Lee by Lee v. U.S., 97-5015

• Decision Date: 17 September 1997
• Docket Number: No. 97-5015,97-5015
• Citation: 124 F.3d 1291
• Parties: Megan Han LEE, By her Mother and Next Friend, Deborah Lynn LEE and Deborah Lynn Lee, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1291

124 F.3d 1291

Megan Han LEE, By her Mother and Next Friend, Deborah Lynn LEE and Deborah Lynn Lee, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.

No. 97-5015.

United States Court of Appeals Federal Circuit.

Sept. 17, 1997.

Robert A. Mazzoni, Scranton, PA, argued for plaintiffs-appellants. With him on brief was Peter Ayers Wimbrow, III, Ocean City, MD.

Harold D. Lester, Jr., Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for defendant-appellee. With him on the brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief was Major Dru Brenner-Beck and Major Leo E. Boucher, Tort Branch, Army Litigation Division, Legal Services Division, Department of the Army, Arlington, VA.

Before CLEVENGER, SCHALL, and BRYSON, Circuit Judges.

BRYSON, Circuit Judge.

In April 1989, Megan Han Lee, a two-year-old child, was being cared for in the home of United States Army Sgt. Boyce Garner and his wife as part of an Army child-care program. One day while Ms. Garner left the home to go shopping, Sgt. Garner placed Megan in a bathtub filled with hot water. When Megan attempted to get out of the bathtub, Sgt. Garner struck her and held her in the water. Megan sustained serious burns as a result.

Sgt. Garner was convicted of criminal child abuse in connection with the incident. Megan and her mother, Deborah Lynn Lee, first sued the Garners in the United States District Court for the District of Maryland, where they obtained a default judgment. The Lees then brought suit against the United States in the Court of Federal Claims seeking damages for breach of an insurance contract relating to the rendering of child care services. The Court of Federal Claims granted summary judgment in favor of the government. We agree with the Court of Federal Claims that the United States did not breach a contract that would entitle the Lees to recover against the United States for their injuries, and we therefore affirm.

I

At the time of the incident giving rise to this case, Deborah Lee was enlisted in the United States Army and was stationed at the Aberdeen Proving Grounds in Maryland where she was receiving training in vehicle mechanics. To accommodate her training schedule, she enrolled her daughter in the Family Child Care ("FCC") program offered to base personnel. Through the program, Deborah Lee selected Marilyn Garner, the wife of Sgt. Garner, as her daughter's child care provider.

As part of the FCC certification process, Marilyn Garner submitted an application to Aberdeen's Child Development Services, which obtained a background clearance for both Sgt. and Marilyn Garner. Ms. Garner executed a document entitled "Statement of Understanding Regarding Home-Based Child Care Insurance Coverage Under The U.S. Army Nonappropriated Fund Risk Management Program." The Statement of Understanding provided, in pertinent part:

D. I understand ... that as a certified FCC provider I am automatically insured under the U.S. Army Nonappropriated Fund Risk Management Program (RIMP).... Although FCC providers are not nonappropriated fund employees, insurance coverage is provided and paid for by the Army to cover FCC providers for their own protection.

E. I understand that I am insured under RIMP for up to $500,000 for any individual claim arising out of the death or injury of any child under my care which occurs as a result of a negligent act or omission on my part, or on the part of any member of my household.

F. I understand that I am not insured for any injury or death to children under my care arising out of any criminal act or omission, or, as a result of any otherwise intentional tort or intentional violation of applicable laws or regulations (e.g. assault, battery, indecent assault, rape, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit) on my part or the part of a member of my household.... I understand that legal representation, if it is provided, will be provided solely to protect the interests of the insurance fund. I understand that I may retain private counsel at my own expense anytime I feel it advisable in order to protect my own interest (e.g., when my actions may be outside the scope of RIMP coverage, when my own interests are in conflict with those interests being represented by the U.S. Attorney or by private counsel retained to represent the interest of the insurance fund.)

After Ms. Garner was certified to serve as an FCC provider, she began to provide care for Megan Lee at her home under the program. On April 12, 1989, approximately one month after Ms. Garner began to care for Megan, Ms. Garner left her home to go to the grocery store. She left Megan and her own daughter in the care of Sgt. Garner, who was not a certified FCC provider. Sgt. Garner told his wife that he would bathe Megan and their daughter while Ms. Garner went to the store. During Ms. Garner's absence, Sgt. Garner engaged in the conduct that led to Megan's injuries.

On April 9, 1990, Megan and her mother filed a complaint in the United States District Court for the District of Maryland seeking damages from the Garners for injuries arising out of the bathtub incident. The Lees did not bring a claim against the United States at that time. Through counsel, the Garners informed the United States Army of the district court action and asserted that the RIMP was responsible for providing insurance coverage and defending the Garners in that action. The Army's representatives denied the Garners' requests for coverage and representation, contending that "the Army is not liable for injuries which resulted from criminal conduct."

The Garners failed to defend the district court action, and the court accordingly entered a default judgment on the Lees' complaint. The Lees were awarded a judgment against the Garners for more than $700,000. The Garners subsequently assigned to the Lees their rights against the government under the insurance agreement.

The Lees then filed a complaint against the United States in the Court of Federal Claims seeking to recover damages from the RIMP. The government first responded that the court lacked jurisdiction to entertain the complaint because the RIMP was a nonappropriated fund instrumentality ("NAFI") and that the United States has not waived its sovereign immunity with respect to claims that arise under contracts with NAFIs such as the RIMP. The court held that the United States was not immune from suit on that ground and therefore denied the government's motion to dismiss the complaint for lack of jurisdiction.

The parties then filed cross-motions for summary judgment. At the outset, the court concluded that a contractual relationship existed between Ms. Garner and the United States. The court found that the government had undertaken "to insure the FCC child care provider, and in return the provider agreed to comply with the FCC certification process." The court also held that the Lees were third party beneficiaries of the contract and thus were entitled to enforce the terms of the agreement.

On the merits, the court held that the Statement of Understanding and the RIMP regulations excluded coverage for claims arising out of criminal acts, such as Sgt. Garner's treatment of Megan. With respect to the claim that Ms. Garner was negligent for leaving Megan in Sgt. Garner's care, the court held that Sgt. Garner's criminal act was "an intervening event" that caused the injury, "thereby superseding [any] original negligence." The court further held that, even if Sgt. Garner's criminal act was a "concurrent" rather than "superseding cause" of Megan's injuries, the plain language of the Statement of Understanding and the RIMP regulations excluded coverage because the injuries arose, at least in part, from a criminal act. The court therefore granted the government's motion for summary judgment. This appeal followed.

II

We first address the government's argument that the Court of Federal Claims lacks jurisdiction over the Lees' claim, because the complaint is based on a contract with a NAFI as to which there has been no waiver of sovereign immunity. The Court of Federal Claims rejected the government's jurisdictional challenge, and so do we.

The Tucker Act, 28 U.S.C. § 1491, generally limits the jurisdiction of the Court of Federal Claims to cases in which the court's judgments could be paid from appropriated funds. United States v. General Elec. Corp., 727 F.2d 1567, 1570 (Fed.Cir.1984). With a few specific exceptions, see 28 U.S.C. § 1491(a)(1), disputes arising from contracts entered into by a federal instrumentality fall outside the jurisdiction of the Court of Federal Claims if "Congress intended that the activity resulting in the claim was not to receive or be funded from appropriated funds." L'Enfant Plaza Properties, Inc. v. United States, 229 Ct.Cl. 278, 668 F.2d 1211, 1212 (1982).

The RIMP provides a form of insurance coverage to protect the assets of NAFIs against administrative claims arising out of NAFI activities. As of 1985, the Army implemented a plan to add liability coverage under the RIMP for quarters-based FCC providers, such as Ms. Garner. The Army Central Insurance Fund ("ACIF") is itself a NAFI that receives and disburses funds of the RIMP. Specifically, the ACIF maintains a RIMP claim fund for FCC program providers, which is used to pay claims against FCC providers adjudicated in accordance with Army regulations. See Army Reg. 215-1, ch. 13, § 5.

On November 29, 1989, as part of the National Defense Authorization Act for Fiscal Years 1990 and 1991, Pub.L. No. 101-189, Congress enacted the Military Child Care Act of 1989, 103 Stat. 1352, 1590. That Act authorized the Department of Defense to use appropriated funds "for operating expenses for military child care development centers," "for child care and child-related...