Maureen Reynolds v. United States

In the

United States Court of Appeals

For the Seventh Circuit

No. 08-1634

M AUREEN R EYNOLDS,

Plaintiff-Appellant,

v.

U NITED S TATES OF A MERICA,

Defendant-Appellee.

Appeal from the United States District Court

for the Southern District of Indiana, Indianapolis Division.

No. 1:07-cv-00171-SEB-TAB—Sarah Evans Barker, Judge.

A RGUED S EPTEMBER 12, 2008—D ECIDED D ECEMBER 9, 2008

Before R IPPLE, R OVNER, and E VANS, Circuit Judges.

R OVNER, Circuit Judge. In August 2003 a security guard

with General Security Services Corporation stood on the

roof of the Minton-Capehart Federal Building in Indianap-

olis, Indiana—inexplicably naked, alone, and locked out of

the building. Later that day Maureen Reynolds, a General

Security officer, learned of the incident, but not the nudity,

and wrote up a report. The Federal Protective Service (FPS)

launched an investigation as well, which culminated in a

2 No. 08-1634

state prosecution against Reynolds for false reporting.

Reynolds’s bench trial resulted in an acquittal. But the state

criminal proceedings cost Reynolds her job, so she sued the

United States under the Federal Tort Claims Act (FTCA),

28 U.S.C. §§ 1346(b)(1), 2671-80, asserting that FPS investi-

gators had initiated a malicious prosecution by submitting

knowingly false information to the Marion County prose-

cutor and the Marion County Superior Court. The district

court dismissed Reynolds’s complaint for lack of subject-

matter jurisdiction, see F ED. R. C IV. P. 12(b)(1), citing

various grounds, including that the discretionary-function

exception to the FTCA shielded the actions of FPS investi-

gators, see 28 U.S.C. § 2680(a). We disagree and remand for

further proceedings.

I.

For purposes of this appeal, we accept the allegations in

Reynolds’s complaint as true and draw all reasonable

inferences in her favor. See Palay v. United States, 349 F.3d

418, 425 (7th Cir. 2003). During the relevant period General

Security contracted with the Department of Homeland

Security to protect the Minton-Capehart building. In

August 2003 a naked General Security guard locked

himself out on the roof of the building. Eventually he was

able to get the attention of another guard, who unlocked

the door and let him inside. When Reynolds arrived for her

shift that evening, both guards approached her and related

the incident, though neither one mentioned the nudity.

Shortly thereafter Reynolds filed an incident report detail-

ing what she had learned about the episode.

No. 08-1634 3

Six weeks later FPS opened an investigation. FPS officers

Mark Lambert and Mark Fullerton questioned the two

security guards, and both admitted that one of them had

been naked on the roof that day. Three days later Lambert

and Fullerton interviewed Reynolds, who relayed only

what she knew at the time—that a security guard had

locked himself out of the building and that one of his peers

had let him back in. Although Lambert and Fullerton knew

that Reynolds was unaware of the nudity, they neverthe-

less approached the Marion County prosecutor’s office and

supplied an affidavit of probable cause averring that

Reynolds had lied to them. That affidavit became the basis

for an information charging Reynolds with false—i.e.,

incomplete—reporting. In light of the criminal charge,

General Security placed Reynolds on an indefinite and

unpaid leave-of-absence. Reynolds was eventually acquit-

ted after a bench trial, but General Security still fired her

after the verdict because of the allegations of criminal

activity.

After losing her job, Reynolds sued the United States

under the FTCA, see 28 U.S.C. §§ 1346(b)(1), 2671-80,

claiming that Lambert and Fullerton, acting in their

capacity as federal law enforcement officers, had “insti-

gated and initiated” a malicious prosecution. The FTCA

authorizes suits against the United States for torts commit-

ted by federal officials if the same acts would create

liability for private persons under applicable state tort law.

See 28 U.S.C. § 1346(b)(1). But the FTCA contains various

exceptions to the waiver of sovereign immunity; there is no

governmental liability, for example, for claims arising from

4 No. 08-1634

an employee’s performance of a discretionary function. See

28 U.S.C. § 2680(a).

At the government’s urging, the district court dismissed

the complaint for lack of subject-matter jurisdiction,

see F ED. R. C IV. P. 12(b)(1), citing three separate grounds.

First, the court concluded that the actions of Lambert and

Fullerton were “clearly discretionary” under 28

U.S.C. § 2680(a) because “the decisions they made and the

actions they took were tied to their own view of what

public policy required.” The court elaborated:

The guidelines governing the work of the FPS leave[]

room for independent judgment on the part of the

officers and the exercise of discretion in deciding what

evidence to gather and credit and whom to investigate

and so forth. Indeed, law enforcement judgment is the

quintessential discretionary activity, requiring the

performance and weighing of a wide array of subjec-

tive factors in order to protect the safety and security

of the federal facility.

Second, the court asserted, Lambert and Fullerton are

government contractors, not “employees of the govern-

ment,” and therefore Reynolds could not sue the United

States under the FTCA. See 28 U.S.C. § 2671. Third, the

court reasoned, an FTCA claim for malicious prosecution

requires allegations of misconduct by “investigative or law

enforcement officers”—and Lambert and Fullerton did not

fit that description “because the actions of which Reynolds

complains did not entail any searches or seizures or . . .

arrests.” See 28 U.S.C. § 2680(h) (defining “investigative or

law enforcement officer” as “any officer of the United

No. 08-1634 5

States who is empowered by law to execute searches, to

seize evidence, or to make arrests for violations of Federal

law”).

This appeal followed.

II.

Reynolds contends that all three reasons for dismissal are

faulty. Before reaching her arguments, though, we must

address the district court’s decision to dismiss her com-

plaint under Rule 12(b)(1). In Palay v. United States, 349 F.3d

418, 424-25 (7th Cir. 2003), we questioned whether statu-

tory exceptions to the FTCA limit the jurisdictional grant

or, as recent cases had suggested, the scope of the right to

recover. And in Parrott v. United States, 536 F.3d 629, 634

(7th Cir. 2008), we held that “[t]he statutory exceptions

enumerated in § 2680(a)-(n) to the United States’s waiver

of sovereign immunity (found in § 1346(b)) limit the

breadth of the Government’s waiver of sovereign immu-

nity, but they do not accomplish this task by withdrawing

subject-matter jurisdiction from the federal courts.” Thus,

the government’s filing in the district court was, despite its

label, more properly a motion to dismiss for failure to state

a claim. See F ED. R. C IV. P. 12(b)(6); Parrott, 536 F.3d at 634;

Clark v. United States, 326 F.3d 911, 913 (7th Cir. 2003). That

designation governs our de novo review of whether

Reynolds has stated a claim for relief. See Palay, 349 F.3d at

424-25.

Reynolds’s chief argument on appeal—and the only one

that the government responds to—is that the alleged

6 No. 08-1634

misconduct of Lambert and Fullerton falls outside of the

FTCA’s discretionary-function exception. The FTCA

permits suits against the United States for personal injuries

caused by the wrongful acts of federal employees acting

within the scope of their employment under circumstances

in which a private person would be liable to the plaintiff.

See 28 U.S.C. § 1346(b)(1). Although the FTCA’s waiver of

sovereign immunity is broad, Congress has excepted

certain claims from its purview, including “[a]ny

claim . . . based upon the exercise or performance or the

failure to exercise or perform a discretionary function or

duty on the part of a federal agency or an employee of the

Government, whether or not the discretion involved be

abused.” 28 U.S.C. § 2680(a); see Berkovitz v. United States,

486 U.S. 531, 535 (1988). The purpose of this discretionary-

function exception is to “prevent judicial ‘second-guessing’

of legislative and administrative decisions grounded in

social, economic, and political policy through the medium

of an action in tort.” United States v. Varig Airlines, 467 U.S.

797, 814 (1984).

The discretionary-function exception has two require-

ments. First, the conduct alleged must involve an element

of judgment or choice. United States v. Gaubert, 499 U.S. 315,

322 (1991); Berkovitz, 486 U.S. at 536; Palay, 349 F.3d at 427.

Conduct cannot be discretionary if “a federal statute,

regulation, or policy specifically prescribes a course of

action for an employee to follow” because “the employee

has no rightful option but to adhere to the directive.”

Berkovitz, 486 U.S. at 536; see Palay, 349 F.3d at 427. Second,

given that the exception “protects only governmental

actions and decisions based on considerations of public

No. 08-1634 7

policy,” the challenged discretionary conduct must amount

to a permissible exercise of policy judgment. Berkovitz, 486

U.S. at 537; see Gaubert, 499 U.S. at 323; Palay, 349 F.3d at

427-28. The government actor’s intent is of no consequence

to our analysis, “[n]or must the actor belong to the

policymaking or planning ranks of government in order for

the exception to apply.” Palay, 349 F.3d at 428. All that

matters is “the nature of the actions taken and . . . whether

they are susceptible to policy analysis.” Gaubert, 499 U.S. at

325; see Varig Airlines, 467 U.S. at 814; Palay, 349 F.3d at 432.

Reynolds insists that the “malicious and bad faith

conduct” of Lambert and Fullerton does not fall within the

discretionary-function exception. Those labels do nothing

for her cause, though, and the government correctly points

out that subjective intent is irrelevant to our analysis. See

Gaubert, 499 U.S. at 325. Still, the government misses a

more subtle strand of Reynolds’s argument when it

maintains that this is a “classic” example of the

discretionary-function exception. As we understand it,

Reynolds asserts—under the umbrella of “malicious and

bad faith conduct” and consistent with her complaint—that

Lambert and Fullerton submitted a knowingly false

affidavit to the Marion County prosecutor and, ultimately,

the state court in an “effort to corrupt the fairness of the

prosecution.” She concedes that the decision to prosecute

her was discretionary; her point is that providing know-

ingly false information en route to a criminal prosecution

is “ ’sufficiently separable’ from the ‘protected discretion-

ary decision.’ ” At oral argument we asked the government

whether a law-enforcement officer involved in a criminal

investigation has discretion to report information that the

8 No. 08-1634

officer knows to be false. To our surprise, counsel an-

swered yes and directed us to Gray v. Bell, 712 F.2d 490

(D.C. Cir. 1983). But that cannot be right, as a close reading

of Gray and related cases shows.

In Gray the D.C. Circuit considered whether prosecutors

who failed to call certain witnesses before a grand jury,

omitted mention of exculpatory evidence, and misrepre-

sented dates in a timeline of criminal activity had neverthe-

less engaged in activities that were not “separable from a

protected discretionary function.” 712 F.2d at 494, 513-16.

The court concluded that the alleged misconduct was

“inextricably tied to the decision to prosecute and the

presentation of evidence to the Grand Jury,” and that there

was “no meaningful way in which the allegedly negligent

investigatory acts could be considered apart from the

totality of the prosecution.” Id. at 516. The case before us is

distinguishable, however. Gray proposes that if the deci-

sion to prosecute is discretionary, so too are the many

small decisions that accompany a prosecution—how much

evidence to present, whether to call certain witnesses,

etc.—even if those decisions inadvertently mislead a grand

jury. For that reason, challenges to the quality of an

investigation or prosecution are generally barred by the

discretionary-function exception. See, e.g., Pooler v. United

States, 787 F.2d 868, 871 (3d Cir. 1986). But this is an

altogether different scenario. Reynolds alleges that Lam-

bert and Fullerton fueled her prosecution with knowingly

false information. And how can that be a discretionary

decision when it is proscribed by Indiana law? See IND.

C ODE §§ 35-44-2-1(a)(1), 35-44-2-2(d)(1). It cannot; a federal

investigator’s decision to lie under oath is separable from

No. 08-1634 9

the discretionary decision to prosecute. See Moore v. Valder,

65 F.3d 189, 197 (D.C. Cir. 1996) (“Disclosing grand jury

testimony to unauthorized third parties . . . is not a discre-

tionary activity nor is it inextricably tied to matters requir-

ing the exercise of discretion.”); Limone v. United States, 271

F.Supp.2d 345, 356 (D. Mass. 2003) (rejecting argument that

law-enforcement officers had discretion to suborn perjury

or falsify evidence); Tri-State Hosp. Supply Corp. v. United

States, 142 F.Supp.2d 93, 100-01 (D.D.C. 2001) (“With

respect to Tri-State’s claims that Customs officials falsified

records and lied to bring about a prosecution, . . . [l]ying

under oath to preserve barred claims is not a protected act

under the discretionary function exception.”), rev’d on other

grounds, 341 F.3d 571 (D.C. Cir. 2003); Wang v. United States,

No. 01-1326, 2001 WL 1297793, at *4 (S.D.N.Y. Oct. 25, 2001)

(“To be actionable as malicious prosecution, the investiga-

tor’s conduct must be independent or quasi-independent

from the non-actionable decision to prosecute and must

constitute the kind of wrongful conduct that is designed to

corrupt the fairness of a prosecution.”). There can be no

argument that perjury is the sort of “legislative [or] admin-

istrative decision[] grounded in social, economic, and

political policy” that Congress sought to shield from

“ ’second-guessing.’ ” Varig Airlines, 467 U.S. at 814. There-

fore, the discretionary-function exception has no applica-

tion here.

Reynolds also contends that the district court incorrectly

characterized Lambert and Fullerton as contractors, see

28 U.S.C. § 2671, and the government does not attempt to

defend the district court on that point. As FPS investiga-

tors, Lambert and Fullerton are undoubtedly government

10 No. 08-1634

employees; the district court’s confusion on this point

stems from the uncontested contractor status of Reynolds’s

former employer, General Security. We need not dwell any

further on this issue.

Reynolds attacks the district court’s third ground for

dismissal—that Lambert and Fullerton could not have

engaged in malicious prosecution because they did not

conduct a search, seizure, or arrest—as well. Again the

government has opted not to contest the point. Relying

indirectly on Pooler v. United States, 787 F.2d 868 (3d Cir.

1986), the district court interpreted the law-enforcement

officer proviso of 28 U.S.C. § 2680(h) to require a search,

seizure, or arrest in order to trigger tort liability. See Pooler,

787 F.2d at 872 (“We read the 1974 amendment to section

2680(h) as addressing the problem of intentionally tortious

conduct occurring in the course of the specified government

activities.” (emphasis added)). Yet the plain language

of § 2680(h) is not so restrictive:

[W]ith regard to acts or omissions of investigative or

law enforcement officers of the United States Govern-

ment, the provisions of this chapter and section 1346(b)

of this title shall apply to any claim arising [out of]

malicious prosecution. For the purpose of this subsec-

tion, “investigative or law enforcement officer” means

any officer of the United States who is empowered by law

to execute searches, to seize evidence, or to make

arrests for violations of Federal law.

28 U.S.C. § 2680(h) (emphasis added). Pooler’s requirement

of a search, seizure, or arrest has largely escaped the

attention of other circuit courts, but numerous district

No. 08-1634 11

courts have criticized the decision as “unduly narrow” and

lacking “any principled underpinning.” E.g., Murphy v.

United States, 121 F.Supp.2d 21, 24 (D.D.C. 2000); Ortiz v.

Pearson, 88 F.Supp.2d 151, 164-65 (S.D.N.Y. 2000) (collecting

cases). Indeed, even the case cited by the district court in

its order of dismissal, Employers Ins. of Wausau v. United

States, 815 F.Supp. 255 (N.D. Ill. 1993), does not strictly

require search, seizure, or arrest: “[T]he fair reading of the

Section 2680(h) proviso is that even if the FTCA action for

such intentional torts is not based on an actual search or

seizure of evidence or arrest, it must at a minimum charge

the government with wrongdoing based on ‘acts or omis-

sions of investigative or law enforcement officers’ while they

are engaged in investigative or law enforcement activities.” Id.

at 259. We, too, disagree with Pooler and the district court’s

interpretation. Section 2680(h) does not require that a law

enforcement officer commit the intentional tort while

executing a search, seizing evidence, or making an arrest.

Accord Sami v. United States, 617 F.2d 755, 764-65 (D.C. Cir.

1979).

The FTCA to one side, we still must evaluate whether

Reynolds has stated a claim for relief under Indiana tort

law. See 28 U.S.C. § 1346(b)(1); Parrott, 536 F.3d at 635. In

order to prevail on a claim of malicious prosecution in

Indiana, a plaintiff must establish that the defendant,

acting with malice and without probable cause, instituted

or caused to be instituted a prosecution that terminated in

the plaintiff’s favor. See City of New Haven v. Reichhart, 748

N.E.2d 374, 378 (Ind. 2001); Glass v. Trump Indiana, Inc., 802

N.E.2d 461, 466-67 (Ind. Ct. App. 2004). Probable cause

exists if, following some reasonable investigation, a

12 No. 08-1634

reasonably intelligent and prudent person in the defen-

dant’s position would believe that the accused committed

the crime charged. Glass, 802 N.E.2d at 467. “[T]he element

of malice,” meanwhile, “may be inferred from a total lack

of probable cause, from the failure to make a reasonable or

suitable inquiry, and from a showing of personal animos-

ity.” Kroger Food Stores, Inc. v. Clark, 598 N.E.2d 1084, 1089

(Ind. Ct. App. 1992). Reynolds has alleged explicitly these

elements, and we see no further obstacle to her complaint

at this stage. We do not, of course, vouch for the accuracy

of Reynolds’s allegations; our holding is merely that she

has stated a claim for relief.

For these reasons we V ACATE the district court’s dis-

missal and R EMAND for further proceedings.

12-9-08