United States District Court, E.D. North Carolina, Western Division
W. FLANAGAN, UNITED STATES DISTRICT JUDGE
matter is before the court on the parties' cross motions
for summary judgment (DE 175, 178, 184, 189). These motions
have been briefed fully, and the issues raised are ripe for
ruling. For the following reasons, defendants' summary
judgment motions are granted and plaintiff's summary
judgment motion is denied.
OF THE CASE
along with former-plaintiff Duarthur Oates, commenced this
action on November 10, 2015, in the United States District
Court for the Western District of North Carolina, asserting
federal constitutional claims and state common law tort
claims against defendants who are current and former state
government officials, arising out of an investigation,
indictment, and prosecution of plaintiff while she was mayor
of the Town of Princeville, North Carolina (the
September 28, 2016, the court dismissed without prejudice all
claims, except for one claim against defendant Beth Wood
(“Wood”) in her individual capacity (false public
statements and seizure, under 42 U.S.C. § 1983). Upon
plaintiff's motion construed as a motion to amend
complaint, the court on May 23, 2017, allowed plaintiff to
file an amended complaint with only certain claims as
proposed by plaintiff but not others. In particular, the
court allowed plaintiff to proceed on the following claims:
Concealment of evidence and seizure under § 1983 (count
two) against defendant Lolita Chapman
Fabrication of evidence and seizure under § 1983 (count
three) against defendant Chapman; and
Civil conspiracy and causing a § 1983 violation (count
four) against defendants Chapman, Wood, T. Vance Holloman
(“Holloman”), Robin Hammond
(“Hammond”), and Sharon Edmundson
(“Edmundson”), and former defendant Barry Long
(“Long”), in their individual capacities.
other proposed claims for malicious prosecution (count one)
and denial of equal protection (counts five and six), as well
as all claims against former-defendants Gregory McLeod,
Gwendolyn Knight (“Knight”), and Ann Howell
(“Howell”), were dismissed as futile for failure
to state a claim. Plaintiff filed a first amended complaint
on June 5, 2017, largely in accord with the court's May
23, 2017 order, but with certain portions foreclosed by the
court's order and/or subject to challenge by defendants
in motions to dismiss and motions to strike. On October 31,
2017, the court dismissed claims against former defendant
Long as time barred, and the court confirmed the remaining
claims and defendants as those claims set forth above and
those defendants set forth in the caption of this order.
an extended period of discovery, and in accordance with the
court's case management order, the parties filed the
instant motions for summary judgment on April 1, 2019.
support of her summary judgment motion, plaintiff relies upon
a memorandum of law, statement of material facts,
supplemental statement of facts, as well as appendix and a
supplemental appendix, with accompanying exhibits, including
declarations by 1) plaintiff (attaching exhibits including
email correspondence and statement by plaintiff), 2)
plaintiff's counsel, 3) former Town attorney Charles D.
Watts, Jr. (“Watts”), 4) a prosecuting attorney
in plaintiff's prosecution, Tonya Montanye
(“Montanye”) (attaching exhibits including
correspondence), 5) consultants Wallace Green and Reginald
‘Reggie' K. Smith (“Smith”), 6) former
Town police chief Joey Petaway, 7) former Town commissioners,
Isabelle P. Andrews (“Andrews”), Calvin Sherrod
(“Sherrod”), and Maggie Boyd, and former town
clerk, Daisy Staton.
addition, plaintiff relies upon 1) excerpts of depositions of
plaintiff; each defendant; former defendant Long; Montanye
and prosecutor Scott Harkey (“Harkey”); and
plaintiff's counsel in criminal proceedings Joseph Hester
and Malvern King; 2) selected deposition exhibits included
among the following documents; 3) Office of the State Auditor
(“OSA”) and State Bureau of Investigation
(“SBI”) interview memoranda; 4) emails and
written correspondence between defendants, plaintiff,
plaintiff's counsel, accountants, prosecutors, Town
officers, and officials of OSA and SBI and other government
officials; 5) copies of files maintained by defendant Hammond
with attachments; 6) OSA Investigative Report, dated April 8,
2013 (“OSA audit report”), and Re-Released
Investigative Report, dated December 2014; 7) a March 27,
2013 “Response” to draft OSA audit report,
prepared by Watts; 8) orders and notices in plaintiff's
criminal case, 13 CRS 2056; 9) a draft indictment with notes;
10) Town resolutions, notices, and agreements; 11)
photographs of file boxes and file contents; 12) reports and
other documents referencing economic development in the Town;
and 13) SBI policy and procedure manual, dated May 1, 2008.
support of her motion, defendant Chapman relies upon a
memorandum of law, statement of material facts, and the
following documents: 1) additional deposition excerpts, 2)
additional SBI interview memoranda, 3) indictment of
plaintiff, and 4) plaintiff's interrogatory responses.
support of her motion, defendant Wood relies upon a
memorandum of law, statement of material facts, and the
following documents in addition to those previously
described: 1) additional deposition excerpts, 2)
interrogatory responses, 3) correspondence between defendant
Edmundson and Town officials, 4) OSA interview memoranda, 5)
April 23, 2012, independent auditors' report by Petway
Mills & Pearson, PA; 6) and declaration of accountant,
Phyllis M. Pearson (“Pearson”).
support of their motion, defendants Holloman, Hammond, and
Edmundson, rely upon a memorandum of law, statement of
material facts, and the following documents in addition to
those previously described: 1) additional deposition
excerpts; 2) declarations of Holloman, Edmundson, and
Hammond, with exhibits including correspondence, resolutions,
and other work product of the Local Government Commission
(“LGC”) and its staff; 3) additional OSA and SBI
interview and file memoranda; 4) additional correspondence
between LGC officers, plaintiff, and Town officers; 5) Long
affidavit; 6) additional documents filed in plaintiff's
criminal case; and 7) additional interrogatory responses.
their April 22, 2019, oppositions to plaintiff's motion,
defendants rely upon memoranda of law, an opposing statement
of facts, as well as a joint appendix containing the
following: 1) additional deposition excerpts 2) additional
correspondence and interview memoranda; and 3) additional
copies of Town receipts, correspondence, and account
April 22, 2019, opposition to defendant Holloman, Hammond,
and Edmundson's motion, plaintiff relies upon a
memorandum of law, an opposing statement of facts, and
objections to evidence submitted. In her opposition to
defendant Chapman's motion, plaintiff relies upon a
memorandum of law, and an opposing statement of facts. In her
opposition to defendant Wood's motion, plaintiff relies
upon a memorandum of law, an opposing statement of facts, and
objections to evidence submitted. Plaintiff also filed on
April 23, 2019, a supplemental statement of material facts,
and a supplemental appendix, including additional deposition
excerpts and exhibits from depositions.
6, 2019, defendants filed a joint response in opposition to
plaintiff's evidentiary objections, relying upon
affidavits of OSA and SBI officials, Timothy J. Hoegemeyer
and Nathaniel L. McLean. That same date, plaintiff filed a
reply in support of her summary judgment motion.
OF UNDISPUTED FACTS
undisputed facts may be summarized as follows.
served two terms as the mayor of the Town, first between 2003
and 2005, and second between January 2010 and December 2013.
(Pl's Opp. Stmt. (DE 200) ¶ 1).
Local Government Commission (“LGC”) is a
legislatively created state commission that has the duties
and authority set out in the North Carolina Local Government
Finance Act, N.C. Gen. Stat. §§ 159-1 to 159-216,
including responsibility for approving local government debt,
and for monitoring the fiscal and accounting practices of
local governments. (Id. ¶¶ 3, 6). The LGC
has the authority to impound the books and records and assume
financial control of any local government that defaults or is
expected to default on a debt or that fails to comply with
the Local Government Finance Act. (Id.). The LGC
consists of nine members, including the State Treasurer, the
State Auditor, who is defendant Wood, and the Secretary of
Revenue, who each serve as ex officio members. (Id.
operates as a division of the Department of State Treasurer
(“DST”), and the staff of the LGC is provided by
the Fiscal Management Section of the State and Local
Government Finance Division of the DST (the “LGC
staff”). (Id. ¶ 5). In the event that the
LGC votes to assume temporary financial control of a local
government, the LGC staff is responsible for maintaining the
day-to-day control of the finances of the local government.
(Id. ¶ 8). The director of the Fiscal
Management Section serves as the finance and budget officer
of the local government during the period of assumed
financial control. (Id.).
defendants in this case worked for DST. Defendant Holloman,
who is a certified public accountant, worked for the DST from
1985 until his retirement in 2015, including from 2006 until
retirement in position of deputy state treasurer and director
of the State and Local Government Finance Division.
(Id. ¶¶ 9-11). Defendant Edmundson, who is
a certified public accountant, has worked for DST since 2002,
and has held the position of director of the Fiscal
Management Section since 2006. (Id. ¶ 16).
Defendant Hammond worked for DST from May 2012 until her
retirement in 2017, serving as assistant general counsel,
assigned to serve as legal counsel to the State and Local
Government Finance Division and LGC. (Id.
North Carolina Office of State Auditor (“OSA”) is
an agency of the state, responsible, in part, for conducting
audits of all state agencies, and entities supported,
partially or entirely, by public funds. (Id. ¶
22). Defendant Wood, as state auditor, is authorized and
directed to make any comments, suggestions, or
recommendations she deems appropriate concerning any aspect
of an audited entity's activities and operations.
(Id. ¶ 23).
North Carolina State Bureau of Investigation
(“SBI”) is a state criminal law agency set up for
the identification of criminals, for their apprehension, and
investigation and preparation of evidence to be used in
criminal courts. (Id. ¶ 26). Defendant Chapman
was an SBI field agent from 2007 until 2014, assigned to
conduct criminal investigations. (Id. ¶ 27). In
2014, she became a special agent with the Medicaid
Investigations Division of the North Carolina Department of
Town has experienced financial difficulties, which have been
exacerbated by severe flooding caused by several hurricanes.
(Id. ¶ 28). As a result of these financial
difficulties, the LGC has twice voted to assume financial
control of the town. (Id.). The first time was in
1997; the second time was in 2012. (Id.).
Princeville is the only town where the LGC has had to assume
financial control more than once. (Id.).
in 2010 and up until July 2012, when the LGC voted to assume
control of the Town's finances, the LGC staff
corresponded and interacted frequently with Town officials
about the financial condition of the town. (Id.
¶ 29). In 2012, prior to the LGC vote, DST staff
prepared a chart summarizing the correspondence and
interactions that LGC staff had with town officials about the
town's financial condition. (Id.). This chart
was prepared by DST staff leading up to the recommendation
from the LGC staff that the LGC vote to assume financial
control of the Town. (Id.).
April 23, 2012, the Town received an independent audit for
the fiscal year ending June 30, 2011 (the “2010-2011
audit”), conducted by the accounting firm Petway Mills
& Pearson, PA, under the direction of Pearson (the
“independent auditor”). (Id.
¶¶ 30-31). In the 2010-2011 audit, the independent
auditor was unable to verify the accuracy of the Town's
financial statements due to inconsistencies and errors in the
accounting records and due to a lack of internal controls
over the Town's financial operations. (Id.
¶¶ 31). Based on this, the independent auditor
issued an adverse opinion on the Town's financial
statements. (Id.). This means that the financial
statements did not present fairly or in conformity with
generally accepted accounting principles the financial
position of the Town. (Id.). In addition, the
independent auditor identified 19 material weaknesses in the
Town's internal controls over its financial reporting.
the identified material weaknesses were inadequate internal
controls to ensure that transactions were properly documented
and properly approved. (Id. ¶ 32). The
independent auditor identified $23, 496 in expenditures that
were not supported by complete or adequate documentation.
(Id.). This included incomplete or inadequate
documentation to show that some credit card charges and other
expenditures were for a legitimate business purpose.
Under generally accepted government accounting and auditing
principles, to verify that a charge or expenditure is for a
legitimate business purpose the charge or expenditure must be
properly documented. Proper documentation for a credit card
expenditure related to town business would include
documentation explaining the purpose of the expenditure and
why it was necessary for town business purposes. For example,
proper support for a travel expenditure charged to a town
credit card would include a travel reimbursement form
explaining the business purpose of the travel and would also
including other supporting documentation such as a conference
or meeting agenda. Under generally accepted government
accounting and auditing principles, itemized receipts are
necessary but not sufficient documentation for town
expenditures. While itemized receipts show that expenditure
was made, they do not show that the expenditure was made for
a legitimate business purpose. Similarly, general statements
that expenditure was for town business or for a meeting are
also inadequate to show that the expenditure was made for a
legitimate business purpose. A statement supporting business
expenditure should explain the purpose of the expenditure and
why it was necessary for town business purposes and should be
supported by additional documentation.
(Id. ¶¶ 33-34).
30, 2012, the LGC voted to assume financial control of the
Town and to impound the Town's financial records.
(Id. ¶ 36). Defendant Edmundson, as Director of
the Fiscal Management Section, was appointed by the LGC as
the finance officer for the Town. (Id. ¶ 37).
LGC staff removed some of the Town's original financial
records to its offices in Raleigh. (Id. ¶ 42).
There was no inventory or log of the Town's financial
records that were brought back to the LGC. (Id.
¶ 43). The records were stored in several different
locations in the LGC offices, including a cubicle, a small
file room, and in offices. (Id. ¶ 44).
Edmundson had responsibility for the Town records in the LGC
offices. (Id. ¶ 44). The records were accessed
by LGC staff as needed and Edmundson trusted her staff to
keep the records organized if possible. (Id.).
Holloman, Edmundson, and the LGC had sole custody of the
records, and the records remained in LGC offices at all times
while LGC had custody of them. (Defs' Opp. Stmt. (DE 196)
¶¶ 58-59). Edmundson kept records in her office
that she was “accessing at least initially on a regular
. . . basis.” (Id. ¶ 60; Edmundson Dep.
Wood, as a member of the LGC, became aware of the financial
problems in the Town, and she was present at the July 30,
2012, LGC meeting when the LGC voted to take over the
Town's finances. (Pl's Opp. Stmt. (DE 200)
¶¶ 55-56). At the meeting, plaintiff gave to
defendant Wood documents that plaintiff alleged were evidence
of the misallocation of Federal Emergency Management Agency
(“FEMA”) funds, meant for the use of the Town and
its residents after Hurricane Floyd in 1999, to individuals
or businesses that were not entitled to the funds.
(Id. ¶ 58). At the conclusion of the meeting,
defendant Wood overheard plaintiff talking to another LGC
member about a fifty thousand dollar check that no one was
looking into. (Id. ¶ 57). Defendant Wood took
the information she received from plaintiff back to her
office and gave it to David King, OSA's Director of
Investigations, to investigate plaintiff's allegations of
misappropriated FEMA funds. (Id. ¶ 59).
Defendant Wood initiated an OSA investigation into
Princeville's finances by passing on to David King the
information she learned at the meeting, who in turn passed
that information on to former defendant Long, who is an
Investigative Supervisor with the OSA. (Id.
¶¶ 60-61). Based on interviews of SBI agents, Long
learned that the SBI had already investigated plaintiff's
allegations. (Id. ¶ 63).
also had made complaints directly to defendant Holloman that
the Town's FEMA funds had been embezzled, including a
complaint about a fifty thousand dollar check made payable to
commissioner Howell and checks written to commissioner
Knight. (Defs' Opp. Stmt. (DE 196) ¶¶ 10, 11).
Plaintiff requested an accounting of all FEMA funds that had
gone to the Town. (Id.).
September 19, 2012, defendant Edmundson sent a letter to
plaintiff and the Town commissioners about the several areas
of concern that the LGC staff had with the Town's
finances. (Pl's Opp. Stmt. (DE 200) ¶¶ 46-47).
This letter also included an attached schedule of charges to
the town credit card account. (Id.). One of the
issues raised in the letter was an alleged lack of
documentation to show that charges on the town credit card
were for legitimate town business and were authorized in the
Town's budget. (Id.). Defendant Edmundson sent
plaintiff and the Town commissioners a revised the schedule
of charges with alleged lack of documentation on October 31,
2012. (Id. ¶ 48).
investigators Long, Bryan Matthews (“Matthews”),
and David King interviewed LGC staff members defendants
Holloman and Edmundson, with Hammond present, on October 8,
2012 at the LGC's offices regarding the LGC's
takeover of the Town's finances and information
concerning allegations of fraud, waste and abuse.
(Id. ¶ 65).
October 23, 2012, OSA investigators David King, Long, and
Matthews interviewed accountant Pearson regarding financial
audits she performed for the Town of Princeville.
(Id. ¶ 68). That same date, OSA investigators
interviewed East and Pappas and created a memorandum of
interview stating “Mr. East suggested that we meet with
the Edgecomb [sic] County District Attorney to apprise
him/her of what we're planning to do in
Princeville.” (DE 187-12 at 3)).
October 29, 2012, Long requested by email “an
African-American Agent” from SBI supervisor Cheryl
McNeill (“McNeill”), with copy to his supervisor,
David King. (Defs' Opp. Stmt. (DE 196) ¶¶ 37).
At the time, Long had no evidence that plaintiff had
committed a crime. (Id. ¶ 38). On October 30,
2012, McNeill sent a letter to Long stating that she was
assigning defendant Chapman to the OSA investigation.
(Pl's Opp. Stmt. (DE 200) ...