Lexington Ins. Co. v. United States

• Decision Date: 04 June 2020
• Docket Number: CASE NO. 3:20-cv-05038-RBL
• Citation: 465 F.Supp.3d 1158
• Parties: LEXINGTON INSURANCE COMPANY, Port of Grays Harbor, and Enduris, Plaintiffs, v. UNITED STATES of America, United States Department of the Army, United States Army Corps of Engineers, and MAB 6 UK, inclusive, Defendants.
• Court: U.S. District Court — Western District of Washington

465 F.Supp.3d 1158

LEXINGTON INSURANCE COMPANY, Port of Grays Harbor, and Enduris, Plaintiffs,

v.UNITED STATES of America, United States Department of the Army, United States Army Corps of Engineers, and MAB 6 UK, inclusive, Defendants.

CASE NO. 3:20-cv-05038-RBL

United States District Court, W.D. Washington, at Tacoma.

Signed June 4, 2020

Paul B. Hines, Pro Hac Vice, Denenberg Tuffley PLLC, Southfield, MI, Zachary P. Marks, Pro Hac Vice, Denenberg Tuffley PLLC, Los Angeles, CA, Adil Aziz Siddiki, Law Office of James R. Vaughan PC, Seattle, WA, for Plaintiffs.

Matt Waldrop, US Attorney's Office, Seattle, WA, for Defendants.

ORDER ON UNITED STATES’ MOTION TO DISMISS

Ronald B. Leighton, United States District Judge

INTRODUCTION

THIS MATTER is before the Court on Defendants the United States of America, the United States Department of Army, and the United States Army Corps of Engineers’ (collectively, the "United States") Motion to Dismiss. Dkt. # 20. Plaintiffs allege that, while conducting military training exercises, the United States damaged property belonging to the Port of Grays Harbor when a helicopter flew too close to a building. These training exercises were carried out pursuant to a Licensing Agreement between the Port and the United States. Plaintiffs claim damage amounting to $405,772, which the Port's insurers, Lexington Insurance Company and Enduris, "paid or will pay" under their policies. Complaint, Dkt. # 1, at 3. The Complaint asserts claims for negligence and breach of contract against the United States. Id. at 4-6.

The United States seeks dismissal on several grounds. First, the United States argues that Lexington and Enduris cannot bring a negligence claim under the Federal Tort Claims Act (FTCA) because these parties did not exhaust their administrative remedies. As a result, the Court lacks subject matter jurisdiction over Lexington and Enduris. Second, the United States contends that the Court lacks subject matter jurisdiction over both claims because the Tucker Act vests the Court of Federal Claims with exclusive jurisdiction over contractual claims against the United States for more than $10,000. According to the United States, both of Plaintiffs’ claims sound in contract. Finally, even if the Court holds that Plaintiffs’ FTCA claim does not sound in contract, the United States argues that claim should still be dismissed because Plaintiffs allege a duty arising from a federal regulation, which cannot support an FTCA claim. The Court will consider each of these arguments in turn.

DISCUSSION

1. Legal Standards

"A complaint must be dismissed under Fed. R. Civ. P. 12(b)(1) if the action: (1) does not arise under the Constitution, laws, or treaties of the United States, or does not fall within one of the other enumerated categories of Article III, Section 2, of the Constitution; (2) is not a case or controversy within the meaning of the Constitution; or (3) is not one described by any jurisdictional statute." United Transp. Union v. Burlington N. Santa Fe R. Co. , No. C06-5441 RBL, 2007 WL 26761, at *2 (W.D. Wash. Jan. 2, 2007), aff'd , 528 F.3d 674 (9th Cir. 2008). The plaintiff bears the burden of proving the existence of subject matter jurisdiction. Stock West, Inc. v. Confederated Tribes , 873 F.2d 1221, 1225 (9th Cir. 1989). In a "factual attack" on jurisdiction, which is what the United States asserts here, the Court is not restricted to the allegations in the complaint and may consider evidence outside it. Thornhill Pub. Co. v. Gen. Tel. & Elecs. Corp. , 594 F.2d 730, 733 (9th Cir. 1979). Further, "[n]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Id.

Dismissal under Fed. R. Civ. P. 12(b)(6) may be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff's complaint must allege facts to state a claim for relief that is plausible on its face. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim has "facial plausibility" when the party seeking relief "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Although the court must accept as true the Complaint's well-pled facts, conclusory allegations of law and unwarranted inferences will not defeat an otherwise proper 12(b)(6) motion to dismiss. Vasquez v. Los Angeles Cty. , 487 F.3d 1246, 1249 (9th Cir. 2007) ; Sprewell v. Golden State Warriors , 266 F.3d 979, 988 (9th Cir. 2001).

On a 12(b)(6) motion, "a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Cook, Perkiss & Liehe v. N. Cal. Collection Serv. , 911 F.2d 242, 247 (9th Cir. 1990). However, where the facts are not in dispute, and the sole issue is whether there is liability as a matter of substantive law, the court may deny leave to amend. Albrecht v. Lund , 845 F.2d 193, 195–96 (9th Cir. 1988).

2. Exhaustion of Administrative Remedies under the FTCA

The United States argues that Lexington and Enduris have not exhausted their administrative remedies because, while the Port submitted a claim to the Army (which was rejected), its insurers did not. The FTCA waives the United States’ sovereign immunity for tort actions and allows plaintiffs to sue in district court if they "first give the appropriate federal agency the opportunity to resolve the claim." Cadwalder v. United States , 45 F.3d 297, 300 (9th Cir. 1995) (citing 28 U.S.C. § 2675(a) ). "This administrative claim prerequisite is jurisdictional." Id. (citing Jerves v. United States , 966 F.2d 517, 518 (9th Cir. 1992) ). It also must be interpreted "strictly" and "in favor of the United States." Vacek v. U.S. Postal Serv. , 447 F.3d 1248, 1250 (9th Cir. 2006) (quoting Jerves , 966 F.2d at 521 ). The purpose of the requirement is "to encourage administrative settlement of claims against the United States and thereby to prevent an unnecessary burdening of the courts." Holloway v. United States , No. 2:12-cv-02120-MCE-CKD, 2014 WL 1747467, at *4 (E.D. Cal. Apr. 29, 2014) (quoting Jerves , 966 F.2d at 520 ).

Although the Ninth Circuit has stated that the FTCA's exhaustion prerequisite "admits to no exceptions," Vacek , 447 F.3d at 1250, some courts have nonetheless allowed a subrogee to assert an FTCA claim when only its subrogor had filed an administrative claim. In Executive Jet Aviation v. United States , 507 F.2d 508, 516 (6th Cir. 1974), the Sixth Circuit held that this complied with the FTCA because "the subrogee stands in the shoes of the subrogor." The court also reasoned that tolling the statute of limitations for the subrogee made sense because the subrogor's administrative claim gave the United States "sufficient notice to begin assembling witnesses and evidence in preparation for a defense on the merits." Id. The Ninth Circuit followed Executive Jet ’s holding in Cummings v. United States , 704 F.2d 437, 439 (9th Cir. 1983).

The Ninth Circuit has more recently expressed doubts about Executive Jet ’s holding. In Cadwalder v. United States , the court observed in dicta that Executive Jet "may conflict with the Supreme Court's demand for ‘strict adherence to the [FTCA's] procedural requirements.’ " 45 F.3d at 302 n.4 (quoting McNeil v. United States , 508 U.S. 106, 112, 113 S.Ct. 1980, 124 L.Ed.2d 21 (1993) ). One district court has agreed with Cadwalder ’s concerns and declined to apply Executive Jet . Sec. Nat. Ins. Co. v. United States , No. 2:13-CV-01594-MCE, 2014 WL 546551, at *4 (E.D. Cal. Feb. 11, 2014), aff'd , 637 F. App'x 347 (9th Cir. 2016). However, neither Cadwalder nor Security National involved situations truly analogous to Executive Jet ; the former addressed an assignment, rather than a subrogation agreement, 45 F.3d at 301-02, and in the latter neither the subrogor nor the subrogee had filed an administrative claim, 2014 WL 546551, at *4.

Here, the Court faces a situation that cannot be so easily distinguished from Executive Jet ; the parties do not dispute that the Port, the injured subrogor, filed a timely administrative claim, after which it initiated this suit along with Lexington and Enduris, the subrogees.¹ Although it has expressed doubts, the Ninth Circuit has followed Executive Jet in the past and has not explicitly rejected its reasoning, which this Court agrees with. If one party can stand in the shoes of another through a valid subrogation agreement, their claims are not only related but the same. As such, Plaintiffs complied with the FTCA's requirement that "[a]n action shall not be instituted upon a claim against the United States ... unless the claimant shall have first presented the claim to the appropriate Federal agency." 28 U.S.C. § 2675(a). Because the Port already presented the claim, an action asserting that claim may commence.

The United States does not explain how Lexington and Enduris filing their own administrative claims, which would derive entirely from the Port's, could have affected the likelihood of settlement. Nor does the United States dispute that a subrogation agreement exists between Plaintiffs.² Under these facts, dismissing Lexington and Enduris does not serve the purposes of the FTCA and is not required by its language. Consequently, the Court declines to dismiss Lexington and Enduris.

3. Subject Matter Jurisdiction under the Tucker Act

The United States contends that this Court must dismiss Plaintiffs’ breach of contract claim because the Tucker Act vests the Court of Federal Claims with exclusive jurisdiction over such claims. The Tucker Act creates jurisdiction for federal district courts over...