Terry v. Newell
| Decision Date | 03 October 2014 |
| Docket Number | No. CV-12-02659-PHX-DGC,CV-12-02659-PHX-DGC |
| Parties | Kent Terry, et al., Plaintiffs, v. William Newell, et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
Defendant United States has filed a motion to dismiss (Doc. 114) the crossclaim of Defendants Lone Wolf Trading Company, L.L.C. and Andre Howard (Doc. 107). The motion is fully briefed. The Court will grant in part and deny in part the United States' motion.1
On December 15, 2010, Border Patrol Agent Brian Terry was killed in the Arizona desert. See Doc. 1. Two years later, Brian Terry's parents ("Plaintiffs") sued several United States agents, Lone Wolf Trading Company, L.L.C. ("Lone Wolf"), and Lone Wolf's owner, Andre Howard. Id; Doc. 32. Plaintiffs claimed that the United States had devised a complex operation that came to be known as "Operation Fast and Furious." Doc. 1. As a part of this operation, United States agents allegedly requested Lone Wolf to sell guns to straw purchasers who then distributed the guns to Mexican drug cartels.Id. Plaintiffs alleged that the guns used to kill Brian Terry were initially acquired from Lone Wolf as a part of this operation. Id. Lone Wolf, in turn, filed a crossclaim against the United States agents, seeking indemnity and damages. Doc. 48.
In a series of orders, the Court dismissed Plaintiffs' claims against the various United States agents (Doc. 68); granted the United States' motion to substitute itself as a defendant with respect to the Lone Wolf's crossclaim (Doc. 70); and granted in part and denied in part Lone Wolf's motion to amend its answer and crossclaim (Doc. 105). This left standing Plaintiffs' state-law claims against Lone Wolf and Lone Wolf's crossclaim against the United States. The United States has now moved to dismiss Lone Wolf's crossclaim for lack of subject matter jurisdiction and failure to state a claim. Doc. 114. The United States also argues that the Court can no longer exercise supplemental jurisdiction over Plaintiffs' claims against Lone Wolf. Id.2
Lone Wolf's crossclaim recounts how federal agents approached Lone Wolf's owner, Andre Howard, and encouraged him to sell guns to particular purchasers as part of an ongoing criminal investigation. Id., ¶ 61. After several purchases, Howard asked the federal agents whether they were later retrieving the guns. Id., ¶ 64. The agents reassured Howard "that ATF was tracking the weapons and intercepting them[.]" Id., ¶ 65. Lone Wolf alleges that the federal agents in fact allowed the guns to be transferred to Mexican drug cartels. Id., ¶ 75.
During Lone Wolf and Andre Howard's initial participation in the operation, they suffered a variety of injuries. They allege that federal agents installed video cameras on their property and, without permission, operated the cameras twenty-four hours a day (id., ¶ 78); that federal agents were behind a theft of numerous guns from Lone Wolf's store (id., ¶ 81); and that federal agents performed "threat assessments" on Andre Howard in order to "harass and intimidate" him. Id., ¶¶ 83-85. Sometime later, at an unspecified date, Lone Wolf's participation in "Operation Fast and Furious" came to light. Id., ¶ 86. Because of this, Lone Wolf sustained financial and reputational losses as "legitimate gun purchasers" would no longer deal with the company. Id., ¶¶ 92, 99. Andre Howard experienced emotional distress and anxiety. Id., ¶¶ 96-98. The crossclaim also alleges that federal agents "published untrue accounts" of Lone Wolf's involvement in the operation, further damaging its reputation. Id., ¶¶ 87-88. Finally, federal agents encouraged Lone Wolf to help in the cover-up of the operation. Id., ¶¶ 89-90.
Lone Wolf has brought a claim for indemnity against any judgment Plaintiffs might win against it. Id., ¶¶ 100-08. Beyond this, the crossclaim focuses exclusively on the tort of negligence.3 Lone Wolf asserts that the United States had a duty to Lone Wolf because federal agents had agreed to prevent the transfer of guns purchased from Lone Wolf, thereby "assuming" a duty to prevent the transfer of those guns. Id., ¶¶ 109-14. Alternatively, the United States had a duty to Lone Wolf because it formed a "special relationship" with Lone Wolf. Id., ¶¶ 127-32 (citing Gibson v. Kasey, 150 P.3d 228 (Ariz. 2007)). The United States allegedly breached this duty by negligently allowing guns to be transferred to drug cartels. Doc. 107, ¶¶ 118-20. Alternatively, the United States breached its duty by failing to follow its own regulations. Id., ¶¶ 122-26.
Significantly, this negligence claim does not appear related to the injuries Lone Wolf suffered during its initial participation in the operation, namely, the improper use of video cameras, the theft of guns from Lone Wolf's store, and the performance of threatassessments. Nor does the claim appear related to the publication of "untrue accounts" of Lone Wolf's involvement (id., ¶¶ 87-88), which would more appropriately be addressed by a claim for libel or slander. Rather, the focus is on the injuries Lone Wolf suffered because federal agents negligently allowed the transfer of Lone Wolf's guns to Mexican drug cartels. See id., ¶¶ 104, 111-14, 118-21, 123. Specifically, when the public learned of the operation and Lone Wolf's participation in it, Lone Wolf and Andre Howard suffered financial, reputational, and emotional injuries. The United States has not addressed whether a negligence claim for these injuries is cognizable under Arizona law, and the Court will not do so here. Rather, the United States attacks Lone Wolf's claim on other grounds.
The United States presents four arguments in support of its motion to dismiss: (1) 28 U.S.C. § 2680(h) bars Lone Wolf's tort claim because the claim is based on misrepresentations by federal agents; (2) the exclusive-liability provision of the Federal Employees' Compensation Act bars Lone Wolf's claim for indemnity; (3) the Federal Tort Claims Act's statute of limitations bars Lone Wolf's tort claim; and (4) the Court no longer has subject matter jurisdiction over Plaintiffs' claims against Lone Wolf.
Absent a waiver, sovereign immunity shields the federal government and its agencies from suit. F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994). The Federal Tort Claims Act ("FTCA") waives the federal government's sovereign immunity for torts committed by federal employees. 28 U.S.C. §§ 1346(b), 2674. The government retains its immunity as to certain torts, however, including the tort of misrepresentation. 28 U.S.C. § 2680(h).
Sovereign immunity is preserved under § 2680(h) for claims "arising out of" both negligent and intentional misrepresentation. United States v. Neustadt, 366 U.S. 696, 702 (1961). In deciding whether a claim arises out of misrepresentation, the Court "looks beyond the labels used" by the plaintiff. Thomas-Lazear v. F.B.I., 851 F.2d 1202, 1207(9th Cir. 1988). As explained by the Supreme Court:
[T]he essence of an action for misrepresentation, whether negligent or intentional, is the communication of misinformation on which the recipient relies. Section 2680(h) thus relieves the Government of tort liability for pecuniary injuries which are wholly attributable to reliance on the Government's negligent misstatements. . . . [The section] does not bar negligence actions which focus not on the Government's failure to use due care in communicating information, but rather on the Government's breach of a different duty.
Block v. Neal, 460 U.S. 289, 296-97 (1983) (emphasis added). Although not explicitly stated, case law teaches that a claim arises out of misrepresentation when the claimant's injuries would not have occurred but for a misrepresentation. See id.; Pauly v. U.S. Dep't of Agri., 348 F.3d 1143, 1151 (9th Cir. 2003) (); Thomas-Lazear, 851 F.2d at 1207 (). Thus, the government "is liable for injuries resulting from negligence in performance of operational tasks even though misrepresentations are collaterally involved." Guild v. United States, 685 F.2d 324, 325 (9th Cir. 1982).
If Lone Wolf's claim arises out of misrepresentation, the government's sovereign immunity would bar the claim and the Court would lack subject matter jurisdiction. See F.D.I.C., 510 U.S. at 475 (). The United States' motion under Rule 12(b)(1) is a facial attack on the Court's jurisdiction, as the government "asserts that the allegations contained in the complaint are insufficient on their face to invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004); see also Savage v. Glendale Union High Sch., 343 F.3d 1036, 1040 n.2 (9th Cir. 2003) (). In a facial attack, the Court "'assume[s] plaintiff's factual allegations to be true and draw[s] all reasonable inferences in his favor.'" Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009) (quoting Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004)).
At this stage, the Court cannot say that Lone Wolf's injuries are "wholly attributable to reliance" on misrepresentations by federal agents. See Block, 460 U.S. at297. The United States reads the crossclaim as asserting that the misrepresentations by federal agents were the only reason Lone Wolf participated in the operation and suffered injuries. The alleged misrepresentations undoubtedly played an important role in Lone Wolf's decision to participate, but they were not the sole reason. Lone Wolf also asserts that it needed to be "responsive to a request by . . . federal law enforcement officers," particularly because it was a licensee of the ATF "whose officers and agents were requesting and encouraging the assistance of cross-claimants." Doc. 107, ¶ 67; see also id., ¶ 97....
To continue reading
Request your trial