341 F.3d 571 (D.C. Cir. 2003), 02-5045, Tri-State Hospital Supply Corp. v. U.S.

Docket Nº:02-5045
Citation:341 F.3d 571
Party Name:Tri-State Hospital Supply Corp. v. U.S.
Case Date:September 02, 2003
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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341 F.3d 571 (D.C. Cir. 2003)



UNITED STATES of America, Appellee.

No. 02-5045.

United States Court of Appeals, District of Columbia Circuit

September 2, 2003

Argued Feb. 10, 2003.

Appeal from the United States District Court for the District of Columbia (No. 00cv01463).

Terence J. Lynam argued the cause for the appellant. John M. Dowd and Joseph P. Esposito were on brief.

Lisa S. Goldfluss, Assistant United States Attorney, argued the cause for the appellee. Roscoe C. Howard, Jr., United States Attorney, and R. Craig Lawrence, Assistant United States Attorney, were on brief.

Before: HENDERSON and ROGERS, Circuit Judges, and SILBERMAN, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge KAREN LeCRAFT HENDERSON.

Separate concurring opinion filed by Circuit Judge ROGERS.

Separate concurring opinion filed by Senior Circuit Judge SILBERMAN.

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Tri-State Hospital Supply Corporation (Tri-State) seeks reversal of the final judgment of the district court dismissing its complaint against the United States for want of subject matter jurisdiction. Relying on the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 2671 et seq., Tri-State sought to recover $3.2 million in damages for the "injury or loss of property" it incurred over a six-year period defending itself against the government's multiple investigations into its importation of surgical instruments from Pakistan. Granting the government's motion to dismiss, the district court held that it lacked authority to award the relief sought by Tri-State because the FTCA does not expressly waive the sovereign immunity of the United States from liability for attorney's fees. Tri-State Hosp. Supply Corp. v. United States, 142 F.Supp.2d 93, 101-04 (D.D.C.2001) (Tri-State).

On appeal, Tri-State argues that the district court erred in holding that "money damages ... for injury or loss of property," 28 U.S.C. § 1346(b)(1), recoverable under the FTCA for claims of abuse of process and malicious prosecution, id. § 2680(h), do not include the attorney's fees Tri-State expended defending itself against the government's alleged torts. We agree and hold that attorney's fees qua damages are recoverable against the United States for abuse of process and malicious prosecution if "the law of the place" where the tort occurred so provides. Id. § 1346(b)(1). Accordingly, we reverse the district court's dismissal of Tri-State's action and remand the matter for further proceedings to consider Tri-State's specific FTCA allegations.

I. Background

Tri-State is a small, privately-owned corporation that sells hospital supplies throughout the United States. 1 In the early 1980s, Tri-State began importing surgical instruments--forceps, scissors and the like--from suppliers in Pakistan. The surgical instruments entered the United States at the Port of Detroit, where Tri-State engaged the services of a licensed customs broker, LEP International, Inc. (LEP), to complete the required customs entry forms. The forms require the importer to list "the price actually paid or payable" for goods entering the country. 19 U.S.C. § 1401a(b)(1).

Although Tri-State in fact paid the invoice price for the imported goods, it subsequently received rebates from its Pakistani suppliers. From 1984 to 1986, Tri-State consulted with LEP regarding the manner in which it should declare the price "actually paid or payable" for the surgical instruments it imported from Pakistan. LEP advised Tri-State to declare the price that was reflected on the invoices accompanying the imported supplies. As a result, Tri-State declared a higher price on the customs entry forms than the price it ultimately paid for the supplies after deducting the subsequent rebates. Because the goods imported from Pakistan were duty-free, however, the United States Customs Service (Customs) suffered no loss of revenue as a result of this practice. 2

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The customs entry forms do not require disclosure of any price rebate. See id.

Beginning in early 1994, Tri-State became the subject of civil and criminal investigations for allegedly falsifying the forms it submitted to Customs. On March 28, 1994, Customs officials executed a search warrant at Tri-State's headquarters, seizing evidence relating to the value of surgical instruments imported from Pakistan. Over the next year, Customs sought the indictment of Tri-State and two of its executives for criminal customs fraud. These efforts ultimately proved unsuccessful, however, as both the United States Attorney for the Eastern District of Michigan and the United States Attorney for the Eastern District of Virginia declined to prosecute Tri-State.

Notwithstanding the federal prosecutors' decision not to indict Tri-State for criminal customs fraud, Customs began to issue a series of civil penalty notices against Tri-State in 1995 based upon allegations that it had fraudulently overstated the prices it had paid for imported surgical instruments and that it had engaged in an international money laundering scheme. Undaunted, Tri-State steadfastly refused to pay any of the amounts alleged in the various penalty notices. In November 1996, Customs referred its case to the Department of Justice (DOJ) for the collection of civil penalties. DOJ then brought suit against Tri-State, on behalf of Customs, in the United States Court of International Trade (CIT) on April 28, 1997.

On numerous occasions before and during the enforcement trial, Tri-State's counsel explained to both DOJ and Customs that Tri-State had relied on LEP's advice in reporting the prices of the surgical supplies it had imported from Pakistan. Evidence likewise emerged both before and during trial that indicated that Tri-State had not in fact engaged in any fraudulent scheme. After the government rested its case, Tri-State moved for judgment as a matter of law on two of the three counts. DOJ then decided to dismiss its fraud claim against Tri-State. The CIT subsequently granted Tri-State's motion for judgment as a matter of law on the gross negligence count, finding "[no] evidence which rises to the level of willful or wanton conduct." Complaint at¶ 156. At the close of trial, the jury deliberated on the sole remaining negligence count and returned a verdict in Tri-State's favor.

Tri-State filed the instant lawsuit under the FTCA on June 20, 2000 to recover the $3.2 million in attorney's fees it had incurred defending itself against the government. Count I of the complaint alleged that the government engaged in a malicious prosecution because it lacked probable cause to issue the penalty notices against Tri-State or to sue Tri-State for collection of those penalties in the CIT. It also claimed that Customs officials knowingly violated their own regulations by seeking to impose civil penalties on Tri-State. Count II alleged that the government engaged in an abuse of process in connection with the penalty notices and enforcement trial.

The government then moved to dismiss Tri-State's complaint for lack of subject matter jurisdiction, arguing that Tri-State's claims were jurisdictionally barred because the United States had not waived its sovereign immunity from suit. Granting the government's motion to dismiss in part, 3 the district court held that because

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the FTCA does not contain an express waiver of sovereign immunity for the recovery of attorney's fees, it lacked authority to award as damages the attorney's fees Tri-State expended defending itself against the government's alleged tortious conduct. Tri-State, 142 F.Supp.2d at 101-04.

Although the district court recognized the unique posture of Tri-State's case--it sought attorney's fees qua damages, not attorney's fees incurred in pursuing the FTCA action--the district court concluded that "the result must be the same" as that obtained in the myriad appellate court decisions holding that attorney's fees are not recoverable under the FTCA. Id. at 102. Stating that "parties cannot use artful pleading to circumvent the limitations of a statute," the district court rejected Tri-State's characterization of the $3.2 million in attorney's fees as " 'money damages ... for injury or loss of property.' " Id. (quoting 28 U.S.C. § 1346(b)(1)). The district court further observed that Tri-State had failed to cite a single case in which a court had awarded attorney's fees in an abuse of process or malicious prosecution action brought under the FTCA. Id. at 103. Because it also was unaware of any such cases itself, save a single district court decision overturned by the Ninth Circuit on other jurisdictional grounds, the district court declined to "be the first." Id. & n. 7.

In addition, the district court reasoned that its "analysis is further supported by the fact that Congress established the Equal Access to Justice Act [EAJA] as a separate statutory scheme that specifically waives the government's sovereign immunity for awards of attorney['s] fees." Id. Noting that "a precisely drawn, detailed statute pre-empts more general remedies," the district court declined to "imply the availability of attorney['s] fees under the more general FTCA, when the more-precisely drawn EAJA appears to express Congress's clear mandate concerning the issue." Id. Because, as Tri-State conceded, it did not meet certain procedural requirements of EAJA, the district court refused to "allow Tri-State to ... seek[ ] the same relief under a different, more general statute." Id. at 104 n. 8.

Nevertheless, the district court observed that "all may not be lost for Tri-State," given that its "complaint asserts that [it] incurred 'special injury including but not limited to $3,239,153.60 in...

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