Clover v. Camp Pendleton & Quantico Housing LLC

— 1 — — 2 — — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA — 10 — 11 JASON CLOVER, et al. Case No.: 20cv567-LAB (WVG) 12 Plaintiffs, ORDER DENYING MOTION TO 13 v. DISMISS 14 CAMP PENDLETON & [DOCKET NUMBER 26] QUANTICO HOUSING LLC, et al. — 15 — Defendants. — 16 — — 17 — Plaintiffs, residents of military housing, brought this action against Camp — 18 — Pendleton & Quantico Housing, LLC; LPC Pendleton Quantico PM, LP; and — 19 — Lincoln Military Property Management, LP in California state court. They alleged — 20 — that Defendants failed to maintain the plumbing, resulting in the property’s — 21 — becoming contaminated with mold, and that they were injured as a result. — 22 — Defendants removed this action, citing federal enclave jurisdiction, federal agency — 23 — jurisdiction, and federal officer jurisdiction. — 24 — Defendants filed a motion to dismiss for lack of jurisdiction, under Fed. R. — 25 — Civ. P. 12(b)(1). (Docket no. 26.) They argue that, as government contractors — 26 — acting within the scope of Congressionally-delegated authority, they are entitled to — 27 — derivative immunity under Yearsley v. W.A. Ross Constr. Co., 309 U.S. 18 (1940) — 28 — 1 and its progeny. They also argue that they are entitled to the benefit of the 2 “discretionary function” exception to the Federal Tort Claims Act (FTCA), as 3 provided in 28 U.S.C. § 2860 (a). Plaintiffs opposed the motion. 4 The United States, though not a party, filed a statement of interest pursuant 5 to 28 U.S.C. § 517 , in the form of a brief with attached evidence. (Docket no. 43.) 6 The government takes the position that Defendants are not entitled to immunity. 7 Defendants filed a reply to the government’s statement. 8 The motion is now fully briefed and ready for decision. 9 Legal Standards 10 Defendants have challenged jurisdiction, arguing that as government 11 contractors they are entitled to derivative sovereign immunity, and that such 12 immunity is jurisdictional. It is questionable whether the type of immunity 13 Defendants rely on is truly jurisdictional. Compare Adkisson v. Jacobs Eng’g 14 Group, Inc., 790 F.3d 641 , 646–47 (6th Cir. 2015) (discussing circuit split on the 15 issue of whether Yearsley derivative immunity is jurisdictional). The parties have 16 not identified any authority binding on this Court saying clearly whether it is. 17 Assuming that immunity under Yearsley is not jurisdictional, Defendants’ 18 motion is properly considered as one brought under Fed. R. Civ. P. 12(b)(6), and 19 the Court’s review would be limited to the face of the Complaint. Unless the Court 20 converted the motion into a motion for summary judgment, it could not consider 21 any of the proffered evidence or other matters outside the pleading. See 22 Thompson v. Campbell Crossing, LLC, 2017 WL 157885 , at *1–2 (W.D. Ky., Jan. 23 13, 2017) (analyzing whether motion to dismiss based on Yearsley immunity was 24 properly treated as a 12(b)(1) or 12(b)(6) motion). If Yearsley is not jurisdictional, 25 the motion raises matters not properly considered under the 12(b)(6) standard, and 26 would be denied for that reason. See id. at *2 (construing motion as properly 27 brought under Rule 12(b)(6), and denying it). 28 / / / 1 When a defendant raises a factual challenge to the Court’s jurisdiction, the 2 Court may consider matters outside the pleading, without converting the motion to 3 a motion for summary judgment. See Kingman Reef Atoll Investments, LLC v. 4 United States, 541 F.3d 1189, 1195 (9th Cir. 2008) (citing Roberts v. Corrothers, — 5 — 812 F.2d 1173, 1177 (9th Cir. 1987)). Assuming, arguendo, that Yearsley immunity 6 is jurisdictional, the Court would deny the motion as well, as discussed below. 7 Sovereign Immunity 8 The United States enjoys sovereign immunity from suit, unless it has 9 expressly waived that immunity. See United States v. Mitchell, 463 U.S. 206 , 212 10 (1983). The FTCA provides such a waiver. See FDIC v. Meyer, 510 U.S. 471 , 475 11 (1994). Yearsley recognizes, within limitations, that acts of the United States’ 12 agents are also the acts of the United States itself. 13 Yearsley involved a claim against a federal contractor who carried out the 14 terms of its federal directive to improve navigation on the Missouri River. The 15 contractor’s liability stemmed from the fact that it had carried out the government’s 16 directions, which resulted in damage to the plaintiffs’ land, for which the plaintiffs 17 sought compensation. It was undisputed that the contractor’s work done in the river 18 bed “was all authorized and directed by the Government of the United States,” and 19 that the work was performed pursuant to an act of Congress. 309 U.S. at 20 . 20 Because the contractor was carrying out Congress’ directive pursuant to validly21 conferred authority, the contractor could not be liable. Id. at 21 . The opinion noted, 22 however, that agents of the government could be held liable where the “ground of 23 liability [was] either that he exceeded his authority or that it was not validly 24 conferred.” Id. at 20–21 (collecting cases). In other words, contractors can be liable 25 to the extent they fail to act according to government specifications. 26 The Ninth Circuit has also explained that this derivative immunity is limited 27 to cases where the contractor had no discretion, and was following government 28 specifications completely. Cabalce v. Thomas E. Blanchard & Assocs., Inc., 797 1 F.3d 720, 732 (9th Cir. 2015) (citing In re Hanford Nuclear Reservation Litig., 534 2 F.3d 986, 1001 (9th Cir. 2008)). In other words, a contractor is derivatively immune 3 only to the extent it is correctly carrying out its validly-conferred authority and is 4 following government specifications. Yearsley, 309 U.S. at 20–21; Cabalce, 797 5 F.3d at 732. To the extent the contractor exercises discretion, it is not immune. Id. 6 (because defendants designed a plan “without government control or supervision,” 7 they were not entitled to derivative immunity). 8 Not all circuits apply such a broad standard. See Adkisson 790 F.3d at 646– 9 47. In particular, the Fourth Circuit, whose decisions Defendants cite, construes 10 Yearsley immunity more broadly. See Butters v. Vance Int’l, Inc., 225 F.3d 462 , 11 466 (4th Cir. 2000) (recognizing derivative immunity for contractors who perform a 12 discretionary function within the scope of a valid government contract). But the 13 Court is bound to apply Ninth Circuit precedent. 14 Cabalce is particularly instructive and apt here. In that case, the defendants 15 had contracted with the United States to store and dispose of seized property. 16 Seized fireworks they had been storing and intended to destroy accidentally 17 exploded, killing several employees. The decedents’ representatives sued, 18 alleging that the defendants had acted negligently. The government did not 19 supervise defendants or direct their day-to-day actions, but instead relied on their 20 expertise. Because it was clear they exercised discretion, derivative sovereign 21 immunity under Yearsley was unavailable. 797 F.3d at 732. 22 Defendants contend that Cabalce’s holding has been vitiated by Campbell23 Ewald Co. v. Gomez, 577 U.S. 153 (2016), which they believe expanded immunity 24 to any government contractor acting within its validly-conferred contractual 25 authority. The purpose of granting certiorari, however, was to resolve a question 26 concerning mootness. Id. at 160 . The holding reiterated Yearsley’s holding that a 27 contractor “who simply performed as the Government directed” was entitled to 28 derivative immunity. Id. at 167 . But because the contractor unquestionably 1 disobeyed government instructions, it was clear derivative immunity was 2 unavailable. Id. at 168 . Other courts in this Circuit also treat Cabalce as still vital, 3 even after Campbell-Ewald. See, e.g., WhatsApp Inc. v. NSO Group Technologies 4 Ltd., 2020 WL 5798378 at *5 n.5, ___ F. Supp. 3d ___ (Sept. 29, 2020) (citing both 5 Cabalce and Campbell-Ewald, and treating both decisions as authoritative). 6 For the first time, Defendants raise qualified immunity, which they appear to 7 conflate with derivative sovereign immunity. (See Docket no. 44 at 3:5–13.) 8 Campbell-Ewald at 167–68 (distinguishing between qualified and derivative 9 immunity). Defendants have not shown why qualified immunity would apply here, 10 even if they had adequately raised it. See Carter v. City of Carlsbad, 799 F. Supp. 11 2d 1147, 1164 (S.D. Cal., 2011) (holding that qualified immunity did not protect 12 officers from state law negligence claims). 13 While Defendants in this case were following a general plan approved by the 14 Navy in how they maintained the housing, they were given discretion in responding 15 to most service requests. (See Mot. to Dismiss (Docket no. 26-1) at 5:13–26, 22:4– 16 16.) Defendants’ own detailed description of how they handled Plaintiffs’ service 17 calls shows they were responding to the situation in the manner they thought best. 18 Defendants’ motion contends that they are entitled to immunity if they acted 19 under validly-conferred authority and their actions were authorized by contract and 20 consistent with the contract. It is undisputed that Defendants were acting according 21 to validly-conferred authority. Defendants, in effect, are asking the Court to apply 22 out-of-circuit precedent as affording immunity because their actions are performed 23 pursuant to and consistently with a government contract — that is, where their 24 actions are permitted by the government. Under the Ninth Circuit’s holding, 25 however, derivative immunity is available only when contractors are carrying out 26 government instructions, without exercising any discretion of their own — that is, 27 where their actions are not merely permitted but directed by the government. To 28 the extent claims arise from their own discretionary activity, they are not immune. 1 Here, Plaintiffs have alleged that Defendants negligently maintained the 2 property, which permitted mold to grow, resulting in Plaintiffs’ injury. Even though 3 Defendants’ maintenance of the property was authorized by the government and 4 the government provided some guidance, it clearly was not directed by the 5 government. The fact that Defendants also seek to benefit from the discretionary 6 function exception to the FTCA only underscores this. 7 FTCA and Discretionary Function 8 Defendants suggest that the FTCA “questionably applies to government 9 contractors,” and cite In re U.S. Consol. Atmospheric Testing Litig., 820 F.2d 982 10 (9th Cir. 1987) and In re: KBR, Inc. Burn Pit Litig., 744 F.3d 326 (4th Cir. 2014). On 11 this basis, they argue that the “discretionary function” exception to liability under 12 the FTCA applies to them. They agree that the text of 28 U.S.C. § 2671 excludes 13 contractors from FTCA application. 14 The authority Defendants cite does not apply to them. In Atmospheric 15 Testing, the plaintiffs sued both the United States and certain contractors for 16 injuries caused by radiation resulting from the use and testing of atomic weapons. 17 However, 50 U.S.C. § 2783 (b)(1) (formerly 42 U.S.C. § 2212 (a)(1)) provided that 18 the FTCA was the exclusive remedy for injury due to radiation based on acts or 19 omissions of contractors carrying out atomic weapons under a contract with the 20 United States. See id., 820 F.2d at 986 (citing this provision). Because the 21 contractors fit within this statutory provision, the FTCA applied and the United 22 States was properly substituted in as the sole defendant. See id. at 992 (“Section 23 2212 is therefore a valid exercise of Congressional power. The United States must 24 be substituted as the defendant in place of the contractors, and the contractors 25 dismissed from these actions.”). 26 KBR and a number of other precedents Defendants cite in this section make 27 reference to the “military contractor” exception, which immunizes private 28 contractors providing military equipment to the United States in accordance with 1 contract specifications. See Boyle v. Utd. Techs. Corp., 487 U.S. 500, 512 (1988) 2 (adopting elements of this defense). See Hukkanen v. Air & Liquid Sys. Corp., — 3 — 2017 WL 1217075 , at *2 (C.D. Cal., Mar. 31, 2017) (citing cases limiting the military 4 contractor defense to those who design and manufacture military equipment). KBR 5 also applies the Yearsley standard which, for reasons discussed above, does not 6 immunize Defendants. 7 Although Defendants provide military housing, they do not fall within the 8 “military contractor” exception. See In re Hawaii Federal Asbestos Cases, 960 F.2d 9 806, 812 (9th Cir. 1992) (military contractor exception did not immunize 10 manufacturers of home insulation not manufactured with the military in mind); 11 Nielsen v. George Diamond Vogel Paint Co., 892 F.2d 1450, 1455 (9th Cir. 1990) 12 (holding that Boyle’s rationale did not apply to paint manufactured to further civilian 13 objectives, even if used in military project). Nor have they suggested or that some 14 other provision of law brings claims against them within the FTCA. 15 Other Relevant Statutory and Contractual Provisions 16 The parties agree that Defendants lease and operate the property as private 17 entities under the Military Housing Privatization Initiative (MHPI), 10 U.S.C. 18 §§ 2871–85. The effect of this is that the provision of housing under the MHPI is 19 no longer a government function. The private company leases land from the 20 military (here, the Navy), and is the exclusive manager of the property; the Navy 21 retains no managerial authority or responsibility. 22 The government has provided both the agreement and the ground lease. 23 Although Defendants have pointed to a Navy-approved mold management plan 24 and other Navy guidance on how to manage the property, there is nothing to 25 suggest that the government was exercising its discretion and that Defendants 26 were merely following orders as given. While the Navy approved the plan, the plan 27 was not the Navy’s. (Docket no. 26–3 (Rizzo Decl.) ¶¶ 9–10.) Defendants agree 28 that they exercised a significant amount of discretion under the mold management 1 plan and maintenance plan. (Mot. at 5:13–26, 22:4–16.) All in all, it is clear 2 Defendants exercised their own judgment, rather than merely acting on 3 government orders. It is also apparent that their judgment about how to respond 4 to maintenance requests was governed by factors other than the factors underlying 5 the “discretionary function” exception to the FTCA. While they have pointed to 6 factors they think are public policy considerations (Rizzo Decl., ¶ 10), the decisions 7 here were based on much more individualized factors. See Federico v. Lincoln 8 Military Housing, LLC, 2013 WL 5409910 , at *4, *6 (E.D. Va., Sept. 25, 2013) 9 (citing Berkovitz v. United States, 486 U.S. 531, 536 (1988)) (holding that decisions 10 about how to manage mold in military housing were not grounded in an exercise 11 of discretion). 12 In case 19cv2329-JM (MDD), Childs v. San Diego Family Housing, LLC (S.D. 13 Cal.) District Judge Miller reached the same conclusion as the Court has in this 14 Order, albeit on the basis of slightly different reasoning. (See Docket no. 34 in that 15 case.) That order is now on appeal, and Defendants have urged the Court to wait 16 for the Ninth Circuit to issue its decision before ruling on their motion. There is no 17 good reason to delay at the moment, however. If the Childs order is reversed on 18 appeal, Defendants may bring it to the Court’s attention. 19 Precedents in this area of the law are not uniform, and district courts have 20 struggled to interpret and apply some of the leading cases. Nevertheless, it 21 appears district courts uniformly reject arguments such as the ones Defendants 22 have advanced here, albeit on different grounds. In three other cases this Order 23 has cited or discussed where operators of housing under the MHPI were sued for 24 negligently managing the property — Childs, Thompson, and Federico — district 25 courts confronted arguments similar to the ones advanced here. The defendants 26 did not from Yearsley or other immunity in these cases. Although other decisions 27 depended on different reasoning, it does not appear that any court has granted a 28 12(b)(1) motion to dismiss on the legal grounds advanced here. 1 || Conclusion and Order 2 It is unclear whether Years/ey immunity is jurisdictional, but whether it is or 3 ||not, Defendants’ motion cannot succeed. If it is not jurisdictional, Defendants 4 ||cannot properly seek dismissal in a Rule 12(b)(1) motion relying on evidence. But 5 || even if it is, Defendants are not entitled to Yearsley immunity. The FTCA does not 6 || cover these claims. The motion to dismiss (Docket no. 26) is DENIED. — 7 — 8 IT IS SO ORDERED. 9 ||Dated: March 12, 2021 10 / wit 4. WY 11 Honorable Larry Alan Burns 42 United States District Judge — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —