Airtrans Inc v. Mead , 389 F.3d 594 ( 2004 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 04a0400p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
Plaintiff-Appellant, -
AIRTRANS, INC.,
-
-
-
No. 02-6411
v.
,
>
KENNETH MEAD, individually and in his capacity as -
-
-
Inspector General, U.S. Department of Transportation;
General; JEFF HOLT, Dyer County Sheriff; LARRY BELL, -
JOSEPH ZSCHIESCHE, Special Agent, Office of Inspector
-
-
Captain, Dyer County Sheriff’s Department; DYER
-
COUNTY, TENNESSEE; SAMSUNG INTERNATIONAL, INC.;
U.S. LOGISTICS INC.; and CHRISTOPHER ASWORTH, ESQ., -
Defendants-Appellees, -
-
-
Intervenor, -
UNITED STATES OF AMERICA,
-
-
-
-
FOUR UNNAMED AGENTS OF THE TENNESSEE
-
DEPARTMENT OF TRANSPORTATION; JIMMY PORTER,
Defendants. -
Dyer County Investigator Sheriff’s Department,
-
N
Appeal from the United States District Court
for the Western District of Tennessee at Memphis.
No. 01-02951—Samuel H. Mays, Jr., District Judge.
Argued: June 15, 2004
Decided and Filed: November 18, 2004
Before: DAUGHTREY and SUTTON, Circuit Judges; COOK, District Judge.*
_________________
COUNSEL
ARGUED: Anthony J. McMahon, Bethesda, Maryland, for Appellant. Steve Frank, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., James B. Summers, NEELY, GREEN, FARAGARSON,
BROOKE & SUMMERS, Memphis, Tennessee, Edward Medina, KIRBY & McGUINN, San Diego,
*
The Honorable Julian A. Cook, Jr., United States District Judge for the Eastern District of Michigan, sitting by designation.
1
No. 02-6411 AirTrans v. Mead, et al. Page 2
California, for Appellees. ON BRIEF: Anthony J. McMahon, Bethesda, Maryland, for Appellant. Steve
Frank, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., James B. Summers, NEELY,
GREEN, FARAGARSON, BROOKE & SUMMERS, Memphis, Tennessee, Edward Medina, Dean T.
Kirby, Jr., KIRBY & McGUINN, San Diego, California, for Appellees.
_________________
OPINION
_________________
PER CURIAM. This civil rights action, filed pursuant to 42 U.S.C. § 1983, was initiated by the
plaintiff, AirTrans, Inc., a Dyer County (Tennessee) long-distance trucking company, while the company
was under investigation by the Office of Inspector General (OIG) of the United States Department of
Transportation (DOT) for alleged violations of federal criminal statutes. AirTrans sought damages from
and injunctive relief against various state and federal government officials and others, after its offices were
subjected to a search and the seizure of company records. The complaint was based on the contention that
the agents’ action in executing the search warrant at the AirTrans offices was in violation of the Fourth
Amendment because the DOT’s Inspector General lacked authority to obtain and execute a search warrant.
The district court dismissed the action against all defendants after finding that the complaint failed to state
a claim upon which relief could be granted, principally because the court concluded that the search warrant
was authorized under § 228 of the Motor Carrier Safety Improvement Act of 1999, Pub. L. No. 106-159,
113 Stat. 1748 (codified at 49 U.S.C. § 101 note and 5 U.S.C. App. § 4 note (2004)). We find no error and
affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On August 17, 2001, Special Agent Joseph Zschiesche of the DOT’s OIG, assisted by FBI agents
and deputies from the Dyer County Sheriff’s Department, executed a federal search warrant on the premises
of plaintiff AirTrans’s business offices in Dyersburg, Tennessee. During execution of the warrant, the
agents seized records and disabled company computers, leaving AirTrans effectively unable to operate. As
a result of the search and the continuing federal investigation, AirTrans allegedly suffered injury to its sales,
credit, goodwill, and reputation.
The source of the plaintiff’s difficulties with the government was an agreement that AirTrans had
reached with defendants Samsung and U.S. Logistics, Inc., under which AirTrans would provide
transportation of Samsung’s manufactured goods from its factory in Tijuana, Mexico. Ultimately, a dispute
broke out among the parties in December 1999, with AirTrans alleging that Samsung and U.S. Logistics had
proposed a fraudulent billing scheme that AirTrans refused to adopt. Samsung and U.S. Logistics, on the
other hand, contended that AirTrans had charged them for some six or seven times the amount of traffic that
AirTrans had actually provided, and they refused to pay the full amount of the invoices that AirTrans had
sold to a factoring agent named Allied. As a result, Christopher Ashworth, an attorney representing
Samsung and U.S. Logistics, sent Allied a letter dated May 16, 2000, accusing Allied and AirTrans of
criminal conduct and indicating that at the request of his clients, he had sent certain business records to the
FBI and requested an investigation.
It is not clear from the record in this case whether or not the DOT’s ensuing investigation of
AirTrans was precipitated by information sent by Ashworth. What is clear is that the investigation led to
criminal litigation involving AirTrans in California and, as part of that investigation, the search of the
AirTrans offices in Tennessee. After the search, AirTrans filed a § 1983 action against the defendants
seeking compensation for its business losses, an order declaring the search illegal, and an injunction against
the government’s continuing investigation of AirTrans. Motions to dismiss were filed by Inspector General
Kenneth Mead and Special Agent Zschiesche, the federal defendants who authorized and secured the search
warrant; by the United States as intervenor; and by Samsung, U.S. Logistics, and Christopher Ashworth,
the private defendants who allegedly initiated the investigation of AirTrans. Dyer Sheriff Jeff Holt, Captain
No. 02-6411 AirTrans v. Mead, et al. Page 3
Larry Bell, and Dyer County, the state defendants who assisted in executing the warrant, filed a motion for
summary judgment. All of the motions were granted and the complaint was dismissed by the district court.
AirTrans now appeals the order of dismissal.
DISCUSSION
We review de novo a district court’s grant of a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6). "Whether the district court properly dismissed the complaint pursuant to [Rule] 12(b)(6)
is a question of law . . . . All factual allegations are deemed admitted, and when an allegation is capable of
more than one inference, it must be construed in the plaintiffs' favor." Sinay v. Lamson & Sessions Co.,
948 F.2d 1037, 1039-40 (6th Cir. 1991). “A Rule 12(b)(6) motion should only be granted if ‘it appears
beyond doubt that the plaintiffs can prove no set of facts in support of [their] claim which would entitle
[them] to relief.’” Taxpayers United for Assessment Cuts v. Austin, 994 F.2d 291, 296 (6th Cir. 1993)
(quoting Hospital Bldg. Co. v. Trustees of the Rex Hosp., 425 U.S. 738, 746 (1976)).
We additionally review de novo the grant of summary judgment by a district court. See Vaughn v.
Lawrenceburg Power Sys., 269 F.3d 703, 710 (6th Cir. 2001). Summary judgment is proper where “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 any material fact and that the moving party is entitled to a judgment
as a matter of law.” Fed. R. Civ. P. 56(c).
Although there are peripheral issues raised on appeal,1 the dispositive issue on appeal concerns the
district court’s decision to dismiss the action against the federal defendants on the basis of qualified
immunity. AirTrans argues that Agent Zschiesche lacked authority to obtain and execute the search warrant
and thereby violated the company’s constitutional rights.2 In support of this contention, the company
argues that the district court misinterpreted the Motor Carrier Safety Improvement Act of 1999 (the 1999
Act) in ruling that the federal defendants were entitled to qualified immunity.
1
For example, AirTrans contended that false statements by attorney Ashworth led to the issuance of the search warrant and
invoked 18 U.S.C. § 1001 as a basis for seeking damages against both Ashworth and, on a theory of respondeat superior, his
clients, Samsung and U.S. Logistics. But there is no right to bring a private action under that federal criminal statute and, as the
district court held in dismissing this claim under applicable California law, the statements were privileged because made in the
course of official proceedings, citing California Civil Code § 47(b)(3). On appeal, AirTrans seeks to shift the focus away from
Ashworth’s statements to law enforcement and onto statements made in letters to Allied, conceding that it “does not believe that
any report that Ashworth made to the FBI in San Diego resulted in the investigation in Tennessee,” but instead positing that a
member of Allied contacted the FBI in Tennessee as a result of Ashworth’s letter to Allied, creating a chain of events for which
Samsung should be held liable. AirTrans does not make clear under what theory or upon what statutory basis this liability should
be imposed.
AirTrans also contends that the Dyer County officials who assisted in the search knew that it was illegally obtained and so
violated 42 U.S.C. § 1983 by violating AirTrans’ constitutional rights under color of state law. The Dyer county defendants
maintain that when assisting with the search warrant they were actually “on loan” to the federal government and so were not acting
under color of state, but rather federal law. However, the district court did not reach this issue as it was satisfied that the warrant
had been obtained legally and so found that AirTrans failed to provide evidence sufficient to raise a genuine issue of material fact
showing that its constitutional rights were violated.
2
AirTrans also attacks the government’s motive in pursuing the investigation in the first place, as well as Agent Zschiesche’s
reason for conducting the search of the AirTrans premises, insisting that the sole purpose of the investigation was to “bring down
Freddie Ford,” the CEO of the company, in retaliation for his succeeding in having prior federal charges against him dismissed.
The most that can be said about this contention is that it was unsubstantiated on the record in this appeal.
No. 02-6411 AirTrans v. Mead, et al. Page 4
As the district court noted, in order to state a claim for violation of its constitutional rights, whether
under Bivens3 or 42 U.S.C. § 1983, AirTrans “must identify a right secured by the United States
Constitution and the deprivation of that right by a person acting under color of . . . law.” Watkins v. City
of Southfield, 221 F.3d 883, 887 (6th Cir. 2000) (quoting Russo v. City of Cincinnati, 953 F.2d 1036, 1042
(6th Cir. 1992)). In determining whether government officials are immune from suit, courts utilize a two-
part test. See Brennan v. Township of Northville, 78 F.3d 1152, 1154 (6th Cir. 1996). First, the plaintiff
must allege and demonstrate the deprivation of a constitutionally protected right. Id. If successful in
meeting that part of the test, the plaintiff must further show that “the right is so ‘clearly established’ that a
‘reasonable official’ would understand that what he is doing violates that right.” Id. (quoting Anderson v.
Creighton, 483 U.S. 635, 640 (1987)); see also Cooper v. Parrish, 203 F.3d 937, 951 (6th Cir. 2000).
Here, AirTrans alleges that its Fourth Amendment rights were violated by an illegal search and
seizure of its property, citing Truckers United for Safety v. Mead, 86 F. Supp. 2d 1 (D.D.C. 2000) (Truckers
United I), and Truckers United for Safety v. Mead, 251 F.3d 183 (D.C. Cir. 2001) (Truckers United II), to
support its contention that the DOT Inspector General was not authorized under §228 of the 1999 Act to
obtain and execute a search warrant of the AirTrans offices. In Truckers United I, the district court held
that the 1999 Act “granted the IG new authority to conduct investigations of motor carriers’ fraudulent and
criminal activities related to DOT’s operations and programs.” Truckers United II, 251 F.3d at 185. On
appeal, however, the D.C. Circuit Court reversed the district court’s judgment, noting that the investigation
in question occurred before the effective date of the amendment, holding that the Act should not be applied
retroactively to that investigation, and declining to deliver an “advisory opinion” on the question of the
amendment’s effect until timely presented. Given the dates on which the activity in this case was
conducted, the question is now ripe for resolution.
The controversy finds its genesis in the original design of the Office of Inspector General, created
by Congress in 1978 to provide the various government agencies with “leadership and coordination” by
allowing the Inspectors General to “recommend policies for activities designed . . . to promote economy,
efficiency, and effectiveness in the administration of, and . . . to prevent and detect fraud and abuse in, such
programs and operations.” 5 U.S.C. App. § 2(2). Because they are appointed by the President and
confirmed by the Senate, 5 U.S.C. App. § 3(a), the Inspectors General are clothed with a degree of
objectivity and independence meant to enhance their principal roles of curtailing bureaucratic waste and
mismanagement and of preventing fraud and abuse within each agency by conducting audits and
investigations its programs and operations. See generally Truckers United II, 251 F.3d at 185-86. Although
supervised by the heads of the various agencies in which they serve, the Inspectors General report directly
to Congress and may not be impeded in their work by the heads of their agencies. 5 U.S.C. App. §§ 3(a),
6(a).
Under the Motor Carrier Safety Act of 1984, the Secretary of the DOT has the authority to ensure
vehicle safety that includes the power to investigate, to subpoena records and witnesses, and to inspect
motor carriers and their documentation. See 49 U.S.C. §§ 502(a), 504(c), 506(a). These activities were
delegated to and carried out by the Federal Highway Administration (FHA) until January 1, 2000, when
regulation of interstate motor carriers was transferred to the newly created Federal Motor Carrier Safety
Administration as part of the 1999 Act. In the same legislation, Congress substantially described the scope
of authority of the DOT’s Inspector General, as follows:
3
Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971) created a federal right of action
for money damages for the violation of constitutional rights. The Supreme Court writing through Justice Brennan for the majority,
acknowledged that although the Fourth Amendment does not allow an award of money damages, “where legal rights have been
invaded, and a federal statute provides for a general right to sue for such invasion, federal courts may use any available remedy
to make good the wrong done." Bivens, 403 U.S. at 396, quoting Bell v. Hood, 327 U.S. 678, 684 (1946). Thus, the Court,
“[h]aving concluded that petitioner's complaint states a cause of action under the Fourth Amendment,” held that petitioner was
“entitled to recover money damages for any injuries he has suffered as a result of the agents' violation of the Amendment.”
Bivens, 403 U.S. at 397.
No. 02-6411 AirTrans v. Mead, et al. Page 5
(a) In General.--The statutory authority of the Inspector General of the Department of
Transportation includes authority to conduct, pursuant to Federal criminal statutes,
investigations of allegations that a person or entity has engaged in fraudulent or other
criminal activity relating to the programs and operations of the Department or its operating
administrations.
(b) Regulated Entities. – The authority to conduct investigations referred to in subsection (a)
extends to any person or entity subject to the laws and regulations of the Department or its
operating administrations, whether or not they are recipients of funds from the Department
or its operating administrations.
106 P.L. 159, 228; 113 Stat. 1748, 1773 (codified at 49 U.S.C. § 354 (2004)).
Although there may have been some dispute between the DOT’s OIG and various trucking
companies concerning the scope of the Inspector General’s investigative authority prior to the 1999 Act,4
there can no longer be any question, given the plain language of § 228. The parties agree that Special Agent
Zschiesche obtained a warrant by telling a magistrate judge that he was investigating “criminal activity
relating to the programs and operations of the Department [of Transportation].” 49 U.S.C. § 354(a). More
specifically, Zschiesche claimed that drivers at AirTrans made false statements in an attempt to cover-up
violations of federal safety regulations. Coinciding with Zschiesche’s claims, the magistrate judge issued
a warrant for the seizure of relevant documents, including “[d]river qualification files and [] personnel
files,” “driver logs” and “[a]ny and all records relating to ICC or DOT numbers and of applications for such
numbers.” And, according to the Government, one individual has pleaded guilty to making false statements
to the Government on a driver employment application as a result of Zschiesche’s investigation. In this
way, Zschiesche confined his investigation and search to “criminal activity relating to the programs and
operations of the Department [of Transportation]” and complied with § 228 of the 1999 Act.
We hold that the district court was correct in determining that the search warrant secured and
executed by Special Agent Zschiesche was validly obtained and that ensuing search did not violate the
plaintiff’s Fourth Amendment rights in any respect. Having found that there was no constitutional violation,
the district court was also correct in granting qualified immunity to the federal defendants and dismissing
the complaint as to them, pursuant to Rule 12(b)(6).
CONCLUSION
Because the district court properly dismissed the complaint in this case as to the federal defendants,
and because the remaining issues raised on appeal are derivative and therefore rendered moot, we AFFIRM
the judgment of the district court as to all defendants.
4
The joint explanatory statement of H.R. 3419: Motor Carrier Safety Improvement Act of 1999 by Rep. Bud Shuster, Rep.
James Oberstar, Rep. Thomas Petri, Rep. Nick Rahall, Sen. John McCain and Sen. Ernest Hollings stated:
This section clarifies Congressional intent with respect to the criminal investigative authority of the Department of
Transportation Inspector General (IG). When the Office of Motor Carrier Safety finds evidence of egregious criminal
violations of motor carrier safety regulations through their regulatory compliance efforts, it refers these cases to the IG's
Office of Investigations. Recently, a U.S. District Court concluded that an investigation undertaken by the IG exceeded
its jurisdiction,see In the Matter of the Search of Northland Trucking Inc. (D.C. Arizona) [sic], finding that the motor
carrier involved was not a grantee or contractor of the Department, nor was there evidence of collusion with DOT
employees. This narrow construction of the IG's authority is not well grounded in law, and the managers are concerned
about the adverse impacts the Order could have on IG operations. This provision, therefore, clarifies Congressional
intent with respect to the authority of the IG, reaffirming the IG's ability and authority to continue to conduct criminal
investigations of parties subject to DOT laws or regulations, whether or not such parties receive Federal funds from the
Department. 145 Cong Rec H 12874 (Nov. 18, 1999) (emphasis added).