Central Claims Service v. Computer Science Corp., Civ. A. No. 88-4029.

• Decision Date: 10 February 1989
• Docket Number: Civ. A. No. 88-4029.
• Citation: 706 F. Supp. 463
• Parties: CENTRAL CLAIMS SERVICE, INC. v. COMPUTER SCIENCE CORPORATION.
• Court: U.S. District Court — Eastern District of Louisiana

706 F. Supp. 463

CENTRAL CLAIMS SERVICE, INC. v. COMPUTER SCIENCE CORPORATION.

Civ. A. No. 88-4029.

United States District Court, E.D. Louisiana.

February 10, 1989.

Law Offices of Ferdinand Kleppner, Ferdinand J. Kleppner, Metairie, La., for Central Claims Service, Inc.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Roy C. Cheatwood, Trial Atty., Nancy Scott Degan, Paul L. Peyronnin, New Orleans, La., Richard J. Brooks, Lanham, Md., for Tim Johnson, Michael Bellmon, Alan Baitler, J.D. Reid and Computer Sciences Corp.

ORDER AND REASONS

FELDMAN, District Judge.

This case arises out of an asserted implied-in-fact contract between plaintiff, an independent insurance claims adjustment agency, and defendant, Computer Science Corporation, fiscal agent for the Federal Emergency Management Agency under the federally-created National Flood Insurance Program (NFIP).

In the spring of 1988, the New Orleans area experienced heavy rains and flooding. As a result, the Federal Emergency Management Agency set up a Flood Insurance Claims Office (FICO) to oversee the processing of government-subsidized flood loss claims. The joint leadership of NFIP/FICO held an adjusters meeting, attended by plaintiff's representatives, to counsel adjusters about how to handle claims regarding losses from area flooding. At the meeting, NFIP/FICO personnel allegedly informed adjusters that they were required to turn over any claims procured before FICO opened so that the claims could be reallocated.

Defendant says that plaintiff failed to voluntarily submit to the NFIP/FICO officials the flood insurance claims that it had solicited from independent agents. Consequently, defendant sent a letter, dated April 25, 1988, that detailed plaintiff's failure to follow NFIP procedures, and advised that plaintiff had been terminated from the National Flood Insurance Program and from the list of adjusters and companies authorized to handle flood losses.

The April 25th letter forms the basis for plaintiff's suit. Plaintiff alleges that when Computer Science Corporation terminated plaintiff from the NFIP, it breached an implied-in-fact contract with the plaintiff. Plaintiff further adds that it suffered lost revenue and loss of reputation in the community and throughout the insurance industry. Plaintiff has also filed suit against the United States in the Court of Claims and makes essentially the same charges of wrongdoing.

Defendants, Computer Science Corporation and individually named employees, move this Court to dismiss plaintiff's complaint pursuant to Fed.R.Civ.Pro. 12(b)(6) or for summary judgment. Defendants' motion, which is treated as one of summary judgment because of matters raised beyond the pleadings, is GRANTED.

I. Background: The National Flood Insurance Program

The National Flood Insurance Program was established by Congress in the National Flood Insurance Act of 1968. 42 U.S.C. §§ 4001-28. The program was designed to provide flood insurance protection to property owners in flood-prone areas under national policy promulgated by the Federal Emergency Management Agency (FEMA). 44 C.F.R. § 61, Appendix A(1).

In 1977, the Secretary of Housing and Urban Development discontinued the original NFIP statutory plan, under which the private insurance industry implemented the policy of the flood program. Under the new program, primary operational responsibility shifted from private industry to the federal government. 42 U.S.C. § 4071. The NFIP is currently operating under this system.

Congress provided, in the new plan, authorization for the appointment of a "servicing agent" to assist the NFIP in issuing and processing flood insurance applications and claims. 42 U.S.C. § 4071. The FEMA regulations authorized the servicing agent to "assist in issuing flood insurance policies ... and to accept responsibility for delivery of policies and payment of claims for losses as prescribed by and at the discretion of the Administrator." 44 C.F.R. § 62.3(a). The regulations further provided that, "The servicing agent will arrange for the issuance of flood insurance to any person qualifying for such coverage ... who submits an application to the servicing agent in accordance with the terms and conditions of the contract between the Agency and the servicing agent." 44 C.F.R. § 62.3(c).

On October 1, 1983, FEMA designated defendant, Computer Science Corporation, as a servicing agent for the NFIP. 48 Fed.Reg. 44544 (1983) (codified at 44 C.F.R. § 62.3(b)). In its capacity as a FEMA servicing agent, Computer Science Corporation and its named employees engaged in the actions which plaintiff targets in this suit.

II. Plaintiff's Breach of Contract Claim

Plaintiff claims that defendants breached an implied-in fact contract when plaintiff was terminated from the National Flood Insurance Program. Because defendants were acting under the regulatory guidelines for claim processing that the Federal Emergency Management Agency and the Flood Insurance Claims Office had enacted, plaintiff's intrinsic claim is that defendants impermissibly exercised their delegated authority. However, in similar cases under both the National Flood Insurance Act and the Social Security Act, courts have traditionally held that such claims could not be brought against an agent of the government, because the United States was the real party in interest, or because the agent enjoyed sovereign immunity. Their doctrine applies here.

For example, in Yonker v. Guifrida, 581 F.Supp. 1243 (D.W.Va.1984), plaintiffs sought to recover monetary damages from defendant, a servicing agent under the National Flood Insurance Program, for defendant's alleged breach of a flood insurance policy. The court dismissed plaintiff's complaint, holding that Congress intended only those entities which are ultimately responsible for the adjustment and payment of claims under the program to be legally responsible for the wrongful denial of a claim. Because the court found that the Federal Emergency Management Agency was ultimately responsible for the actions of its fiscal agent, the court held that the agent was not a proper party to the plaintiff's suit. Computer Science Corporation is clearly FEMA's fiscal agent.

Although the Fifth Circuit has never spoken to the role of fiscal agents under the National Flood Insurance Program, the court has reviewed cases in the related universe of Medicare Act claims. They counsel the same result. In Matranga v. Travelers Ins. Co., 563 F.2d 677 (5th Cir. 1977), plaintiff sued a Medicare carrier alleging that defendant was liable for willful and wanton misconduct in processing Medicare claims submitted to Travelers to cover professional services rendered to nursing home patients. Specifically, plaintiff alleged that Travelers wrongfully withheld payments to plaintiff and referred his case to the Social Security Administration for investigation.

Pointing to an earlier Fifth Circuit case, Peterson v. Weinberger, 508 F.2d 45 (5th Cir.1975), cert. denied, 423 U.S. 830, 96 S.Ct. 50, 46 L.Ed.2d 47 (1975), in which the court held that a district court lacked jurisdiction over Medicare fiscal intermediaries under the doctrine of sovereign immunity, the Matranga court instructed:

The Medicare Act authorizes the Secretary of Health, Education and Welfare to provide for the administration of the Act through contract "carriers." 42 U.S.C. § 1395u (1970) (amended 1976). Travelers is such a carrier. Although Travelers makes determinations of amounts to be paid on claims and disburses funds provided by the government, the United States is the real party in interest. 20 C.F.R. § 405.670 (1977).

Travelers was acting under the direction of the Secretary of Health, Education and Welfare and there is nothing in the record to indicate that Travelers was acting outside the perimeters of its official duties in its dealings with Dr. Matranga. The district court erred in declining to grant Travelers' motion for summary judgment.

563 F.2d at 677-78.

The Matranga rationale must conceptually extend to fiscal intermediary sovereign immunity cases under the National Flood Insurance Act. Just as the Medicare Act provided for fiscal intermediaries between the Department of Health, Education and Welfare and Medicare claimants, so the National Flood Insurance Act and National Flood Insurance Program structure the relationship of fiscal intermediaries between the Federal Emergency Management Agency and individual claim adjusters and claimants.

Although plaintiff contends that Computer Science Corporation impermissibly exercised its delegated authority, plaintiff does not dispute that the defendant acted as an agent of a federal agency, within "the perimeters of its official dealings" with plaintiff. Defendant's status as a federal agent is indisputable because FEMA designated the defendant as its official servicing agent for processing NFIP claims, a relationship that has been statutorily constructed. 44 C.F.R. § 62.3(b). Thus, this Court must conclude that the United States is the real party in interest in this suit, that defendants are shielded by sovereign immunity, and that plaintiff's breach of contract claim must be dismissed. See also, Anderson v. Occidental Life Insurance Co., 727 F.2d 855, 856 (9th Cir.1984); cf. Group Health Inc. v. Blue Cross Association, 587 F.Supp. 887, 891 (S.D.N.Y.1984) (Fiscal intermediary of the Department of Health and Human Services is a "federal official" for purposes of removal under 28 U.S.C. § 1442(a)(1)).¹

III. Plaintiff's Defamation Claim

Defendants are similarly shielded by sovereign immunity from any claim by plaintiff that it was defamed and suffered loss of reputation in the community and insurance industry. The letter which is central to plaintiff's complaint was sent by a Computer Science Corporation employee in the exercise of an official duty; plaintiff does not contend otherwise, although it questions the factual comments contained within the...