Elias Karkalas v. Linda Marks

E
                                                                   NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ____________

                                       No. 19-2816
                                         ______

                                  ELIAS KARKALAS,
                                            Appellant

                                             v.

                    LINDA MARKS, Esquire; KIMBERLY BRILL;
                         UNITED STATES OF AMERICA
                                ____________

                     On Appeal from the United States District Court
                        for the Eastern District of Pennsylvania
                             (D.C. Civ. No. 2-19-cv-00948)
                      District Judge: Honorable Mark A. Kearney
                                     ____________

                   Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                                   March 12, 2020

                Before: McKEE, AMBRO, and PHIPPS, Circuit Judges

                                (Filed: February 11, 2021)

                                      ____________

                                        OPINION *
                                      ____________



*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
PHIPPS, Circuit Judge.

       For over thirty years, Dr. Elias Karkalas was a family practice physician in a

Philadelphia suburb. He also had an interest in cyber medicine, and in 2005, he

responded to a recruiter’s advertisement seeking doctors to review online prescription

requests for an internet pharmacy company, Rx Limited. At that time, Rx Limited was

operated by Paul Calder Le Roux, who would later plead guilty to several criminal

charges related to the company’s practices. Karkalas began working for Rx Limited, and

between 2005 and 2012, he approved online prescriptions for several drugs. As he did

so, he understood that federal law required an in-person encounter to prescribe a

controlled substance. See 21 U.S.C. §§ 829(b), (e); 21 C.F.R. § 1306.04(a).

       One drug that Karkalas prescribed online was Fioricet – a combination drug used

to treat tension headaches. Although Fioricet is not expressly listed as a controlled

substance, it contains butalbital, a derivative of barbituric acid, which is listed as a

controlled substance. 21 U.S.C. § 812, Sch. III(b)(1) (designating “[a]ny substance

which contains any quantity of a derivative of barbituric acid” as a Schedule III

controlled substance); 21 C.F.R. § 1308.13(c)(3) (same). Nevertheless, the Physicians’

Desk Reference, a reference manual for prescribers, did not designate Fioricet as a

controlled substance during the years in which Karkalas prescribed it. 1




1
 The Physicians’ Desk Reference currently identifies Fioricet as a Schedule III controlled
substance. See Fioricet Capsules Drug Summary, Prescribers’ Digital Reference,
https://www.pdr.net/drug-summary/Fioricet-Capsules-acetaminophen-butalbital-caffeine-
3284.2260 (last visited Feb. 9, 2021).

                                               2
       Karkalas’s online approval of Fioricet prescriptions caught the attention of a

diversion investigator at the Drug Enforcement Administration and a federal prosecutor

who were investigating Rx Limited. They both believed that, under federal law, Fioricet

constituted a controlled substance because it contained butalbital. Through an

undercover investigation, they learned that Karkalas was prescribing Fioricet online not

just for tension headaches but also for other maladies such as knee pain and hemorrhoids.

       In 2013, a federal grand jury in Minnesota returned an 85-count indictment related

to Rx Limited against eleven defendants. It named Karkalas in 38 counts. Many of those

counts related to the illegal distribution of Fioricet, see 21 U.S.C. §§ 841(a)(1), (b)(1)(E),

(h)(1), (h)(4), but the indictment also charged Karkalas with conspiracy, wire fraud, mail

fraud, and introducing misbranded drugs into interstate commerce. Karkalas was arrested

at his office and detained pretrial for six months, including four-and-a-half months in

detention centers in multiple states and six weeks in a halfway house. He was later

released to home confinement with an ankle monitor.

       Throughout the pretrial period, Karkalas asserted that Fioricet was not a controlled

substance. He emailed and called the prosecutor and investigator, and he even

voluntarily traveled to Washington, D.C. to meet with them, but they were unconvinced.

Karkalas also filed motions in the Minnesota trial court to dismiss the Fioricet charges

and to exclude evidence of his distribution of Fioricet. But that court denied both

motions, concluding that Fioricet – because it contains butalbital – is a Schedule III

controlled substance. See United States v. Oz, 

2017 WL 342069

, at *2, *3–5 (D. Minn.

Jan. 23, 2017) (citing 21 U.S.C. § 812, Sch. III(b)(1)); United States v. Oz, 

2016 WL 3

1183041, at *2, *4–6 (D. Minn. Mar. 28, 2016). Despite prevailing on those motions, the

United States voluntarily dismissed ten of the charges against Karkalas related to his

distribution of Fioricet.

       The case against Karkalas and three other defendants proceeded to a jury trial, and

there it continued to turn in his favor. In the middle of its case-in-chief, the United States

dropped the remaining charges related to the distribution of Fioricet. And in returning its

verdict, the jury acquitted Karkalas and the other defendants of all other charges.

       To vindicate himself beyond that acquittal, Karkalas filed this two-count civil

lawsuit in the Eastern District of Pennsylvania. In Count One of the complaint, Karkalas

asserts that the prosecutor and investigator violated his Fourth and Fifth Amendment

rights by knowingly presenting false and misleading testimony and by prosecuting him

without probable cause, leading to his unlawful pretrial detention. In Count Two,

Karkalas sues the United States for malicious prosecution under the Federal Tort Claims

Act.

       The defendants moved to dismiss the counts against them – the prosecutor and

investigator pursuant to Federal Rules of Civil Procedure 12(b)(2), 12(b)(3), and

12(b)(6), and the United States pursuant to Rules 12(b)(1) and 12(b)(6). The District

Court granted those motions on several alternative grounds and dismissed Karkalas’s

amended complaint with prejudice. In doing so, the District Court exercised subject-

matter jurisdiction over the federal questions in Count One, see 28 U.S.C. § 1331, but

determined that it lacked personal jurisdiction over the individual defendants. In

addition, the District Court determined that no Bivens cause of action could be implied

                                              4
against those defendants, who were also shielded from suit due to qualified immunity

(and the prosecutor further protected by absolute immunity). On Count Two, the District

Court concluded that it lacked jurisdiction due to the United States’ sovereign immunity

for discretionary functions and for intentional torts (the latter as to only the conduct of the

prosecutor). See

id. §§ 1346(b)(1), 2674,

2680(a), (h).

       Karkalas timely appealed, bringing the case within this Court’s appellate

jurisdiction. See 28 U.S.C. § 1291. The individual defendants no longer press the

personal jurisdiction defense, see Appellees’ Br. 15 n.3, thereby consenting to such

jurisdiction. See Danziger & De Llano, LLP v. Morgan Verkamp LLC, 

948 F.3d 124

,

129 (3d Cir. 2020) (“A defendant may . . . consent to personal jurisdiction by waiving

any objection to it.” (citing Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee,

456 U.S. 694

, 703 (1982))). They have preserved and presented their other defenses. In

reviewing the dismissal of the complaint de novo, see Buck v. Hampton Twp. Sch. Dist.,

452 F.3d 256

, 260 (3d Cir. 2006), we will affirm the District Court’s judgment.

                                              I.

       In Count One, Karkalas sues the prosecutor and the investigator in their individual

capacities, seeking to recover damages. He does so through a judicially implied cause of

action, a Bivens claim, which permits a damages remedy for a person whose

constitutional rights have been violated by agents of the federal government. See Ziglar

v. Abbasi, 

137 S. Ct. 1843

, 1854 (2017). See generally Bivens v. Six Unknown Named

Agents of Fed. Bureau of Narcotics, 

403 U.S. 388

(1971). In response, the individual

defendants argue that a Bivens action is unavailable in this context, that the prosecutor

                                              5
qualifies for absolute immunity, and that both defendants are entitled to qualified

immunity. The last of those arguments – qualified immunity – is the most natural starting

place because it is common to both individual defendants and because it proves

dispositive.

       Qualified immunity shields government officials from liability for civil damages

so long as “their conduct does not violate clearly established statutory or constitutional

rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 

457 U.S. 800

, 818 (1982); see also District of Columbia v. Wesby, 

138 S. Ct. 577

, 589 (2018); El v.

City of Pittsburgh, 

975 F.3d 327

, 334 (3d Cir. 2020). At the motion-to-dismiss stage,

courts evaluate qualified immunity for a constitutional claim by examining (i) whether

the complaint contains plausible allegations of a constitutional violation and (ii) whether

the asserted constitutional right is clearly established. See Wood v. Moss, 

572 U.S. 744

,

757 (2014) (citing Ashcroft v. al-Kidd, 

563 U.S. 731

, 735 (2011)); see also Conn v.

Gabbert, 

526 U.S. 286

, 290 (1999) (explaining that the qualified immunity inquiry

requires “a court [to] determine whether the plaintiff has alleged the deprivation of an

actual constitutional right at all”).

       To evaluate the first prong of qualified immunity on a motion to dismiss, this

Court follows a three-step plausibility inquiry. See Connelly v. Lane Constr. Corp.,

809 F.3d 780

, 787 (3d Cir. 2016); see also Pearson v. Callahan, 

555 U.S. 223

, 236

(2009) (noting that “it is often beneficial” for courts to address the two prongs of the

qualified immunity analysis in order, even though it is no longer mandatory). The first

step involves an articulation of the elements of the claim. See 

Connelly, 809 F.3d at 787

                                              6
(citing Ashcroft v. Iqbal, 

556 U.S. 662

, 675 (2009)). The second step scrutinizes the

complaint to identify and disregard any ‘“formulaic recitation of the elements of a . . .

claim’ or other legal conclusion,”

id. at 789

(quoting 

Iqbal, 556 U.S. at 681

), as well as

allegations that “while not stating ultimate legal conclusions, are nevertheless so

threadbare or speculative that they fail to cross the line between the conclusory and the

factual,”

id. at 790

(quoting Peñalbert-Rosa v. Fortuño-Burset, 

631 F.3d 592

, 595 (1st

Cir. 2011)). The third step evaluates the plausibility of the remaining allegations – after

first assuming their veracity, construing them in the light most favorable to the plaintiff,

and drawing all reasonable inferences in the plaintiff’s favor. See

id. at 787, 790;

see

also 

Iqbal, 556 U.S. at 679

; Fowler v. UPMC Shadyside, 

578 F.3d 203

, 211 (3d Cir.

2009). At that point, if a complaint alleges “enough fact[s] to raise a reasonable

expectation that discovery will reveal evidence of” the necessary elements of a claim,

then it plausibly pleads a claim. Bell Atl. Corp. v. Twombly, 

550 U.S. 544

, 556 (2007);

see also Phillips v. County of Allegheny, 

515 F.3d 224

, 234 (3d Cir. 2008). But if “a

complaint pleads facts that are merely consistent with a defendant’s liability, it stops

short of the line between possibility and plausibility of entitlement to relief.” 

Iqbal, 556 U.S. at 678

(internal quotation marks omitted) (quoting 

Twombly, 550 U.S. at 557

).

       As set forth below, under this plausibility analysis, Karkalas fails to state a claim

for a constitutional violation under Count One. And because the complaint fails to

plausibly allege that the prosecutor or investigator violated Karkalas’s constitutional

rights, those individual defendants are entitled to qualified immunity. That conclusion

renders unnecessary an analysis of the second prong of qualified immunity, as well as the

                                              7
other defenses related to absolute immunity and the unavailability of a Bivens action in

this context. See 

Wood, 572 U.S. at 757

(assuming without deciding that a Bivens cause

of action is available and resolving based on qualified immunity); Hui v. Castaneda,

559 U.S. 799

, 807 (2010) (“Even in circumstances in which a Bivens remedy is generally

available, an action under Bivens will be defeated if the defendant is immune from suit.”).

                                              A.

       Karkalas first brings a Fourth Amendment malicious prosecution claim against the

individual defendants. See Manuel v. City of Joliet, 

137 S. Ct. 911

, 919 (2017) (“If the

complaint is that a form of legal process resulted in pretrial detention unsupported by

probable cause, then the right allegedly infringed lies in the Fourth Amendment.”).

Under the three-step plausibility inquiry, he fails to allege a violation of the Fourth

Amendment.

       1. Articulation of the elements. A claim for Fourth Amendment malicious

prosecution consists of the following elements:

       (1)    the defendant initiated a criminal proceeding;
       (2)    without probable cause;
       (3)    maliciously or for a purpose other than bringing the plaintiff to
              justice;
       (4)    causing the plaintiff to suffer a deprivation of liberty consistent with
              the concept of seizure; and
       (5)    the outcome of the criminal proceeding favored the plaintiff.

See Harvard v. Cesnalis, 

973 F.3d 190

, 203 (3d Cir. 2020) (citation omitted); see also

Black v. Montgomery County, 

835 F.3d 358

, 364 (3d Cir. 2016) (citation omitted).




                                              8
       2. Identification of deficient allegations. Several of Karkalas’s conclusory

allegations should be disregarded. In particular, Karkalas alleges that the individual

defendants made “knowingly false presentations” to the grand jury, namely, (i) that

Fioricet is a controlled medication, (ii) that Karkalas knew so, and (iii) that he would

continue to prescribe it. First Amended Complaint ¶ 86 (App. 77). But grand jury

proceedings are shrouded in secrecy. See Fed. R. Crim. P. 6(e)(2)(B); see also Rehberg

v. Paulk, 

566 U.S. 356

, 374 (2012) (“We consistently have recognized that the proper

functioning of our grand jury system depends upon the secrecy of grand jury

proceedings.” (citations omitted)); United States v. Smith, 

123 F.3d 140

, 148 (3d Cir.

1997) (“Fed. R. Crim. P. 6(e) is intended to preserve the tradition of grand jury secrecy,

creating a general rule of confidentiality for all ‘matters occurring before the grand

jury.’”). And the complaint nowhere indicates how Karkalas became privy to this secret

information. See District Ct. Op. 32 (App. 32) (“Given the secrecy of the grand jury

proceeding, we question how Dr. Karkalas knows what [the prosecutor and investigator]

told the grand jury . . . .”). Without providing a factual basis for his purported knowledge

of the grand jury proceedings, Karkalas’s allegations that the individual defendants made

false statements to the grand jury are “speculative” and “threadbare.” 

Connelly, 809 F.3d at 790

; see also Oliver v. Roquet, 

858 F.3d 180

, 192 (3d Cir. 2017) (“[A] plaintiff’s

allegations ‘must be enough to raise a right to relief above the speculative level,’ and

must reflect ‘more than a sheer possibility that a defendant has acted unlawfully.’”

(quoting 

Twombly, 550 U.S. at 555

, and 

Iqbal, 556 U.S. at 678

)); 

Peñalbert-Rosa, 631 F.3d at 595

–96 (“[S]ometimes a threadbare factual allegation bears insignia of its

                                              9
speculative character and, absent greater concreteness, invites an early challenge.”). As

such, those allegations must be excluded from the plausibility analysis.

       Similarly, the complaint alleges that the prosecutor and investigator acted “with

malice” in initiating the criminal proceeding against Karkalas. First Amended Complaint

¶ 88 (App. 78). But without supporting factual allegations, that is nothing more than a

conclusory reformulation of the malice element of a Fourth Amendment malicious

prosecution claim, which should be disregarded. See 

Twombly, 550 U.S. at 555

(“[A]

plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more

than labels and conclusions, and a formulaic recitation of the elements of a cause of

action will not do.” (alteration in original) (citation omitted)).

       3. Evaluation of the remaining allegations. Without crediting the deficient

allegations, Karkalas has failed to plausibly allege two essential elements of a Fourth

Amendment malicious prosecution claim: lack of probable cause and malice. A federal

indictment triggers a rebuttable presumption of probable cause to prosecute. See

Goodwin v. Conway, 

836 F.3d 321

, 329 (3d Cir. 2016); Rose v. Bartle, 

871 F.2d 331

, 353

(3d Cir. 1989); see also Kaley v. United States, 

571 U.S. 320

, 328 (2014) (“[A]n

indictment fair upon its face and returned by a properly constituted grand jury . . .

conclusively determines the existence of probable cause to believe the defendant

perpetrated the offense alleged.” (citations and internal quotation marks omitted)). And

without the allegations concerning the individual defendants’ statements to the grand

jury, the remainder of the complaint does not rebut that presumption. See 

Rose, 871 F.2d at 353

(explaining that the presumption of probable cause “may be rebutted by evidence

                                              10
that the [indictment] was procured by fraud, perjury or other corrupt means”). Likewise,

without the excluded conclusory allegation of malice, the remaining allegations – which

do not reflect a prosecution motivated by “ill will” or “spite” or some “extraneous

improper purpose,” Lippay v. Christos, 

996 F.2d 1490

, 1502 (3d Cir. 1993) (citation

omitted) – do not plausibly suggest that the prosecutor or the investigator acted

maliciously.

       Karkalas has therefore failed to state a Fourth Amendment malicious prosecution

claim, as the complaint does not plausibly allege two necessary elements. Accordingly,

the individual defendants are entitled to qualified immunity for this claim. See Bennett v.

Murphy, 

274 F.3d 133

, 136 (3d Cir. 2001) (“If the plaintiff fails to make out a

constitutional violation, the qualified immunity inquiry is at an end; the officer is entitled

to immunity.”).

                                              B.

       Karkalas also sues the individual defendants for using fabricated evidence against

him in violation of the Fifth Amendment. See Halsey v. Pfeiffer, 

750 F.3d 273

, 289 (3d

Cir. 2014) (“When falsified evidence is used as a basis to initiate the prosecution of a

defendant, . . . the defendant has been injured regardless of whether the totality of the

evidence, excluding the fabricated evidence, would have given the state actor a probable

cause defense in a malicious prosecution action . . . .”). The plausibility analysis for this

claim proceeds along the same lines as above, yielding a similar result: Karkalas does not

state a plausible claim for a violation of the Fifth Amendment.



                                              11
       1. Articulation of the elements. For an acquitted criminal defendant, a due

process fabricated evidence claim consists of the following elements:

       (1)    a government actor’s production or introduction of evidence or
              testimony;
       (2)    at any point before or during a criminal proceeding;
       (3)    that the government actor knew to be;
       (4)    false; and
       (5)    without that fabricated evidence, there is a reasonable likelihood that
              the defendant would not have been criminally charged.

See 

Black, 835 F.3d at 370

–72; 

Halsey, 750 F.3d at 294

–95; see also Caldwell v. City &

County of San Francisco, 

889 F.3d 1105

, 1112, 1115 (9th Cir. 2018); Zahrey v. Coffey,

221 F.3d 342

, 348–49, 355 (2d Cir. 2000).

       2. Identification of deficient allegations. As before, Karkalas’s allegations as to

the statements made to the grand jury are too speculative for inclusion in the plausibility

analysis.

       3. Evaluation of the remaining allegations. Without the disregarded allegations,

Karkalas does not plausibly allege any element of a fabricated evidence claim. He

attempts to compensate for this shortcoming by referencing statements that the prosecutor

made before the Magistrate Judge at the pretrial detention hearing. Those statements

include the assertions that Karkalas was involved with an international drug cartel, that

his actions resulted in several drug related deaths, that the evidence against him was

overwhelming, and that he presented a flight risk. But the prosecutor made those

statements not through testimony or the admission of evidence, but rather through

advocacy – arguing that Karkalas should be detained pursuant to a statutory presumption


                                             12
against release based on the nature of his charges, see 18 U.S.C. § 3142(e)(3)(A).

Beyond the dispositive facts that those statements were not evidence and were made after

Karkalas was charged, the complaint still lacks any non-conclusory allegations that the

prosecutor knew her statements to be false when she made them. See 

Halsey, 750 F.3d at 295

(“[T]estimony that is incorrect or simply disputed should not be treated as fabricated

merely because it turns out to have been wrong.”). Absent plausible allegations stating a

fabricated evidence claim, the individual defendants are entitled to qualified immunity.

See

id. at 295

(“[W]e expect that it will be an unusual case in which a police officer

cannot obtain a summary judgment in a civil action charging him with having fabricated

evidence used in an earlier criminal case.”).

                                                II.

       In Count Two, Karkalas sues the United States for the state-law tort of malicious

prosecution under the Federal Tort Claims Act. The FTCA exposes the United States to

tort liability by waiving its sovereign immunity for certain claims. See 28 U.S.C.

§§ 1346(b)(1), 2674. But that waiver is limited by several exceptions, and the United

States invokes two of those jurisdictional defenses here: the discretionary function

exception

, id. § 2680(a), and

the intentional tort exception

, id. § 2680(h). As

explained

below, the discretionary function exception bars Karkalas’s malicious prosecution claim,

making it unnecessary to evaluate the United States’ remaining defenses.

       The discretionary function exception is aptly named. It bars suits against the

United States that challenge “the exercise or performance or the failure to exercise or

perform a discretionary function or duty on the part of . . . an employee of the

                                                13
Government, whether or not the discretion involved be abused.”

Id. § 2680(a). It

applies

when the challenged acts (i) “involve[d] an element of judgment or choice,” and (ii) were

“based on considerations of public policy.” United States v. Gaubert, 

499 U.S. 315

, 322–

23 (1991) (quoting Berkovitz v. United States, 

486 U.S. 531

, 536–37 (1988)); see also

Merando v. United States, 

517 F.3d 160

, 164–65 (3d Cir. 2008). Although the exception

is “jurisdictional on its face,” S.R.P. ex rel. Abunabba v. United States, 

676 F.3d 329

, 333

n.2 (3d Cir. 2012), the United States “has the burden of proving the applicability of the

discretionary function exception,” 

Merando, 517 F.3d at 164

(citations omitted). Here,

where the challenged acts involve the investigation and prosecution of Karkalas, the

United States has met that burden.

       Both the investigation and the prosecution of Karkalas satisfy the first element of

the discretionary function exception. Investigation and prosecution involve judgment or

choice. See Pooler v. United States, 

787 F.2d 868

, 871 (3d Cir. 1986) (“Prosecutorial

decisions as to whether, when and against whom to initiate prosecution are quintessential

examples of governmental discretion in enforcing the criminal law.” (citations omitted)),

abrogated on other grounds by Millbrook v. United States, 

569 U.S. 50

(2013); Bernitsky

v. United States, 

620 F.2d 948

, 955 (3d Cir. 1980) (“Decision making as to investigation

and enforcement, particularly when there are different types of enforcement action

available, are discretionary judgments.”).

       Similarly, those actions satisfy the second element. Investigatory and

prosecutorial decisions are “susceptible to policy analysis.” 

Gaubert, 499 U.S. at 325

;

see Bond v. United States, 

572 U.S. 844

, 865 (2014) (“Prosecutorial discretion involves

                                             14
carefully weighing the benefits of a prosecution against the evidence needed to convict,

the resources of the public fisc, and the public policy of the State.”); Baer v. United

States, 

722 F.3d 168

, 175 (3d Cir. 2013) (“Whether to pursue a lead, to request a

document, or to assign additional examiners to an investigation are all discretionary

decisions, which necessarily involve considerations of . . . resource allocation and

opportunity costs.”).

       Karkalas does not challenge those straightforward conclusions directly. Rather, he

contends that, even with the government’s broad discretion to investigate and prosecute

crimes, “there is no discretion to violate the Constitution.” Appellant’s Br. 22; see also

Pooler, 787 F.2d at 871

(stating in dicta that “federal officials do not possess discretion”

to violate “constitutional rights or federal statutes”). But this case does not present an

opportunity to evaluate that legal theory because, as explained above, Karkalas does not

allege plausible violations of the Constitution. Without such allegations, “all of the

challenged actions . . . involved the exercise of discretion in furtherance of public policy

goals,” 

Gaubert, 499 U.S. at 334

, and the United States thus retains its sovereign

immunity for this claim.

                                           * * *

       In sum, the District Court properly dismissed the Bivens claims against the

prosecutor and the investigator as well as the FTCA claim against the United States. We

will affirm.




                                             15

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