Clancy et al v. United States of America et al

Filing 28

ORDERED that Defendants' Motion to Dismiss 12 is GRANTED IN PART and DENIED IN PART. IT IS FURTHER ORDERED that Plaintiffs Clancy and McMullen are DISMISSED. Signed by Magistrate Judge Lynnette C Kimmins on 7/25/18. (CKS)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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JOHN CLANCY, a single man; EDWARD
MCMULLEN, a single man; and LAS
CIEN CASAS, LLC., an Arizona company,

Case No.: 4:18-CV-00011-LCK
ORDER

Plaintiffs,

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v.

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UNITED STATES OF AMERICA; and
UNITED STATES AIR FORCE,

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Defendants.

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Defendants United States of America and United States Air Force move to dismiss

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the Complaint filed by Plaintiffs John Clancy, Edward McMullen, and Las Cien Casas,

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LLC for lack of subject matter jurisdiction. (Doc. 12.) Plaintiffs filed an Objection to

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Motion to Dismiss and Defendants replied. (Docs. 13-2, 16.) Plaintiffs filed and later

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withdrew their response to Defendants’ Reply. (Docs. 17, 18.) Plaintiffs filed a Motion

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to Supplement, and the motion was granted.1 (Docs. 19, 25.) Defendants replied to the

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supplementary documents. (Doc. 26.) Both parties consented to Magistrate Judge

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Kimmins’s authority to render a final judgment. (Doc. 23.) For the reasons discussed

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below, the Court grants in part and denies in part the Motion to Dismiss.

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In their Motion to Supplement, Plaintiffs also requested oral argument on the
Motion to Dismiss. (Doc. 19.) The Court determines that it does not require oral
argument to resolve the pending motion.

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FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs filed a complaint against Defendants, asserting the Federal Tort Claim
Act (the “FTCA”), 28 U.S.C. §§ 1346(b), 2671-2680, as the basis for the Court’s
jurisdiction. (Doc. 1.) The following facts are taken from Plaintiffs’ Complaint. Plaintiffs
allege that, on or about February 8, 2016, an airman of the United States Air Force
inadvertently started a fire on the real property known as Parcel number 302-24-007 (the
“Property”) and caused damage to the Property. On March 9, 2016, Plaintiffs filed an
administrative claim with Defendants pursuant to the FTCA. On April 13, 2016,
Defendants offered Plaintiffs $2,500 to settle the claim. Plaintiffs requested

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reconsideration. On July 13, 2017, Plaintiffs’ administrative claim was denied. Plaintiffs

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sue for negligence and seek damages. The Property is owned by Las Cien Casas, LLC.

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Mr. Clancy and Mr. McMullen are the sole owners of Las Cien Casas, LLC.

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DISCUSSION

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Defendants moved to dismiss for lack of subject matter jurisdiction. First,

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Defendants argue that, because the Property is owned by Las Cien Casas, LLC, Mr.

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Clancy and Mr. McMullen have not been injured and do not have standing to sue.

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Second, Defendants contend that, although Las Cien Casas, LLC owns the Property, it

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failed to file an administrative claim with Defendants pursuant to the FTCA.

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Plaintiffs submitted to the Court: (1) a copy of the SF-95 Claim Form as originally

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submitted to Defendants; (2) a copy of the deed of the Property submitted along with the

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SF-95 Claim Form; and (3) Defendants’ settlement offer. (Doc. 25.)

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Plaintiffs Mr. Clancy and Mr. McMullen

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Because the Property is owned by Las Cien Casas, LLC, Mr. Clancy and Mr.

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McMullen have not been injured and do not have standing to sue. It is a “fundamental

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rule” that even though a stockholder owns all of the stock in a corporation, he cannot sue

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as an individual for injury to the corporation. Erlich v. Glasner, 418 F.2d 226, 228 (9th

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Cir. 1969); Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 439-40 (9th Cir.
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1979); Shell Petroleum, N.V. v. Graves, 570 F. Supp. 58, 62 (N.D. Cal), aff’d, 709 F.2d
593 (9th Cir. 1983). In responding to the Motion to Dismiss, Plaintiffs Mr. Clancy and
Mr. McMullen did not dispute Defendants’ argument based on standing. (Doc. 13-2.)
Mr. Clancy and Mr. McMullen will be dismissed.
Plaintiff Las Cien Casas, LLC
The FTCA provides that “[a]n action shall not be instituted . . . unless the claimant
shall have first presented the claim to the appropriate Federal agency and his claim shall
have been finally denied by the agency in writing and sent by certified or registered
mail.” 28 U.S.C. ' 2675(a). Administrative exhaustion is a jurisdictional prerequisite to
filing a FTCA suit. McNeil v. United States, 508 U.S. 106, 113 (1993). Federal Courts are
courts of limited jurisdiction, and the burden of establishing such jurisdiction rests upon
the party bringing the case to federal court. Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994).
Defendants argue that Las Cien Casas, LLC failed to file an administrative claim
and the Court should enforce strict adherence with the exhaustion requirement.
See McNeil, 508 U.S. at 113 (“[E]xperience teaches that strict adherence to the
procedural requirements specified by the legislature is the best guarantee of evenhanded
administration of the law.” (quoting Mohasco Corp. v. Silver, 447 U.S. 807, 826 (1980))).
Defendants note that Box 2 on the SF-95 Claim Form asks for “claimant’s personal
representative if any” and directs the filer to the instructions on the reverse, which state
that “[a] claim presented by the agent or legal representative must be presented in the
name of claimant” and that “[i]f the incident involves more than one claimant, each
claimant should submit a separate claim.” (Doc. 25-1.) The SF-95 Claim Form at issue
only listed Mr. McMullen as the Claimant, with no indication that he was filing on behalf
of the LLC or any evidence of his authority to act on behalf of the company. When asked
for the name and address of the owner, if other than the claimant, Mr. McMullen wrote

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“same as claimant.” Therefore, Defendants allege that the administrative claim was filed
on behalf of Mr. McMullen personally, not on behalf of Las Cien Casas, LLC.
Plaintiffs counter that Mr. McMullen, at all times, was acting on behalf of Las
Cien Casas, LLC, and Defendants were aware that the administrative claim was filed on
behalf of the LLC. The deed that Plaintiffs submitted to Defendants with the SF-95 Claim
Form states that the Property is owned by Las Cien Casas, LLC. The Court also reviewed
a copy of Defendants’ settlement letter to Mr. McMullen. The relevant part of
Defendants’ offer states: “I note that the property is actually owned by Las Cien Casas,
LLC. Therefore, an authorized officer will have to sign the settlement agreement even if
that officer is you, and the payment will be made to Las Cien Casas.”
The Court finds that Plaintiff Las Cien Casas, LLC met its burden with respect to
the exhaustion requirement. The exhaustion requirement serves two general purposes: to
avoid unnecessary litigation by making it possible for the government to “expedite the
fair settlement” of the claims, and to provide for a “more fair and equitable treatment” of
private parties when they have claims against the government. Shipek v. United States,
752 F.2d 1352, 1354 (9th Cir. 1985). These two purposes are served when the claim
gives the government sufficient notice to commence investigation, and the claimant
places a value on the claim. Id. The Ninth Circuit held that only “minimal notice” is
required to satisfy the exhaustion requirement. Id.; Avery v. United States, 680 F.2d 608,
611 (9th Cir. 1982) (reasoning that requiring more than minimal notice would be an
inefficient use of judicial resources and also inconsistent with the congressional purpose
of providing for a “more fair and equitable treatment” of private parties).
The Court recognizes that the FTCA is a limited waiver of sovereign immunity
and the exhaustion requirement must be interpreted strictly. McNeil, 508 U.S. at 113;
Vacek v. U.S. Postal Serv., 447 F.3d 1248, 1250 (9th Cir. 2006). However, the facts here
show that, as far as Las Cien Casas, LLC’s claim is concerned, the congressional
purposes for enacting the exhaustion requirement were well served and the “minimal

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notice” requirement was satisfied. Therefore, Las Cien Casas, LLC sufficiently
exhausted its claim.
First, despite Mr. McMullen’s failure to list Las Cien Casas, LLC in the SF-95
Claim Form, Defendants were aware that the Property was owned by Las Cien Casas,
LLC and made a settlement offer to the company. Thus, the congressional purpose of
facilitating settlement was well served. The deed submitted along with the SF-95 Claim
Form was an indication of Las Cien Casas, LLC’s claim and Mr. McMullen’s
representative capacity. Defendants’ settlement offer unequivocally stated, “I note that
the property is actually owned by Las Cien Casas, LLC,” and Defendants offered to pay
the LLC rather than Mr. McMullen. Las Cien Casas, LLC provided Defendants with
sufficient information to investigate its claim and to make a settlement offer to it. In fact,
Defendants were able to do so quickly. The administrative claim was filed in March
2016, and Defendants made an offer to Las Cien Casas, LLC in April 2016.
Second, to hold otherwise would be inconsistent with the congressional purpose of
providing for a “more fair and equitable treatment” of private parties and the “minimal
notice” requirement. A lay person need provide only a “general description of the time,
place, cause and general nature of the injury and the amount of compensation
demanded.” Goodman v. United States, 298 F.3d 1048, 1055 (9th Cir. 2002); see also
Avery, 680 F.2d at 610-11. Las Cien Casas, LLC satisfied that requirement. Although the
information was available in the instructions, Mr. McMullen may not have known that he
needed to list the LLC as the claimant in the SF-95 Claim Form. Forfeiture of the LLC’s
claim for that oversight would undermine Congress’s intent to provide fair treatment to
private parties. The deed indicated Las Cien Casas, LLC’s claim and Mr. McMullen’s
representative capacity, and it was submitted to Defendants along with the SF-95 Claim
Form. To establish jurisdiction, Mr. McMullen was not required to submit to Defendants
evidence of his authority to act on behalf of the LLC. See Blair v. IRS, 304 F.3d 861, 865
(9th Cir. 2002); Kinlichee v. United States, 929 F. Supp. 2d 951, 960 (D. Ariz. 2013)

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(finding that evidence of authority is only instructional not jurisdictional). In addition, to
find that the administrative claim was filed on behalf of Las Cien Casas, LLC is not
unfair to Defendants: Defendants received the deed at the outset, were aware of the
LLC’s claim, and made a settlement offer to the LLC rather than Mr. McMullen.

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CONCLUSION
Based on the above assessment, the Court will grant in part and deny in part
Defendants’ Motion to Dismiss. Because the Property is owned by Las Cien Casas, LLC,
Mr. Clancy and Mr. McMullen have not been injured and do not have standing to sue.
The Court will dismiss Plaintiffs Mr. Clancy and Mr. McMullen. However, the Court will
deny the motion to dismiss Las Cien Casas, LLC, as the Court finds that Las Cien Casas,
LLC satisfied the exhaustion requirement pursuant to the FTCA and the Court has proper
jurisdiction over its claim.
When a court grants dismissal, it “should grant leave to amend even if no request
to amend the pleading was made, unless it determines that the pleading could not
possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe, Inc. v. N. Cal.
Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). Plaintiffs did not contest dismissal of
Mr. Clancy or Mr. McMullen, nor did they request leave to amend their claims. Because
the dismissal as to Mr. Clancy and Mr. McMullen is based on their lack of standing and
the defect cannot be cured by allegation of additional facts, the Court will not grant
amendment at this time.

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Accordingly,
IT IS ORDERED that Defendants’ Motion to Dismiss (Doc. 12) is GRANTED
IN PART and DENIED IN PART.

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IT IS FURTHER ORDERED that Plaintiffs Clancy and McMullen are
DISMISSED.
Dated this 25th day of July, 2018.

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