private party may sue individual state officers in federal

court to obtain prospective relief from an ongoing violation of federal law.” AT&T Comme 'ns v.

BellSouth Telecommunications Inc., 238 F.3d 636, 647 (Sth Cir. 2001) (citations omitted)

(emphasis added). However, retrospective relief serving “compensatory or deterrence interests

are insufficient to overcome the dictates of the Eleventh Amendment.” Green v. Mansour, 474

U.S. 64, 68 (1985). Plaintiff failed to allege a continuing violation of federal law which is

' Plaintiff states that it did not bring claims against TABC as an entity, just against its officials.

Doc. #28 at 12. However, to the extent Plaintiff made allegations against TABC, those

allegations against both TABC and its officials in their official capacity are barred by the

Eleventh Amendment.

necessary to avoid the immunity to which state officials are entitled under the Eleventh

Amendment. Here, all that Plaintiff seeks is compensation for the enforcement proceedings and

deterrence against TABC from initiating enforcement proceedings like those initiated against

Plaintiff. While the effects to plaintiff may be ongoing, they flow from a single, allegedly

defective administrative hearing in the past, which will not be repeated. The relief requested is

injunctive in nature, in that Plaintiff seeks a court order to correct past alleged deficiencies. The

requested relief, however, is not prospective in effect, and, therefore, Plaintiff's challenge is

barred by Eleventh Amendment immunity.”

Accordingly, because the Court finds that. the claims against TABC and its officials in

their official capacity are barred by Eleventh Amendment sovereign immunity, the Court lacks

subject-matter jurisdiction over such claims under Fed. R. Civ. P. 12(b)(1).

B. Claims against Defendants in their individual capacity

All of Plaintiff's allegations surround the actions taken by TABC officials during the

administrative enforcement action brought by TABC against Plaintiff. Plaintiff's claims involve

the prosecutorial conduct of Defendants Helm, Kennison, and Cherry and the testimony provided

by Defendant Jones.

? Plaintiff also invoked the so-called ultra vires exception to the immunity of TABC officials.

Doc. #3 at 40-41. An ultra vires action is one in which the plaintiff seeks “relief in an official-

capacity suit against a government actor who allegedly has violated statutory or constitutional

provisions by acting without legal authority or by failing to perform a purely ministerial act.”

Lazarides v. Farris, 367 S.W.3d 788, 801 (Tex. App.—Houston [14th Dist.] 2012, no pet.)

(citing City of El Paso v. Heinrich, 284 S.W.3d 366, 372-73 (Tex. 2009)). Governmental

immunity does not bar such ultra vires claims, but the only remedies available to a successful

plaintiff are prospective declaratory and injunctive relief. Heinrich, 284 S.W.3d at 376, 380; see

Lowell v. City of Baytown, 356 S.W.3d 499, 501 (Tex. 2011) (explaining “retrospective

monetary remedies are generally barred by gove:nmental immunity”). Plaintiff seeks damages

and not prospective injunctive or declaratory relizf, in this case; thus, the ultra vires exception

does not apply. Accordingly, Plaintiff's ultra vires allegation is dismissed.

Plaintiff's claims against Defendants Helrn, Kennison, and Cherry fail because they are

absolutely immune in their individual capacity from suit on claims arising out of their

involvement as attorneys that initiated the administrative enforcement actions against Plaintiff

and wherein they represented TABC. See Modelist v. Hernandez, 482 F. App’x 971 (Sth Cir.

2012) (citations omitted) (“The lawyer defendants are also absolutely immune because they were

performing ‘functions analogous to those of a pzosecutor.’”). Courts in the Fifth Circuit have

found that those involved as attorneys representing administrative agencies like the Texas

Medical Board and the Texas State Board of Dental Examiners are absolutely immune in their

individual capacity from suits involving administrative proceedings that they were involved in

prosecuting. See e.g. Beck v. Tex. State Bd. of Dental Exam’rs, 204 F.3d 629, 634 (Sth Cir.

2000); see also Simmons v. Jackson, No. 3:15-CV-01700-S-BT, 2018 WL 7021485, at *3 (N.D.

Tex. Dec. 21, 2018), report and recommendation adopted, No. 3:15-CV-01700-S-BT, 2019 WL

186654 (N.D. Tex. Jan. 14, 2019).

The TABC officials listed as Defendants .n this case were working as executive branch

officials of the state of Texas involved in an administrative adjudicative process performing

functions similar to those of prosecutors. All of Plaintiff's claims against the Defendants arise

out of their role as attorneys in the prosecution TABC’s case against Plaintiff. As the Fifth

Circuit has recognized, a prosecutor is absolutely immune when “she acts in her role as an

advocate for the state by initiating and pursuing prosecution,” or “her conduct is ‘intimately

associated with the judicial phase of the criminal process.’” Beck, 204 F.3d at 637 (citing Burns

v. Reed, 500 U.S. 478, 491-92 (1991)). Plaintiff's claims against Defendants Helm, Kennison,

and Cherry fail due to Defendants’ entitlement to absolute immunity, therefore Plaintiff's claims

should be dismissed with prejudice. See Boyd 1. Biggers, 31 F.3d 279, 285 (Sth Cir. 1994)

(holding that a dismissal based on absolute immur.ity was properly dismissed with prejudice).

Furthermore, Plaintiff alleges that Defendant Jones gave inaccurate testimony at the

administrative enforcement proceeding. However, absolute immunity extends to a witness for his

or her testimony at trial. See Castellano v. Fragozo, 352 F.3d 939, 958 (5th Cir. 2003) (stating

“the well-established rule that prosecutors and witnesses, including police officers, have absolute

immunity for their testimony at trial.”). “Absolute immunity to a witness against claims arising

from testimony applies with equal force in both trial and adversarial pretrial settings.” Moore v.

McDonald, 30 F.3d 616, 619 (Sth Cir. 1994). Accordingly, Plaintiff's claims against Defendant

Jones in his individual capacity are also properly Cismissed based upon absolute immunity.’

C. Sherman Antitrust claims

Plaintiff alleges that Defendants engaged in anticompetitive conduct when Defendants

refused to issue new permits to Plaintiff and soug.it cancellation of Plaintiff's permits during the

administrative enforcement action. Plaintiff's complaints concern how TABC officials enforced

the very state laws that they are tasked to enforce. The Sherman Antitrust Act confers immunity

on the States’ own anticompetitive policies “out of respect for federalism” and “confer[s]

immunity on anticompetitive conduct by the States when acting in their sovereign capacity.” N.

Carolina State Bd. of Dental Examiners v. F.T.C., 574 U.S. 494, 503 (2015) (citing Parker v.

Brown, 317 U.S. 341, 350-51 (1943)). TABC is a sovereign entity controlled by the state of

Texas. Here, the Plaintiff complains of actions taken by TABC officials in their sovereign

capacity while enforcing the States’ own laws and policies. Accordingly, Defendants are immune

from Plaintiff's Sherman Antitrust claims.

> Because the Court finds that Defendants are enitled to absolute immunity, the Court will not

analyze the applicability of qualified immunity.

D. State law claims

When a “district court has dismissed all claims over which it has original jurisdiction” it

may decline supplemental jurisdiction over state law claims. 28 U.S.C. § 1367(c)(3). Because the

Court finds that the claims against Defendants in their official capacity are barred by Eleventh

Amendment sovereign immunity and the claims against the Defendants in their individual

capacity are dismissed based upon absolute immunity, the Court declines to exercise

supplemental jurisdiction over Plaintiff's state law malicious prosecution claims. Accordingly,

Plaintiff's malicious prosecution claims are dismissed without prejudice.

IV. Conclusion

For the foregoing reasons, Defendants’ Motion to Dismiss (Doc. #12) is GRANTED. All

claims alleged against TABC and its officials in “heir official capacity are hereby DISMISSED

without prejudice for lack of subject-matter jurisdiction. Additionally, Plaintiff's state law

malicious prosecution claims are DISMISSED without prejudice. Furthermore, all claims against

all Defendants in their individual capacity are hereby DISMISSED with prejudice due to

Defendants’ absolute immunity from suit.

It is so ORDERED.

AUG 28 2019

Date The donorable Alffed H. Bennett

United States Distiict Judge

10