                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 19a0177n.06

                                            No. 17-2226

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT                                     FILED
                                                                                    Apr 05, 2019
BRIAN PALMER,                                 )                                DEBORAH S. HUNT, Clerk
                                              )
       Plaintiff-Appellant,                   )
                                              )       ON APPEAL FROM THE
v.                                            )       UNITED STATES DISTRICT
                                              )       COURT FOR THE EASTERN
BILL SCHUETTE; SCOTT LEE TETER,               )       DISTRICT OF MICHIGAN
                                              )
       Defendants-Appellees.                  )       OPINION
                                              )

BEFORE: NORRIS, STRANCH, and LARSEN, Circuit Judges.

       ALAN E. NORRIS, Circuit Judge. Plaintiff Brian Palmer, a former Michigan state

representative, filed this Section 1983 action against Bill Schuette, the state’s then Attorney

General, and Scott Teter, an assistant attorney general. The claims stem from a misdemeanor

prosecution initiated by the Attorney General charging plaintiff with willful neglect of duty while

a government official in violation of Mich. Comp. Laws § 750.478. Plaintiff pleaded no contest

and agreed to the use of the criminal complaint as the factual basis for his plea.

       In the wake of the plea, the Attorney General posted a press release on his office’s website

that profiled plaintiff’s prosecution. Plaintiff contends that the release contained numerous

falsehoods that adversely affected his professional activities. (At the time of the charge, plaintiff

no longer served in the legislature.) Plaintiff demanded that the Attorney General remove the press

release from the website; he refused to do so. Plaintiff responded by filing the instant three-count

complaint against Schuette, who approved the prosecution, and Teter, who investigated, brought

the misdemeanor complaint, and appeared at the plea hearing. The complaint alleged that
                                                                                  Palmer v. Schuette
                                                                                       No. 17-2226

defendants violated two of plaintiff’s rights under the federal Constitution: 1) his Fifth and

Fourteenth Amendment right to due process; and 2) his Fourth Amendment right to be free of

prosecution without probable cause. The third count raised a state-law claim for defamation.

       Defendants filed a Rule 12(b)(6) motion to dismiss. The district court concluded that the

defendants were entitled to qualified immunity, granted the motion, and dismissed the federal

counts with prejudice. It declined to retain jurisdiction over the state-law claim and dismissed it

without prejudice. Plaintiff then filed a motion for reconsideration, which included a request for

permission to amend the complaint. The district court denied that motion. Plaintiff appealed.

                                                 I.

       Plaintiff pleaded no contest to the following charge:

       When any duty is or shall be enjoined by law upon any public officer, or upon any
       person holding any public trust or employment, every willful neglect to perform
       such duty, where no special provision shall have been made for the punishment of
       such delinquency, constitutes a misdemeanor punishable by imprisonment for not
       more than 1 year or a fine of not more than $1,000.00.
Mich. Comp. Laws § 750.478. As the result of his plea, the court sentenced plaintiff to twelve

months of probation and 320 hours of community service, which he discharged.

       The press release that spawned this litigation reads in part as follows:

       The conviction stems from Palmer using his position as an elected official to assist
       the ring-leader of a $9 million Ponzi scheme.
               The scheme, conducted by API Worldwide, Inc., defrauded more than 150
       victims between 2006 and 2012. . . . Palmer cooperated with investigators after
       losing $400,000 of his own money to one of the API ringleaders in a separate
       transaction.
       ....
               From July 2006 through January 2012, API Worldwide, Inc. and its
       operators Jeffrey L. Ripley, 61, of Sparta, and Danny Lee VanLiere, 62, of Grand
       Rapids, ran a Ponzi scheme promising huge returns on investments. The two west
       Michigan men promised high returns on money invested, but never delivered on
       their promises to victims. . . .

                                                 2
                                                                                 Palmer v. Schuette
                                                                                      No. 17-2226

                Ripley and VanLiere targeted elderly investors with their scam. An
       investigation revealed they preyed on elderly victims by convincing them to cash
       in certificates of deposit (CD’s) and other legitimate investments in order to invest
       the proceeds in API Worldwide. . . . The investigation revealed that although some
       investors did receive a return, those returns were derived from other investor’s
       funds, the trademark of a Ponzi scheme. None of the victims received any returns
       on their “investments,” and some even lost their life savings.
                                          Palmer’s Role
              Palmer served as a state representative from 2002-2008. During that time,
       Palmer used his position as an elected official to assist Ripley and VanLiere in their
       Ponzi scheme involving API Worldwide, Inc. Prior to his involvement with API,
       Palmer had invested $400,000 with Ripley on an unregistered security. Ripley lost
       Palmer’s $400,000 on the investment and assured Palmer that he would get his
       money back if Palmer helped him with API. Ripley gave Palmer credit for the
       $400,000 in API investments and Palmer cooperated with API because he believed
       he would receive a return on his lost funds.
              Palmer met with potential investors on behalf of Ripley and API. With the
       knowledge that Ripley was attempting to circumvent the Securities Act, Palmer did
       not report the conduct to proper authorities.
              Palmer carried a cell phone provided by API and answered calls from
       potential investors even while on the House floor. To circumvent state security
       laws, Palmer assisted Ripley by providing documents to make the scheme appear
       legitimate and signed investment guarantees. And, with Palmer’s knowledge,
       Ripley used Palmer’s name and position as a public official to vouch for and sell
       the API scheme to potential victims.
The release goes on to describe the charge to which plaintiff pleaded guilty and the sentence

imposed. It ends with the Attorney General’s advice to senior citizens on steps they should take to

avoid fraud.

       Plaintiff’s federal complaint lists the statements contained in the release which he considers

to be materially false. As mentioned above, plaintiff agreed to accept the charges set forth in the

State’s misdemeanor complaint as the factual basis for his plea of no contest. That complaint

contains the following summary:

              This case is related to People v. API Worldwide Holdings. The scheme is
       based on the misrepresentation that Dan Hershey has millions of dollars “locked
       up” in overseas accounts with Lloyds Bank. The schemers then solicited money

                                                 3
                                                                                Palmer v. Schuette
                                                                                     No. 17-2226

       from “investors” that is supposedly to be pooled with other investors’ funds and
       used to pay off various tax liens, fees, and other charges that are keeping Hershey’s
       Lloyd’s Bank account “locked up.” Although the promises varied, the schemers
       usually gave the victims promissory notes that reflect 10% interest and promise a
       “fee” of many times the initial investment amount. The schemers usually asked for
       the money on short notice, and assured the “investor” that repayment was 30-90
       days away. To date, API has taken in $9,245,814 from over 150 victims from this
       same scheme from 2006 to the present.
               Brian Palmer was a state representative from Romeo in Macomb County at
       the time of his involvement with API. Palmer told Ripley that Palmer could assist
       Ripley in moving money from overseas to domestic accounts. In 2006, Palmer
       wired $11,000 to Dan Hershey for scheme-related expenses. Ripley told Palmer
       that he wanted to sell API Investments in a way to circumvent Michigan’s security’s
       [sic] laws. As a result, Palmer provided Ripley with sample documents for Ripley’s
       use in the scheme including promissory notes and facilitation agreements designed
       to circumvent [] Michigan’s Securities Act. In addition, Palmer carried a cell phone
       provided by API and answered calls from potential investors even while on the
       House floor. Palmer was aware that Ripley had advised several potential API
       “investors” that “State Representative” Palmer was also an investor who was
       helping API unlock the Lloyds’ account. Interviews of investors confirmed that
       Ripley used Palmer’s name and position as a public official to vouch for and sell
       the API scheme. Investors stated that Palmer’s name provided legitimacy to the
       API investment. Palmer also acted as a guarantor for API “investor” Bob Carlton
       in 2007. The API investment paperwork was structured as a loan from the Investor
       to API. Palmer was guaranteeing that if API didn’t repay Carlton with interest, that
       Palmer would repay Carlton. During the same time period according to records at
       the Office of Finance, Insurance and Regulation (OFIR), Palmer reported another
       securities scheme to OFIR but never reported API. Finally, Ripley owed Palmer
       $400,000 from a previous loss that Ripley repaid Palmer with API securities.
       Therefore, Palmer believed if he cooperated with the API scheme and it was
       successful, he would get that money back.
       Despite these allegations, which he conceded are true, plaintiff’s complaint asserted that

they do not support several statements made in the press release: plaintiff denies that he pleaded

no contest to a Ponzi scheme; “assisted two other men to operate a $9 million Ponzi scheme that

defrauded more than 150 persons between 2006 and 2012”; “used his position as an elected official

to assist” in a fraudulent scheme; invested $400,000 in an unregistered security; “met with

potential investors on behalf of Ripley and API, with the knowledge that Ripley was attempting to

circumvent the Securities Act, and that Palmer did not report the conduct to proper authorities”;


                                                4
                                                                                   Palmer v. Schuette
                                                                                        No. 17-2226

“carried a cell phone provided by API and answered calls from potential investors even while on

the House floor”; provided documents to make the API scheme appear to be legitimate; and, lastly,

allowed Ripley to use “Palmer’s name and position as a public official to vouch for and sell the

API scheme to potential victims.” Compl. ¶¶ 24-32.

        Defendants filed a motion to dismiss pursuant to Federal Rule 12(b)(6). They contended

that the Eleventh Amendment precluded any official capacity claims, that they were entitled to

qualified immunity with respect to individual capacity claims, and that they were entitled to

immunity with respect to the state-law claim. The district court granted that motion. It also denied

plaintiff’s subsequent motion to reconsider and to amend the complaint.

                                                  II.

Standard of Review

        We “review the grant of a motion to dismiss under Rule 12(b)(6) de novo, construing the

record in the light most favorable to the non-moving party and accepting as true all well-pleaded

allegations in the complaint.” Republic Bank & Tr. Co. v. Bear Stearns & Co., Inc., 683 F.3d 239,

246 (6th Cir. 2012) (citations omitted). “To survive a motion to dismiss, a complaint must contain

sufficient factual matter, accepted as true, to . . . allow[] the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

Did the Complaint State a Viable Due Process Violation?

        The first count of the complaint charges that “[b]y falsely prosecuting Palmer by press

release, defendants violated Palmer’s due process rights under the Fifth and Fourteenth

Amendments.” Compl. ¶ 44. As the result of this constitutional violation, plaintiff alleges these

injuries:


                                                   5
                                                                                     Palmer v. Schuette
                                                                                          No. 17-2226

         As a direct and proximate result of the defendants’ violations of Palmer’s
         constitutional rights, Palmer suffered severe and substantial damages. These
         damages include, but are not limited to, loss of earnings and loss of earnings
         capacity, lost business opportunities, litigation expenses including attorney fees,
         loss of reputation, humiliation, embarrassment, inconvenience, mental and
         emotional anguish, and distress.
Compl. ¶ 47.

         The district court explained the well-known contours of qualified immunity: “government

officials performing discretionary functions generally are shielded from liability for civil damages

insofar as their conduct does not violate clearly established statutory or constitutional rights of

which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982)

(citation omitted). The Supreme Court has recently reminded us that courts “do not require a case

directly on point, but existing precedent must have placed the statutory or constitutional question

beyond debate.” Mullenix v. Luna, 136 S. Ct. 305, 308 (2015) (quoting Ashcroft v. al-Kidd, 563

U.S. 731, 741 (2011)).

         Before turning to due process itself, the court first determined that plaintiff incorrectly cited

both the Fifth and Fourteenth Amendments as the source of his right to due process. While the

Fifth Amendment undeniably contains a due process guarantee, it applies to federal, not state,

officials and thus the district court limited its analysis to plaintiff’s claim to the due process

protections of the Fourteenth Amendment. See Scott v. Clay Cty., 205 F.3d 867, 873 n.8 (6th Cir.

2000).

         The court then summarized the essence of plaintiff’s claim in these terms: “Plaintiff

maintains that he has a clearly established liberty interest protected by the Due Process Clause of

the Fourteenth Amendment with respect to his good name, reputation, honor, and integrity.”

Palmer v. Schuette, No. 14-14820, 2016 WL 5477260, at *4 (E.D. Mich. Sept. 29, 2016) (citing

Board of Regents v. Roth, 408 U.S. 564, 573 (1972); Wisconsin v. Constantineau, 400 U.S. 433,

                                                    6
                                                                                   Palmer v. Schuette
                                                                                        No. 17-2226

437 (1971)). However, the court noted that subsequent cases, specifically Paul v. Davis, 424 U.S.

693 (1976), clarified that more than defamation is required to state a claim: “the defamation had

to occur in the course of the termination of employment.” Paul, 424 U.S. at 710. The district court

reasoned that, pursuant to Paul, the due process protection of a person’s good name is triggered

only when a plaintiff establishes that there had been a stigma to his reputation, a state action

altering or extinguishing a right or status previously recognized by state law, and a

contemporaneous tangible loss. See Paul, 424 U.S. at 708-12. The Supreme Court further clarified

the scope of viable due process claims in Siegert v. Gilley, 500 U.S. 226, 234 (1991) (“[S]o long

as such damage flows from injury caused by the defendant to a plaintiff’s reputation, it may be

recoverable under state tort law but it is not recoverable in a [federal] action.”).

       The district court construed these cases to require a change in the status of a protected

interest, such as employment. In the instant case, the court noted that the complaint did not allege

that plaintiff’s employment status was affected by the press release: “[a] stigma to reputation that

affects only future employment opportunities does not give rise to a protected liberty interest.”

Mertik v. Blalock, 983 F.2d 1353, 1363 (6th Cir. 1993).

       Having had the benefit of the parties’ briefs to this court, we affirm the judgment of the

district court for the reasons given in its orders granting defendants’ motion to dismiss and denying

plaintiff’s motion for reconsideration.1 Palmer v. Schuette, No. 14-14820, 2016 WL 5477260, at

*3-5 (E.D. Mich. Sept. 29, 2016); Palmer v. Schuette, No. 14-14820, 2017 WL 3977864, at 2-5


1
 Our disposition would not change even if we were to accept the allegations that plaintiff made
for the first time in his combined motion to amend his complaint. There, he alleged that he is “self-
employed as a partner and the president of his own venture capital company,” was so employed at
the time of the defamatory press release, and as a result of the press release, lost business. But
plaintiff still has not shown that he has been deprived of a governmental right, benefit, or
entitlement; he has presented no support for a conclusion that damage to or loss of self-
employment is a violation of a clearly established constitutional right.
                                                   7
                                                                                 Palmer v. Schuette
                                                                                      No. 17-2226

(E.D. Mich. Sept. 11, 2017). Despite plaintiff’s protests to the contrary, the disputed press release

did not differ to any great extent from the factual statement contained in the misdemeanor

complaint. In fact, plaintiff filed a parallel defamation action in the Michigan Circuit Court, which

granted summary disposition to defendants: “Taken together, the complaint and the transcript [of

his state court plea and sentencing hearings] establish that the allegedly false and defamatory

statements in the Press Release were substantially, if not entirely, true.” Palmer v. Schuette, Mich.

Cir. Ct., No. 2016-4357-NO, June 7, 2017, at 16. While a state-law defamation action does not

control the outcome of a federal due process claim, it provides some perspective into the validity

of the claims advanced by plaintiff.

Fourth Amendment Claim

       Count Two of the complaint alleges the following constitutional violation:

       By prosecuting Palmer by press release, where the allegations in the press release
       falsely accused Palmer of a crime he did not commit, the defendants have violated
       Palmer’s right under the Fourth Amendment to be free from prosecution for an
       offense where there is no probable cause to charge him with the offense.
Compl. ¶ 54.

       The district court held that plaintiff had failed to establish the existence of such a

constitutional right. Palmer v. Schuette, No. 14-14820, 2016 WL 5477260, at *8 (E.D. Mich. Sept.

29, 2016). In doing so, it rejected plaintiff’s reliance on Bivens v. Six Unknown Named Agents of

the Federal Bureau of Narcotics, 403 U.S. 388 (1971). In Bivens, the Court held that a plaintiff

could seek damages against federal agents who violated the Fourth Amendment in the execution

of a search even though no prosecution ensued. 403 U.S. at 397. Here, however, there was no

search or seizure, and plaintiff’s contention that the press release is analogous to an

unconstitutional search or seizure is strained at best.




                                                  8
                                                                                 Palmer v. Schuette
                                                                                      No. 17-2226

       Plaintiff refers us to Katz v. United States, 389 U.S. 347, 350 (1967), and argues that a

Fourth Amendment right extends to wiretapping even where, as here, there is no physical intrusion

into a protected space and that probable cause is required before such an invasion of privacy.

Plaintiff, however, does not allege any unlawful surveilling or wiretapping occurred and has not

established a reasonable expectation of privacy.

       Plaintiff also points to Valmonte v. Bane, 18 F.3d 992 (2d Cir. 1994), which hinged on a

state-law requirement to report child abuse and neglect. However, that case did not involve the

Fourth Amendment.

       In short, the allegations and case law brought forward by plaintiff fail to state a claim

under the Fourth Amendment.

Pendent Jurisdiction

       Plaintiff asks this court to reinstate his state-law defamation claim in the event that we

reverse the judgment of the district court with respect to his federal claims. Given that we affirm

the judgment on the federal claims, we need not reach this issue.

                                                III.

       The judgment of the district court is affirmed.




                                                   9
