Commercial Union Ins. Co. v. U.S.

• Decision Date: 11 April 1991
• Docket Number: No. 89-3873,89-3873
• Parties: COMMERCIAL UNION INSURANCE COMPANY, et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 176

928 F.2d 176

COMMERCIAL UNION INSURANCE COMPANY, et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

No. 89-3873.

United States Court of Appeals, Fifth Circuit.

April 11, 1991.

Samuel M. Rosamond, III, Thomas Loehn, Boggs, Loehn & Rodrique, New Orleans, La., for Commercial Union Ins.

Gary A. Lee, Eric J. Schincler, Faris, Ellis, Cutrone & Gilmore, New Orleans, La., for Underwriters.

Phyllis Jackson Pyles, Asst. Dir., Torts Branch, Civ. Div., U.S. Dept. of Justice, Washington, D.C., John Volz, U.S. Atty., New Orleans, La., for U.S.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, GARWOOD and SMITH, Circuit Judges.

GARWOOD, Circuit Judge:

Commercial Union Insurance Company et al. (collectively, "insurers") appeal the dismissal of their claim against the United States for the Bureau of Mines' allegedly improper approval of supplied-air respiratory equipment in the 1930s. The district court dismissed the claim for lack of subject matter jurisdiction pursuant to the discretionary function and misrepresentation exceptions of the Federal Tort Claims Act, 28 U.S.C. Secs. 2680(a) & (h). We affirm.

Facts and Proceedings Below

The insurers underwrote liability coverage for the executive officers of Avondale Shipyards, Inc., (Avondale), who in turn were defendants in a number of Louisiana law actions by workers who allegedly contracted silicosis as a result of exposure to silica dust during sandblasting at the shipyard. Eventually the insurers negotiated a compromise settlement with the workers. The insurers then asserted administrative claims for indemnity or contribution against the United States pursuant to the Federal Tort Claims Act (FTCA), 28 U.S.C. Sec. 2671 et seq., and filed the present action seeking the same relief in the United States District Court for the Eastern District of Louisiana on August 20, 1987.

The insurers allege that Avondale supplied its workers with supplied-air respirators that had been submitted by the manufacturers of that equipment to the United States Bureau of Mines (the bureau) between 1936 and 1937 for testing and approval pursuant to the bureau's statutory mission to

"prepare and publish ... reports of inquiries and investigations, with appropriate recommendations of the bureau, concerning ... the improvement of conditions, methods, and equipment, with special reference to health [and] safety ... in the mining, quarrying, metallurgical, and other mineral industries." Act of February 25, 1913, ch. 72, Sec. 3, 37 Stat. 681 (currently codified at 30 U.S.C. Sec. 5).

Information pertaining to these tests was published in Bureau of Mines, U.S. Dep't of the Interior, Procedure for Testing Supplied-Air Respirators for Permissibility (1937). The insurers allege that the bureau approved all the respirators used by the silicosis claimants in the Avondale shipyard, but that in fact the respirators were defectively designed and thus inadequate to protect workers using them from being exposed to dangerous levels of silica dust. The insurers claim that the bureau's failure to discover this risk was negligent, and proximately caused the injuries of the silicosis claimants.

On May 3, 1988, the United States moved to dismiss the action for lack of subject matter jurisdiction on the theory that it was barred by the discretionary function and misrepresentation exceptions to the FTCA, 28 U.S.C. Secs. 2680(a) & (h) respectively. ¹ The court denied the motion on August 19, 1989, but ordered the insurers to file a written statement detailing the duty that was allegedly breached by the bureau's activities. Instead, the insurers filed a second amended complaint on September 23, 1988. On May 22, 1989, the government renewed its motion to dismiss on the basis of the misrepresentation and discretionary function exceptions to the FTCA. On November 17, 1989, the district court granted the motion and dismissed the action on both grounds.

Discussion

As a general rule, the FTCA waives the sovereign immunity of the United States from tort liability for negligent or wrongful acts or omissions of its agents acting within the scope of their employment. See 28 U.S.C. Sec. 2674. The district courts have exclusive jurisdiction over these claims. See id. Sec. 1346(b). The district courts are divested of jurisdiction, however, to hear certain types of claims falling within this general class. See id. Sec. 2680. In particular, section 2680(h) divests them of jurisdiction to hear claims arising out of several traditional torts, including misrepresentation.

The framework for applying the misrepresentation exception in negligence actions is drawn by the Supreme Court's decisions in United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 1298, 6 L.Ed.2d 614 (1961) and Block v. Neal, 460 U.S. 289, 103 S.Ct. 1089, 75 L.Ed.2d 67 (1983). In Neustadt, the Court held that the misrepresentation exception barred the claim of one who, in purchasing his home with mortgage financing insured by the Federal Housing Administration (FHA), relied upon an allegedly negligent FHA appraisal. The Court determined that the plaintiff's allegations simply stated a claim for negligent misrepresentation ² and that there was nothing to indicate the government had offered its appraisal as a warranty of value or otherwise intended to give the plaintiffs an actionable right of redress against the government. Neustadt, 81 S.Ct. at 1302-03.

In Block, the plaintiff was furnished a loan by the Farmers Home Administration (FmHA) to construct her residence pursuant to an arrangement calling for the contractor's work to conform to FmHA-approved plans and to be periodically inspected and approved by the FmHA, and the FmHA did inspect and approve the construction. The Court held that the misrepresentation exception did not bar the plaintiff's claim for damages for the failure of the FmHA to detect defects in her home during its construction, because the Court found that the government's active involvement in the construction process constituted the assumption of a supervisory role in that construction. While the government had no duty to assume such a role, once it did so, applicable state law obligated it to carry the role out in a nonnegligent manner. Had the FmHA not negligently failed to point out defects while construction was still underway, the contractor "would never have turned the house over to [plaintiff] Neal in its defective condition." Id. 103 S.Ct. at 1094. Thus, the Court decided that while there might also be claims for negligent misrepresentation on the Block facts, those allegations were not necessary to the state negligence cause of action. The misrepresentation exception, therefore, would not bar the claim. See id. at 1092-94. Block describes Neustadt as a case where the plaintiff "alleged no injury that he would have suffered independently of his reliance on the erroneous appraisal." Block, 103 S.Ct. at 1093. Block did not purport to overrule or question the soundness of Neustadt.

This Court has also had occasion to discuss the application of section 2680(h) to claims of negligent misrepresentation. In Rey v. United States, 484 F.2d 45 (5th Cir.1973), we affirmed the dismissal of an action by a hog farmer for damages incurred when he relied on erroneous representations by an agent of the Department of Agriculture that his livestock was infected with a cholera virus, because we found that the "negligently erroneous transmission of misinformation [was] the crucial element in the chain of causation from defendant's negligence to plaintiffs' damages." Id. at 49. In Baroni v. United States, 662 F.2d 287 (5th Cir.1981), cert. denied, 460 U.S. 1036, 103 S.Ct. 1426, 75 L.Ed.2d 787 (1983), we affirmed the dismissal of claims by homeowners suing the government for incorrectly determining the extent of the flood plain in their neighborhoods when approving FHA funding for their developer. Following Neustadt, we held that the National Housing Act did not create an independent federal right of redress for the error, and any state law negligence action was barred because the plaintiffs' damages still turned solely on the government's communication of misinformation. See id. at 289. Similarly, in City of Garland v. Zurn Indus., Inc., 870 F.2d 320, 325 (5th Cir.1989), we held that the misrepresentation exception barred any state law negligence claim by Garland and its wastewater contractor against the EPA, because the claim was premised on their reliance on inaccurate test data made available by the EPA. Because City of Garland also held that the Clean Water Act imposed no independent federal duty on EPA to warrant the accuracy of information it disseminated,...