AlliedSignal Inc. v. City of Phoenix

Decision Date28 June 1999
Docket NumberNo. 98-15901,DEFENDANT-APPELLEE,PLAINTIFF-APPELLANT,98-15901
Citation182 F.3d 692
Parties(9th Cir. 1999) ALLIEDSIGNAL, INC., A DELAWARE CORPORATION,, v. CITY OF PHOENIX,
CourtU.S. Court of Appeals — Ninth Circuit

Thomas L. Hudson and David B. Rosenbaum, Osborn Maledon, Phoenix, Arizona, for the plaintiff-appellant.

Peter S. Modlin, Landels Ripley & Diamond, San Francisco, California; Phillip M. Haggerty, Chief Assistant City Attorney, Phoenix, Arizona, for the defendant-appellee.

Appeal from the United States District Court for the District of Arizona Paul G. Rosenblatt, District Judge, Presiding D.C. No. CV 96-00683-PGR

Before: Warren J. Ferguson and Sidney R. Thomas, Circuit Judges, and Garr M. King, District Judge.1

OPINION

KING, District Judge

I. OVERVIEW

AlliedSignal, Inc. ("AlliedSignal") appeals from the district court's dismissal under Federal Rule of Civil Procedure 12(b)(6) of its action seeking money damages and equitable relief against the City of Phoenix ("City") for damage to AlliedSignal's water sprinkler systems ("systems"). AlliedSignal contends that the district court erred by (1) concluding that the City was entitled to absolute immunity against its claims for money damages, and (2) concluding that mandamus relief was unavailable in light of the City's discretion in implementing its water disinfection policy. We have jurisdiction under 28 U.S.C. S 1291, and we reverse in part and affirm in part.

II. BACKGROUND

AlliedSignal, a Delaware corporation, owns various parcels of real property within the City of Phoenix, each containing a fire protection sprinkler system. AlliedSignal gets the water necessary to operate its systems from the City's public water supply system. Because the water comes from the same distribution system used for providing drinking water to the City's residents, the water is treated by the City pursuant to its water disinfection policy to make it potable. In 1995, AlliedSignal discovered that the pipes in its systems were corroding at an unusually rapid rate. AlliedSignal determined that corrosioninducing bacteria ("CIB") in the water supplied by the City was causing the corrosion.

AlliedSignal filed an administrative claim against the City. The City refused to accept the claim and AlliedSignal brought this diversity action alleging that the water provided by the City contains excessive amounts of bacteria. AlliedSignal asserted claims for negligence, breach of the implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, strict liability for defective product, and failure to warn. In its complaint, AlliedSignal sought damages for the cost of replacing the corroded pipes and a permanent injunction and/or a writ of mandamus requiring the City to take all necessary measures to ensure that the water it provides is free of CIB.

The City filed a motion to dismiss pursuant to Rule 12(b)(6), contending that AlliedSignal's claims were barred by Arizona's Actions Against Public Entities or Public Employees Act ("Immunity Act"), Ariz. Rev. Stat. S 12-820 et seq. The district court granted the motion, concluding that the City was absolutely immune under the Immunity Act from AlliedSignal's challenge to the City's formulation of a water disinfection policy. The district court also rejected AlliedSignal's request for a writ of mandamus requiring the City to pretreat its water so that it is free of CIB, concluding that "mandamus may not be used to instruct a public official how to exercise discretion." This appeal followed.

III. ANALYSIS
A.

It is well-settled law in Arizona that governmental immunity is the exception and liability is the rule. See City of Tucson v. Fahringer, 795 P.2d 819, 820 (Ariz. 1990). Under S 12-820.01 of the Immunity Act, "public entities are protected by absolute immunity when the process involves legislative or judicial decision making within the respective powers granted to the legislature or judiciary, but entities are entitled to immunity for administrative action only to the extent such action involves the determination of fundamental governmental policy." Fidelity Sec. Life Ins. Co. v. Arizona Dep't of Ins., 954 P.2d 580, 583 (Ariz. 1998).

It is undisputed that the City's delivery of water is an administrative action and thus will only give rise to immunity to the extent that it involves the determination of fundamental governmental policy. In granting the City's Rule 12(b)(6) motion, the district court concluded that AlliedSignal's complaint challenged the City's formulation of its water disinfection policy that the court found to be "the quintessential exercise of governmental discretion in an area of fundamental government policy." See Galati v. Lake Havasu City, 920 P.2d 11, 15 (Ariz. Ct. App. 1996) (absolute immunity applies to discretionary governmental actions involving fundamental governmental policy). AlliedSignal contends that dismissal of its complaint at the pleading state was inappropriate because the district court misread the complaint as challenging the City's formulation of its water disinfection policy. As AlliedSignal points out, the complaint doesn't mention the water disinfection policy. Rather, it merely states that the City was negligent in delivering contaminated water to its facilities. The complaint offers no theories as to how this water became contaminated. The question thus becomes whether the district court's dismissal of AlliedSignal's complaint based on its Conclusion that the City was entitled to immunity from AlliedSignal's negligence claim seeking money damages was appropriate under Rule 12(b)(6).

A dismissal for failure to state a claim pursuant to Rule 12(b)(6) is reviewed de novo. See Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998). When reviewing a dismissal for failure to state a claim pursuant to Rule 12(b)(6) all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. See Jensen v. City of Oxnard, 145 F.3d 1078, 1082 (9th Cir.), cert. denied, 119 S. Ct. 540 (1998). A complaint should not be dismissed under Rule 12(b)(6) unless it appears beyond a doubt that the non-moving party can prove no set of facts in support of its claim which would entitle it to relief. See Steckman, 143 F.3d at 1295.

As previously stated, not all administrative decisions made by a public entity in Arizona are entitled to immunity. To be entitled to immunity for its administrative actions, a public entity must demonstrate that the action involves the determination of a fundamental governmental policy. See Warrington v. Tempe Elementary Sch. Dist. No. 3, 928 P.2d 673, 676 (Ariz. Ct. App. 1996). The burden of showing that its administrative action falls within this narrow category of fundamental governmental policy making rests with the public entity. See Fidelity, 954 P.2d at 583.

In Fidelity, the Arizona Supreme Court reversed the court of appeals' affirmance, in a consolidated appeal, of the Maricopa County Superior Court's dismissal of three separate complaints under Arizona Rule of Civil Procedure 12(b)(6).2 See id. at 581-82. In each case, the plaintiffs' complaints alleged that the defendant public entities were negligent in carrying out their administrative duties. The trial courts concluded that dismissal at the pleading stage was appropriate because the defendant public entities were entitled to absolute immunity under the Immunity Act for their discretionary actions involving fundamental governmental policy. See id. at 582. In reversing, the Arizona Supreme Court held that the trial courts acted prematurely by granting Rule 12(b)(6) motions in the "face of the allegations in these complaints." Id. at 583. The Court held that "[o]n the face of the pleadings" it was not apparent that the public entities were acting in an area of fundamental governmental policy. Id. at 584. Thus, because the public entity has the burden of "plead[ing] and prov[ing]" that their actions fall within the "narrow category of fundamental governmental policy making," and the four corners of the plaintiffs' complaints did not evince such action, the trial courts erred by granting defendants' motions to dismiss. Id. at 583-84.

The district court in the case before us made a similar error. Fairly read, the four corners of AlliedSignal's complaint alleges that it purchased water from the City and the water contained excessive amounts of bacteria that damaged its systems. Nowhere in the complaint does AlliedSignal allege that the City's formulation of its water disinfection policy was the cause of the excessive bacteria in the water. As AlliedSignal points out, there are numerous potential explanations for the presence of excessive bacteria in the water; only one (the City's formulation of its water disinfection policy) that would arguably entitle the City to immunity from AlliedSignal's claim for money damages. For example, a mistake made by a City employee charged with the ministerial task of implementing the water disinfection policy may have caused the heightened level of bacteria and the resultant harm to AlliedSignal's systems. Under Arizona law, the City most likely would not be entitled to immunity under the Immunity Act for this hypothetical act of negligence. See Evenstad v. State, 875 P.2d 811, 816-17 (Ariz. Ct. App. 1993) (distinguishing between discretionary governmental actions involving fundamental governmental policy, to which immunity applies, and ministerial actions implementing that policy, to which immunity does not apply); Ryan v. State, 656 P.2d 597, 598 (Ariz. 1982) ("[W]here negligence is the proximate cause of injury, the rule is liability and immunity is the exception.") (quoting Stone v. Arizona Highway Comm'n, 381 P.2d 107, 112 (Ariz. 1963); Diaz v. Magma Copper Co., 950 P.2d 1165, 1175 (Ariz. Ct. App. 1997) (state inspector's negligent implementation of...

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