Muniz-Rivera v. U.S.

• Decision Date: 07 April 2003
• Docket Number: No. 02-2011.,02-2011.
• Parties: Rufino MUNIZ-RIVERA, et al., Plaintiffs, Appellants, v. UNITED STATES of America, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

326 F.3d 8

Rufino MUNIZ-RIVERA, et al., Plaintiffs, Appellants, v. UNITED STATES of America, Defendant, Appellee.

No. 02-2011.

United States Court of Appeals, First Circuit.

Heard March 3, 2003.

Decided April 7, 2003.

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Ruth Santiago, for appellants.

Steve Frank, Attorney, Appellate Staff, Civil Division, Dep't of Justice, with whom Robert D. McCallum, Jr., Assistant Attorney General, Guillermo Gil, United States Attorney, and Robert S. Greenspan, Attorney, were on brief, for appellee.

Before TORRUELLA, Circuit Judge, COFFIN, Senior Circuit Judge, and SELYA, Circuit Judge.

SELYA, Circuit Judge.

This appeal requires us to address the parameters of the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 1346(b), 2671-2680, and, in particular, its misrepresentation and discretionary function exceptions. The plaintiffs (appellants here) are 108 persons who own a total of 67 residential properties in Salinas, Puerto Rico. These homes are situated in two housing developments that have undergone repeated flooding. Noting that federal officials played a significant role in the planning, siting, construction, and financing of the projects, the plaintiffs seek to hold the government answerable in damages. They sue under the FTCA, a statutory scheme that carves out a tort-based exception to the federal government's sovereign immunity. But the FTCA's exception to sovereign immunity itself contains exceptions. Because the plaintiffs' claims, as stated, fall within spheres that the FTCA abjures, we conclude that the district court properly dismissed the amended complaint for lack of subject matter jurisdiction. See Fed. R.Civ.P. 12(b)(1).

We afford plenary review to a district court's order of dismissal for lack of subject matter jurisdiction. Corrada Betances v. Sea-Land Serv., Inc., 248 F.3d 40, 44 (1st Cir.2001). At the pleading stage, such an order is appropriate only when the facts alleged in the complaint, taken as true, do not justify the exercise of subject matter jurisdiction. Royal v. Leading Edge Prods., Inc., 833 F.2d 1, 1 (1st Cir.1987). In line with the foregoing, we glean the relevant background information from the plaintiffs' amended complaint, accepting the well-pleaded factual averments contained therein and indulging all reasonable inferences in the plaintiffs' favor. Valentin v. Hosp. Bella Vista, 254 F.3d 358, 365 (1st Cir.2001).

The plaintiffs purchased their homes at various times between 1973 and 1995. All of them obtained loans through the Farmers Home Administration (FmHA), the Federal Housing Administration (FHA), or some other federal agency. They attribute their current predicament to the government's negligence.

In their view, the principal difficulty is that the government sited the housing developments along the Nigua River basin. That area has endured flooding both before and after the developments were built. The amended complaint enumerates no fewer than eight major floods (occurring in 1928, 1933, 1956, 1970, 1975, 1985, 1992, and 1996). Progressive soil movement has placed unaccustomed strains on foundations, and most plaintiffs report structural damage to walls, roofs, and floors. Moreover, poor drainage results in a backflow of sewage whenever flooding occurs. Over time, these conditions have taken their toll: the plaintiffs say that their dwellings are now in "total ruin" and "unfit" for human habitation. They themselves have experienced mental anguish and emotional distress.

The plaintiffs filed unsuccessful administrative claims with the appropriate agencies in 1998 and 2000 and, in the same time frame, brought suit in the United States District Court for the District of Puerto Rico.¹ Their amended complaint alleges that the government has had an intimate involvement with the planning and construction of the housing developments. For example, federal agencies (1) approved the specifications under which the dwellings were built; (2) granted mortgage loans in which they reserved the right to inspect the properties and obligated the plaintiffs to execute any repairs that they requested; (3) compelled the sellers of the homes to issue builders' warranties; and (4) retained the right to insist upon certain types of insurance coverage. The amended complaint proceeds to list a litany of acts and omissions that form the basis for the government's putative liability. These include the government's supposed failures to (1) inspect the plaintiffs' properties with adequate care; (2) scrutinize the topography and detect the substantial likelihood of future flooding; (3) provide reasonable oversight during construction; (4) warn the plaintiffs that their homes were in a floodway zone; (5) require the plaintiffs to carry flood insurance (or advise them of the need for it); and (6) take appropriate measures to protect the houses from flooding.

The government responded to the plaintiffs' amended complaint with a motion to dismiss. The district court, in a scholarly opinion, granted the motion. Muñiz-Rivera v. United States, 204 F.Supp.2d 305 (D.P.R.2002). The plaintiffs now appeal that ruling. Although our reasoning differs slightly from the district court's, we affirm the order of dismissal. See Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204 (1st Cir.1994) (explaining that an appeals court is "free to affirm the judgment below on any independently sufficient ground made manifest by the record").

The FTCA constitutes "a limited waiver of the federal government's sovereign immunity" against private suits. Shansky v. United States, 164 F.3d 688, 690 (1st Cir.1999). The narrowing adjective is necessary because there are a number of situations in which the waiver will not attach. The government contends that the plaintiffs' claims fall within the compass of these exceptions. If so, the instant action is outside the ambit of federal subject matter jurisdiction. See Hydrogen Tech. Corp. v. United States, 831 F.2d 1155, 1161 (1st Cir.1987) (holding that the FTCA's exceptions "define the limits of federal subject matter jurisdiction in this area"). We test the government's hypothesis by classifying the plaintiffs' claims and then evaluating each category of claims through the prism of the FTCA's exceptions.

The first category of claims includes the plaintiffs' accusations that the government negligently failed to warn of the danger of future flooding, advise the plaintiffs of the need for flood insurance, and inform them that their homes were not constructed stoutly enough to withstand the ineluctable forces of nature. Despite the plaintiffs' disclaimers, these allegations necessarily rest on the premise that the federal government had a duty to exercise due care in communicating useful information regarding the safety and security of the plaintiffs' properties; that the plaintiffs reasonably relied on government officials to fulfill this duty; and that the government let them down.

We need not decide whether the government owed such a duty to the plaintiffs. Assuming, for argument's sake, that it did, any breach of the duty would fall squarely within the FTCA's misrepresentation exception.

The misrepresentation exception immunizes the United States from liability for "[a]ny claim arising out of ... misrepresentation, deceit, or interference with contract rights." 28 U.S.C. § 2680(h). The exception extends to a wide range of communicative activity (including failures of communication). The leading case on this exception is United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614 (1961), in which a home buyer reasonably relied on an erroneous FHA appraisal. Id. at 698-700, 81 S.Ct. 1294. In declaring that the plaintiff's claim for ensuing economic harm was barred by the misrepresentation exception, the Supreme Court observed that, in enacting section 2680(h), Congress "clearly meant to exclude claims arising out of negligent, as well as deliberate, misrepresentation." Id. at 702, 81 S.Ct. 1294. Thus, the exception insulates the government against liability for conveying false or inaccurate information. Id. at 706-07, 81 S.Ct. 1294; see also Jimenez-Nieves v. United States, 682 F.2d 1, 4 (1st Cir.1982) (noting that misrepresentation, as an independent tort, is comprised of the dissemination of false information and the reliance by the plaintiff upon that information). The case law makes manifest that the prophylaxis of the misrepresentation exception extends to failures of communication. See, e.g., JBP Acquisitions v. United States, 224 F.3d 1260, 1265 (11th Cir.2000); Green v. United States, 629 F.2d 581, 584 (9th Cir.1980).

In this case, the plaintiffs' first set of claims are grounded in just such a theory of liability. The plaintiffs contend that the government's intimate role in approving, financing, and monitoring the housing projects implicitly conveyed an assurance that the homes constituted secure domiciles, and that the lack of any warning calculated to alert the plaintiffs to the likelihood of future harm reinforced those implied assurances. Even if such acts and omissions were negligent — a matter on which we take no view — the misrepresentation exception precludes the assertion of a cause of action against the government based upon either miscommunication or non-communication of the information in question. See JBP Acquisitions, 224 F.3d at 1266 (holding that a "failure to communicate, as well as direct miscommunication, is encompassed by the misrepresentation exception"); Green, 629 F.2d at 584 (noting that the misrepresentation exception "bar[s] suits based on a failure to give any warning to injured parties").

The plaintiffs also accuse the government of negligently inspecting their homes and failing to detect the likely problems associated with future flooding. These claims are likewise precluded by the misrepresentation exception. A negligent inspection, in and of itself, cannot cause injury. Harm...