Lee v. Walters

Full title: VICKI B. LEE and DARRELL E. LEE, husband and wife, Plaintiffs, v. STEPHEN…

Court: United States District Court, D. Oregon

Date published: Jan 30, 2002

Civil No. 95-274-ST (D. Or. Jan. 30, 2002)

Opinion

Civil No. 95-274-ST.

January 30, 2002

OPINION

STEWART, U.S. Magistrate Judge:

INTRODUCTION

Plaintiffs, Vicki and Darrell Lee, and another individual, Gene Ferryman ("Ferryman"), co-owned a business known as The New Portland Meadows ("TNPM") which had a perpetual lease for the realty commonly referred to as Portland Meadows race track ("Portland Meadows") in Portland, Oregon. This dispute stems from a disagreement between plaintiffs and the Oregon Racing Commission ("ORC") over plaintiffs' financial management of Portland Meadows. That disagreement culminated in the ORC issuing four sets of orders in 1993 and 1994 purporting to exclude plaintiffs from Portland Meadows and all other areas within the jurisdiction of the ORC, arresting them for alleged violations of those orders, and temporarily suspending and eventually permanently revoking their employee licenses.

In the lengthy and tortuous history of this case, this court has made a number of prior rulings on the parties' cross motions for summary judgment, the parties' supplemental cross motions for summary judgment, defendants' motion for clarification and additional motion for summary judgment on damages, defendants' motion for summary judgment on all remaining claims based on absolute immunity, and plaintiffs' motion for reconsideration. These rulings were followed by defendants' unsuccessful interlocutory appeal on their absolute quasi-judicial immunity defense. Then, on the eve of trial of the remaining claims, defendants renewed their attack by filing a motion for reconsideration of the prior summary judgment orders (docket #295), another motion for summary judgment based on lack of subject matter jurisdiction (docket #293), and a motion in limine (docket #296). For the reasons set forth below, the motion for reconsideration is granted as to Claims Two and Three and otherwise denied, and the other motions are denied.

DISCUSSION

I. Lack of Jurisdiction

Although the dispositive motion deadline has long since passed, defendants now raise two new jurisdictional challenges. They assert that this court lacks subject matter jurisdiction based upon the Eleventh Amendment to the United States Constitution and the Rooker-Feldman doctrine.

A. Eleventh Amendment

Although defendants did not previously raise any such defense in their Answer, they now move against two state law claims in the Second Amended Complaint claiming that the court has no jurisdiction over them due to the Eleventh Amendment.

The two state law claims are the Thirteenth Claim for intentional interference with economic relations and the Seventeenth Claim for trespass to chattels. However, the Pretrial Order has superseded all prior pleadings, including the Second Amended Complaint, and the Pretrial Order contains neither of the state law claims that defendants now seek to attack. Thus, the defense is moot as to those claims.

Defendants also argue that the Eleventh Amendment bars any action for money damages against the state of Oregon, and hence its agency, the ORC, and the defendants who merely acted on behalf of the ORC. This analysis carries the Eleventh Amendment too far. A damages action against a state official, in his official capacity, is tantamount to a suit against the state itself and, absent waiver or consent, is barred by the Eleventh Amendment. Will v. Michigan Dep't of State Police, 491 U.S. 58 (1989) (holding that neither a state nor a state official in his official capacity is a "person" for purposes of a § 1983 damages action). However, a state official sued in his individual capacity for damages is a "person" under § 1983. Hafer v. Melo, 502 U.S. 21, 26 (1991); Kroll v. Board of Trs. of Univ. of Ill., 934 F.2d 904, 907 (7th Cir), cert denied 502 U.S. 941 (1991) ("Personal capacity suits raise no Eleventh Amendment issues."). Here plaintiffs sue defendants in their personal capacities. Therefore, the Eleventh Amendment has no applicability.

Furthermore, this defense is untimely. In Hill v. Blind Indus. Servs. of Md., 179 F.3d 754 (9th Cir), amended, 201 F.3d 1186 (1999), the Ninth Circuit held that the defendant waived any immunity it might have enjoyed under the Eleventh Amendment by participating in extensive pretrial activities and waiting until the first day of trial before objecting to the jurisdiction of the federal court. The panel expressly rejected the defendant's claim that the defense could be raised at any time. Here, defendants waited for over six years of litigation, including several summary judgment motions and an interlocutory appeal on the issue of absolute quasi-judicial immunity, before raising the alleged Eleventh Amendment defense for the first time. Accordingly, Hill bars this defense.

B. Rooker-Feldman Doctrine

Defendants also assert that this court lacks subject matter jurisdiction pursuant to the Rooker-Feldman doctrine. Under that doctrine, inferior federal courts lack subject matter jurisdiction over cases that effectively seek review of state court judgments or application of various rules and procedures pertaining to a state case because federal review of state court decisions is entrusted solely to the United States Supreme Court. District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 415 (1923). The Rooker-Feldman doctrine bars not only issues actually raised, but also claims that a plaintiff may fail to raise in state court. "If the constitutional claims presented to a United States District Court are inextricably intertwined" with the merits of a judgment rendered in a state court proceeding, "then the District Court is in essence being called upon to review the state court decision. This the District Court may not do." Feldman, 460 U.S. at 483 n16. A claim is

inextricably intertwined with the state-court judgment if the federal claim Ssucceeds only to the extent that the state court wrongly decided the issues before it. Where federal relief can only be predicated upon a conviction that the state court was wrong, it is difficult to conceive the federal proceeding as, in substance, anything other than a prohibited appeal of the state-court judgment.

Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 25 (1987) (Marshall, J., concurring); accord Canal Capital Corp. v. Valley Pride Pack, Inc., 169 F.3d 508, 512 (8th Cir 1999), quoting Bechtold v. City of Rosemount, 104 F.3d 1062, 1065 (8th Cir 1997) ("A federal claim is inextricably intertwined with a state court judgment when `the relief requested in the federal action would effectively reverse the state court decision or void its ruling'").

However, Rooker-Feldman bars only federal claims that the plaintiff had a reasonable opportunity to raise in state court. Wood v. Orange County, 715 F.2d 1543, 1547 (11th Cir 1983), cert denied, 467 U.S. 1210 (1984). Absent such an opportunity, the plaintiff cannot be said to have failed to raise the issue and, if barred by Rooker-Feldman, would then be deprived of any forum, state or federal. The Rooker-Feldman doctrine is at least as broad as res judicata. As explained by the Ninth Circuit:

[f]aced with the task of deciding our power to review constitutional issues which arise from a state court proceeding, we view the res judicata requirement of full and fair opportunity to litigate, and the Feldman "inextricably intertwined" barrier as two sides of the same coin. Under the rubric of either "jurisdiction" or "res judicata," the crux of the question is whether there has already been actual consideration of and a decision on the issue presented. If consideration and decision have been accomplished, action in federal court is an impermissible "appeal" from the state court decision. If no consideration has been given, or any decision on the matter is ambiguous, it is unlikely that the issues presented to the state high court and to the federal court are so "inextricably intertwined" that the federal court cannot take jurisdiction. Nor is it likely that there will have been a full enough and fair enough opportunity for litigation to warrant the claim preclusive effect of res judicata.

Robinson v. Ariyoshi, 753 F.2d 1468, 1472 (9th Cir 1985), vacated on other grounds, 477 U.S. 902 (1986) (citations omitted).

To assess the applicability of the Rooker-Feldman doctrine, "the fundamental and appropriate question to ask is whether the injury alleged by the federal plaintiff resulted from the state court judgment itself or is distinct from that judgment." Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir 1999) (citations omitted). In this regard, courts distinguish between "a federal claim alleging injury caused by a state court judgment" and "a federal claim alleging a prior injury that a state court failed to remedy." Id. (citations omitted). A federal court is precluded from considering the former, but not the latter.

Defendants contend that plaintiffs' claims are barred by the Rooker-Feldman doctrine because they were litigated, or are "inextricably intertwined" with the issues litigated, in state court. In response, plaintiffs invoke the "reasonable opportunity" exception, arguing that they had no opportunity to pursue their federal constitutional claims in state court.

Plaintiffs' federal claims all arise out of orders issued by the ORC on March 5 and 15, 1993. Without any notice or meaningful opportunity to be heard, the ORC issued the March 5 Exclusion Orders pursuant to ORS 462.080 excluding plaintiffs "from all areas of licensed race meets in the State of Oregon, including frontside, backside, offices, and off-track betting sites, until otherwise ordered by the Commission. "On March 9, 1993, plaintiffs filed a petition for judicial review of the March 5 Exclusion Orders in state court, Lee v. State of Oregon, Multnomah County Circuit Court Case No. 9303-01534, contending that the ORC lacked probable cause and failed to provide procedural due process. Affidavit of David L. Kramer ("Kramer Aff), Exhibit 1. One of the grounds alleged in the petition was that the ORC's remedy for two of the alleged statutory violations "is the revocation or suspension of the license issued by the [ORC], pursuant to ORS 462.090," and not exclusion pursuant to ORS 462.080. Id. at ¶ 9(b). Plaintiffs then filed a motion for an order temporarily restraining the ORC from enforcing the March 5 Exclusion Orders, characterizing the ORC's actions as "an unlawful taking." Id. Exhibit 2, p. 4.

On March 15, 1993, Judge Nely Johnson granted a preliminary injunction to Darrell Lee (on condition that he post a bond and not withdraw funds from TNPM), but not to Vicki Lee because of her failure to show irreparable injury. However, on that same day immediately prior to the hearing scheduled before Judge Johnson, the ORC mooted the March 5 Exclusion Orders by issuing "emergency" March 15 Suspension Orders of plaintiffs' licenses on the basis that a "serious and imminent danger to the public health or safety" existed, a situation that defendants have since admitted did not exist.¹ As did the March 5 Exclusion Orders, the March 15 Suspension Orders, pursuant to OAR 452-35-005(5), excluded ("ruled off") plaintiffs from all areas within the jurisdiction of the ORC.

1 By the time of the ORC's March 15, 1993 meeting, defendants knew that the signature cards to the bank accounts had been changed, that Ferryman was in charge of TNPM, and that Darrell Lee had offered to surrender "supervisory control over the money room, check signing, the parimutuel wagering staff or the actual running of the races" until the dispute with the ORC had been resolved. Plaintiffs' Exhibits 47-52; Defendants' Response to Plaintiffs' Concise Statement of Material Facts, ¶¶ 81-85, 88.

On March 16, 1993, plaintiffs filed a supplemental petition seeking relief from those March 15 Suspension Orders (Kramer Aff, Exhibit 2) and obtained a temporary restraining order from Judge Gary Kahn until the date of the preliminary injunction hearing on March 26, 1993.

Once again, the ORC deliberately mooted that hearing when, on March 25, 1993, it held a contested case hearing with only three days notice to plaintiffs. As a result of the hearing, the ORC issued final orders suspending plaintiffs' licenses (March 26 and April 1 Suspension Orders). Plaintiffs then filed a second supplemental petition seeking reversal of all the orders. Kramer Aff, Exhibit 3. On August 25, 1993, Judge Redding held a trial and on August 27, 1993, issued an Opinion and Order denying relief to plaintiffs. In December 1994, the ORC issued final orders refusing to renew and revoking plaintiffs' licenses.

Plaintiffs belatedly sought judicial review of the March 5, 1993 Order (but not Judge Reddings' ruling) by filing a new action in the Oregon Court of Appeals, In the matter of Darrell E. Lee v. Oregon Racing Commission, Oregon Court of Appeals No. A81573. After ordering the plaintiffs to show cause why their petition should not be dismissed, and after considering matters they submitted, the Oregon Court of Appeals held:

[Darrell E. Lee] filed a petition for judicial review of an order of the Oregon Racing Commission dated March 5, 1993. * * *

The Court determines that a preliminary injunction issued in a circuit court case enjoining the Commission from enforcing the order did not toll the running of the statutorily prescribed period for filing a petition for judicial review. The court also determines that the [administrative] order [of the ORC] was not subject to judicial review, because the order gave petitioner the opportunity to request a hearing and he failed to avail himself of that opportunity. Therefore, the court on its own motion dismisses this judicial review.

Id. Order dated March 24, 1994.

Finally, plaintiffs appealed to the Oregon appellate courts yet again, challenging the ORC orders suspending/revoking their employee licenses. The Oregon Court of Appeals rejected all of their arguments and affirmed the ORC administrative orders. The Oregon Supreme Court denied review. Darrell E. Lee v. Oregon Racing Commission, and Vicki Lee v. Oregon Racing Commission, both affirmed without opinion, 131 Or. App. 268, 884 P.2d 1230 (1994), rev. denied, 321 Or. 429, 899 P.2d 1197 (1995).

Defendants argue that these related state court proceedings compel dismissal of all of plaintiffs' claims, pointing to Ahmed v. State of Washington, 2001 WL 1654534 (9th Cir 2001). Ahmed alleged a § 1983 claim and presented evidence at trial that he was wrongfully terminated from his employment with the state in retaliation for his alleged "whistleblowing" activity in violation of the First Amendment. The Ninth Circuit reversed a substantial jury verdict in Ahmed's favor, holding that Rooker-Feldman precluded federal jurisdiction. Ahmed — as did plaintiffs here — brought related claims in state and federal proceedings. He first sought relief from the Washington Personnel Appeals Board ("PAB") which found, among other things, that there were "legitimate bases for Ahmed's termination." Ahmed, 2001 WL 1654534 at * 2. Ahmed unsuccessfully appealed the administrative order through the state courts.

The Ninth Circuit applied the Rooker-Feldman jurisdictional bar for two reasons. First, it found that the PAB considered and rejected Ahmed's First Amendment claim by finding that he was terminated for legitimate reasons, not for exercising his First Amendment rights. Second, it found that the state and federal claims were "inextricably entwined:"

In order to succeed on his First Amendment claim [in the subsequent Federal case], Ahmed must prove that his speech was a substantial motivating factor in his termination. . . . If he were to carry that burden, Defendants could still insulate themselves from liability by proving that they would have fired him for legitimate reasons if the proven retaliatory motive had not been present. . . . Thus Defendants' reasons and motivations for firing Ahmed, and the legitimacy of those reasons, were all crucial to Ahmed's First Amendment claim. Consequently, throughout his Federal suit he has sought to minimize his disciplinary problems, arguing the facts of all of the alleged instances of misconduct in great detail and seeking to explain away his alleged disciplinary violations. In effect, Ahmed argued to the federal jury that the disciplinary charges against him were largely manufactured or exaggerated by Defendants in order to get rid of him.

These arguments are necessary to the success of Ahmed's First Amendment claim, because he was required to show that his speech was a substantial motivating factor of his termination, and he needed to overcome Defendants' showing that without his speech, they would have fired him anyway. The problem is that all of these facts were already found by the PAB, and in Defendants' favor, and it rejected Ahmed's versions of the incidents in question. Because the facts found by the PAB thus go the heart of Ahmed's First Amendment claim, we conclude that Ahmed's claim is inextricably intertwined with the PAB's factual findings, which were affirmed by the state trial court before the second federal jury returned its verdict. Under Rooker-Feldman, therefore, the district court did not have jurisdiction over Ahmed's suit.

Ahmed, 2001 WL 1654534 at *4-5 (citations omitted).

Precisely as in Ahmed, defendants argue that this court must find plaintiffs' claims are "inextricably intertwined" with the findings of the state administrative and judicial process because the heart of the plaintiffs' federal claims is that defendants "trumped up" charges against plaintiffs in retaliation for their alleged exercise of First Amendment rights. Defendants reason that, as in Ahmed, plaintiffs' federal claims turn on their ability to prove that their speech was a substantial motivating factor of their exclusion and must overcome defendants' showing that absent the protected speech, they would have excluded plaintiffs anyway. However, according to defendants, the ORC already rejected plaintiffs' version of the incidents in question by making key factual findings, all of which were affirmed by Oregon courts. Those facts establish that the ORC had legitimate, lawful reasons for its actions. Thus, according to defendants, plaintiffs cannot now claim in federal court that the defendants' charges were a mere pretext to exclude them from Portland Meadows.

Plaintiffs respond first by pointing out that as a consequence of defendants' maneuvering, they never had a hearing in state court on the March 5 Exclusion Orders and March 15 Suspension Orders. That argument is belied by the Opinion and Order issued in August 1993 by Judge Redding after trial in the Multnomah County Circuit Court on plaintiffs' second supplemental petition.² That petition sought:

2 Despite the voluminous record in this case, this document was submitted to the court for the first time in connection with the pending motions.

(1)To make permanent the preliminary injunction against enforcement of the original [March 5] exclusion orders.

(2)To enjoin the Commission from enforcing the second [March 15] Order[s] of Exclusion at times when racing events are not being run at the Portland Meadows facility.

(3)To enjoin the Commission from proceeding with a newly filed notice of intent to revoke the licenses of the Lees.

Kramer Aff, Exhibit 3, p. 2.

Judge Redding concluded that these claims failed because the court lacked jurisdiction to review the administrative actions at issue. Id. Pursuant to ORS 183. 480(3), only final administrative agency orders are subject to judicial review unless the agency acts without probable cause or the plaintiff will suffer substantial and irreparable harm if interlocutory relief is not granted. Judge Redding found that the ORC actions attacked were not final orders; the ORC had probable cause to believe that it had jurisdiction; and the actions would not cause plaintiffs substantial and irreparable harm. Id. at 2-3. Judge Redding further concluded that even if the court had jurisdiction, "those claims would fail on the evidence." Id. at 3. With respect to the March 5 Exclusion Orders, he rejected plaintiffs' argument that "as licensees the [ORC] could only affect their rights through a suspension or revocation process with a prior hearing, and not through the summary exclusion process." Id. at 3-4. Judge Redding also found that the "sanction of ejection may be applied to `any person,' including a licensee." Id. at 5. With respect to the March 15 Suspension Orders, he concluded that the ORC had the authority to exclude plaintiffs not only from the race course while it is licensed to conduct race meets, but also as a public training track or as an off-track betting facility. Id. at 5-6.

Although not directly ruling on the constitutionality of the March 5 Exclusion Orders, Judge Redding did rule that the Orders were valid because licensees could be excluded without prior notice and a hearing.³ Nevertheless, plaintiffs point out that despite Judge Redding's instruction (id at 7), the ORC never prepared a final decree in accordance with the Opinion and Order. On May 10, 1994, the court advised the parties that the case would be dismissed for want of prosecution unless either party showed "good cause" to keep the case active. Kramer Aff, Exhibit 5, p. 5. Because neither party responded, on July 20, 1994, the court on its own motion entered a judgment of dismissal pursuant to ORCP 54(b)(3) for lack of prosecution. Id. Exhibit 4. Thereafter, on August 8, 1994, plaintiffs moved the court for an order releasing the $5,000 they had deposited with the court and did not file a notice of appeal. Id. Exhibit 5, p. 5.

3 This court has reached the contrary conclusion.

Plaintiffs characterize Judge Redding's Opinion and Order as an interlocutory ruling on issues made moot by defendant's subsequent actions with no preclusive effect. Because they could not appeal from that ruling, plaintiffs contend that the Rooker-Feldman doctrine does not apply. Plaintiffs are correct that under Oregon law, they could not file an interlocutory appeal from a trial court order. ORS 19. 205. It is only after entry of a final judgment that "the appellate court may review any intermediate order involving the merits or necessarily affecting the judgment or decree appealed from." ORS 19. 425. Here, the trial court entered a judgment of dismissal under ORCP 54(b) which "operates as an adjudication without prejudice. "A dismissal without prejudice under Oregon law is not a final determination on the merits for purposes of claim preclusion. Hampton Tree Farms, Inc. v. Jewett, 125 Or. App. 178, 188, 865 P.2d 420, 426 (1993), aff'd and remanded, 320 Or. 599, 892 P.2d 683 (1995). A dismissal for want of prosecution may be appealed, but the standard of review is an abuse of discretion. See Lambert v. American Dream Homes Corp., 148 Or. App. 371, 375, 939 P.2d 661, 663 (1997). Thus, based on the form of judgment entered by state court, Judge Redding's Opinion and Order were not preserved for appellate review and, as defendants concede, cannot be analyzed for purposes of the Rooker-Feldman doctrine. Instead, this court must consider to what extent plaintiffs' federal claims are "inextricably intertwined" with the issues decided by the other judgments in state court involving the same underlying facts.

Second, assuming that plaintiffs presented similar claims in both state and federal court, they argue that the issues are not necessarily "inextricably intertwined. "In state court, plaintiffs sought judicial review of the administrative process. They had no reasonable opportunity to seek a declaration that ORS 462. 080(1) was unconstitutional and to seek damages for violation of their constitutional rights, as they now seek in federal court. This court agrees.

Claim Four of the Pretrial Order alleges retaliation in violation of plaintiffs' First Amendment rights. Contrary to defendants' argument, Ahmed is not precisely on point. Plaintiffs will need to prove, as did Ahmed, that their speech was a substantial motivating factor in defendants' decisions to exclude them, and defendants will try to insulate themselves from liability by proving that they would have excluded plaintiffs for other reasons anyway. However, there the similarity with Ahmed ends. Unlike Ahmed, involving a plaintiff who contested legitimacy of the reasons given for firing him, the legitimacy of the ORC's reasons are not crucial to plaintiffs' First Amendment claim. Even if plaintiffs violated various statutes and regulations, they contend that the ORC pursued either an unconstitutional remedy or treated plaintiffs differently than others who committed the same violations. In other words, it is the ORC's choice of remedy, not the plaintiffs' violations, that is the heart of plaintiffs' First Amendment claim. Plaintiffs claim that defendants chose the unlawful remedy of exclusion as retaliation against them. In order to find for plaintiffs on this claim, a jury does not have to find that the ORC's findings of fact were wrong, that plaintiffs committed other violations, or that any state court decisions were wrong.

Three of plaintiffs' other claims seek damages for violations of the Fourth, Fifth and Fourteenth Amendments arising from the unlawful seizure of plaintiffs' tangible and intangible personal property (Claims One and Five) and unlawful arrest (Claim Two). These claims were neither presented to nor decided by the ORC or the Oregon courts. Rather, these claims are completely independent from the administrative proceedings in the same way that a § 1983 claim for damages for excessive force is separate and independent from a disciplinary proceeding against a police officer for using excessive force. Even if the state courts had reversed the ORC's orders, plaintiffs could not recover damages for the seizure and arrests that had already occurred. Claims One, Two and Five allege a prior injury that the state courts failed to remedy. Accordingly, these claims fall outside the preclusion of the Rooker-Feldman doctrine.

Claim Three seeks damages for defendants' violation of procedural due process under the Fifth and Fourteenth Amendments. Defendants correctly note that plaintiffs' Petition for Review to the Oregon Supreme Court in their consolidated cases presented similar factual and legal issues. Plaintiffs alleged, among other things, violations of the Due Process Clause of the Fourteenth Amendment to the United States Constitution because the ORC was a "biased tribunal" which "prejudged" the issues involving plaintiffs, its members were "openly hostile" towards the plaintiffs and "impermissibly assumed an adversarial role," thereby tainting and requiring reversal of the ORC's decisions. As here, plaintiffs relied on the same statements of defendants (ie, the transcript of the March 5, 1993 ORC emergency meeting), the same administrative orders (including the March 5 Exclusion Orders), the same factual arguments, and at least some of the same case authority. However, as this court has previously held, the preclusive effect of the various state court proceedings bars plaintiffs' claims alleging a deprivation of procedural due process and the unconstitutionality of ORS 462.080 as applied. It does not bar plaintiffs' claim for damages due to the facial unconstitutionality of ORS 462.080, as alleged in Claim Three.

Claim Six seeks damages for an unlawful restriction on plaintiff's freedom of movement. As discussed below, plaintiffs must replead this claim. If repled as indicated by plaintiffs, Claim Six will be based only on conduct occurring after this court ruled that ORS 462.080 was facially unconstitutional. As such, it clearly falls outside any prior agency order or state court judgment.

In sum, in order to find for plaintiffs on their federal claims, a jury does not have to find that the state courts' decisions were wrong. Thus, there is no prohibited appeal of any state court judgment and no collateral attack on any such judgment. Consequently, the Rooker-Feldman doctrine does not bar any of plaintiffs' claims.

II. Failure to Exhaust Administrative Remedies

In its Opinion dated July 17, 1997 (docket #163), this court declined to dismiss plaintiffs' federal claims to the extent that they were a "facially constitutional" challenge to ORS 462.080(1). Defendants argue that this conclusion was wrong since Oregon law allowed plaintiffs to raise "facially unconstitutional" challenges in the prior state court proceeding. Because plaintiffs failed to do so, defendants argue that the doctrine of claim preclusion and the Full Faith and Credit Act preclude plaintiffs from raising this issue now.

The remaining claims for trial are not the precisely the same as the claims pending in July 1997. Based on subsequent motions and rulings by this court, the Pretrial Order alleges six remaining federal claims. Although defendants are moving for reconsideration of the court's summary judgment rulings, defendants' motion is directed at each of these remaining six claims.

This court previously held that plaintiffs' failure to include claims based on facial constitutional challenges as part of their appeals to the Oregon appellate courts did not bar consideration of those claims by this court. Defendants contend that plaintiffs should have litigated the constitutionality of their exclusion from their place of business on March 5, 1993, and the summary suspension of their licenses on March 15, 1993, before the ORC or before the state courts. By failing to do so, defendants conclude that they failed to exhaust their administrative remedies and therefore are barred from pursuing any of their remaining six claims.

Defendants are correct that an Oregon administrative agency has the authority to consider constitutional challenges to a statute. Outdoor Media Dimensions, Inc. v. State, 331 Or. 634, 662, 20 P.3d 180, 196 (2001), citing Nutbrown v. Munn, 311 Or. 328, 346, 811 P.2d 131, 141 (1991), cert denied, 502 U.S. 1030 (1992), citing Cooper v. Eugene Sch. Dist. No. 4, 301 Or. 358, 363-64, 723 P.2d 298, 302-03 (1986), appeal dismissed, 480 U.S. 942 (1987). Defendant also are correct that a plaintiff must exhaust all available administrative remedies. Id. 331 Or at 661-62, 20 P. 3d at 196. But those two general propositions do not compel the conclusion in this case that plaintiffs failed to exhaust their administrative remedies by failing to make a facial constitutional challenge to ORS 462.080(1) before the ORC and in their subsequent appeals to the Oregon appellate courts. Defendants fail to include in their analysis the fact that plaintiffs had no opportunity to make such a challenge since they had no pre-deprivation hearing. Judicial review of an administrative proceeding "cannot be converted into a declaratory proceeding on the constitutionality of a statute to accommodate the parties." Cooper, 301 Or at 361, 723 P.2d at 301.

Thus, this court declines to reconsider its prior rulings against defendants on this issue of failure to exhaust administrative remedies.

III. Qualified Immunity

This court previously considered and rejected defendants' claim to qualified immunity based on factual issues as to defendants' motivation and the reasonableness of their actions regarding the scope of plaintiffs' exclusion. Opinion dated September 9, 1998 (docket #232). Defendants urge reconsideration of that decision on several grounds.

A. Failure to Differentiate between Defendants

First, defendants contend that the court did not consider each defendant separately. As the Ninth Circuit has explained, "in resolving a motion for summary judgment based on qualified immunity, a court must carefully examine the specific factual allegations against each individual defendant." Cunningham v. Gates, 229 F.3d 1271, 1287 (9th Cir 2000).

"It is well established that section 1983 does not impose liability upon state officials for the acts of their subordinates under a respondeat superior theory of liability." Rise v. State of Oregon, 59 F.3d 1556, 1563 (9th Cir 1995), cert denied 517 U.S. 1160 (1996), citing Monell v. Department of Soc. Servs. of New York, 436 U.S. 658, 691-94 (1978)." Rather, state officials are subject to suit under section 1983 only if `they play an affirmative part in the alleged deprivation of constitutional rights.'" Id. quoting King v. Atiyeh, 814 F.2d 565, 568 (9th Cir 1987). "`A supervisor may be liable if there exists either (1) his or her personal involvement in the constitutional deprivation, or (2) a sufficient causal connection between the supervisor's wrongful conduct and the constitutional violation.'" Redman v. County of San Diego, 942 F.2d 1435, 1446 (9th Cir 1991), cert denied, 502 U.S. 1074 (1992), quoting Thompkins v. Belt, 828 F.2d 298, 303-04 (5th Cir 1987) (emphasis in original); Larez v. City of Los Angeles, 946 F.2d 630, 646 (9th Cir 1991).

Plaintiffs do not seek to hold defendants liable for the actions of the ORC on the basis of respondeat superior. Instead, plaintiffs seek to hold them liable for their own acts or omissions as co-conspirators. According to plaintiffs, defendants acted jointly to issue and enforce the March 5 Exclusion Orders and March 15 Suspension Orders and to direct their agents to accomplish the seizure of plaintiffs and their property.

Although the Pretrial Order alleges only very general factual contentions, plaintiffs have submitted numerous detailed factual contentions in connection with the parties' various summary judgment motions. The specific facts defendants now seek are in the record, as summarized in this court's Opinion dated April 16, 1998 (docket #205). Plaintiffs allege that all defendants were ORC members who authorized issuance of the March 5 Exclusion Orders. The hearing transcript of the ORC's March 5, 1993 meeting clearly reveals that all defendants (except Laura Fine and Richard Reid who were not present) intended that the Orders operate to exclude plaintiffs for all purposes, and, in particular, from obtaining access to any personal property. As the ORC's attorney stated during that meeting:

[I]t seems like the best thing to do is to stop [Darrell Lee] from getting into his office as much as when a corporate employee is accused of misappropriating or something you can take away his key to the office and his parking sticker and everything else. So keep him out. That is the idea of the exclusion.

Plaintiffs' Exhibit 43, p. 7.⁴

4 The analogy is faulty since Darrell Lee was not ORC's employee and the personal property seized did not belong to the ORC.

And as ORC's attorney represented to the court on March 9, 1993, the Orders were "intended to prevent [plaintiffs] from obtaining access to corporate records. "Affidavit of James Cartwright, ¶ 6. ORC's chief enforcement officer, Bob Brackeen, signed plaintiffs' arrest citation on March 6, 1993, on orders from defendants. A guard, acting on orders by defendants, denied Darrell Lee admittance on March 8, 1993, in order to retrieve his personal property.

Here it is undisputed that all defendants, except Laura Fine⁵ and Richard Reid, issued the March 5 Exclusion Orders and relied on their agents to enforce them. Similarly, all defendants, except Laura Fine, Richard Reid, and George Rankins, issued the March 15 Suspension Orders. Plaintiffs allege a sufficient causal connection between defendants' allegedly wrongful conduct, namely the issuance and enforcement of the Orders to deny plaintiffs' entry to their corporate office, and the constitutional violation, namely physically preventing plaintiffs from retrieving their personal property, even if defendants were not personally involved. Thus, defendants Laura Fine and Richard Reid are dismissed from all claims based on issuance of the ORC's Orders,⁶ and the liability of George Rankins based on issuance of the ORC Orders is limited to solely the March 15 Suspension Orders.

5 Laura Fine's term as a member of the ORC did not begin until May 17, 1993. Fine Depo, p. 6.

6 It appears that Fine was already dismissed because this court granted her motion for summary judgment by Opinion dated August 18, 1999.

B. New Law

Defendants assert that a recent Supreme Court decision, Saucier v. Katz, 533 U.S. 194, 121 S Ct 2151 (2001), compels this court to reconsider its prior decision. In Saucier, the Supreme Court held that the Ninth Circuit had improperly denied qualified immunity to a police officer in an excessive force case. The Ninth Circuit had held that the inquiry whether an officer was entitled to qualified immunity was the same inquiry as the merits of the excessive force claim. Katz v. United States, 194 F.3d 962, 968 (9th Cir 1999), rev'd, Saucier v. Katz, 533 U.S. 194 (2001). Due to factual issues as to whether the force used was excessive, the Ninth Circuit denied qualified immunity to the officer.

The Supreme Court reversed and reiterated its prior ruling on qualified immunity in Anderson v. Creighton, 483 U.S. 635 (1987), namely that a court must first consider whether the facts, taken in the light most favorable to the injured party, show that the officer violated a constitutional right and then whether the law was so clearly established that the officer should have known that he was violating the rights of the claimant. In essence, at the first step, the inquiry is whether the facts alleged constitute a violation of the plaintiff's rights. If they do, then, at the second step, the question is whether the defendant could nonetheless have reasonably but erroneously believed that his or her conduct did not violate the plaintiff's rights. See Saucier, 533 U.S. at ___, 121 S.Ct. at 2158 ("The concern of the immunity inquiry is to acknowledge that reasonable mistakes can be made as to the legal constraints on particular police conduct"). It faulted the Ninth Circuit for not making the second inquiry and determined, on the record before it, that the officer could have reasonably believed, given the "`hazy border between excessive and acceptable force,'" that the officer could not have reasonably known that he was violating the claimant's rights.Id. quoting Priester v. Riviera Beach, 208 F.3d 919, 926-27 (11th Cir 2000).

As plaintiffs correctly note, Saucier does not change, but rather only clarifies, the qualified immunity analysis in excessive force cases. Nevertheless, Saucier does require a qualified immunity defense in all cases to be considered in the proper sequence. Devereaux v. Abbey, 263 F.3d 1070, 1074 (9th Cir 2001) (en banc) (applying Saucier to a § 1983 claim that defendants fabricated evidence). In order to decide whether state officers are entitled to qualified immunity, Saucier instructs that the court must first determine whether, "[t]aken in the light most favorable to the party asserting the injury . . . the facts alleged show the officer's conduct violated a constitutional right. " Saucier, 533 U.S. at ___, 121 S.Ct. at 2156. "[I]f a violation could be made out on a favorable view of the parties' submissions, the next, sequential step is to ask whether the right was clearly established . . . in light of the specific context of the case" such that "it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted." Id. citing Wilson v. Layne, 526 U.S. 603, 615 (1999).

In its Opinion dated September 9, 1998, this court did not ask and answer these two questions with respect to each of plaintiffs' claims. It cited Anderson, upon which Saucier relies, but an analysis of each claim was hindered by defendants' failure at that time to apply their motions to particular claims, leaving that task to the court to sort out defendants' contentions as best it could. Defendants moved for qualified immunity from damages for excluding plaintiffs pursuant to the March 5 Exclusion Orders on only one basis, namely that the law was not clearly established in 1993 whether it was unconstitutional to exclude plaintiffs from Portland Meadow as "detrimental to the best interests of racing" under ORS 462. 080(1) without a pre-deprivation hearing. This court agreed that this particular law was not clearly established in March 1993, but pointed out that other law was clearly established at that time.

C. Analysis as to Each Claim

Pursuant to Saucier and Anderson, this court must complete its qualified immunity analysis by specifically asking and answering the two sequential questions for each of plaintiffs' claims.

1. Claim One

Claim One alleges that defendants violated the Fourth and Fourteenth Amendments by unreasonably seizing plaintiffs' tangible personal property on the premises of Portland Meadows, including their office furnishings and equipment, business papers, and even the horse that they stabled at the race track, from March 5 (the date of the initial Exclusion Orders) until March 26, 1993 for Darrell Lee (the date of the subsequent Exclusion Order applicable to him that was upheld by the Oregon Court of Appeals) and until April 1, 1993 for Vicki Lee (the date of the subsequent Exclusion Order applicable to her that was upheld by the Oregon Court of Appeals).⁷ This court previously granted plaintiffs summary judgment as to liability on this claim in its Opinion dated April 16, 1998, pp. 23-25 (docket #205).

7 Claim One was previously part of plaintiffs' Third Claim in the Second Amended Compliant.

a. Violation of a Constitutional Right

The first inquiry is "whether a constitutional right would have been violated on the facts alleged." Saucier, 533 U.S. at ___, 121 S.Ct. at 2157. The Fourth Amendment prohibits unreasonable searches and seizures of person or property. A "seizure" of property occurs whenever "there is some meaningful interference with an individual's possessory interests in that property. " Soldal v. Cook County, Ill., 506 U.S. 56, 61 (1992). All Fourth Amendment claims are reviewed for objective reasonableness because the subjective intent of the defendant is irrelevant. Brower v. County of Inyo, 489 U.S. 593 (1989). A seizure does not violate the Fourth Amendment if it is objectively reasonable. A seizure of property without a warrant or other court or administrative order is presumptively unreasonable. See Soldal, 506 U.S. at 68-69. On the other hand, a seizure pursuant to a warrant or order is objectively reasonable if the official has a reasonable belief that the warrant or order allows the seizure. See, e.g., Johnson v. Outboard Marine Corp., 172 F.3d 531, 537 (8th Cir 1999).

The March 5 Exclusion Orders excluded plaintiffs "from all areas of licensed race meets in the State of Oregon, including frontside, backside, offices, and off-track betting sites. "No provision allowed plaintiffs to enter Portland Meadows for any purpose, even to reclaim their personal property. Pursuant to those Orders, plaintiffs were arrested at Portland Meadows on March 6, 1993, and on March 8, 1993, a guard, acting on orders from defendants, denied Darrell Lee admittance in order to retrieve his personal property. Later plaintiffs' daughters, after initially being refused admittance, were able to retrieve a briefcase, computer, some computer disks, and a few miscellaneous items. However, plaintiffs were unable to retrieve their horse, tables, chairs, personal and business papers, telephone slips, computer disks, address books, business cards, and telephone numbers. Declaration of Darrell E. Lee filed October 10, 1997 (docket #176), 666-8. Since Darrell Lee had closed his law office and removed his furniture and records to the race track office, some of this property related to his business interests outside TNPM, including his restaurants and law practice. Supplemental Declaration of Darrell E. Lee filed December 15, 1997 (docket #198), ¶ 2. His attorney's request to ORC's attorneys to allow plaintiffs to regain possession of their personal property was ignored. Affidavit of James R. Cartwright filed December 15, 1997 (docket #201), ¶ 3. As this court previously concluded:

While plaintiffs' claim is not in the usual context of a Fourth Amendment to the United States Constitution claim, there is no analytical difference between the usual situation where a governmental agent physically takes tangible personal property away from a person (such as seizing luggage for inspection at an airport) and the situation here where plaintiffs have been prevented from regaining possession of their property by defendants' acts of excluding them from the area where their property is located.

Opinion filed July 17, 1997, p. 39, citing U.S. v. Jacobsen, 466 U.S. 109, 113 (1984).

Thus, by barring the admission of plaintiffs and their agents to Portland Meadows, the ORC's Orders effectively resulted in a seizure of plaintiffs' personal property for purposes of the Fourth Amendment. Whether that seizure violated a constitutional rights depends upon whether the seizure was objectively reasonable.

Defendants contend that no analogous case has found a Fourth Amendment violation as a result of an administrative order being issued to prevent a person from conducting an illegal enterprise, such as plaintiffs managing TNPM. This contention is rejected for several reasons. First, the Orders do not purport to stop plaintiffs from conducting an illegal enterprise, nor could they. The supporting statute and regulations only permit exclusion of persons from the premises, not the termination of an illegal enterprise. Besides, plaintiffs were never accused of operating an illegal enterprise; at best, there was a dispute between Darrell Lee and the ORC as to the order in which certain bills would be paid and a dispute over the interpretation of some contracts. Second, the personal property seized included far more than just the books and records of TNPM, the allegedly illegal enterprise.

And third, it is not necessary for some prior court to have found a Fourth Amendment violation on identical facts for this court to conclude that defendants violated plaintiffs' Fourth Amendment rights. The March 5 Exclusion Orders summarily excluded plaintiffs' physical presence at Portland Meadows, but, unlike a search warrant, did not expressly allow the seizure of plaintiffs' personal property. Only if the Orders expressly allowed the seizure of plaintiffs' personal property could defendants rely upon them to deny plaintiffs the right to enter and retrieve their personal property and avoid a constitutional violation. Instead, the Orders excluded plaintiffs from physically entering the race track with no exceptions and, according to plaintiffs, these Orders were enforced, as intended by defendants, to prevent plaintiffs from retrieving their personal property located on the premises. Plaintiffs' daughters were not allowed admittance and their attorney's request for a return of their personal property was ignored. Even if defendants could physically exclude plaintiffs to prevent them from interfering with the operation of the race track, they could not use the Orders to prevent plaintiffs from retrieving their personal property. Absent an order specifically allowing the seizure of plaintiffs' personal property, the answer to Saucier's first question, whether the right was violated based on the facts alleged, is clearly "yes."

This was accomplished by broadly worded Orders which the guard enforced as intended by defendants to bar plaintiffs, as well as their daughters, from retrieving the personal property, and by the ORC's attorney failing to respond to the request by plaintiffs' attorney to retrieve their personal property. Viewing the evidence in the light most favorable to plaintiffs, this is sufficient to prove that defendants were active participants in the seizure of plaintiffs' personal property.

b. Clearly Established Law

The second inquiry for the qualified immunity analysis is whether the law was so clearly established that defendants should have known that they were violating plaintiffs' rights. With respect to this inquiry, defendants argue that this court erred in several respects.

i. Subjective Intent

Defendants contend that this court mistakenly considered evidence of their alleged subjective intent on the issue of qualified immunity. This court agrees that defendant's subjective intentions are irrelevant to the analysis on this claim. F. E. Trotter, Inc. v. Watkins, 869 F.2d 1312, 1316 (9th Cir 1989). Instead, the issue is whether a reasonable government official could have believed that he could interfere with plaintiffs' possessory interest in their personal property, as discussed below.

ii. ORC's Findings of Fact

Defendants also argue that this court erred by failing to consider the preclusive effect of the ORC's findings of fact concerning plaintiffs' misuse of funds, violations of ORC orders, etc. However, defendants' various findings of fact concerning plaintiffs are not relevant to the issue of qualified immunity. None of the findings has any bearing on the clearly established right of plaintiffs not to have their personal property unreasonably seized or whether any reasonably competent official could have reasonably believed that such a seizure would be lawful.

iii. Reasonableness of Defendants' Conduct

Citing Saucier, defendants contend that qualified immunity cannot be denied unless the alleged conduct under similar facts has previously been found to be unconstitutional. This argument misconstrues Saucier. A plaintiff need only show that the "contours of the [constitutional] right [were] sufficiently clear that a reasonable official would understand that what he is doing violates that right." Anderson, 483 U.S. at 640.

This does not mean that any official action is protected by qualified immunity "unless the very action in question has previously been held unlawful," but it does require that "in the light of pre-existing law the unlawfulness must be apparent." . . . Thus, when "the defendants' conduct is so patently violative of the constitutional right that reasonable officials would know without guidance from the courts" that the action was unconstitutional, closely analogous pre-existing case law is not required to show that the law is clearly established.

Mendoza v. Block, 27 F.3d 1357, 1361 (9th Cir 1994) (citations omitted); see also Martinez v. City of Oxnard, 270 F.3d 852, 857 (9th Cir 2001) (applying same standard after Saucier).

"[W]hat is required is that government officials have `fair and clear warning' that their conduct is unlawful. " Devereaux, 263 F.3d at 1074; see also United States v. Lanier, 520 U.S. 259, 271 (1997) (noting that "general statements of the law are not inherently incapable of giving fair and clear warning," and that "a general constitutional rule already identified in the decisional law may apply with obvious clarity to the specific conduct in question, even though `the very action in question has [not] previously been held unlawful,'" quoting Anderson, 483 U.S. at 640 (alteration in original). "`[P]recedent directly on point is not necessary to demonstrate' that a right is clearly established. . . . Rather, if `the unlawfulness [is] apparent in light of preexisting law,' then the standard is met. . . . In addition, even if there is no closely analogous case law, a right can be clearly established on the basis of `common sense.'" Giebel v. Sylvester, 244 F.3d 1182, 1189 (9th Cir 2001) (citations omitted).

Here, the law was clearly established that a seizure of property occurs when "there is some meaningful interference with an individual's possessory interest in that property" absent a warrant or an order. Soldal, 506 U.S. at 61. Of course, until this court issued its rulings in this case, defendants had no reason to know that excluding plaintiffs based on ORS 462. 080(1) patently violated constitutional principles. However, even if defendants reasonably believed that their exclusion of plaintiffs from Portland Meadows was constitutional, the March 5 Exclusion Orders did not and could not give defendants the right to also deny plaintiffs their possessory interest in their tangible personal property at Portland Meadows. Thus, defendants cannot rely upon the purported validity of the March 5 Exclusion Orders to justify the seizure of the personal property.

In order to obtain summary judgment on the issue of qualified immunity, defendants must prove that no reasonable government official could have believed that he could deprive plaintiffs of their tangible property. They have not done so. At this point, factual issues preclude issuance of summary judgment in their favor. Such issues include why defendants felt that public safety in any way was related to the seizure of plaintiffs' personal property, especially after access by plaintiffs to the race track funds was stopped, and what legitimate reason defendants had, ostensibly to protect the public, to deny plaintiffs access to their corporate books and records so that they could defend against Ferryman's hostile takeover of TNPM. In fact, according to the transcript of the March 3, 1993, meeting, Stephen Walters ("Walters") doubted the ORC's legal authority to issue and enforce the March 5 Exclusion Order. Plaintiffs' Exhibit 43, pp. 24-25.

No closely analogous case law is required when, on the basis of common sense, a reasonable government official would know that the Fourth Amendment prohibits the seizure of plaintiffs' personal property absent an authorizing warrant or order. Thus, defendants are not entitled to qualified immunity on Claim One.

2. Claim Two

Claim Two alleges an unreasonable seizure of plaintiffs in violation of the Fourth and Fourteenth Amendments based upon defendants causing their arrest on March 6, 1993, which was beyond the scope of their lawful authority.⁸ a. Violation of a Constitutional Right

8 Claim Two was previously part of plaintiffs' Tenth Claim in the Second Amended Complaint.

The first inquiry is "whether a constitutional right would have been violated on the facts alleged." Saucier, 533 U.S. at ___, 121 S.Ct. at 2157. Defendants argue that no constitutional violation occurred because the arrests were lawful. As noted above, the March 5 Exclusion Orders authorized the exclusion of plaintiffs from Portland Meadows. A violation of the March 5 Exclusion Orders is a misdemeanor under Oregon criminal law. ORS 462. 080(5) ("Any of the foregoing persons [named in an exclusion order] who refuses to leave a race course when ordered to do so by commission inspectors or the stewards, or by any peace officer, is guilty of a misdemeanor"). Thus, when plaintiffs were presented with the March 5 Exclusion Orders and refused to leave the premises, defendants contend that probable cause existed sufficient to justify arrest under Oregon law.

However, plaintiffs respond that, as this court has ruled, the March 5 Exclusion Orders were facially unconstitutional when issued, such that any arrest premised on those Orders was unconstitutional. Accordingly, plaintiffs' arrest did violate their constitutional rights.⁹ b. Clearly Established Law

9 Plaintiffs also argue that defendants are liable for unlawful arrests if they enforced their March 5 Exclusion Orders in an unreasonable manner by barring plaintiffs from their business premises, from the non-secure areas of the racetrack, and from the track when no racing was taking place. Darrell Lee apparently was arrested on the golf course in the middle of the race track. Such enforcement can be a basis for liability when an officer unlawfully implements an official policy or order in an egregious manner. Chew v. Gates, 27 F.3d 1432, 1450 (9th Cir 1994), cert denied, 513 U.S. 1148 (1995). However, as previously discussed in the Opinion dated April 16, 1998, pp. 19-21, the state court upheld the scope of the Exclusion Orders. Thus, this court granted summary judgment to defendants as to that portion of this claim premised on defendants exceeding the scope of the exclusion permitted by statute.

Having affirmatively answered the first inquiry, the second inquiry for the qualified immunity analysis is whether the law was so clearly established that defendants should have known that they were violating plaintiffs' rights by arresting them. As defendants point out, until this court ruled that ORS 462.080(1) is unconstitutional, no law clearly established its unconstitutionality. Thus, defendants and their agents had no reason to know on March 5, 1993, that the Orders were unconstitutional.¹⁰ As a result, even if plaintiffs' arrest violated a constitutional right, that right was not clearly established at the time defendants issued the Orders. Therefore, defendants are entitled to qualified immunity on Claim Two with respect to plaintiffs' arrest.

10 The March 5 Exclusion Orders excluded plaintiffs not only as "detrimental to the best interests of racing," the facially unconstitutional provision of ORS 462.080(1), but also for other reasons. However, as discussed more fully below on the Motion in Limine, regardless of the reason for the exclusion, plaintiffs did not receive any pre-deprivation notice or opportunity to be heard.

3. Claim Three

Claim Three alleges a violation of procedural due process under the Fifth and Fourteenth Amendments because defendants excluded plaintiffs on March 5, 1993, from Portland Meadows based upon ORS 462.080(1), which this court has ruled is unconstitutional on its face.¹¹ a. Violation of a Constitutional Right

11 Claim Three was previously part of plaintiffs' Sixth, Seventh, and Eighth Claims in the Second Amended Complaint.

The first inquiry is "whether a constitutional right would have been violated on the facts alleged." Saucier, 533 U.S. at ___, 121 S.Ct. at 2157. Given that plaintiffs were entitled to receive, but did not receive, a pre-deprivation hearing prior to their exclusion based upon ORS 462.080(1), clearly their exclusion violated a constitutional right. Also, as discussed below, the same is true of the other statutory and regulatory bases listed in the March 5 Exclusion Orders.

b. Clearly Established Law

The second inquiry for the qualified immunity analysis is whether the law was so clearly established that defendants should have known that they were violating plaintiffs' rights. As defendants correctly note, until this court ruled that ORS 462.080(1) is unconstitutional, no law clearly established its unconstitutionality. As a result, even if a constitutional violation occurred, the right was not clearly established at the time defendants issued the Orders on March 5, 1993. Therefore, defendants are entitled to qualified immunity on Claim Three.

4. Claim Four

Claim Four alleges that defendants retaliated against plaintiffs for their exercise of their constitutional rights of free speech, expression and petition for redress by issuing exclusion orders against plaintiffs, suspending and revoking their licenses, and then, after this action was filed, refusing to lift the exclusions or remove the suspensions and revocations of their licenses.¹² Defendant's conduct allegedly violated due process and equal protection guaranteed under the Fifth and Fourteenth Amendments and also violated the First Amendment.

12 Claim Four was previously part of plaintiff's Sixth (¶¶ 109-110) and Eighth (¶¶ 118-119) Claims in the Second Amended Complaint. Although defendants now argue that the allegations in Claim Four do not satisfy the heightened pleading standard applicable to § 1983 actions, that argument is untimely.

Although the Pretrial Order contains only general allegations, plaintiffs' Statement of Facts (docket #127) submitted in connection with the prior summary judgment motions reveal an ongoing battle between the parties concerning the ORC's attempts to involve itself in the management of TNPM. At the final hearing on whether to grant TNPM a license for 1991-92, Darrell Lee refused to sign a letter agreeing that Steve Barham ("Barham"), ORC's Executive Director, would have to approve every expenditure in advance. Lee Aff, ¶ 15. He later refused to accede to a demand by JoAnne McAdam ("McAdam") for a mid-season accounting and pointed out that his only obligation under Oregon law was to make TNPM's books available for inspection by the ORC. Id. ¶ 16. He obtained a refund of $110,000 that TNPM had accidently overpaid to the Oregon Thoroughbred Breeder's Association despite pressure by the ORC not to do so. Id. ¶ 17. He contested the authority of the ORC to force TNPM to pay a dog breeders' association a percentage of the handle on all simulcast dog races and threatened to sue the ORC to recoup payment. Id. ¶ 18. When Darrell Lee complained to Barham about an ORC employee alienating customers, Barham berated him for allegedly reprimanding the ORC employee. Id. ¶ 19. When Barham sent a letter to Darrell Lee, with copies to the ORC members, Ferryman, and several individuals in the racing community, accusing Lee of being a cheat and a liar, Lee responded with a strongly worded letter. Id. ¶ 20; Plaintiffs' Exhibit 4. Defendants, particularly McAdam and Walters, strongly opposed Darrell Lee's ideas for revitalizing racing in Oregon, such as simulcasting and video poker. Lee Aff, ¶ 21. The negotiations over the 1992-93 contract were protracted and often contentious. Id. ¶ 26. As a result of these confrontations, the parties had a strained relationship. Plaintiffs' Statement of Facts, pp. 18-19. In February 1993, Darrell Lee refused to comply with Barham's subpoena for his personal bank accounts, including the trust account at Lee's law office, contending that Barham lacked any valid reason. Lee Aff, ¶ 29. Darrell Lee also advised defendants that Barham's extra-marital affair with a subordinate and public drunkenness interfered with his job performance and expressed concern about a cover-up by one of the defendants. Id. ¶ 29; Plaintiffs' Exhibit 20.

Defendants complain that plaintiffs have failed to indicate which defendants knew of Darrell Lee's speech in order to retaliate against plaintiffs. However, the facts reveal that Darrell Lee either made comments at ORC meetings or in correspondence addressed to all of the ORC members. Therefore, this court has no basis to grant summary judgment as to any individual defendant on this claim based on a lack of knowledge or participation.

a. Violation of a Constitutional Right

Analyzing the qualified immunity defense to Claim Four, the first question is whether the facts, taken in the light most favorable to plaintiffs, show that the defendants violated a constitutional right. The constitutional right at issue is the well-established First Amendment right to criticize government officials without fear of retaliation. See City of Houston, Tex. v. Hill, 482 U.S. 451, 461-63 (1987) (invalidating a Texas county's ordinance which made verbally challenging an officer in the line of duty unlawful); Mackinney v. Nielsen, 69 F.3d 1002, 1007 (9th Cir 1995).

No less well established is the principle that government officials in general, and police officers in particular, may not exercise their authority for personal motives, particularly in response to real or perceived slights to their dignity. Surely anyone who takes an oath of office knows — or should know — that much. . . . Whether or not officer Aguilar was aware of the fine points of First Amendment law, to the extent that he is found to have detained Duran as punishment for the latter's insults, we hold that he ought to have known that he was exercising his authority in violation of well-established constitutional rights.

Duran v. City of Douglas, Ariz., 904 F.2d 1372, 1378 (9th Cir 1990) (citation omitted).

Plaintiffs allege that defendants sought to oust plaintiffs from TNPM for things that Darrell Lee said and proposed by interfering with their business interests in TNPM.¹³ Rather than suspending or revoking TNPM's race-meet license, which may have shut down the race track operations entirely, ORC chose the alternative strategy of unlawfully excluding plaintiffs from TNPM's business operations under the guise of excluding them from Portland Meadows in order to permit the other 50% shareholder, Ferryman, to take command of TNPM. At that time, they knew that Darrell Lee had discussed seeking protection of TNPM by filing bankruptcy and mentioned that possibility as one of the reasons to take immediate action against plaintiffs. Thus, if plaintiffs are right, and defendants used their authority under ORS 462.080(1) to arbitrarily exclude plaintiffs based on personal dislike or disagreement with their management style or business decisions, then defendants violated a constitutional right on the alleged facts.

13 This court is not aware that Vicki Lee criticized any of the defendants. Instead, Darrell Lee acted on his own or on behalf of TNPM, of which Vicki Lee was not an officer or director. Nevertheless, defendants excluded both plaintiffs and suspended and revoked their licenses, apparently viewing Vicki Lee as Darrell Lee's agent who fully supported his speech and conduct. See Plaintiffs' Exhibit 43, p. 10. Therefore, this court assumes that both plaintiffs may pursue this claim, although their damages may differ.

Defendants argue that plaintiffs do not meet the higher First Amendment standard for government employees that engage in "protected public speech." Connick v. Meyers, 461 U.S. 138, 146 (1983). However, plaintiffs were not government employees and are not required to meet that standard. Even if they had to meet that standard, Darrell Lee's complaint about Barham, ORC's Executive Director, is a complaint about government misconduct which clearly deals with matters of public concern. See e.g., Martinez v. Hooper, 148 F.3d 856, 859 (7th Cir 1998) (police misconduct is a matter of public concern).

b. Clearly Established Law

The second inquiry for the qualified immunity analysis is whether the law was so clearly established that defendants should have known that they were violating plaintiffs' rights. As noted above, the First Amendment right to criticize government officials is clearly established. No reasonable government official could have reasonably believed that it was lawful to retaliate against plaintiffs for the things that they said and proposed to do. Thus, defendants are not entitled to qualified immunity on Claim Four.

5. Claim Five

Claim Five alleges an illegal taking of plaintiffs' intangible personal property for a private purpose without just compensation.¹⁴ That intangible personal property is Darrell Lee's management interest in TNPM March 5-April 28, 1993, and both plaintiffs' rights as TNPM shareholders. This conduct allegedly violates the Takings Clause under the Fifth Amendment.

14 Claim Five was previously part of plaintiffs' Third Claim in the Second Amended Complaint.

In essence, plaintiffs complain that under the guise of regulating TNPM, defendants used their positions to make it impossible for plaintiffs to resist the Ferryman takeover. One of the ways that they did so was blocking plaintiffs from having access to TNPM's corporate books, a right that they enjoyed as a matter of state law. ORS 60.774. By being excluded from TNPM and its books, plaintiffs were fatally disadvantaged in the corporate battle, a contest that was entirely private but one in which defendants unlawfully weighed in on the side of Ferryman.

a. Violation of Constitutional Right

The first inquiry is "whether a constitutional right would have been violated on the facts alleged." Saucier, 533 U.S. ___, 121 S.Ct. at 2157. The right to inspect the corporate books is merely an aspect of plaintiffs' constitutional right not to have their property interest in TNPM taken without just compensation. Even though defendants did not actually seize plaintiffs' corporate stock, as a consequence of defendants' interference, plaintiffs lost their 50% interest in TNPM and their employment with TNPM, and Darrell Lee lost the rights and benefits that he enjoyed as a director and a president of TNPM.¹⁵

15 Vicki Lee lost the value of the stock since her shares and her husband's shares were worth less as minority shareholders. Since plaintiffs reside in Washington State, which is a community property state, Darrell Lee's property belongs to Vicki Lee as well.

Defendants argue that plaintiffs' rights to examine corporate books could only result in a devaluation of the corporation's stock, which is a derivative claim belonging to the corporation, not its shareholders. If the only remedy plaintiffs seek is the loss in the value of their interest in TNPM, then they "run up against the fundamental rule that `a stockholder has no personal right of action against a third party for a wrong to the corporation which lowers the value of the stock.'" Lee v. Mitchell, 152 Or. App. 159, 173, 953 P.2d 414, 423 (1998), citing Weiss v. Northwest Accept. Corp., 274 Or. 343, 348, 546 P.2d 1065, 1069 (1976). This rule has limited exceptions that allow a direct action, such as "when the defendant's actions violate a duty owed to the plaintiff as an individual or when the plaintiff suffers harm distinct from the harm to the corporation. " Id. If the sole damage alleged by plaintiffs is a decline in the value of their stock, or even the eventual demise of TNPM caused by their inability to manage TNPM, then the claim for that loss belongs to TNPM, not to plaintiffs, and provides no basis for a Takings Claim.

However, by being ousted from TNPM, plaintiffs allegedly sustained personal damages apart from TNPM's damages. Instead of merely suffering a decline in the value of their TNPM stock, they became minority shareholders, rather than equal shareholders, and lost their jobs with TNPM. Plaintiffs' allegations are analogous to defendants barring an employee from going to work, which results in the employee being fired. In such a situation, both the employee and the corporation have been harmed. Thus, defendants' conduct, which deprived plaintiffs of their intangible personal property for which they have a direct right of action to recover, violated the Takings Clause.

b. Clearly Established Law

The second inquiry for the qualified immunity analysis is whether the law was so clearly established that defendants should have known that they were violating plaintiffs' rights. The Supreme Court has long held that a state's taking of private property for a private use, as opposed to a public use, violates due process. Armendariz v. Penman, 75 F.3d 1311, 1323 (9th Cir 1996); Chalmers v. City of Los Angeles, 762 F.2d 753, 757 (9th Cir 1985) (finding that a T-shirt vendor has a right protected by the Due Process Clause to engage in his occupation).

According to plaintiffs, defendants destroyed plaintiffs' ability to pursue their livelihood and compromised them with respect to their internal corporate struggle with Ferryman. As evidence, plaintiffs point to defendants' admission that the ORC intended to interfere with Darrell Lee's management of TNPM. See e.g., McAdam Depo, pp. 40, 53, 55, 66; Walters Depo, pp. 41, 79. Defendants did not want to revoke TNPM's license because that would have shut down the race track, but only wanted to rid the ORC of Darrell Lee's involvement in TNPM.

There is no question that plaintiffs had the clearly established right not to have their management of the corporation confiscated by defendants in order to benefit Ferryman or the ORC. No reasonable government official could have believed that such conduct was lawful. Thus, this court will not reconsider its ruling as to qualified immunity on Claim Five.

6. Claim Six

Claim Six alleges that defendants restricted plaintiffs' freedom of movement by excluding them from areas open to the public, as well as to plaintiffs' own private property.¹⁶ "Citizens have a fundamental right of free movement, `historically part of the amenities of life as we have known them.'" Nunez by Nunez v. City of San Diego, 114 F.3d 935, 944 (9th Cir 1997), quoting Papachristou v. City of Jacksonville, 405 U.S. 156, 164 (1972) and citing United States v. Wheeler, 254 U.S. 281, 293 (1920).

16 Although Claim Six was not alleged in the Second Amended Complaint, plaintiffs have argued this claim since at least 1998 and cannot be heard at this late date to complain of its inclusion.

However, at oral argument, plaintiffs clarified that this claim is limited to plaintiffs' exclusion from non-racing events at Portland Meadows and from other race tracks around the country as a result of reciprocity agreements only for the time period after this court's ruled in April 1998 that ORS. 462.080(1) was facially unconstitutional. In addition, plaintiffs recognize that at least one defendant, Brad Higbee, was not involved during this time period. Therefore, plaintiffs intend to replead this claim accordingly. Accordingly, this claim is dismissed with leave to replead.

IV. Motion in Limine

Defendants move for an Order that all of the orders issued by the ORC, including the various findings of fact and conclusions of law contained in them, are valid, that they have been conclusively established for evidentiary purposes, and that at trial plaintiffs may not prove or argue otherwise.

A. Validity of Orders

This court previously ruled that one portion of the March 5 Exclusion Orders is unconstitutional and left open the issue of the validity of plaintiffs' exclusion for any other reason:

Because of the [April 16, 1998 Opinion] the March 5 Exclusion Order is invalid to the extent that it excluded plaintiffs under ORS 462. 080(1) as "detrimental to the best interests of racing" without a pre-deprivation hearing. The parties did not ask this court to decide, and this court has not decided, whether the March 5 Exclusion Order — or any other order — is otherwise valid to exclude plaintiffs for another independent reason. That is still an open issue and may involve disputed facts.

Opinion, September 9, 1998, p. 5.

Defendants now ask this court to address that open issue of whether the orders are valid to exclude plaintiffs "for another independent reason."

1. March 5 Exclusion Orders

Defendants correctly point out that the March 5 Exclusion Orders not only excluded plaintiffs as "detrimental to the best interests of racing," but also excluded them because they "willfully violated provisions of statutes relating to racing or the Rules of Racing," based upon violations of four statutes and rules. This is another permissible basis for exclusion under ORS 462. 080(1), which states in material part as follows:

(1) The Oregon Racing Commission may exclude from any and all race courses any person whom the commission deems detrimental to the best interest of racing or any person who willfully violates any provision of this chapter or any rule or order issued by the commission or any person who has been found guilty of violating [criminal laws]. The commission may take such action without first providing a hearing and without being subject to either criminal or civil liability.

Emphasis added.

Each subsequent ORC Order imposed sanctions for violations of Oregon racing law for reasons other than the unconstitutionally vague phrase "detrimental to the best interests of racing" in ORS 462. 080(1). Thus, the only ORC Orders invoking any part of ORS 462. 080(1) are the March 5 Exclusion Orders which did not rely exclusively on a finding that plaintiffs were "detrimental to the best interests of racing."¹⁷

17 ORS 462.080(1) also permit exclusion of "any person who has been found guilty of violating [criminal laws]. "However, defendants did not purport to exclude plaintiffs for that reason.

Defendants contend that their March 5 Exclusion Orders are valid and enforceable if at least one of the independently sufficient bases for issuing them is valid, citing Gambee v. Board of Med. Exam'rs for the State of Oregon, 143 Or. App. 435, 923 P.2d 679, rev denied, 324 Or. 394, 927 P.2d 600 (1996). In Gambee, an administrative order revoked a chiropractor's license based on four different findings of statutory violations. During the appeal, the legislature changed the statute, eliminating two of the four violations supporting the revocation. Nevertheless, the Oregon Court of Appeals upheld the administrative order because the other two violations were not implicated by the statutory change.

Defendants analogize the present case to Gambee because each ORC Order, including the March 5 Exclusion Orders, had at least one valid, statutory basis independent of the unconstitutionally vague portion of ORS 462.080(1). However, this case differs from Gambee in one critical respect. In Gambee, the license was revoked after a contested case hearing which proved the statutory violations.

In contrast, plaintiffs' exclusion was premised only on allegations without any notice or pre-deprivation hearing. The issue in this case is not whether any statutory basis exists for revoking a license, as in Gambee, but whether, under every set of circumstances, ORS 462.080(1) deprives persons of a protected property interest without due process. Reno v. Flores, 507 U.S. 292, 300-01 (1993). Of course, a pre-deprivation hearing is not always required. Instead, procedural due process may be satisfied by "either the necessity of quick action by the State or the impracticality of providing any meaningful predeprivation process, when coupled with the availability of [post-deprivation procedures]. " Parratt v. Taylor, 451 U.S. 527 (1981). A summary suspension followed by a post-deprivation hearing must provide clear standards that are "susceptible of reasonably precise measurement by external standards." Chalkboard, Inc. v. Brandt, 902 F.2d 1375, 1381 (9th Cir 1989), cert denied, 498 U.S. 980 (1990).

This court previously recognized that ORS 462.080(1) lists several grounds for exclusion, only one of which plaintiffs challenge as unconstitutional, raising the issue of how the other grounds for exclusion affect the analysis. Without much guidance from the parties, this court concluded as follows: In analyzing the constitutionality of this statute, the question arises whether this court may consider only the one basis for exclusion challenged by plaintiffs or, as urged by defendants, must consider all other potential bases for exclusion. In the latter situation, a set of circumstances easily exists under which the statute would be valid, such as excluding a person who has been convicted of a crime relating to gambling. A criminal conviction is objectively verifiable and poses little risk of erroneous deprivation, similar to the indictment at issue in FDIC v. Mallen, [ 486 U.S. 230 (1988)]. However, lumping together all bases for exclusion would create a huge loophole in the due process analysis. If one basis for exclusion alone would require a pre-deprivation hearing, it is constitutional sleight of hand to eliminate the need for that pre-deprivation hearing by tacking on other unrelated bases for exclusion that do not require a pre-deprivation hearing. Therefore, this court views each separate basis for exclusion in the statute as requiring a separate due process analysis. Opinion, April 16, 1998, p. 11.

By requesting this court to rule that the March 5 Exclusion Orders are valid, defendants in essence are asking this court to determine that another basis for exclusion under ORS 462.080(1) is constitutional. The validity of the March 5 Exclusion Orders is premised on defendants' contention they could exclude plaintiffs under ORS 462.080(1) without a pre-deprivation hearing for willfully violating any statute or ORC rule. If so, then plaintiffs clearly were denied no procedural due process even if they were also improperly excluded as "detrimental to the best interests of racing" without a pre-deprivation hearing.

Now that this issue is squarely before the court, defendants' argument is rejected. To avoid a pre-deprivation hearing, the statute must provide clear standards that are "susceptible of reasonably precise measurement by external standards." Chalkboard, 902 F.2d at 1381. Allegations of violating a statute or rule, particularly willful violations, cannot be measured by external standards, such as an indictment. See e.g., FDIC v. Mallen, 486 U.S. 230, 241 (1988). This standard is inherently subjective because defendants admittedly did not even hear any evidence as of March 5, 1993. They could not lawfully have found plaintiffs "guilty" of any offense. Defendants have admitted there was never any threat to the public health or safety, let alone an imminent threat. The liberty and property interests at stake were significant, and the court has already ruled that the burden of providing a pre-deprivation hearing was small. Thus, the risk of an erroneous deprivation of a private interest far outweighs the public interest involved.

Thus, the March 5 Exclusion Orders were illegal regardless of whether plaintiffs were excluded as "detrimental to the best interests of racing" or for some other alleged reason.

2. March 15 Suspension Orders

The ORC's March 15, 1993 Suspension Orders suffer from the same defects as the March 5, 1993 Exclusion Orders, although they were based on OAR 462-35-005(5) due to a "serious imminent danger to the public health or safety. "They were issued without notice and a hearing, and there was no danger to the public health or safety. By defendants' own account, the dispute was about money. Therefore, the Orders were illegal under both Oregon law and the Due Process Clause of the Fourteenth Amendment. Plaintiffs attempted to litigate the validity of those Orders, but, after Judge Kahn granted a TRO, defendants intentionally mooted that controversy by issuing a final suspension order in order to deprive him of jurisdiction. Accordingly, no court has ever issued a final order regarding the validity of the March 15, 1993 Suspension Orders, nor could any court have reviewed them. Therefore, plaintiffs are not barred from arguing the unlawfulness of those Orders.

3. Other Orders

The subsequent orders are not premised on ORS 462.080(1) and, for the reasons set forth in this court's prior Opinions, their validity is not subject to challenge in this proceeding. Although these orders are valid and enforceable, they are not necessarily conclusive for evidentiary purposes and binding for all purposes, as discussed below.

B. Evidentiary Use

Although defendants seek to preclude plaintiffs from refuting the findings and conclusions on the face of the ORC's orders, they have not identified each of the findings that are at issue, making it impossible for the court to address them thoroughly. Moreover, defendants have not demonstrated how any of those findings or conclusions are relevant to the pending claims.

Even assuming that any of the ORC orders and findings and conclusions have any relevance, Rule 403 of the Federal Rules of Evidence may pose a bar to their use. Any probative value may well be substantially outweighed by the danger of unfair prejudice to plaintiffs, confusion of the issues, and misleading the jury.

It is clear that defendants seek to use the Orders to poison the jurors' minds against plaintiffs. For example, related to the March 5, 1993 Exclusion Orders, defendants claim that plaintiffs had misappropriated funds, even though plaintiffs had no chance to be heard to challenge that assertion before that order was issued. There is a substantial risk that jurors would be misled and not understand that the Orders are not binding given the due process violations.

The Orders also are likely to be misused with respect to the issue of the Takings Clause claim. A key issue is whether defendants took plaintiffs' property in order to help Ferryman in his takeover fight with plaintiffs. To allow defendants to interject their "findings" would obscure this issue that the jury must decide.

C. Issue Preclusion

Defendants also seek to apply issue preclusion to bar all of plaintiffs' claims. However, defendants first must identify the specific factual issues or legal questions that they contend were decided in the prior proceeding and the basis for that contention. Defendants have not done so.

V. Conclusion

For the reasons set forth above, defendants Laura Fine and Howard Reid are dismissed from Claims One through Five; defendants are granted summary judgment as to Claims Two and Three; and Claim Six is dismissed with leave granted to plaintiffs to amend. In all other respects, defendants motions (dockets #293, #295, and #296) are denied.