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KNEPP v. LANE

April 19, 1994

STEPHEN S. KNEPP, Plaintiff,
v.
SCOTT A. LANE, et al., Defendants.



The opinion of the court was delivered by: J. CURTIS JOYNER

 Joyner, J.

 Plaintiff, Stephen S. Knepp, a registered securities agent in Pennsylvania, has brought suit against Scott A. Lane, Elliot Klein, Cynthia M. Frederick, Joseph J. Carroll, Marie A. Stein, M. Joanna Cummings and Simon J. Dengel, all employees of the Pennsylvania Securities Commission, under 42 U.S.C. §§ 1983, 1985. Section 1983 allows a civil action and an award of damages where a deprivation of "rights, privileges, or immunities secured by the Constitution and laws" has taken place. 42 U.S.C. § 1983 (1979). Similarly, section 1985 allows an award of damages for a conspiracy to deprive those rights or privileges. 42 U.S.C. § 1985 (1980). Plaintiff alleges that the underlying rights being deprived to him allowing a recovery under these statutes are his equal protection and due process rights granted in the Fourteenth Amendment of the United States Constitution.

 Defendants have moved for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure, which is now ripe for consideration by this Court. Rule 12(c) provides that "after the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). Under this rule, judgment will not be granted "unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law." Jablonski v. Pan American World Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988)(citation omitted).

 In deciding whether to grant a rule 12(c) motion, the facts and inferences drawn therefrom should be viewed in the light most favorable to the non-moving party. Institute For Scientific Information, Inc. v. Gordon and Breach Science Publishers, Inc., 931 F.2d 1002, 1004 (3d Cir.), cert. denied, 112 S. Ct. 302, 116 L. Ed. 2d 245 (1991); see also 5A C. Wright & A. Miller, Federal Practice And Procedure, § 1368, at 519 (1990). In order to find for Defendants and grant a judgment on the pleadings, it must be determined that Plaintiff can prove no set of facts to support a finding that Defendants are liable for violating his Fourteenth Amendment rights. See Institute For Scientific Information, 931 F.2d at 1005.

 The facts as summarized below are not materially in dispute. The issue as framed by both sides is one of law, therefore, appropriate for a determination on the pleadings.

 I. FACTS

 In 1993, Plaintiff Knepp was a licensed securities agent and the sole proprietor of a company called Innovative Concepts. Through this company, Knepp sold certificates on commission which were issued by Premier Benefit Capital Trust ("Premier"). The funds generated by these certificates were used to purchase accounts receivable for a sum less than the face value of the accounts. The certificates were to mature in nine months with a 12% rate of return. Collection of the accounts receivable allowed Premier to repay the purchase price plus the 12% return to the purchasers. Neither the Plaintiff, nor Premier, believed the certificates to be securities as defined by state or federal law.

 In the spring of 1993, Knepp and Premier advertised the certificates in several newspapers. At some point following this publication, Defendant Klein initiated an investigation into the sale of these certificates believing the certificates to be securities. Then, sometime in May, Premier was given the opportunity to show why the certificates were not securities or were exempt. On May 19, 1993, the Pennsylvania Securities Commission issued a Summary Order to Cease and Desist against Knepp to stop soliciting and selling the certificates to Pennsylvania residents. *fn1" On or about May 20, 1993, Defendant Lane issued a news release in several newspapers including the Philadelphia Inquirer stating that "Delaware Valley Residents [had been] Solicited Illegally for [an] Unregistered Investment." On May 21, 1993, Knepp was sent a letter from Defendant Cummings enclosing the cease and desist order and on May 22, 1993, the news release naming Knepp was published in the newspaper.

 In the following months, Plaintiff was issued a subpoena and an Order to Show Cause advising him of the penalties if it was determined that he violated the law. One suggested penalty was the suspension of his registration; however, it was never actually suspended. Additionally, Defendants filed reports with the National Association of Securities Dealers and hired an investigator, Defendant Carroll, to contact customers.

 Plaintiff alleges that the Defendants have conspired against him in a plan to destroy his ability to conduct his business in the Commonwealth of Pennsylvania. He asserts it is their goal to prevent him from earning a living. Further, according to Plaintiff, there is a bias toward him and the same action has not been taken against others. Defendants admit that the same action has not been taken against others selling similar instruments because they claim no knowledge of others within the Commonwealth selling similar instruments. Plaintiff asserts that these actions have deprived him of equal protection of the laws and denied him due process of law in contravention of the Fourteenth Amendment to the Constitution.

 Defendants have asserted seven arguments in support of their motion for judgment on the pleadings, including: (1) Defendants are not amenable to suit in their official capacity; (2) no equal protection or due process violation occurred; (3) if there was a violation, Plaintiff's claims are not yet ripe; (4) this Court should abstain from exercising jurisdiction; (5) Plaintiff's section 1985 claim is not viable; (6) Defendants are entitled to absolute immunity; and (7) Defendants are entitled to qualified immunity. We will first address whether or not Plaintiff has stated a claim under the equal protection or due process clauses. Whether Plaintiff has stated a claim for relief under the equal protection clause or the due process clause can be resolved as a matter of law. Based on the following analysis, this Court finds that Plaintiff can state no set of facts on which to establish a claim under the Fourteenth Amendment. Thus, Defendants are entitled to judgment on the pleadings, and it is uneccesary to address Defendants' remaining arguments.

 II. DISCUSSION

 A. Due ...


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