C.P. Chemical Co., Inc. v. U.S., No. 313

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtMINER
Citation810 F.2d 34
Decision Date26 January 1987
Docket NumberNo. 313,D
PartiesC.P. CHEMICAL COMPANY, INC., Plaintiff-Appellant, v. UNITED STATES of America and U.S. Consumer Product Safety Commission, Defendants-Appellees. ocket 86-6132.

Page 34

810 F.2d 34
55 USLW 2436
C.P. CHEMICAL COMPANY, INC., Plaintiff-Appellant,
v.
UNITED STATES of America and U.S. Consumer Product Safety
Commission, Defendants-Appellees.
No. 313, Docket 86-6132.
United States Court of Appeals, Second Circuit.
Argued Oct. 31, 1986.
Decided Jan. 26, 1987.

Page 35

Joseph A. Maria, P.C., White Plains, N.Y., for plaintiff-appellant.

Richard M. Schwartz, Asst. U.S. Atty., New York City (Rudolph W. Giuliani, U.S. Atty., John P. Mackey, Stephen Lemberg, and Harleigh P. Ewell, New York City, of counsel), for defendants-appellees.

Before MANSFIELD *, MESKILL and MINER, Circuit Judges.

MINER, Circuit Judge:

C.P. Chemical Company appeals from a judgment of the United States District Court for the Southern District of New York (Brieant, J.) dismissing its complaint against the United States and the Consumer Product Safety Commission ("Commission" or "agency") under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671-80 ("FTCA"), and the Consumer Product Safety Act, 15 U.S.C. § 2053(h) ("CPSA"), for lack of subject matter jurisdiction and failure to state a claim. The suit arose from the Commission's ban on the use of formaldehyde-emitting foam insulation, 47 Fed.Reg. 57,488 (1982). The Fifth Circuit ruled, in Gulf South Insulation v. U.S. Consumer Product Safety Commission, 701 F.2d 1137, 1148-50 (5th Cir.1983), that the ban was improper because it was promulgated under the procedures of the CPSA, 15 U.S.C. §§ 2057, 2058, 2079(d), rather than under the appropriate procedures of the Federal Hazardous Substances Act, 15 U.S.C. §§ 1261-1276. C.P. Chemical alleged that the Commission erroneously included within the ban its insulation product, Tripolymer 105, which emits no formaldehyde gas. The district court held that the FTCA waiver of sovereign immunity does not extend to the agency conduct forming the basis for this tort action against the United States and the Commission. The court also held that the CPSA provides no predicate for this action. For the reasons stated below, we affirm.

BACKGROUND

C.P. Chemical Company is a family-owned New York corporation that manufactured "Tripolymer 105," a foam insulation product that was mixed on the job site and pumped between a structure's walls. Tripolymer 105, a phenal-urea based product, competed with a similar product--urea-formaldehyde foam insulation ("UFFI"). However, unlike Tripolymer 105, UFFI was found to emit detectable levels of formaldehyde gas.

On March 5, 1979, the Consumer Product Safety Commission announced an investigation of UFFI in response to complaints of "acute irritant symptoms"--irritations to the eye, nose and throat and related symptoms allegedly attributable to the formaldehyde emissions of the formaldehyde-based foam insulation. 44 Fed.Reg. 12,080 (1979). After extensive information gathering, the Commission proposed a rule that would ban installation of UFFI in all residences and public structures, 46 Fed.Reg. 11,188 (1981). Pursuant to the rulemaking procedures of the Consumer Product Safety Act, 15 U.S.C. §§ 2058, 2079(d), the agency found that UFFI posed an unreasonable risk of acute irritant effects and cancer. The Commission issued its final ban on the use of UFFI in residences and schools on April 2, 1982. 47 Fed.Reg. 14,366 (1982). A memorandum issued on April 14, 1982 stated that it was the staff's "preliminary opinion that Tripolymer 105 falls within the definition of urea-formaldehyde foam insulation as specified in the Commission's ban." Joint App. at 209. As the district court noted, "this press release effectively terminated the plaintiff's insulation business." Joint App. at 251.

C.P. Chemical Company, along with other foam insulation manufacturers, sought judicial review of the UFFI ban pursuant to 15 U.S.C. § 2060. On April 7, 1983, the

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Fifth Circuit held that the Commission's rule was not supported by substantial evidence and therefore vacated the ban. Gulf South Insulation v. U.S. Consumer Product Safety Commission, 701 F.2d 1137 (5th Cir.1983). While expressly declining to address C.P. Chemical's claim that it should have been exempted from the ban because its product was safer than UFFI, 701 F.2d at 1140, the court also held that the Commission had followed the wrong rulemaking procedures when it promulgated the rule under the informal procedures of the Consumer Product Safety Act, 15 U.S.C. §§ 2058, 2079(d). The agency should have proceeded under the Federal Hazardous Substances Act, 15 U.S.C. §§ 1261-1276, which requires a formal hearing wherein rules of evidence are applied and the right to confront and cross-examine witnesses is recognized, 701 F.2d at 1149-50, see 15 U.S.C. § 1262(a)(2).

Thereafter, on December 23, 1983, C.P. Chemical filed an administrative claim, alleging that the Commission recklessly disseminated false and derogatory information about its product, and that the Commission was grossly negligent in failing to follow the appropriate rulemaking procedure under the Federal Hazardous Substances Act. That claim was denied by the Commission because it was based on agency action as defined by 5 U.S.C. § 551(13) and therefore was prohibited by 15 U.S.C. § 2053(h)(2), which bans such claims. Joint App. at 16.

On August 24, 1984, C.P. Chemical timely filed suit in the United States District Court for the Southern District of New York, seeking $700,000,000 in damages on two causes of action identical to those asserted in its administrative claim: (1) the Commission was grossly negligent in failing to follow the appropriate rulemaking procedure; and (2) the Commission recklessly disseminated false and derogatory information about Tripolymer 105. Defendants moved to dismiss the complaint pursuant to Rules 9(b), 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, for lack of subject matter jurisdiction and failure to state a claim. The district court entered final judgment for defendants on three grounds: (1) that the Federal Tort Claims Act did not waive sovereign immunity for nationwide agency conduct that could not be committed by a private individual, 28 U.S.C. §§ 1346(b), 2674; (2) that the agency conduct at issue fell squarely within the discretionary function exception, or other exceptions set forth in 28 U.S.C. § 2680(h); and (3) that the complaint did not state a claim within the jurisdiction of the CPSA, 15 U.S.C. § 2053(h).

On appeal, C.P. Chemical contends that sovereign immunity has been waived under the Federal Tort Claims Act, 28 U.S.C. § 2680, because a private individual would be held liable under New York law for tortious interference with business, and because the agency failed to use "due care" when it applied the wrong rulemaking procedure. C.P. Chemical also contends that the district court erred in applying the discretionary function exception. Finally, C.P. Chemical asserts that by failing to follow the appropriate rulemaking procedure, the Commission's gross negligence was outside the bounds of its authority and therefore did not constitute "agency action," so that a civil suit would lie under section 2053(h) of the CPSA.

DISCUSSION

A. Federal Tort Claims Act

Purposes of the Act

When the FTCA was enacted, "[u]ppermost in the collective mind of Congress were the ordinary common-law torts. Of these, the example which is reiterated in the course of the repeated proposals for submitting the United States to tort liability is 'negligence in the operation of vehicles.' " Dalehite v. United States, 346 U.S. 15, 28, 73 S.Ct. 956, 964, 97 L.Ed. 1427 (1953) (footnotes omitted). The Dalehite Court's discussion of the FTCA's legislative history contains ample evidence that while Congress intended to allow garden-variety tort suits against the United

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States, 1 it was concerned with avoiding precisely the type of liability appellant asserts here. Id. at 27, 73 S.Ct. at 963-64.

The House Report accompanying the bill that became the FTCA included the specific statement that it is neither "desirable [n]or intended that the constitutionality of legislation, or the legality of a rule or regulation, should be tested through the medium of a damage...

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70 practice notes
  • Mr. (Vega Alta) v. Caribe General Elec. Products, Civil No. 97-2294 (JAF).
    • United States
    • United States District Courts. 1st Circuit. District of Puerto Rico
    • December 3, 1998
    ...U.S. 135, 141, 71 S.Ct. 153, 95 L.Ed. 152 (1950); Chen v. United States, 854 F.2d 622 (2d Cir.1988); C.P. Chemical Co. v. United States, 810 F.2d 34, 37 (2d Cir.1987). In other words, "for liability to arise under the FTCA, a plaintiff's cause of action must be `comparable' to a cause of ac......
  • Liranzo v. United States, Docket No. 11–61.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • August 9, 2012
    ...analogue, and with respect to which sovereign immunity had therefore not been waived by the FTCA. In C.P. Chemical Co. v. United States, 810 F.2d 34 (2d Cir.1987), a producer of formaldehyde-based foam insulation brought suit against the federal government after the Consumer Product Safety ......
  • Derrick Storms, Adrian Batlle, A1 Procurement, LLC v. United States, 13-CV-811 (MKB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 16, 2015
    ...functions, the UnitedPage 41States cannot be held liable, for no private analog exists." C.P. Chem. Co., Inc. v. United States, 810 F.2d 34, 37 (2d Cir. 1987); see Nakamura v. United States, No. 10-CV-2797, 2012 WL 1605055, at *3 (E.D.N.Y. May 8, 2012) ("A court considers whether or not a p......
  • Jones v. Nat. Commun. and Surveillance Networks, No. 05 Civ. 3461(AKH).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • January 12, 2006
    ...(2d Cir.1998), though such actions must name as a defendant the United States, not the defendant agency. C.P. Chem. Co. v. United States, 810 F.2d 34, 37 n. 1 (2d Cir.1987). In no cases can actions be brought against the United States for negligence by the Postal Service in the delivery of ......
  • Request a trial to view additional results
70 cases
  • Mr. (Vega Alta) v. Caribe General Elec. Products, Civil No. 97-2294 (JAF).
    • United States
    • United States District Courts. 1st Circuit. District of Puerto Rico
    • December 3, 1998
    ...U.S. 135, 141, 71 S.Ct. 153, 95 L.Ed. 152 (1950); Chen v. United States, 854 F.2d 622 (2d Cir.1988); C.P. Chemical Co. v. United States, 810 F.2d 34, 37 (2d Cir.1987). In other words, "for liability to arise under the FTCA, a plaintiff's cause of action must be `comparable' to a cause of ac......
  • Liranzo v. United States, Docket No. 11–61.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • August 9, 2012
    ...analogue, and with respect to which sovereign immunity had therefore not been waived by the FTCA. In C.P. Chemical Co. v. United States, 810 F.2d 34 (2d Cir.1987), a producer of formaldehyde-based foam insulation brought suit against the federal government after the Consumer Product Safety ......
  • Derrick Storms, Adrian Batlle, A1 Procurement, LLC v. United States, 13-CV-811 (MKB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 16, 2015
    ...functions, the UnitedPage 41States cannot be held liable, for no private analog exists." C.P. Chem. Co., Inc. v. United States, 810 F.2d 34, 37 (2d Cir. 1987); see Nakamura v. United States, No. 10-CV-2797, 2012 WL 1605055, at *3 (E.D.N.Y. May 8, 2012) ("A court considers whether or not a p......
  • Jones v. Nat. Commun. and Surveillance Networks, No. 05 Civ. 3461(AKH).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • January 12, 2006
    ...(2d Cir.1998), though such actions must name as a defendant the United States, not the defendant agency. C.P. Chem. Co. v. United States, 810 F.2d 34, 37 n. 1 (2d Cir.1987). In no cases can actions be brought against the United States for negligence by the Postal Service in the delivery of ......
  • Request a trial to view additional results

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