Case Style: Columbian Financial Corp. v. Stork
Case Number: 14-3274
Judge: Neil Gorsuch, Robert E. Bacharach, David M. Ebel
Court: UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT
Plaintiff's Attorney: Jay D. Befort, Dustin L. Kirk
Defendant's Attorney: Matt Limoli, John Edgar, Mike Pospisil
Description: Amidst the 2007–2008 financial crisis, the Office of the State Bank
Commissioner of Kansas declared The Columbian Bank and Trust Company
insolvent, seized the bank’s assets, and appointed the Federal Deposit
Insurance Corporation as receiver. The FDIC then sold many of the bank’s
assets. Columbian Financial Corporation, the bank’s sole shareholder, sued
the state bank commission and four commission officials (Ms. Judi Stork,
Mr. Deryl Schuster, Mr. Edwin Splichal, and Mr. J. Thomas Thull) under
42 U.S.C. § 1983.1 In the complaint, Columbian Financial alleges denial of
due process from the seizure of bank assets, seeking equitable remedies
The district court dismissed the complaint. On the equitable claims,
the district court ordered dismissal without prejudice under Younger v.
Harris, 401 U.S. 37 (1971). On the claims for damages, the court ordered
dismissal, concluding that (1) Eleventh Amendment immunity applied to
all of the claims against the state bank commission and the official
capacity claims against Ms. Stork and Mr. Schuster and (2) Ms. Stork and
1 In district court, the bank was included as a plaintiff. The district court dismissed the claims brought by the bank, concluding that it could not sue under § 1983. This ruling has not been appealed.
2 Ms. Stork is named in her individual and official capacities, Mr. Schuster is named in his official capacity, and Mr. Splichal and Mr. Thull are named in their individual capacities.
Mr. Schuster, in their official capacities, were not considered “persons” for
purposes of § 1983. The district court ruled that Mr. Splichal had absolute
immunity and that all of the commission officials enjoyed qualified
immunity in their individual capacities. This appeal followed, with the
parties raising two issues.
The first issue is whether the district court properly abstained under
Younger. Younger requires federal courts to refrain from ruling when it
could interfere with ongoing state proceedings. Sprint Commc’ns, Inc. v.
Jacobs, __ U.S. __, 134 S. Ct. 584, 591 (2013). Though a state court
proceeding was ongoing when the federal complaint was filed, the state
proceeding terminated while this appeal was pending. In light of this
change of circumstances, we vacate the dismissal without prejudice on the
equitable claims and remand for further proceedings.
The second issue is whether Ms. Stork and Mr. Thull are entitled to
qualified immunity on the claims for damages. Columbian Financial
alleged violation of a clearly established right to procedural due process
when commission officials seized the bank’s assets and placed them under
FDIC receivership without a predeprivation hearing or a prompt
postdeprivation hearing. In our view, Ms. Stork and Mr. Thull enjoy
qualified immunity on this claim because the alleged conduct would not
have violated a clearly established constitutional right. Thus, we agree
with the district court’s decision to dismiss the claims for damages against
Ms. Stork and Mr. Thull.
I. The bank was declared insolvent, its assets were seized, and the FDIC was appointed as receiver.
Because this appeal involves a ruling on a motion to dismiss, we take
the following facts from the complaint unless otherwise noted. See Brown
v. Montoya, 662 F.3d 1152, 1162-63 (10th Cir. 2011).
Like many financial institutions, The Columbian Bank and Trust
Company experienced financial difficulties during the 2007–2008 financial
crisis. These difficulties led the FDIC to conduct an onsite examination of
the bank and downgrade its supervisory rating; months later, the bank
entered into a consent agreement with the FDIC and the state bank
The consent agreement stated that the FDIC and the state bank
commission “had reason to believe that the [b]ank had engaged in unsafe
and unsound banking practices,” and the FDIC and the state bank
commission ordered the bank to “cease and desist” from those practices.
Appellant’s App’x at 72. The order stiffened regulatory oversight of the
bank, requiring written liquidity analyses, projections on sources of
liquidity and uses of funds, and review and amendment of the bank’s
management policies. The bank’s analyses, projections, and policy
amendments were to be submitted to the state bank commission and the
FDIC for review and comment. The bank complied with these
Notwithstanding the bank’s compliance, the state bank commission
declared the bank insolvent, seized the bank’s assets, and appointed the
FDIC as receiver. The same day, the FDIC sold many of the bank’s assets
to a third party in a prearranged sale.
Columbian Financial and the bank did not obtain a hearing until after
the state commission seized the bank’s assets and appointed the FDIC as
the receiver. But Columbian Financial and the bank petitioned a Kansas
trial court for review of the commission’s actions.
About eighteen months later, the Kansas trial court remanded the
petition to the bank commission for a postseizure hearing. Roughly two
more years elapsed before the bank commission issued a decision, granting
summary judgment against Columbian Financial and the bank. They then
filed a new petition for judicial review in the Kansas courts. The trial court
dismissed the action as moot, and Columbian Financial and the bank
appealed. Columbian Bank & Trust Co. v. Splichal, No. 110,256-57, 329
P.3d 557 (Kan. Ct. App. July 25, 2014) (unpublished). Before the Kansas
Court of Appeals issued a decision, Columbian Financial filed this suit in
federal court for deprivation of due process. The federal district court
ordered dismissal, relying in part on Younger abstention and qualified
This appeal followed. While our appeal was pending, the state-court
appeal terminated in favor of the state bank commission. Columbian Bank
& Trust Co. v. Spichal, No. 110,256-57, 329 P.3d 557 (Kan. Ct. App. July
25, 2014) (unpublished), rev. denied (Kan. June 29, 2015).
II. In light of a change in circumstances, we vacate the district court’s dismissal of the equitable claims.
We engage in de novo review of the district court’s decision to
abstain under Younger v. Harris, 401 U.S. 37 (1971). Brown ex rel. Brown
v. Day, 555 F.3d 882, 887 (10th Cir. 2009). Under Younger, federal courts
must abstain from exercising jurisdiction when three conditions are
1. There is an ongoing state proceeding.
2. The state court provides an adequate forum for the claims raised in the federal complaint.
3. The state proceedings “involve important state interests, matters which traditionally look to state law for their resolution or implicate separately articulated state policies.” Amanatullah v. Colo. Bd. of Med. Exam’rs, 187 F.3d 1160, 1163 (10th Cir.
1999) (quoting Taylor v. Jaquez, 126 F.3d 1294, 1297 (10th Cir. 1997)). If
these three conditions are met, abstention under Younger is mandatory.
Taylor v. Jaquez, 126 F.3d 1294, 1297 (10th Cir. 1997).
The parties disagree only on the first Younger prong: whether there is
an ongoing state proceeding. Under our precedent, we ask both whether
there is an ongoing state proceeding and whether this proceeding is the
type afforded Younger deference. Brown, 555 F.3d at 888. The parties
the state proceeding was ongoing when Columbian Financial filed its federal complaint and
the state proceeding has terminated.
Thus, if Columbian Financial were to refile its federal complaint, Younger
would no longer present a jurisdictional hurdle.
The termination of the state proceeding might render the Younger
issue moot. But we need not decide this issue.3 Regardless of whether the
Younger issue is moot, Columbian Financial could now prosecute the
equitable claims in federal court in light of the termination of the state
administrative proceedings. For example, if we were to affirm the
dismissal, Columbian Financial could refile because the dismissal was
3 Some courts have held that under Younger, a state proceeding is considered ongoing if it was pending when the federal suit was filed. See Tony Alamo Christian Ministries v. Selig, 664 F.3d 1245, 1250 (8th Cir. 2012) (“[T]he relevant time for determining if there are ongoing state proceedings is when the federal complaint is filed.”); Bettencourt v. Bd. of Registration in Med., 904 F.2d 772, 777 (1st Cir. 1990) (same); Beltran v. California, 871 F.2d 777, 782 (9th Cir. 1988) (holding that Younger abstention was required even where “the state court proceedings were completed by the time the district court granted summary judgment”). But Younger may also require abstention when the state proceeding is begun during the pendency of the federal proceeding. See Hicks v. Miranda, 422 U.S. 332, 349 (1975) (“[W]here state criminal proceedings are begun against the federal plaintiffs after the federal complaint is filed but before any proceedings of substance on the merits have taken place in the federal court, the principles of Younger v. Harris should apply in full force.”). In this case, the opposite situation exists: the state case preceded initiation of the federal case, but ended while our appeal was pending.
without prejudice. And if we were to reverse the dismissal, Columbian
Financial could renew the equitable claims already filed.
In these circumstances, we vacate dismissal of the equitable claims
and remand these claims to the district court so that it can reconsider them
without the need to abstain now that the state proceedings have ended. See
Citizens Potawatomi Nation v. Freeman, 113 F.3d 1245, 1297 WL 235624,
at *1-2 (10th Cir. 1997) (unpublished table decision). Thus, we vacate the
district court’s order dismissing Columbian Financial’s equitable claims on
Younger grounds and remand these claims for further consideration.4
III. Ms. Stork and Mr. Thull are entitled to qualified immunity on the claims for damages.
Columbian Financial also seeks damages, claiming violation of its
clearly established right to procedural due process when
the bank’s assets were seized and placed under FDIC receivership without a predeprivation hearing and
the conclusion of the postdeprivation hearing was delayed by roughly three years and eight months.5
4 In similar circumstances, two federal circuits (the Third and D.C. Circuits) have treated the Younger issue as moot. Bass v. Butler, 258 F.3d 176, 179 (3d Cir. 2001); Davis v. Rendell, 659 F.2d 374, 376 (3d Cir. 1981); Woods v. Several Unknown Metro. Police Officers, 835 F.2d 340, 341-42 (D.C. Cir. 1987). But in these circuits, the disposition was the same as ours. Bass, 258 F.3d at 179; Woods, 235 F.3d at 342.
5 The state bank commission issued the Declaration of Insolvency on August 22, 2008, and the decision on April 18, 2012.
On these claims, the federal district court held that Ms. Stork and Mr.
Thull were entitled to qualified immunity. We agree.
A. We engage in de novo review of the district court’s dismissal based on qualified immunity.
We engage in de novo review when the district court orders dismissal
based on qualified immunity. Schwartz v. Booker, 702 F.3d 573, 579 (10th
Cir. 2012). To overcome a motion to dismiss based on qualified immunity,
Columbian Financial had to allege facts plausibly showing violation of a
clearly established constitutional right. For a constitutional right to be
clearly established, “there must be a Supreme Court or Tenth Circuit
decision on point, or the clearly established weight of authority from other
courts must have found the law to be as [Columbian Financial] maintains.”
Price–Cornelison v. Brooks, 524 F.3d 1103, 1108 (10th Cir. 2008).
The parties agree that the Fourteenth Amendment’s Due Process
Clause applies, entitling Columbian Financial to due process; the disputed
question is what process was due. See Cleveland Bd. of Educ. v.
Loudermill, 470 U.S. 532, 541 (1985) (“[O]nce it is determined that the
Due Process Clause applies, ‘the question remains what process is due.’”
(quoting Morrissey v. Brewer, 408 U.S. 471, 481 (1972))).
The Supreme Court has explained that while “the right to due process
of law is quite clearly established by the Due Process Clause,” not every
due process violation involves a clearly established right. Anderson v.
Creighton, 483 U.S. 635, 639-40 (1987). Rather, Columbian Financial must
show that the desired process was clearly established given the particular
facts. See id.6
B. The seizure of the bank’s assets and the appointment of the FDIC as receiver without a prior hearing did not violate a clearly established constitutional right.
Columbian Financial claims a denial of procedural due process based
on the lack of a hearing prior to seizure of the bank assets and appointment
of a receiver. On this claim, the two sides point to dueling lines of
Ms. Stork and Mr. Thull point to precedent stating that a
predeprivation hearing is unnecessary when state officials seize bank
assets and appoint a conservator. In response, Columbian Financial argues
that conservators can control bank assets only temporarily while receivers
can permanently dispose of the bank’s assets. Our precedents have not
squarely addressed the need for a predeprivation hearing when a bank’s
assets are placed in the control of a receiver (rather than a conservator).
Columbian Financial points to our precedent requiring a
predeprivation hearing for a pawnshop when a state official returns an item
6 Ms. Stork and Mr. Thull argue that the postdeprivation hearing was timely because it complied with Kansas law. Appellees’ Resp. Br. at 23-27. This argument is invalid, for Kansas law does not bear on what process is due under the Fourteenth Amendment. See Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 541 (1985) (explaining that state law may bear on whether due process is required, but not on what process is due).
to its owner after it had been stolen and pawned. But as Ms. Stork and Mr.
Thull point out, this precedent does not involve the need for quick
intervention when a bank faces imminent collapse.
The result is a gray area where state officials appoint a receiver over
bank assets and allow those assets to be sold without a predeprivation
hearing. In this gray area, the constitutional right to a predeprivation
hearing is not clearly established.
1. Ms. Stork and Mr. Thull rely on precedent allowing appointment of conservators without a predeprivation hearing.
Ms. Stork and Mr. Thull rely in part on Fahey v. Mallonee, where the
Supreme Court upheld the constitutionality of a statute permitting ex parte
appointment of a conservator. 332 U.S. 245, 249, 253-54 (1947). In that
case, a federal agency appointed a conservator for a savings and loan
association, which complained about the unavailability of a predeprivation
hearing. Id. at 247. The Supreme Court held that a postdeprivation hearing
satisfied due process and that a predeprivation hearing was not
constitutionally required. Id. at 253-54.
Guided by Fahey, we held in Franklin Sav. Ass’n v. Director, Office
of Thrift Supervision that the opportunity for a postdeprivation hearing
“precludes any due process violations” when a conservator is appointed for
a bank that had been seized. 934 F.2d 1127, 1140 (10th Cir. 1991). There a
federal agency appointed a conservator for a savings and loan association
without a prior hearing. Id. at 1135, 1140. The federal statute permitted the
ex parte appointment of a conservator without any notice, but allowed
post-seizure judicial review. Id. at 1136. We held that the availability of a
postdeprivation hearing satisfied due process. Id. at 1140.
2. Columbian Financial relies on a precedent involving loss of ownership of a single item (a ring) without a predeprivation hearing.
Columbian Financial relies on Winters v. Bd. of Cnty. Comm’rs,
which involved the lost ownership of a ring. 4 F.3d 848, 850 (10th Cir.
1993). In Winters, the police retrieved a stolen ring from a pawnshop and
returned the ring to its rightful owner, all without affording the pawnshop
a hearing. Id. at 850-51. We held that this action had deprived the
pawnshop of procedural due process. Id. at 858.
3. Columbian Financial did not plead facts showing the violation of a clearly established constitutional right.
For the sake of argument, we can assume that Columbian Financial’s
reading of Winters is correct and that the U.S. Constitution required a
hearing before state officials could appoint a receiver or allow transfer of
the bank’s assets. For qualified immunity, however, the question is
whether that constitutional requirement was clearly established. It was not:
Winters is at least arguably distinguishable, and Franklin and Fahey are at
least arguably applicable even when the governmental action results in the
permanent loss of bank assets.
The facts in Winters differ from ours and would have provided little
guidance to commission officials, for they could reasonably regard the
possibility of a bank failure as a far greater public danger than the inability
to return a pawned item to a pawnshop. The danger of a bank failure could
require commission officials to react quickly; in contrast, the need for
quick governmental action would not have been readily apparent in
But Columbian Financial views Franklin and Fahey as
distinguishable, arguing that the appointment here involved a receivership
(rather than a conservatorship) and would have resulted in permanent loss
of Columbian Financial’s ownership interests.
Our court has acknowledged that the consequences of a receivership
and conservatorship are different. See Franklin Sav. Ass’n v. Dir., Office of
Thrift Supervision, 934 F.2d 1127, 1141 (10th Cir. 1991); Franklin Sav.
Ass’n v. Office of Thrift Supervision, 35 F.3d 1466, 1471 (10th Cir. 1994).
Based on this difference, Columbian Financial argues that appointment of a
receiver would trigger a right to a predeprivation hearing even if no such
right exists when a conservator is appointed.
For the sake of argument, we can assume that Columbian Financial is
correct. The issue, however, is whether this distinction would have been
clear to state officials like Ms. Stork and Mr. Thull. In our view, that
distinction would have been hazy, to say the least, in light of Supreme
Court precedent, treatment of the issue in other circuits, state law, and our
The Supreme Court has held that government officials can seize
property without a prior hearing when three circumstances exist:
1. The seizure “is directly necessary to secure an important governmental or general public interest.”
2. There is a “special need for very prompt action.”
3. The government “kept strict control over its monopoly on legitimate force; the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance.”
Fuentes v. Shevin, 407 U.S. 67, 91-92 (1972).
Ms. Stork and Mr. Thull could reasonably conclude that these factors
would allow the seizure of bank assets without a prior hearing. For
example, Ms. Stork and Mr. Thull could reasonably consider the first and
second factors as supportive, viewing the safety of the banking system as
an important governmental interest requiring immediate action. See id.
(“[T]he Court has allowed summary seizure of property . . . to protect
against the economic disaster of a bank failure.”); see also James Madison
Ltd. v. Ludwig, 82 F.3d 1085, 1099-1100 (D.C. Cir. 1996) (concluding that
the first factor supported seizure and disposal of bank assets prior to a
hearing because the government “has a substantial interest in moving
quickly to seize insolvent institutions” and a preseizure hearing could
increase losses to depositors and the FDIC insurance fund). In addition,
Ms. Stork and Mr. Thull could reasonably regard the third factor as
supportive, for Kansas has strictly controlled the power to seize bank
assets. See Kan. Stat. Ann. § 9-1903 (2015) (establishing the state bank
commission’s power to seize “critically undercapitalized” or “insolvent”
This application of the three factors is subject to reasonable debate.
But Ms. Stork and Mr. Thull had to decide whether to allow a
predeprivation hearing, without any dispositive precedent, by applying the
three factors to the appointment of a receiver for a bank facing possible
In making this decision, Ms. Stork and Mr. Thull could reasonably
consider what other circuits had done in similar circumstances. Three other
circuits had held that a predeprivation hearing was unnecessary even when
the bank is placed in the hands of a receiver rather than a conservator. See
James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1101 (D.C. Cir. 1996)
(holding that the right to due process did not require a hearing before the
government seized banks and allowed the FDIC to liquidate the banks);
First Fed. Sav. Bank & Trust v. Ryan, 927 F.2d 1345, 1358 (6th Cir. 1991)
(holding that a postdeprivation hearing satisfies due process because “[i]n
the event of wrongful appointment of a receiver, [the plaintiff] could sue
for all damages arising out of the wrongful appointment”); FDIC v. Am.
Bank Trust Shares, Inc., 629 F.2d 951, 953-54 (4th Cir. 1980) (rejecting a
bank’s due process claim when the bank was not provided notice prior to
appointment of the FDIC as a receiver and sale of the bank’s assets); see
also Woods v. Fed. Home Loan Bank Bd., 826 F.2d 1400, 1410 (5th Cir.
1987) (“The Supreme Court has held that there is no constitutional
requirement that an association be given an adjudicatory hearing prior to
the [Federal Home Loan Bank Board’s] appointment of a receiver.”).
Columbian Financial counters that two of the cited opinions are
distinguishable and that state law provided a mechanism for a
predeprivation hearing while state officials protected the public. We reject
According to Columbian Financial, Woods and American Bank Trust
Shares are distinguishable because they involved greater evidence
justifying the immediate appointment of receivers. But Ms. Stork and Mr.
Thull could reasonably regard the present circumstances as similar, for the
complaint reflects close scrutiny by regulators prior to the appointment of
a receiver. With this scrutiny already underway, state officials could
reasonably debate the necessity of a predeprivation hearing. As a result, we
reject Columbian Financial’s reliance on factual distinctions between their
circumstances and the circumstances in Woods and American Bank Trust
Shares. Even if we were to fully credit these purported distinctions, we
could not regard the right to a predeprivation hearing as clearly
In addition, Columbian Financial contends that state law provided a
mechanism to protect the public by allowing a hearing to take place before
the seizure of any bank assets. This argument is based on a
misinterpretation of Kansas law.
Columbian Financial relies on § 9-1903 of the Kansas Statutes, which
allows state officials to appoint a special deputy commissioner to take
control of a bank if it is insolvent or critically undercapitalized. Kan. Stat.
Ann. § 9-1903 (2015). But the special deputy commissioner is to take
control only until a receiver is appointed. Id. That appointment is to take
place “forthwith” if the commissioner determines that the bank cannot
sufficiently recapitalize, resume business, or liquidate its indebtedness to
the satisfaction of depositors and creditors. Kan. Stat. Ann. § 9-1905
Columbian Financial pleaded in the complaint that the commissioner
had declared the bank insolvent. Thus, under state law, the commissioner
was required to appoint a receiver “forthwith.” In these circumstances, the
appointment of a special deputy commissioner would not have provided a
mechanism to allow a hearing prior to the appointment of a receiver. To
the contrary, state law required the state bank commissioner to appoint the
receiver “forthwith.” He did that by appointing the FDIC as the receiver.
Ms. Stork and Mr. Thull could reasonably rely not only on Supreme
Court precedent and case law in other circuits, but also on our own
precedent in Franklin Sav. Ass’n v. Office of Thrift Supervision, 35 F.3d
1466 (10th Cir. 1994). There the government appointed a conservator over
a savings and loan association, provided a hearing, and appointed a
receiver. See Franklin Sav. Ass’n, 35 F.3d at 1468, 1472. Complaining
about the receivership, the savings and loan association claimed that it was
entitled to additional process before the government replaced the
conservator with a receiver. See id. at 1471. For this claim, the savings and
loan association made an argument similar to Columbian Financial’s: that
“the decision to replace the conservator with a receiver entails a
permanent, rather than temporary, deprivation of property.” Id. We
rejected this argument. Id. at 1472.
As Columbian Financial points out, the savings and loan association
had already had a hearing by the time a receiver was appointed. Id. But we
relied not only on the availability of a hearing, but also on our conclusion
that replacement of a conservator with a receiver did not result in any
further property loss:
Once a conservator is appointed, the conservator gains “all the powers of the members, the stockholders, the directors, and the officers of the [savings and loan] association and shall be authorized to operate the association in its own name or to conserve its assets.” 12 U.S.C.A. § 1464(d)(2)(E)(i) (Supp. 1994). Because the [a]ssociation and its stockholders do not retain authority to control specific assets after the conservator
takes control of the savings and loan, a later decision to employ a receiver does not deprive the owners or operators of more property.
Id. at 1471-72.
Columbian Financial argues that its situation is different because it
did not obtain any hearing before the appointment of a receiver. That is
true and perhaps this difference is enough to distinguish Franklin. But
even if we credit this distinction, Ms. Stork and Mr. Thull could
reasonably rely on Franklin’s explanation that replacement of a
conservator with a receiver did not result in any further loss of property
for the savings and loan association. And as discussed above, our
precedents had already held that there was no constitutional right to a
predeprivation hearing prior to the appointment of a conservator. In these
circumstances, we cannot regard the necessity of a predeprivation hearing
as “clearly established.”
Even Columbian Financial acknowledges that no predeprivation
hearing is necessary when the State faces a “need for ‘swift or expedited
action.’” Appellant’s Opening Br. at 32-33 (quoting Winters v. Bd. of Cnty.
Comm’rs, 4 F.3d 848, 857 (10th Cir. 1993)). Ms. Stork and Mr. Thull could
reasonably conclude that they needed to move quickly once the bank was
At a minimum, the constitutional necessity of a predeprivation
hearing would have been unclear to state officials pondering whether to
immediately appoint a receiver or wait until Columbian Financial could
obtain a hearing. In these circumstances, the denial of a predeprivation
hearing did not violate a clearly established constitutional right. Thus, we
affirm the district court’s ruling that Ms. Stork and Mr. Thull are entitled
to qualified immunity on the claim involving denial of a predeprivation
C. The delay in the postdeprivation hearing did not violate a clearly established constitutional right.
Columbian Financial also contends that the delay between the bank’s
seizure and the conclusion of the postdeprivation hearing violated a clearly
established right to procedural due process. We disagree.
“The Due Process Clause requires provision of a hearing ‘at a
meaningful time.’” Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532,
534 (1985) (quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965)). And
prompt postdeprivation proceedings are particularly important when a
predeprivation hearing is unavailable. FDIC v. Mallen, 486 U.S. 230, 241
42 (1988). Thus, at some point, an unjustifiable delay in postdeprivation
proceedings may become a constitutional violation. But locating that line
is sometimes difficult.
To decide whether the delay is excessive, we balance three factors:
1. “the importance of the private interest and the harm to this interest occasioned by delay,”
2. “the justification offered by the government for delay and its relation to the underlying governmental interest,” and
3. “the likelihood that the interim decision may have been mistaken.”
Id. Based on these factors, “the determination of the constitutionality of a
delay is a fact-intensive analysis.” Collvins v. Hackford, 523 F. App’x 515,
520 (10th Cir. 2013) (unpublished).7
The first factor (the importance of the private interest and harm from
the delay) could cut either way. Columbian Financial enjoys an important
private interest in being free from the unlawful deprivation of its property
by the government.8 See Mallen, 486 U.S. at 240. But Ms. Stork and Mr.
Thull could reasonably conclude that the delay did not substantially harm 7 Columbian Financial relies in part on Barry v. Barchi, 443 U.S. 55 (1979), and Lawrence v. Reed, 406 F.3d 1224 (10th Cir. 2005). This reliance is misguided. The Supreme Court in Barchi held only that the plaintiff was entitled to a “prompt postsuspension hearing,” and the Court did not address what would constitute a prompt hearing. 443 U.S. at 66. And Lawrence involved the right to a predeprivation hearing, not delay in a postdeprivation hearing. 406 F.3d at 1239.
8 The district court found Columbian Financial’s interest diminished due to the “constant and intensive government regulation” of banks. Appellant’s App’x at 204. Some other courts have engaged in similar reasoning. See First Nat’l Bank & Trust v. Dept. of the Treasury, 63 F.3d 894, 896 (9th Cir. 1995) (concluding that the private interest was diminished because the bank’s shareholders “had full knowledge” of extensive bank regulations); Woods v. Fed. Home Loan Bank Bd., 826 F.2d 1400, 1411 (5th Cir. 1987) (concluding that the private interest was diminished because the shareholder “was aware of the extensive regulatory system” for banks). We need not decide whether to adopt this approach. In our view, Ms. Stork and Mr. Thull would enjoy qualified immunity even if we disregard the existence of bank regulations in connection with the first factor.
Columbian Financial because its property interest in the bank’s assets had
already been “destroyed” when the bank was declared insolvent.
Appellant’s Opening Br. at 35; Oral Arg. at 14:06-14:18. Thus, this factor
does not clearly favor Columbian Financial.
The second factor (whether a governmental interest can justify the
delay) could also point either way. Part of Columbian Financial’s wait
could be attributed to normal court processes, but the state bank
commission likely prolonged the state court proceedings by opposing a
postdeprivation hearing. In these circumstances, much of the delay can be
justified. But the state bank commission likely extended the delay by
challenging Columbian Financial’s right to a postdeprivation hearing.
Thus, this factor does not clearly cut either way.
The third factor (the likelihood that the interim decision could be
mistaken) could also cut either way. Columbian Financial argues that the
Declaration of Insolvency was “conclusory” and “devoid of factual
findings.” Appellant’s Opening Br. at 41. But Columbian Financial alleged
in the complaint that prior to the Declaration of Insolvency
the FDIC had conducted an onsite investigation,
the FDIC had downgraded the bank’s ratings, and
the bank had entered into a consent decree with the FDIC and the state bank commission.
Based on these factual allegations, Ms. Stork and Mr. Thull could
reasonably minimize the possibility of a mistake. See Spiegel v. Ryan, 946
F.2d 1435, 1440 (9th Cir. 1991) (finding “substantial assurance” that a
temporary cease and desist order was not “baseless or unwarranted” due to
a “long investigation” by the agency); Woods v. Fed. Home Loan Bank Bd.,
826 F.2d 1400, 1412-13 (5th Cir. 1987) (engaging in similar reasoning).
The three factors do not clearly cut in favor of Columbian Financial.
* * *
The balancing of these factors is fact intensive, and “a rule of law
determined by a balancing of interests is inevitably difficult to clearly
anticipate.” Melton v. City of Oklahoma City, 879 F.2d 706, 729 (10th Cir.
1989). That difficulty was present here, for Ms. Stork and Mr. Thull faced
two obstacles in determining the constitutionality of the delay.
The first was the absence of any “precedent sufficiently on point
with this case that could have put [defendants] on notice that the delay was
unconstitutional.” Collvins v. Hackford, 523 F. App’x 515, 520 (10th Cir.
The second was the inherent uncertainty in how our court or the
Supreme Court would apply the fact-intensive balancing test governing the
constitutionality of delay in postdeprivation hearings. See Humphries v.
Cnty. of Los Angeles, 554 F.3d 1170, 1202 (9th Cir. 2008) (holding that the
defendant was entitled to qualified immunity because the issue involving
procedural due process turned on an unpredictable application of a
complicated balancing test), rev’d on other grounds, Los Angeles Cnty. v.
Humphries, 562 U.S. 29 (2010); see also Benson v. Allphin, 786 F.2d 268,
276 (7th Cir. 1986) (“It would appear that, whenever a balancing of
interests is required, the facts of the existing caselaw must closely
correspond to the contested action” to defeat qualified immunity.).
For both reasons, the delay in a postdeprivation hearing did not
violate a clearly established constitutional right.
Outcome: We vacate the dismissal without prejudice on the equitable claims,
remanding them for further consideration without the need to abstain now
that the state proceedings have terminated. We affirm the dismissal of the
damage claims against Ms. Stork and Mr. Thull based on qualified