JBP Acquisitions, LP v. United States ( 2000 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
AUGUST 30, 2000
________________________
THOMAS K. KAHN
CLERK
No. 99-11551
________________________
D. C. Docket No. 98-00149-1-CV-RWS
JBP ACQUISITIONS, LP,
Plaintiff-Appellant,
versus
UNITED STATES OF AMERICA, Ex Rel:
the FEDERAL DEPOSIT INSURANCE CORPORATION,
in its corporate capacity and as successor to the
RESOLUTION TRUST CORPORATION,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(August 30, 2000)
Before TJOFLAT, MARCUS and KRAVITCH, Circuit Judges.
MARCUS, Circuit Judge:
Plaintiff JBP Acquisitions, LP (“JBP”) appeals the district court’s order
dismissing its tort claims for lack of subject matter jurisdiction. The court
concluded that it did not have jurisdiction because the Plaintiff’s tort claims fell
within the “misrepresentation” exception to the Government’s waiver of sovereign
immunity in the Federal Tort Claims Act (“FTCA”). We agree and affirm the
district court’s ruling.
I.
The essential facts of this case are undisputed. JBP Acquisitions is a
Pennsylvania limited partnership that purchases real property assets and loan
portfolios secured by real estate for profit. On December 27, 1995, JBP purchased
five nonperforming loans for $355,000.00 from the Resolution Trust Corporation
(“RTC”) at an RTC auction of assets taken over from failed financial institutions.1
Among the loans purchased was one secured by low-income multi-family housing
units located on four tracts of land near the Olympic Stadium in Atlanta, Georgia
(the “Property”). JBP planned to rent the Property during the 1996 Olympic
Games and then sell the units as low-income housing.
JBP alleges that ownership of the loan secured by the Property was
1
The Federal Deposit Insurance Corporation (“FDIC”) has since succeeded the RTC. They will
be referred to collectively as “RTC/FDIC.”
2
transferred to it on January 31, 1996, the date on the Bill of Sale and Assignment
of Loans from the RTC. Under the terms of the written contract between the RTC
and JBP, the RTC was not obligated to actually deliver the loan documents to JBP
until March 15, 1996.
Upon receipt of the loan file, JBP took steps to foreclose on the
nonperforming loan in order to obtain title to the Property. At an undetermined
time either before or after JBP’s purchase of the loan pool, the Metropolitan
Atlanta Olympic Games Authority (“MAOGA”) initiated a condemnation action
on the property in the Superior Court of Fulton County. Plaintiff alleges that
during the course of these proceedings, the RTC/FDIC negotiated with MAOGA as
if it were still the owner of the property and did not notify JBP that it was
negotiating with MAOGA. On February 22, 1996, three weeks after the official
transfer date of the loan to JBP, an Award of the Special Master of the Superior
Court was entered indicating that an agreement had been reached between the
RTC/FDIC and MAOGA in which the parties consented to the Property’s
condemnation and stipulated to an award of $163,462.00 based upon an
independent appraisal of the Property. The condemnation award was funded by
Peoples Town Development Corporation, a low-income housing developer.
On May 7, 1996, the Sheriff’s sale and foreclosure measures instituted by
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JBP were completed, and JBP recorded the deed to the Property. On the same day,
MAOGA recorded its deed of title to the Property. Upon checking title just prior
to recording the foreclosure deed, JBP discovered the pending condemnation of the
Property. JBP attempted to intervene in the condemnation action asserting its
ownership interest in the Property, but MAOGA had already bulldozed the housing
units in preparation for the Olympics.
JBP then disputed ownership of the Property with Peoples Town, the group
to which MAOGA had transferred its interest. JBP ultimately quit-claimed its
interest in the Property to Peoples Town for $2,000,000.00. JBP argues, however,
that this amount does not reflect the fair market value of the Property. On January
14, 1998, JBP filed suit in district court against the RTC/FDIC under the Federal
Tort Claims Act, alleging breach of contract, conversion, trespass, negligence, and
interference with property rights. JBP sought compensatory damages in the
amount of $1.3 million, offset by the consideration already paid by People’s Town,
as well as punitive damages.
The Government moved to dismiss for lack of subject matter jurisdiction on
the grounds that JBP’s tort claims were barred by the “misrepresentation”
exception to the FTCA, and that JBP’s breach of contract claim was barred by the
Little Tucker Act, 28 U.S.C. § 1346. Alternatively, the Government argued that
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JBP’s tort claims should be dismissed for failure to state a claim upon which relief
could be granted.
On February 22, 1999, the district court granted the Government’s motion to
dismiss for lack of subject matter jurisdiction. As for the tort claims, the court
found that “all of JBP’s injuries arise not out of FDIC’s negligent performance of
operational tasks in connection with the loan transfer but, instead arise, solely out
of RTC’s failure to convey information to JBP about the pending condemnation
proceedings and out of FDIC’s misrepresentations to MAOGA that RTC still
owned an interest in the property.” Order at 4. The court held that “[h]aving found
that these claims arise solely out of misrepresentations by the Government, they
must be dismissed pursuant to § 2680(h).” Order at 4. The district court also
concluded that it lacked jurisdiction over JBP’s breach of contract claim because
the Little Tucker Act, 28 U.S.C. § 1346, provides that breach of contract claims
against the government in excess of $10,000 lie within the exclusive jurisdiction of
the United States Court of Federal Claims. Order at 5-6. JBP does not challenge
the district court’s holding as to its breach of contract claim, but does challenge the
dismissal of its tort claims.
II.
We review de novo the district court’s dismissal of an action for lack of
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subject matter jurisdiction and its interpretation and application of statutory
provisions. See Ochran v. United States, 117 F.3d 495, 499 (11th Cir. 1997); see
also Pillow v. Bechtel Constr. Inc., 201 F.3d 1348, 1351 (11th Cir. 2000).
The law at issue in this case is clearly established and not in dispute.
“Absent a waiver, sovereign immunity shields the Federal Government and its
agencies from suit.” FDIC v. Meyer, 510 U.S. 471, 475, 114 S.Ct. 996, 1000, 127
L.Ed.2d 308 (1994); see also United States v. Testan, 424 U.S. 392, 399, 96 S.Ct.
948, 953, 47 L.Ed.2d 114 (1976); United States v. Sherwood, 312 U.S. 584, 586,
61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941). The terms of the federal government’s
“consent to be sued in any court define that court’s jurisdiction to entertain the
suit.” Sherwood, 312 U.S. at 586, 61 S.Ct. at 770. The Federal Tort Claims Act
provides a limited waiver of sovereign immunity making the United States liable
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 of employment . . . .” 28 U.S.C. § 1346(b). Where
the FTCA applies, the United States may be liable for certain torts “in the same
manner and to the same extent as a private individual under like circumstances . . .
.” 28 U.S.C. § 2674.
Congress, however, “adopted several exceptions to this consent to be sued,
6
which must be strictly construed in favor of the United States.” McNeily v. United
States, 6 F.3d 343, 347 (5th Cir. 1993); see also Baum v. United States, 986 F.2d
716, 719 (4th Cir. 1993) (noting that “waiver of immunity is tempered by a rather
extensive list of exceptions”). If the alleged conduct falls within one of these
statutory exceptions, the court lacks subject matter jurisdiction over the action. See
Dalehite v. United States, 346 U.S. 15, 31, 73 S.Ct. 956, 965, 97 L.Ed. 1427(1953); Boda v. United States, 698 F.2d 1174, 1176 (11th Cir. 1983).
At issue in the present case is the “misrepresentation” exception to the
FTCA. The misrepresentation exception bars any claim “[a]rising out of . . .
misrepresentation, deceit, or interference with contract rights.” 28 U.S.C. §
2680(h). The test in applying the misrepresentation exception is whether the
essence of the claim involves the government’s failure to use due care in obtaining
and communicating information. See Block v. Neal, 460 U.S. 289, 296, 103 S.Ct.
1089, 1093, 75 L.Ed.2d 67 (1983) (explaining that “[t]he essence of an action for
misrepresentation, whether negligent or intentional, is the communication of
misinformation on which the recipient relies”); United States v. Neustadt, 366 U.S.
696, 706-07, 81 S.Ct. 1294, 1300-01, 6 L.Ed.2d 614 (1961) (holding that the
breach of the “duty to use due care in obtaining and communicating information
upon which that party may reasonably be expected to rely in the conduct of his
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economic affairs, is only to state the traditional and commonly understood legal
definition of the tort of ‘negligent misrepresentation,’ . . . which there is every
reason to believe Congress had in mind when it placed the word
‘misrepresentation’ before the word ‘deceit’ in § 2680(h)”).
The exception covers actions for negligence when the basis for the
negligence action is an underlying claim for misrepresentation. See Metz v. United
States, 788 F.2d 1528, 1534 (11th Cir. 1986) (emphasizing that a “cause of action
which is distinct from one of those excepted under 2680(h) will nevertheless be
deemed to ‘arise out of’ an excepted cause of action when the underlying
governmental conduct which constitutes an excepted cause of action is ‘essential’
to plaintiff’s claim”); Rey v. United States, 484 F.2d 45, 49 (5th Cir. 1973)
(barring a claim for negligence where the “negligently erroneous transmission of
misinformation is the crucial element in the chain of causation from defendant’s
negligence to plaintiffs’ damages);2 Mt. Homes, Inc. v. United States, 912 F.2d
352, 355 (9th Cir. 1990) (holding that plaintiff’s claim for failure to communicate
correct sales tax information “is in essence an action for negligent
misrepresentation”); Leaf v. United States, 661 F.2d 740, 742 (9th Cir. 1981)
2
Fifth Circuit decisions issued prior to October 1, 1981 are binding precedent in the Eleventh
Circuit. See Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
8
(holding plaintiff’s negligence claim barred by misrepresentation exception
because the alleged false representation was “within the chain of causative events
upon which plaintiff’s claim is founded”).
“It is the substance of the claim and not the language used in stating it which
controls” whether the claim is barred by an FTCA exception. See Gaudet v.
United States, 517 F.2d 1034, 1035 (5th Cir. 1975). Thus, a plaintiff cannot
circumvent the misrepresentation exception simply through the artful pleading of
its claims. See Atorie Air, Inc. v. Fed. Aviation Admin., 942 F.2d 954, 958 (5th
Cir. 1991) (rejecting plaintiff’s attempt to recast a misrepresentation claim as one
for breach of duty of good faith and fair dealing and explaining that “causes of
action distinct from those excepted under section 2680(h) are nevertheless deemed
to be barred when the underlying governmental conduct ‘essential’ to the
plaintiff’s claim can fairly be read to ‘arise out of’ conduct that would establish an
excepted cause of action”); Mt. Homes, 912 F.2d at 356 (analyzing whether
plaintiff’s claim fell within the misrepresentation exception and explaining that
“[a]lthough it has couched its complaint in terms of the breach of a duty to prepare
the documents adequately, we look beyond the characterization to the conduct on
which the claim is based”); Lambertson v. United States, 528 F.2d 441, 443 (2d
Cir. 1976) (explaining that “[i]n determining the applicability of the 2580(h)
9
exception, a court must look, not to the theory upon which the plaintiff elects to
proceed, but rather to the substance of the claim which he asserts”).
JBP argues that the misrepresentation exception does not bar its claims
because its claims against the Government are not grounded in
“misrepresentation,” but instead in the Government’s negligent performance of an
operational task. In Block, the Supreme Court made clear that the
misrepresentation exception “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, 460 U.S. at 297, 103 S.Ct.
at 1093-94 (holding that respondent’s claim against the government for negligent
supervision of the construction of her home was not barred by the
misrepresentation exception because the government’s “duty to use due care to
ensure that the builder adhere to previously approved plans and cure all defects
before completing construction is distinct from any duty to use due care in
communicating information to respondent”); see also Guild v. United States, 685
F.2d 324, 325 (9th Cir. 1982) (explaining that “[t]he Government is liable for
injuries resulting from negligence in performance of operational tasks even though
misrepresentations are collaterally involved. It is not liable, however, for injuries
resulting from commercial decisions made in reliance on government
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misrepresentations.”). Specifically, JBP argues that the Government was negligent
in selling it the loan securing the Property and then continuing to act as though it
had an ownership interest in the Property by negotiating a condemnation award
with MAOGA. JBP contends that its tort claims are based on the Government’s
negligent performance of a particular task, not on the Government’s
misrepresentations, and, therefore, the claims are not barred by the
misrepresentation exception.
JBP’s characterization of its claims is unpersuasive. The basis for JBP’s
claims against the Government is the Government’s misrepresentations to JBP and
MAOGA. JBP’s complaint makes clear that the Government’s failure to
communicate information to JBP about the Government’s negotiations with
MAOGA is central to its claim for damages.3 The complaint alleges that “[t]he
RTC/FDIC did not notify Plaintiff that it was negotiating with MAOGA and
PeoplesTown as if it still owned the Property, did not notify Plaintiff of the
existence of the condemnation action, and did not cease negotiations upon selling
the Property in question to Plaintiff.” Complaint, ¶ 14. Also central to JBP’s
claims is the Government’s misrepresentation to MAOGA regarding its continued
3
The misrepresentation exception encompasses failure to communicate as well as
miscommunication. See Neustadt, 366 U.S. at 706-07, 81 S.Ct. at 1300-01.
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ownership of the loan during the condemnation proceeding. While JBP contends
that the basis for its tort claims is the Government’s negligent act of continuing
negotiation with MAOGA subsequent to its sale of the ownership interest in the
Property to JBP, the basis of the Government’s negligence, in fact what makes it
negligence in the first place, is the Government’s misrepresentation to MAOGA
regarding its current ownership of the loan. It is that misrepresentation which is
the “crucial element of the chain of causation” upon which JBP’s claims are
founded. See Rey, 484 F.2d at 49; see also Leaf, 661 F.2d at 742 (failure to
provide information to plaintiffs was the misrepresentation “at the heart of
plaintiffs’ complaint, however deftly they have attempted to avoid using the
word”). Without the false representation by the Government that it was the owner
of the Property, the consent agreement in the condemnation proceedings never
would have been consummated, the Property would not have been demolished, and
JBP would have suffered no injury.
Moreover, the Plaintiff does not point to any negligence by the Government
that is independent of or in any real way removed from its misrepresentations to
JBP and MAOGA. The only “task” JBP complains of is the Government’s selling
the loan to JBP and then continuing to negotiate with MAOGA, just as though it
still had an ownership interest in the Property. Again, we emphasize that at its core
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the negligent “act” is the Government’s misrepresentation to MAOGA regarding
its ownership interest in the Property and its misrepresentation to JBP regarding its
continued negotiation in the condemnation proceedings.
JBP also suggests that its claims against the Government are not barred by
the misrepresentation exception because it does not allege that the Government
directly misrepresented any facts to JBP. As we have noted, the Government’s
failure to communicate to JBP the fact that it was engaged in condemnation
proceedings with MAOGA is central to JBP’s claims, and failure to communicate,
as well as direct miscommunication, is encompassed by the misrepresentation
exception. See Neustadt, 366 U.S. at 706-07, 81 S.Ct. at 1300-01. Moreover, it
does not matter for purposes of the misrepresentation exception whether the
misrepresentations causing JBP’s claims were made directly to it or to some third
party. See Schneider v. United States, 936 F.2d 956, 960 (7th Cir. 1991) (holding
plaintiffs’ claims, based on the government’s misrepresentation to the private
builder from whom plaintiffs bought their homes, were barred by the
misrepresentation exception); Baroni v. United States, 662 F.2d 287, 288-89 (5th
Cir. 1981) (holding plaintiff homeowners’ claims were barred by the
misrepresentation exception even though the government’s miscalculation was
communicated to the real estate developer and not to the plaintiffs directly). Thus,
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even if the Government’s misrepresentations were only to MAOGA and not to
JBP, this fact is legally irrelevant to the determination of whether JBP’s claims
against the Government are barred by the FTCA.
In short, the district court properly concluded that the underlying conduct
essential to JBP’s tort claims was not the Government’s negligent performance of a
particular task in connection with the loan transfer, but instead the Government’s
failure to convey any information to JBP about the pending condemnation
proceedings, and its misrepresentations to MAOGA regarding the Government’s
ownership interest in the Property. Accordingly, we must affirm the dismissal of
JBP’s tort claims for lack of subject matter jurisdiction.
AFFIRMED.
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