Gildor v. U.S. Postal Service

• Citation: 491 F.Supp.2d 305
• Decision Date: 27 April 2007
• Docket Number: No. 1:04-CV-1320 (LEK/DRH).,1:04-CV-1320 (LEK/DRH).
• Parties: Arieh GILDOR, Plaintiff, v. UNITED STATES POSTAL SERVICE, Defendant.
• Court: U.S. District Court — Northern District of New York

Page 305

491 F.Supp.2d 305

Arieh GILDOR, Plaintiff, v. UNITED STATES POSTAL SERVICE, Defendant.

No. 1:04-CV-1320 (LEK/DRH).

United States District Court, N.D. New York.

April 27, 2007.

Andrea W. Trento, Cravath, Swaine Law Firm, New York, NY, for Plaintiff.

Barbara D. Cottrell, Office of United States Attorney, Albany, NY, for Defendant.

MEMORANDUM-DECISION AND ORDER¹

KAHN, District Judge.

I. Background

This case was brought by Plaintiff Arieh Gildor ("Gildor" or "Plaintiff') after Defendant United States Postal Service ("USPS" or "Defendant") refused to indemnify him for the loss of the contents of a package he mailed via Global Express Mail. On March 20, 2004, Gildor brought a package to the United States Post Office in Cobleskill, New York to be sent to France via Global Express Mail. Plntf's Mem. of Law (Dkt. No. 43) at 2. Gildor asked the USPS window clerk on duty at the time if the package could be insured for shipment to Paris. Id. Upon being told that the package could be insured for up to $5,000.00, Plaintiff paid $49.00 for $5,000.00 of insurance, in addition to the shipping costs, for a total of $68.15. Id. Plaintiff alleges that, prior to purchasing the insurance, he discussed with USPS's employee whether jewelry could be shipped and insured via Global Express Mail and was told that there would be no problem. Id. Plaintiffs U.S. Customs declaration indicates that the contents of the package are "2 rings." Customs Receipt (Dkt. No. 1, Ex. 2). Eventually, the package was returned to Plaintiff empty. Plntfs Mem. of Law (Dkt. No. 43) at 3. Plaintiffs attempt to collect on the insurance policy was unsuccessful; USPS denied his claim on the grounds that the contents of the package were prohibited items in Global Express Mail and would not indemnify Plaintiff for his loss, according to the terms of the International Mail Manual ("IMM"), Section 935.2, Payments for Global Express Mail, When Prohibited, at 278. Id.; Deft's Motion to Dismiss (Dkt. No. 18) at 3; IMM (Dkt. No. 18, Exhibit 6, Attach. J) at 278. On November 15, 2004, after exhausting his administrative remedies, Plaintiff filed suit in this Court against USPS and three USPS employees, David DeGeorge, Mark Harbison and I.P. Mingo, claiming negligence and breach of contract. Complaint (Dkt. No. 1) at 1-2.

On July 12, 2005, this Court granted summary judgment to Defendants De-George, Harbison, Mingo and USPS on both the tort and contract claims. Order (Docket No. 32). The negligence claims were dismissed against DeGeorge, Harbison, and Mingo because, to the extent that their actions gave rise to Plaintiffs claims, they were acting within the scope of their employment. See id. at 11; 28 U.S.C. § 2679(b)(1). Additionally, the negligence claims against USPS were dismissed because Plaintiffs claims did not fall within an exception to sovereign immunity, and were thus barred. Order (Docket No. 32) at 7. Finally, Plaintiffs claims against USPS arising in contract were dismissed on the grounds that USPS had not been contractually bound to indemnify Plaintiff for any loss of jewelry shipped via International Express Mail, Id. at 8. This Court found that despite the false representations of USPS employees that Plaintiffs jewelry would be covered in the case of loss, USPS was not equitably estopped from denying coverage. Id. at 10-11. This was based, in part, on Plaintiffs failure to prove affirmative misconduct by USPS employees. Id.

The Court of Appeals for the Second Circuit affirmed the decision, except for the dismissal of Plaintiffs contract claim against the USPS. Gildor v. U.S. Postal Serv., 179 Fed.Appx. 756 (2006) (unpublished). The Second Circuit vacated the Order for summary judgment on Plaintiffs contract claim, finding that "a reasonable trier of fact could find that it was reasonable for Gildor to rely on the assurance of the postal employees," and remanded. Id. at 759-60. The Second Circuit directed this Court to consider the Seventh Circuit holdings in Azar v. U.S. Postal Service, F.2d 1265 (7th Cir.1985) and Portmann v. United States, 674 F.2d 1155 (7th Cir.1982) and examine whether affirmative misconduct should be a prerequisite for the imposition of equitable estoppel on USPS. Id. This Court now considers Defendant's Motion for summary judgment, in light of the Second Circuit's analysis.

II. Discussion

A. Jurisdiction of District Court Over Plaintiff's Contract Claim

Defendant alleges that Plaintiffs claim is not properly heard before this Court because contract claims against the federal government in excess of $10,000 must be brought in the United States Court of Federal Claims, as dictated by the Tucker Act. 28 U.S.C. § 1346(a)(2); 28 U.S.C. § 1491(a)(1). However, "most courts have held that a claim brought against the USPS in its own name is not a claim against the United States and thus is not governed by the Tucker Act." Beckman v. U.S. Postal Serv., 79 F.Supp.2d 394, 406 (S.D.N.Y.2000). See also Licata v. U.S. Postal Serv., 33 F.3d 259, 263 (3rd Cir.1994) (noting that "it is well settled" that a claim against USPS in its own name is not governed by the Tucker Act). This Court's jurisdiction over this case is not dependant on the Tucker Act; section 409(a) of the Postal Reorganization Act granted United States District Courts jurisdiction "over all actions brought by or against" USPS. 39 U.S.C. § 409(a). Accordingly, this Court properly retains jurisdiction over Plaintiffs contract claim.

B. Does USPS's Settlement Offer Make This Case Moot?

On October 12, 2006, Defendant USPS made an offer, under Rule 68 of the Federal Rules of Civil Procedure, to pay Plaintiff $5,500, which constituted, the amount of the original insurance contract plus Plaintiffs court fees. Offer (Dkt. No. 45, Attach.1, Ex. D). Plaintiff rejected the offer on the grounds that the amount did not make Plaintiff whole, in that Plaintiff would not recover his administrative, private investigative, and legal expenses. Pilaf's Reply Mem. of Law (Dkt. No. 52) at 2-4. USPS argues that the offer rendered the case moot, because it could not be subject to an amount greater than the amount offered if Plaintiffs contract claim was successful. Offer (Dkt. No. 45) at 4. Defendant is correct that a rejected settlement offer which would have given Plaintiff all the benefits of litigation victory would moot the case. Fox v. Bd. of Trustees of State Univ. of New York, 42 F.3d 135, 140 (2d Cir.1994). See also McCauley v. Trans Union, L.L.C., 402 F.3d 340, 341-2 (2005). However, Plaintiff disputes USPS's claim that its liability is limited to the amount of the insurance contract and court costs. Specifically, Plaintiff alleges that USPS could be liable for prejudgment interest, litigations expenses and punitive damages. Plntf's Reply Mem. of Law (Dkt. No. 52) at 2-4.

Prejudgment interest is recoverable against USPS, if the substantive law governing the underlying claim allows such recovery. Loeffler v. Frank, 486 U.S. 549, 557, 108 S.Ct. 1965, 100 L.Ed.2d 549 (1988). As long as there is no "significant conflict between the state rule and a federal interest," the state rule, New York substantive law in this case, would govern. Palmieri v. Allstate Ins. Co., 445 F.3d 179, 188-89 (2d Cir.2006). The New York rule awards prejudgment interest at the rate of nine (9) percent per annum. N.Y. C.P.L.R. § 5001(a). Although exposing a state agency to liability for prejudgment interest can be seen as conflicting with federal financial interests, the Supreme Court has specifically allowed an interest award against USPS. Loeffler, 486 U.S. at 556, 108 S.Ct. 1965. Thus, it can be presumed that the state rule allowing prejudgment interest does not conflict with a federal interest and New York substantive law applies.

Because, if successful, Plaintiff may be entitled to prejudgment interest of nine percent per annum, USPS's settlement offer, which does not encompass that amount, cannot be determined to moot the case before the court. Accordingly, it is not necessary to address the issue of USPS's potential liability for punitive damages or Plaintiffs litigation expenses at this time.

C. The Applicability of Equitable Estoppel

1. Elements of an Equitable Estoppel Claim

"Estoppel is an equitable doctrine invoked to avoid injustice in particular cases." In re Becker, 407 F.3d 89, 98-99 (2d Cir.2005). The requirements to invoke equitable estoppel successfully are (1) that the party claiming estoppel relied on a misrepresentation or concealment of facts; and (2) changed his position for the worse based on that reliance. Id. at 99. The relying party must show that he or she did not know the truth, that his or her reliance was reasonable and that refusing estoppel would cause him or her injury. Id.; Gen. Auth. for Supply Commodities, Cairo, Egypt v. Ins. Co. of North America, 951 F.Supp. 1097, 1111 (S.D.N.Y.1997).

As is proper in evaluating a Motion for summary judgment, this Court must view all facts and construe all ambiguities in the light most favorable to the non-moving party. Fed.R.Civ.P. 56(c); D'Cunha v. Genovese/Eckerd Corp., 479 F.3d 193, 194 (2d Cir.2007). Under that standard, Plaintiff meets all of the aforementioned elements of invoking estoppel. He was told by a USPS employee that the contents of his package were insurable against damage or loss, although that was factually untrue. Plaintiff relied upon the incorrect information provided by the USPS employee in sending the package via USPS with purchased insurance. As for the reasonableness of Plaintiffs reliance, the Second Circuit has already determined that "a reasonable trier of fact could find that it was reasonable for Gildor to rely on the assurance of the postal employees." Gildor, 179 Fed.Appx. at 759. Assuming these four prongs were sufficient to establish equitable estoppel, Plaintiff would have established that his claim to equitable estoppel could succeed.

2. Affirmative Misconduct Requirement

i....