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
Free access — add to your briefcase to read the full text and ask questions with AI
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-