Court Opinion

ID: 154364
Source: CourtListenerOpinion
Date Created: 2010-08-14 03:55:36+00
Date Added: 2024-06-11T14:54:30.826290
License: Public Domain

UNITED STATES COURT OF APPEALS
Filed 1/8/97
                               TENTH CIRCUIT

 LOUISE WHITNEY,
      Plaintiff-Appellant,

           v.
                                                     No. 96-2157
 NEW MEXICO GUARANTEE STUDENT                (D.C. No. Civ 96-512 JC/RLP)
 LOAN AGENCY; NEW MEXICO                               (D. N.M.)
 EDUCATIONAL ASSISTANCE
 FOUNDATION; DAVID KING, Chairman
 of the Board of New Mexico Assistance
 Foundation and New Mexico Guarantee
 Student Loan Agency; JOHN MERRET,
 President, New Mexico Educational
 Assistance Foundation and New Mexico
 Guarantee Student Loan Agency; SARAH
 BRANCH, Vice-President, New Mexico
 Educational Assistance Foundation and New
 Mexico Guarantee Student Loan Agency;
 JOE BOWEN, Compliance Officer, New
 Mexico Educational Assistance Foundation
 and New Mexico Guarantee Student Loan
 Agency; JOHN SILCO, Attorney; RANDY
 ESCAMILLO; FRANK FLORES, Agent,
 Federal Bureau of Investigation; RICHARD
 WOODS; PATSY CHAVEZ; CHERYL
 SHACKELFORD; FRAN GATES;
 VALERIE MOODY CALLAWAY;
 JENNIFER MOODY; CRIMESTOPPERS
 ROSWELL, INC.; FIRST SECURITY
 BANK, ALBUQUERQUE; SUNWEST
 BANK OF ALBUQUERQUE; BANK OF
 AMERICA, Albuquerque; NORWEST, INC.;
 UNITED NEW MEXICO BANK; FIRST
 INTERSTATE BANK, NEW MEXICO,
 INC., (Roswell and Albuquerque); FIRST
 INTERSTATE BANK, OKLAHOMA, INC.;
 KOB, INC., and subsidiaries,
        Defendants-Appellees.
                              ORDER AND JUDGMENT*

Before ANDERSON, HENRY, and BRISCOE, Circuit Judges.

      After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of this

appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. Therefore, the case is ordered

submitted without oral argument.

      Plaintiff Louise Whitney, a federal inmate appearing pro se and proceeding in

forma pauperis, filed this civil action seeking damages from defendants for alleged

violations of 28 U.S.C. § 1331, 42 U.S.C. § 1983, and 18 U.S.C. § 1961 et seq., the

Racketeer Influenced and Corrupt Organizations Act (RICO). The district court, acting

sua sponte, dismissed plaintiff's §§ 1331 and 1983 claims without prejudice and

dismissed her RICO claim with prejudice. We affirm the dismissal of the RICO claim

and reverse and remand with directions to dismiss the §§ 1331 and 1983 claims with

prejudice.

      According to her complaint, plaintiff owned and operated a cosmetology college in

Roswell, New Mexico, from the mid-1970's until July 1991. She also owned and

operated a business college in Roswell from 1990 until July 1991. During 1990 and

1991, a majority of students at both colleges received student loans funded through

      *
          This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.

                                            -2-
defendant New Mexico Educational Assistance Foundation (NMEAF) and guaranteed by

defendant New Mexico Guarantee Student Loan Agency (NMGSLA).

       In October 1989, two defendants, an Albuquerque television station and a reporter

for the station, prepared and televised a report about plaintiff and mailed a copy of the

report to the U.S. Department of Education. In December 1989, the Department

conducted a review of the cosmetology college records. In March 1990, the NMEAF

suspended loans to students at the cosmetology college.

       In June 1990, plaintiff fired one of her employees, defendant Richard Woods, for

suspected embezzlement of school funds. Woods reported to defendant Crimestoppers,

Inc., that plaintiff was forging student loan checks. Woods, together with defendants

Patsy Chavez and Cheryl Shackelford, who were also employees of plaintiff, reported

plaintiff's alleged illegal conduct to the FBI. FBI agents and employees of NMEAF

began calling students at plaintiff's colleges "telling them that the school[s] w[ere] being

closed down because Plaintiff was guilty of forging checks." Complaint at 7. The

complaint alleged these actions resulted in decreased enrollment and revenue at both

colleges.

       In July 1990, the NMEAF audited the records of the cosmetology college and, on

August 1, 1990, conducted an administrative hearing. According to plaintiff, the

NMEAF used school records stolen by her former employees. On August 10, 1990, the

NMEAF fully suspended the operation of both colleges.

       During this general time period, the television station and reporter that prepared

and televised the initial report on plaintiff investigated and reported a fire in a building

next to the cosmetology college. According to the complaint, they knowingly and

                                              -3-
intentionally produced and aired false reports that the fire was deliberately set by a former

student of the college.

       On November 14, 1990, plaintiff allegedly discovered defendant First Interstate

Bank had been holding, rather than depositing, checks and student loan refunds delivered

to it by plaintiff and the cosmetology college. Further, the bank had been charging

insufficient fund fees for checks presented for payment on plaintiff's accounts. In

November 1991, plaintiff discovered the bank had unlawfully removed $17,000 from the

college's bank account.

       Plaintiff closed both colleges on June 30, 1991, and eventually filed for bankruptcy

in late 1991. She was subsequently indicted and convicted of embezzlement of

educational grant and student loan funds. Although the record is not clear, plaintiff is

apparently still serving her sentence.

       Plaintiff alleged in count 1 of her complaint that defendant Frank Flores, an FBI

agent, violated her constitutional rights on or about June 25, 1990, by conducting an

unwarranted and unauthorized search and seizure of the college records. In count 2, she

alleged her former employees, acting under the direction of Flores, violated her

constitutional rights on that same date by assisting in the unwarranted search and seizure

of the records. In count 3, she alleged all defendants violated RICO by conspiring to

commit and committing a series of racketeering activities "with the intent to extort

Plaintiff's property interest in her business of teaching cosmetology and business."

Complaint at 9. In count 4, she alleged NMEAF and NMGSLA, together with their

employees, violated her constitutional rights on or about July 1990 by conducting

unwarranted searches and seizures of college records.

                                             -4-
       The district court interpreted counts 1, 2, and 4 as claims for malicious

prosecution. Because the complaint did not allege plaintiff's conviction had been

reversed or otherwise declared invalid, the court dismissed her claims without prejudice

in accordance with Heck v. Humphrey, 114 S. Ct. 2364, 2367 (1994) (to recover damages

for "harm caused by actions whose unlawfulness would render a conviction or sentence

invalid, a § 1983 plaintiff must prove that the conviction or sentence has been reversed

. . ., expunged . . ., declared invalid . . ., or called into question by a federal court's

issuance of a writ of habeas corpus"). The court concluded plaintiff's RICO claim failed

to allege an enterprise on the part of defendants. The court concluded the complaint

failed to plead with particularity "'an agreement to a pattern of racketeering activity, and

an agreement to the statutorily proscribed conduct.'" Memorandum Opinion at 5 (quoting

Brooks v. Bank of Boulder, 891 F. Supp. 1469, 1479 (D. Colo. 1995)).

       Plaintiff takes issue with the district court's interpretation of counts 1, 2, and 4.

Specifically, she asserts she is not challenging her conviction and is therefore not barred

by Heck. As for the RICO claim, count 3, she asserts the court failed to liberally construe

her allegations, particularly in light of the fact that she is proceeding pro se.

       After carefully reviewing the complaint, we disagree with the district court that

counts 1, 2, and 4 set forth claims for malicious prosecution. Instead, we believe they

allege only that certain defendants violated plaintiff's constitutional rights by engaging in

unlawful searches and seizures of college records. It is debatable whether these claims

are barred by Heck. Compare Simpson v. Rowan, 73 F.3d 134, 136 (7th Cir. 1995)

(holding plaintiff's claims relating to illegal search and improper arrest not barred by

Heck because, if successful, they would not necessarily undermine convictions), cert.

                                                -5-
denied 117 S. Ct. 104 (1996), with Schilling v. White, 58 F.3d 1081, 1086 (6th Cir. 1995)

("The fact that a Fourth Amendment violation may not necessarily cause an illegal

conviction does not lessen the requirement [under Heck] that a plaintiff show that a

conviction was invalid as an element of constitutional injury."). However, we find it

unnecessary to decide this question.

       Construing the allegations of the complaint in the light most favorable to plaintiff,

it is clear all of her claims are untimely. Plaintiff's complaint was filed April 3, 1996.

Counts 1, 2, and 4 were filed pursuant to 28 U.S.C. § 1331 and 42 U.S.C. § 1983, and are

subject to New Mexico's three-year statute of limitations for personal injury actions. See

Industrial Constructors Corp. v. Bureau of Reclamation, 15 F.3d 963, 968 (10th Cir.

1994) (noting actions under §§ 1331 and 1983 are "subject to the statute of limitations of

the general personal injury statute in the state where the action arose") (citing Wilson v.

Garcia, 471 U.S. 261 (1985)); N.M. Stat. Ann. § 37-1-8 (1978). Count 3 is subject to

RICO's four-year statute of limitations. See Agency Holding Corp. v. Malley-Duff &

Associates, 483 U.S. 143, 156 (1987). Although we do not attempt to pinpoint a precise

accrual date for each count, it is clear all of plaintiff's claims accrued, at the latest, in

November 1991. See Hunt v. Bennett, 17 F.3d 1263, 1266 (10th Cir. 1994) (§ 1983 claim

accrues when plaintiff knows or has reason to know of injury), cert. denied 115 S. Ct. 107

(1994); Bath v. Bushkin, Gaims, Gaines & Jonas, 913 F.2d 817, 820 (10th Cir. 1990)

(cause of action under RICO accrues as soon as plaintiff discovers, or reasonably should

have discovered, existence and source of injury and that injury is part of a pattern),

overruled in part on other grounds Lampf, Pleva, Lipkind, Prupis & Petigrow v.

Gilbertson, 501 U.S. 350 (1991).

                                                -6-
       In light of our conclusion that the entire complaint is time-barred, we find it

necessary to remand counts 1, 2, and 4 to the district court for dismissal with prejudice.

       AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. The

mandate shall issue forthwith.

                                                   Entered for the Court

                                                   Mary Beck Briscoe
                                                   Circuit Judge

                                             -7-