5TH CIRCUIT REINS IN FBI

Agency May Be Liable For Harm To Third Parties

For the first time, a federal court has imposed limits on the authority of
federal law enforcement agents engaged in undercover operations.

The 5th U.S. Circuit Court of Appeals ruled Sept. 8 in Brown v. Nationsbank
Corp. that the FBI can be liable to innocent third parties who are harmed in
a sting operation by agents' "deliberate indifference." The court did not
extend this standard to injuries suffered by people who are targets of an
undercover investigation.

"Because the Fifth Amendment due process guarantee against
conscience-shocking injury imposes clear limits on law enforcement conduct,
we conclude that it was neither necessary nor proper for the defendants in
this case to destroy the lives and businesses of innocent non-targets in the
name of law enforcement," wrote Circuit Judge Robert M. Parker for a
unanimous three-judge panel. He was joined by Judges Carl E. Stewart and W.
Eugene Davis.

Though the court held the FBI could be liable, it dismissed the plaintiffs'
claims against the FBI on two grounds: The claims were not filed within the
statute of limitations and the new liability standard was not in effect when
the plaintiffs were injured.

Scott Rothenberg, the plaintiffs' attorney, says he is shocked the court
would recognize the harm suffered by his clients yet not afford them relief.
Still, he says, the holding has value as precedent.

"In light of the Ruby Ridge debacle . . . and the serious questions raised
by the FBI's conduct in its handling of the Waco situation . . . this case
provides fuel for one who would argue that the FBI's emphasis on law
enforcement must be counterbalanced by a consideration of citizen's
constitutionally protected rights," says Rothenberg, a Houston solo.

The FBI did not respond to two requests for comment. Chris Watney, a
spokesperson with the U.S. Department of Justice, which represented the FBI,
declines to comment because the litigation is pending.

According to the 5th Circuit's opinion, the FBI began "Operation Lightning
Strike" in 1991 to uncover alleged contract procurement fraud in the
aerospace industry.

The sting targeted certain NASA employees and private members of the
aerospace industry, but not the plaintiffs, who operated two Houston-based
companies that provided high-tech engineering services, the opinion noted.

In 1992, an FBI agent indicated to plaintiffs Dale A. Brown, R. Scott
Satterwhite and Anthony P. Hodgson that he wanted to form a partnership in
order to gain contracts with NASA, according to the opinion. The 5th Circuit
found that the plaintiffs worked hundreds of hours and spent large amounts
of money bidding on projects with the agent before learning of the
undercover operation.

Concluding that Operation Lightning Strike was a "disastrous boondoggle . .
. run amok," the court held that the FBI could be liable under the U.S.
Supreme Court's 1971 ruling in Bivens v. Six Unknown Named Agents of Fed.
Bureau of Narcotics, which permits the recovery of money damages from
federal agents who violate a person's constitutional rights.

The court distinguished U.S. Supreme Court precedent that grants law
enforcement agents qualified immunity for misconduct they commit during
high-pressure situations, such as prison riots or automobile chases.

In Brown, the 5th Circuit concluded, "The FBI made decisions which harmed
the Plaintiffs after ample opportunity for cool reflection."

Cynthia Hujar Orr, a San Antonio criminal-defense lawyer, says Brown will
afford relief to innocent people harmed by undercover operations. Potential
beneficiaries would be people whose private telephone calls are intercepted
by an FBI wiretap and later made public in litigation, she says.

"In their effort to uncover secret illicit behavior, law enforcement
[officers] often listen too long and recover too much and harm a lot of
folks in their zeal to catch criminals," says Orr, an associate with
Goldstein, Goldstein & Hilley.

She applauds Brown, adding, "I understand the tough job law enforcement
have, but I think a strong statement needs to be made to tell law
enforcement that you don't have the right to abuse power like this."