Cabalce v. VSE Corp.

• Decision Date: 29 November 2012
• Docket Number: Civil Nos. 12–00373 JMS–RLP, 12–00376 JMS–RLP, 12–00377 JMS–RLP, 12–00391 JMS–RLP.
• Parties: Terrance C. CABALCE, et al., George Joseph Kelii, et al., Heather Freeman, et al., Charlize Leahey Irvine, et al., Plaintiffs, v. VSE CORPORATION, et al., Defendants. VSE Corporation, Third–Party Plaintiff, v. United States of America, et al., Third–Party Defendants.
• Court: U.S. District Court — District of Hawaii

914 F.Supp.2d 1145

Terrance C. CABALCE, et al., George Joseph Kelii, et al., Heather Freeman, et al., Charlize Leahey Irvine, et al., Plaintiffs,

v.VSE CORPORATION, et al., Defendants.

VSE Corporation, Third–Party Plaintiff,

v.United States of America, et al., Third–Party Defendants.

Civil Nos. 12–00373 JMS–RLP, 12–00376 JMS–RLP, 12–00377 JMS–RLP, 12–00391 JMS–RLP.

United States District Court,

D. Hawai‘i.

Nov. 29, 2012.

Brian T. Toma, Keith K.H. Young, Sylvia J. Luke, Wayne K. Kekina, Cronin Fried Sekiya Kekina & Fairbanks, Honolulu, HI, for Plaintiffs.

Cathy Gee Kong, Ralph J. O'Neill, MacDonald Rudy Byrns O'Neill & Yamauchi, Honolulu, HI, for Third–Party Plaintiff/Defendants.

Jonathan L. Ortiz, Ortiz & Katano, April Luria, Arthur F. Roeca, Norman Koji Odani, Roeca Luria Hiraoka LLP, Robert P. Richards, Hughes Richards & Associates, Christian Darin Chambers, A. Bernard Bays, Bays Lung Rose & Holma, Honolulu, HI, for Defendants.

Arthur S.K. Fong, Peter C.K. Fong, Fong & Fong, Honolulu, HI, for Third–Party Defendants.

ORDER GRANTING (1) THIRD–PARTY DEFENDANT UNITED STATES' MOTIONS TO DISMISS THIRD–PARTY COMPLAINTS; AND (2) PLAINTIFFS' MOTIONS TO STRIKE THIRD–PARTY COMPLAINTS

J. MICHAEL SEABRIGHT, District Judge.

I. INTRODUCTION

This consolidated Order rules on Motions to Dismiss (and related Motions to Strike) the Third–Party Complaints in the following four related actions: Cabalce et al. v. VSE Corp. et al., Civ. No. 12–00373 JMS–RLP (“ Cabalce ”); Kelii et al. v. VSE Corp. et al., Civ. No. 12–00376 JMS–RLP (“ Kelii ”); Freeman et al. v. VSE Corp., et al., Civ. No. 12–00377 JMS–RLP (“ Freeman/Sprankle ”); and Irvine et al. v. VSE Corp., et al., Civ. No. 12–00391 JMS–RLP (“ Irvine ”). In each of these actions, Defendant/Third–Party Plaintiff VSE Corporation (“VSE”) asserts the same claims in its Third–Party Complaints against Third–Party Defendant United States of America (“the United States” or “the government”).¹ Because many of the relevant pleadings and arguments are identical, it is appropriate to issue this consolidated Order in each action.

Specifically, the court has before it (1) the United States' Motions to Dismiss VSE's Third–Party Complaints; (2) related Motions by the Plaintiffs in Cabalce, Freeman/Sprankle, and Irvine to Strike VSE's Third–Party Complaints; and (3) various procedural and substantive joinders in both sets of Motions. Based on the following, the Motions are GRANTED. VSE's Third–Party Complaints against the United States are DISMISSED.

II. BACKGROUND

The Motions to Dismiss are brought pursuant to Federal Rules of Civil Procedure 12(b)(1) (lack of subject matter jurisdiction) and 12(b)(6) (failure to state a claim). Accordingly, the court begins by assuming the veracity of well-pleaded factualallegations in the Third–Party Complaints to assess whether claims are plausible. See Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Further, in addressing subject matter jurisdiction, the court may consider evidence outside the pleadings, construed in the light most favorable to the non-moving party.²See, e.g., Autery v. United States, 424 F.3d 944, 956 (9th Cir.2005) (explaining that a court is not confined to the pleadings when addressing a Rule 12(b)(1) motion); Dreier v. United States, 106 F.3d 844, 847 (9th Cir.1996) (stating that, when considering evidence in a Rule 12(b)(1) motion, courts construe disputes of fact in favor of the non-movant). Applying these principles, the court sets forth the following factual background.

A. Factual Background

On April 8, 2011, five people died in an explosion and fire in or near a commercial storage facility located at 94–990 Pakela Street, Waipahu, Hawaii. Doc. No. 1–2, Compl. ¶ 14; Doc. No. 1–1, Fallon Decl. ¶¶ 3, 43. The storage facility “is located in a cave approximately 250 feet long and 15 feet wide,” with “double steel doors at the entrance[.]” Doc. No. 1–2, Compl. ¶ 17 ( Kelii ). The decedents—Bryan Dean Cabalce, Justin Joseph Kelii, Robert Kevin Donor Freeman, Neil Benjiman Sprankle, and Robert Leahey—were employees of Third–Party Defendant Donaldson Enterprises, Inc. (“Donaldson”). At least some of the decedents were likely working and handling fireworks being held in the storage facility. Id. ¶ 20, 22.³ Although the exact cause of the explosion has not yet been determined, it is undisputed that fireworks were directly involved.

The fireworks were part of a large cache (over 1,600 cartons) that had been forfeited to the government from two separate seizures after a joint investigation by United States Immigration and Customs Enforcement (“ICE”), the Bureau of Customs and Border Protection (“CBP”), and the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”). Doc. No. 9–1, Third–Party Compl. ¶¶ 20–21, 25, 29, 35. Donaldson was a subcontractor that VSE had retained to, among other duties, destroy the fireworks. Id. ¶¶ 21, 23; Doc. No. 1–2, Compl. ¶ 15 ( Kelii ). In turn, VSE was a government contractor for the Treasury Executive Office for Asset Forfeiture (“TEOAF”), which is an office of the United States Department of the Treasury. Doc. No. 1–1, Fallon Decl. ¶ 4.

1. VSE's Prime Contract with TEOAF

Among other functions, TEOAF supports federal law enforcement agencies, such as ICE, CBP, and ATF, with maintaining chain of custody of items seized in connection with prosecution of violations of federal law. This support includes receiving, transporting, storing, managing, and disposing of seized or forfeited items. Id. ¶¶ 5–11. But TEOAF does not perform these support services directly. Instead, since 2006, it has had a multi-million-dollar ⁴ contract with VSE to perform the support functions on a nationwide basis. Doc. 9–1, Third–Party Compl. ¶¶ 13–15; Doc. No. 1–1, Fallon Decl. ¶¶ 8–11 & Ex. E. “TEOAF depends on the involvement of such contractors to carry out its functions, as TEOAF does not maintain the necessary internal resources.” Doc. 9–1, Third–Party Compl. ¶ 21. A CBP official, Eugene Relacion, confirms that “[c]ertain seized items are managed by contractors nationwide, for further security and other types of control, and due to limited federal resources, as was the case with the ... fireworks at issue” in these actions. Doc. No. 45–7, Relacion Decl. ¶ 3.

Under the contract, when the government orders consignment of seized items, VSE cannot reject them—it is required to accept, preserve, and protect the items until instructed by the government to take further action (such as to destroy them). Doc. No. 1–2, Fallon Decl. ¶¶ 16–18. Ownership of seized items, however, is not transferred to VSE. Rather, once items are forfeited, the government retains actual ownership. Id. ¶ 19.

VSE's contract requires it to “provide all services, materials, supplies, supervision, labor, and equipment, except that specified [in the contract] as Government-furnished, to perform all property management and disposition work set forth in [the contract].” Doc. No. 1–7, Fallon Decl. Ex. E ¶ C.3. VSE is “responsible for the performance and conduct of Project Personnel at all times,” including “any subcontracted personnel.” Id. ¶¶ C.3.1.1.3 & C.3.1.1.4. The contract specifies that “Project Personnel assigned to render services under the Contract shall at all times be employees of [VSE] (or a subcontractor at any tier) and under the direction and control of [VSE]” and “shall not at any time during the Contract period be employees of the U.S. Government.” Doc. No. 1–8, Fallon Decl. Ex. E (pt. 2) ¶ H.29.

The contract delegates responsibility for safety and hazardous materials—VSE must “ensure that all safety regulations, training requirements, and certification requirements have been met by Project Personnel and documented,” Doc. No. 1–7, Fallon Decl. Ex. E ¶ C.3.1.1.1, and “is responsible for detecting, identifying, and managing hazardous materials[.]” Id. ¶ C.3.5.4; see also Doc. No. 1–8, Fallon Decl. Ex. E (pt. 2) ¶ H.23.3(A). When disposing items, VSE is required to “destroy General Property, including hazardous materials, in accordance with federal, state, and local laws” and its responsibilities include “determining what materials are hazardous in accordance with state and federal law; ... preparing and submitting any required reports[; and] completing any necessary training requirements related to disposal, handling, and destruction of hazardous waste.” Doc. No. 1–7, Fallon Decl. Ex. E. ¶¶ C.3.4.1.4.1 & C.3.4.1.4.1c. In doing so, it “shall follow ... professional recommendations for control of humidity and temperature, cleanliness, and handling of materials, to include hazardous materials.” Doc. No. 1–8, Fallon Decl. Ex E (pt. 2) ¶ H.23.3(B). Moreover, the contract requires VSE to “take proper safety and health precautions to protect the work, the workers, and public and property of others.” Id. ¶ H.31.

The contract also has broad indemnity-related clauses. It provides that VSE “shall be responsible for all damages to persons or property that occurs as a result of its, its subcontractors, or any of its or its ... subcontractor's employees's fault or negligence.” Id. It declares that VSE “is ‘an Independent Contractor’ and shall obtain all necessary insurance to protect Project Personnel from liability arising out of the Contract.” Id. ¶ H.17. Further, under the contract, VSE agreed:

to indemnity and hold the Government and its employees harmless in connection with any loss or liability from ... injuries to or death of persons (including the agents and employees of both parties) if such ... injury or death arises out of, or is caused by, performance of work under the Contract, unless such ... injury, or death is caused solely by the active negligence of the Government or its employees.

Id.

2. The Seizures and Consignment of Fireworks to Donaldson

At the time of the April 8, 2011 explosion, fireworks from two government seizures were being held at the storage facility—the “Haleamau Seizure” and the “Chang...