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Daniels v. Alameda County

United States District Court, N.D. California

July 10, 2019

PAUL S. DANIELS, et al., Plaintiffs,
v.
ALAMEDA COUNTY, et al., Defendants.

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND RE: DKT. NO. 15

          JACQUELINE SCOTT CORLEY UNITED STATES MAGISTRATE JUDGE

         Paul Daniels and Nanette Dillard allege that they were prosecuted by the Alameda County District Attorneys' Office in retaliation for exercising their First Amendment rights. Defendants move to dismiss all of Plaintiffs' claims under Federal Rule of Civil Procedure 12(b)(6) and to strike the state law claims under California Code of Civil Procedure § 425.16, the anti-Strategic Lawsuits Against Public Participation (anti-SLAPP) statute.[1] (Dkt. No. 15.) After carefully considering the parties' submissions, including their post-hearing submissions, and having had the benefit of oral argument on June 13, 2019, Defendants' motion to dismiss Plaintiffs' Section 1983 claim is GRANTED with leave to amend and the motion to dismiss Plaintiffs' state law claims is denied without prejudice. The Section 1983 claim must be dismissed because Plaintiffs have not plausibly alleged that each defendant caused Plaintiffs' prosecution; nor have they plausibly alleged an absence of probable cause. The Court declines to address the state law claims until it determines if the federal claim will proceed past the pleading stage.

         BACKGROUND

         A. Complaint Allegations[2]

         Nanette Dillard was the Executive Director of Alameda County's Associated Community Action Program (“ACAP”). (Complaint at ¶ 7.) ACAP was a “quasi-governmental Joint Powers Agency in Alameda County.” (Id. at ¶ 5.) During the summer of 2005, Ms. Dillard and Paul Daniels, who worked for ACAP as the Community Services Block Grant Manager, fell in love. (Id. at ¶ 7.) The couple married two years later in 2007. (Id.)

         In 2010, Ms. Dillard discovered that $159, 000 which should have been held in the Alameda County Treasury for ACAP was missing. (Id. at ¶ 8.) Ms. Dillard raised this issue at a January 19, 2011 meeting with Alameda County Board of Supervisors President Nate Smiley, who was also a member of the ACAP Governing Board. (Id.) Although Ms. Dillard requested Mr. Smiley's assistance in tracing the missing funds, they were never accounted for and Ms. Dillard now believes that Supervisor Miley and Scott Haggerty, who was on the Alameda County Board of Supervisors, caused them to be transferred. (Id.)

         At the January 19, 2011 meeting Ms. Dillard also raised concerns regarding the financial services Alameda County provided to ACAP under the joint powers agreement. (Id. at ¶ 9.) Ms. Dillard requested that ACAP be allowed to go forward as an independent 501(c)(3) non-profit organization and allowed to “operate outside of political motivation.” (Id.) This change did not happen, and instead, Plaintiff was placed on administrative leave following a February 2, 2011 emergency closed door session of the ACAP Board of Governors. (Id. at ¶ 11.) Ms. Dillard and Mr. Daniels were both subsequently removed from their positions with ACAP. (Id. at ¶ 12.)

         The County thereafter shut down ACAP and “cannibalized its grants to benefit the pet pork barrel projects of certain supervisors including Supervisor Miley.” (Id. at ¶ 12.) The County then attempted to interfere with Ms. Dillard and Mr. Daniels' unemployment benefits by suggesting that they had been terminated for cause. (Id.) Ms. Dillard sued the ACAP Governing Board including Mr. Miley, Mr. Haggerty, Mr. Lieber, and Ms. Souza for violation of her rights under California's Brown Act based on their actions at the February 2, 2011 meeting and her termination. (Id. at ¶ 13.) The County ultimately agreed to settle the suit for more than $300, 000. (Id.)

         As soon as the settlement was reached, “County officials immediately demanded that Dillard return the settlement money paid, based on a bogus theory that Dillard was liable for certain ACAP indebtedness to the federal government.” (Id. at ¶ 14.) However, this “indebtedness was a consequence of the County Political Defendants' own actions.” (Id.) When Ms. Dillard refused to return the settlement money, “the county Political Defendants trumped up a raft of specious accusations, and caused a criminal prosecution to be commenced against both Dillard and Daniels.” (Id.) Defendants “peddled” “false allegations” to the District Attorney's Office and Ms. Dillard and Mr. Daniels were charged with having violated federal regulations by “drawing down and distributing federal Department of Health and Human Services (“DHHS”) funds.” (Id. at ¶ 16.) The criminal complaint also charged Ms. Dillard with “enrich[ing] herself by utilizing ACAP resources, and [] creat[ing] two backdated documents immediately following her dismissal as executive director of ACAP.” (Id.) Mr. Daniels was only charged “to place pressure on Dillard to enter a plea bargain” and she was promised that if she entered a plea, the charges against Mr. Daniels would be reduced to a misdemeanor. (Id. at ¶ 17.) A deputy district attorney also advised Mr. Daniels and Ms. Dillard's defense counsel that although “the prosecutors were disinclined to bring the action of highly dubious merit, ” they did so because of “intense political pressure from the County Board of Supervisors.” (Id.) Plaintiffs also subsequently discovered that the County was pursuing an insurance claim that the carrier would only pay if Mr. Daniels or Ms. Dillard was convicted of a crime. (Id.)

         Mr. Daniels and Ms. Dillard “refused to buckle under pressure” and the case against them proceeded to trial. (Id. at ¶ 18.) The trial lasted over four months during which time “Defendants drummed up publicity, and Dillard and Daniels were portrayed in the press and media as crooks.” (Id.) The cost of attorney's fees “was crushing” and led to Ms. Dillard and Mr. Daniels losing their home in foreclosure. (Id. at ¶ 19.) Mr. Daniels and Ms. Dillard were eventually convicted of some of the charges and acquitted of others. (Id. at ¶ 20.) In particular, they were both convicted of improper “draw-down” of federal funds and Ms. Dillard was also convicted of creating two post-dated documents that she intended to use in unspecified legal proceedings. (Id.) Neither Mr. Daniels nor Ms. Dillard received any custody time; instead, the judge ordered them to pay over $300, 000 in restitution. (Id. at ¶ 21.) “The restitution order was based upon the mistaken belief that Dillard and Daniels owed this sum to the federal Department of Health and Human Services.” (Id.)

         Mr. Daniels and Ms. Dillard appealed their convictions; however, this process took over four years and during this time they paid appellate counsel $100, 000 which left them “destitute” and “virtually unemployable.” (Id. at ¶ 22.) On March 29, 2018, the First District Court of Appeal issued an opinion finding that “Alameda County had violated the Supremacy Clause of the United States Constitution by fashioning state law crimes out of violations of non-penal federal regulations, when the federal agency charged with administering the regulations did not deem Daniels' and Dillards' conduct culpable.” (Id. at ¶ 24.) As a result, Mr. Daniels “was fully exonerated on the merits” and Ms. Dillard was “left with only a single count of conviction, for creating two back-dated documents.” (Id.)

         The Alameda County Superior Court subsequently granted Mr. Daniels' and Ms. Dillard's request to dismiss all charges, terminate their probation, and expunge their criminal records. (Id. at ¶ 25.) Both Mr. Daniels and Ms. Dillard nonetheless continue to struggle for employment. (Id. at ¶ 26.) Ms. Dillard now works for a tour company making $47, 000 a year. (Id.)

         B. Procedural Background

         Nearly ten months after the Court of Appeal's decision, Mr. Daniels and Ms. Dillard filed this action against Alameda County; the Alameda County Board of Supervisors; Nate Miley, Keith Carson, Scott Haggerty, Wilma Chan, all members of the Alameda County Board of Supervisors; Susan Muranishi, the Alameda County Administrator; Robert Lieber, the former mayor of Albany and a former member of the ACAP Governing Board; Diana Souza, a former San Leandro City Council member and former member of the ACAP Governing Board, the Alameda County Auditor-Controller Agency, and Patrick O'Connell, the former Alameda County Auditor-Controller. (Dkt. No. 1.) Plaintiffs plead four claims for relief: (1) malicious/retaliatory prosecution in violation of 42 U.S.C. § 1983; (2) malicious prosecution under California common law; (3) violation of the Bane Act, Cal. Civ. Code § 52.1; and (4) California common law intentional infliction of emotional distress.

         Defendants Alameda County, Alameda County Board of Supervisors, Keith Carson, Wilma Chan, Scott Haggerty, Nate Miley, Susan Muranishi, Patrick J O'Connell, and Richard Valle (hereafter “Defendants”) subsequently filed the now pending motion to dismiss and to strike the state law claims under California Code of Civil Procedure § 425.16, the anti-Strategic Lawsuits Against Public Participation (anti-SLAPP) statute. (Dkt. No. 15.) Defendants Diana Souza and Robert Lieber separately moved to ...


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