Mike Rahbarian v. Daniel Cawley

FILED NOT FOR PUBLICATION AUG 17 2017 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

MIKE RAHBARIAN; PAIMAN No. 15-17288 RAHBARIAN, Individually and as the Personal Representatives of the Estate of D.C. No. 2:10-cv-00767-TLN Fakhri Attar; VERA DAVYDENKO, On behalf of herself and as Guardian Ad Litem for N.R., a minor, and M.R., a MEMORANDUM* minor,

Plaintiffs-Appellants,

v.

DANIEL CAWLEY; BRUCE SMALLWOOD,

Defendants-Appellees.

Appeal from the United States District Court for the Eastern District of California Troy L. Nunley, District Judge, Presiding

Argued and Submitted April 19, 2017 San Francisco, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: REINHARDT and TASHIMA, Circuit Judges, and MOLLOY,** District Judge.

Appellants Mike Rahbarian, the estate of his wife Fakhri Attar, their son

Paiman Rahbarian, Paiman’s ex-wife Vera Davydenko, and Paiman and Vera’s

minor children N.R. and M.R. (collectively, the “Rahbarians”) filed suit under 42

U.S.C. § 1983 against two California Department of Motor Vehicles (“DMV”)

investigators, Daniel Cawley and Bruce Smallwood. The Rahbarians allege that

Cawley and Smallwood, who conducted a search of the Rahbarians’ homes and

car-related businesses, violated their Fourth Amendment rights by, inter alia,

omitting material facts from the affidavit submitted in support of the search

warrant application, deceiving the state court judge who issued it. The district

court granted summary judgment to the investigators on that claim. The

Rahbarians now appeal. We have jurisdiction under 28 U.S.C. § 1291, and we

affirm.

The warrant authorized a search for records and other evidence showing that

the Rahbarians embezzled from Brasher’s Sacramento Auto Auction (“Brasher’s”).

An arrangement between Brasher’s and Suzuki of Sacramento (“SOS”), a car

dealership owned by Shayan Rahbarian and managed by his brother Paiman

** The Honorable Donald W. Molloy, United States District Judge for the District of Montana, sitting by designation. 2 Rahbarian, provided that Brasher’s would finance (floor) the purchase of vehicles

from a manufacturer, those vehicles would be put up for sale at SOS, and SOS

would pay Brasher’s the proceeds if and when the vehicles were sold. The alleged

embezzlement involved nonpayment for almost 200 vehicles financed by Brasher’s

that were either sold to customers or given to members of the Rahbarian family.

The Rahbarians contend that the investigators intentionally or recklessly

omitted four material facts from the search warrant affidavit. To survive summary

judgment on this claim, the Rahbarians “must make (1) a substantial showing of . .

. reckless disregard for the truth, and (2) establish that but for the dishonesty, the

challenged action would not have occurred.” Butler v. Elle, 281 F.3d 1014, 1024

(9th Cir. 2002) (internal quotation marks omitted). We first address each alleged

omission individually, and then consider the “cumulative[]” effect of the omissions

“on the existence of probable cause.” See United States v. Stanert, 762 F.2d 775,

782 (9th Cir. 1985).

A. THE OMISSIONS

1. The affidavit failed to mention that SOS had copies of checks made

out to Brasher’s, which Brasher’s never cashed, for some of the allegedly

3 embezzled vehicles.1 We agree that the Rahbarians made “a substantial showing”

that omitting this evidence from the warrant application was at least “reckless.”

See Butler, 281 F.3d at 1025–26. While the Rahbarians have no direct evidence

that Cawley and Smallwood were aware of the uncashed checks, the investigators

did have copies of SOS’s bankruptcy records, including copies of the checks, in

their possession at the time they applied for the warrant. An investigator’s reckless

omission of information can be inferred if the information was contained in

documents that he “possessed at the time he submitted his affidavit.” Id. at 1025.

This omitted evidence also affects the probable cause analysis because the

checks tend to show that payment was tendered and therefore no embezzlement

occurred. See Wilson v. Russo, 212 F.3d 781, 790 (3d Cir. 2000) (noting that

“[i]ndependent exculpatory evidence” may outweigh a probable cause

determination that rests on other evidence).

2. The affidavit also did not disclose that all of the vehicles listed in

Attachment A were recovered by Brasher’s, but this omission is immaterial.

Repossession would not have negated embezzlement, had it occurred. See United

States v. Coin, 753 F.2d 1510, 1511 (9th Cir. 1985) (holding that returning

1 The record contains documentary evidence that SOS gave checks to Brasher’s for three of the twenty-three vehicles identified in the warrant affidavit, and about half of the total allegedly embezzled vehicles. 4 embezzled funds is not a defense to embezzlement because that crime is “complete

when the . . . embezzlement occurs”). Nor would disclosure of the circumstances

of repossession have weakened the probable cause analysis. The vehicles were

found on the lot of Payless Car Rentals, owned by Mike Rahbarian. Although the

Rahbarians explain that it was SOS’s practice to store unsold SOS inventory on

Mike Rahbarian’s property, “innocent explanations for . . . odd behavior cannot

eliminate the suspicious facts from the probable cause calculus.” See Ramirez v.

City of Buena Park, 560 F.3d 1012, 1024 (9th Cir. 2009). Moreover, DMV

records showed that Payless Car Rentals had been registered as the owner of some

of the subject vehicles, undermining SOS’s story that Mike Rahbarian was merely

storing them. Consistent with those records, Shayan Rahbarian admitted that SOS

gave vehicles financed by Brasher’s to Mike Rahbarian, purportedly as repayment

for undocumented loans.

The Rahbarians correctly point out that the district court erred when it

“purg[ed] the 19 repossessed cars” from the affidavit. On summary judgment,

courts draw “[a]ll justifiable inferences” in favor of the non-moving party. See

McSherry v. City of Long Beach, 584 F.3d 1129, 1135 (9th Cir. 2009). Because

the contents of Attachment A are in dispute, the district court was required to

assume that Attachment A listed only the nineteen recovered vehicles, as the

5 Rahbarians claim. The error was harmless, however, for the reasons discussed

above.

3. The affidavit also omitted that Brasher’s, which provided the

investigators with much of the evidence of embezzlement, had filed a civil suit

against the Rahbarians. Cawley and Smallwood had “personal knowledge” of that

litigation, and therefore “a reasonable factfinder” could infer that this omission was

made “with at least a reckless disregard for the truth.” See Chism v. Washington,

661 F.3d 380, 388 (9th Cir. 2011).

We conclude, however, that the civil litigation, had it been disclosed, would

have had a minimal effect on the state court judge’s probable cause analysis.

Brasher’s “was a citizen witness, not an informant, and such witnesses are

generally presumed reliable.” Ewing v. City of Stockton, 588 F.3d 1218, 1224 (9th

Cir. 2009). Also, independent evidence provided “corroboration that the crime

being investigated had actually occurred.” United States v. Ruiz, 758 F.3d 1144,

1151 (9th Cir. 2014) (holding that corroborating evidence of a source’s statements

rendered immaterial evidence undermining that source’s reliability). Specifically,

Henry Moustafi, the business office manager of SOS, told the investigators that

“SOS had failed to make payments to Brasher’s for new vehicles floored by

Brasher’s and sold to retail customers.” Other SOS employees told investigators

6 that “they engaged in subterfuges under the direction of Paiman Rahbarian . . . to

conceal from Brasher’s that cars had already been sold and were no longer in the

[SOS] inventory.”

4. Although the Rahbarians argue that the affidavit improperly failed to

disclose that Cawley and Smallwood already had access to some of the records for

which they sought a search warrant, this fact was not omitted. The affidavit stated

that the investigators had “received copies of SOS banking records and business

checks from the bankruptcy trustee.”2

B. MATERIALITY

To assess whether the omissions are material, we “determine[] whether the

affidavit, once . . . supplemented [with the omitted facts], establishes probable

cause.” Ewing, 588 F.3d at 1224. As our above analysis shows, the affidavit

should be supplemented to reflect that (1) SOS’s records contained copies of three

checks made out to Brasher’s for the allegedly embezzled vehicles and a report

indicating Brasher’s received checks for approximately half of the 200 total

2 In addition to these four alleged omissions, the Rahbarians point to separate evidence that they believe shows that the investigators were biased in Brasher’s favor, and therefore acted intentionally in omitting exculpatory facts from the affidavit. Because we have already concluded that the Rahbarians made a sufficient showing that each of the alleged omissions was at least reckless, we need not consider additional evidence of the investigators’ states-of-mind. 7 vehicles at issue, and (2) that Brasher’s was involved in litigation against the

Rahbarians.

We conclude that an affidavit supplemented with this information would still

“justif[y] issuance of the warrant.” Id. On the critical point of whether SOS paid

Brasher’s, the supplemented affidavit would contain Brasher’s statements and

internal records showing that it was not paid for almost 200 vehicles, countered by

SOS’s records showing that it had tendered some payments and that checks for

some of those vehicles had been received by Brasher’s. Although the Rahbarians’

documentary proof and the possibility of Brasher’s bias would cast doubt on

Brasher’s representations and records, Brasher’s was not the only source of

evidence that no payments were made. Brasher’s evidence was corroborated by

statements from an SOS manager that “payments were not made [to Brasher’s] for

the new Suzuki vehicles,” and that he had found “irregularities in the debt owed to

Brasher’s.” Moreover, the Rahbarians do not allege – and the record does not

indicate – that they paid for any of the nineteen vehicles included in Attachment

A.3

3 A Flooring Check Report in the record indicates that Brasher’s received checks for only three of the four vehicles described in the body of the affidavit, and none of the nineteen vehicles listed in the attachment to the affidavit. 8  The supplemented affidavit would also contain the circumstantial evidence

of embezzlement that was in the original affidavit, including DMV records

showing that Payless Car Rentals was the registered owner of some vehicles

financed by Brasher’s but allegedly never paid for. Additionally, there was

evidence that some vehicles financed by Brasher’s were given to Mike Rahbarian

as purported repayment for undocumented loans, and that other members of the

Rahbarian family had received thousands of dollars from SOS accounts, also

purportedly to repay undocumented loans, just before SOS filed for bankruptcy.

Such evidence supports the theory that the Rahbarians were draining SOS of

borrowed capital before filing for bankruptcy.

This circumstantial evidence, together with Brasher’s records and the SOS

manager’s statements, give rise to a “fair probability” that evidence of

embezzlement based on the nonpayment for vehicles financed by Brasher’s would

be found in the places identified in the warrant application. See Garcia v. Cty. of

Merced, 639 F.3d 1206, 1211 (9th Cir. 2011) (internal quotation marks omitted).

AFFIRMED.

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