McMichael v. U.S.

• Decision Date: 10 April 1985
• Docket Number: No. 83-2497,83-2497
• Parties: Carl McMICHAEL, Administrator of the Estate of Emma McMichael, Appellee, Mrs. LaMar Bartlett, et al., Appellee, Leonard Madison, Administrator of the Estate of Lula Mae Madison, Deceased, Appellee, Gertie B. Mitchell, Administrator in Succession of Estate of Eliza Walker, Deceased, Appellee, Willie Moody, Administrator of the Estate of Geraldine Moody, Deceased, Appellee, Willie E. Kelly, Administrator of the Estate of Shirley J. Kelly, Deceased, Appellee, Billy Harrison, Administrator of the Estate of Elsie Marie Harrison, Deceased, Appellee, v. UNITED STATES of America, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 303

751 F.2d 303

53 USLW 2365

Carl McMICHAEL, Administrator of the Estate of Emma McMichael, Appellee Mrs. LaMar Bartlett, et al., Appellee Leonard Madison, Administrator of the Estate of Lula Mae Madison, Deceased, Appellee Gertie B. Mitchell, Administrator in Succession of Estate of Eliza Walker, Deceased, Appellee Willie Moody, Administrator of the Estate of Geraldine Moody, Deceased, Appellee, Willie E. Kelly, Administrator of the Estate of Shirley J. Kelly, Deceased, Appellee, Billy Harrison, Administrator of the Estate of Elsie Marie Harrison, Deceased, Appellee, v. UNITED STATES of America, Appellant.

No. 83-2497.

United States Court of Appeals, Eighth Circuit.

Submitted May 18, 1984.

Decided Jan. 2, 1985.

Rehearing and Rehearing En Banc Denied April 10, 1985.

Pamela L. Wood, Justice Dept., Washington, D.C., Larry R. McCord, Asst. U.S. Atty., Fort Smith, Ark., for appellant.

Bernard Whetstone and James B. McMath, Little Rock, Ark., for appellees.

Before HEANEY, BRIGHT and JOHN R. GIBSON, Circuit Judges.

HEANEY, Circuit Judge.

These consolidated cases were filed against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. Secs. 1346, 2671-80. The Department of Defense hired an independent contractor, Celesco Industries, to produce explosive photo-flash cartridges. The plaintiffs seek to recover for deaths and injuries caused by an explosion at the Celesco munitions plant near Camden, Arkansas, on March 8, 1976. The United States brings an interlocutory appeal from the district court's order denying the United States' motion to dismiss the complaints. For the reasons set forth below, we affirm.

I. PROCEDURAL HISTORY.

This case is before us for the second time. The factual background is outlined in our first opinion, Madison v. United States, 679 F.2d 736, 737-38 (8th Cir.1982). The plaintiffs alleged the government was negligent in: 1) awarding a contract to produce a highly dangerous commodity to Celesco, which possessed neither the necessary skills nor proper facilities; 2) promulgating inadequate safety standards in the Department of Defense Contractor's Safety Manual; and 3) failing to enforce Celesco's compliance with the safety requirements set forth in the manual. The government successfully moved for summary judgment on the ground that the plaintiffs' claims were barred by the discretionary function exception to the FTCA. 521 F.Supp. 1273. 28 U.S.C. Sec. 2680(a). On appeal, we affirmed the district court concerning the first two theories of liability, but held that the discretionary function exception did not bar the plaintiffs from recovery for failure to enforce compliance with the safety requirements of the contract. We noted, however, that an important issue remained to be decided: whether under Arkansas law an employer of an independent contractor has a duty to use due care to prevent the contractor from conducting inherently dangerous or ultrahazardous activities without proper precautions. We remanded to the district court to determine this question, and if Arkansas law does recognize such a duty, to determine whether the plaintiffs can establish their claim.

On remand, the district court ruled that Arkansas law permits such a theory of recovery and denied the motion of the government to dismiss the complaints. It also ruled that its order involved a "controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the Order may materially advance the ultimate termination of the litigation." The government filed this appeal on December 19, 1983.

After the case was reargued, the United States Supreme Court decided United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines) (Varig), --- U.S. ----, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984), an FTCA case in which the Court analyzed the discretionary function exception for the first time since Dalehite v. United States, 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427 (1953). The Court held that the discretionary function exception barred a tort action against the United States government based on the Federal Aviation Administration's (FAA) adoption and implementation of a "spot-checking" program to ensure that aircraft complied with FAA safety regulations. --- U.S. at ---- - ----, 104 S.Ct. at 2767-69, 81 L.Ed.2d at 676-79. We directed the parties to file supplemental briefs concerning the effect of the Varig decision on the pending appeal.

II. ISSUES.

We must decide two issues: 1) whether the plaintiffs' remaining theory of recovery is cognizable under the FTCA in light of the discretionary function exception, and 2) if so, whether this theory is cognizable under Arkansas law.

III. DISCRETIONARY FUNCTION EXCEPTION.

The FTCA provides that the United States is liable for any "negligent or wrongful act or omission of any employee of the government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." 28 U.S.C. Sec. 1346(b). The United States cannot, however, be held liable for a discretionary function or duty performed by employees of the government. Id. Sec. 2680(a).

We noted in our prior decision that the parties stipulated for purposes of summary judgment that

Celesco did not have the requisite skills; that the facilities in question were inadequate; and that the generally recognized procedures were not followed; that the government was aware, or could have learned of the various inadequacies mentioned through its pre-award survey, its three on-sight [sic] assurance inspectors who were present throughout the operation, and through periodic spot-check inspections.

* * * that the contract with Celesco contained numerous safety regulations and requirements which the contract required Celesco to comply with; that the requirements were inadequate in some respects, and that they were not enforced by the Department of Defense.

Madison v. United States, 679 F.2d at 738 n. 3 (emphasis added).

We analyzed the governmental conduct concerning the Celesco contract, and held that the government was not completely immune from suit under the FTCA's discretionary function exception. Our rationale was as follows:

The government may not have a legal obligation to promulgate safety rules and conduct inspections for compliance. But once it has exercised its discretion to adopt such rules and to conduct safety inspections, it is obligated in circumstances such as those allegedly present here to take reasonable steps to enforce compliance with the applicable safety regulations. * * * The failure to fulfill that obligation when the interests of safety plainly mandate it is an operational level decision that is not immune from suit under the FTCA.

Id. at 741 (citations omitted).

In Varig, the Supreme Court held that the FAA was immune from suit. The Court determined that the FAA's decision to review aircraft design and manufacture for compliance with FAA safety regulations through a certification process--involving a spot-check of the manufacturer's work--was a discretionary function; and that the FAA employees' execution of the spot-check program was discretionary.

At our request, the parties filed supplemental briefs on the import of Varig. The United States argues that the decision mandates dismissal of the entire action. The plaintiffs, on the other hand, argue that Varig not only calls for affirming our prior decision allowing suit against the government for its failure to enforce Celesco's compliance with safety regulations, but also compels reversal of our decision that the plaintiffs were barred from suing the government for negligently letting the contract to Celesco.

We believe Varig is entirely consistent with our prior decision. The discretionary immunity exception does not bar the plaintiffs' suit against the government for failing to enforce the safety regulations in the contract. In Varig, the Supreme Court evaluated the government's conduct emphasizing that it is the nature and quality of the government employee's acts, not his or her status, that is important in applying the discretionary function exception. Varig, --- U.S. at ----, 104 S.Ct. at 2765, 81 L.Ed.2d at 674. According to the Court, Congress intended to protect "the discretionary acts of the Government acting in its role as a regulator of the conduct of private individuals. * * * Congress wished to prevent judicial 'second-guessing' of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort." Id. (Footnote omitted.).

In Varig, the FAA developed a system for enforcing compliance with minimum safety standards. It placed the duty of insuring compliance on the manufacturer. It only retained the responsibility for policing compliance. Thus, the manufacturer performed all inspections while the FAA reviewed the manufacturer's work by conducting spot-checks. The Supreme Court found that the decision to use this system was "plainly discretionary," explaining that "[w]hen an agency determines the extent to which it will supervise the safety procedures of private individuals, it is exercising discretionary regulatory authority of the most basic kind." Id. --- U.S. at ----, 104 S.Ct. at 2768, 81 L.Ed.2d at 678. The Supreme Court further held that the acts of the FAA employees in conducting spot-checks were also protected as discretionary activity. It reasoned that the FAA was "specifically empowered to make policy judgments regarding the degree of confidence that might reasonably be placed in a given manufacturer, the need to maximize compliance with the FAA regulations, and the efficient allocation of agency resources." Id.

There are several important differences between Varig and this case. Initially, we note that in Varig, the...