Brown v. Nationsbank Corp.

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 97-41214

DALE A. BROWN; ET AL

Plaintiffs,

DALE A. BROWN; R. SCOTT SATTERWHITE;

ANTHONY P. HODGSON

Plaintiffs-Appellants,

VERSUS

NATIONSBANK CORPORATION; ET AL

Defendants,

NATIONSBANK CORPORATION; JODIE JONES; CONN & COMPANY;

SOUTHERN TECHNOLOGIES DIVERSIFIED, L.P.; HAL FRANCIS, also

known as John Clifford; JOSEPH CARROLL, also known as Joe Carson;

HILTON HOTELS; LEISURE HOSPITALITY MANAGEMENT COMPANY doing

business as Sheraton Hotel-Astrodome; UNITED STATES OF AMERICA

Defendants-Appellees.

Appeal from the United States District Court

for the Southern District of Texas

September 8, 1999

Before DAVIS, STEWART, and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Dale A. Brown, R. Scott Satterwhite, and Anthony P. Hodgson

brought claims against the United States, federal agents, and

1

private businesses who assisted federal agents in an undercover

operation designed to detect contract procurement fraud in the

space industry. The district court dismissed all claims against

the government, federal agents, and private defendants. Brown,

Satterwhite, and Hodgson appeal. We AFFIRM.

I. FACTS

Dale A. Brown, R. Scott Satterwhite, and Anthony P. Hodgson

(“Appellants”) owned and operated two respected and successful

Houston-based corporations called TerraSpace, Inc. and TerraSpace

Technology, Inc. The companies provided high-tech engineering and

management services to the private and government sectors.

TerraSpace, Inc. received several engineering and management

contracts for services to the private sector. TerraSpace

Technology was successful in securing engineering and software

development contracts with aerospace firms and were awarded a

multi-million dollar Space Shuttle software development contract.

In the Fall of 1991, the Federal Bureau of Investigation began

a sting operation, called Operation Lightning Strike, designed to

uncover contract procurement fraud and other illegal activity

committed in the aerospace community. The undercover operation

targeted employees of the National Aeronautic and Space

Administration and aerospace contractors doing business with NASA.

Both the NASA Office of the Inspector General (“OIG”) and the

Defense Contractor Investigative Service (“DCIS”) participated in

2

the sting.

In May, 1992, FBI Special Agent James H. Francis, posing as a

wealthy investor named John Clifford, initiated contact with

Appellants Brown, Satterwhite, and Hodgson. Clifford told

Appellants that he owned a Maryland-based company called Eastern

Tech Manufacturing Company (“ETMC”) and that he wanted to find a

Houston-based aerospace firm to form a partnership with ETMC in

order to gain contracts with NASA and its contractors. Appellants

were not targets of the sting operation, but were selected by the

FBI as entities that could be used in order to gain access to the

aerospace community. Appellants were unaware that they and their

companies were being set up by the FBI as tools of deception in an

undercover operation.

Clifford represented to Appellants that he wanted to develop

a miniature medical device, a “lithotripter,” that astronauts could

use to pulverize kidney stones while in space. Clifford suggested

that his company, ETMC, would provide technology and facilities for

the development of the lithotripter. Further, Clifford contended

that the device would be developed into a multi-tissue ultrasonic

imaging system.

In July 1992, as the plans for the lithotripter developed,

Clifford offered Brown a job as the Chief Financial Officer and

Vice-President of Marketing of another company ostensibly owned by

Clifford, called Space, Inc. As the Vice-President, Brown was

offered a monthly salary of $5,000.00 plus expenses. Brown was to

3

receive his salary through yet another one of Clifford's

illusionary companies, Southern Technologies Diversified, L.P.

(“STD”). Clifford directed Brown to perform a number of activities

for Space, Inc. From August of 1992 to March of 1993, Brown made

numerous presentations as the Chief Financial Officer and Vice-

President of Marketing of Space and he spent time merging financial

summaries of Clifford's businesses with Space. To further gain

Appellants’ confidence and trust, Clifford promised to lend them

millions in venture capital for their companies.

As the Operation developed, the FBI enlisted the assistance of

several private companies to legitimize and lend credibility to its

fictitious business enterprises. During the summer of 1992,

Nationsbank provided financial information via telephone to Brown's

business associate, Neil Jackson, about Clifford and Clifford's

business partner, Joe Carson (FBI agent Joseph Carroll).

Nationsbank informed Jackson that Clifford and Carson had accounts

with Nationsbank totaling one hundred thirty (130) million dollars

and a one million dollar line of credit. In June and July, 1992,

Dun & Bradstreet provided favorable information via telephone and

fax about the FBI’s front company, STD. In July, 1992, Conn &

Company also provided favorable financial information via telephone

regarding STD.

By October, 1992, the Operation had developed its facilities

for the production of the lithotripters. Larry Seiler, a Vice-

President of ETMC, flew Brown to Columbia, Maryland to view ETMC’s

4

facilities and to learn about the manufacture of lithotripters. At

this time, ETMC persuaded Brown that it had the capability to

develop a product called the Printed Wiring Assembly Robotic

Tinning System (“PWARTS”), for which it represented it intended to

negotiate a future contract with the Tobyhanna U.S. Army base. In

the following months, ETMC represented, via fax and telephone,

various plans to develop other devices such as a digital pager,

infrared sensors, and mine detectors.

In 1992 and 1993, Appellants worked hundreds of hours and

spent large amounts of money bidding on projects. Appellants also

introduced Clifford to managers at NASA and aerospace companies,

including Rockwell, Lockheed, IBM, Loral, Boeing, General Electric,

McDonnell Douglas, Martin Marietta, and others. Ultimately, Space

submitted several successful bids on contracts.

In December, 1992, Clifford and Carson offered Brown an

opportunity to develop a multi-million dollar hotel and dive resort

in the Bahamas, called “The Isle of Gold.” Persuading Brown to

leave his job in the aerospace industry, Clifford and Carson

promised him a large salary, excellent fringe benefits, and a

personal plane. Because of this opportunity, Brown dissolved his

business relationship with Satterwhite and Hodgson and made

extensive arrangements to leave the country and sell his home.

On February, 26, 1993, Clifford told Jackson, Brown's

associate, that a procurement officer from the U.S. Army's

Tobyhanna base would be arriving in Houston. Clifford directed

5

Jackson to “entertain” the procurement officer and told Jackson to

enlist Brown's assistance. On March 4, 1993, Brown and Jackson

went to the Hilton Hotel at Hobby Airport in Houston. In the

parking lot, Jackson provided Brown with a sealed envelope

containing “entertainment funds,” and told Brown to deliver the

envelope to the procurement officer's hotel room. As Brown

delivered the envelope to a man in the hotel, the FBI recorded the

transaction, using audio and visual recording equipment in the

room.

Six months later, on August 4, 1993, Brown learned that there

was no miniature lithotripter device and that Clifford and Carson

were government undercover agents. Attempting to convince Brown to

work as an unpaid undercover informant to set up stings, the FBI

agents physically and psychologically intimidated Brown. On

numerous occasions throughout August and September, 1993, the

agents questioned Brown for multiple hours without the presence of

an attorney and detained him against his will. Brown was

threatened with prosecution of twenty-one different crimes, which

could result in sixty years imprisonment and over a million dollars

in fines. The FBI agents also questioned Satterwhite on at least

one occasion for approximately two hours.

In May, 1994, the FBI abandoned Operation Lightning Strike.

A few months later, in August 1994, a federal grand jury indicted

Brown for one count of offering a $500 bribe to a public official.

The first trial resulted in a mistrial. The United States declined

6

to retry the case and later dismissed the indictment against Brown.

II. PROCEEDINGS

On January 6, 1996, Appellants presented claims to the FBI,

the OIG, and the DCIS for injuries suffered from the undercover

operation. On February 22, 1996, Appellants brought this suit in

the United States District Court for the Southern District of

Texas.

A. Claims

Appellants made claims against the United States, through the

actions of the FBI, OIG, and DCIS agents, under the Federal Torts

Claim Act (“FTCA”) for abuse of process, malicious prosecution,

assault, intentional infliction of emotional distress, false

imprisonment, and invasion of privacy.

Appellants made Bivens1 claims against FBI agents Francis,

Carroll, Jean Barrett Yetman, Michelle Wyckoff, and Sheila Chadwick

for due process and Fifth Amendment violations.

Appellants also alleged violations of the federal Racketeering

and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961-1968, by

Nationsbank, Conn & Company, Dun & Bradstreet, Southern

Technologies Diversified, Eastern Tech Manufacturing Corporation,

various employees of these private businesses, and FBI agents

Carroll, Francis, and Yetman.

1

Bivens v. Six Unknown Named Agents of Federal Bureau of

Narcotics, 403 U.S. 388 (1971).

7

Finally, Appellants brought state law claims for: civil

conspiracy against ETMC, Nationsbank, Dun & Bradstreet, Conn &

Company, Hilton Hotels Corporation, various employees of the

private companies and FBI agents Carroll, Francis, and Yetman;

invasion of privacy claims against Hilton Hotels and Leisure

Hospitality Management Company doing business as Sheraton Hotel-

Astrodome; and interference with economic advantage and benefit,

intentional infliction of emotional distress, and fraud and deceit

claims against all defendants.

B. District Court Decision

The defendants filed, and the district court granted, Motions

to Dismiss the Appellants’ claims. The district court ruled that

the claims for abuse of process and malicious prosecution were

barred by the discretionary function exception to the FTCA. The

district court ruled that the Appellants' FTCA claims for false

imprisonment, assault, intentional infliction of emotional

distress, and invasion of privacy were barred by the statute of

limitations, as were the Appellants' Bivens claims. The district

court then found that the Appellants' RICO claims should be

dismissed because the Appellees were protected by qualified

immunity. Finally, the district court ruled that the Appellants'

state tort claims should be dismissed because they were barred by

the principle of federal supremacy.

III. DISCUSSION

8

A. Standard of Review

The district court granted the Appellees’ Motions to Dismiss

pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).

We review the district court's dismissal of a complaint for failure

to state a claim for which relief can be granted under FED. R. CIV.

P. 12(b)(6) de novo. See Lowrey v. Texas A & M University System,

117 F.3d 242, 246 (5th Cir. 1997). The complaint must be liberally

construed in favor of the plaintiff, and all the facts pleaded in

the complaint must be taken as true. See Campbell v. Wells Fargo

Bank, N.A., 781 F.2d 440, 442 (5th Cir. 1986). The district court

may not dismiss a complaint under rule 12(b)(6) “unless it appears

beyond doubt that the plaintiff can prove no set of facts in

support of his claim which would entitle him to relief.” Conley v.

Gibson, 355 U.S. 41, 45-46 (1957). This standard of review under

rule 12(b)(6) has been summarized as follows: “The question

therefore is whether, in the light most favorable to the plaintiff

and with every doubt resolved in his behalf, the complaint states

any valid claim for relief.” 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER,

FEDERAL PRACTICE AND PROCEDURE § 1357, at 601 (1969).

B. Abuse of Process and Malicious Prosecution Claims

Appellants argue that the district court erred when it

dismissed their abuse of process and malicious prosecution claims

under the discretionary function exception to the FTCA. The

government urges us to affirm on the alternative ground that, as a

9

matter of law, Appellants failed to state malicious prosecution and

abuse of process claims. See Gulf Island, IV v. Blue Streak

Marine, Inc., 940 F.2d 948, 952 (5th Cir. 1991)(In reviewing the

district court’s order, the appellate court can affirm on any

ground presented to the district court, even though it may not have

formed the basis for that court’s decision.)

1. Malicious Prosecution

The FTCA applies state law to determine the government’s

liability for torts within the FTCA waiver of immunity. See 28

U.S.C. §§ 1346(b), 2674. Under Texas law, there are seven elements

for a malicious prosecution claim: (1) commencement of a criminal

prosecution against the plaintiff; (2) causation (initiation or

procurement) of the action by the defendant; (3) termination of the

prosecution in the plaintiff’s favor; (4) the plaintiff’s

innocence; (5) the absence of probable cause for the proceedings;

(6) malice in filing the charge; and (7) damage to the plaintiff.

See Richey v. Brookshire Grocery Co., 952 S.W.2d 515, 517 (Tex.

1997). The government asserts, and we agree, that Appellants

cannot meet the fifth criterion, absence of probable cause.

Brown was indicted for bribing a public official in violation

of 18 U.S.C. § 201(b)(1)(A)& (C), which provides:

(b) Whoever (1) directly or indirectly, corruptly gives

. . . anything of value to any public official . . . with

intent

(A) to influence any official act; or

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(B) to induce such public official . . . to commit or aid

in committing, or collude in, or allow, any fraud, or

make opportunity for the commission of any fraud, on the

United States;

shall be [subject to criminal liability].

Probable cause is defined as “the existence of such facts and

circumstances as would excite belief in a reasonable mind, acting

on the facts within the knowledge of the prosecutor [complainant],

that the person charged was guilty of the crime for which he was

prosecuted.” Richey, 952 S.W.2d at 517 (citation omitted) (editing

original). If the facts necessary to instigate a criminal

prosecution are in dispute, the issue of probable cause is a mixed

question of law and fact to be resolved by a jury. Where the facts

underlying the decision to prosecute are not disputed, however,

then the question of probable cause is a question of law decided by

the court. See Richey, 952 S.W.2d at 518.

It is undisputed that Brown accepted and delivered an envelope

containing money to a United States Army procurement officer at his

hotel room. The only dispute concerns Brown’s mens rea – what he

knew or intended. “[T]he complainant’s failure to make a further

investigation into the suspect’s state of mind does not constitute

lack of probable cause if all objective elements of a crime

reasonably appear to have been completed.” Id. at 518. Even

though the government’s evidence might have been weak and the

prospects of obtaining a conviction may not have been good, as a

matter of law, the government has proffered proof of probable

11

cause, and thus, Appellants have failed to state a claim for

malicious prosecution.

2. Abuse of Process

Under Texas law, there are three elements for an abuse of

process claim: “(1) that the defendant made an illegal, improper or

perverted use of the process, a use neither warranted nor

authorized by the process; (2) that the defendant had an ulterior

motive or purpose in exercising such illegal, perverted or improper

use of the process; and (3) that damage resulted to the plaintiff

as a result of such illegal act.” Sierra Club, Lone Star Chapter

v. Cedar Point Oil Co. Inc., 73 F.3d 546, 577 (5th Cir. 1996).

Appellants' allegations are fatally defective because they

fail to allege use of the process other than the mere institution

of the criminal complaint, which was not improper. See In re

Burzynski, 989 F.2d 733, 739 (5th Cir. 1993). Thus, as a matter of

law, Appellants have failed to state a claim for abuse of process

upon which relief can be granted.

C. RICO Claims

Appellants argue that the district court erred in dismissing

their RICO claims against the government agents and private

defendants on the basis of qualified immunity. Government

officials performing discretionary functions are shielded from

“liability for civil damages insofar as their conduct does not

violate ‘clearly established’ statutory or constitutional rights of

12

which a reasonable person would have known.” Harlow v. Fitzgerald,

457 U.S. 800, 818 (1982). The district court determined that

defendants were entitled to qualified immunity from the RICO claims

because the Plaintiffs cannot show a violation of statutory rights

secured by RICO. Specifically, the district court reasoned that

“[t]he FBI agents are not liable for RICO violations in the

performance of their duties because there can be no RICO claim

against federal officials on account of their alleged official

misconduct,” citing McNeily v. United States, 6 F.3d 343, 350 (5th

Cir. 1993). The district court misconstrued our holding in

McNeily, which held that the FDIC cannot be sued under the RICO

statute because the FDIC, as a federal agency, is not chargeable,

indictable or punishable for violations of state and federal

criminal provisions. See id., relying on Berger v. Pierce, 933

F.2d 393, 397 (6th Cir. 1991). Had the Plaintiffs named the FBI as

a defendant to this suit, the district court would have been on

firm ground in dismissing RICO claims against that federal agency

based on McNeily. However, McNeily does not support the grant of

qualified immunity to the FBI agents or to the private individuals

who acted at the direction of those agents. However, if the

defendants are entitled to qualified immunity on some alternative

ground, we will affirm the district court’s dismissal. See Gulf

Island IV, 940 F.2d at 952.

In assessing a claim of qualified immunity, we must determine

13

whether: (1) the plaintiffs have asserted a constitutional or

statutory violation; (2) the law regarding the alleged violation

was clearly established at the time of the operative events; and

(3) the record shows that the violation occurred, or at least gives

rise to “a genuine issue of material fact as to whether the

defendant actually engaged in conduct that violated the clearly-

established law.” Kerr v. Lyford, 171 F.3d 330, 338 (5th Cir.

1999). If we determine that the official’s conduct violated

clearly established law, we address whether that conduct was

objectively reasonable. See Wren v. Towe, 130 F.3d 1154, 1159 (5th

Cir. 1997).

The Racketeering and Corrupt Organizations Act (“RICO”) imposes

criminal and civil liability upon those who engage in “a pattern of

racketeering activity” defined as “any act or threat involving”

specified state-law crimes, acts indictable under various specified

federal statutes, and other federal offenses. See 18 U.S.C. §

1961(1). Section 1964(c) allows a private party who has been

sustained damages from a RICO violation, to recover those damages.

See 18 U.S.C. § 1964(c). Appellants’ complaint alleges that the

Government and private defendants’ racketeering activities included

mail and wire fraud, which are included among the enumerated

predicate acts for a RICO claim. See 18 U.S.C. § 1961(1).

We are not persuaded that the Appellants have asserted a

violation of statutory rights which were clearly established at the

14

time of the events. In McNally v. United States, 483 U.S. 350

(1987), the Supreme Court held that the mail fraud statute did not

prohibit schemes that defrauded people of their intangible rights

to an honest and impartial government. Following McNally, Congress

enacted 18 U.S.C. § 1346,2 which, in one sentence, provided that

“[f]or the purposes of this chapter, the term ‘scheme or artifice

to defraud’ includes a scheme or artifice to deprive another of the

intangible right of honest services.” In 1997, the Fifth Circuit,

sitting en banc, held that, by enacting § 1346, Congress intended

to protect the intangible right of honest services from wire fraud

schemes by state actors. See United States v. Brumley, 116 F.3d

728, 733 (5th Cir. 1997) (“fraud statutes cover the deprivation of

intangible rights.”). However, prior to the en banc resolution of

Brumley, we cannot say that such rights were clearly established by

the enactment of § 1346. See id. at 736 (dissent)(“It is therefore

incomprehensible to us that the majority can conclude . . . that [§

1346] reflects a clear statement of a Congressional intention to

protect the citizenry of a state from corrupt state officials.”).

Because the rights asserted by Appellants were not clearly

established at the time of defendants’ alleged acts, we conclude

that the district court did not err in dismissing Appellants’ RICO

claims.

2

Added by Pub.L. 100-690, Title VII, § 7603(a), Nov. 18,

1988, 102 Stat. 4508.

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D. Supremacy Clause and State Law Claims

Appellants brought state law claims for civil conspiracy,

invasion of privacy, interference with economic advantage and

benefit, intentional infliction of emotional distress,3 and fraud

and deceit. Appellants contend that the district court erred when

it dismissed the Appellants’ state law claims on the ground that

they were barred by the federal supremacy clause.4

1. Government Agents

The individual agents’ immunity from suit under Texas law is

not at issue. The Attorney General certified under 28 U.S.C. §

2679(d)(1) that the agents acted within the scope of their

employment at the time of the events at issue, thereby substituting

the United States as defendant on those claims, see Gutierrez de

Martinez v. Lamagno, 515 U.S. 417, 420 (1995). This procedure is

not challenged.

2. Private Defendants

The district court also dismissed Appellants’ state law claims

against the private defendants under the federal supremacy clause.

3

Appellants brought two separate claims for intentional

infliction of emotional distress. The claims brought pursuant to

Texas state law are addressed here. The causes of action seeking

relief under the Federal Tort Claims Act are discussed below.

4

It is not clear from the record before us, and we do not

reach the question, whether Appellants’ state law claims are

governed by the Texas two year statute of limitations, TEX. CIV.

PRAC. & REM. CODE ANN. § 16.003 or the four year statute of

limitations, TEX. CIV. PRAC. & REM. CODE ANN. § 16.004. See Williams

v. Khalaf, 802 S.W.2d 651, 658 (Tex. 1990).

16

While this Court has not addressed the issue of whether the

supremacy clause preempts state law tort claims against private

defendants acting at the direction of the federal government, there

is some precedent to guide us.

In Boyle v. United Technologies Corp., 487 U.S. 500 (1988),

the Supreme Court considered the issue of whether the supremacy

clause preempted state law liability of independent contractors

performing work for the federal government. Under Boyle, state law

may be preempted where: (1) there is a uniquely federal interest

and (2) there is a significant conflict between federal policy and

the operation of state law. See Boyle, 487 U.S. at 504-05, 507.

The liability of private defendants for actions taken at the

direction of agents acting within their authority is a unique

federal interest. Private businesses and individuals provide

invaluable assistance as informants who provide evidence against

law violators or, as in this instance, lend credibility to FBI

undercover operations. If private businesses were not eligible for

immunity from state law claims arising from assisting undercover

federal operations, this would provide a major disincentive to

assisting law enforcement and would undermine the needs and

interests of the federal government.

At issue then, is whether the federal policy conflicts with

the operation of state law. If the private defendants committed

what would have been illegal acts under state law at the direction

17

and control of agents acting within their authority, the operation

of state law would conflict with federal policy. In Hunter v.

Wood, 209 U.S. 205 (1908), where state law conflicted with a

federal court order, the Court precluded a state law prosecution of

a railroad clerk who sold tickets pursuant to that order.

Similarly, this Court has suggested that federal immunity privilege

should be extended to preclude an action against a telephone

company who assisted federal law enforcement agents with

wiretapping. See Fowler v. Southern Bell Telephone & Telegraph

Co., 343 F.2d 150, 156-57 (5th Cir. 1965). See also Connecticut v.

Marra, 528 F. Supp. 381 (D. Conn. 1981) (holding that defendant

working at direction of FBI was entitled to federal immunity from

state law prosecution). State law cannot operate to impede

individuals who have government authority and act as is necessary

and proper within that authority. See, e.g., Cunningham v. Neagle,

135 U.S. 1, 75 (1890).

If the private defendants acted in good faith by reasonably

relying upon the authority of government agents, their actions are

shielded from state law action. In this case, the private

defendants, in good faith, supported the FBI’s undercover operation

with credibility and legitimacy. There has been no suggestion that

the private defendants acted maliciously or attempted to derive

personal gain from assisting in the operation. Moreover, the

private defendants’ actions, consistent with the apparent authority

18

granted by the government agents, were objectively reasonable.

Under the veil of apparent authority, the private defendants had no

reason to believe that their actions were illegal or would cause

injury to the Appellants. Thus, Appellants’ state law claims

against the private defendants are barred by the supremacy clause.

E. FTCA and Bivens Claims: Statute of Limitations

Appellants argue that the district court erred in finding that

their FTCA causes of action and Bivens claims were barred by the

statute of limitations. We affirm the district court’s ruling as

to Brown and Satterwhite. Although we conclude that the district

court erred in holding that Hodgson’s Bivens claims are time

barred, we nevertheless affirm the dismissal of those claims on the

basis of qualified immunity.

1. FTCA Claims

The FTCA applies a two-year statute of limitations from the

accrual date of the cause of action. See 28 U.S.C. § 2401(b). A

cause of action accrues, under federal law, “when the plaintiff

knows or has reason to know of the injury which is the basis of the

action.” See Moore v. McDonald, 30 F.3d 616, 620-21 (5th Cir.

1994). The plaintiff's knowledge of the injury depends on two

elements: (1) the existence of the injury; and (2) the connection

between the injury and the defendant's actions. See Piotrowski v.

City of Houston, 51 F.3d 512, 516 (5th Cir. 1995).

After carefully reviewing the Appellants’ Second Amended

19

Complaint, we conclude that their claims for assault, false

imprisonment, intentional infliction of emotional distress, and

invasion of privacy are barred by the statute of limitations. They

rest on allegations of events that occurred in August and September

1993. Appellants presented their claims on January 8, 1996 and

January 10, 1996. Because the claims were presented more than two-

years after the events giving rise to the complaint, the district

court was correct in dismissing them.

2. Bivens Claims

We also hold that Brown and Satterwhite’s Bivens claims for

due process and Fifth Amendment violations are barred by the

statute of limitations. Under Bivens, a person may sue a federal

agent for money damages when the federal agent has allegedly

violated that person's constitutional rights. See Bivens v. Six

Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388

(1971). A Bivens action is controlled by the applicable state

statute of limitations. See Alford v. United States, 693 F.2d 498,

499 (5th Cir. 1982) (per curiam). This Court, applying Texas law,

has held that the statute of limitations period on a Bivens claim

is two years. See Pena v. United States, 157 F.3d 984, 987 (5th

Cir. 1998). Brown became aware that he had been injured by the

Defendants’ alleged violation of his constitutional rights on

August 10, 1993, when the FBI agents revealed to him that he had

been expending his time and energy furthering the deceptions of

20

Operation Lightning Strike, rather than his own business interests.

Likewise, the pleadings allege that the FBI revealed the undercover

scheme to Plaintiff Satterwhite on August 20, 1993. However, we

find nothing in the record that establishes when Plaintiff Hodgson

was made privy to this information. We therefore affirm the

district court’s holding that Brown and Satterwhite’s Bivens claims

are barred by Texas’ two-year statute of limitations, but find that

we are unable to affirm the district court’s dismissal of Hodgson’s

Bivens claims on statute of limitations grounds.

3. Qualified immunity

Although neither the pleadings, the district court’s order nor

the briefs develop the analysis, it is obvious that defendants have

a qualified immunity defense to the Bivens claims. Therefore, in

the interest of judicial economy, we affirm the dismissal of

Hodgson’s Bivens claims on that alternative ground. See Gulf

Island, IV, 940 F.2d at 952.

“Governmental officials performing discretionary functions are

shielded from liability for civil damages insofar as their conduct

[does] not violate clearly established statutory or constitutional

rights of which a reasonable person would have known.” Wyatt v.

Cole, 504 U.S. 158, 166 (1992). Hodgson’s Bivens claims are

bottomed on defendants’ alleged violations of his constitutional

21

due process rights.5

No court has addressed the particular issue presented by this

case: the specific limits on federal agents’ authority in

undercover operations. The district court found no limits on the

power of federal agents operating under cover, reasoning that if

Appellants are allowed to pursue state law causes of action it

would “effectively stop” federal undercover operations because, “by

their very nature [they] seek to invade the privacy of those who

violate the law.” The district court went on to hold, without

citation to authority, that “[t]he constitutional structure of our

federal system does not permit private litigants to police federal

law enforcement activities by asserting state law claims against

federal law enforcement agencies or their agents.” The district

court erred: it asked the wrong question and reached the wrong

conclusion.

The district court should have asked whether it was

constitutionally permissible for federal agents to inflict damages

on innocent non-targets6 during an undercover operation and refuse

them compensation. Because the Fifth Amendment due process

guarantee against conscience-shocking injury imposes clear limits

5

Brown and Satterwhite brought additional Bivens claims

based on violations of their rights to remain silent and to

consult with an attorney during their encounters with agents.

Hodgson makes no allegation that he suffered similar violations.

6

We emphasize at the outset that the legitimacy of the

operation vis-a-vis those who violate the law, i.e. the targets

of Operation Lightning Strike, is not at issue in this analysis.

22

on law enforcement conduct, we conclude that it was neither

necessary nor proper for the defendants in this case to destroy the

lives and businesses of innocent non-targets in the name of law

enforcement.

“The touchstone of due process is protection of the individual

against arbitrary action of government.” Wolff v. McDonnell, 418

U.S. 539 (1974). The Due Process Clause was intended to prevent

government officials from abusing their power or employing it as an

instrument of oppression. See Collins v. City of Harker Heights,

Tex., 503 U.S. 115, 126 (1992). The cognizable level of executive

abuse of power is that which “shocks the conscience,” violates the

“decencies of civilized conduct” or interferes with rights

“implicit in the concept of ordered liberty.” Rochin v.

California, 342 U.S. 165, 209-210 (1952). Obviously, this

guarantee of due process protects citizens against deliberate harm

from government officials. See Daniels v. Williams, 474 U.S. 327,

331 (1986). Allegations of lesser culpability have been held

adequate to state a claim in some circumstances. For example,

deliberate indifference suffices to impose due process liability

when government actors fail to provide adequate care for pretrial

detainees with serious medical needs. See Hare v. City of Corinth,

74 F.3d 633 (5th Cir. 1996)(en banc). However, harm inflicted due

to government actors’ simple negligence is categorically beneath

the threshold of constitutional due process. See Daniels, 474 U.S.

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at 328.

The Supreme Court recently provided a road map for navigating

mid-level-culpability due process claims. In County of Sacramento

v. Lewis, 523 U.S. 833 (1998), parents of a motorcycle passenger

killed in a high-speed police chase brought a 42 U.S.C. § 1983

action against the officer and governmental agencies involved,

alleging deprivation of their decedent’s substantive due process

right to life. Lewis, 118 S. Ct. 1708, 1712. The Supreme Court

rejected the plaintiff’s contention that proof of deliberate

indifference by the officer would be sufficient to establish a due

process violation. Id. at 1711. “A police officer deciding

whether to give chase must balance on one hand the need to stop a

suspect and show that flight from the law is no way to freedom,

and, on the other, the high-speed threat to everyone within

stopping range, be they suspects, their passengers, other drivers

or bystanders.” Id. at 1720. Analogizing the circumstances of a

police chase to the situation of officers called on to quell a

prison riot, the Supreme Court held that “‘[a] deliberate

indifference standard does not adequately capture the importance of

such competing obligations, or convey the appropriate hesitancy to

critique in hindsight decisions necessarily made in haste, under

pressure, and frequently without the luxury of a second chance.’”

Id. at 1720, quoting Whitley v. Albers, 475 U.S. 312, 320 (1986).

The court went on to distinguish situations where mid-level fault

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was sufficient to impose liability. For example, liability for

deliberate indifference to inmate welfare rests upon the luxury

enjoyed by prison officials of having time to make unhurried

judgments, upon the chance for repeated reflection, largely

uncomplicated by the pulls of competing obligations. See Lewis,

118 S. Ct. at 1720. “When such extended opportunities to do better

are teamed with protracted failure even to care, indifference is

truly shocking. But when unforeseen circumstances demand an

officer’s instant judgment, even precipitate recklessness fails to

inch close enough to harmful purpose to spark the shock that

implicates ‘the large concerns of the governors and the governed.’”

Id., quoting Daniels v. Williams, 474 U.S. at 332.

Applying the Lewis analysis to the FBI’s alleged activity in

this case, we conclude that the FBI made decisions which harmed the

Plaintiffs after ample opportunity for cool reflection. In fact,

they invested almost two years and thousands of man hours in

developing the sting operation. Thus, the due process clause

protects the Plaintiffs from any harm that arose from the officers’

deliberate indifference. The facts, as pleaded, establish at least

that level of federal agent culpability as Operation Lightning

Strike evolved into a disastrous boondoggle. We therefore hold

that Hodgson’s allegations that federal agents inflicted damages on

him, an innocent non-target, during this particular undercover

operation and refused him compensation states a claim under Bivens.

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However, because we address today for the first time the

parameters of due process protections afforded innocent third

parties injured by law enforcement sting operations run amok, and

because the Supreme Court’s language that drives our analysis

appeared in a case decided in 1998, we cannot say that the due

process rights claimed by Hodgson were clearly established during

1992-94. See Lewis, 523 U.S. 833. We therefore affirm the

district court’s dismissal of Hodgson’s Bivens claims on the

alternative basis of qualified immunity.

IV. CONCLUSION

Based on the foregoing, we affirm the district court’s

dismissal of Appellants’ suit.

AFFIRMED.

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