Lawyer Acquitted of Fraud Can’t Sue Prosecutors

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By Samson Habte

Dec. 12 — A lawyer who was acquitted of criminal fraud charges can’t bring federal civil rights claims against the prosecutors and state officials who were involved in her arrest and prosecution, a divided panel of the U.S. Court of Appeals for the Seventh Circuit held Dec. 8 ( Katz-Crank v. Haskett , 2016 BL 408598, 7th Cir., No. 15-1809, 12/8/16 ).

The ruling was a victory for a group of officials who were sued by an attorney who saw her “reputation disgraced and her law practice in shambles” after she was charged with abetting the fraud of a client she tried to blow the whistle on.

Voting 2-1, the court said the defendants—who included former Indiana Secretary of State and U.S. Rep. Todd Rokita—were immune from liability to plaintiff Sherry Katz-Crank, who after her acquittal sued them for violating her civil rights.

Judge Diane S. Sykes said the defendants were “protected by robust immunity from federal tort liability” for acts that fell within the scope of their official duties.

And even if they were not immune, Katz-Crank failed to identify a “constitutional basis” for her claims, Sykes said in an opinion joined by Judge Kenneth Francis Ripple.

Judge Richard A. Posner dissented in part. He said Katz-Crank plausibly alleged that she was deprived of property under the Due Process Clause because of allegedly defamatory statements some defendants made to the press and her legal clients.

‘Close Call.’

Even the judges in the majority acknowledged that it was a “close call” for them to find the defendants immune from liability for the allegedly “false and inflammatory public statements” they made about Katz-Crank after her arrest in 2008.

The arrest was tied to Katz-Crank’s representation of a client in the funeral services industry who embezzled $22 million from cemetery trust funds. Katz-Crank contacted state authorities to offer her cooperation after learning her client was under investigation, but the call wasn’t returned and prosecutors later charged her with aiding and abetting the fraud.

Katz-Crank sued several state officials and prosecutors, alleging they violated her civil rights under 42 U.S.C. § 1983 by, among other things, indicting her without probable cause and making false and inflammatory statements about her to the press and her clients.

Sykes said the Eleventh Amendment barred claims Katz-Crank brought against the defendants in their official capacities.

The claims against the defendants in their individual capacities also failed, the court said, because the prosecutors and state officials were “protected by robust immunity from federal tort liability” for acts that fell within the scope of their official duties.

The “only close call” involved the allegations about “false and inflammatory public statements in press releases, which arguably falls outside the immunity shield” because the defendants were acting as investigators when they made the statements, Sykes said.

No Constitutional Basis

But although Katz-Crank’s allegations “may form the basis of an actionable defamation claim,” she made “no effort to fit them within any recognized constitutional doctrine,” Sykes said.

“Katz-Crank has not alleged that the defendants altered her legal status in some way, or impaired her employment prospects with the government, or deprived her of a right she once held, or revoked a license ‘recognized and protected by state law,’” Sykes said.

The complaint does allege that the defendants damaged Katz-Crank’s reputation, but reputational harm “is neither liberty nor property ‘by itself sufficient to invoke the procedural protection of the Due Process Clause,’” Sykes said, addressing one possible constitutional basis for Katz-Crank’s claim.

‘Clumsy,’ but Cognizable

Posner said he would have allowed Katz-Crank to go forward with the claims tied to the allegedly defamatory statements made about her.

Posner said that although the complaint was “clumsy,” the defamation claims were tied to conduct that some of the defendants committed while acting as investigators. “The absolute prosecutorial immunity here invoked by the defendants does not extend to investigators,” Posner noted.

Posner also rejected the contention that Katz-Crank didn’t identify a constitutional basis for her defamation claim.

“The wrinkle in this case is that the plaintiff is self-employed,” Posner said. “Were she employed and lost her job, then according to [ Paul v. Davis, 424 U.S. 693 (1976)] the loss might count as a deprivation of property in violation of the Fourteenth Amendment and thus of 42 U.S.C. § 1983.”

“But to be self-employed, and lose one’s self-employment (or a great deal of it) by being defamed, is the equivalent of being fired or suffering a drastic reduction in pay,” Posner said.

Derek Wilczynski of Blanco Wilczynski PLLC, Troy, Mich., represented Katz-Crank.

The Indiana Attorney General’s Office and the Indianapolis Office of Corporation Counsel represented the defendants.

To contact the reporter on this story: Samson Habte in Washington, D.C. at shabte@bna.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bna.com

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