Florida Auto Auction of Orlando, Inc. v. U.S.

Citation74 F.3d 498
Decision Date31 January 1996
Docket NumberNos. 95-1271,95-1347,s. 95-1271
PartiesFLORIDA AUTO AUCTION OF ORLANDO, INCORPORATED, d/b/a Lakeland Auto Auction, as Successor in Interest to the claims of Lakeland Auto Auction, Incorporated; Florida Auto Auction of Orlando, Incorporated, d/b/a Imperial Auto Auction of Orlando, Incorporated, as Successor in Interest to the Claims of Florida Auction Services Corporation, d/b/a Imperial Auto Auction of Orlando; Centennial Casualty Company, as Subrogee of Claims of ADT Automotive, Incorporated, Formerly Doing Business as West Palm Beach Auto Auction, Incorporated; Florida Auto Auction Of Orlando, Incorporated; Centennial Casualty Company, as Subrogee of the Claims of ADT Automotive, Incorporated, Formerly Doing Business as Orange County Auto Auction, Incorporated, Now Known as Greater Orlando Auto Auction, Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant. FLORIDA AUTO AUCTION OF ORLANDO, INCORPORATED, d/b/a Lakeland Auto Auction, as Successor in Interest to the Claims of Lakeland Auto Auction, Incorporated; Florida Auto Auction of Orlando, Incorporated, d/b/a Imperial Auto Auction of Orlando, Incorporated, as Successor in Interest to the Claims of Florida Auction Services Corporation, d/b/a Imperial Auto Auction of Orlando; Centennial Casualty Company, as Subrogee of Claims of ADT Automotive, Incorporated, Formerly Doing Business as West Palm Beach Auto Auction, Incorporated; Florida Auto Auction of Orlando, Incorporated; Centennial Casualty Company, as Subrogee of Claims of ADT Automotive, Incorporated, Formerly Doing Business as Orange County Auto Auction, Incorporated, Now Known as Greater Orlando Auto Auction, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

ARGUED: Deborah Ruth Kant, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Appellant. Donald William Tyler, Sr., Tyler, Cassell, Jackson, Peace & Silver, L.L.P., Columbia, South Carolina, for Appellee. ON BRIEF: Frank W. Hunger, Assistant Attorney General, J. Preston Strom, Jr., United States Attorney, Robert S. Greenspan, Appellate Staff, Civil Division, United States Department of Justice, Washington, D.C., for Appellant. M. Alan Peace, Tyler, Cassell, Jackson, Peace & Silver, L.L.P., Columbia, South Carolina; Charles R. Stepter, Jr., Fishback, Dominick, Bennett, Stepter, Ardaman & Bonus, Orlando, Florida, for Appellee.

Before MURNAGHAN and MOTZ, Circuit Judges, and YOUNG, Senior United States District Judge for the District of Maryland, sitting by designation.

Reversed in part and affirmed in part by published opinion. Judge MURNAGHAN wrote the opinion, in which Judge MOTZ and Senior Judge YOUNG joined.

OPINION

MURNAGHAN, Circuit Judge:

Appellees, automobile auctioneers, sued Appellant, the Federal Government, claiming that United States Customs officials committed the torts of negligence and conversion when they allowed automobiles to be exported without requiring presentation of the certificates of title. The district court granted the Government's motion for summary judgment on Appellees' conversion claim, but held that the Federal Tort Claims Act permitted Appellees to sue the Government for breach of a duty seemingly imposed on it by Customs regulations. Following a bench trial, the court held that Customs officials had behaved negligently, and awarded Appellees damages exceeding $400,000. We reverse in part and affirm in part.

I.

Appellees conduct automobile auctions in the State of Florida, selling used cars to wholesale dealers. Appellees review the credit histories of all dealers participating in a given auction, then determine the method of payment that each will be permitted to use. While some dealers are required to pay cash to Appellees immediately upon making a purchase, many others are allowed to submit "sight drafts." A sight draft is a check-like method of payment commonly used by automobile auctioneers nationwide. When a sight draft is used, Appellees deliver a bill of sale and the purchased automobiles to the purchaser, then forward a copy of the sight draft and the certificates of title to the purchaser's bank. Once the bank receives the sight draft, the purchaser is expected to authorize the bank to make payment on its behalf. If such payment is indeed authorized, the purchaser's bank delivers the certificates of title to the purchaser; if payment is refused, the certificates are returned to Appellees.

In January 1990, Appellees sold numerous cars to Preowned Cars, Inc., a company with which Appellees had been dealing for more than three years. Preowned was permitted to submit sight drafts to Appellees promising payment of approximately $600,000. Soon thereafter, Preowned shipped the cars to Charleston, South Carolina, in order to export the vehicles to Saudi Arabia. Despite the provisions of 19 C.F.R. Sec. 192.2(b)--a federal regulation which states that exporters must present original or certified copies of certificates of title to Customs officials before automobiles may be transported out of the United States 1--Customs officials permitted the exportation after receiving only a copy of the bill of sale. At about that same time, Appellees learned that Preowned had refused to authorize its bank to make payment against the sight drafts.

After proving unable to secure payment from Preowned, Appellees filed suit in federal district court, claiming entitlement to damages under theories of conversion and negligence. The district court granted the Government's motion for summary judgment on Appellees' conversion claim, finding that, under South Carolina law, conversion is the "unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of the owner's rights," see Powell v. A.K. Brown Motor Co., 200 S.C. 75, 20 S.E.2d 636, 637 (1942), and that Customs officials never possessed the automobiles or exercised "any of the rights of ownership over the automobiles in question." Even if Customs officials had taken possession of the cars, the district court reasoned, the Federal Tort Claims Act's waiver of sovereign immunity would have been deemed rescinded by 28 U.S.C. Sec. 2680(c), which provides that the Act is inapplicable to claims "arising in respect of ... the detention of any goods or merchandise by any officer of customs."

With respect to Appellees' negligence claim, however, the district court denied the Government's motion for summary judgment. Finding that Customs officials have a regulatory obligation to require presentation of certificates of title before allowing automobiles to be exported and that Customs officials did not demand such certificates in the instant case, the court held that the Government's failure to require presentation of the certificates was actionable under a state-law negligence theory of liability, and that jurisdiction under the Federal Tort Claims Act was therefore proper. The district court subsequently found the Government liable for negligence and awarded Appellees damages exceeding $400,000.

The Government has appealed the district court's denial of its motion for summary judgment on Appellees' negligence claim. Appellees have cross-appealed the district court's grant of summary judgment to the Government on their conversion claim.

Grants and denials of motions for summary judgment are reviewed de novo. Henson v. Liggett Group, Inc., 61 F.3d 270, 274 (4th Cir.1995).

II.

"The basic rule of federal sovereign immunity is that the United States cannot be sued at all without the consent of Congress." Block v. North Dakota, 461 U.S. 273, 287, 103 S.Ct. 1811, 1819-20, 75 L.Ed.2d 840 (1983). Through the Federal Tort Claims Act (FTCA), Congress has provided that the Federal Government may be sued in federal district courts

for injury or loss of property ... 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. Sec. 1346(b) (1988); see also 28 U.S.C. Sec. 2674 (1988) ("The United States shall be liable, respecting the provisions of this title relating to tort claims, in the same manner and to the same extent as a private individual under like circumstances...."). The Act does not create new causes of action; "the mere allegation of a breach of duty under Federal law does not, by itself, state a valid tort claim against the Government." Goldstar (Panama) S.A. v. United States, 967 F.2d 965, 969 (4th Cir.1992). Instead, the Act "only serves to convey jurisdiction when the alleged breach of duty is tortious under state law, or when the Government has breached a duty under federal law that is analogous to a duty of care recognized by state law." Id.; see also Rayonier, Inc. v. United States, 352 U.S. 315, 319, 77 S.Ct. 374, 376-77, 1 L.Ed.2d 354 (1957) (stating that, as in all other cases in which the Federal Government claims immunity from suit in tort, when the performance of a uniquely governmental function gave rise to the claimed harm, the court must simply determine "whether a private person would be responsible for similar negligence under the laws of the State where the acts occurred").

Under Goldstar and like cases, there are therefore two instances in which the FTCA would permit Appellees to sue the Government for negligence as a result of Customs officials' failure to enforce federal regulations. First, the suit would be permitted if Appellees showed that "the alleged breach of duty is tortious under state law." See Goldstar, 967 F.2d at 969. Second, the suit would be permitted if Appellees demonstrated...

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