Nixon v. United States

• Decision Date: 04 January 2013
• Docket Number: No. 12 C 0016.,12 C 0016.
• Citation: 916 F.Supp.2d 855
• Court: U.S. District Court — Northern District of Illinois
• Parties: Madie NIXON, Latoya Conner, David Conner, Portrice Vernon, as mother of Ariana Conner, formerly a minor, and Ariana Conner, Plaintiffs, v. UNITED STATES of America, Defendant.

916 F.Supp.2d 855

Madie NIXON, Latoya Conner, David Conner, Portrice Vernon, as mother of Ariana Conner, formerly a minor, and Ariana Conner, Plaintiffs,
v.
UNITED STATES of America, Defendant.

No. 12 C 0016.

United States District Court,
N.D. Illinois,
Eastern Division.

Jan. 4, 2013.

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Russell M. Kofoed, Law Offices Of Russell M. Kofoed, Chicago, IL, for Plaintiff.

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MEMORANDUM OPINION AND ORDER
JOHN J. THARP, JR., District Judge.

This is a negligence action filed against the United States of America (the “Government”) by a group of plaintiffs who allege that the Government failed to properly maintain and/or forward a form designating the plaintiffs as beneficiaries on a life insurance policy, causing them to lose insurance benefits to which they otherwise would otherwise have been entitled. The Government moves to dismiss pursuant to Rule 12(b)(6). For the reasons stated herein, the Court denies the Government's motion to dismiss.

FACTS¹

This litigation concerns the life insurance benefit proceeds from a Federal Employees' Group Life Insurance (“FEGLI”) policy obtained by Robert L. Conner. Conner, who was an employee of the United States Small Business Administration (“SBA”), died on July 15, 2009. At the time of his death, Conner owned a FEGLI life insurance policy in the principal sum of $702,000.

On December 15, 2000, Conner signed a designation of beneficiary form naming his son, Jadonn Harris Conner, as a 40% beneficiary; his nephew, D'Angelo Marzell Conner, as a 20% beneficiary; and his daughter, Ariana Portrice Conner, as a 40% beneficiary. The plaintiffs allege that on April 27, 2007, Conner completed and signed an updated designation of beneficiary form, altering the beneficiaries. The new form named his son, Jadonn Harris Conner, as a 21% beneficiary; his nephew, D'Angelo Conner, as a 10% beneficiary; his daughter, Ariana Portrice Conner, as a 50% beneficiary; his niece, Latoya Conner, as an 8% beneficiary; his sister, Madie Nixon, as an 8% beneficiary; and his brother, David M. Conner, as a 3% beneficiary. Ariana Portrice Conner, Latoya Conner, Madie Nixon, and David M. Conner are the plaintiffs in this lawsuit.

The plaintiffs further allege that after Conner signed the updated designation of beneficiary form, the two SBA employees who witnessed his signature, Maria Ramirez and Sheila Bartolomei, or some other SBA employee, took possession of the form. The SBA employees failed, however, to send the form to the SBA Office of Human Capital Management in Denver, or to any other appropriate office, in order for the form to take effect or for the insurer to pay the correct beneficiaries.² As a result, the insurance company paid benefits in the amounts listed on the earlier designation form executed in 2000 (which presumably had been forwarded to the appropriate office). Under that distribution, each of the plaintiffs received less than they would have received under the updated designation form from 2007; three of the plaintiffs received nothing at

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all and Ariana Conner received a 40 percent distribution rather than the 50 percent distribution to which she was entitled under the 2007 beneficiary designation.

The plaintiffs now bring suit to recover from the Government the difference between the amounts that they would have received under the 2007 designation form and the amounts they actually received under the 2000 designation form.

DISCUSSION

The Government makes three arguments in favor of dismissing the plaintiffs' complaint. First, the Government argues that the plaintiffs' de facto cause of action is for negligent misrepresentation, and that the FTCA does not waive sovereign immunity for claims arising out of misrepresentation. Second, the Government argues that the plaintiffs allege only economic damages, which are not recoverable in tort under Illinois law. Third, the Government argues that it had no duty to maintain the designation of beneficiary form, and because it had no duty, the plaintiffs cannot establish negligence. The Court rejects each of the Government's arguments, and finds that the plaintiffs have stated a claim for negligence.

I. Sovereign Immunity Is Waived.A. The FTCA Waives Sovereign Immunity Because Plaintiffs' Claim is Not for “Misrepresentation.”

The Government, as a sovereign, is immune from suit except as it consents to be sued, and the terms of its consent define the federal courts' jurisdiction to entertain suits against it. See United States v. Nordic Vill., Inc., 503 U.S. 30, 34, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992). The FTCA waives the Government's immunity for:

“claims against the United States, for money damages, ... for injury or loss or property, or personal injury or death caused by the 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. § 1346(b)(1). There are exceptions to the Government's waiver of sovereign immunity, however, including an exception for any claim arising out of “misrepresentation.” 28 U.S.C. § 2680(h). “The exception applies to both negligent and intentional misrepresentations, as well as to both affirmative acts and omissions of material fact.” Metropolitan Life Ins. Co. v. Atkins, 225 F.3d 510, 512 (5th Cir.2000). The court must “look to the essential act that spawned the damages,” not to “the manner in which a plaintiff chooses to plead her claim,” in order to determine whether the misrepresentation exception to the FTCA's waiver of sovereign immunity bars the claim. Id.

The Government argues that the Plaintiffs' claim is for the Government's “misrepresentation” concerning Conner's beneficiary designations. MTD Br. (Dkt. 17) at 5. Therefore, according to the Government, the plaintiffs' claim is for negligent misrepresentation. But this argument is misdirected. To the extent that there is a misrepresentation involved in the facts of this case, it is a misrepresentation made by the Government to the insurance company, not to the plaintiffs. If anyone relied on a representation as to the proper payee of the insurance proceeds, it was the insurer, not the plaintiffs, and the insurer is not a party to this suit. If the insurer had somehow suffered damages, it might be able to argue that the Government's negligent misrepresentation caused those damages. But the plaintiffs do not seek

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redress because of any misrepresentation by the government on which they relied; rather, they claim that the Government harmed them by failing to send the beneficiary designation form to the appropriate office—which is an operational task, not a misrepresentation—causing the insurance company to pay the wrong parties.

In Atkins, the Fifth Circuit examined a virtually identical fact pattern and determined that the plaintiffs' claims were not for negligent misrepresentation, but rather for negligent performance of an operational task.³225 F.3d at 512–13 (rejecting argument that claim was for “negligent misrepresentation” where Government failed to retain employee's life insurance beneficiary form); see also Redmond v. United States, 518 F.2d 811, 816 (7th Cir.1975) (“Where the gravamen of the complaint is the negligent performance of operational tasks, rather than misrepresentation, the government may not rely upon § 2680(h) to absolve itself of liability.”) (quoting Ingham v. Eastern Air Lines, Inc., 373 F.2d 227, 239 (2d Cir.1967)). The court stated that to determine whether a negligence claim arose “out of misrepresentation, we consider whether the focal point of the claim is negligence in the communication of (or failure to communicate) information or negligence in the performance of an operational task, with misrepresentation being merely collateral to such performance.” Atkins, 225 F.3d at 512. The Atkins court described the claim as “alleging that the United States employee failed to preserve and properly file the correct copy” of the designation form, and found that the “negligent performance of an operational task allegedly caused the harm.” Id. at 513. As in Atkins, the claim here was not one for negligent misrepresentation, but rather for a negligent action, and therefore the FTCA waives sovereign immunity.

A look at the elements necessary to prove negligent misrepresentation further confirms that the plaintiffs' de facto claim is not for negligent misrepresentation. “The elements of a negligent misrepresentation claim under Illinois law are: (1) a duty on the part of [the defendant] to communicate accurate information; (2) false statements of material fact; (3) carelessness or negligence by [the defendant] in ascertaining the truth of the statements; (4) intention to induce [the plaintiff] to act; (5) action by [the plaintiff] in reliance on the truth of the statements; and (6) damages.” F:A J Kikson v. Underwriters Labs., Inc., 492 F.3d 794, 801 (7th Cir.2007) (internal citation omitted). The plaintiffs do not allege that the Government induced them to act or that they acted in reliance on the truth of the Government's “statements.” Rather, they argue that the Government failed to maintain the proper form, which had the legal effect of preventing them from being paid as beneficiaries to Conner's life insurance policy. The plaintiffs do not allege misrepresentation, and therefore the exception to the FTCA waiver of sovereign immunity does not apply.

B. FEGLIA Also Waives Sovereign Immunity.

Though the plaintiffs argue only that the FTCA waives the Government's sovereign immunity, FEGLIA also waives sovereign immunity here. The Act states that “[t]he district courts of the United States have original jurisdiction ... of a

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civil action or claim against the United States founded on this chapter.” 5...