Pierce v. Garmon et al
Filing
93
ORDER granting 39 Motion to Dismiss for Failure to State a Claim; denying 76 Motion to Amend; denying 84 Motion for Sanctions; granting 89 Motion for Hearing. Signed by District Judge Terrence W. Boyle on 12/12/2016. (Stouch, L.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
NO. 4:16-CV-20-BO
RONALD L. PIERCE,
Plaintiff,
v.
ANNEM. GARMON, eta!.,
Defendants.
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ORDER
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This matter comes before the Court on defendant's motion to dismiss, made pursuant to
Rule 12 of the Federal Rules of Civil Procedure [DE 39], plaintiffs motion for leave to file a
second amended complaint [DE 76], and plaintiffs motion for sanctions [DE 84]. All motions
are ripe for adjudication. For the reasons stated below, defendant's motion to dismiss is granted
and plaintiffs motions are denied.
BACKGROUND
Plaintiff is an individual engaged in the roofing repair business in North Carolina.
Plaintiff owned disaster services and construction companies that repaired damaged houses,
usually from hail and other storms. [DE 35 at 4]. Plaintiff states that he "made it his business to
thoroughly inspect these damaged roofs and provide realistic and good faith estimates to
homeowners." Id When repairing storm-damaged roofs for homeowners, plaintiff would, in lieu
of direct payment from the homeowner, receive compensation directly from insurance companies
either under a written assignment of post-loss claim with the homeowners' insurance policies, or
through a licensed public adjuster, working for plaintiff. Id Plaintiff stated that insurance
companies "were all quoting homeowners estimates for roof repair for storm-damaged roofs,
which were grossly inadequate to cover the costs ofrepair." Id at 12.
As a result of this business, the North Carolina Department of Insurance ("DOI")
investigated whether plaintiff was acting in the capacity of a public adjuster and being a
middleman regarding claims of policyholders against their insurance company, without being
licensed as such. Id. at 5-7.
Plaintiff was arrested in June of 2014 on 108 counts of allegedly obtaining money or
property by false pretenses. Id. at 8. Less than one year later, all charges were voluntarily
dismissed by the District Attorney due to insufficient evidence to prosecute. Id. at 9, 12.
Plaintiff alleges that his arrest was unlawful and without cause. Id. at 8. He alleges that
there was no basis for his arrest, and that the DOI was pressured by insurance companies to
arrest him in order to harass, intimidate, and shut down his business. Id. Specifically, plaintiff
states that "partly because of [his] numerous, caustic, accusatory, and annoying administrative
complaints to the Department of Insurance, and partly because of the insurance industry's
dismay at watered-down profits, the Department decided to 'shut [Plaintiff] down.' Arresting
Plaintiff on 108 felony counts appeared to Defendants to be a way to appease the insurance
industry and put Plaintiff out of business." Id. at 12.
The warrants charge that plaintiff wrongfully obtained checks from insurance companies.
Certified copies of the criminal warrants against plaintiff show that in each case the magistrate
found "that there is probable cause to believe that on or about the date of offense shown and in
the county named above, the defendant named above [Ronald Leonard Pierce] unlawfully,
willfully and feloniously did knowingly and designedly, with the intent to cheat and defraud,
obtain US currency check [check number] [check dollar amount] from [Insurance Company
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name] by means of a false pretense which was calculated to deceive and did deceive. The false
pretense consisted of the following: Defendant deposited insurance check into his business
account without proper endorsement." [DE 32-1, 32-2, 32-3, 32-4].
Plaintiff filed a corrected complaint on February 26, 2016. [DE 3]. On May 2, 2016, the
defendants filed a motion to dismiss the corrected complaint. [DE 32]. Plaintiff, instead of filing
a response to the May 2, 2016 motion to dismiss, filed his first amended complaint on May 18,
2016. [DE 35]. The first amended complaint, among other things, added insurance companies
Nationwide, State Farm, Safeco, and Farm Bureau as new defendants. [DE 35 at if 11]. Plaintiff
subsequently moved to voluntarily dismiss those very same insurance defendants as well as two
other individual defendants. [DE 82].
On June 8, 2016 defendants filed the instant motion to dismiss. [DE 39]. On August 22,
2016, plaintiff filed a motion for leave to file second amended complaint. [DE 76]. The proposed
second amended complaint seeks to add Ben Tesh as a new individual defendant. Id.
On September 16, 2016, plaintiff filed a motion for sanctions under Rule 26(g) of the
Federal Rules of Civil Procedure. [DE 84].
DISCUSSION
Plaintiff brought suit against individual defendants under 42 U.S.C. § 1983, alleging a
violation of his rights under the United States Constitution. Section 1983 provides a method for
vindicating rights enshrined in the Constitution. Albright v. Oliver, 510 U.S. 266, 271 (1994). As
a basis for this claim, plaintiff alleges that the individual defendants investigated and arrested
him without cause, and thereby violated his constitutional rights.
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Motion to Dismiss
The Court first considers defendants' motion to dismiss. In considering a motion to
dismiss pursuant to Rule 12(b)(6), or in conducting a futility review, the Court may consider
documents attached to the complaint, as well as those attached to the motion to dismiss so long
as they are integral to the complaint and authentic. Fed. R. Civ. P. 10(c); Secy ofState for
Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007); Philips v. Pitt County
Mem 'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). A court ruling on a motion to dismiss under
Rule l 2(b)( 6) may properly take judicial notice of matters of public record. Secy ofState for
Defence, 484 F.3d at 705.
A Rule 12(b)(6) motion tests the legal sufficiency of the complaint. Papasan v. Allain,
478 U.S. 265, 283 (1986). When acting on a motion to dismiss under Rule 12(b)(6), "the court
should accept as true all well-pleaded allegations and should view the complaint in a light most
favorable to the plaintiff." Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). A
complaint must allege enough facts to state a claim for relief that is facially plausible. Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means that the facts
pled "allow[] the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged," and mere recitals of the elements of a cause of action supported by
conclusory statements do not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint
must be dismissed if the factual allegations do not nudge the plaintiffs claims "across the line
from conceivable to plausible." Twombly, 550 U.S. at 570. The complaint must plead sufficient
facts to allow a court, drawing on judicial experience and common sense, to infer more than the
mere possibility of misconduct. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d
250, 256 (4th Cir. 2009). The court need not accept the plaintiffs legal conclusions drawn from
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the facts, nor need it accept as true unwarranted inferences, unreasonable conclusions, or
arguments. Philips v. Pitt County Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
Plaintiffs claim under§ 1983 is properly understood as a Fourth Amendment claim for
unreasonable seizure which incorporates certain elements of the common law tort. To state such
a claim, a plaintiff must allege that the defendant (1) caused (2) a seizure of the plaintiff pursuant
to legal process unsupported by probable cause, and (3) criminal proceedings terminated in
plaintiffs favor. Evans v. Chalmers, 703 F.3d 636, 647 (4th Cir. 2012).
Probable cause has been defined as the existence of such facts and circumstances, known
to the officer at the time of arrest, as would induce a reasonable person to commence a
prosecution. Bestv. Duke Univ., 448 S.E.2d 506, 510 (1994). Probable cause exists when the
facts and circumstances within an officer's knowledge and of which he had reasonably
trustworthy information would be sufficient to warrant a prudent person in believing that the
suspect had committed or was committing an offense. State v. Biber, 712 S.E.2d 874, 879
(2011). Probable cause is not eliminated based on an after-the-fact decision by the State not to
prosecute a particular claim or by a conclusion by a court that a defendant is not guilty. Adams v.
City of Raleigh, 782 S.E.2d 108, 114 (2016). The validity of the arrest does not depend on
whether the suspect actually committed a crime; the fact that the suspect is later acquitted of the
offense for which he is arrested is irrelevant to the validity of the arrest. Michigan v. De Fillippo,
443 U.S. 31, 36 (1979).
Accepting only properly pled factual allegations, plaintiffs complaint essentially
provides the following narrative: Plaintiff was engaged in roofing repair business, and always did
his work satisfactorily and completely. Plaintiff, in exchange for an assignment of insurance
claims by homeowners, would repair roofs and subsequently charge insurance companies
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directly. Plaintiff opposed and antagonized insurance companies who would under-compensate
homeowners by filing claims for correct amounts. The insurance companies, unhappy with
plaintiff, used their apparent influence over the DOI to initiate a corrupt fabrication of charges
against plaintiff, leading to his arrest. Later, those charges were dismissed due to insufficient
evidence to convict.
Even reading the complaint in the light most favorable to plaintiff, the Court is not
persuaded that plaintiff has pled sufficient facts that would allow the Court to draw the
reasonable inference that defendants are liable for misconduct alleged. The amended complaints
are sparse on actual factual allegations of misconduct on the part of defendants. Additionally,
plaintiffs complaint largely consists of conclusory allegations or rote legal statements, which
under the pleading standards set out by the Supreme Court in Twombly and Iqbal add nothing to
make plaintiffs allegations more facially plausible.
The Court first notes that the fact that the charges were dismissed does not in itself make
plaintiffs claims plausible. First, the District Attorney's voluntary dismissal of the charges
against plaintiff does not establish that there was no probable cause for the arrest. Under North
Carolina law, probable cause is not eliminated based on an after-the-fact decision by the State
not to prosecute a particular claim or a conclusion by a court that a defendant is not guilty.
Adams v. City of Raleigh, 782 S.E.2d 108, 114 (2016). The fact that the suspect is later acquitted
of the offense for which he is arrested is irrelevant to the validity of the arrest. Michigan v. De
Fillippo, 443 U.S. 31, 36 (1979). Additionally, the Court notes that the dismissals were not due
to lack of probable cause for the arrest but because of lack of evidence of fraudulent intent. 1 As
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The dismissals stated: "There is insufficient evidence to warrant prosecution for the following
reasons: No evidence putting defendant at the bank depositing the check or depositing via mobile
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such, the fact that the charges against plaintiff were ultimately dismissed has little probative
weight in determining whether plaintiff was arrested without probable cause that he had
committed a crime. Instead, the Court must look to the circumstances of the arrest and the
evidence known to the State at that time to determine whether plaintiff was improperly arrested
in violation of his rights under the Fourth Amendment.
Plaintiff alleges a conspiracy between the insurance industry and the Department of
Insurance as an explanation for his targeting and invalid arrest. Plaintiff claims that the insurance
companies were angry that he was exposing them for underpaying and making them pay
appropriate amounts for roofing repairs, and thus the insurance companies pressed upon the DOI
to harass and eventually arrest plaintiff. 2 This is a serious claim, and plaintiff has not pled
sufficient to make this plausible. He alleges no statements, circumstances, experiences that
occurred to plaintiff or that are in plaintiffs knowledge that would support these claims that the
insurance industry was "out to get him," that the insurance industry has a corrupting influence
over the DOI, or that the DOI arrested plaintiff illegally and without cause, even though such an
arrest would put their own reputations or careers at stake if exposed. This is a fantastic set of
conclusions plaintiff has asked the Court to make, and he has asked the Court to make them
without alleging any supporting facts. Plaintiffs complaint leaves the Court with many critical
questions unanswered, and such questions render the complaint fatally implausible.
deposit. Assignment of benefits by victim and the fact that funds would have been deposited
anyway makes fraudulent intent unclear." [DE 32-1, 32-2, 32-3, and 32-4].
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"Upon information and belief, partly because of Plaintiffs numerous, caustic, accusatory, and
annoying administrative complaints to the Department of Insurance, and partly because of the
insurance industry's dismay at watered-down profits, the Department decided to "shut [Plaintiff]
down." Arresting Plaintiff on 108 felony counts appeared to Defendants to be a way to appease
the insurance industry and put Plaintiff out of business." [DE 35 at 12].
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Plaintiff also alleges that defendants did not know, or should not have known, that
plaintiff did not possess the requisite specific intent to cheat or deceive necessary to sustain a
conviction for obtaining property by false pretenses. Plaintiff essentially argues, in conclusory
fashion, that defendants knew or should have known that there was no evidence of specific intent
to defraud customers, and that because there was no evidence of false representation, the arrests
were without probable cause. Plaintiff offers no specific factual allegations to show that
defendants had this presence of mind, but instead apparently argues that the fact that the charges
were dismissed necessarily infers that defendants knew or should have known at the time of the
arrest that the charges would not be later sustained. But this directly contradicts settled law
which states that a later dismissal does not eliminate probable cause at the time of the arrest. The
fact of dismissal adds little to an analysis of whether probable cause existed at the time of the
arrest.
Additionally, a probability of illegal activity, rather than a definitive showing of illegal
activity or proof of guilt, is sufficient for a finding of probable cause. Biber, 712 S.E.2d at 879.
Therefore, even accepting plaintiffs conclusory allegation that the DOI did not know beyond a
reasonable doubt whether plaintiff had the specific intent to deceive does not defeat probable
cause. The fact that the evidence did not in the end rise to the level of beyond a reasonable doubt
does not establish that it was unreasonable for the DOI to have suspected plaintiff of such
criminal activity in the first instance. Under plaintiffs theory of the Fourth Amendment, any
individual accused, or even investigated, of a crime by the state but not ultimately convicted in
court could sue the state for damages. Such a system would be unworkable. The standard instead
is that such individuals can only receive damages when the arrest was unjustified, and an
unjustified arrest is one effected without probable cause.
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The Court is not convinced here that such probable cause was lacking at the time plaintiff
was arrested on 108 counts of obtaining property by false pretenses, considering the extensive
investigations into plaintiffs businesses, the averments of investigators that plaintiffs customers
did not receive repairs charged by plaintiff,3 the fact that plaintiff was arguably operating as a
public adjuster without proper licensing (as plaintiffs own allegations admit), the lack of any
factual allegations of actual instances of collusion between the insurance industry and the DOI
which plaintiff alleged was the motivation behind his investigations and arrest, the fact that the
charges were ultimately dismissed not because of lack of probable cause but because of
insufficient evidence, and the fact that an independent magistrate determined that there was
probable cause for plaintiffs arrest. 4 As a result, the Court finds that plaintiff has not pled
sufficient facts to show that he was arrested unlawfully or that any of his constitutional rights
were violated during as a result of his arrest.
3
Defendant Garmon' s limited scope interrogatory answers were attached to the motion to
dismiss and are integral to plaintiffs complaint. Garmon stated, regarding her investigation into
plaintiffs activity, that she "interviewed a number of homeowners who did not get the roof
repairs promised to them by Plaintiff or Plaintiffs companies." [DE 83-1].
4
The letter from Assistant Attorney General Kirby to plaintiffs lawyer attached to plaintiffs
second amended complaint elucidates the circumstances of the DOI's investigation into
plaintiffs business activities. According to the letter, plaintiffs billings practices to his
customers and his customers' insurance companies included invoices and explanation of charges
indicating that plaintiff charged the insured $310 per hour for rendering "legal preparation" or
"paralegal and paperwork." [DE 76-2 at 18]. These bills added up to more than $10,000 dollars
for some of plaintiffs customers and their insurers. Id. at 18-19. Regarding the justification for
DOI's licensing investigation, the letter stated: "Mr. Pierce's statements about licensure, his
abandoned attempts to obtain entity licenses, in conjunction with evidence indicating that Mr.
Pierce has acted and held himself and Clear Choice out as a public adjuster, appear to show an
intent to circumvent the public adjuster license requirements through purported assignments of
claims. For this reason, the Department questioned the validity of the assignments to the named
insureds." Id. at 21. Regarding the legality of such activity, the letter stated that there is not "any
case decided by the appellate courts in North Carolina specifically addressing this issue. Thus,
until this issue is resolved by an appellate court, it remains a matter of legal opinion ....
Nevertheless, the validity of any assignment depends upon the language of the given insurance
policy regarding assignments and, if contested by the insurer, is an issue to be ultimately decided
by the courts." Id.
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Plaintiff also appears to claim that he was deprived of some constitutional right by reason
of the investigation into whether he was acting as an adjuster without a license. To the extent
plaintiff makes a claim that he was deprived of a constitutional right by way of that investigation,
this claim fails. Plaintiff admits that he was never charged with the misdemeanor of acting as an
adjuster without a license. [DE 35 at 8]. This investigation affected no stop or seizure implicating
the Fourth Amendment and deprived the plaintiff of no liberty or property under the protections
of due process.
Also determinative in this case is that fact that individual defendants are, as officials of a
state agency, subject to qualified immunity. Qualified immunity protects government officials
from suit for damages when their conduct does not violate a "clearly established" constitutional
right. Evans, 703 F.3d at 646. Qualified immunity protects "all but the plainly incompetent or
those who knowingly violate the law." Malley v. Briggs, 475 U.S. 335, 341 (1986). To prevail on
a motion to dismiss made on qualified immunity grounds, a plaintiff must allege a violation of a
right that is clearly established at the time of the violation. Evans, 703 F.3d at 646. Unless
plaintiffs allegations state a claim of violation of clearly established law, a defendant pleading
qualified immunity is entitled to dismissal before the commencement of discovery. Mitchell v.
Forsyth, 472 U.S. 511, 526 (1985). For the reasons stated above-because plaintiff fails to plead
sufficient facts showing a lack of probable cause in his arrest, and because plaintiff has failed in
any other way to show how individual defendants' conduct violated plaintiffs clearly established
constitutional rights-the complaint should also be dismissed because plaintiff has failed to
overcome individual defendants' qualified immunity.
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Motion to Amend
Plaintiff also filed a motion requesting leave to amend his complaint a second time. The
decision to allow leave to amend a pleading rests within the discretion of the trial court and
should be freely given "when justice so requires." Fed. R. Civ. P. 15(a)(2). Leave to amend
should be denied only when the amendment would be prejudicial to the opposing party, when
there has been bad faith on the part of the moving party, or when the amendment would be futile.
Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). Futility is apparent ifthe proposed amended
complaint fails to state a claim under the applicable rules and accompanying standards. Katyle v.
Penn Nat'! Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011). Thus, the standard guiding whether
leave to amend would be futile is largely the same as the standard the Court applies under a Rule
12(b)(6) motion for failure to state a claim analysis.
Plaintiff seeks leave to amend his complaint to add Ben Tesh, defendant Garmon's
supervisor, as a defendant. Doing so does nothing to make plaintiffs claims more plausible or
address the inadequacies in the complaint as discussed above. Plaintiffs proposed second
amended complaint mirrors the allegations and claims made in the first amended complaint, and,
for the reasons stated above, neither complaint states a claim upon which relief can be granted.
Therefore, the Court finds that such an amendment would be futile and leave to amend should be
denied.
Motion for Sanctions
Finally, plaintiff submitted a motion for sanctions under Rule 26(g) of the Federal Rules
of Civil Procedure. Plaintiff claims that Ms. Stanford and Mr. Johnson, counsel for the individual
defendants, engaged in civil discovery violations by certifying the discovery responses of Shane
Guyant and Angela Hatchell which they knew or should have known to be false. Defendants
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Guyant and Hatchell responded to interrogatories by indicating they did not take part in the
criminal investigation of plaintiff. 5 Plaintiff claims this is false, because Guyant wrote an email
to other individuals in the DOI saying that he received a call from an attorney in Charlotte about
plaintiff who had some "new information that will benefit CID." [DE 84-1]. Plaintiff similarly
claims Hatchell lied when, in an email she sent to plaintiff in 2013, warned plaintiff that his
activities violated certain North Carolina statutes. Id Plaintiff claims these emails show that
Guyant and Hatchell were involved in the criminal investigation of plaintiff and that they
therefore lied in discovery. Id
The Court finds this motion to be without merit. Individual defendants submitted
adequate evidence demonstrating that criminal investigations are handled solely by the Criminal
Investigation Division ("CID") of the DOI, that the investigation into plaintiff was assigned to
defendant Garmon, and that only Garmon participated in and directed the criminal investigation
into plaintiffs business activities. [DE 88]. Hatchell was a member of the Agent Services
Division ("ASD") of the DOI, which is responsible for the administrative regulation oflicensed
5
In her discovery interrogatory answers, defendant Hatchell submitted the following response:
"QUESTION: Did you participate, in any way, either directly or indirectly, in the criminal
investigation, arrest, or prosecution of Ronald Leonard Pierce?
ANSWER: No. Criminal investigations and prosecutions are handled by the Criminal
Investigations Division (CID) of the Department of Insurance and I have never been a member
of the CID." [DE 84-5 at 2].
Similarly, Guyant responded with the following: "QUESTION: Did you participate, in any way,
either directly or indirectly, in the criminal investigation, arrest, or prosecution of Ronald
Leonard Pierce?
ANSWER: No. I was not personally involved in the criminal investigation, arrest, or criminal
prosecution of Plaintiff Pierce. I am employed in the Criminal Investigations Division (CID) of
the Department of Insurance which handles criminal investigations and prosecutions. CID
Investigators are experienced law enforcement officers who use judgment, in consultation with
prosecuting attorneys, to determine whether there is sufficient evidence to bring a criminal
charge. I became the Director of CID on March 1, 2013. While the Director position has indirect
supervisory authority over the Investigators, each Investigator has a direct supervisor who has
familiarity with the Investigator's workload." [DE 84-5 at 6].
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agents, adjusters, and other licensees. Id. The DOI interacted with plaintiff on a variety of
matters in the course of licensing, filing and responding to complaints, and the opening of both
regulatory and criminal investigations. Id. Defendants have shown that DOI's administrative and
licensing operations are separate and distinct from its criminal investigations responsibilities. Id.
The fact that Hatchell mentioned in a regulatory cease and desist letter that acting as an
unlicensed public adjuster is a misdemeanor in North Carolina does not show that she criminally
investigated plaintiff.
Similarly, the Court is not persuaded by plaintiffs proffer of the email from defendant
Guyant that he gave a false answer in response to plaintiffs interrogatories. Guyant was the
director of CID, and at one time received information regarding the investigation into plaintiff,
but the Court is not persuaded a single email showing that he was present for an interview of a
criminal witness means that he thereby was personally involved in the criminal investigation.
Additionally, defendants submitted evidence showing that it was defendant Garmon who
interviewed the attorney referenced in the email. [DE 88-5
at~
11]. While Guyant was present
during Garmon's interview of the attorney, under the understanding of the attorneys in the CID,
Guyant's presence during the interview did not make him a participant in Garmon's criminal
investigation of plaintiff. Id.
As a result, the Court is persuaded that Guyant and Hatchell did not criminally
investigate Plaintiff and that their interrogatory answers are truthful. Therefore, plaintiffs
motion for sanctions is denied.
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CONCLUSION
For the reasons stated above, defendants' motion to dismiss [DE 39] is GRANTED, and
plaintiff's motion for leave to file a second amended complaint [DE 76] and motion for sanctions
[DE 84] are DENIED. Plaintiff's motion for hearing [DE 89] is GRANTED by reason of the
hearing held on November 8, 2011. The Clerk is DIRECTED to enter judgment accordingly and
to close the file.
SO ORDERED, this / J-day of December, 2016.
T RRENCE W. BOYLE
UNITED STATES DISTRICT J
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