B & A Marine Co., Inc. v. American Foreign Shipping Co., Inc.

• Decision Date: 04 May 1994
• Docket Number: D,No. 1198,1198
• Citation: 23 F.3d 709
• Parties: B & A MARINE CO., INC., Plaintiff-Appellant, v. AMERICAN FOREIGN SHIPPING CO., INC. and Harry W. Marshall, Defendants-Appellees. ocket 93-9023.
• Court: U.S. Court of Appeals — Second Circuit

Page 709

23 F.3d 709

1994 A.M.C. 2991

B & A MARINE CO., INC., Plaintiff-Appellant, v. AMERICAN FOREIGN SHIPPING CO., INC. and Harry W. Marshall Defendants-Appellees.

No. 1198, Docket 93-9023.

United States Court of Appeals Second Circuit.

Argued March 3, 1994.

Decided May 4, 1994.

Charles Haydon, New York City (Dublirer, Haydon, Straci & Victor, New York City), for plaintiff-appellant.

Robert E. Crotty, New York City (Russell G. Bogin, Kelley Drye & Warren, New York City), for defendants-appellees.

Before: KEARSE and LEVAL, Circuit Judges, and GLASSER, District Judge. ^*

LEVAL, Circuit Judge:

This is an action alleging libel brought against an agent of the United States Government, and an employee of the agent. The District Court for the Eastern District of New York, Sterling Johnson, Jr., J., granted summary judgment for the defendants because the Federal Tort Claims Act, 28 U.S.C. Sec. 2671 et seq., bars such actions against employees of the United States acting within the scope of their office or employment. 28 U.S.C. Sec. 2679(b)(1). We affirm.

Background

On August 1, 1984, the United States, acting through the Department of Transportation, Maritime Administration ("MARAD"), entered into a service agreement with the defendant American Foreign Shipping Co. ("AFS"). Pursuant to the agreement, the United States appointed AFS "as its agent, and not as an independent contractor," to manage and conduct the maintenance and repair of vessels in the Ready Reserve Force. ¹ (emphasis added).

In September of 1987, Plaintiff B & A successfully bid for a contract with MARAD to refit the S.S. Cape Ann and S.S. Cape Avinof, both a part of the Ready Reserve Force. Pursuant to B & A's agreement with MARAD, B & A's work on these ships was to be supervised by AFS. Sometime after it undertook the work, B & A began to encounter severe cost overruns and substantial delays; B & A attributed these problems to inclement weather, and to AFS's neglect and lack of cooperation. Faced with an inability to meet its contractual deadlines for delivery, B & A requested a meeting with MARAD and AFS to resolve its performance difficulties.

On February 1, 1988, B & A representatives met with defendant Captain Harry W. Marshall, the President of AFS, and with three MARAD officials. After the meeting, MARAD instructed Marshall to draft a letter to B & A seeking assurances that B & A would complete the contracts and warning B & A that it might be necessary for MARAD to notify B & A's bonding companies of the possibility of default. Marshall prepared a draft, which included the following language:

In the event that you are unable to immediately provide assurances satisfactory to us as to your ability and resources to complete the Contracts on the subject vessels, we consider it prudent to alert your bonding companies of the possibility of default in the performance of the Contracts.

Marshall showed the draft to MARAD. MARAD redrafted the letter and returned it to Marshall with instructions to type MARAD's redraft on AFS stationery. MARAD's redraft included the following language:

B & A Marine Co., Inc. has placed itself in a default situation by falling behind the contract schedule. MARAD is hereby notifying the appropriate insurance companies by copy of this letter that B & A Marine Co., Inc. is in default of its contract obligations.

Marshall incorporated MARAD's changes into a revised letter, which he resubmitted to MARAD. MARAD approved the letter and instructed Marshall to send it to B & A and its sureties; Marshall followed these instructions. The letter was signed by Marshall; the signature block indicated that it was sent by AFS as general agent on behalf of MARAD.

In February of 1989, B & A commenced this action in Supreme Court, Kings County, New York against Marshall and AFS alleging that Marshall, acting individually and on behalf of AFS, "willfully, maliciously, wrongfully and intentionally made the false statement that [B & A] was in default" of its obligations under its contract with MARAD. The complaint alleged that the statement prompted B & A's bonding companies to refuse to issue bonds to B & A in connection with substantial business opportunities, resulting in $15,000,000 in damages.

AFS and Marshall removed the action to federal court on the basis of diversity of citizenship and moved for summary judgment. The district court ordered B & A and the United States to show cause why the United States should not be substituted as defendant in place of AFS and Marshall under Sec. 2679(d) of the Federal Tort Claims Act ("FTCA").

B & A responded that the United States should not be substituted for several reasons, including that the defendants were not acting within the scope of their employment, that the Government was not liable as it had not waived immunity for libel claims, and that the private defendants were not immune because the immunizing provisions of Sec. 2679 were made inapplicable to a libel action by Sec. 2680(h). The Government responded that the United States should not be substituted as a defendant because, under Sec. 2680(h), it did not waive sovereign immunity for claims of libel; AFS & Marshall asked the court to rule that they had acted within the scope of their employment and to dismiss the action because Sec. 2679(b)(1) precludes a civil action against an employee of the Government who has committed a tort while acting within the scope.

On August 27, 1993, the court granted defendants' motion for summary judgment. The court ruled that Marshall and AFS were employees of the United States within the meaning of the FTCA, 28 U.S.C. Sec. 2671; that they acted within the scope of their employment in the sending of the allegedly libelous letter; and that they were therefore immune from tort liability under 28 U.S.C. Sec. 2679. The court did not substitute the United States as defendant. Although no explanation was given, it is clear this was because the United States is immune from suit for libel under Sec. 2680(h) of the FTCA.

Discussion

The FTCA is a limited waiver of sovereign immunity, making the Federal Government liable to the same extent as a private employer for certain torts of "employees" acting within the scope of their employment. See United States v. Orleans, 425 U.S. 807, 813, 96 S.Ct. 1971, 1975, 48 L.Ed.2d 390 (1976); Leone v. United States, 910 F.2d 46, 48-49 (2d Cir.1990), cert. denied, 499 U.S. 905, 111 S.Ct. 1103, 113 L.Ed.2d 213 (1991). At the same time as it offers the liability of the United States to compensate victims of such torts, the Act also provides that:

[t]he remedy against the United States ... for ... personal injury ... arising or resulting from the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment is exclusive of any other civil action or proceeding for money damages ... against the employee whose act or omission gave rise to the claim.... Any other civil action or proceeding for money damages arising out of or relating to the same subject matter against the employee ... is precluded.... 28 U.S.C. Sec. 2679(b)(1).

To emphasize the exclusivity of the remedy against the United States under the FTCA, Sec. 2679(d) requires that the United States be substituted as the party defendant upon certification by the Attorney General or the court that the defendant employee was acting within the scope of his employment.

The Act defines "[e]mployee of the government" as including "officers or employees of any federal agency," and "federal agency" is defined as including "corporations primarily acting as instrumentalities or agencies of the United States but does not include any contractor with the United States." 28 U.S.C. Sec. 2671. Thus, the FTCA explicitly excludes liability of the Government for the wrongful act or omission of an independent contractor. See, e.g., Logue v. United States, 412 U.S. 521, 526-27, 93 S.Ct. 2215, 2218-19, 37 L.Ed.2d 121 (1973); Berkman v. United States, 957 F.2d 108, 111 (4th Cir.1992). The court accordingly must determine: (1) whether the tortfeasors were acting in the role of employee of the Government or independent contractor, within the meaning of the FTCA, and (2) if they were employees, whether they were acting within the scope of their employment.

For purposes of the FTCA, the common law of torts and agency defines the distinction between an independent contractor (for whose torts the Government is not responsible) and an employee, servant or agent (for whose torts the Government is responsible). The Restatement (Second) of Agency provides helpful guidance. It defines a servant as "an agent employed by a master to perform service in his affairs whose ... performance of the service is controlled or is subject to the right to control by the master." Restatement (Second) of Agency Sec. 2(2) (1958). If the court determines that the wrongdoer is an agent or employee of the Government who committed a tort within the scope of the employment, then the plaintiff may not recover from the agent or employee, but ordinarily has a claim against the Government. If, on the other hand, the tortfeasor is not an agent or employee of the Government, or is an agent or employee but did not commit the wrongdoing in the scope of the employment, then the plaintiff has a cause of action against the agent or employee in his individual capacity, but not against the Government.

I. Agency Status Under the FTCA

The district court concluded that Marshall and AFS were employees of the Government acting within the scope of their employment. B & A contends this was error and that there were genuine issues of material fact for trial concerning AFS's agency. We reject this contention. As Marshall was an employee of AFS, it is AFS's status with respect to the Government that is critical. The evidence presented to the district court on the motion for summary judgment showed as a matter of...