Dynamic Image Tech v. USA

Citation221 F.3d 34
Decision Date16 June 2000
Docket NumberNo. 00-1004,00-1004
Parties(1st Cir. 2000) DYNAMIC IMAGE TECHNOLOGIES, INC., ET AL.,Plaintiffs, Appellants, v. UNITED STATES OF AMERICA, Defendant, Appellee. . Heard:
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO.

Hon. Daniel R. Domnguez, U.S. District Judge.

Johnny Rivera and Ivan Dominguez on brief for appellants.

David W. Ogden, Acting Assistant Attorney General, Guillermo Gil, United States Attorney, Robert S. Greenspan and E. Roy Hawkens, Attorneys, Appellate Staff, United States Dep't of Justice, on brief for appellee.

Before: Selya, Boudin and Lipez, Circuit Judges.

SELYA, Circuit Judge.

Dynamic Image Technologies, Inc. (DIT) and Rafael Vega (DIT's principal) sued the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 1346, 2671-2680. The district court gave their claims careful consideration, but found them wanting. See Dynamic Image Technologies, Inc. v.United States, 68 F. Supp. 2d 113 (D.P.R. 1999) (Dynamic II);Dynamic Image Technologies, Inc. v. United States, 18 F. Supp. 2d 146 (D.P.R. 1998) (Dynamic I). DIT and Vega appeal. We affirm.

I. BACKGROUND

We take the plaintiffs' version of the facts, consistent with record support. See Pagano v. Frank, 983 F.2d 343, 347 (1st Cir. 1993) (elucidating summary judgment standard). In the interests of fairness, however, we report that the government disputes many of the facts.

In mid-1991, the United States Postal Service (USPS) announced a set of requirements for obtaining bulk mail pre-sort discounts. This innovation opened a window of opportunity for direct-mail houses and other firms offering mail-processing services. In an attempt to pass through this window, DIT invested appreciable time and money in the development of a software system capable of effecting compliance with the new requirements. In July 1995, the USPS granted its seal of approval -- termed, in an epitomical example of bureaucratic doublespeak, a coding accuracy support system quality certification (CASSQC) -- to DIT's newly-developed software.

Later that month, the USPS hosted a trade show in San Juan to enable vendors to present mail-processing products and systems to prospective customers. The USPS's customer service manager, Luis Pena, informed those attending the show that no one in Puerto Rico had obtained the certification necessary for pre-sort clearance. When Vega objected to this misstatement, Pena ordered his forcible removal from the premises. Following this episode, DIT claims to have suffered a severe erosion of its customer base.

A USPS representative subsequently informed the plaintiffs that a new (and different) test would be administered. This test bore tangentially, if at all, on the efficacy of techniques intended to comply with the announced pre-sort requirements, and employed criteria that departed radically from the CASSQC standard. Moreover, USPS employees continued to inform DIT's actual and potential customers that it lacked the proper credentials to obtain pre-sort discounts.

In response, the plaintiffs filed an administrative claim with the USPS alleging negligent misrepresentation, libel, slander, intentional interference with contractual relations, and discrimination under 42 U.S.C. § 1983. They averred, at some length, that USPS personnel made false and misleading statements anent DIT's certification status, disrupted advantageous economic relations between DIT and its customers, drove DIT out of business, and, in the bargain, discriminated against Vega. Notably, however, the document -- which prayed for $5,000,000 in damages -- did not mention the incident involving Vega's ejection from the trade show.

When the matter was not resolved administratively within the obligatory six-month waiting period, the plaintiffs brought suit in the United States District Court for the District of Puerto Rico. See 28 U.S.C. § 2675(a). Their complaint mirrored their administrative claim and did not refer to Vega's confrontation with Pena. The United States moved to dismiss and to stay discovery. The district court granted the stay. It later granted the motion to dismiss. See Dynamic I, 18 F. Supp. 2d at 148. Taking matters in sequence, the court invoked an FTCA exception, 28 U.S.C. § 2680(h), to dispose of the misrepresentation, libel, slander, and contractual interference claims. 1 See Dynamic I, 18 F. Supp. 2d at 149-51. The court found Vega's discrimination claim wanting for several reasons, including the fact that the United States is not a proper party defendant in a suit brought under 42 U.S.C. § 1983. See Dynamic I, 18 F. Supp. 2d at 151.

The district court could have stopped there, but it did not. The court believed that the general scenario described by the plaintiffs arguably encompassed claims for intentional infliction of emotional distress and negligent supervision. See id. at 151-52. Noting that such claims might be permissible under the FTCA, the court gave the plaintiffs an opportunity to file an amended complaint. 2 See id. at 151 (citing Santiago-Ramirez v. Secretary of the Dep't of Defense, 984 F.2d 16, 20 (1st Cir. 1993)), 153. The court cautioned, however, that any amended complaint (a) must be consistent with the notice that the plaintiffs previously had provided to the government via their administrative claim, and (b) "should not merely reformulate the contract, slander, libel and misrepresentation claims which are dismissed herein because the court does not have subject matter jurisdiction over them, no matter how Plaintiffs dress them up." Id. at 153.

The plaintiffs seized this lifeline and filed an amended complaint. In it, they described for the first time the altercation that allegedly occurred at the 1995 trade show and claimed that USPS hierarchs negligently permitted their underlings to arrest Vega without sufficient cause in front of prospective clients and others. 3 Vega also proffered a claim for intentional infliction of emotional distress, linking that claim to the same episode. The United States again moved to dismiss, asserting both lack of subject matter jurisdiction and failure to state a cognizable claim. See Fed. R. Civ. P. 12(b)(1), 12(b)(6). Because documents dehors the pleadings were presented to (and considered by) the district court in connection with the motion, the court converted the motion into one for summary judgment. See Fed. R. Civ. P. 12(b) (providing for conversion of Rule 12(b)(6) motions). Emphasizing that the plaintiffs' administrative claim failed to mention any facts which would have alerted the government to the possibility of litigation based on false arrest, the court then ruled that it lacked jurisdiction to entertain the amended complaint. See Dynamic II, 68 F. Supp. 2d at 117-18. This appeal ensued.

II. ANALYSIS

We note, at the outset, our doubts about the district court's procedural praxis. As a general matter, trial courts should give Rule 12(b)(1) motions precedence. See Northeast Erectors Ass'n of the BTEA v. Secretary of Labor, 62 F.3d 37, 39 (1st Cir. 1995). The conversion principle does not apply in regard to such motions -- and for good reason. The court, without conversion, may consider extrinsic materials and, to the extent it engages in jurisdictional factfinding, is free to test the truthfulness of the plaintiff's allegations. See Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 890-91 (3d Cir. 1977). Thus, the district court's decision to convert the government's motion to a motion for summary judgment strikes us as unnecessary.

Be that as it may, we need not pass definitively on the propriety of the conversion for two reasons. First, neither party objects to this aspect of the court's ruling, and any error is therefore waived. See Attallah v. United States, 955 F.2d 776, 779 n.3 (1st Cir.1992). Second, this appeal turns on a purely legal question -- one that requires a comparison of the administrative claim with the amended complaint -- so characterization of the government's motion has no practical effect. At any rate, the plaintiffs cannot be heard to complain, inasmuch as the summary judgment standard is as favorable to them as any other that they might reasonably request. Cf. United States v. AVX Corp., 962 F.2d 108, 114 n.6 (1st Cir. 1992) (using parallel logic to justify application of Rule 12(b)(6) criteria to a standing challenge). Thus, we do not probe the point more deeply, but, rather, proceed to address seriatim the stay of discovery and the dismissal of the amended complaint.

A. The Stay of Discovery.

The plaintiffs asseverate that the district court erred in denying them the opportunity to conduct discovery before it adjudicated the government's motion for brevis disposition. Trial courts have broad discretion in determining the timing of pretrial discovery, and appellate courts are reluctant to interfere unless it clearly appears that a "discovery order was plainly wrong and resulted in substantial prejudice to the aggrieved party." Mack v.Great Atl. & Pac. Tea Co., 871 F.2d 179, 186 (1st Cir. 1989). This discretion obtains where, as here, the question is whether to permit discovery before deciding jurisdictional issues. SeeCrocker v. Hilton Int'l Barbados, Ltd., 976 F.2d 797, 801 (1st Cir. 1992).

Here, the plaintiffs' "denial of discovery" claim fails for two reasons. First, they raise it too late. When the government moved to stay discovery in the district court, the plaintiffs did not file an opposition. See D.P.R. Local Rule 311.5 (stating that "[i]f the respondent opposes a motion, he or she shall file a response within ten (10) days after service of the motion"). Nor did they present in their opposition to the dismissal motion any developed argumentation as to how additional discovery might advance their cause. Consequently, they forfeited the point. See United States v. Slade, 980 F.2d 27,...

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