finding that despite the plaintiff’s failure to address whether the Board adhered to precedent, “there is no reason for the court to conclude that the Board would be unlikely to follow its own precedent.”
How later courts described this case
- finding that despite the plaintiff’s failure to address whether the Board adhered to precedent, “there is no reason for the court to conclude that the Board would be unlikely to follow its own precedent.”
- finding sufficient safeguards in, inter alia, requirements of a hearing, evidence, and written decision
- emphasizing that the Butz factors should be applied comprehensively
- noting that absolute immunity denies all remedies to an individual
Written by the judges who cited it.
The opinion
United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 13, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
__________________________ Clerk
No. 05-51418
__________________________
DAVID DISRAELI,
Plaintiff - Appellant,
versus
JOSEPH JASON ROTUNDA; DAVID ANDREW GRAUER; JOHN ROBERT MORGAN;
JOHN DOE, 1; JOHN DOE, 2; JOHN DOE, 3; JOHN DOE, 4; JOHN DOE, 5
Defendants - Appellees.
___________________________________________________
Appeal from the United States District Court
for the Western District of Texas
___________________________________________________
Before KING, WIENER, and CLEMENT, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
David Disraeli (“Disraeli”), appearing pro se, appeals the district court’s judgment dismissing
his complaint filed pursuant to 42 U.S.C. § 1983. In his original complaint, Disraeli named Joseph
Rotunda (“Rotunda”), David Grauer (“Grauer”), and John Morgan (“Morgan”) as defendants. He
later amended his complaint to add five John Does (“the Does”) as additional defendants. Disraeli
never amended his complaint to more specifically identify the Does. The district court found that all
three named defendants are entitled to absolute immunity from civil liability in connection with their
duties as government officials and that Disraeli failed to prosecute his claims against the Does.
Disraeli appeals this ruling.
I. FACTS AND PROCEEDINGS
In October 2002, Rotunda, an enforcement attorney with the Texas State Securities Board
(“the Board”), observed an advertisement for an investment opportunity placed by Disraeli in the
Austin American Statesman. Rotunda suspected that the advertisement indicated possible violations
of Texas’s securities laws. Rotunda then began an investigation of Disraeli and concluded that
Disraeli might be misrepresenting himself as a licensed investment adviser, when in fact he was not.
Rotunda also discovered that the advertised investment opportunity was neither registered nor
permitted for sale in Texas. When Rotunda contacted Disraeli in the course of the investigation,
Disraeli represented that he had not sent any materials relating to the investment to any potential
investors, though Rotunda knew the opposite to be true. Consequently, Rotunda concluded that
Disraeli was actively misrepresenting the nature of the investment. Rotunda presented his findings
and conclusions to Grauer, the director of the enforcement division of the Board, who agreed with
Rotunda that “an Enforcement Cease and Desist Order was necessary to protect the public.” Grauer
and Rotunda drafted an order and presented it to Morgan, the acting Securities Commissioner at the
time, who agreed that such an order was necessary. On November 10, 2003, Morgan signed and
executed the Emergency Cease and Desist Order (“emergency order”), ordering Disraeli to
immediately cease and desist from offering the securities at issue in the investigation in Texas until
the securities could be registered, using misleading or fraudulent offers in connection with the
securities, and rendering services as an investment adviser without a license to do so. See TEX. REV.
CIV. STAT. ANN. art. 581-22 (establishing statutory requirements for advertising securities). The
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order notified Disraeli of his right to request a hearing from the Securities Commissioner. Disraeli
ultimately waived his right to a hearing and consented to entry of a Cease and Desist Order (“consent
order”) that prohibited the same activities named and prohibited in the emergency order.
On November 5, 2004, Disraeli filed suit under 42 U.S.C. §§ 1983 and 1985(3), as well as
28 U.S.C. § 2201, alleging that Rotunda, Grauer, and Morgan were liable for violating his right to
due process by issuing the emergency order. He further asserted that the defendants violated federal
trademark law by publishing his name in a disparaging manner without his consent. Defendants
asserted absolute immunity from suit and moved to dismiss under Rule 12(b)(6); the district court
converted their motion into one for summary judgment under Rule 56. The district court ordered
limited discovery on the question of defendants’ actions with respect to the emergency order.
Following discovery, defendants moved formally for summary judgment, again asserting that they
were entitled to absolute immunity or, in the alternative, qualified immunity. The magistrate judge
recommended dismissing Disraeli’s claims and the district court did so, specifically finding that the
named defendants “are entitled to absolute immunity in this cause,” that the defendants were within
their jurisdiction to issue the emergency order, and that Disraeli had abandoned his claims against the
John Does. Disraeli now appeals this decision.
II. DISCUSSION
A. Standard of Review
We review a district court’s grant or denial of summary judgment de novo, applying the same
standard as the district court. Gowesky v. Singing River Hosp. Sys., 321 F.3d 503, 507 (5th Cir.
2003). Summary judgment is appropriate if “the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
3
any material fact and that the moving party is entitled to a judgment as a matter of law.” FED. R. CIV.
P. 56(c). Any reasonable inferences are to be drawn in favor of the non-moving party. Gowesky, 321
F.3d at 507.
If a party moves for summary judgment and asserts a defense of absolute or qualified
immunity in good faith, the burden shifts to the other party to rebut it. Beck v. Tex. State Bd. of
Dental Exam’rs, 204 F.3d 629, 633–34 (5th Cir. 2000). The movant can support its motion by
relying on the pleadings alone. Id. at 634.
B. Absolute Immunity
Absolute immunity denies all remedies to an individual, like Disraeli, who asserts that his
rights have been violated. O'Neal v. Miss. Bd. of Nursing, 113 F.3d 62, 65 (5th Cir. 1997).
Consequently, the Supreme Court has been “quite sparing” in broadening its scope. Id. (quoting
Forrester v. White, 484 U.S. 219, 224 (1988)). Judges and prosecutors are generally entitled to
absolute immunity. Beck, 204 F.3d at 634. Absolute immunity is also available to certain quasi-
judicial officers and agencies. Butz v. Economou, 438 U.S. 478, 512 (1978); Beck, 204 F.3d at 634
(noting that immunity may extend to state agencies as well). Agency officials “performing certain
functions analogous to those of a prosecutor” are immune from civil liability resulting from such acts.
Butz, 438 U.S. at 515. This court applies a “nonexhaustive list” of factors from Butz to determine
whether an administrative employee or agency is entitled to absolute immunity:
(1) the need to assure that the individual can perform his functions without
harassment or intimidation;
(2) the presence of safeguards that reduce the need for private damages actions as a
means of controlling unconstitutional conduct;
(3) insulation from political influence;
(4) the importance of precedent;
(5) the adversary nature of the process; and
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(6) the correctability of error on appeal.
Beck, 204 F.3d at 634 (citing Butz, 438 U.S. at 512). No one factor is controlling. Id. Applying
these factors, this court has found that members of a state nursing board, O'Neal, 113 F.3d at 67,
members of a state dental board, Beck, 204 F.3d at 636, and members of the disciplinary board of the
National Association of Securities Dealers, Austin Mun. Secs., Inc. v. Nat’l Ass’n of Secs. Dealers,
Inc., 757 F.2d 676, 679 (5th Cir. 1985), are entitled to absolute immunity from suit in the
performance of their quasi-judicial functions. In Beck, the court held that while the board was entitled
to absolute immunity, an investigator employed by the board was not, as he “performed investigative,
not adjudicative nor prosecutorial functions.” Beck, 204 F.3d at 636. The Beck court pointed out
that the investigator “neither initiated nor pursued prosecution of the complaint” against the plaintiff,
and his work was thus “not at the heart of the adjudicative process.” Id. at 637.
C. Applying Butz
Disraeli primarily challenges the issuance of the emergency order, which he contends “acted
as a de facto disbarment.” He asserts that because of the nature of the process by which an
emergency order is issued, the defendants should not be protected by absolute immunity.
It is clear from the facts that the actions of the three named defendants in drafting and issuing
the emergency order were prosecutorial or adjudicative in nature and were “at the heart of the
adjudicative process” established by the Texas State Securities Board. See Beck, 204 F.3d at 637.
More specifically, by applying the Butz factors we hold that the district court correctly granted
absolute immunity to the defendants.
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1. Need to protect against harassment or intimidation
Disraeli concedes that “both Rotunda and Grauer must be free from harassment or
intimidation to carry out their duties.” We agree and point out that the attorneys here perform a
disciplinary function in their work for the Board, which this court has noted makes individuals “likely
targets for suit.” Austin Mun. Secs., 757 F.2d at 689; see also O’Neal, 113 F.3d at 66. The Texas
Securities Commissioner is charged with “tak[ing] such measures and [making] such investigations
as will prevent or detect the violation of any provision” of Texas’s securities laws. TEX. REV. CIV.
STAT. ANN. art. 581-3. Further, the Commissioner must present any evidence of wrongdoing to the
proper District or County Attorney. Id. Here, the defendants’ actions were all in furtherance of these
statutory duties, which by their nature are both prosecutorial and likely to arouse the ire of targeted
individuals.
2. The presence of safeguards that reduce the need for private damages
Disraeli asserts that because the Board can issue an emergency order without any preceding
process, there is an absence of safeguards to protect against violations of constitutional rights before
any reputational damage is done. In Austin Municipal Securities, we examined a similar argument;
plaintiffs alleged that the administrative appeals process by which a securities dealer might vindicate
itself in a disciplinary proceeding would “not rectify the expense and injury to one’s reputation
incurred by having to defend against improper prosecution.” 757 F.2d at 690. We rejected that
argument, stating plainly that “this hazard is precisely the same as would be faced in any other judicial
or administrative proceeding of a regulatory nature.” Id. The logic of Austin Municipal Securities
applies here with greater force, as the emergency order is a necessary tool for protecting the public
from fraudulent or misleading investments. Our system of justice would not long tolerate lawsuits
6
against prosecutors based on the damage inflicted by initial injunctive steps taken to prevent further
illegal activity.
Further, any party aggrieved by a decision of the Commissioner is entitled to a hearing, at
which it may be represented by counsel and present evidence. TEX. REV. CIV. STAT. ANN. art. 581-
24; TEX. GOV’T CODE ANN. § 2001.051, 2001.053. Any adverse decision must be in writing or
stated on the record, and any findings of fact must be supported by evidence presented at the hearing.
TEX. GOV’T CODE ANN. § 2001.141. Should an aggrieved party wish to appeal the outcome of the
hearing, it may file a petition with the state district court. TEX. GOV’T CODE ANN. § 2001.171.
Consequently, there are sufficient safeguards limiting the discretion of the Securities Commissioner
such that private damages are not necessary to protect against capricious enforcement.
3. Insulation from political influence
Much like the members of the nursing board found to be “shielded” from political influence
in O’Neal, the five members of the State Securities Board are shielded from political influence
because they are appointed to staggered six-year terms by the governor. O’Neal, 113 F.3d at 66;
TEX. REV. CIV. STAT. ANN. art. 581-2(A). The Board appoints a Securities Commissioner who
serves at its pleasure. TEX. REV. CIV. STAT. ANN. art. 581-2(G). The Securities Commissioner is,
in turn, empowered to appoint “other persons as necessary to carry out the powers and duties of the
Commissioner under this Act.” TEX. REV. CIV. STAT. ANN. art. 581-2(H). As the acting Securities
Commissioner, Morgan was sufficiently shielded from political influence to allay fears that he might
use his power to carry out politically motivated prosecutions. As his employees, Rotunda and
Grauer were similarly shielded. This factor thus weighs in favor of finding all three defendants
immune.
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4. The importance of precedent
Disraeli does not present any arguments about whether the Board was bound by or followed
its own precedent. In any event, there is no reason for the court to conclude that the Board would
be unlikely to follow its own precedent.
5. The adversarial nature of the process
Disraeli asserts that because the emergency order could be issued without a hearing, that
portion of the process is not adversarial. While this is true, it does not make the proceedings less
judicial in nature. State and federal courts routinely issue temporary restraining orders without a
hearing — the ability to do so lies at the core of a court’s ability to carry out its duties. Here, Disraeli
does not deny that the remaining portion of the process would have been adversarial. Though
Disraeli focuses on a necessarily non-adversarial stage of the process, which can be challenged and
appealed at subsequent stages, the overall agency action is judicial in nature.
6. The correctability of error on appeal
As noted above, Disraeli could have sought correction of any order entered by the
Commissioner on review to the state courts of Texas. He chose not to avail himself of the
protections afforded by this system and instead signed the consent order.
D. The defendants’ actions
The following recapitulation of each defendant’s actions shows why they are entitled to
immunity for their roles in the issuance of the emergency order and the preceding investigation.
(1) Morgan
Morgan’s role was limited to reviewing and signing the emergency order drafted by Rotunda
and Grauer. Morgan reviewed the evidence presented to him and determined that it supported a
8
finding that Disraeli was in violation of Texas securities law. He took no part in the gathering of facts
supporting this decision. Disraeli asserts that Morgan is “not a judge,” but this argument misses the
fact that quasi-judicial authority is sufficient to confer immunity upon state officials who “make
findings of fact and assess punishments or accolades in accordance with these findings.” O’Neal, 113
F.3d at 66.
(2) Grauer
Grauer’s role was entirely supervisory. As director of the Board’s Enforcement Division,
Grauer’s primary responsibility was enforcement of Texas’s securities laws, which included
overseeing the actions of the attorneys working under him. Grauer’s actions in evaluating the facts
presented by Rotunda and determining what action to take were virtually identical to those of a
district attorney who is presented with evidence of a crime and must decide how to protect the public.
By preparing the emergency order for Morgan to sign, Grauer took the first step toward stopping
Disraeli’s actions. Had the case proceeded to an administrative hearing, Grauer, along with Rotunda,
would have been responsible for presenting evidence at the hearing and otherwise prosecuting the
case. There is no doubt that all of Grauer’s actions were “analogous to those of a prosecutor” and
thus protected by absolute immunity. Butz, 438 U.S. at 515.
(3) Rotunda
As a staff attorney in the Enforcement Division, Rotunda was responsible for detecting,
investigating, and preventing any violations of securities law. Disraeli came to Rotunda’s attention
through an advertisement in the newspaper, which Rotunda reviewed regularly as part of his duties.
The advertisement aroused Rotunda’s suspicion, and he directed an undercover investigator employed
by the Board to contact Disraeli and learn what she could about the investment. The investigator
9
reported that Disraeli represented himself to be a registered investment adviser, which was false.
Rotunda gathered more information about the investment itself and discovered that no permit had
been issued to sell the offered securities. Rotunda spoke with Disraeli, who told him that he had not
received any money for investment in the advertised securities, nor had he sent any documents to any
potential investors. Rotunda knew that the latter assertion was also false.
Rotunda then took the necessary steps to protect the public against Disraeli’s acts. Together,
he and Grauer determined that an emergency order was necessary, drafted the order, and presented
it to Morgan. Rotunda then proceeded to negotiate the terms of the consent order to which Disraeli
ultimately agreed. In these later steps, his role was indistinguishable from that of Grauer and was
afforded the same protection. Disraeli has seized upon the word “investigation” with regard to
Rotunda’s initial efforts at verifying whether a crime had indeed been committed and has asserted that
these actions should not receive the protection of absolute immunity. Disraeli’s second amended
complaint does not clearly articulate how, if at all, he was harmed by Rotunda’s investigation. The
complaint focuses on the issuance of the emergency order as the source of the harm, though it
identifies some grievances regarding the course of the investigation and asserts that the investigation
should have been both more thorough in parts and less intrusive in others.
Even if we assume that Disraeli has alleged harm caused by Rotunda’s efforts at investigating
his actions and that Rotunda’s investigative efforts are not protected by absolute immunity, Disraeli’s
claims against Rotunda still fail. This is because Rotunda, like the other two defendants, asserted a
defense of qualified immunity in the alternative to absolute immunity.
If a prosecutor engages in activities “akin to those of an administrative or investigative officer,
rather than to those of an advocate,” the prosecutor is no longer entitled to absolute immunity. Geter
10
v. Fortenberry, 849 F.2d 1550, 1553 (5th Cir. 1988). As long as the prosecutor acts within his
discretionary authority, however, he is entitled to qualified immunity. Id. Rotunda, like Grauer and
Morgan, asserted that he was entitled to qualified immunity for any actions the court found were not
protected by absolute immunity. Once Rotunda asserted this defense, the burden shifted to Disraeli.
McClendon v. City of Columbia, 305 F.3d 314, 323 (5th Cir. 2002). The district court allowed
Disraeli to conduct discovery to address the proffered immunity defenses, but Disraeli’s brief in
response failed to address qualified immunity in any meaningful way. Disraeli never connected any
of Rotunda’s investigative acts to an alleged constitutional violation. It is clear from the record that
Disraeli failed to carry his burden of rebutting the proffered defense and the district court could have
awarded Rotunda qualified immunity on this basis. “It is well-settled . . . that we will not reverse a
judgment of the district court if it can be affirmed on any ground, regardless of whether the district
court articulated the ground.” United States v. Real Property Located at 14301 Gateway Blvd. West,
El Paso County, Texas, 123 F.3d 312, 313 (5th Cir. 1997). Because the district court could have
awarded Rotunda qualified immunity based on the record and briefs before it, we affirm its judgment.
See Brown v. Lyford, 243 F.3d 185, 191 (5th Cir. 2001) (awarding a defendant qualified immunity
though the district court granted him absolute immunity and thus did not address qualified immunity).
E. Disraeli’s other claims
Disraeli asserts that the district court made various errors relating to the merits of his claim.
Because we affirm the district court’s grant of immunity, we need not reach these arguments. Disraeli
also contends that he would have amended his petition to name one of the unnamed Does in his
amended complaint, but the district court dismissed his claims before he had a chance to do so. On
August 5, 2005, Disraeli stated that he would seek leave to amend his complaint to add the name, but
11
by September 13, 2005, he had not done so, and the district court dismissed these claims. Disraeli
offers no reason for this delay. We conclude that the district court did not abuse its discretion in
ruling that he failed to prosecute his claims against the Does. See Ramsay v. Bailey, 531 F.2d 706,
707–08 (5th Cir. 1976).
III. CONCLUSION
For the foregoing reasons, we AFFIRM the decision of the district court.
12