VAL-U CONST. CO. OF SOUTH DAKOTA, INC. v. US

• Decision Date: 29 September 1995
• Docket Number: No. CIV 94-4121.,CIV 94-4121.
• Citation: 905 F. Supp. 728
• Parties: VAL-U CONSTRUCTION COMPANY OF SOUTH DAKOTA, INC., Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of South Dakota

905 F. Supp. 728

VAL-U CONSTRUCTION COMPANY OF SOUTH DAKOTA, INC., Plaintiff, v. UNITED STATES of America, Defendant.

No. CIV 94-4121.

United States District Court, D. South Dakota, Southern Division.

September 29, 1995.

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William G. Taylor, Jr., James E. Moore, Woods, Fuller, Shultz & Smith, Sioux Falls, SD, for Plaintiff.

Karen E. Schreier, U.S. Attorney, Bonnie P. Ulrich, Asst. U.S. Attorney, Sioux Falls, SD, for Defendant.

MEMORANDUM OPINION AND ORDER

PIERSOL, District Judge.

Plaintiff, Val-U Construction Company, was awarded a construction contract with the United States government, acting through the Rosebud Sioux Tribe as general contractor, pursuant to an agreement with the Indian Health Service IHS, to build 66 staff quarter units to serve the newly completed IHS Hospital on the Rosebud reservation. On September 25, 1990, and before completion of the project, the Tribe terminated the contract with Val-U. Val-U brings this action under the Federal Tort Claims Act FTCA alleging breach of common law duty, breach of regulatory duty and breach of professional duty. Doc. 1. The government moves to dismiss on the grounds that (1) Plaintiff has pleaded a claim for interference with contract¹ which is exempted from the FTCA under 28 U.S.C. § 2680(h); (2) the actions of the Tribe were discretionary and, therefore, exempt from the FTCA under § 2680(a); or (3) the statute of limitations has run because Plaintiff failed to file its administrative claim with a sum certain within the two years prescribed by 28 U.S.C. § 2401(b). Doc. 6, 7. In the alternative, the government moves for summary judgment alleging there is no genuine issue of material fact requiring trial. Doc. 6 & 10.

The Court has addressed the issues presented in the following manner: the government pleads three exceptions to the FTCA in their motion to dismiss. The Court first examines whether this is a claim sounding in contract or in negligence. This is the threshold issue because the FTCA waives sovereign immunity only for negligence claims. I find that South Dakota recognizes a tort for negligent performance of a contract. Plaintiff chooses to bring a negligent performance claim rather than a breach of contract claim. Having passed the first hurdle, the Court then examines whether Plaintiff's negligence claim is barred by either the discretionary function exception or by the statute of limitations. I find that the claim is barred by the discretionary function exception. If the claim had not been barred by the discretionary function exception, the statute of limitations would bar the claim to the extent that it fails to state a claim for a sum certain of more than $690,330.68.

MOTION TO DISMISS

Subject matter jurisdiction is a threshold issue. Kronholm v. FDIC, 915 F.2d 1171, 1174 (8th Cir.1990). Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of an action whenever the court lacks jurisdiction over the subject matter. The Eighth Circuit has stated the standards applicable to motions to dismiss:

Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction — its very power to hear the case — there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to the plaintiff's allegations, and the existence of dispute material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist.

Osborn v. United States, 918 F.2d 724, 730 (8th Cir.1990); Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir.1993).

FEDERAL TORT CLAIMS ACT

The United States is immune from suit except to the extent that it consents to be sued. The FTCA permits suits (1) against the United States; (2) for money damages; (3) for injury or loss of property, or personal injury or death; (4) caused by the negligent or wrongful act or omission; (5) of any employee of the Government while acting within the scope of his office or employment;² (6) "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) (1993). In sum, the FTCA is a waiver of sovereign immunity for cases sounding in tort, with certain exceptions enumerated by statute. 28 U.S.C. § 2680 (1994). The FTCA should be construed liberally to implement its broad purpose. Indian Towing Co. v. United States, 350 U.S. 61, 64-65, 76 S.Ct. 122, 124, 100 L.Ed. 48 (1955); United States v. Yellow Cab, 340 U.S. 543, 550, 71 S.Ct. 399, 404, 95 L.Ed. 523 (1951) ("Recognizing such a clearly defined breadth of purpose for the bill as a whole, and the general trend toward increasing the scope of the waiver of the United States of its sovereign immunity from suit...."). The exceptions to the waiver of sovereign immunity must be strictly construed. As the Supreme Court has stated:

Like a waiver of sovereign immunity itself, which must be "unequivocally expressed," "this Court has long decided that limitations and conditions upon which the government consents to be sued must be strictly observed and exceptions thereto are not to be implied."

Lehman v. Nakshian, 453 U.S. 156, 161, 101 S.Ct. 2698, 2701-02, 69 L.Ed.2d 548 (1981) (citations omitted).

INTERFERENCE WITH CONTRACT

The government argues first that this Court lacks subject matter jurisdiction because Val-U has brought a claim for interference with contract rights which is expressly exempted from the FTCA by 28 U.S.C. § 2680(h) (1994).³ Val-U maintains it has pleaded a claim for negligence which may be maintained under the FTCA. First, only tort claims recognized under state law may be brought under the FTCA.⁴ South Dakota recognizes a tort for negligent performance of a contract. Limpert v. Bail, 447 N.W.2d 48, 51 (S.D.1989). This tort for breach of the "common-law duty to perform with care, skill, reasonable expediency, and faithfulness," is separate from a claim for breach of contract.⁵Id. (quoting Lincoln Grain, Inc. v. Coopers & Lybrand, 216 Neb. 433, 345 N.W.2d 300, 305 (1984)). While the same set of facts may give rise to both breach of contract and negligent performance claims, any plaintiff is entitled to forgo one remedy in favor of another. As the Third Circuit stated:

The complaint is a sufficient statement of a cause in tort for conversion, and it would seem that Plaintiff could have equally made out a complaint for breach of contract.... Plaintiff has chosen to prosecute its action on the basis of tort in the District Court. That it failed to avail itself of an action in the Court of Claims is not a valid jurisdictional objection.

Aleutco Corp. v. United States, 244 F.2d 674, 678-79 (3d Cir.1957). The requirement that "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" is met in the instant case. 28 U.S.C. § 1346(b).

Second, the Court must examine whether the liability claimed is created solely by the contractual relationship between the Plaintiff and United States or whether it exists independently. Walsh v. United States, 672 F.2d 746, 750 (9th Cir.1982) (finding duty to repair and maintain easement existed independently from the contract creating the easement and could be basis for claim under FTCA). As the Fifth Circuit has explained the relationship:

Moreover, causes of action distinct from those excepted under section 2680(h) are nevertheless barred when the underlying governmental conduct "essential" to the plaintiff's claim can be fairly read to "arise out of" conduct that would establish an excepted cause of action.

McNeily v. United States, 6 F.3d 343, 347 (5th Cir.1993) (citing Atorie Air v. F.A.A., 942 F.2d 954, 958 (5th Cir.1991).

The government cites the Court to Blanchard v. St. Paul Fire & Marine Ins. Co., a case with facts similar to this one, in which a contractor sued the government alleging that the government had wrongfully interfered with the performance of plaintiff's contract to remodel Air Force dormitories. 341 F.2d 351, 352 (5th Cir.), cert. denied, 382 U.S. 829, 86 S.Ct. 66, 15 L.Ed.2d 73 (1965). In Blanchard, the Fifth Circuit held that any claim that the government "hampered" Blanchard's performance of his contract was grounded in contract and fell within the exception to the FTCA. Id. at 357. See also Woodbury v. United States, 313 F.2d 291, 294 (9th Cir.1963) (holding that the substance of the claim against the government for failing to obtain financing for a contractor sounded in contract and that "the breach of contract, if any, was not a mere background for the tort.").

In Mundy v. United States, the Ninth Circuit held that a suit for the denial of a security clearance which resulted in the plaintiff being fired was not exempt under § 2680(h). The court wrote, "Even though the damages sought by Mundy are similar to those obtainable in an interference claim, the tortious wrong alleged in his complaint is the failure to process a security clearance with due care, not an interference with contract." 983 F.2d 950, 953 (9th Cir.1993).

In this case, it is true that there would be no tort liability absent the contractual relationship itself. I find that South Dakota recognizes a tort for the negligent performance of a contract. I further find that, while Val-U might have pleaded breach of contract, Val-U has instead chosen to plead a failure to perform the contract with reasonable skill and care.⁶ Both remedies were potentially available to Val-U and its preference for the tort remedy does not bar the suit under § 2680(h).

DISCRETIONARY FUNCTION EXCEPTION

The government's second argument for dismissal is that the actions of the Tribe in selecting...