Union Pacific R. v. U.S. ex rel. U.S. Army Corps of Engin.

• Decision Date: 05 January 2010
• Docket Number: No. 08-7102.,08-7102.
• Citation: 591 F.3d 1311
• Parties: UNION PACIFIC RAILROAD COMPANY, Plaintiff-Appellee, v. UNITED STATES of America, ex rel. U.S. ARMY CORPS OF ENGINEERS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

591 F.3d 1311

UNION PACIFIC RAILROAD COMPANY, Plaintiff-Appellee, v. UNITED STATES of America, ex rel. U.S. ARMY CORPS OF ENGINEERS, Defendant-Appellant.

No. 08-7102.

United States Court of Appeals, Tenth Circuit.

January 5, 2010.

Sarang V. Damle, Attorney, Appellate Staff, Civil Division (Michael F. Hertz, Acting Assistant Attorney General, Sheldon J. Sperling, United States Attorney, Thomas M. Bondy, Attorney, Appellate Staff, Civil Division, with him on the briefs), Washington, D.C., for Defendant-Appellant.

George R. Mullican (Robert D. Hart and Christopher D. Wolek, with him on the brief), Gibbs Armstrong Borochoff Mullican & Hart, P.C., Tulsa, OK, for Plaintiff-Appellee.

Before MURPHY, EBEL, and HARTZ, Circuit Judges.

HARTZ, Circuit Judge.

On May 23, 2003, a train owned and operated by the Union Pacific Railroad Company derailed when metal culverts beneath the tracks collapsed. The train had been traveling along the shoreline of Lake Eufaula, a man-made lake in eastern Oklahoma created as part of a United States Army Corps of Engineers project (the Project). Construction of the Project had required the relocation of existing railroad tracks and rail facilities belonging to the Missouri-Kansas-Texas Railroad Company, Union Pacific's predecessor-in-interest. Under a contract (the Contract) between the railroad and the government to execute the relocation, the railroad gave the government certain land and rights-of-way, and the government agreed to build new rails and rail facilities, including the culverts at issue in this case. A clause in the Contract (the Exculpatory Clause) stated that the railroad would hold harmless and release the United States from any liability arising out of the construction, operation, or maintenance of the Project.

In March 2006 Union Pacific filed suit against the United States in the United States District Court for the Eastern District of Oklahoma under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 1346(b), 2671 et seq. Union Pacific's complaint blamed the government for the derailment. It claimed (1) that the government negligently breached the Contract by installing metal culverts, which were prone to erosion, rather than culverts made of more durable reinforced concrete; and (2) that the government had negligently failed to inspect and maintain the culverts, contributing to their collapse. The government moved to dismiss the suit, arguing that the case fell under the exclusive jurisdiction of the United States Court of Federal Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1), because the action sounded in contract rather than tort. The district court denied the government's motion.

A bench trial was conducted in October 2007. The district court ruled that because the government had constructed the culverts with metal rather than reinforced concrete, it had "breached the duty established under Oklahoma law which it owed to Union Pacific through its predecessor to perform the contract with due care and engineering skill." Union Pac. R.R. Co. v. United States ex rel. U.S. Army Corps of Eng'rs, No. CIV-06-094-KEW, 2008 WL 3926395, at *8 (E.D.Okla. Aug.26, 2008). It also ruled that the government owned the land on which the culverts were constructed and therefore "had a duty to maintain the property it owned such that the railroad's operation was not affected." Id. at *11. It found that the government had breached this duty by failing to inspect or maintain the culverts. Finally, the court held that the Exculpatory Clause was unenforceable because it violated Oklahoma public policy, and it awarded Union Pacific $4,456,606.70 in damages.

We reverse. The Tucker Act deprived the district court of jurisdiction over the negligent-breach-of-contract claim because it was a contract claim under the exclusive jurisdiction of the Court of Federal Claims. And the negligent-inspection-and-maintenance claim was barred by the Exculpatory Clause, which did not violate Oklahoma public policy.

I. DISCUSSION

A. Subject-Matter Jurisdiction/Negligent-Breach-of-Contract Claim

The United States is immune from suit except when it expressly consents. See United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 63 L.Ed.2d 607 (1980). Two specific waivers of sovereign immunity are relevant in this case: the FTCA, which waives the government's immunity for tort claims, and the Tucker Act, which waives the government's immunity for, among other things, contract claims.

Union Pacific contends that jurisdiction over its claims is proper under the FTCA. The FTCA permits the United States to be sued in federal district court for damages

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 is no dispute about the exercise of FTCA jurisdiction over Union Pacific's negligent-inspection-and-maintenance claim. But the government asserts that the district court lacked jurisdiction over the negligent-breach-of-contract claim. That claim, the government argues, must be brought in the Court of Federal Claims under the Tucker Act. We agree.¹

The federal district courts and the Court of Federal Claims have concurrent jurisdiction over claims up to $10,000 "against the United States ... founded ... upon any express or implied contract with the United States." Id. § 1346(a)(2). But under the Tucker Act, the Court of Federal Claims has exclusive jurisdiction over such claims exceeding $10,000. See id. § 1491(a)(1); Normandy Apartments, Ltd. v. U.S. Dep't of Hous. & Urban Dev., 554 F.3d 1290, 1295 (10th Cir.2009).

Because Union Pacific's claim exceeds $10,000, the question before us is therefore whether Union Pacific's negligent-breach-of-contract claim is founded upon a contract (in which case jurisdiction would be proper only in the Court of Federal Claims) or should be considered a tort claim coming under the FTCA (in which case jurisdiction would be proper in federal district court). Union Pacific has pleaded its claim as one of negligence, characterizing it as a tort claim. But we are not bound by Union Pacific's characterization. See Burkins v. United States, 112 F.3d 444, 449 (10th Cir.1997) ("the Court of Federal Claims' exclusive jurisdiction may not be avoided by" artful framing of a complaint); Hall v. United States, 274 F.2d 69, 71 (10th Cir.1959) (plaintiff could not avoid the jurisdictional limits of the FTCA by characterizing his claim as one for negligence when it was really a claim for misrepresentation, which is excluded from the FTCA); LaPlant v. United States, 872 F.2d 881, 882 (9th Cir.1989) ("[T]he language of appellants' complaint, which casts its claim for relief in terms of tort rather than contract, cannot be determinative in our inquiry."), withdrawn, replaced on reh'g, 916 F.2d 1377 (9th Cir. 1989); Putnam Mills Corp. v. United States, 432 F.2d 553, 554 (2d Cir.1970) (per curiam) ("Plaintiff's attempt to classify his cause of action as a prima facie tort does not suffice to avoid the jurisdictional inhibitions on claims in deceit or contract.").

In close cases, whether to characterize a claim as one in tort or as founded on contract will depend on the purpose served by the characterization. Our analysis in this case must therefore be informed by an understanding of how and why contract claims against the government are processed differently than tort claims in the federal courts. Under the FTCA not only are tort claims handled in the various federal district courts, but also the applicable law may vary widely because the government's liability is determined under state law — the law "of the place where the act or omission occurred." 28 U.S.C. § 1346(b)(1). In contrast, contract claims are handled in a more uniform manner. To begin with, state law is not relevant to the interpretation of a federal contract; the court applies federal contract law rather than state law to determine the government's liability. See United States v. City of Las Cruces, 289 F.3d 1170, 1186 (10th Cir.2002) ("`The obligations to and rights of the United States under its contracts are governed exclusively by federal law.'" (quoting Boyle v. United Techs. Corp., 487 U.S. 500, 504, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988))); 14 Charles Alan Wright et al., Federal Practice and Procedure § 3657 & n. 30 (3d ed. 1998); 17A James Wm. Moore et al., Moore's Federal Practice ¶ 124.42 (3d ed. 2008). Moreover, decision-making authority in contract disputes is more concentrated within the judicial system. All substantial claims (those exceeding $10,000) must be litigated in the Court of Federal Claims. See 28 U.S.C. §§ 1491(a)(1), 1346(a)(2). And even though Congress has permitted claims under $10,000 to be brought in the federal district courts so that plaintiffs with these lesser claims are not burdened by having to litigate in the District of Columbia (where the Court of Federal Claims sits), see United States v. Hohri, 482 U.S. 64, 67 n. 1, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987), those claims are reviewed on appeal only in the Federal Circuit, which also hears all appeals from the Court of Federal Claims, see 28 U.S.C. § 1295(a)(2), (3); Hohri, 482 U.S. at 68, 107 S.Ct. 2246. This centralization of judicial authority in Tucker Act cases has an obvious purpose-uniformity. See Hohri, 482 U.S. at 73, 107 S.Ct. 2246 (noting Congress's "strong expressions of the need for uniformity in" Tucker Act claims). As a result, the federal government can use the same language in its contracts throughout this nation and be confident that it will have the same contractual rights and obligations everywhere.

With this understanding, we turn to the specific cause of action alleged by Union Pacific. It claims that the United...