Morgan et al v. Freshour et al

Filing 75

MEMORANDUM AND ORDER denying 64 and 65 MOTIONS to Dismiss. (Signed by Judge Kenneth M Hoyt) Parties notified.(chorace)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
VICTORIA DIVISION
COURTNEY MORGAN, et al,
Plaintiffs,
VS.
SCOTT FRESHOUR, et al,
Defendants.

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April 20, 2018
David J. Bradley, Clerk

CIVIL ACTION NO. 6:17-CV-0004

MEMORANDUM AND ORDER
I.
Before the Court are the defendants’; Mary Chapman and John Kopacz, motions to
dismiss [DEs 64 and 65], the plaintiff’s Courtney Morgan, second amended complaint [DE 63],
the plaintiff’s responses to the defendants’ motions [DE 66 and 68] and the plaintiffs’ reply [DE
69]. The Court has reviewed the documents, arguments presented and attachments and
determines that the defendants’ motions should be denied.
II.
On July 18, 2013, the defendants, agents of the Texas Medicaid Board (“TMB”), or the
Department of Public Safety accompanied by law enforcement agents, executed administrative
subpoenas on the plaintiff’s medical offices at two locations in Victoria County, Texas.
According to the plaintiff, he and his staff were intimidated and threatened with severe
consequences if they objected or obstructed the search or fail to provide the documents described
in the subpoenas. The plaintiff further asserts that he was detained in an examination room for
over 40 minutes while the search was conducted. The defendants seized documents listed in the
subpoenas and other unidentified documents that were not listed.

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As a result of the search and seizure the defendants’ caused criminal charges to be filed
against the plaintiff. Felony criminal charges were brought against the plaintiff in state court. See
[State of Texas v. Courtney Ricardo Morgan, (Cause No. 14-28128-A) 24th Judicial District
Court, Victoria County, Texas]. On October 13, 2015, the state court, based on a motion to
suppress entered findings of fact and conclusions of law concerning that motion and thereafter
granted the motion. The plaintiff then filed this civil suit against the defendants, in their
individual capacities, asserting malicious prosecution and abuse of process.
The defendants have not disputed the facts stated in the plaintiff’s second amended
complaint. Instead, they assert that the plaintiff’s claims must be dismissed because he cannot
overcome their claim of qualified immunity, that the plaintiff’s unlawful search and seizure and
abuse of process claims under 42 U.S.C. § 1983, are time-barred, the federal Constitution’s 14th
Amendment and Texas Constitution, Article I, Section 9 claims are inapplicable because the
defendants enjoy absolute quasi-prosecutorial immunity from the plaintiff’s malicious
prosecution claim, alternatively, the plaintiff has failed to state a viable malicious prosecution or
abuse of process claim.
III.
In his second amended complaint, the plaintiff asserts two causes of action – malicious
prosecution and abuse of process. A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for
failure to state a claim for which relief may be granted tests the formal sufficiency of the
pleadings and should be granted when and only when the suit fails to state a legally cognizable
claim. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied sub com. Cloud
v. United States, 122 S. Ct. 2665 (2002). The Court must accept the factual allegations of the
complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable

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inferences in the plaintiff’s favor. Id. The issue is not whether a plaintiff will ultimately prevail
but whether the claimant is entitled to offer evidence to support the claims. Swierkiewicz v.
Sorema N.A., 122 S. Ct. 992, 997 (2002) (quoting Scheuer v. Rhodes, 94 S. Ct. 1683, 1686
(1974).
Therefore, the issue before the Court is whether the plaintiff has asserted “enough facts to
state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 127 S. Ct.
1955, 1974 (2007). This test requires more than accusation of wrong-doing. In determining the
plausibility issue, a district court may consider documents attached to the plaintiff’s complaint,
the defendants’ motion and the plaintiff’s response that are central to the inquiry. Scanlan v. Tex.
A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003) (citation omitted). They are considered part of the
pleadings when they are referenced. Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285,
288 (5th Cir. 2004).
In his pleadings, the plaintiff asserts that the defendants’ sole purpose was to compile an
investigative report for purposes of prosecuting the plaintiff. Aside from the manner of
appearance and show of force exhibited by the defendants and law enforcement, the seizure of
documents expressly reveals the purpose involved, i.e., an intent to use an administrative
subpoena as a substitute for a formal search warrant. Among other things this conduct, asserts
the plaintiff, constitutes an abuse of the State statute governing the issuance of administrative
subpoena. Hence, such conduct constitutes an abuse of the state rights under an administrative
subpoena resulting in an abuse of process (misuse) and malicious prosecution. The plaintiff cites
to See v. Seattle, 387 U.S. 541, 545 (1967); Club Retro LLC v. Hilton, 568 F.3d 181, 195 (5th
Cir. 2009); Texas Medical Practice Act, §§ 153.007(c), and 154.057.

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IV.
In addition to the facts set forth in his second amended complaint and responses to the
defendants’ motion to dismiss, the plaintiff includes the findings of fact and conclusions of law
from the criminal case filed against the plaintiff. The testimony of Kopacz and Chapman was
received by the state court from which findings and analysis were recorded. The defendants
have not challenged those findings here or by appeal. Therefore, the Court relies on those
findings and incorporates them here:
Findings from Testimony of Agent Kopaz
The Defendant, Courtney Ricardo Morgan is a medical doctor. According to
Agent Kopaz with the Texas Department of Public Safety (DPS), law
enforcement received informal complaints about the defendant writing out
prescriptions for scheduled drugs without "seeing" the patients. Agent Kopaz
was contacted by the Texas Medical Board (TMB) to assist in the
investigation. The Texas Medical Board is a regulatory agency that regulates
certain physicians. The TMB has power to subpoena records of certain doctors
through the Texas Occupations Code. The defendant was running a pain
management clinic which falls under the authority of the TMB. According to
Kopaz, when the TMB contacted the DPS, it had not begun a criminal
investigation.
Kopaz had conversations with Mary Chapman an investigator with the TMB.
When Agent Kopaz first spoke with the TMB, he was not aware if TMB had
already begun an investigation into the defendant's practice. Agent Kopaz
conducted an undercover investigation of one of the business locations owned by
the defendant prior to the serving of the administrative subpoenas.
Findings from Testimony of Mary Chapman
On July 18, 2013, DPS, TMB, the U.S. Drug Enforcement Agency (DEA) and
other law enforcement agencies, served an administrative subpoena to determine
if there were violations of criminal law. No search warrant was prepared to
search the business of the defendant. The first location served with a subpoena
was located at 302 West Rio Grande. The second location served with a
subpoena was 2901 Hospital Drive. Ms. Chapman described the subpoenas as
"instanter."

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Ms. Chapman stated that the subpoenas were based on information
which included the defendant's prescribing history and reports from
media involvement. Chapman contended that prior to getting the subpoenas,
she had prescribing history given to her by DPS. However, she could not
recall when she received that prescribing history from DPS. According to the
testimony of Ms. Chapman, the TMB had no information that the defendant's
practice met the criteria of a "pill mill." For Example, there were no lines of
people at the location; there were no pre-written prescription pads, and there
was no evidence that it was primarily a cash business.
When the subpoenas were sought by the TMB, the TMB was not aware of
the number of patients the defendant examined. In addition, the TMB was not
familiar with the defendant's prescribing trends. After both locations were
searched through the subpoena, medical records that contained the medical
history of several patients were shared by the TMB to DPS to begin a criminal
investigation.
The State Court’s Findings and Analysis
The Fourth Amendment protects individuals from searches conducted outside
the judicial process, without prior approval by a judge or magistrate. U.S.
Const.4th Amend. Searches conducted without a warrant are per se
unreasonable ... subject only to a few specifically established and welldelineated exceptions.'" Arizona v. Gant, 556 U. S. 332, 338, 129 S. Ct. 1710,
173 L. Ed. 2d 485 (2009) (quoting Katz v. United States, 389 U.S. 347, 357,
88 S. Ct. 507, 19 L. Ed. 2d 576 (1967)). This rule “ applies to commercial
premises as well as to homes." Marshall v. Barlow's, Inc., 436 U. S. 307, 312, 98
S. Ct. 1816, 56 L. Ed. 2d 305 (1978).
Therefore, the question before this court is whether the actions by law
enforcement and the TMB are covered by the exceptions to the warrant
requirement under the law. Because the medical profession is an industry that is
heavily regulated by the State there is a reduced expectation of privacy. New
York v. Burger, 482 U.S. 691, 702-03, 107 S. Ct. 2636 (1987). To be reasonable,
the State must show that: 1. There must be a substantial government interest that
gives rise to the regulatory scheme under which the search is made; 2. The
warrantless search must be necessary to further the regulatory scheme; and 3.
The certainty and regularity of the application of the regulatory scheme
must provide an adequate substitute for a warrant. Id. If actions by the TMB
were an administrative search pursuant to valid subpoenas the court would look to
Burger to apply its analysis. Id. However, if TMB acted with the intent to
promote a criminal investigation and not under its regulatory powers, then the
Court will treat the actions of TMB as an extension of law enforcement.
If the TMB was acting as an agent of the government, the 4th Amendment would
be violated. Morrow v. State, 757 S.W.2d 484, 488 (Tex. App.—Houston [1st

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Dist.] 1988, pet. ref’d) (generally exclusionary rule does not apply to search
and seizure of property by a private individual where there is no
governmental involvement), cert. denied, 493 U.S. 921, 107 L. Ed. 2d 265, 110
S. Ct. 285 (1989). When a private citizen is assisting law enforcement
authorities as an agent of law enforcement pursuant to a police practice,
constitutional safeguards are implicated. Paez v. State, 681 S.W.2d 34, 36-37
(Tex. Crim. App. 1984). Any evidence seized illegally, whether by a law
enforcement officer or a private citizen, is by statute subject to suppression in a
criminal case. Article 38.23(a) of the Texas Code of Criminal Procedure. See
TEX. CODE CRIM. PROC. ANN. art. 38.23(a) (Vernon Supp. 2013).
The Texas Medical Board may issue subpoenas for the "production of books,
records and documents" under the authority of §153.007 of the Texas
Occupations Code. Texas Occupations Code §153.007 (2014); See Also Texas
Occupations Code §602.1525 (2014). Any investigation started by the TMB
shall be complete "not later than the 45th day after receiving the complaint.”
Texas Occupations Code § 154.057 (2014). Investigators working under the
hospices of the Texas Occupations Code may not carry firearms. Id. The TMB is
authorized to cooperate and assist law enforcement with a criminal investigation.
Texas Occupations Code §164.007 (2014).
To determine whether the TMB was acting as an agent of the State, the Court
should consider whether the government initiated, knew of, or acquiesced in
intrusive conduct and whether the party performing the search intended to assist
law enforcement efforts or to further his own ends. See Dawson v. State, 868
S.W.2d 363, 369 (Tex. App.--Dallas 1993, pet. ref'd). In this case, there ample
evidence suggesting that the search of the defendant was either known to or
requested by the police. Dawson, 868 S.W.2d at 369, 372 (search was illegal
where club manager's search was conducted because of police officer's
request); King v. State, 746 S.W.2d 515, 518 (Tex. App.--Dallas 1988, pet.
ref'd).
Testimony during the hearing shows that the DPS contacted the TMB to make
"inquires based on complaints and suspicion." See Reporters Record. The
TMB informed DPS that they had "also received complaints from pharmacies"
with regard to the defendant's actions. See Reporters Record. It is unclear by
the testimony and evidence as to whether the TMB's investigation of the
defendant was instigated because of the actions of DPS. See Reporters Record.
However, the Court finds that there were several contacts between the TMB
and DPS with regard to using the information secured as a result of the
subpoena(s) to charge the defendant with a crime. The fact that a regulatory
agency and law enforcement agencies are contacting each other and sharing
information to conduct and coordinate a warrantless "administrative search" is
a cause of concern for this Court.

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In fact, the DPS used the information seized by the TMB's subpoenas to
formally charge the defendant. See Reporters Record. The Court finds that
there was an unusual show of force by law enforcement to merely serve
subpoena(s).
Finally, the Court finds that Chapman's testimony was evasive
when repeatedly pressed about whether the TMB coordinated with law
enforcement to "search" the defendant's business. Ms. Chapman's testimony
was less than credible during the suppression hearing.
The Court finds that the defendant did not consent to the search of his
business. The actions by the TMB and DPS (along with other law
enforcement) conducted a warrantless search. The Court finds that there is
a substantial government interest to search the business of the defendant.
Considering the evidence presented, there is certainly a need to prohibit the
prescribing of medication to patients with little or no examination by doctors.
See Texas Occupations Code. However, the Court does not believe that the
warrm1tless search of the defendant by TMB in conjunction with
numerous law enforcement agencies was necessary to further the regulatory
scheme. New York v. Burger, 482 U.S. 691,702-03, 107 S. Ct. 2636 (1987).
The Court notes that the TMB failed to act in pursuing any action against the
defendant's license until November 21, 2014. See State's Ex. 8. The Court
believes that the intent behind the search (of the defendant) was to pursue
criminal charges against tile defendant. Therefore, the search of the defendant
violates the 4th Amendment of the U.S. Constitution. In addition, the actions
by the TMB and law enforcement in this case do not provide a substitute for a
warrant. New York v. Burger, 482 U.S. 691, 702-03, 107 S. Ct. 2636 (1987).
In addition, the Court notes that the defendant was immediately served with
notice of the actions of the TMB to ensure that there was no judicial oversight of
the search by the TMB and law enforcement. See Texas Occupations Code
§154.056 (2014). Absent consent, exigent circumstances must exist in order for
an administrative search to be constitutional. See City of Los Angeles, California
v. Patel, No. 13-1175; 576 US __ (US Sct. 2015). The subject of the search must
be afforded an opportunity to obtain pre-compliance review before a neutral
decision maker. Id. The Court finds no exigent circumstances existed to
demonstrate that the notice provided to the defendant in this case was reasonable.
Further, the Courts finds that there are no facts presented that would lead to a
reasonable conclusion that any evidence would have been destroyed or altered
had law enforcement secured a search warrant for the business of the defendant.
The Court finds that there was no valid reason why law enforcement did not
secure a search warrant for the defendant's business.
Under the Fourth and Fourteenth Amendments to the United States Constitution, a
search conducted without a warrant is per se unreasonable. Schneckloth v.
Bustamante, 412 U.S. 218, 219, 93 S. Ct. 2041, 2043, 36 L. Ed. 2d 854 (1973).
The Court believes that the State has not demonstrated the subpoenas issued
in this case were valid. Therefore, because the search is per se

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unreasonable, the Court needs to determine whether the defendant consent the
search of his business.
Consent to search is one of the well-established exceptions to the constitutional
requirements of both a warrant and probable cause. Id. at 219; Hubert v. State,
312 S.W.3d 554, 560 (Tex. Crim. App. 2010). The validity of a consensual search
is a question of fact, and the State bears the burden to prove by clear and
convincing evidence that consent was obtained voluntarily. Gutierrez v. State,
221 S.W.3d 680, 686-87 (Tex. Crim. App. 2007). To determine whether the State
met its burden, the Court must consider the totality of the circumstances.
Gutierrez, 221 S.W.3d at 686-87; Maxwell v. State, 73 S.W.3d 278,281 (Tex.
Crim. App. 2002).
Considering the testimony presented, the Court believes that the search of the
defendant was without his consent. The Court notes that the actions of the TMB
and law enforcement bordered on intimidation. It was not necessary for the
service of subpoenas to display actions of intimidation such as the following: I)
having several law enforcement agencies present during the search, 2) seizing of
phones, 3) prohibiting filming or photographing during the service of subpoenas,
and 4) prohibiting employees from talking to other employees.
For consent to be valid, it must '"not be coerced, by explicit or implicit means, by
implied threat or covert force."' Carmouche v. State, 10 S.W.3d 323, 331 (Tex.
Crim. App. 2000) (quoting Schneckloth v. Bustamante, 412 U.S. 218,228, 93 S.
Ct. 2041, 36 L. Ed. 2d 854 (1973)). Consent must be given freely, unequivocally,
and without duress or coercion. Allridge v. State, 850 S.W.2d 471, 493 (Tex.
Crim. App. 1991). "The ultimate question is whether the suspect's will was
overborne" by the officer's actions. Creager v. State, 952 S.W.2d 852, 856 (Tex.
Crim. App. 1997). Considering the totality of the circumstances surrounding the
case at bar, the Court finds that the defendant did not intelligently and voluntarily
consent to the search of his business.
The Court finds that the TMB acted with bad faith in partnering up with law
enforcement to conduct the search of the defendant's business. The Court finds
that the TMB's interest in serving the subpoenas upon the defendant was not a
legitimate pursuit of its administrative authority but an exercise to circumvent
both the Texas and US Constitutions' requirement for a warrant. Because the
Court finds that the TMB was acting as agents of law enforcement, defendant's
Motion to Suppress is hereby GRANTED.
V.
Based on the facts presented the Court concludes that the defendants’ motion to dismiss
based on a failure to plead sufficient facts to support a plausible cause of action, should be

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denied. The Court is also of the opinion that dismissal based on the defendants’ asserted legal
bases, i.e. qualified immunity, failure to establish elements of claims, Fourth Amendment search
and seizure without consent or a search warrant, and absolute quasi-prosecutorial immunity,
should be denied.
The issue here is not whether the plaintiff will prevail on any or every claim, or whether
the defendants had authority to serve an administrative subpoena, as argued by the defendants.
The issue(s) is whether the defendants’ conduct violated “clearly established law” even in the
face of statutory authority or privilege. The evidence shows that defendants entered the
plaintiff’s offices without a search warrant and conducted a search without the plaintiff’s consent
and in the absence of exigent circumstances. Clearly, the defendants were searching for
contraband or other illegal activity that was presumed by them in advance of the search. This
conduct presumably violated clearly established state and federal law. See (State Court findings
and Conclusions). Case law cited by the defendants is instructive only in that the cases either
addressed regulatory searches at the summary judgment stage, or when a motion to dismiss was
denied. The Court concludes that the defendants’ motion to dismiss the plaintiff’s suit should be
and it is hereby DENIED.
It is so Ordered.
SIGNED on this 20th day of April, 2018.
___________________________________
Kenneth M. Hoyt
United States District Judge

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