Opinion
CV-01-532-ST
September 10, 2001
OPINION AND ORDER
INTRODUCTION
Plaintiff, Edgar T. Numrich ("Numrich"), appearing pro se, brings this action against defendant, the United States of America ("United States"), alleging damages resulting from the actions of individual postal employees in the administration of a contract for the construction of a new post office in Absarokee, Montana. The Complaint alleges negligence (First Claim for Relief), defamation (Second Claim for Relief), and intentional interference with business relations and economic expectation (Third Claim for Relief).
All parties have consented to allow a Magistrate Judge to enter final orders and judgment in this case in accordance with FRCP 73 and 28 U.S.C. § 636(c).
Now before the court is the United States' Motion to Dismiss for lack of subject matter jurisdiction (docket #8). For the reasons set forth below, that motion is granted.
ALLEGATIONS
Numrich was a full-time advisor to his former spouse, Patricia Numrich ("Ms. Numrich"), concerning her investment real estate holdings. On June 9, 1997, Ms. Numrich entered into a contract with the United States Postal Service ("USPS") to construct a post office in Absarokee, Montana, (the "Project") which the USPS would then lease from her. At about that same time, Ms. Numrich also entered into a contract with Numrich, in exchange for his advisory services, to evenly share the profit of the Project, together with rental revenues, upon its resale. Ms. Numrich also entered into a contract with McCrumb Construction Company ("McCrumb") to act as her subcontractor-builder. Neither Numrich nor the USPS were parties to the McCrumb contract.
The USPS Contracting Officer and Project Manager undertook to supervise construction of the Project. During the course of a site visit on November 13, 1997, and without advising or consulting with either of the Numrichs, the Project Manager made an unauthorized decision to allow McCrumb to delay completion of the Project well beyond the 150-day period set forth in Ms. Numrich's contract with the USPS ("the deferred work"). The USPS Contracting Officer failed to notify the Numrichs of this decision and to authorize the deferred work as required by the terms of Ms. Numrich's contract with the USPS.
The relationship between Ms. Numrich and McCrumb eventually soured and on December 26, 1997, McCrumb attempted to rescind its contract and gave notice of its intent to claim the value of its work in quantum meruit while remaining at work on the project. On December 31, 1997, Ms. Numrich filed suit in Montana state court against McCrumb which is still pending. In March 1998, unbeknownst to either of the Numrichs and without any authority, the USPS Project Manager offered certain terms to McCrumb in return for completing the deferred work.
In April 1998, Numrich determined that McCrumb had falsified a claim for extra work on the Project which he brought to the attention of the USPS and cautioned the USPS not to negotiate with McCrumb. By dated April 24, 1998 to the USPS Project Manager ("the McCrumb letter"), McCrumb stated that it would not complete the deferred work without a release by the USPS of the money for extra work that it was claiming, including the falsified claim. The USPS did not disclose the McCrumb letter to the Numrichs. When subsequent negotiations by the USPS failed to resolve all of McCrumb's claims for extra money on the Project, the USPS demanded by letter dated May 4, 1998, that Ms. Numrich complete the deferred work or else the USPS would complete the work and abate the rental payments to Ms. Numrich under the lease for the cost. The USPS demanded a complete release of liability in return for releasing any additional sums of money, even for extra work that the USPS had requested, and then only to McCrumb and Ms. Numrich jointly.
With the deferred work on the Project remaining to be done, Mc Crumb failed to complete the Project and Ms. Numrich terminated McCrumb in early June 1998. From June 1998 through at least November 1999, the USPS communicated with McCrumb about its private negotiations with the Numrichs and their counsel. McCrumb's attorney then used those communications to discredit the Numrichs and deceitfully influence the Montana state court and the United States District Court for the District of Montana in which Numrich had filed a claim against McCabe's attorney for deceit.
The deferred work ultimately had to be completed at an additional cost to the Numrichs. Ms. Numrich has filed a claim against the USPS in the Court of Federal Claims related to the Project in which she asserts many of the same issues raised here. Numrich was a plaintiff to the USPS litigation along with Ms. Numrich, but the court dismissed Numrich as a party on January 12, 2001, because he lacked the requisite privity of contract. He filed this Complaint against the USPS on April 17, 2001.
DISCUSSION
The United States argues that this suit should be dismissed for lack of subject matter jurisdiction because the federal government has not waived its immunity from suit as to these claims.
I. Legal Standards
"It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction." United States v. Mitchell, 463 U.S. 206, 212 (1983). The United States must expressly and unambiguously waive its sovereign immunity before it may be Subject to suit. See United States v. Idaho ex rel Dir., Idaho Dep't of Water Res., 508 U.S. 1, 6 (1993). Such waivers must be construed narrowly. United States Dep't of Energy v. Ohio, 503 U.S. 607, 615 (1992).
The Federal Tort Claims Act ("FTCA"), under which Numrich's claims arise, provides a limited waiver of sovereign immunity for common law torts against federal government employees acting within the course and scope of their employment. 28 U.S.C. § 2679(b)(1). The FTCA provides that "[t]he United States shall be liable, respecting the provisions of this title relating to tort claims, in the same manner and to the same extent as a private individual under like circumstances, but shall not be liable for interest prior to judgment or for punitive damages." 28 U.S.C. § 2674. The FTCA also provides that:
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 . . . 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.28 U.S.C. § 1346(b).
However, the FTCA specifically excludes, and therefore does not waive sovereign immunity for, certain intentional torts, including "[a]ny claim arising out of . . . libel, slander, misrepresentation, deceit, or interference with contract rights." 28 U.S.C. § 2680(h). "When a claim falls within a statutory exception to the FTCA's waiver of sovereign immunity, the court is without subject matter jurisdiction to hear the case." Mundy v. United States, 983 F.2d 950, 952 (9th Cir 1993) (as amended on denial of rehearing and rehearing en banc) (citation omitted). In determining whether a claim "arises out of" one of the torts enumerated in 28 U.S.C. § 2680(h), courts examine whether the conduct upon which a plaintiff's claim is based, rather than the label attached to the claim. Sabow v. United States, 93 F.3d 1445, 1456 (9th Cir 1996) (citations omitted) ("We focus our § 2680(h) inquiry on whether conduct that constitutes an enumerated tort is `essential' to a plaintiff's claim."); Mt. Homes, Inc. v. United States, 912 F.2d 352, 356 (9th Cir 1990) ("[W]e look beyond [the complaint's] characterization [of the cause of action] to the conduct on which the claim is based."); Thomas-Lazear v. FBI, 851 F.2d 1202, 1207 (9th Cir 1988) ("This circuit looks beyond the labels used to determine whether a proposed claim is barred [by the intentional torts exception]").
II. Analysis
A. First Claim for Relief (Negligence)
Numrich's First Claim for Relief, labeled "Negligence," alleges six Counts against the USPS for: (1) "[f]ailing to notice the site-inspection on or about November 13, 1997, and allowing unauthorized deferred work on the Project;" (2) "[r]ecommending on or about March 9, 1998, that McCrumb be paid for work, including McCrumb's false claims on the Project, in return for completing the deferred work for which McCrumb had already been paid;" (3) "[a]cting on the McCrumb letter on or about April 24, 1998, without notifying" either of the Numrichs; (4) "[d]emanding on or about May 4, 1998, that [Ms. Numrich] complete the deferred work at her (and [Numrich's]) added cost and without notifying [them] of the fact and content of the McCrumb letter;" (5) "[i]gnoring McCrumb's falsified claim between May 4, 1998, and May 24, 1999;" and (6) "[c]ommunicating directly and continuously to McCrumb's counsel . . . from January 1998, to the present, and in the face of McCrumb's litigation with" Ms. Numrich. Complaint, ¶ 62.
The United States argues that although Numrich characterizes the First Claim for Relief as one for negligence, in fact arises out of contract and/or misrepresentation and therefore is barred by the FTCA, 28 U.S.C. § 2680(h).
1. The Interference with Contract Exception
As noted above, the FTCA expressly exempts from the waiver of sovereign immunity "[a]ny claim arising out of . . . interference with contract rights." 28 U.S.C. § 2680(h). This exemption applies to both existing and prospective contracts. Art-Metal-U.S.A. v. United States, 753 F.2d 1151, 1155 (D.C. Cir 1985). Thus, the issue is whether the First Claim for Relief, despite its label, is actually a claim "arising out of" contract rights. In evaluating whether a claim in fact is exempted under the FTCA, this court must look beyond the characterization of the claim to the conduct on which the claim is based. Mt. Homes, 912 F.2d at 356.
Numrich argues that this court should apply Oregon tort law because suits brought under the FTCA are to be decided "in accordance with the law of the place where the act or omission occurred." 28 U.S.C. § 1346(b)(1) (1999); see USAir Inc. v. United States Dep't of the Navy, 14 F.3d 1410, 1412 (9th Cir 1994). Under Oregon law, a defendant may be found negligent either because there existed "a status, a relationship, or a particular standard of conduct that creates, defines, or limits the defendant's duty," or because the defendant's conduct "unreasonably created a foreseeable risk to a protected interest of the kind of harm that befell the plaintiff." Fazzolari v. Portland Sch. Dist., 303 Or. 1, 17, 734 P.2d 1326, 1336 (Or 1987). The United States, however, argues that the law of Montana may apply. This court need not decide that issue, however, as it must first determine whether the court has subject matter jurisdiction over the claims.
Here, the alleged underlying conduct consists of actions taken by the USPS with respect to various aspects of the Project which reduced the profit Numrich anticipated receiving as a result of his contract with Ms. Numrich. Numrich complains of the manner in which the USPS dealt with Ms. Numrich's subcontractor, McCrumb. His allegations all involve actions by USPS administering its contract with Ms. Numrich that, in one way or another, interfered with the contract between Ms. Numrich and McCrumb by increasing the cost to Ms. Numrich. Either the USPS allowed McCrumb to defer work, recommended that McCrumb be paid for work, secretly negotiated with McCrumb, ignored McCrumb's falsified claim, or made unauthorized disclosures to McCrumb's attorney. Numrich's harm is simply an unintended by-product of that interference. The FTCA expressly bars such an interference with contract claim.
Numrich counters that the First Claim for Relief alleges only negligent acts by USPS employees which are separate and apart from the contractual relationships between the parties. In support, he relies on Dorking Genetics v. United States, 76 F.3d 1261, 1265 (2nd Cir 1996), which allowed a foreign cattle buyer to sue the United States for negligently certifying that cattle purchased in New York for export to Zimbabwe met that country's health requirements. After Zimbabwean authorities discovered that an imported heifer had bovine leucosis, most of plaintiff's herd of cattle were destroyed. The Second Circuit held that "[r]ecovery is not barred by the misrepresentation exception . . . if the plaintiff alleges the breach of a cognizable duty owed to him which is `distinct from any duty to use due care in communicating information.'" Id, citing Block v. Neal, 460 U.S. 289, 297 (1983) (allowing a claim against the Farmers Home Administration for breach of a Good Samaritan duty under state law for negligently supervising construction of a house). The plaintiff cleared that jurisdictional hurdle by alleging that the United States breached its duty to prohibit the export of cattle exposed to bovine leucopsis, which was separate from a misrepresentation of the heifers' herd history in the Health Certificate. However, the court then held that plaintiff failed to state such a claim.
Dorking stressed that a plaintiff must be able to articulate a claim that is separate from the named exemptions to the FTCA in order to maintain a claim. To illustrate, it cited several related cases. For example, National Carriers, Inc., v. United States, 755 F.2d 675 (8th Cir 1985), held that the negligent failure by a USDA agent to identify and tag beef exposed to ditch water after a trucking accident was distinct from a negligent misrepresentation that separation of exposed and unexposed beef was unnecessary. Ware v. United States, 626 F.2d 1278, 1283 (5th Cir 1980), held that the negligence of government in destroying cattle that it had misdiagnosed as tubercular was distinct from a negligent misrepresentation that the cattle were diseased.
Here, in contrast, Numrich does not allege any negligence arising from a duty that is separate and distinct from the duty owed by the USPS not to interfere with Ms. Numrich's contracts. Every alleged act of negligence is also an interference with Ms. Numrich's contract with McCrumb which, in turn, adversely affected her contract with Numrich. Numrich alleges no duty owed by the USPS to him apart from its contractual duty to Ms. Numrich. At best, Numrich has alleged that the USPS negligently interfered with Ms. Numrich's contracts. However, a negligent interference with contract claim also is exempt under the FTCA. See Thomas-Lazear, 851 F.2d at 1207 (noting same analysis for intentional and negligent commission of enumerated torts). Therefore, the First Claim for Relief is dismissed.
2. The Misrepresentation Exception
Furthermore, to the extent that these Counts allege that USPS employees made misrepresentations to Numrich or to McCrumb, the FTCA also bars that claim. The United States' waiver of sovereign immunity does not apply to "any claim arising out of . . . misrepresentation." 28 U.S.C. § 2860(h). The misrepresentation exception is broadly construed. United States v. Neustadt, 366 U.S. 696, 702 (1961). It applies to negligent, as well as intentional, misrepresentations (Block, 460 US at 295) and applies to claims of negligence both in the misrepresentation and in the conduct underlying the misrepresentation. Dorking Genetics, 76 F.3d at 1264, citing Neustadt, 366 U.S. at 706-07.
B. Second Claim for Relief (Defamation)
Numrich's Second Claim for Relief, labeled "Defamation," includes three Counts: (1) "[c]ommunications to McCrumb's counsel . . . were defamatory to [the Numrichs'] interests by virtue of including unsupported allegations, [and] false and misleading statements;" (2) "[c]ommunications to McCrumb's counsel . . . without the knowledge of [the Numrichs] of the McCrumb letter . . . [which] contained false and misleading statements, and were defamatory to [the Numrichs'] interests;" and (3) "[c]ontact to McCrumb's counsel . . . of the fact of Plaintiff's filing of an administrative claim against USPS . . . [which] was done with improper purpose, and improper means . . . and was defamatory to [the Numrichs'] interests." Complaint, ¶ 64.
The United States argues that these allegations are best characterized as claims "arising out of . . . libel, slander [or] misrepresentation," all of which are barred by 28 U.S.C. § 2680(h).
1. Libel or Slander
Express language in the FTCA retains sovereign immunity for claims of "libel" and "slander," but not "defamation." See 28 U.S.C. § 2680(h). Numrich argues strenuously that a defamation claim is substantively different than a claim of libel or slander. He contends that the three words do not have the same legal meaning and definition, citing Black's Law Dictionary for support. For purposes of the FTCA, he is wrong.
Defamation, libel, and slander all share the same essential characteristics, namely false or misleading communications damaging the reputation of the plaintiff. No FTCA decision makes the distinction drawn by Numrich between defamation on the one hand, and libel and slander on the other. Instead, numerous courts have dispensed with claims such as this one under the FTCA, whether those claims were characterized as "defamation," "libel," or "slander." See eg, Siegert v. Gilley, 500 U.S. 226, 234 (1991) (noting the exemption in the FTCA for "defamation"); Sabow, 93 F.3d at 1456 (noting that "defamation" is an excepted tort under 29 U.S.C. § 2680(h)).
Furthermore, this court "looks beyond the labels used to determine whether a proposed claim is barred." Thomas-Lazear, 851 F.2d at 1207. In so doing, this court concludes that all three Counts comprising Numrich's Second Claim for Relief are best viewed as "arising out of . . . libel, slander, [or] misrepresentation" and therefore are barred by 28 U.S.C. § 2680(h).
The alleged conduct at issue involves communications made by the USPS to McCrumb's counsel concerning Numrich or Ms. Numrich that were either false, misleading, or "improper." Libel, slander, and the like involve exactly the same sort of claims. The focus must be on "whether conduct that constitutes an enumerated tort is `essential' to a plaintiff's claim." Sabow, 93 F.3d at 1456, citing Mt. Homes, Inc., 912 F.2d at 356. Here, harmful communication, the heart of a defamation claim, is also "essential" to Numrich's Second Claim for Relief. As the Eighth Circuit noted, "[i]f the gravamen of [plaintiff's] complaint is that the [defendant United States] communicated defamatory material to Continental, then his claim falls within the libel and slander exception to the FTCA." Moessmer v. United States, 760 F.2d 236, 237-38 (8th Cir 1985).
To the extent that Numrich argues that, elsewhere, his Complaint alleges injury absent communication, this court agrees. However, those allegations are more applicable to Numrich's other claims for relief, which do not require the element of a harmful communication to a third party injuring the plaintiff. As explained above, the Second Claim for Relief is entitled "defamation" and primarily involves damage from false or misleading statements made to a third party.
2 Misrepresentation
As just explained, the Second Claim for Relief is premised on false statements made by the USPS to McCrumb or its lawyer, which ultimately injured Numrich. While these allegations certainly arise from charges of defamation, they also may be characterized as arising from misrepresentations. To that extent, this claim is also be barred by 28 U.S.C. § 2680(h). Furthermore, to the extent that these claims could in part be characterized as claims for damages from commercial decisions based upon false or misleading information provided by the government, they also are barred by the misrepresentation exception. See Frigard v. United States, 862 F.2d 201, 202-03 (9th Cir 1988).
C. Third Claim for Relief (Interference with Business Relations and Economic Expectation)
Numrich's Third Claim for Relief includes seven Counts alleging that the USPS: (1) deferred work on the Project; (2) recommended "that McCrumb be paid for work, including McCrumb's false claims on the Project, in return for completing the deferred work;" (3) acted "on the McCrumb letter on or about April 24, 1998, without notifying" the Numrichs; (4) demanded "on or about May 4, 1998, that [Ms. Numrich] complete the deferred work at her (and therefore [Numrich's]) cost, and without notifying [the Numrichs] of the fact and content of the McCrumb letter;" (5) ignored "McCrumb's falsified claim between May 4, 1998, and May 24, 1999;" (6) contacted McCrumb's counsel "despite, and in the face of, the adversarial nature of the state case;" and (7) answered an inquiry from McCrumb's attorney "on or about February 19, 1999, concerning the availability of additional money to McCrumb . . . [which] aggravated a resolution of the state case litigation." Complaint, ¶ 67. All of these acts allegedly interfered with Numrich's "business relationship and economic expectation by increasing the costs of the Project," which reduced Numrich's profit upon sale of the Project and increased his administrative costs. Id.
The USPS contends that because all of these actions are barred by the FTCA exemption for claims "arising out of . . . interference with contract rights." 28 U.S.C. § 2680(h).
1. Interference with Contract
The Third Claim for Relief does not specifically allege that the USPS interfered with any contract. Instead it carefully sidesteps the FTCA bar by alleging only that the USPS interfered with Numrich's "business relationship and economic expectation." Nevertheless, this court must look "beyond the labels used to determine whether a proposed claim is barred." Thomas-Lazear, 851 F.2d at 1207. Doing so, it is evident that all of these allegations concern actions undertaken by the USPS that interfere with contract rights between the various parties. Absent the alleged interference with the contract between Ms. Numrich and McCrumb, which increased the cost to Ms. Numrich, Numrich would suffer no loss. As far as the FTCA is concerned, the government is given a free hand to interfere with contracts. Thus, the Third Claim for Relief is barred by the FTCA provision exempting "[a]ny claim arising out of . . . interference with contract rights." 28 U.S.C. § 2680(h).
Not to be undone, Numrich argues that the exemption applies only to inference with contracts to which the United States is a party and that here, in contrast, the USPS was not a party to his contract with Ms. Numrich. This argument lacks merit. In Art-Metal-U.S.A., 753 F.2d at 1154 n 4, the government was not a party to any existing contract with the plaintiff. The relevant potential contracts were between the plaintiff and third parties, such as creditors and other buyers. The court explained that the duty the government allegedly breached "is the duty not to interfere with Art Metal's economic relationship with third parties. That duty is the same as the duty underlying a claim for interference with contract rights." Id at 1154 (emphasis added). Similarly, the plaintiff in Moessmer was a former CIA pilot involved in several semi-clandestine extra-judicial foreign conflicts who alleged that the government had interfered with his potential employment with Continental Airlines. Moessmer, 760 F.2d at 237. As in Art-Metal-U.S.A., the government was not a party to the relationship with which it was accused of interfering. Thus, the exemption does not distinguish between contracts to which the United States is or is not a party.
To the extent that Numrich also argues that his claim should survive based on the Oregon tort of intentional interference with economic relations, that argument too must fail. This court must be satisfied of subject matter jurisdiction over these claims before it may address the substantive nature of a tort under state law.
2. Interference with Prospective Economic Gain
Even were this court to ignore or discount the various contractual relationships vital to this claim, the Third Claim for Relief still fails under the FTCA exemption for claims arising out of contract. The substance of this claim is that the USPS somehow interfered with Numrich's future economic gain which he expected to realize through his involvement with the Project as an advisor to Ms. Numrich. Even absent contractual relationships, this is nothing more than a claim for interference with prospective economic gain or advantage, which the FTCA bars, no matter what specific words are used to describe such a tort.
In Art-Metal-U.S.A., 753 F.2d at 1155, the plaintiff's claim for interference with prospective advantage was barred under the interference with contracts exemption to the FTCA. Other courts universally have held likewise. For example, Moessmer dismissed a claim for interference with prospective or potential economic advantage because it came within the contract rights exception of the FTCA. Moessmer, 760 F.2d at 237; see also Saratoga Savings and Loan Ass'n, v. Federal Home Loan Bank of San Francisco, 724 F. Supp. 683, 688 (N.D. Cal 1989) (dismissing claims of interference with contract and a claim entitled "conspiracy to interfere with prospective economic advantage" because FTCA exception for interference with contracts is applicable to prospective contractual relations, as well as existing contracts). To hold otherwise would achieve the anomalous result that actions could proceed for interference with prospective contracts, but not for existing contracts. Moessmer, 760 F.2d at 237.
Thus, even were this court inclined to ignore the web of contracts in this case, it would still find that, in substance, Numrich alleges that the USPS interfered with his expected economic benefit. That claim is no different from the claim of interference with prospective advantage which is barred by the FTCA.
D. Conclusion
Although the Complaint lacks subject matter jurisdiction, this court is willing to provide Numrich with another opportunity to plead claims not exempted by the FTCA, especially since he requests leave to assert claims against the USPS under the Postal Reorganization Act. Whether or not he can state such a claim can be determined only by allowing him to plead it.
ORDER
For the reasons set forth above, the United States' Motion to Dismiss (docket #8) is GRANTED and Numrich's Complaint is dismissed with leave to replead. An Amended Complaint must be filed on or before September 24, 2001. Failure to timely file an Amended Complaint will result in dismissal of this action with prejudice.