Appley Bros. v. U.S.
| Citation | 7 F.3d 720 |
| Decision Date | 15 December 1993 |
| Docket Number | No. 92-3382,92-3382 |
| Parties | APPLEY BROTHERS; Appley Farms, Inc.; Kevin Beerman; Tom Curry; Dakota Eastern, Ltd.; Raymond Hall; Hayes & Hayes, Inc.; Sam Hatton; Robert Hebeler; Dean Hebeler; Heckathorn Farms, Inc.; Curt Jervik; Dennis Kjose; Gordon Kleihauer; David Larsen; Morris Larsen; Todd Larsen; Lyle Lawrensen; Eldean Lykken; Martin McInerney; Lawrence McInerney; Daniel O'Connor; Kelly O'Connor; Owen Quall; Mark Quam; Lyle Wagner; Kaylor Grain Co.; Viborg Coop Elevator; Hurley Elevator; Transamerica Insurance Company; Burnette Quam, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Jonathan VanPatten, Vermillion, SD, argued, for plaintiffs-appellants.
Bertha Mitrani, Washington, DC, argued, for defendant-appellee.
Before JOHN R. GIBSON, Circuit Judge, ROSS, Senior Circuit Judge, and MORRIS SHEPPARD ARNOLD, Circuit Judge.
Appley Brothers appeal the district court's dismissal of its action against the United States for losses as a result of the United States Department of Agriculture's negligent inspection of the Bird Grain Company warehouse, a federally licensed grain warehouse. The district court held that it lacked subject matter jurisdiction because the claims were barred by both the discretionary function exception and the misrepresentation exception to the Federal Tort Claim Act. 28 U.S.C. § 2680(a), (h) (1988 & Supp.1993). Appley Brothers contend that the losses were caused by the negligent failure to follow specific agency regulations, and that the discretionary function and misrepresentation exceptions do not apply. We reverse and remand.
Appellants include a group of farmers and grain elevators who sold or stored grain at the Bird Grain warehouse, and Transamerica, issuer of warehouseman bonds covering the Bird Grain operation. For simplicity, as all appellants raise the same issues, we refer to all appellants as Appley Brothers.
Between March 29 and April 1, 1988, inspectors from the United States Department of Agriculture examined the Bird Grain operations and cited Bird Grain for a number of violations, including corn and soybean inventory shortages. On April 1, 1988, U.S.D.A. inspectors examined Bird Grain and prepared a WA-125 form or a Memorandum of Adjustments. This form showed that Bird Grain had corn and soybean inventory shortages, and had "previous show short positions." Specifically, the WA-125 showed that in May, September, and October 1987, and January 1988, Bird Grain had corn shortages as high as 8591 bushels, and soybean shortages in January and February 1987 of up to 921 bushels. The inspectors directed Bird Grain to eliminate these shortages. The April 1 inspection showed that Bird Grain was again deficient in corn by 6405 bushels and in soybean by 8159 bushels. The inspectors directed Bird Grain to remedy the deficiencies.
On August 5, 1988, U.S.D.A. inspectors conducted a special examination of Bird Grain. The stated purpose of the inspection was "to check compliance with WA-125 issued 4-1-88." The inspectors did not indicate on the report whether they checked the corn or soybean inventories, or whether they verified Bird Grain's compliance with the directive to eliminate previous show short positions. The outcome of the August 5 examination was that Bird Grain was cited for continuing problems with temporary storage bunkers but was otherwise allowed to continue in operation. After August 5, various farmers and grain elevators continued to deliver grain to Bird Grain for storage or purchase by it. Transamerica also issued a $233,000 warehouseman's bond effective for one year beginning September 23, 1988.
On November 15, 1988, U.S.D.A. inspectors conducted an inspection of Bird Grain. The inspectors discovered grain shortages, and the U.S.D.A. suspended Bird Grain's federal license on November 22, 1988. Bird Grain's inventory was liquidated and proceeds distributed to the holders of valid storage claims on pro rata basis.
After this inspection, the U.S.D.A. prepared daily position reports which showed that on August 5, 1988, (the time of the second inspection), Bird Grain was short approximately 358,011 bushels of corn. At that time, it had permanent storage capacity of 631,000 bushels and an additional temporary storage capacity of 140,000 to 150,000 bushels. The shortage thus represented approximately forty-six percent of the licensed capacity and possibly over fifty percent of the existing obligations. This shortage was higher than that discovered during the November 15 inspection which resulted in the suspension of Bird Grain's license.
Appley Brothers sued the U.S.D.A. alleging a breach of U.S.D.A.'s regulatory duty and a breach of its common law duty, and seeking to recover the value of grain delivered for which they had not been paid. Transamerica joined the action, alleging damages because of its issue of the $233,000 warehouseman's bond on September 23, 1988. They alleged that had the inspectors conducted even a cursory visual inspection of grain inventories, they would have immediately discovered the grain shortages, and Bird Grain's violation of the United States Warehouse Act, 7 U.S.C. § 246 (1988). The government filed a motion to dismiss for lack of subject matter jurisdiction, arguing that the claims were barred by the misrepresentation exception and the discretionary function exception to the Federal Tort Claims Act. 28 U.S.C. § 2680(a), (h). The district court granted the government's motion, and Appley Brothers appeals.
The Federal Tort Claims Act authorizes suits for damages against the United States for "injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." 28 U.S.C. § 1346(b) (1988). The government is not liable for "[a]ny claim ... based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." 28 U.S.C. § 2680(a) (1988).
We review de novo the dismissal of a case under the discretionary function exception. Tracor/MBA, Inc. v. United States, 933 F.2d 663, 665 (8th Cir.1991). When analyzing whether the discretionary function applies, we first consider whether the conduct complained of is a matter of choice for the governmental employee. Berkovitz v. United States, 486 U.S. 531, 536, 108 S.Ct. 1954, 1958, 100 L.Ed.2d 531 (1988). The discretionary function exception "covers only acts that are discretionary in nature, acts that 'involv[e] an element of judgment or choice.' " United States v. Gaubert, 499 U.S. 315, 322, 111 S.Ct. 1267, 1273, 113 L.Ed.2d 335 (1991) (quoting Berkovitz, 486 U.S. at 536, 108 S.Ct. at 1958). The requirement of judgment or choice is not satisfied if a "federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow," because "the employee has no rightful option but to adhere to the directive." Berkovitz, 486 U.S. at 536, 108 S.Ct. at 1958.
Even if the challenged conduct involves an element of judgment, we then consider whether the judgment is of the kind that the discretionary function exception was designed to shield. Gaubert, 499 U.S. at 322, 111 S.Ct. at 1273. The exception was designed to " 'prevent judicial "second guessing" of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort.' " Id. (quoting United States v. S.A. Empresa De Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 814, 104 S.Ct. 2755, 2765, 81 L.Ed.2d 660 (1984)).
The district court concluded that 7 U.S.C. § 246 of the Warehouse Act gave the Secretary of Agriculture broad discretion to decide whether to revoke Bird Grain's warehouse license, and thus, Appley Brothers' claims were barred by the discretionary function exception. Appley Brothers v. United States, No. 92-4037, slip op. at 7-8 (D.S.D. Sept. 16, 1992). The court reasoned that even if the inspectors had issued a new form TW-125 as required by their agency handbook, the U.S.D.A. could still have allowed Bird Grain to remain open just as it did after the April 1 inspection. Id. at 8.
Appley Brothers contend that the inspectors' failure to check compliance with the April 1 citation violated a mandatory agency procedure and, thus, the conduct is not protected by the discretionary function exception. Appley Brothers point out that the stated purpose of the August 5 special examination was "to check compliance with WA-125 issued 4-1-88." They also cite the U.S.D.A. published Grain Warehouse Examiner's Handbook, which states:
In all instances where a previously issued Form TW-125 has not been completely cleared, the examiner is to issue a new Form TW-125 listing those conditions which remain uncorrected at the time of the special examination. If another special examination is necessary, the same procedure should be followed.
(Emphasis added).
The handbook also instructs that if the inspector discovers quantity deficiencies between one and three percent, the inspector "will complete Form TW-315." (Emphasis added). The handbook further instructs that: "If a deficiency exceeds the greater of three percent of the storage obligation or 2,000 bushels, the examiner will complete Form TW-315 and report by telephone to the area office." (Emphasis added).
Appley Brothers argue that the notations on the April 1 WA-125 included previous "show short" positions, and soybean and corn deficiencies on that date....
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