Columbian Fin. Corp. v. Bowman

314 F.Supp.3d 1113

COLUMBIAN FINANCIAL CORPORATION, Plaintiff

v.Michelle W. BOWMAN, in her official capacity as Bank Commissioner of Kansas, et al, Defendants.

Case No. 14–2168–SAC

United States District Court, D. Kansas.

Signed May 17, 2018

John M. Edgar, Matthew J. Limoli, Pro Hac Vice, Edgar Law Firm, LLC, Michael D. Pospisil, Pospisil Swift LLC, Kansas City, MO, for Plaintiff.

Brock Roehler, Office of the State Bank Commissioner, Jay Philip Van Blaricum, Kansas Board of Healing Arts, Stanley R. Parker, Topeka, KS, Jay Douglas Befort, Befort Law Firm, LLC, Kansas City, MO, for Defendants.

Sam A. Crow, Senior Judge

MEMORANDUM AND ORDER

The plaintiff Columbian Financial Corporation ("CFC"), as the sole shareholder of Columbian Bank and Trust Company ("Bank"), originally brought this action with the Bank against the Office of the Kansas State Bank Commissioner ("OSBC") and four commission officials under 42 U.S.C. § 1983. The action principally alleged denial of due process from the OSCB declaring the Bank insolvent, seizing the Bank's assets, and doing so without providing adequate constitutional protections and remedies before and after the declaration and seizure. Twice this court granted motions to dismiss in favor of the defendants, and twice the Tenth Circuit returned the case for further consideration. An understanding of these two instances is helpful background for framing the pending dispositive motion.

On the first motion to dismiss, the district court agreed that abstention under Younger v. Harris , 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), required the plaintiff's claims for injunctive and declaratory relief to be dismissed without prejudice due to the pending state court matters. ECF# 30, pp. 12–13. The court dismissed the Bank as not a person capable of bringing a § 1983 action and dismissed the OSBC as not a person amenable to suit under § 1983. Id. at pp. 13–14, 18. The court held that the defendant Edwin G. Splichal was entitled to absolute immunity for his role in presiding over the 2012 administrative hearing, in determining what discovery to allow, and in deciding the parties' cross-motions for summary judgment. Id. at 22–25. Finally, on grounds of qualified immunity, the court dismissed the individual capacity actions against the defendant J. Thomas Thull, the former bank commissioner who issued the declaration of insolvency; the defendant Deryl K. Schuster, the bank commissioner coming into office in April 2014; and the defendant Judi Stork, the acting bank commissioner and deputy bank commissioner during the relevant period. ECF# 30, pp. 25–38. The plaintiffs appealed the Younger abstention ruling and the qualified immunity rulings in favor of the defendants Stork and Thull.

While this order was on appeal, the circumstances of this case for Younger abstention changed when the pending state proceedings terminated in favor of the defendants. Consequently, the Tenth Circuit "vacate[d] dismissal of the equitable claims and remand[ed] these claims to the district court so that it can reconsider them without the need to abstain now that the state proceedings have ended." Columbian Financial Corp. v. Stork , 811 F.3d 390, 395 (10th Cir. 2016) (citation omitted). The circuit court de novo reviewed and affirmed the district court's dismissal of the defendants Stork and Thull based on qualified immunity. The circuit court also found that the seizure of the bank's assets and the appointment of a receiver without a prior hearing did not violate a clearly established right and that the delay in the post-deprivation hearing did not violate a clearly established right.

On remand, the plaintiff filed an amended complaint with leave of the court granted over the defendants' objections. ECF## 63 and 66. The defendants then filed their next motion to dismiss the first amended complaint asserting the lack of jurisdiction and other legal defenses, including the failure to state a claim for relief. ECF# 69. Their first issue was that the plaintiff's remaining equitable action against the defendants in their official capacities was barred by the Eleventh Amendment. The defendants specifically argued the plaintiffs were not seeking prospective relief against an ongoing violation within the exception created by Ex Parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). Instead, the plaintiffs were seeking "backward-looking relief" against OSBC's order of seizure and receivership. ECF# 70, pp. 11–16. Based on the parties' arguments as briefed and presented to it, the district court granted the defendants' motion to dismiss for Eleventh Amendment immunity and did not address the balance of the issues presented in the defendants' motion to dismiss.

On appeal, the Tenth Circuit construed the plaintiff's amended complaint to "allege[ ] an ongoing violation of federal law and [to] seek[ ] from the federal court only prospective relief and other relief ancillary thereto." Columbian Financial Corporation v. Stork , 702 Fed. Appx. 717, 721 (10th Cir. 2017). The panel understood the plaintiff to be alleging an ongoing due process violation from the denial of "a hearing before an impartial hearing officer after sufficient opportunity for discovery." Id.¹ Citing precedent that involved claims such as ongoing exclusion from school, from employment, and from an approved vendors' list, as well as the ongoing denial of a hearing in each instance, the panel saw no distinction between them and the plaintiff's claim here of just the ongoing denial of a constitutionally adequate due process hearing. Id. at 721–22. The panel believed that an injunction giving the plaintiff another hearing fell within the Young exception. Finally, on the question of whether any meaningful relief was available here pursuant to the Young exception, Columbian argued for the first time on appeal:

Columbian contends that its right to a constitutionally adequate hearing exists independently of its ability to have the Bank's assets restored. Moreover, it maintains that a partial remedy is still available. Columbian notes that, as a consequence of the seizure, it lost not only the Bank's assets but also the Bank's charter to conduct future business in Kansas. And furthermore, Columbian argues that the Declaration's insolvency finding could be held against in a future application for a Kansas banking charter. Thus, Columbian argues that an opportunity to clear its name in a proper due process hearing would have "some effect in the real world" sufficient to avoid mootness of its procedural due process claim. (citation omitted).

702 Fed. Appx. at 723. The Tenth Circuit held that "Columbian identifies injuries that could be redressed by its requested relief—specifically, a new hearing with adequate procedural protections—which could overturn the insolvency finding and restore the Bank's charter." Id. The district court's judgment was reversed and remanded for further proceedings consistent with the Circuit's order and judgment.

Now on remand, there has been a substitution of defendants with Michelle W. Bowman replacing Deryl K. Schuster for the official capacity action against the Bank Commissioner and with the titled position of Deputy Bank Commissioner replacing Judi Stork. ECF# 101. The plaintiff has propounded discovery requests for which the defendant Bowman sought an extension of the response deadline and then sought a stay after filing a dispositive motion. ECF## 102, 104 and 106. The Magistrate Judge denied the stay request, and review of that ruling is also pending before this court. ECF# 121. The district court has entered an order staying discovery pending the filing of this order. ECF# 130. With the matters fully briefed and before the court, the court takes up the defendant Bowman's motion for summary judgment, or in the alternative, judgment on the pleadings. ECF# 104.

Judicial Notice

In her motion, the defendant asks the court to take judicial notice of all proceedings in this litigation and all related commission proceedings and state court proceedings. The court may take judicial notice of state court documents. See Pace v. Swerdlow , 519 F.3d 1067, 1072–73 (10th Cir. 2008). In doing so, the court will follow the Tenth Circuit's holding:

However, facts subject to judicial notice may be considered in a Rule 12(b)(6) motion without converting the motion to dismiss into a motion for summary judgment. See Grynberg v. Koch Gateway Pipeline Co. , 390 F.3d 1276, 1278 n. 1 (10th Cir. 2004) (citing 27A Fed. Proc., L.Ed. § 62:520 (2003) ). This allows the court to "take judicial notice of its own files and records, as well as facts which are a matter of public record." Van Woudenberg ex rel. Foor v. Gibson , 211 F.3d 560, 568 (10th Cir. 2000), abrogated on other grounds by McGregor v. Gibson , 248 F.3d 946, 955 (10th Cir. 2001). However, "[t]he documents may only be considered to show their contents, not to prove the truth of matters asserted therein." Oxford Asset Mgmt., Ltd. v. Jaharis , 297 F.3d 1182, 1188 (11th Cir. 2002).

Tal v. Hogan , 453 F.3d 1244, 1265 (10th Cir. 2006), cert. denied , 549 U.S. 1209, 127 S.Ct. 1334, 167 L.Ed.2d 81 (2007) ); see Winzler v. Toyota Motor Sales U.S.A., Inc. , 681 F.3d 1208, 1213 (10th Cir. 2012) ("The contents of an administrative agency's publicly available files, after all, traditionally qualify for judicial notice, even when the truthfulness of the documents on file is another matter. (citations omitted)."). Thus, the court will take judicial notice of the existence and content of the orders and pleadings submitted and publicly filed and take note of the content of what was argued and what was decided.

See Kaufman v. Miller , 2013 WL 4446977, at *2 (10th Cir. Aug. 21, 2013) ("[W]e can take judicial notice of the contents of the habeas petition to determine whether this claim had been presented in the district court. See Guttman v. Khalsa , 669 F.3d 1101, 1130 n. 5 (10th Cir.2012)."). But, the court will not...