United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS'
MOTION FOR PARTIAL SUMMARY JUDGMENT
Bivens action, Plaintiff David Wellington, acting
pro se, alleges that a search of his residence under
a search warrant, procured and executed by agents of the
United States Internal Revenue Service (IRS), violated his
First and Fourth Amendment rights. See COMPLAINT FOR
DECLARATORY AND INJUNCTIVE RELIEF AND DAMAGES (Doc. No. 1)
(Complaint). IRS Special Agents Fernando Daza (SA Daza), Sean
Marshall (SA Marshall), and Gregory Hand (SA Hand) (together,
Defendants) move for summary judgment on six of
Plaintiff's seven claims. See DEFENDANT DAZA,
HAND, AND MARSHALL'S MOTION FOR PARTIAL SUMMARY JUDGMENT
BASED ON QUALIFIED IMMUNITY (Doc. No. 53) (the Motion). The
Motion is fully briefed. See PLAINTIFF'S
RESPONSE TO DEFENDANTS' PARTIAL SUMMARY JUDGMENT MOTION
ON QUALIFIED IMMUNITY (Doc. No. 60) (Response), and REPLY OF
THE DEFENDANTS IN SUPPORT OF DEFENDANTS' MOTION FOR
PARTIAL SUMMARY JUDGMENT (Doc. No. 62) (Reply). The Court
will grant the Motion because Defendants are entitled to
qualified immunity on the First Claim, the Second Claim, the
Fourth Claim, the Fifth Claim, the Sixth Claim, and the
STANDARD OF REVIEW
judgment is appropriate if the factual record demonstrates
that there is no genuine issue as to any material fact and
the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a). When applying this standard, the court
examines the factual record in the light most favorable to
the non-movant. Belhomme v. Widnall, 127 F.3d 1214,
1216 (10th Cir.1997). “[T]he movant need not negate the
non-movant's claim, but need only point to an absence of
evidence to support the non-movant's claim.”
Sigmon v. CommunityCare HMO, Inc., 234 F.3d 1121,
1125 (10th Cir.2000). If the moving party meets this initial
burden, the nonmoving party may not rest on his pleadings but
must bring forward evidence showing a genuine issue for trial
as to those dispositive matters for which the nonmoving party
carries the burden. Kannady v. City of Kiowa, 590
F.3d 1161, 1169 (10th Cir. 2010).
doctrine of qualified immunity protects public or government
officials ‘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.'” Pearson v. Callahan, 555
U.S. 223, 231 (2009) (quoting Harlow v. Fitzgerald,
457 U.S. 800, 818 (1982)). Once a defendant asserts qualified
immunity, the plaintiff must satisfy a “strict two-part
test.” McBeth v. Himes, 598 F.3d 708, 716
(10th Cir. 2010) (citation omitted). The plaintiff must
establish that 1) the defendant violated a constitutional or
statutory right and 2) the right was clearly established at
the time of the defendant's conduct. Courtney v.
Oklahoma ex rel., Dep't of Pub. Safety, 722 F.3d
1216, 1222 (10th Cir. 2013). “If the plaintiff fails to
satisfy either part of this two-part inquiry, the court must
grant the defendant qualified immunity.” Hesse v.
Town of Jackson, Wyo., 541 F.3d 1240, 1244 (10th Cir.
2008) (quotations omitted). But, if the plaintiff succeeds in
carrying his two-part burden, the burden shifts to the
defendant who must show there are no remaining material
issues of fact that would defeat the claim of qualified
immunity. Walton v. Gomez, 745 F.3d 405, 412 (10th
the Court must construe pleadings filed by a pro se
litigant liberally, “the courts do not serve as the
pro se litigant's advocate, and pro se
litigants are expected to follow the Federal Rules of Civil
Procedure, as all litigants must.” McDaniels v.
McKinna, 96 Fed.Appx. 575, 578 (10th Cir. 2004). In
ruling on a motion for summary judgment based on qualified
immunity, the Court must keep in mind three principles.
First, the Court's role is not to weigh the evidence, but
to assess the threshold issue of whether a genuine issue
exists as to material facts requiring a trial. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50.
Second, the Court must resolve all reasonable inferences and
doubts in favor of the non-moving party, and it must construe
all evidence in the light most favorable to the non-moving
party. See Tolan v. Cotton, 134 S.Ct. 1861, 1866
(2014). Importantly however, “a plaintiff's version
of the facts must find support in the record” at the
summary judgment stage. Thomson v. Salt Lake Cty.,
584 F.3d 1304, 1312 (10th Cir. 2009). Third, the court cannot
decide any issues of credibility. See Liberty Lobby,
477 U.S. at 255. At bottom, the non-movant must present
evidence “from which a jury might return a verdict in
his favor.” Id. at 257. See Gonzales v.
Bernalillo Cty. Sheriff's Dep't, CV 16-1045
MCA/GBW, 2017 WL 3208529, at *4 (D. N.M. Apr. 4, 2017)
(discussing summary judgment in qualified immunity context),
report and recommendation adopted, CV 16-1045
MCA/GBW, 2017 WL 3207798 (D. N.M. May 31, 2017).
Warrant Application and Execution
March 10, 2017, SA Daza of the Internal Revenue Service (IRS)
Criminal Investigation Unit applied for a warrant to search
Plaintiff's residence located at 2124 Altura Verde Ln.
NE, Albuquerque, New Mexico. (UMF 1; Mot. Ex. A (Daza Aff.);
Mot. Ex. B (Warrant).) United States Magistrate Judge William
P. Lynch reviewed (1) the Warrant application, (2) SA
Daza's supporting affidavit (Warrant Affidavit); (3) the
Warrant itself; and (4) two attachments to the Warrant
describing the residence and the items sought. No. 17-mr-0186
(Warrant Case) (UMF 2; Mot. Ex. B attachments A and B.)
Magistrate Judge William P. Lynch approved and signed the
Warrant on March 10, 2017. See Warrant Affidavit,
17-mr-00186 JHR (Doc. No. 1) (unsealed).
March 14, 2017, SA Marshall, SA Hand, and other federal
agents executed the Warrant. Plaintiff alleges that the
agents told him he “could either go inside and sit, or
leave” during the search. (See Compl. ¶
30.) However, Plaintiff adds that since he was only wearing a
t-shirt and pajama bottoms and was not allowed to change
clothes, he had no real choice but to stay. (Id.)
One agent patted down Plaintiff for weapons. (Id.
¶ 27.) During the search, agents seized numerous
documents, publications, and electronic storage devices. (UMF
12; Mot. Ex. B.) The Court has described in detail all of the
items seized at Plaintiff's residence in its MOO Denying
Summary Judgment (Doc. No. 46) at p. 10. On March 16, 2017,
SA Daza filed a return and an inventory of items seized at
the residence. (Mot. Ex. B (inventory).) As of February 20,
2018, all seized items had been returned to Plaintiff either
in original form or in the form of electronic copies. (UMF
13; Mot. Ex. C (Chavez Aff.)).
prepared the Warrant Affidavit based on “his personal
knowledge, his review of documents and other evidence, and
his conversations with other law enforcement officers.”
(Mot. at 4 citing Mot. Ex. B.) An attorney assigned to IRS
Criminal Tax matters reviewed the Warrant Affidavit prior to
its submission to Magistrate Judge Lynch. (UMF 8; Mot. Ex.
B.) The Warrant Affidavit describes an investigation of
“whether Stacy Underwood (UNDERWOOD) and other
individuals set up and operated a tax evasion scheme which
relies on the use of New Mexico Domestic Limited Liability
Companies (LLCs) and bank accounts[.]” (Warr. Aff.
¶ 5.) Several facts were listed as supporting probable
Records from the IRS indicate that Plaintiff had not filed
“U.S. Individual Income tax returns for over 20 years
and may have never filed.” (Id. ¶ 14.)
Underwood had not filed Individual Income tax returns with
the IRS since tax year 2004. (Id. ¶ 9.)
2005, Plaintiff organized National Business Services, LLC
(NBS), a New Mexico LLC, and listed Underwood as the
registered agent for NBS. (Id. ¶ 16.) Plaintiff
and Underwood used NBS: to set up LLCs; to obtain Employer
Identification Numbers (EINs) from the IRS for the LLCs; to
open bank accounts for the LLCs using only EINs; and to
instruct clients how to deposit and withdraw money from the
account to avoid IRS detection. (Id. ¶¶ 3,
5, 6, 16-25.)
“The State of New Mexico does not require the organizer
of an LLC to identify the owner of the LLC.”
(Id. ¶ 22.) A website associated with NBS
advertised “the services provided by NBS[.]”
(Id. ¶ 18.) The NBS website describes how to
take advantage of New Mexico law to open a financial account
for an LLC using only the LLCs identifying information to
avoid linking the LLC to its individual owner. (Id.
¶ 21.) Between 2005 and 2016, Plaintiff and Underwood
used NBS to organize “hundreds of New Mexico LLCs with
the New Mexico Secretary of State.” (Id.) NBS
requested EINs for over 50 LLCs from the Internal Revenue
Service (IRS). (Id. ¶ 23.)
NBS's website advertises a “Free Asset Protection
Training Course, ” on how to “keep your business,
income, and property affairs private[.]” (Id.
¶ 19.) Between 2005 and 2016, “Underwood opened at
least 50 bank accounts at Bank of America for New Mexico LLCs
that she organized. Underwood had signature authority on the
accounts and sole signature authority on most of the
accounts.” (Id. ¶ 24.) The bank account
documents did not identify the owner of the LLC and also did
not “contain the SSN for Underwood as the individual in
control of the account.” As a result, the bank reported
to the IRS financial information only for the LLC.
January 2011, Underwood set up White Top Enterprises, LLC
(White Top), a New Mexico LLC owned by Jerry R. Shrock
(Shrock). Shrock has not filed individual income tax returns
with the IRS for the years 1998-2001; 2003-04; and
2011-2014. (Id. ¶¶ 15, 26, &
31.) Underwood opened a bank account for White Top using only
the EIN for White Top and authorizing herself as the only
signatory on the account. (Id. ¶ 32.) Between
August 2011 and June 2014, the White Top bank account
received deposits of over four million dollars from Moark,
LLC, a company in the egg production industry. (Id.
¶ 33.) IRS Special Agents learned from an interview with
Moark executives that the payments were for installation of
specialized equipment and that Moark considered Shrock the
owner of White Top. (Id.) Shrock provided Moark a
required IRS Form W-9 so that Moark could report to the IRS
payments made to White Top. However, the Form W-9 contained
only White Top's EIN, and Shrock did not sign his name on
the form but instead wrote “White Top Enterprises,
LLC” on the signature line. (Id. ¶ 34.)
Based on the information on White Top's W-9 Form, the IRS
would link Moark's payments only to White Top's EIN
and not to Shrock individually. (Id.)
Under IRS Publication 3402 (Rev. March 2010), a single member
LLC is a disregarded entity for federal income tax purposes
and is required to use the owner's SSN or the owner's
EIN for reporting purposes. (Id. ¶ 35.)
funds deposited into the White Top bank account were obtained
through the use of debit card transactions, money orders,
cash withdrawals from ATMs, and checks signed by Underwood.
The funds were used to buy property, to pay credit card
balances, and to pay expenses for Shrock and his wife.
(Id. ¶¶ 37-42.)
Plaintiff was believed to have been residing at 2124 Altura
Verde Ln. NE because (1) utility service was in
Plaintiff's name (Id. ¶ 51); (2) Plaintiff
had been served a subpoena at that address (Id.
¶ 52); and (3) Internet service for that address was in
Plaintiff's name (Id. ¶ 55).
There were numerous messages between email accounts
associated with Underwood and Plaintiff. (Id. ¶
56.) Based on the information from the emails, SA Daza stated
that in his experience, business owners like Plaintiff and
Underwood who use email also have other business records
stored on computers and electronic devices. (Id.
¶¶ 57-58.) Based on information from internet
providers, SA Daza opined that computers containing those
types of records would be located at 2124 Altura Ln. NE.
(Id. ¶ 59.)
Finally, SA Daza stated
I expect that this warrant will be executed reasonably.
Reasonable execution will likely involve conducting an
investigation on the scene of what computers, or storage
media, must be seized or copied, and what computers or
storage media need not be seized or copied. Where
appropriate, officers will copy data, rather than physically
seize computers, to reduce the extent of the disruption. If,
after inspecting the computers, it is determined that some or
all of this ...