Case Name: Robert AMATO v. The OFFICE OF the LOUISIANA COMMISSIONER OF SECURITIES, Bridger Eglin in his capacity as Commissioner of Securities, and Harry C. Stansbury in his capacity as Deputy Securities Commissioner
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 1994-10-03
Citations: 644 So. 2d 412
Docket Number: No. 94-CA-0082
Parties: Robert AMATO v. The OFFICE OF the LOUISIANA COMMISSIONER OF SECURITIES, Bridger Eglin in his capacity as Commissioner of Securities, and Harry C. Stansbury in his capacity as Deputy Securities Commissioner.
Judges: Before BARRY, BYRNES and PLOTKIN, JJ.
Reporter: Southern Reporter, Second Series
Volume: 644
Pages: 412–423

Head Matter:
Robert AMATO v. The OFFICE OF the LOUISIANA COMMISSIONER OF SECURITIES, Bridger Eglin in his capacity as Commissioner of Securities, and Harry C. Stansbury in his capacity as Deputy Securities Commissioner.
No. 94-CA-0082.
Court of Appeal of Louisiana, Fourth Circuit.
Oct. 3, 1994.
Rehearing Denied Nov. 15, 1994.
Reasons for Voting to Grant Rehearing Filed by Justice Plotkin Nov. 15, 1994.
James E. Stovall, Jackson and Stovall, Me-tairie, for plaintiff/appellant.
Adrian F. LaPeyronnie III, and Henry G. Sullivan, Jr., Campbell, McCranie, Sistrunk, Anzelmo & Hardy, Metairie, for defendants/appellees.
Before BARRY, BYRNES and PLOTKIN, JJ.

Opinion:
| iBARRY, Judge.
Robert Amato appeals the dismissal of his suit for a declaratory judgment and damages based on the defendants' alleged failure to comply with procedural due process requirements of the Louisiana Securities Law. We hold that defendants did not comply with the Louisiana Securities Law; however, the commissioner is immune from liability when acting under the Louisiana Securities Law or under color of law. We affirm.
FACTS
Amato is a stock broker and specializes in selling "penny stocks" i.e., stocks under $5.00 a share. He testified that in June 1987 he began working for Brennan Ross Securities which ceased operations in October 1990. On October 31, 1990 Amato resigned and in early November 1990 Brennan Ross submitted a form U-5, Uniform Termination Notice for Securities Industry Registration, to the National Association of Securities Dealers (NASD) to notify them of Amato's termination.
laAmato applied for employment with Adams Securities and on November 1, 1990 he completed a form U-4, Form Application For Securities Industry Registration or Transfer. As Amato's prospective employer, Adams Securities submitted the U-4 in November or early December 1990 to register Amato through the NASD. Mr. Daniel Bag-danov, compliance director for Adams Securities, testified by deposition that the U-4 is prepared by the employee but submitted by the firm.
Bagdanov testified that on December 19, 1990 he received a telephone call from Deputy Securities Commissioner Harry Stans-bury. The context of that conversation is disputed, but it is agreed that Stansbury told Bagdanov that Amato's U-4 was incomplete because it failed to disclose a Louisiana investigation of Amato.
According to Amato, he did not have notice that he was the subject of an investigation by the Louisiana Securities Commissioner. Stansbury testified that there is no such thing as notice of an investigation and the Louisiana Commissioner's office does not maintain a file on persons under investigation which Amato could check. However, Stans-bury believed that Amato should have known of the investigation and reported it after Amato signed for a subpoena directed to Brennan Ross Securities.
Bagdanov stated that Stansbury called him on December 28, 1990 and demanded the immediate withdrawal of Amato's U-4, subject to suspension of Adams Securities' license. That testimony was corroborated by Amato, who testified that Bagdanov relayed that information to him shortly after December 28, 1990. Stansbury denied that he demanded withdrawal of the U-4, but ^admitted that he told Bagdanov that failure to withdraw the application would result in the denial of Adams Securities' license. Stansbury testified that the options available to Adams Securities were to amend or withdraw the U-4 or risk non-renewal of the firm's license, a disciplinary measure. Adams Securities filed a form U-5 and withdrew Amato's application.
Amato's legal counsel inquired about Ama-to's application and was told by Stansbury that because Amato's U-4 was withdrawn there was no pending application and nothing for Stansbury to rule upon.
On April 10, 1991 Amato filed this suit for injunctive relief and a declaratory judgment. He amended his petition to pray for damages resulting from the defendants' alleged violation of Amato's due process rights. On April 11, 1991 Amato completed an amended U-4 application and disclosed the Louisiana investigation. The Louisiana Commissioner's Office approved his application shortly thereafter.
The trial court ruled in favor of defendants and Amato appeals. The defendants answer the appeal and contest the trial court's assessment of costs. The issues are whether Amato was denied due process; whether the trial judge erred in his factual findings; and quantum (the trial court rendered judgment for defendants and assessed damages).
DUE PROCESS
Amato argues that he was refused registration without notice or opportunity for a hearing in violation of due process. He contends that Stansbury's insistence upon withdrawal of the U-4 without formal notice effectively refused his registration without affording him an opportunity for a hearing. Defendants respond that the U-4 was voluntarily withdrawn by Adams ^Securities and there was no pending application until the amended U-4 was submitted in April 1991. Thus, there was no refusal or denial of Ama-to's registration.
The regulation of securities in Louisiana is governed in part by the Louisiana Securities Law, LSA-R.S. 51:701 et seq. Section 703 controls the application and registration of a securities salesman.
Under Section 703(C)(4), the registration of a salesman automatically terminates from the time of termination of employment. Am-ato resigned from Brennan Ross October 31, 1990. Brennan Ross ceased operations in October 1990 and submitted the U-5 termination notice in early November 1990. Joseph Long, who was qualified as an attorney and testified for the defense, stated that a salesman's transfer from one broker-dealer to another is usually simultaneous. The NASD Central Registration Depository (a computer filing system) listed the application as a transfer, but there is no evidence that Amato submitted an application for transfer before or simultaneously with the U-5 termination notice. Thus Amato's registration terminated when his employment terminated and Brennan Ross submitted the U-5 termination form on his behalf. His subsequent application was one for re-registration rather than transfer.
Section 703(C)(4) provides that when an individual completes an application for registration,
the commissioner shall register such applicant as a salesman, unless he finds that such applicant is not of good business reputation or does not appear to be qualified by training, experience, or knowledge of the securities business to act as a salesman of securities.
|sIf the commissioner finds that an applicant omitted any material fact required to be stated in the application, that omission may support a finding by the commissioner that the applicant is not of "good business reputation." See § 703(E)(2) and 704(A)(1). That would presumably be sufficient ground to refuse to register an applicant under § 703(C)(3).
The Louisiana Securities Law clearly contemplates that an applicant be afforded notice and an opportunity for a hearing prior to refusal of his registration. Section 703(E)(1) provides in pertinent part:
If, after affording an applicant a hearing or an opportunity for a hearing as provided in R.S. 51:716, the commissioner finds that there are sufficient grounds to refuse to register such applicant as provided in this Section, he shall issue an order refusing to register such applicant. [Emphasis added]
Section 716(A) requires:
Before entering an order refusing to register any person under R.S. 51:703, . the commissioner shall promptly send to such person and, if such person is a salesman to the dealer who employs or proposes to employ such salesman a notice of opportunity for hearing. [Emphasis added]
Section 716(B) provides that the notice and hearing shall be in the manner prescribed in the Administrative Procedure Act, LSA-R.S. 49:950 et seq.
The defendants argue that Sections 703 and 716 are inapplicable because Adams Securities withdrew Amato's U-4 application and there was no refusal of registration. The trial judge apparently agreed and stated in his reasons:
1 fiSince Adams Securities withdrew the plaintiff's U4 by filing a U5, it is questionable whether (the Administrative Procedure[s] Act) ever applies.
Stansbury acknowledged that denial could be made only through the statutory process and testified that he used the informal procedure for informational purposes. Joseph Long testified that the informal procedure involving withdrawal of an incorrect application is common across the United States and avoids the formal process of denial.
Neither the Louisiana Securities Law nor the Administrative Procedure Act sets forth an informal procedure for refusal of registration, particularly where, as here, the validity of the underlying facts are in dispute. Compare Louisiana State Board of Medical Examiners v. Bertucci, 593 So.2d 798 (La.App. 4th Cir.1992), which recognized the existence of a legislatively mandated informal compliance procedure within the Administrative Procedure Act. In Bertucci this Court considered the requirements for revocation, suspension, annulment or withdrawal of an existing license under LSA-R.S. 49:961(0) and held that, in addition to the basic procedural due process elements of notice and an opportunity for a hearing, § 961(C) required that the licensee be given an opportunity to show compliance prior to the institution of formal proceedings. This Court stated that "(t)he purpose of the additional compliance opportunity of subsection (C) is to 'short circuit' the procedure." Id. at 801. Unlike Bertucci, Amato's license was terminated before his U-4 was submitted and § 961(C) is not applicable. However, Bertucci clearly indicates that an informal procedure is appropriate when statutory requirements are met.
An informal procedure under the Louisiana Securities Law must comply with that law. It must be established and promulgated as required by statute 17and cannot be used to circumvent the statutorily imposed requirements for notice and an opportunity for a hearing which are an integral part of the formal process of denial.
The procedure used by Stansbury was not promulgated as required by law. The Louisiana Securities Law grants to the Commissioner of Securities the power to make "such rules and regulations from time to time as he may deem necessary and proper for the enforcement of (the Louisiana Securities Law)." Such rules and regulations shall be adopted, promulgated and contested as provided in the Administrative Procedure Act. LSA-R.S. 51:710(D).
The Administrative Procedure Act states that each agency which engages in rulemak-ing shall:
Adopt rules of practice setting forth the nature and requirements of all formal and informal procedures available.
LSA-R.S. 49:952(2).
Stansbury testified that there is no written procedure for reviewing a salesman's license. There is no operations manual and the state's statutes provide the only guide. There is no evidence of a rule of practice setting forth the nature and requirements of the informal procedure utilized by Stansbury to refute the sufficiency of Amato's U-4 application or to obtain its withdrawal. That clearly violates the procedure for adopting rules under the R.S. 51:710 and R.S. 49:952(2).
Moreover, Stansbury's call for the withdrawal of Amato's application for license subject to non-renewal of Adams Securities' license without providing an opportunity to show that the application complied with the requirements Igexceeded the purported purpose of avoiding the formal process of denial; it circumvented the requirements of notice and opportunity for a hearing statutorily afforded to an applicant prior to refusal of his license, and infringed on Amato's right to procedural due process.
IMMUNITY
Defendants filed an exception of lack of jurisdiction based on immunity and the trial court denied that exception. Defendants also assert the affirmative defense of absolute and qualified immunity based on the Louisiana Securities Law (LSA-R.S. 51:720) and the discretionary acts doctrine (LSA-R.S. 9:2798.1). The judgment does not address immunity and it is only briefly addressed by the parties. This is a ease of first impression.
The Louisiana Securities Law provides immunity of the commissioner from suit. LSA-R.S. 51:720 provides:
For any action taken or any proceeding had under this Part or under color of law, the commissioner shall be immune from liability and suit to the same extent that any judge of any court of general jurisdiction in this state would be immune.
Louisiana jurisprudence on judicial immunity mirrors the federal doctrine. Moore v. Taylor, 541 So.2d 378, 381 (La.App.2d Cir.1989). For a judge, an absolute immunity from liability and damages attaches when the judge performs a function that is integral to the judicial process. Johnson v. Foti, 583 So.2d 1210, 1212 (La.App. 4th Cir.1991); see Moore v. Taylor, 541 So.2d at 381. Although immunity does not attach to an administrative (as opposed to judicial) act, Forrester v. White, 484 U.S. 219, 108 S.Ct. 538, 98 L.Ed.2d 555 (1988), the question of whether an act is judicial in character does not depend on whether it is discretionary or ministerial. Johnson v. Foti, 583 So.2d at 1212. [9'Immunity is justified and defined by the functions it protects and serves, not by the person to whom it attaches." Forrester v. White, 484 U.S. at 227, 108 S.Ct. at 544. [Emphasis in original]
Applying these principles to the Securities Commissioner, absolute immunity from damages attaches to an action that is integral to the function of the commissioner's office. The evaluation of an application and registration of a securities salesman are integral to the effective function of the commissioner's office. Moreover, the immunity is justified because of special problems which might arise if the commissioner of such a highly regulated industry as the securities industry were exposed to liability under the Louisiana Securities Law. Compare Forrester v. White, 484 U.S. at 223, 108 S.Ct. at 542, in which the Supreme Court discussed the inhibiting and perverse incentives that result from the threat of liability on some governmental officials. Therefore, we hold that defendants are immune from civil liability.
Pulliam v. Allen, 466 U.S. 522, 104 S.Ct. 1970, 80 L.Ed.2d 565 (1984), cited by the dissent, merely holds that judicial immunity is not a bar to the award of attorney fees under 42 U.S.C. § 1988 (Civil Rights Attorney Fees Awards Act of 1976) where the judge is not immune from the underlying relief on which the award is premised. That underlying relief in Pulliam was not in the form of damages, but rather, § 1983 collateral injunctive relief against a state magistrate who was setting bail for nonjailable misdemeanors. Pulliam has no bearing on our analysis which recognizes limitations on absolute judicial immunity.
Even if defendants were not absolutely immune from liability, the doctrine of qualified immunity shields them from liability. A government | ipofficial who performs a discretionary function is generally shielded from liability for civil damages insofar as the official's conduct "does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Moresi v. Department of Wildlife & Fisheries, 567 So.2d 1081, 1085 (La.1990), quoting Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982); Malina v. Gonzales, 994 F.2d 1121, 1125-26 (5th Cir.1993).
The qualified immunity inquiry "focuses on whether the contours of the right allegedly violated were sufficiently clear such that a reasonable official would understand that his action violated that right." Malina v. Gonzales, 994 F.2d at 1125-26. An official cannot reasonably be expected to know at the time an action occurs that the law forbade conduct that was not previously identified as unlawful. Moresi v. Department of Wildlife & Fisheries, 567 So.2d at 1085. Compare LSA-R.S. 9:2798.1, which delineates the discretionary acts doctrine for government entities and employees generally and reads in pertinent part:
B. Liability shall not be imposed on public entities or their officers or employees based upon the exercise or performance or the failure to exercise or perform their policy-making or discretionary acts when such acts are within the course and scope of their lawful powers and duties.
There is no recorded precedent for the withdrawal of an application which the deputy securities commissioner ostensibly believed was inadequate. We hold that Stans-bury could not reasonably be expected to know that his action violated Amato's rights. Therefore, his action is shielded by qualified immunity.
lnThe dissent attempts to distinguish Mor-esi as a federal civil rights action and asserts that the proper test for a qualified immunity is set forth in Rick v. State, Department of Transportation & Development, 630 So.2d 1271 (La.1994); and Simeon v. Doe, 618 So.2d 848 (La.1993), citing Fowler v. Roberts, 556 So.2d 1 (La.1989), on rehearing.
Amato alleged in his Amended Petition "(t)hat said acts of defendants also constitute deprivation of petitioner's civil rights in violation of state and federal constitutional and statutory rights .and he argues in brief that he "is entitled to recover damages under 42 U.S.C. § 1983 for deprivation of his civil rights." Moresi is applicable.
The two prong test set forth in Rick and in Simeon is not appropriate in this case. That test is valid for an analysis of the discretionary immunity for public entities and employees under R.S. 9:2798.1, but 51:720 grants to the commissioner immunity "to the same extent that any judge of any court of general jurisdiction in this state would be immune." [Emphasis added]
The Louisiana Supreme Court noted that The discretionary function exception to state governmental liability established by (9:2798.1) is essentially the same as the exception in the Federal Tort Claims Act [28 U.S.C. § 2680(a)],
Fowler v. Roberts, 556 So.2d at 15.
Section 2680(a) of the FTCA grants a discretionary function exception to liability of a government employee. The FTCA contains a separate section which grants judicial immunity to liability under the Act. Specifically, 28 U.S.C. § 2674 provides in pertinent part:
With respect to any claim under this chapter, the United States shall be entitled to assert any defense based upon judicial or legislative immunity which | ^otherwise would have been available to the employee of the United States whose act or omission gave rise to the claim, as well as any other defenses to which the United States is entitled.
Rick v. State, Department of Transportation & Development, Simeon v. Doe and Fowler v. Roberts did not involve judicial immunity, and under the statutory mandate the immunity in this case must be defined according to the extent of judicial immunity. It is further noted that the federal cases cited in Rick and in Fowler (in which the Louisiana Supreme Court first enumerated the two prong test for 9:2798.1) did not involve judicial immunity. Rather, the majority were cases brought under the FTCA.
COSTS
Defendants answer the appeal and claim the trial court abused its discretion by ordering each party to bear its own costs.
The trial court has great discretion in awarding costs and may render judgment as it considers equitable. LSA-C.C.P. art. 1920. Earles v. Ahlstedt, 591 So.2d 741 (La.App. 1st Cir.1991). The assessment of costs against a prevailing party has been considered an abuse of discretion absent proof that the prevailing party incurred costs pointlessly or engaged in other conduct that justified the assessment of costs against it. Flair v. Board of Commissioners of Orleans Levee Board, 411 So.2d 614, 618 (La.App. 4th Cir.1982); Polk Chevrolet, Inc. v. Webb, 572 So.2d 1112, 1116 (La.App. 1st Cir.1990), writ den. 575 So.2d 394 (La.1991). Nevertheless, because Amato's first assignment of error on appeal has some merit, we do not disturb the trial court's assessment of costs. See Holdsworth v. Holdsworth, 621 So.2d 71 (La.App.2d Cir.1993).
Jis CONCLUSION
The defendants did not comply with the Louisiana Securities Law and violated Ama-to's right to due process. However, the commissioner acted in good faith and is shielded from liability under the Louisiana Securities Law or color of law. We pretermit Amato's remaining assignments of error.
AFFIRMED.
BYRNES, J., concurs with reasons.
PLOTKIN, J., concurs in part, dissents in part with written reasons.
. Bagdanov did not testify at trial. References to Bagdanov's testimony refer to his deposition which was submitted in evidence.
. Stansbury acknowledged on cross examination that the Louisiana Securities Law does not specifically require that a pending state investigation be reported on an application. See LSA-R.S. 51:703(C)(1). However, the U-4 form does require that an investigation be reported.
. The cases relied upon by the dissent are all distinguished above and are inapplicable. The constitutionality of LSA-R.S. 51:720 is not before this Court.