Amy's Enterprises v. Sorrell

Annotate this Case
Amy's Enterprises v. Sorrell (2001-519); 174 Vt. 623; 817 A.2d 612

[Filed 18-Dec-2002]

                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 2001-519

                            SEPTEMBER TERM, 2002

  Amy's Enterprises d/b/a	        }	APPEALED FROM:
  Vermont Breakopen and Bingo Supplies	}
       v.	                        }	Washington Superior Court
  William Sorrell, et al.	        }		
                                                Trial Judge: Mathew J. Katz

             In the above-entitled cause, the Clerk will enter:

       ¶ 1.    Plaintiff appeals a decision of the Washington County
  Superior Court dismissing its claims against the State of Vermont and
  various defendants employed by the State.  Defendants were sued in their
  official capacity and individually.  They are: William Sorrell, Attorney
  General of the State of Vermont; Michael Hogan, Commissioner of the
  Department of Liquor Control (DLC); William Griffin, Chief Assistant
  Attorney General; Albert Elwell, Chief Inspector for the DLC;  Paula
  Niquette, Inspector for the DLC; and Paul Farnham, Inspector  for the DLC. 
  Relying principally on the well-established doctrines of sovereign and
  official immunity, we affirm.

       ¶ 2.  In January 2001, in the course of an investigation into
  illegal gaming tickets, liquor control inspectors Farnham and Niquette
  entered the Eagle Lodge in South Burlington.  The Eagle Lodge relinquished
  to the inspectors certain break-open tickets which had been purchased from
  Amy's Enterprises.  In the course of that exchange, plaintiff alleges that
  Inspector Farnham told the proprietor of the Eagle Lodge that the tickets
  distributed by plaintiff were "probably illegal."  This characterization is
  the fountainhead from which plaintiff's claims against the State, its
  officials, intermediate supervisors, and inspectors, flowed. 

       ¶ 3.  Under Rule 12(b)(6) dismissal should be affirmed where there
  exist no facts or circumstances that would entitle the plaintiff to relief. 
  See Powers v. Office of Child Support, ___ Vt. ___, 795 A.2d 1259, 1263
  (2002). Plaintiff claims that the superior court erred in holding that
  sovereign and official immunity protects Defendants from claims of tortious
  interference with business relations, and slander.  He also claims that the
  superior court improperly relied on such immunity when it dismissed his 42
  U.S.C. § 1983 claims.  
       ¶ 4.  Sovereign immunity precludes suits against the State
  for acts essentially governmental in nature, unless that immunity is
  expressly waived.  See Denis Bail Bonds, Inc. v. State, 159 Vt. 481,
  484-85, 622 A.2d 495, 497 (1993).  In certain circumstances, the State has
  waived its immunity by statute.  See 12 V.S.A. § 5601.  Sovereign immunity
  also confers immunity on the State from liability for torts committed by
  its officers or employees.  See Libercent v. Aldrich, 149 Vt. 76, 80, 539 A.2d 981, 983 (1987); see also Cronin v. State, 148 Vt. 252, 257, 531 A.2d 929, 932 (1987) (sovereign immunity protecting the state attaches to all
  actions of the state and its employees acting 


  within the scope of their employment), overruled on other grounds by
  Libercent, 149 Vt. at 80, 539 A.2d  at 983 (1987).  

       ¶ 5.  The first issue to be addressed is the claim against the
  State, and whether the State has waived its sovereign immunity.  The
  analysis required for determining whether immunity has been waived requires
  that the elements pled against the state be sufficiently comparable to the
  elements of an action for which a private person could be liable.  See
  Powers, __ Vt. at ___, 795 A.2d  at 1264 (finding no analog between the
  activities of Office of Child Support and a private person).  If no such
  analog to private action exists, suit against the state is precluded. 
  Denis Bail Bonds, 149 Vt. at 486, 622 A.2d  at 498; see also LaShay v.
  Dep't. of Soc. Serv., 160 Vt. 60, 68, 625 A.2d 224, 229 (1993) (government
  is immune when no private analog exists).  The plaintiff failed to
  establish any analogy between the regulation, investigation and enforcement
  of liquor and gambling laws and some act of a private individual that could
  give rise to a cause of action. The responsibilities of the Department of
  Liquor Control and the Attorney General's office in investigating and
  regulating dram shops and break-open ticket distributors are uniquely
  governmental.  Without an analogy to private action, a claim may not lie
  against the State.  Even if such an analogy had been made, such claims are
  still barred by 12 V.S.A. § 5601 (e)(1), (6).  Section 5601(e)(1) provides
  an exception to the State's waiver of sovereign immunity for "[a]ny . . .
  act or omission of an employee of the state exercising due care, in the
  execution of a statute or regulation, whether or not such statute or
  regulation is valid," and § 5601(e)(6) excepts "any claim arising out of .
  . . misrepresentation . . . or interference with contractual rights."  

       ¶ 6.  Against the intermediate officials and the liquor
  inspectors, plaintiff alleges claims arising from negligent supervision,
  slander and tortious interference with a business relationship.  First,
  plaintiff maintains that Chief Assistant Attorney General Griffin
  supervised the investigation and, in the course of that supervision,
  refused to authorize the release of the seized gaming tickets.  The only
  allegation against Chief Inspector Elwell is that he supervised inspectors
  Farnham and Niquette.  Plaintiff alleges that defendant Farnham committed
  slander when he warned the proprietor that plaintiff's other break-open
  tickets were "probably illegal." Additionally, plaintiff maintains that the
  seizure of the tickets constituted tortious interference with a business
  relationship, and that the interference gave rise to a 42 U.S.C. § 1983
  claim based on a violation of due process.   

       ¶ 7.  Generally, claims based on the acts or omissions of an
  employee of the state acting within the scope of employment lie against the
  state, not against the individual employees who allegedly committed the
  harm.  12 V.S.A. § 5602(a).  However, there is an exception in the Vermont
  Tort Claims Act which allows claims to be brought against an employee for
  gross negligence or willful misconduct, even if the conduct occurred within
  the scope of employment.  See id. § 5602(b).  In order to maintain a claim
  of gross negligence, a plaintiff must present facts that show an individual
  defendant "heedlessly and palpably violated of a legal duty owed to
  plaintiff."  See Powers v. Office of Child Support, ___ Vt. at ___, 795 A.2d  at 1266 (2002).  No such allegation is made against the individual
  defendants in this case.  By failing to assert facts sufficient to meet the
  requirements of § 5602, plaintiff failed to state a claim against the
  individual defendant officials upon which a court may grant relief.  
       ¶ 8.  With respect to defendant investigators, liquor control
  inspectors Farnham and Niquette, plaintiff's claims, including those of
  slander and tortious interference, are also barred by qualified immunity. 
  In applying qualified immunity, the general rule is that lower level
  officers, employees and agents are immune only when they are: "1) acting
  during the course of their employment and 


  acting, or reasonably believe they are acting, within the scope of their
  authority; 2) acting in good faith; and 3) performing discretionary, rather
  than ministerial acts." Libercent, 149 Vt. at 81, 539 A.2d  at 984. 
  Plaintiff asserts that defendants exceeded the statutory authority of the
  Liquor Control Board by seizing the break-open tickets.  However, this
  Court has confirmed the power of the Liquor Control Board to police
  gambling on premises where liquor is served.  In re Con-Elec., 168 Vt. 576,
  577, 716 A.2d 822, 824 (1998).  In that case, we held that as Liquor
  Control Board Regulation 9, "merely prohibits what the Legislature has
  proscribed . . . its promulgation and enforcement did not exceed the
  Board's authority."  Id at 577, 716 A.2d  at 824.  

       ¶ 9.  This Court has adopted the federal standard for good faith. 
  Cook v. Nelson, 167 Vt. 505, 509, 712 A.2d 1362, 384 (1998).  The
  determination of good faith depends upon the objective reasonableness of
  the official's conduct.  "[I]f the official's conduct does not violate
  clearly-established rights of which a reasonable person would have known,
  the official is protected by qualified immunity from tort liability." Id. 
  Such acts are objectively reasonable if an officer of reasonable competence
  could have made the same choice in similar circumstances. Long v.
  L'Esperance, 166 Vt. 566, 571, 701 A.2d 1048, 1052 (1988); see Malley v.
  Briggs, 475 U.S. 335, 341 (1986).  In light of the various protections
  afforded to officials in the context of an investigation and the nature of
  the comments made by Inspector Farnham to the bartender at the Eagle Lodge,
  the inspectors' behavior was not objectively unreasonable.  In the absence
  of any clearly established rules governing this situation, it cannot be
  said that no reasonable officers would have acted in the same manner. 

       ¶ 10.  A discretionary function is an act which requires the
  exercise of judgment in its performance, or, in the alternative, where
  there is no specifically dictated course of action for the employee to
  follow.  See Searles v. Agency of Transportation, 171 Vt. 562, 563, 762 A.2d 812, 814 (2000) (mem.) (adopting standard of U.S. v. Gaubert, 499 U.S. 315, 322-23 (2000)).  This Court has previously held that decisions made in
  the course of investigations are discretionary.  See Levinsky v. Diamond,
  151 Vt. 178, 191, 559 A.2d 1073, 1082 (1989)  (publicity decisions made by
  assistant attorneys general in course of investigation were discretionary),
  overruled on other grounds by Muzzy v. State, 155 Vt. 279, 583 A.2d 82
  (1990).  The investigation of potentially criminal conduct related to
  locations where alcohol is distributed is fundamental to the duties of
  liquor control inspectors.  As it requires substantial judgment in terms of
  means and manner, the act of investigation is a discretionary one. 
  Otherwise, the ability of public officers to perform their obligations
  would be impermissibly inhibited.  Without an allegation that inspectors
  Farnham and Niquette acted with anything but good faith and due care in the
  performance of a discretionary act, they are subject to qualified immunity
  for actions undertaken in the course of their investigation and
  consequently shielded from the claims of plaintiff.
       ¶ 11.  The superior court held plaintiff had conceded the § 1983
  claims by not raising them in its response to the state's motion to
  dismiss.  Failure to respond to a Rule 12(b)(6) motion to dismiss for
  failure to state a claim does not necessarily warrant granting the motion
  for dismissal, unless the complaint does not sufficiently state a claim
  upon which relief can be granted.  In order for this Court to consider the
  claims of a litigant, they must be adequately raised below.  This Court
  will not reverse a lower court when a party's failure to raise an issue
  denied that court the opportunity to consider it.  Duke v. Duke, 140 Vt.
  543, 545, 442 A.2d 460, 462 (1982).  In reviewing a Rule 12(b)(6) motion,
  this Court assumes all factual allegations pleaded in the complaint are
  true.  Richards v. Town of Norwich, 169 Vt. 44, 48-49, 726 A.2d 81, 85
  (1999).  Such motions assume the truth of a pleading's factual allegation
  and tests only its legal sufficiency.  See McCall v. Pataki, 


  232 F.3d 321, 322 (2nd Cir. 2000) (dismissal merely for failing to respond
  to a 12(b)(6) claim was error).  Even if the trial court may have erred in
  dismissing the § 1983 claims as waived, which we do not decide, this Court
  may rely on alternative grounds in affirming that decision.  See In re
  Handy, 171 Vt. 336, 343, 764 A.2d 1226, 1234 (2000). 

       ¶ 12.  While plaintiff's claims against defendants as individuals
  under 42 U.S.C. § 1983 fall short in the pleadings because of defendants'
  eligibility for qualified immunity, they also fail because the plaintiff no
  longer had a possessory interest in the seized tickets.  In Levinsky v.
  Diamond, we recognized that a loss to prospective business operations is
  too speculative to support a § 1983 claim.  151 Vt. at 196-97, 559 A.2d  at
  1085.  In that case, plaintiff alleged, among other things, that defamatory
  comments made by officials in the Attorney General's office interfered with
  his potential business.  A plaintiff cannot sustain a § 1983 action without
  indicating that he has been deprived of a right secured to him by the
  Fourteenth Amendment.  Paul v. Davis, 424 U.S. 693, 713 (1976).  In the
  case at hand, plaintiff maintains that seizure of tickets which he no
  longer owned, from an entity with which he conducted business and was not
  otherwise connected, coupled with a comment made by an inspector in the
  course of an investigation, interfered with his business prospects because
  the investigator knew or should have known that such a statement from a law
  enforcement official could have a devastating effect on plaintiff's future
  business.  Such an attenuated interest is too speculative to support a
  claim for relief.  Accordingly, as noted above, defendant officials were
  subject to qualified immunity, and the State of Vermont has not waived its
  sovereign immunity in cases of this kind.


                                       BY THE COURT:

                                       Jeffrey L. Amestoy, Chief Justice

                                       John A. Dooley, Associate Justice

                                       James L. Morse, Associate Justice

                                       Denise R. Johnson, Associate Justice

                                       Marilyn S. Skoglund, Associate Justice