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Carruth v. Bentley

United States Court of Appeals, Eleventh Circuit

November 7, 2019

JOHN DEE CARRUTH, an individual, Plaintiff - Appellant,
ROBERT J. BENTLEY, an individual, DAVID BYRNE, an individual, Defendants - Appellees.

          Appeal from the United States District Court for the Northern District of Alabama D.C. Docket No. 7:17-cv-01445-LSC

          Before MARCUS, JULIE CARNES, and KELLY, [*] Circuit Judges.


         John Dee Carruth, the former CEO of Alabama One Credit Union, sued former Governor of Alabama Robert Bentley and his legal advisor, David Byrne, after Alabama One was taken into conservatorship by a state agency and he was terminated. Carruth alleged that the Governor and his counsel conspired with others to improperly exert regulatory pressure on the credit union, in order to induce Alabama One to settle lawsuits brought by a friend and former law partner of Byrne. Carruth filed an array of constitutional claims against Bentley and Byrne under § 1983 -- including violations of the Equal Protection Clause, a substantive due process claim, a Takings Clause claim in violation of the Fifth Amendment, the denial of his First Amendment right to petition government, retaliation for exercising his right to petition the courts, and conspiracy to violate his rights, along with three supplemental state law claims. The district court dismissed all of the civil rights claims on qualified immunity grounds and declined to entertain the supplemental claims.

         Carruth now appeals the dismissal of his complaint. After thorough review, we affirm. The first defect in the complaint is that Carruth does not plausibly allege that the Governor or his legal advisor was responsible for causing his injuries. The decision to place Alabama One in conservatorship and the concomitant decision to terminate Carruth's employment were made by Sarah Moore, the Administrator of the Alabama Credit Union Administration (ACUA), and approved by the ACUA Board of Directors. Carruth has pled no facts plausibly establishing that the Governor and Byrne made the decisions causing Carruth harm. What's more, even if we could assume away the basic causation problem permeating the entire complaint, Carruth also has failed to plausibly allege that Bentley and Byrne violated his clearly established constitutional rights. From the face of the complaint, it is clear that he cannot defeat their entitlement to qualified immunity. The district court did not err in dismissing the federal claims.


         John Dee Carruth served as the Chief Executive Officer of Alabama One Credit Union from 1998 until 2015. Like all other credit unions in the state, Alabama One was regulated by the Alabama Credit Union Administration, an independent state agency. In December 2011, the ACUA and the National Credit Union Association (NCUA), an agency of the federal government, determined that Alabama One was in violation of a regulatory cap placed on the percentage of loans that could be made to any one member of the credit union. The violation related to a series of "Member Business Loans" made to a used-car broker named Danny Butler, a long-time member of Alabama One. The ACUA and NCUA issued a joint Letter of Understanding and Agreement (LUA) requiring Alabama One to reduce its concentration of Member Business Loans, directed an outside investigation by a law firm into the actions of Carruth and other senior management officials, and ordered an accounting audit. The investigations did not turn up evidence of wrongdoing and the LUA was lifted in April 2013.

         On July 16, 2013, a group of attorneys that Carruth refers to as the "Smyth Group" -- Jay Smyth, his firm Lewis Smyth Winter Ford LLC, Albert Lewis, and Bobby Cockrell -- filed four lawsuits against Alabama One and various employees, including Carruth. The plaintiffs were past business associates of Butler, who claimed that Alabama One was responsible for the losses they sustained in connection with the loans made to Butler. A fifth lawsuit followed in March 2015. Carruth characterizes these cases as an "old-fashioned 'stick-up, '" pursued in the hope that Alabama One would choose to "pay off" the plaintiffs in order to avoid extended litigation.

         Finding little success in these lawsuits, the Smyth Group allegedly hatched a plot "to improperly increase the regulatory pressure on and governmental and public scrutiny of Alabama One and Carruth in order to coerce Alabama One to settle the Smyth Lawsuits." Smyth reached out to his former law partner and friend David Byrne, Jr., the chief legal advisor to then-Governor Bentley. On November 25, 2013, Smyth, Byrne, Governor Bentley, State Senator Gerald Allen, and former Alabama Supreme Court Justice Bernard Harwood allegedly held a meeting at the state capitol. According to an email from Smyth, the meeting's purpose was to allow the parties to "speak freely" on "Alabama One Issues" in order to decide "what actions would seem to be most . . . appropriate for the State of Alabama." Smyth told Senator Allen in a separate email that he hoped Governor Bentley would direct the ACUA to "pick up where it left off," claiming that "conditions at Alabama One have only deteriorated."

         According to the complaint, on January 24, 2014 another meeting took place at the state capitol, which was attended by Smyth, Byrne, Carrie McCollum (another legal advisor to Governor Bentley), ACUA Administrator Larry Morgan, NCUA and ACUA officials, and a disgruntled former Alabama One employee named Lori Baird. At this meeting, Smyth led Baird through a presentation that provided "inside information" on wrongdoing within Alabama One. Eleven days later, Smyth sent a memorandum to State Senator Allen, copying Byrne and McCollum, claiming that Alabama One "has become so impaired that the only responsible action would be for the [ACUA] to take prompt remedial action." He requested that certain Alabama One employees be suspended and that Alabama One be placed into conservatorship.

         About a week later, on February 12, 2014, Smyth sent another memorandum to Byrne and Senator Allen, and in an email to Byrne's assistant he wrote:

Thanks for your help, Pam. I believe now that everyone (perhaps with the notable exception of Larry Morgan) is on the same page re Alabama One issues. I have confidence the Governor will act decisively on this. David (Byrne) is providing good leadership, as usual.

         Smyth sent another email to Byrne, Allen, and others the following day, in which he discussed a lawsuit two of his clients had filed against Alabama One. He wrote:

[The plaintiffs] continue to hope for prompt and effective remedial action against Alabama One by the ACUA acting in concert and coordination with the Governor's office. They are, quite literally, depending on the Bentley administration's showing up like the cavalry in a John Wayne movie. While we all expect these civil plaintiffs to ultimately prevail in their various lawsuits, the results from the courthouse will not materialize soon enough to save them from suffering serious -- and wholly unnecessary -- damages in the meantime.

         During a break in a deposition in one of the Smyth-Alabama One lawsuits, on February 27, 2014, Smyth said to an Alabama One attorney, "If you don't settle our lawsuits today and pay us money today, the regulators will do bad things to Alabama One tomorrow." The next day, Carruth and three other Alabama One employees were suspended by the ACUA. Administrator Morgan later said that "both Mr. Byrne and Governor Bentley wanted something to happen at Alabama One, they wanted suspensions," and that Bentley told Morgan to suspend the Alabama One employees or resign. Morgan said that he did not know who prepared the suspension letters. That evening, Smyth sent an email to Byrne with the subject line "Alabama One" expressing his appreciation.

         The ACUA allowed the suspended employees to return to work on March 21, 2014, after they agreed to release all claims against the ACUA. The next day, Morgan resigned from his position as Alabama Credit Union Administrator. On April 15, 2014, Bentley appointed Sarah Moore as the new Administrator. Moore had no professional experience in credit union regulation. Prior to her appointment, she was an executive at Colonial Bank in Montgomery, Alabama, where she worked with Byrne while he was the bank's general counsel. During the interview process, Byrne told her that Alabama One was a "large problem" that she'd have to deal with.

         Ms. Moore officially took office on July 1, 2014 as the new Administrator of the Alabama Credit Union Administration. A few days later, she met with Carruth and told him she was ordering an examination of Alabama One by an outside auditing firm. ACUA and NCUA conducted a joint examination in August, and they then issued a Preliminary Warning Letter directing Alabama One to stop making Member Business Loans. In March 2015, the ACUA informed Alabama One that it would be receiving a Cease and Desist Order, a more severe sanction requiring Alabama One to undergo more extensive outside review of its lending activities and its management.

         In June 2015, Alabama One and Carruth filed their first lawsuit in federal district court against the Smyth Group, Byrne, Moore, and others, alleging violations of various constitutional provisions and several claims under Alabama law. On August 26, the complaint was amended to add Governor Bentley as a defendant. The following day, on August 27, 2015, some sixteen months after Sarah Moore had taken the reins, the ACUA placed Alabama One in conservatorship and removed Carruth as CEO. The ACUA appointed itself conservator of Alabama One and delegated its authority to Moore to run Alabama One. Moore, in turn, denied Carruth indemnification for his legal expenses related to his challenge to the conservatorship order.

         Carruth then commenced this lawsuit in federal district court against Bentley and Byrne under § 1983 on August 25, 2017. He claimed that (1) his termination and the denial of indemnification was a taking in violation of the Fifth Amendment, (2) the defendants violated his right to the equal protection of the laws, (3) they violated his substantive due process rights, (4) they interfered with his First Amendment right to petition the courts, (5) they retaliated against him because of the lawsuit he filed against the Smyth Group in 2015, and, finally, (6) they conspired to deprive him of his rights. Carruth added three state law claims, for tortious interference, intentional infliction of emotional distress, and civil conspiracy.

         In a lengthy order, the district court granted Bentley and Byrne's motion to dismiss, concluding that they were entitled to qualified immunity on each of Carruth's § 1983 claims. Having dismissed all of the federal claims, the court declined to exercise supplemental jurisdiction over the state law claims and dismissed them without prejudice.

         This timely appeal followed.[1] Carruth now challenges the district court's conclusion that Bentley and Byrne are entitled to qualified immunity and that his equal protection, takings, due process, retaliation, and conspiracy claims should be dismissed. He also says that the district court erred by not granting leave to amend his complaint.


         We review the dismissal of a complaint under Rule 12(b)(6) de novo. Gates v. Khokhar, 884 F.3d 1290, 1296 (11th Cir. 2018). We accept all facts alleged in the complaint as true and draw all inferences in the plaintiff's favor. Id. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcr ...

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