Summary
holding that the majority view is that employers are not liable for theft committed by employees
Summary of this case from City of Syracuse v. Loomis Armored US, LLCOpinion
No. 03 Civ. 5055 (JFK).
September 16, 2004
Chittur Associates, P.C., Krishnan Chittur, Esq., New York, NY, for Plaintiffs C.D. of NYC Inc., and D.J. of America, Inc., d/b/a Diajewel of America.
James B. Comey, United States Attorney for the Southern District of New York, Joseph A. Pantoja, New York, New York, for Defendant United States Postal Service.
OPINION and ORDER
Background
Plaintiffs are diamond and jewelry merchants in Manhattan. Plaintiffs claim that two of their own employees conspired with two employees of the United States Postal Service ("U.S.P.S." or "Postal Service") to convert plaintiffs' jewelry. According to the complaint, plaintiffs' two employees would deliver packages of jewelry, along with an original and one copy of a manifest, to the Rockefeller Center Post Office, and the two Postal Service employees would accept the packages on behalf of the Postal Service. The Postal Service employees would indicate receipt of all packages listed on the original manifest, and the plaintiffs' employees would return that manifest to plaintiffs. However, on the duplicate manifest kept in U.S.P.S. records, the Postal Service employees would strike some of the packages and then would keep those packages for themselves. This conduct allegedly continued for nearly two years, resulting in approximately $1.5 million in jewelry never reaching plaintiffs' customers.
Plaintiffs bring claims for conversion, money had and received, unjust enrichment, negligent supervision, concerted action, and civil conspiracy. Plaintiffs seek $1.5 million in damages, plus attorneys' fees, costs, expenses, and disbursements.
The U.S.P.S. moves to dismiss plaintiffs' claims for lack of subject matter jurisdiction pursuant to Federal Rules of Civil Procedure 12 (b) (1) and 12 (h) (3), and for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12 (b) (6). For the reasons that follow, the Postal Service's motion is granted and plaintiffs' claims are dismissed.
I. 12 (b) (1) and 12 (b) (6) Standards
Federal Rule of Civil Procedure 12 (b) (1) provides for the dismissal of a complaint when the federal court lacks jurisdiction over the subject matter. Because a lack of subject matter jurisdiction renders other defenses moot, a court usually gives first consideration to a motion to dismiss under Rule 12 (b) (1). Friedman v. United States, No. 01 Civ. 7518 (LTS) (RLE), 2003 WL 1460525 at *5 (S.D.N.Y. Mar. 18, 2003); Prestop v. Hamlett, No. 99 Civ. 2747 (GBD), 2001 WL 363676 at *6 (S.D.N.Y. Apr. 12, 2001). Where the defendant challenges the legal, and not the factual, sufficiency of the plaintiff's jurisdictional allegations, the district court takes all facts alleged in the complaint as true, and draws all reasonable inferences in favor of the plaintiff. Robinson v. Gov't of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001) (citations omitted). However, when jurisdictional facts are called into question,id., "jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it." Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998) (citation omitted); Smith v. Potter, 208 F. Supp. 2d 415, 417 (S.D.N.Y. 2002) (citations omitted).
On review of a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b) (6), a court must accept the plaintiff's allegations of fact as true, and must draw all reasonable inferences in the plaintiff's favor. Potter, 208 F. Supp. 2d at 417 (citations omitted).
II. Sovereign Immunity, Consent to Suit, and Exceptions
Under the principle of sovereign immunity, "the United States may not be sued without its consent and . . . the existence of consent is a prerequisite for jurisdiction." Adeleke v. United States, 355 F.3d 144, 150 (2d Cir. 2004) (citations omitted);see Guccione v. United States, 670 F. Supp. 527, 529 (S.D.N.Y. 1987). Pursuant to the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346, 2671 et seq., the United States has consented to suit under certain limited circumstances:
[The district courts] shall have exclusive jurisdiction of civil actions on claims against the United States, for money damages, . . . for injury or loss of 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). As a further limitation to the scope of consent, § 2680 of the FTCA enumerates various exceptions to the waiver of sovereign immunity, including § 2680(b) (the "Postal Matter Exception") and § 2680(h) (the "Intentional Torts Exception"). Because the United States' consent to suit is a prerequisite for jurisdiction, claims that fall within the enumerated exceptions, or claims that do not satisfy the requirements of § 1346(b)(1), must be dismissed for lack of subject matter jurisdiction. See Dorking Genetics v. United States, 76 F.3d 1261, 1263-64 (2d Cir. 1996); Birnbaum v. United States, 588 F.2d 319, 322 (2d Cir. 1978).
Congress has also waived the Postal Service's sovereign immunity by providing, in the Postal Reorganization Act ("PRA"), that the Postal Service may "sue and be sued." 39 U.S.C. § 401(1). However, the scope of that waiver of immunity is not without limits with respect to tort claims. Specifically, § 409 (c) of the PRA limits the § 401 (1) waiver by providing that any tort claim against the Postal Service is subject to the remedies and restrictions of the FTCA. 39 U.S.C. § 409(c) ("[The FTCA] shall apply to tort claims arising out of activities of the Postal Service."); see Smith v. Potter, 187 F. Supp. 2d 93, 98 (S.D.N.Y. 2001); see also Loeffler v. Frank, 486 U.S. 549, 557, 108 S. Ct. 1965, 1970, 100 L. Ed. 2d 549 (1988) ("Congress expressly included several . . . specific limitations on the operation of the sue-and-be-sued clause [including § 409].");Franchise Tax Bd. v. United States Postal Serv., 467 U.S. 512, 519, 104 S. Ct. 2549, 2553, 81 L. Ed. 2d 446 (1984) (noting the applicability of the FTCA to the Postal Service via § 409(c));Active Fire Sprinkler Corp. v. United States Postal Serv., 811 F.2d 747, 753 (2d Cir. 1987) ("One might note that the PRA also incorporated the provisions of the [FTCA]. And by doing so, Congress explicitly has narrowed the waiver of immunity contained in the `sue or be sued' clause of section 401(1)." (citations omitted)). Tort claims brought against the Postal Service, therefore, are subject to the limitations on sovereign immunity expressed in the FTCA.
A. Postal Matter Exception
Under 28 U.S.C. § 2680(b), the government's waiver of sovereign immunity in the FTCA does not extend to "[a]ny claim arising out of the loss, miscarriage, or negligent transmission of letters or postal matter." The Court of Appeals for the Second Circuit analyzed this provision in Marine Insurance Co. v. United States, 387 F.2d 812 (2d Cir. 1967), a case involving a package of jewels that "was stolen while it was in the normal flow of mail" by a federal employee. Id. at 813, 815. The employee was apprehended and convicted, and the Second Circuit held that the Postal Matter Exception barred the plaintiff's claim for recovery against the United States. Id. at 813-14. The Second Circuit, in Birnbaum, specifically upheld the decision in Marine Insurance: "The claim in Marine Insurance was . . . [for the] "loss" [of the package] from the postal system," and therefore "fell within the postal exception."Birnbaum, 588 F.2d at 328 n. 20.
The relevant facts in this case are indistinguishable from the facts in Marine Insurance. As in Marine Insurance, the plaintiffs' packages were allegedly stolen from the mails and thus all plaintiffs' claims fall squarely within the Postal Matter Exception. For this reason alone the Court lacks jurisdiction over all plaintiffs' claims, as the root of all the claims is the conversion of the packages.
B. Intentional Torts Exception
The FTCA provides, in § 2860(h), that "[a]ny claim arising out of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights" is excepted from the FTCA's waiver of sovereign immunity — i.e., the federal government does not consent to suit for these torts or for claims arising out of these torts. While the question whether this provision bars suits for all intentional torts is open to debate,compare Guccione v. United States, 847 F.2d 1031, 1036 (2d Cir. 1988) ("[T]he United States is not liable for the intentional torts of those carrying out its business. . . ."),with Birnbaum, 588 F.2d at 328 ("Although [§ 2680 (h)] might be construed as excepting all intentional torts, the Government does not urge that reading upon us."), at the very least the enumerated torts are excepted from the waiver of sovereign immunity.
Furthermore, the statute bars claims "arising out of" the enumerated torts. The Second Circuit has repeatedly stated that claims for the enumerated torts cannot simply be clothed "in the garb of negligence," thus avoiding the restrictions of the FTCA.See Guccione, 847 F.2d at 1034 (quoting Johnson v. United States, 788 F.2d 845, 850 (2d Cir. 1986)). Indeed, the Supreme Court of the United States has held that, absent a special, independent duty of care that does not depend on the employment status of the intentional tortfeasor, a negligence claim that is based on one of the enumerated intentional torts is barred.Sheridan v. United States, 487 U.S. 392 (1988).
The Intentional Torts Exception serves as an additional barrier to several of plaintiffs' claims which, according to plaintiffs, "arise out of three torts: (a) conversion; (b) the fraudulent misrepresentations in the postal manifests; and (c) the post office's incredible negligence that permitted such clearly foreseeable misrepresentations and theft to take place repeatedly, uninterrupted, for close to two years." Plaintiffs' Memorandum in Opposition ("Pl. Mem.") at 11. To the extent that plaintiffs' claims for money had and received, unjust enrichment, negligent supervision, concerted action, and civil conspiracy arise out of the fraudulent misrepresentations in the postal manifests, those claims fall within the Intentional Torts Exception and this Court lacks jurisdiction over those claims on that basis.
III. Jurisdictional Barriers Under New York Law
Under 28 U.S.C. § 1346(b), the general jurisdictional provision of the FTCA, for a plaintiff to pursue an FTCA claim against the government, the United States must be amenable to suit as if a private person under the law of the state where the act or omission occurred. Because the alleged conversions took place in New York, New York law applies here.
A. Conversion, Civil Conspiracy, and Concerted Action
New York, like most states, recognizes the doctrine of respondeat superior, by which an employer may be vicariously liable for the torts of an employee if the employee's conduct is within the scope of his or her employment. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts §§ 69-70 (5th ed. 1984) (hereinafter Prosser). The scope of employment is "highly indefinite," as many methods, "even . . . quite improper ones, of carrying out the objectives of the employment," may be grounds for holding an employer liable for an employee's torts. See Prosser § 70.
Courts in New York are agreed, however, that theft by an employee is not within the scope of the employment, and employers are not held liable for thefts by employees. See Island Associated Coop., Inc. v. Hartmann, 500 N.Y.S.2d 315 (2d Dep't 1986); Benjamin v. Brooklyn Trust Co., 57 N.Y.S.2d 816 (2d Dep't 1945). See also Saghezi v. Reno, No. 94 Civ. 8291 (HB), 1996 WL 524338 (S.D.N.Y. Sept. 16, 1996); Int'l Fragrances, Inc. v. M.V. "San Martin I," No. 90 Civ. 6972 (LJF), 1992 WL 93220 (S.D.N.Y. Apr. 21, 1992). Instead, theft by an employee is an example of frolic and detour:
If a servant steps outside of his employment to do some act for himself, not connected with the master's business, there is no more responsibility for what he does than for the acts of any stranger. If he has no intention, not even in part, to perform any service for the employer, but intends only to further a personal end, his act is not within the scope of the employment.Prosser § 70; see Island Associated, 500 N.Y.S.2d at 316 (holding that "torts committed for personal motives unrelated to the furtherance of the employer's business" cannot be within the scope of the employment).
Furthermore, an employer who has no notice of suspicious activity and no reason for suspicion can assume that employees are performing their work with integrity. See Benjamin, 57 N.Y.S.2d at 817; Ehrich v. Guaranty Trust Co., 186 N.Y.S.2d 103, 107 (1st Dep't 1921) ("An employer is not bound to assume that an employee, whom he has no reason to suspect of dishonesty, will or may commit a crime. On the contrary, the presumption is that he will do right and not wrong." (citations omitted)).
Plaintiffs refer to Rudge v. Laidlaw-Coggeshall, Inc., 465 N.Y.S.2d 591 (2d Dep't 1983), and Sports Car Centre v. Bombard, 672 N.Y.S.2d 201 (4th Dep't 1998), as examples of cases where an employer was held liable for an employee's misappropriation of checks made payable to the employer. These two cases appear to represent a minority view in contradiction to the general view that employers are not liable for theft by employees. Also, the conduct in these cases was much closer to the scope of the employment than the conduct alleged by plaintiffs, i.e., the employees in these two cases had the authority to accept checks on behalf of their employers.
The alleged thefts committed by the Postal Service employees are not within the scope of their employment. In no way can it be said that the "business" of the Postal Service is to convert its patrons' mail, so in no way were the employees here carrying out the business of their employer. Indeed, no allegation has been made that the employees were acting out of any motive other than personal pecuniary gain.
In addition, no allegation has been made that the Postal Service had any reason to be suspicious of its employees, or to doubt the integrity of the employees' performance of their work. At best, plaintiffs draw the unreasonable conclusion that, because the alleged conversions took place over almost two years, the Postal Service must have known of the conversions. For these reasons, plaintiffs' conversion claim is not cognizable under New York law and is therefore barred by § 1346 (b) (1) of the FTCA.
Moreover, under New York law, no substantive tort of civil conspiracy exists. See Smith v. Fitzsimmons, 584 N.Y.S.2d 692, 695 (4th Dep't 1992); Falle v. Metalios, 517 N.Y.S.2d 534, 536 (2d Dep't 1987). Thus, because plaintiffs' underlying claim of conversion is not cognizable under New York law, plaintiffs' conspiracy claim is similarly barred by the FTCA.
It is unclear to the Court what sort of claim plaintiffs are attempting to assert as "concerted action." The language of the pleading is language of civil conspiracy. Because plaintiffs made no attempt to explain this cause of action in their Memorandum, and because, as best this Court can tell, the claim is essentially a civil conspiracy claim, the concerted action claim is also dismissed.
B. Negligent Supervision
While New York does recognize a cause of action for negligent hiring and supervision, "[l]iability will attach on such a claim only when the employer knew or should have known of the employee's [tortious] propensities." Yeboah v. Snapple, Inc., 729 N.Y.S.2d 32, 33 (1st Dep't 2001) (citation omitted). Where there is no showing that defendant employers knew of such propensities, or that there had been any indication that would have alerted the employer to the possibility of tortious conduct, the torts of the employee cannot be considered reasonably foreseeable and, under New York law, a negligent supervision claim must be dismissed. Id.; see Well v. Rambam, 753 N.Y.S.2d 512, 514 (2d Dep't 2002) ("A necessary element of a cause of action alleging negligent supervision . . . is that the employer knew or should have known of the employee's propensity for the conduct which caused the injury." (quotation and citation omitted)); Detone v. Bullit Courier Serv., Inc., 528 N.Y.S.2d 575, 576 (1st Dep't 1988) (reversing a jury verdict in favor of plaintiffs because of plaintiffs' failure to prove that defendant had "knowledge of the employee's propensity for the sort of behavior which caused the injured party's harm." (citation omitted)).
As noted above, no allegation has been made that the Postal Service had any reason to know of its employees' tortious propensities. This claim, therefore, cannot stand under New York law and this Court lacks jurisdiction under the FTCA.
C. Unjust Enrichment and Money Had and Received
The equitable claim of unjust enrichment will lie only if a plaintiff can show "that the defendant was enriched, that such enrichment was at plaintiff's expense, and that the circumstances were such that in equity and good conscience the defendant should return the money or property to the plaintiff." Dolmetta v. Uintah Nat'l Corp., 712 F.2d 15, 20 (2d Cir. 1983) (citation omitted). Similarly, money had and received "is an equitable cause of action premised upon unjust enrichment . . . [where] one party possesses money that in equity and good conscience [the party] ought not to retain and that belongs to another." Hamlin Beach Camping, Catering, Concessions Corp. v. State of New York, 756 N.Y.S.2d 354, 358 (3d Dep't 2003) (quotations and citations omitted).
As noted above, New York law will not hold the Postal Service liable for conversion committed by its employees where the Postal Service did not have reason to know of its employees' tortious propensities. Equity and good conscience, therefore, do not demand that the Postal Service be held accountable for the conduct of its employees who may have been unjustly enriched at plaintiffs' expense or who may possess property that belongs to plaintiffs. Thus, these claims are barred by the jurisdictional provision of the FTCA.
V. 12(b) (6)
Having found that plaintiffs' claims are not cognizable under New York law for purposes of jurisdiction under § 1346(b) (1) of the FTCA, this Court finds in the alternative, and for the same reasons, that all plaintiffs' claims should be dismissed under Federal Rule of Civil Procedure 12(b) (6).
Conclusion
This Court does not have jurisdiction, pursuant to 28 U.S.C. §§ 1346 (b) (1), 2680(b), or 2680(h), over plaintiffs' claims. Alternatively, plaintiffs fail to state claims under New York law upon which relief can be granted. Thus, all plaintiffs' claims are dismissed. The Clerk of the Court is instructed to close this case and remove it from the Court's active docket.
SO ORDERED.