7th Circuit affirms dismissal of claims against Indiana, Marion County officials

The 7th Circuit Court of Appeals has affirmed the dismissal of claims against several Indiana state and county officials, finding that most of the claims failed due to the immunity provided to government employees in the scope of their employment.

Sherry Katz-Crank, a Michigan resident, had a cemetery management law practice in 2004 when Robert Nelms retained her to assist in his acquisition of funeral homes in Indiana, Michigan and Ohio. The trust funds associated with the cemeteries were valued at roughly $22 million, and in 2007 Katz-Crank learned that Nelms was under investigation by the Indiana Secretary of State for misappropriating cemetery trust assets.

Upon learning of Nelms’ investigation, Katz-Crank called Kimberly Haskett, an investigator in the Secretary of State’s office, to tell her that she was willing to cooperate fully with the investigation. However, Haskett never returned the call – “apparently she didn’t need Katz-Crank’s help,” the 7th Circuit Court of Appeals wrote – and in 2008 Nelms was indicted on charges of embezzling $22 million in cemetery trust funds. Nelms pleaded guilty and, as part of a plea bargain, agreed to testify against Katz-Crank.

“Although Haskett never returned Katz-Crank’s call, she did find time to contact some of her clients and advise them that Katz-Crank was under criminal investigation,” Judge Diane Sykes continued in her opinion. In July 2008, Katz-Crank was charged in Marion County with aiding and abetting Nelms’ embezzlement. After her arrest, both the Indiana Secretary of State and the Marion County Prosecutor’s Office issued press releases about the arrest.

In December 2010, a jury acquitted Katz-Crank of all charges against her, and two years later she filed a suit in federal court against Marion County, Haskett, and former and current state and county officials in their individual and official capacities. Her claims included malicious prosecution, “abuse of process,” violations of the Fourth and 14th amendments and intentional infliction of emotional distress.

The defendants moved variously for dismissal for failure to state a claim, and Judge Tanya Walton Pratt in the U.S. District Court for the Southern District of Indiana found in Katz-Crank’s favor on some claims and dismissed others under Trial Rule 12(b)(6).

Katz-Crank appealed, but Sykes wrote that her claims against Marion County and the state and county officials sued in their official capacities – the equivalent of suing the state and county – were properly dismissed because the 11th Amendment bars suit in federal court against nonconsenting states absent specific types of congressional authorization.

Additionally, the 7th Circuit judge wrote Thursday that the three former prosecutors were protected from most of Katz-Crank’s claims because of a broad immunity that is provided to them within the scope of their prosecutorial work. The only claim that could be considered outside the scope of immunity was Katz-Crank’s allegation that the prosecution made false and inflammatory statements against her in their press releases. However, Katz-Crank’s conspiracy claim failed, Sykes wrote, because Katz-Crank failed to make a viable federal constitutional claim. For example, although Katz-Crank made allegations of Fourth and 14th amendment violations, she did not identify the basis for such claims, Sykes wrote.

Further, because Katz-Crank failed to prove that the former Secretary of State or any of the investigators convinced the prosecutors to indict her without probably cause, her malicious prosecution complaints fail. Finally, Sykes wrote that although her complaints against the press releases and Haskett’s decision to call her clients and tell them she was under criminal investigation could form the basis of an actionable defamation claim, Katz-Crank made no effort to fit those claims within a recognized constitutional doctrine because she only alleged that those actions damaged her reputation.

Katz-Crank also made state-law claims and argued that Michigan, not Indiana, law should apply because she is a Michigan resident. But Sykes wholly disputed that notion, saying that because the alleged wrongful prosecution took place in Indiana, Hoosier law must apply. And because Indiana law applies, immunity offered under the Indiana Tort Claims Act defeated Katz-Crank’s claims against the defendants in their individual capacities.

In a separate opinion, Judge Richard Posner both concurred and dissented. Posner’s dissent was based on the majority opinion that Katz-Crank’s defamation claims did not fall within constitutional doctrine.

Because she is self-employed and lost a great deal of her employment as a result of Haskett’s actions and the press releases, she essentially had suffered the equivalent of being fired or taking a drastic pay cut, which would entitle her to prove that the actions against her caused irreparable harm under the 14th Amendment, he wrote. Thus, Posner said the dismissal of the defamation claim related to Katz-Crank’s legal business should be reversed and remanded for a trial.

The case is Sherry Katz-Crank v. Kimberly Haskett, 15-1809.