05 Civ. 9294 (KMW).
March 4, 2007
OPINION AND ORDER
Plaintiffs are a corporation that buys and sells potatoes, and its president. They filed suit against Defendant United States Department of Agriculture ("USDA") for malfeasance, fraud, and breach of contract relating to the practices of USDA inspectors at the Hunts Point Terminal Market in the Bronx. The USDA moves to dismiss the Complaint for lack of subject-matter jurisdiction and failure to state a claim on which relief can be granted. Fed.R.Civ.P. 12(b)(1), (6). Because the Court concludes that it lacks jurisdiction, the Complaint is dismissed.
Because the Court concludes that it lacks subject-matter jurisdiction over any of Plaintiffs' claims, it need not consider the USDA's alternative argument that Plaintiffs have failed to state a claim for breach of contract.
"After [c]onstruing all ambiguities and drawing all inferences in a plaintiff's favor, a district court may properly dismiss a case for lack of subject matter jurisdiction under Rule 12(b)(1) if it lacks the statutory or constitutional power to adjudicate it." Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) (alteration in original) (citations and internal quotation marks omitted). Plaintiffs must prove subject-matter jurisdiction by a preponderance of the evidence.Id.
Subject-matter jurisdiction over the United States and its agencies exists only where the United States has waived its sovereign immunity. Dep't of the Army v. Blue Fox, Inc., 525 U.S. 255, 260 (1999). Sovereign immunity can be waived only by statute. Presidential Gardens Assocs. v. United States ex rel. Sec'y of HUD, 175 F.3d 132, 139 (2d Cir. 1999). If no statute authorizes Plaintiffs' claims against the USDA, then this Court lacks subject-matter jurisdiction. See FDIC v. Meyer, 510 U.S. 471, 475 (1994) ("Sovereign immunity is jurisdictional in nature.").
Plaintiffs contend that the first three causes of action in their Complaint, sounding in tort and alleging malfeasance and fraud, are authorized by the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346, 2401(b), 2671-2680. This is incorrect. These three causes of action are rooted in allegations of misrepresentation or deceit; they are thus not authorized by the FTCA, which excludes claims "arising out of . . . misrepresentation [or] deceit." Id. § 2680(h). "[T]he essence of an action for misrepresentation . . . is the communication of misinformation on which the recipient relies." Block v. Neal, 460 U.S. 289, 296 (1983).
Here, each of Plaintiffs' first three claims is based on alleged misrepresentation by the USDA of the actual state of inspected produce, notwithstanding that Plaintiffs do not use the word "misrepresentation." See United States v. Neustadt, 366 U.S. 696, 703 (1961) (approving lower court statement, in case defining "misrepresentation" under 28 U.S.C. § 2680(h), that "`[w]e must then look beyond the literal meaning of the language to ascertain the real cause of complaint'" (quoting Hall v. United States, 274 F.2d 69, 71 (10th Cir. 1959))). Plaintiffs do not distinguish, dispute, or discuss several analogous cases cited by the USDA, in which courts barred claims against the agency for improper inspection of foodstuffs on the ground that the claims were really misrepresentation claims under Section 2680(h). See Carolinas Cotton Growers Ass'n, Inc. v. United States, 785 F.2d 1195 (4th Cir. 1986) (misrepresentation claim where USDA misgraded cotton); Rich Prods. Corp. v. United States, 804 F. Supp. 1270 (E.D. Cal. 1992) (same, where USDA improperly inspected fruit); Forsythe Meats, Inc. v. USDA, 508 F. Supp. 237 (S.D.N.Y. 1981) (same, where USDA wrongly identified plaintiff's meat as contaminated).
The first cause of action, for "malfeasance," claims that the USDA "instructed its inspectors to falsify inspection reports" (Compl. ¶ 54) and to reinspect where its initial inspection found grade defects in more than 5% of potatoes (id. ¶ 56). The second cause of action, also for "malfeasance," alleges that the USDA "instructed its inspectors not to use the word `Soft' when describing produce. . . . caus[ing] the inspection reports to be inaccurate." (Id. ¶ 62.) The third cause of action, for fraud, claims that the USDA ordered inspectors to determine if a prior inspection of a produce shipment had been performed and, if so, "to make the inspection similar to the prior inspection or slightly worse." (Id. ¶ 70.) Plaintiffs acknowledge that the conduct described in the third cause of action "constitutes the intentional use of deceit by dishonest means." (Id. ¶ 74 (emphasis added).)
Although all these cases dealt with allegations of negligent rather than intentional misrepresentation, the distinction is irrelevant for purposes of 28 U.S.C. § 2680(h). The Supreme Court in Neustadt made clear that the bar on misrepresentation or deceit claims against the United States extends to intentional and negligent misrepresentations alike. Neustadt, 366 U.S. at 702.
Plaintiffs argue that their malfeasance and fraud causes of action should not be regarded as misrepresentation claims because (1) "the USDA inspectors did not misstate facts to obtain money, goods or benefits of another to which they were not entitled" and (2) "the Plaintiffs never relied upon the inspection certificates because Spinale . . . knew that the inspection certificates were inaccurate." (Pls.' Mem. of Law in Opp'n 7.) The first objection is irrelevant: the government's misrepresentation need not have been made for the purpose of pecuniary gain, given that Section 2680(h) also bars claims for negligent misrepresentation.Neustadt, 366 U.S. at 702. The facts relied upon in the second objection are time-barred by the FTCA's two-year statute of limitations, 28 U.S.C. § 2401(b), given that Plaintiffs acknowledge in their brief that they have been subjected to no inspections (fraudulent or otherwise) since 1999. (Pls.' Mem. of Law in Opp'n 10.) If, as Plaintiffs assert, they knew the certificates were inaccurate at the time of the inspections, then their claim accrued no later than 1999; plaintiff Spinale did not file a claim for damages with the USDA until January 2005. (Compl. ¶ 48.)
Plaintiffs' fourth cause of action alleges breach of contract. The United States has waived its immunity to breach of contract suits in the Tucker Act, 28 U.S.C. § 1491. However, for claims of more than $10,000, the Tucker Act vests exclusive jurisdiction in the Court of Federal Claims. See 28 U.S.C. § 1346(a)(2); id. § 1491(a)(1). Because Plaintiffs seek damages of $500,000 on their fourth cause of action (Compl. ¶ 82), this Court has no jurisdiction to entertain their claim.
The Tucker Act provides, in relevant part:
The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.28 U.S.C. § 1491(a)(1).
Plaintiffs incorrectly claim that the Tucker Act bars the Court of Federal Claims from hearing this cause of action. The Act grants the Court of Federal Claims jurisdiction over claims founded "upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort." 28 U.S.C. § 1491(a)(1) (emphasis added). Plaintiffs' fourth cause of action is founded upon an express or implied contract with the United States; it therefore falls within the Act's grant of jurisdiction.
Plaintiffs' error is grammatical. They assume that the phrase "in cases not sounding in tort" modifies two prepositional phrases: "upon any express or implied contract with the United States" and "for liquidated or unliquidated damages." The word "or" and the comma preceding it, however, show that "in cases not sounding in tort" modifies only the latter phrase.
Plaintiffs' argument that tort and contract claims should not be entertained in separate fora is moot. Plaintiffs' tort claims may not be entertained at all, so no bifurcation will be required.
For the reasons stated above, Plaintiffs' Complaint is DISMISSED. The Clerk of Court is directed to close this case. Any pending motions are moot.