Enterprise Electronics Corp. v. US
| Decision Date | 21 December 1992 |
| Docket Number | Civ. A. No. 91-T-1258-S. |
| Parties | ENTERPRISE ELECTRONICS CORPORATION, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
M. Dale Marsh, Enterprise, AL, for plaintiff.
Kenneth E. Vines, U.S. Atty's Office, Montgomery, AL, Stuart Gerson, Jeffrey Axelrad, Paul Figley, Diana Gordon, Washington, DC, for defendant.
Enterprise Electronics Corporation filed this lawsuit against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C.A. §§ 1346(b), 2671-2680. Enterprise Electronics charges that the Defense Contract Audit Agency (DCAA) negligently performed an audit of a contract between Enterprise Electronics and the United States Air Force, resulting in administrative, civil, and criminal proceedings against Enterprise Electronics. The United States moves to dismiss this lawsuit, asserting that Enterprise Electronics has not stated a claim under the FTCA, Fed.R.Civ.P. 12(b)(6), and for lack of subject-matter jurisdiction, Fed. R.Civ.P. 12(b)(1). Rule 12(b)(6) authorizes a court to dismiss a claim if, accepting the allegations of the complaint as true, "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 1832, 104 L.Ed.2d 338 (1989). For the reasons that follow, the government's motion is granted.
Enterprise Electronics has alleged the following. In July 1985, Enterprise Electronics and the Department of Defense entered into a "letter contract" for the purchase of weather radar systems, in which they agreed to negotiate the price at a later date. In August 1985, Enterprise Electronics submitted a proposed price, which included a summary of the estimated cost to be incurred by Enterprise Electronics. The Department of Defense asked the DCAA to review Enterprise Electronics's proposal. The DCAA auditor found discrepancies and mistakes which he believed indicated possible fraud against the United States. The auditor did not report these findings to Enterprise Electronics, the Department of Defense, or the DCAA supervisor as required by the DCAA's audit manual and as a reasonably prudent accountant would have done. As a result of the failure of the DCAA to comply with these standards, the Department of Defense and Enterprise Electronics negotiated a definitive contract with no knowledge of the alleged defective cost. Had the parties been informed of the alleged defects, they would have been resolved, thereby obviating the need for administrative and judicial actions.
The DCAA thereafter reported the suspected fraud to the Department of Defense Inspector General's office, which conducted an investigation. As a result of the investigation and a second DCAA audit, a federal grand jury indicted Enterprise Electronics, its president, and former purchasing agent on charges of fraud, false claims, and conspiracy. At trial, the jury acquitted all the defendants on all charges. The Department of Defense had suspended Enterprise Electronics from receiving government contracts while the criminal case was pending and continued the suspension pending an administrative action to show cause why the company should not be barred from receiving contracts for a period of five years. The Department of Defense also issued a notice to show cause why the contract price should not be unilaterally reduced. The Justice Department subsequently filed a civil suit for fraud under the False Claims Act. The jury in the civil suit found Enterprise Electronics liable and penalized it $100,000. In defending itself in the various actions, Enterprise Electronics has spent over $500,000.
Enterprise Electronics maintains that it is entitled to recover all expenses it has incurred as a result of the criminal, civil, and administrative proceedings in which it has been involved.
The government argues that Enterprise Electronics's suit is barred by the specific exceptions to the FTCA for malicious prosecution, discretionary functions, and misrepresentation. 28 U.S.C.A. §§ 1346(a), 2680(a) & (h). The government also contends that: Enterprise Electronics's suit sounds in contract not tort; Enterprise Electronics seeks to recover expenses that did not arise from the "loss of property" under the FTCA; and no duty exists under state law for which the government can be held liable.
The FTCA does not waive sovereign immunity for "any claim arising out of ... malicious prosecution." 28 U.S.C.A. § 2680(h). The government contends that the malicious prosecution exception bars Enterprise Electronics's suit. Malicious prosecution is the groundless instigation of criminal or civil proceedings against the claimant. Stacks v. Pate, 561 So.2d 1072, 1074 (Ala. 1990). The proceedings must be instituted without probable cause and must be terminated in favor of the claimant. Id. at 1074. The government argues that, although Enterprise Electronics's complaint does not identify all the elements of the tort, the gravamen of Enterprise Electronics's case is malicious prosecution.
The Eleventh Circuit Court of Appeals has held that "a cause of action which is distinct from one of those excepted under § 2680(h) will nevertheless be deemed to `arise out of' an excepted cause of action when the underlying governmental conduct which constitutes an excepted cause of action is `essential' to plaintiff's claim." Metz v. United States, 788 F.2d 1528, 1534 (11th Cir.) (quoting Block v. Neal, 460 U.S. 289, 297, 103 S.Ct. 1089, 1094, 75 L.Ed.2d 67 (1983)), cert. denied, 479 U.S. 930, 107 S.Ct. 400, 93 L.Ed.2d 353 (1986). However, a plaintiff can "pursue `a distinct claim arising out of other aspects of the Government's conduct.'" Metz, 788 F.2d at 1534 (quoting Neal, 460 U.S. at 298, 103 S.Ct. at 1094). The issue, then, is whether Enterprise Electronics's claim "arises out of" a malicious prosecution. The court must determine whether Enterprise Electronics has alleged an injury independent of that which arose from a malicious prosecution.
In Neal, the Supreme Court noted that a plaintiff could not recover where she alleged "no injury that she would have suffered independently of her reliance on the erroneous appraisal." 460 U.S. at 296, 103 S.Ct. at 1093. The government argues that Enterprise Electronics claims no injury other than that which it allegedly suffered by being investigated and prosecuted by the Department of Justice and that Enterprise Electronics suffered no injury solely because of the DCAA's negligent audit.
Enterprise Electronics maintains that a cause of action is defined by the nature of the underlying wrongful acts and not the nature of the resulting injuries and damages. According to Enterprise Electronics, it does not allege any tortious act based upon the DCAA's referral decision or any act by the Justice Department. These decisions, Enterprise Electronics explains, are relevant only insofar as they are the foreseeable result of the DCAA's negligence in performing its professional auditing activities. Enterprise Electronics...
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