Mark Feathers v. United States of America

Filing 47

ORDER GRANTING MOTION TO DISMISS by Magistrate Judge Paul Singh Grewal granting 37 . (psglc1S, COURT STAFF) (Filed on 12/1/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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MARK FEATHERS,
Plaintiff,

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ORDER GRANTING MOTION TO
DISMISS

v.

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(Re: Docket No. 37)

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UNITED STATES OF AMERICA,
Defendant.

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United States District Court
Northern District of California

Case No. 5:15-cv-02194-PSG

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Plaintiff Mark Feathers, individually and on behalf of all others similarly situated, alleges

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in his Amended Complaint that Defendant the United States of America violated his Fourth, Fifth,

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and Fourteenth Amendment rights.1 The United States moves to dismiss for lack of subject matter

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jurisdiction.2 Because sovereign immunity bars Feathers’ claims, and because Feathers has not

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suggested he can avoid this roadblock with any further amendment, the United States’ motion to

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dismiss is GRANTED without leave to amend.

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I.
Feathers’ claims arise from the Securities and Exchange Commission’s actions in a civil

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enforcement case against him, SEC v. SBCC.3 He alleges that the SEC violated the Generally

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Accepted Accounting Principles and Generally Accepted Audit Standards in that case, and then

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See Docket No. 31.

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See Docket No. 37.

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See Securities and Exchange Commission v. Small Business Capital
Corporation, Case No. 12-cv-03237-EJD, 2013 WL 4455850 (N.D. Cal. Aug. 16, 2013).
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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS

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based on their accounting error, improperly seized his assets in violation of the Fourth and Fifth

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Amendments.4 He also alleges a violation of the Fourteenth Amendment.5 For these

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constitutional torts, he seeks damages.6
This is not Feathers’ first time raising claims based on the SEC’s accounting in SEC v.

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SBCC. In his initial complaint, Feathers argued that the SEC’s accountant had “deliberately,

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fraudulently, and incorrectly” miscalculated certain numbers to support the claim that Feathers and

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the SBCC had made Ponzi-like payments to investors.7 Although the court granted summary

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judgment for the SEC in SEC v. SBCC without reference to this accounting calculation,8 this error

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formed the basis for Feathers’ request for relief under the Federal Tort Claims Act for professional
negligence by the SEC’s accountant, negligence by the SEC, a failure to disclose, supervisory

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United States District Court
Northern District of California

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liability for constitutional violations, false light, and negligent infliction of emotional distress.9 He

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also sought relief under the Civil Rights Act10 and the Privacy Act.11
The court granted the United States’ motion to dismiss all claims under Fed. R. Civ. P.

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12(b)(1) and 12(b)(6).12 The court held that it lacked subject matter jurisdiction over the FTCA

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claims due to the FTCA’s discretionary function exemption,13 sovereign immunity barred the

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See Docket No. 31 at ¶¶ 21, 38, 42-44, 92, 96, 101.

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See id. at ¶¶ 2, 21, 38, 96, 101.

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See Docket No. 31 at ¶ 86, p. 20.

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See Docket No. 1 at 4-5.

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See Docket No. 18 at 6.

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See Docket No. 1.

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See 42 U.S.C. § 1983.

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See 5 U.S.C. § 522a. See Docket No. 1.

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See Docket No. 30.

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See id. at 6-7.

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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS

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Section 1983 claim,14 and Feathers’ allegations failed to state a claim upon which relief could be

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granted for the Privacy Act claim.15 In light of Feathers’ pro se status, and because he had not

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previously received leave to amend, the court granted leave to amend.16
Feathers availed himself of that leave and now alleges claims for violations of his Fourth,

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Fifth, and Fourteenth Amendment rights.17 However, although Feathers’ amended complaint is

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dressed in new causes of action, largely the same body of facts lies under those new clothes. The

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Fourth and Fifth Amendment claims are based on the SEC’s calculation of the total amount of

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distributions in Feathers’ business,18 which is the same accounting calculation that Feathers’ initial

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FTCA, Section 1983, and Privacy Act claims were based on. The Fourteenth Amendment claim is

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based on the allegation that the SEC discriminated against Feathers by treating his firm differently

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United States District Court
Northern District of California

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from the other firms that they regulate.19 Feathers alleges that the SEC failed to commit adequate

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resources to investigating his firm, which resulted in the accounting error, and that they did not

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engage in meaningful discussion with his firm, as he believes they do with other firms.20 The

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United States moves to dismiss with prejudice under Rule 12(b)(1).21
II.

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This court has jurisdiction under 28 U.S.C. § 1331. The parties further consented to the

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jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and Fed. R. Civ. P.

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See id. at 7-8.

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See id. at 8.

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See id.

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See Docket No. 31 at ¶¶ 92, 96, 101

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See id. at 1, ¶¶ 1-2, 12.

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See id. at ¶¶ 3, 13.

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See id. at ¶¶ 3, 13.

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See Docket No. 37.

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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS

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72(a).22

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Rule 12(b)(1) allows defendants to move to dismiss for lack of subject matter

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jurisdiction.23 A 12(b)(1) challenge may attack either the sufficiency of the pleadings or the

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existence of jurisdiction as factual matter.24 Where a defendant presents a factual challenge to

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subject matter jurisdiction, “no presumptive truthfulness attaches to Plaintiff’s allegations, and the

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existence of disputed material facts will not preclude the trial court from evaluating for itself the

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merits of the jurisdictional claims.”25 In addition, a plaintiff has the burden of proving that

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jurisdiction exists.26
“Absent a waiver, sovereign immunity shields the Federal Government and its agencies

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from suit. Sovereign immunity is jurisdictional in nature.”27 “It is axiomatic that the United

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United States District Court
Northern District of California

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States may not be sued without its consent and that the existence of consent is a prerequisite for

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jurisdiction.”28 “The SEC is specifically immune from suit except in certain well-defined

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circumstances,”29 and “may be sued only in the limited circumstances where Congress has

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expressly waived sovereign immunity.”30 “The party who sues the United States bears the burden

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of pointing to such an unequivocal waiver of immunity.”31

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See Docket Nos. 11, 21.

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See Fed. R. Civ. P. 12(b)(1).

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See Thornhill Pub. Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979).

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Id.

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See id.

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See F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994) (internal citations omitted).

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See United States v. Mitchell, 463 U.S. 206, 212 (1983).

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Standifer v. S.E.C., 542 F. Supp. 2d 1312, 1316 (N.D. Ga. 2008) (citing SEC v. Independence
Drilling Corp., 595 F.2d 1006, 1008 (5th Cir. 1979); 15 U.S.C §§ 77v(a), 78aa).
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Standifer, 542 F. Supp. 2d at 1316 (citing United States v. Dalm, 494 U.S. 596, 608 (1990)).

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Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983).

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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS

III.

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Applying the standards as set forth above, the court holds that sovereign immunity bars

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Feathers’ claims, and the court therefore lacks subject matter jurisdiction. The Amended

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Complaint pleads claims directly under the Fourth, Fifth, and Fourteenth Amendments.32 The

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Amended Complaint does not plead causes of action arising under any statute or, more critically,

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any statutory waiver of sovereign immunity for the SEC. Nonetheless, there are three potential

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avenues for Feathers’ suit: the Administrative Procedures Act,33 the FTCA,34 and a Bivens action.

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Feathers’ claims do not satisfy the requirements of any of these waivers.
First, the APA waives sovereign immunity only for claims “seeking relief other than

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money damages.”35 Because Feathers seeks only damages,36 his claim does not fall within the

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United States District Court
Northern District of California

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APA’s waiver. Moreover, the APA provides for judicial review only of an “[a]gency action made

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reviewable by statute and [a] final agency action for which there is no other adequate remedy in a

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court.”37 Feathers has not identified any statute that makes the SEC’s actions in SEC v. SBCC

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reviewable by the court, and has not alleged a final agency action of the SEC that harmed him and

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for which he has no other adequate remedy. In other words, even if Feathers were granted leave to

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amend, he could not come within the APA’s sovereign immunity waiver by requesting injunctive

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relief as well as damages.
Second, the FTCA provides a limited waiver of sovereign immunity for a federal agency

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employee’s tortious acts.38 The waiver applies only if such torts committed in the employ of a

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See Docket No. 31 at ¶¶ 38, 101.

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See 4 U.S.C. §§ 701 et seq.

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See 28 U.S.C. §§ 2671 et seq.

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5 U.S.C. § 702.

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See Docket No. 31 at 20.

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5 U.S.C. § 704.

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See 28 U.S.C. § 1346(b).

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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS

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private person would give rise to liability under state law.39 “Constitutional torts are, by

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definition, founded on federal, not state law.”40 Since Feathers alleges claims only under the

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United States Constitution, the FTCA’s waiver of sovereign immunity does not apply.
Third, a Bivens action provides an avenue for a plaintiff to seek remedies from a federal

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agent that commits a constitutional wrong.41 However, a plaintiff cannot bring a Bivens action

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against the agency that employs the agent.42 Feathers has not named the SEC’s accountant as a

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defendant in this case. Moreover, amending his complaint to name the accountant would not

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allow Feathers to successfully present a Bivens claim, because the court previously found that

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Feathers’ injury was caused by the SEC’s decision to bring a civil enforcement action against him,

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not by the accountant’s alleged error.43
IV.

United States District Court
Northern District of California

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Because sovereign immunity bars all of Feathers’ claims, the court lacks subject matter

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jurisdiction to adjudicate his claims and GRANTS the United States’ motion to dismiss. Because

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Feathers has previously received leave to amend,44 and because he has not suggested that further

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leave to amend would solve the difficulty of sovereign immunity, further leave to amend is

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DENIED.45

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See id.; see also Pereira v. U.S. Postal Service, 964 F.2d 873 (9th Cir. 1992).

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Pereira, 964 F.2d at 876.

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See Bivens v. Six Unknown Named Agents of the Fed. Bureau of Narcotics, 403 U.S. 388
(1971).

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See Meyer, 510 U.S. at 484-86.

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See Docket No. 30 at 6-7.

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See Docket No. 30 at 8.

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See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (quoting Foman v.
Davis, 371 U.S. 178, 182 (1962)) (articulating standard for granting leave to amend).

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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS

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SO ORDERED.

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Dated: December 1, 2015
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PAUL S. GREWAL
United States Magistrate Judge

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United States District Court
Northern District of California

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Case No. 5:15-cv-02194-PSG
ORDER GRANTING MOTION TO DISMISS