Fifth Circuit Allows Maliciously Prosecuted Company to Sue US Government for Damages

EPAcrimIn 1996, a heavily armed team of EPA criminal investigators raided a facility of Louisiana company Trinity Marine Products, Inc. Three years later, the federal government indicted the company and manager of the raided facility, Hubert Vidrine, for illegally storing hazardous waste without a permit. The U.S. Attorney dismissed the indictment in 2003. On February 8, 2016, 20 years after the EPA raid, the U.S. Court of Appeals for the Fifth Circuit has cleared the path for the company to at last pursue Federal Tort Claims Act (FTCA) remedies against the government. As we explained in a WLF Legal Pulse post, Mr. Vidrine, with assistance from WLF attorneys, won a $1.7 million malicious-prosecution claim under the same law in 2011.

Affairs and Hypnotism. The factual situation underlying Trinity’s and Mr. Vidrine’s FTCA claims, as our previous post put it, is “worthy of daytime television.” EPA’s star witness in the case, who claimed to have taken samples proving the existence of hazardous waste at Trinity’s facility, couldn’t produce the tests. After discovering that the witness was a cocaine addict prone to being out of touch with reality, the government tried to extract truthful information by hypnotizing him. One factor that contributed to such a desperate tactic: the lead EPA agent, Keith Phillips, and the FBI agent assigned to the case, Ekko Barnhill, were having an affair, and didn’t want the case to end.

After the U.S. Attorney finally threw in the towel four years after the indictment, Mr. Vidrine sued the government. He won a $1.7 million judgment that included $900,000 in lost earning capacity. The FTCA constrained the trial judge, Rebecca Doherty, from imposing exemplary damages on the government, but, she wrote, “had punitive damages been allowable, this Court would have awarded punitive damages in the hope of deterring such reckless and damaging conduct and abuse of power in the future.”

Another Indictment Leads to New FTCA Suit. After an inquiry into his actions during the Trinity Marine investigation, a federal grand jury indicted Agent Phillips in 2011 for perjury and obstruction of justice. Trinity officials learned of that indictment and the reason for it in July 2011. One year later, Trinity filed an administrative FTCA complaint for malicious prosecution, and then a federal lawsuit in August 2013.

The government argued that the FTCA’s two-year statute of limitations barred Trinity’s claim. Trinity argued that it hadn’t discovered the basis for its claim until July 2011. The district court rejected Trinity’s discovery-rule argument and held that the expiration of the two-year limitations period deprived the court of jurisdiction.

Fifth Circuit’s Reversal. The appellate court upheld the district judge’s ruling that Trinity was on notice of its injury and the role of Agent Phillips in that injury prior to 2009. Thus, its FTCA claim was technically time-barred. However, in 2015, after the trial court’s dismissal of Trinity’s suit, the U.S. Supreme Court held in U.S. v. Kwai Fun Wong that the FTCA’s statute of limitations is “nonjurisdictional and subject to equitable tolling.”

The Fifth Circuit thus had to determine whether to apply its equitable powers and allow Trinity’s suit to proceed. It examined whether the government concealed the conduct complained of and whether, despite its exercise of reasonable due diligence, Trinity failed to learn of Agent Phillips’s actions. The first factor, the court said, “is plainly met.” Agent Phillips concealed the material facts in Trinity’s case. On the second factor, the court explained that once a plaintiff provides evidence of its efforts to discover the injury, the defendant must “demonstrate conclusively” that the plaintiff failed to exercise due diligence. The government could not meet that high burden with regard to Trinity’s due diligence. Trinity could not have reasonably discovered Agent Phillips’s motives to maliciously investigate the company without probably cause, the court wrote, until the government made public the results of its internal investigation in 2011.

Accountability. The federal government prosecuted Agent Phillips for perjury and obstruction of justice, as it should have. But the resulting sanctions did not make Mr. Vidrine or Trinity Marine whole for the miscarriages of justice they suffered. Just as the state can hold businesses responsible for the unlawful acts of their employees, the state should be accountable for malicious actions committed by its agents under the color of law. The Fifth Circuit could have given the government the benefit of the doubt on whether Trinity exercised reasonable due diligence to discover Agent Phillips’s misdeed. Instead, it granted Trinity its day in federal district court—in this case, an equitable, and justifiable, outcome.

Also published by Forbes.com on WLF’s contributor page

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