Appley Bros. v. US, Civ. No. 92-4037

• Decision Date: 12 April 1996
• Docket Number: 92-4110.,Civ. No. 92-4037
• Parties: APPLEY BROTHERS, et al., Plaintiffs, v. UNITED STATES of America, Defendant. UNITED STATES of America, Plaintiff, v. TRANSAMERICA INSURANCE CO., Defendant.
• Court: U.S. District Court — District of South Dakota

924 F. Supp. 944

APPLEY BROTHERS, et al., Plaintiffs, v. UNITED STATES of America, Defendant.

UNITED STATES of America, Plaintiff, v. TRANSAMERICA INSURANCE CO., Defendant.

Civ. Nos. 92-4037, 92-4110.

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

April 12, 1996.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John J. Ulrich, U.S. Attorney's Office, Sioux Falls, SD, Bertha R. Mitrani, U.S. Dept. of Justice, Torts Branch, Civil Division, Washington, DC, Peter Bonner, International Affairs, Department of Agriculture, Office of General Counsel, Washington, DC, for U.S.

James M. Cremer, Bantz, Gosch, Cremer, Peterson & Sommers, Aberdeen, SD, for Transamerica Insurance.

Jonathan K. VanPatten, Vermillion, SD, for Appley Brothers.

Glenn L. Roth, Freeman, SD, for Kaylor Grain Co., Inc.

MEMORANDUM OPINION AND ORDER

PIERSOL, District Judge.

Plaintiffs¹ bring this suit for damages, CIV 92-4037, against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 2671-2680. Before the Court for ruling are the government's Motion to Dismiss or, Alternatively, For Summary Judgment and plaintiffs' Motion for Partial Summary Judgment on liability. For the reasons discussed below, the Court denies the government's motion for summary judgment and grants plaintiffs' motion for partial summary judgment on the issue of liability.

Plaintiffs brought this action in 1992. The government moved to dismiss the complaint as barred by the discretionary function exception, 28 U.S.C. § 2680(a), and by the misrepresentation exception, 28 U.S.C. § 2680(h). The limited record before Judge John B. Jones at that time consisted of the facts as alleged in the complaint and one page from the Grain Warehouse Examiner's Handbook, published by the Warehouse Division of the United States Department of Agriculture (USDA). Taking the alleged facts in the complaint as true, Judge Jones granted the motion to dismiss as to both statutory exceptions. On appeal, a panel of the Eighth Circuit reversed, one judge dissenting, holding that neither exception applied. Appley Brothers v. United States, 7 F.3d 720 (8th Cir.1993).

As to the discretionary function exception, the circuit court ruled that an agency policy, set out in the one page exhibit from the Grain Warehouse Examiner's handbook, required the warehouse examiner to take certain actions during an August 5, 1988 inspection of Bird Grain Elevator, and this requirement stripped the examiner of discretion to decide what actions to take during the inspection. Id. at 725. The court held that the warehouse examiner failed to follow the agency policy and that he violated the agency's own stated purpose for the August 1988 inspection. Id. Consequently, the court ruled that the discretionary function exception did not apply and remanded the case for further proceedings.

The parties have now litigated the facts underlying the complaint, and the government again moves to dismiss or for summary judgment based upon the discretionary function exception and on the legal merits of plaintiffs' claims. Plaintiffs argue that the Eighth Circuit's decision is the law of the case with respect to the applicability of the discretionary function exception, (Doc. 74 at 23), but they acknowledge that the law of the case doctrine "does not prevent the United States from litigating the factual predicate upon which Appley Brothers was based," citing Peterson v. City of Plymouth, 60 F.3d 469, 473 (8th Cir.1995) (holding that law of case doctrine was not strictly applicable on remand following qualified immunity appeal where police officers offered evidence at trial disputing version of events upon which Eighth Circuit's holdings were based). The government argues that the law of the case doctrine does not apply because it has now produced evidence that is substantially different than the facts alleged in the complaint, citing In re Progressive Farmers Ass'n, 829 F.2d 651, 655 (8th Cir.1987) (observing that "`the law of the case' doctrine generally requires that a decision on a former appeal be followed in any subsequent proceedings in that court or a lower court unless evidence subsequently introduced is substantially different or the decision is clearly erroneous and works manifest injustice."), cert. denied, 485 U.S. 1021, 108 S.Ct. 1574, 99 L.Ed.2d 889 (1988).

The Court cannot agree with plaintiffs' argument that "very little of the factual basis of the Eighth Circuit's decision, and certainly none of the factual basis relevant for purposes of this motion, has changed." (Doc. 74 at 23.) The government has produced evidence substantially different than what was before Judge Jones and the Eighth Circuit, and more importantly, the government's evidence is uncontroverted. The Court will determine, based upon the expanded factual record, whether the discretionary function exception applies. See McMichael v. United States, 856 F.2d 1026, 1031 (8th Cir.1988) (determining, on subsequent appeal following trial, whether discretionary function exception applied).

Although the discretionary function exception, if it applies, is jurisdictional in nature, the Court will treat the government's motion as one for summary judgment, rather than as a motion to dismiss, because of the numerous exhibits submitted by the parties in support of and in opposition to the pending motions. See Layton v. United States, 984 F.2d 1496, 1498-99 (8th Cir.) (affirming summary judgment for government on discretionary function exception), cert. denied, 510 U.S. 877, 114 S.Ct. 213, 126 L.Ed.2d 170 (1993). Because the material facts are not disputed, the Court must determine whether the United States or the plaintiffs are entitled to summary judgment as a matter of law.

I. Undisputed Facts

Bird Grain, a now-defunct privately owned grain elevator, was a federally licensed warehouse operating in Elk Point, South Dakota.² Dennis Bird was Bird Grain's president and general manager. From March 29 through April 1, 1988, John Iten, a USDA warehouse examiner, conducted a "subsequent" examination at Bird Grain, which involved a review of the elevator's records and a physical inventory of the grain on hand. (Doc. 63, Ex. 1.) At the conclusion of this inspection, Iten identified four problem areas in a Form WA-125 Memorandum of Adjustments.³ (Id. Ex. 1 at 2.) First, Iten identified two contracts that had not been signed by the grain producers. Iten instructed Bird Grain to have "these signed as soon as possible." Next, Iten listed:

PREVIOUS SHOW SHORT POSITIONS:

The daily position record reveals that you were in a show short or over obligated position in Corn in May, September & October 1987, & January 1988 as high as 8,591 Bu.. sic Soybeans showed short in January & February 1987 up to 921 Bu.. sic These positions are not allowed under the USWA & UGSA,⁴ under which you operate. See that they are eliminated in the future.

A warehouseman is in a show-short position if his storage obligations exceed his stocks. Third, Iten cited Bird Grain for a quality shortage of No. 2 yellow corn ("2YC"). Iten noted on the WA-125 that the elevator's records showed obligations of 871,849 bushels of 2YC, but he measured only 865,444 bushels, a difference of 6,405 bushels. Iten also noted that the elevator's records showed obligations of sample grade yellow corn (SGYC) of 1,248 bushels, but he measured 10,985 bushels. Thus, Iten stated:

As of the 3-30-88 cut-off date, this station was found to be grade deficient of 2YC by 6,405 Bu. The United States Warehouse Act & Uniform Grain Storage Agreement require that sufficient quantities & qualities of grain be maintained at all times to cover all obligations to others. Please purchase & receive into approved storage space sufficient quantities of sufficient quality Corn to upgrade inventory, so obligations to others are covered by like or better quality Corn.

Finally, Iten cited Bird Grain for a measured soybean shortage of 8,159 bushels, which represented 59 percent of the total obligation for soybeans. (Doc. 63, Ex. 1 at 2, 4.) Iten stated on the WA-125: "To correct, you are requested to reduce soybean inventories, both total & cash, by 8,159 Bu." (Id., Ex. 1 at 2.) The shortage was corrected at the warehouse by reducing the company-owned inventory by 8,159 bushels. As to this last item, Dennis Bird signed the WA-125 as manager following the notation, "Today, 4-1-88, soybeans reduced 8,159 Bu.," and Iten signed as a witness. No similar notations and signatures were made on the WA-125 regarding the quality deficiency in No. 2 yellow corn.

In responding to these four citations listed on the WA-125 for the subsequent examination, Dennis Bird stated:

Deferred payment contracts are from landlords whom sic live a long ways away. I will get the tenant to sign for them. All short positions were covered instantly as soon as we realized we were in a short position. I normally watch this very carefully so as to keep us out of a short position. All off grade Corn was replaced while examiner was here. Soybean inventories have been reduced as of date examiner left.

(Doc. 63, Ex. 1 at 3; Doc. 74 at 4 n. 6.) The parties agree that the quality deficiency in No. 2 yellow corn, unlike the soybean shortage, was not immediately corrected at the warehouse.

John Lamborn, then a supervisor in the Central Examination Branch, Kansas City Commodities Office, reviewed the WA-125 issued by Examiner Iten on April 1, 1988, as a result of Bird Grain's subsequent examination, and he also reviewed Dennis Bird's written response to the WA-125. With the exception of the citation for "previous show shorts," Lamborn determined that the items listed on the WA-125 were not serious deficiencies and none of them warranted a follow-up examination. (Doc. 63, Ex. 7 at ¶ 15; Ex. 11 at 57-65.) Lamborn determined that Dennis Bird's commitment to acquire signatures on the two unsigned contracts appeared to be reasonable, and there was no...