Kelii et al v. VSE Corporation et al
Filing
68
ORDER Granting (1) Third-Party Defendant United States' Motions to Dismiss Third-Party Complaints, And (2) Plaintiffs' Motions To Strike Third-Party Complaints re 34 , 37 . Signed by JUDGE J. MICHAEL SEABRIGHT on 11/29/12. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
TERRANCE C. CABALCE, ET AL.,
GEORGE JOSEPH KELII, ET AL.,
HEATHER FREEMAN, ET AL.,
CHARLIZE LEAHEY IRVINE, ET
AL.,
)
)
)
)
)
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Plaintiffs,
)
)
vs.
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)
VSE CORPORATION, ET AL.,
)
)
Defendants.
)
________________________________ )
)
VSE CORPORATION,
)
)
Third-Party Plaintiff,
)
)
vs.
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UNITED STATES OF AMERICA, ET )
AL.,
)
)
Third-Party Defendants.
)
________________________________ )
CIVIL NO. 12-00373 JMS-RLP
CIVIL NO. 12-00376 JMS-RLP
CIVIL NO. 12-00377 JMS-RLP
CIVIL NO. 12-00391 JMS-RLP
(Related Cases)
ORDER GRANTING (1) THIRDPARTY DEFENDANT UNITED
STATES’ MOTIONS TO DISMISS
THIRD-PARTY COMPLAINTS,
AND (2) PLAINTIFFS’ MOTIONS
TO STRIKE THIRD-PARTY
COMPLAINTS
ORDER GRANTING (1) THIRD-PARTY DEFENDANT UNITED STATES’
MOTIONS TO DISMISS THIRD-PARTY COMPLAINTS; AND
(2) PLAINTIFFS’ MOTIONS TO STRIKE THIRD-PARTY COMPLAINTS
I. INTRODUCTION
This consolidated Order rules on Motions to Dismiss (and related
Motions to Strike) the Third-Party Complaints in the following four related
actions: Cabalce et al. v. VSE Corp. et al., Civ. No. 12-00373 JMS-RLP
(“Cabalce”); Kelii et al. v. VSE Corp. et al., Civ. No. 12-00376 JMS-RLP
(“Kelii”); Freeman et al. v. VSE Corp., et al., Civ. No. 12-00377 JMS-RLP
(“Freeman/Sprankle”); and Irvine et al. v. VSE Corp., et al., Civ. No. 12-00391
JMS-RLP (“Irvine”). In each of these actions, Defendant/Third-Party Plaintiff
VSE Corporation (“VSE”) asserts the same claims in its Third-Party Complaints
against Third-Party Defendant United States of America (“the United States” or
“the government”).1 Because many of the relevant pleadings and arguments are
identical, it is appropriate to issue this consolidated Order in each action.
Specifically, the court has before it (1) the United States’ Motions to
Dismiss VSE’s Third-Party Complaints; (2) related Motions by the Plaintiffs in
Cabalce, Freeman/Sprankle, and Irvine to Strike VSE’s Third-Party Complaints;
1
The Third-Party Complaints also implead Third-Party Defendant Donaldson
Enterprises, Inc. (“Donaldson”), but claims against Donaldson are not at issue in these Motions.
That is, regardless of rulings in this Order, the third-party claims against Donaldson remain.
To be precise, at issue are nearly identical First Amended Third-Party Complaints against
Donaldson and the United States in Cabalce, Kelii, and Freeman; and a similarly-identical
Third-Party Complaint (i.e., not an amended pleading) in Irvine. The court refers to the
operative pleadings as “Third Amended Complaints” whether or not they have been amended.
2
and (3) various procedural and substantive joinders in both sets of Motions. Based
on the following, the Motions are GRANTED. VSE’s Third-Party Complaints
against the United States are DISMISSED.
II. BACKGROUND
The Motions to Dismiss are brought pursuant to Federal Rules of
Civil Procedure 12(b)(1) (lack of subject matter jurisdiction) and 12(b)(6) (failure
to state a claim). Accordingly, the court begins by assuming the veracity of wellpleaded factual allegations in the Third-Party Complaints to assess whether claims
are plausible. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Further, in
addressing subject matter jurisdiction, the court may consider evidence outside the
pleadings, construed in the light most favorable to the non-moving party.2 See,
e.g., Autery v. United States, 424 F.3d 944, 956 (9th Cir. 2005) (explaining that a
court is not confined to the pleadings when addressing a Rule 12(b)(1) motion);
Dreier v. United States, 106 F.3d 844, 847 (9th Cir. 1996) (stating that, when
considering evidence in a Rule 12(b)(1) motion, courts construe disputes of fact in
2
In particular, the court has considered the June 29, 2012 Declaration of James S.
Fallon, a representative of VSE (the non-moving party) attached to VSE’s Notice of Removal in
each case. See Doc. No. 1-1, Fallon Decl. (Cabalce). This citation refers to the court’s
electronic docket in Cabalce et al. v. VSE Corp. et al., Civ. No. 12-00373 JMS-RLP. Similarly,
the court references documents in different cases by the Plaintiff’s last name in parentheses (e.g.,
“(Kelii)” refers to documents in Kelii et al. v. VSE Corp. et al., Civ. No. 12-00376 JMS-RLP).
Unless otherwise noted, the document citations refer to the Cabalce docket.
3
favor of the non-movant). Applying these principles, the court sets forth the
following factual background.
A.
Factual Background
On April 8, 2011, five people died in an explosion and fire in or near a
commercial storage facility located at 94-990 Pakela Street, Waipahu, Hawaii.
Doc. No. 1-2, Compl. ¶ 14; Doc. No. 1-1, Fallon Decl. ¶¶ 3, 43. The storage
facility “is located in a cave approximately 250 feet long and 15 feet wide,” with
“double steel doors at the entrance[.]” Doc. No. 1-2, Compl. ¶ 17 (Kelii). The
decedents -- Bryan Dean Cabalce, Justin Joseph Kelii, Robert Kevin Donor
Freeman, Neil Benjiman Sprankle, and Robert Leahey -- were employees of ThirdParty Defendant Donaldson Enterprises, Inc. (“Donaldson”). At least some of the
decedents were likely working and handling fireworks being held in the storage
facility. Id. ¶ 20, 22.3 Although the exact cause of the explosion has not yet been
determined, it is undisputed that fireworks were directly involved.
The fireworks were part of a large cache (over 1,600 cartons) that had
been forfeited to the government from two separate seizures after a joint
investigation by United States Immigration and Customs Enforcement (“ICE”), the
3
Specifically, the Kelii Complaint alleges that Justin Kelii “and five employees of
Donaldson Enterprises were working in or about the storage unit dismantling fireworks by
cutting open the casings of the fireworks with a cutting tool similar to a scissors and mixing the
gun powder removed from the casings with . . . diesel fuel.” Doc. No. 1-2, Compl. ¶ 20 (Kelii).
4
Bureau of Customs and Border Protection (“CBP”), and the Bureau of Alcohol,
Tobacco, Firearms and Explosives (“ATF”). Doc. No. 9-1, Third-Party Compl.
¶¶ 20-21, 25, 29, 35. Donaldson was a subcontractor that VSE had retained to,
among other duties, destroy the fireworks. Id. ¶¶ 21, 23; Doc. No. 1-2, Compl.
¶ 15 (Kelii). In turn, VSE was a government contractor for the Treasury Executive
Office for Asset Forfeiture (“TEOAF”), which is an office of the United States
Department of the Treasury. Doc. No. 1-1, Fallon Decl. ¶ 4.
1.
VSE’s Prime Contract with TEOAF
Among other functions, TEOAF supports federal law enforcement
agencies, such as ICE, CBP, and ATF, with maintaining chain of custody of items
seized in connection with prosecution of violations of federal law. This support
includes receiving, transporting, storing, managing, and disposing of seized or
forfeited items. Id. ¶¶ 5-11. But TEOAF does not perform these support services
directly. Instead, since 2006, it has had a multi-million-dollar4 contract with VSE
to perform the support functions on a nationwide basis. Doc. 9-1, Third-Party
Compl. ¶¶ 13-15; Doc. No. 1-1, Fallon Decl. ¶¶ 8-11 & Ex. E. “TEOAF depends
on the involvement of such contractors to carry out its functions, as TEOAF does
4
The VSE contract awarded by TEOAF on September 28, 2010 was valued at over $25
million for a seven-month period. Doc. No. 1-7, Fallon Decl. Ex. E at 2.
5
not maintain the necessary internal resources.” Doc. 9-1, Third-Party Compl. ¶ 21.
A CBP official, Eugene Relacion, confirms that “[c]ertain seized items are
managed by contractors nationwide, for further security and other types of control,
and due to limited federal resources, as was the case with the . . . fireworks at
issue” in these actions. Doc. No. 45-7, Relacion Decl. ¶ 3.
Under the contract, when the government orders consignment of
seized items, VSE cannot reject them -- it is required to accept, preserve, and
protect the items until instructed by the government to take further action (such as
to destroy them). Doc. No. 1-2, Fallon Decl. ¶¶ 16-18. Ownership of seized items,
however, is not transferred to VSE. Rather, once items are forfeited, the
government retains actual ownership. Id. ¶ 19.
VSE’s contract requires it to “provide all services, materials, supplies,
supervision, labor, and equipment, except that specified [in the contract] as
Government-furnished, to perform all property management and disposition work
set forth in [the contract].” Doc. No. 1-7, Fallon Decl. Ex. E ¶ C.3. VSE is
“responsible for the performance and conduct of Project Personnel at all times,”
including “any subcontracted personnel.” Id. ¶¶ C.3.1.1.3 & C.3.1.1.4. The
contract specifies that “Project Personnel assigned to render services under the
Contract shall at all times be employees of [VSE] (or a subcontractor at any tier)
6
and under the direction and control of [VSE]” and “shall not at any time during the
Contract period be employees of the U.S. Government.” Doc. No. 1-8, Fallon
Decl. Ex. E (pt. 2) ¶ H.29.
The contract delegates responsibility for safety and hazardous
materials -- VSE must “ensure that all safety regulations, training requirements,
and certification requirements have been met by Project Personnel and
documented,” Doc. No. 1-7, Fallon Decl. Ex. E ¶ C.3.1.1.1, and “is responsible for
detecting, identifying, and managing hazardous materials[.]” Id. ¶ C.3.5.4; see also
Doc. No. 1-8, Fallon Decl. Ex. E (pt. 2) ¶ H.23.3(A). When disposing items, VSE
is required to “destroy General Property, including hazardous materials, in
accordance with federal, state, and local laws” and its responsibilities include
“determining what materials are hazardous in accordance with state and federal
law; . . . preparing and submitting any required reports[; and] completing any
necessary training requirements related to disposal, handling, and destruction of
hazardous waste.” Doc. No. 1-7, Fallon Decl. Ex. E. ¶¶ C.3.4.1.4.1 & C.3.4.1.4.1c.
In doing so, it “shall follow . . . professional recommendations for control of
humidity and temperature, cleanliness, and handling of materials, to include
hazardous materials.” Doc. No. 1-8, Fallon Decl. Ex E (pt. 2) ¶ H.23.3(B).
Moreover, the contract requires VSE to “take proper safety and health precautions
7
to protect the work, the workers, and public and property of others.” Id. ¶ H.31.
The contract also has broad indemnity-related clauses. It provides that
VSE “shall be responsible for all damages to persons or property that occurs as a
result of its, its subcontractors, or any of its or its . . . subcontractor’s employees’s
fault or negligence.” Id. It declares that VSE “is ‘an Independent Contractor’ and
shall obtain all necessary insurance to protect Project Personnel from liability
arising out of the Contract.” Id. ¶ H.17. Further, under the contract, VSE agreed:
to indemnity and hold the Government and its employees
harmless in connection with any loss or liability from . . .
injuries to or death of persons (including the agents and
employees of both parties) if such . . . injury or death
arises out of, or is caused by, performance of work under
the Contract, unless such . . . injury, or death is caused
solely by the active negligence of the Government or its
employees.
Id.
2.
The Seizures and Consignment of Fireworks to Donaldson
At the time of the April 8, 2011 explosion, fireworks from two
government seizures were being held at the storage facility -- the “Haleamau
Seizure” and the “Chang Seizure.” Doc. No. 9-1, Third-Party Compl. ¶ 21. The
“Haleamau Seizure” consisted of 1,370 cartons of fireworks seized by ICE agents
on February 4, 2009. Id. ¶ 29. The “Chang Seizure” consisted of 296 cartons
seized on January 13, 2010. Id. ¶ 35. Although ICE seized the fireworks, CBP
8
managed the seizures for the government. Id. ¶ 24. Donaldson took custody of the
fireworks as a subcontractor retained by VSE to handle, store, and (when ordered
to do so) destroy them.5 Id. ¶¶ 19, 23; Doc. No. 1-1, Fallon Decl. ¶¶ 15, 19, 22.
Donaldson held a “Type 20 - Manufacturer of High Explosives” federal
license/permit issued pursuant to 18 U.S.C. Chapter 40 (§ 841 et seq.) (regarding
“importation, manufacture, distribution and storage of explosive materials”). Doc.
No. 56-3, VSE’s Opp’n Ex. 2.
Specifically, on March 29, 2010, Donaldson took custody of the 296
cartons from the “Chang Seizure,” consisting of four types of fireworks on
seventeen pallets. Doc. No. 1-16, Fallon Decl. Ex. L; Doc. No. 9-1, Third-Party
Compl. ¶ 39. These fireworks had been forfeited to the government on March 22,
2010. Doc. No. 1-19, Fallon Decl. Ex. O. On March 24, 2010, CBP had issued a
disposition order, directing that one carton of each type of fireworks be separated
and preserved for evidentiary use. Doc. No. 9-1, Third-Party Compl. ¶ 40. And on
April 16, 2010, CBP ordered the remaining 292 cartons to be destroyed.6 Id. ¶ 41;
5
Initially, for the “Haleamau Seizure” in 2009, Donaldson was a subcontractor to
Timberline Environmental Services, which in turn was a subcontractor to VSE. Doc. No. 1-1,
Fallon Decl. ¶ 20. Later, Donaldson had a subcontract directly with VSE for fireworks storage
and destruction, including the “Chang Seizure.” Doc. No. 1-12, Fallon Decl. Ex. I (part one) at
19 (Statement of Work for Destruction Services); Doc. No. 1-13, Fallon Decl. Ex. I (part two) at
28 (Request for Quotation).
6
Donaldson was still storing the 1,370 cartons in the “Heleamau Seizure,” but, as of
(continued...)
9
Doc. No. 1-21, Fallon Decl. Ex.Q.
3.
Government Approval of the Destruction Plan for the “Chang
Seizure,” and the April 8, 2011 Explosion
After the government ordered destruction of the 292 cartons,
Donaldson submitted a step-by-step “Disposal of Commercial Grade Fireworks
Plan” to VSE on April 26, 2010. Doc. No. 45-3, Watson Decl. Ex. A at 5-6. VSE
then submitted a corresponding “Property Destruction Plan” to CBP on April 28,
2010, describing how Donaldson personnel would prepare the seizure for
destruction at the Koko Head Firing Range, overseen by a representative of CoDefendant Blanchard Associates, Inc. Doc. No. 1-22, Fallon Decl. Ex. R. VSE’s
Property Destruction Plan contained a “Material Safety Data Sheet,” setting forth
numerous health and safety warnings and instructions, such as:
Unusual Fire and Explosion Hazards: Fireworks 1.3G
MAY MASS EXPLODE IN A FIRE. DO NOT ALLOW
FIREWORKS TO GET WET - Hazardous
Decomposition May Result in a FIRE or EXPLOSION.
EXPLOSION MAY OCCUR IF EXPOSED TO
SPARKS OR FLAME.
....
Conditions to Avoid: - Open Flames, Sparks, High
Temperatures, Friction or Impact.
6
(...continued)
April 11, 2011, the government had not ordered destruction of those fireworks. Doc. No. 9-1,
Third-Party Compl. ¶ 34. That is, only fireworks from the “Chang Seizure” were to be
destroyed.
10
Incompatibility (Materials to Avoid): - Do No Allow
Fireworks to Get Wet.
....
Conditions to Avoid: - Storage in High Temperatures,
Moist or Wet Conditions. Keep away From Open Flame
or Sparks.
....
Steps to Be Taken in Case Material is Released or
Spilled: - If Fireworks are spilled, carefully pick up the
material and place in a Cardboard Carton. Keep OPEN
FLAMES and Sparks AWAY and NO SMOKING.
Waste Disposal Method: - Fireworks that fail to go off
should be soaked in a bucket of water and returned to the
source where it was obtained. Dry Components or
powder should be carefully swept up and placed in a
cardboard container then soaked with water. Burning of
Fireworks Waste must be performed in compliance with
local and state laws.
Precautions in Handling and Storing: - Keep from
OPEN FLAMES, NO SMOKING, AVOID IMPACT of
MATERIALS and CONTAINERS of MATERIALS,
STORE FIREWORKS IN A COOL AND DRY
ENVIORNMENT [sic], FIREWORKS 1.3G MUST BE
STORED AND TRANSPORTED IN COMPLIANCE
WITH FEDERAL, STATE AND LOCAL LAWS.
Other Precautions: - Fireworks 1.3G un 0335 can cause
SERIOUS INJURY or DEATH. They Should only be
Handled by Properly Trained and Qualified Personnel.
When Shooting these Fireworks, PERSONNEL
SHOULD WEAR PROPER EYE PROTECTION,
HEAD PROTECTION AND NON-SYNTHETIC
CLOTHING.
....
Work/Hygienic Practices: - Store Fireworks in a Cool
Dry and Well Ventilated area. Protect Against Physical
11
Damage and Moisture. Fireworks should be isolated
from all Heat Sources, Sparks and Open Flame. No
Smoking.
Doc. No. 45-8, Relacion Decl. Ex. A at 5-6.
Under the prime contract’s terms, the government retains some
oversight responsibilities regarding destruction of property. In particular, the
contract provides that “[VSE] shall destroy General Property as prescribed and
directed by the responsible seizing or blocking agency designated representative
[e.g., ICE or CBP] on the disposition order.” Doc. No. 1-7, Fallon Decl. Ex. E
¶ C.3.4.1.4. VSE’s responsibilities for destruction include “[n]otifying the seizing
or blocking agency official issuing the disposition order for destruction within at
least five (5) working days, of location, date, and time of destruction in order to
permit the agency unannounced verification of the destruction[.]” Id.
¶ C.3.4.1.4.1a. The contract further provides that “[a]ll destructions must be
coordinated and approved by the responsible seizing or blocking agency
designated representative.” Id. ¶ C.3.4.1.4.2. Accordingly, CBP officials approved
VSE’s Property Destruction Plan on April 28, 2010. Doc. No. 45-8, Relacion
Decl. Ex. A at 3.
On June 10, 2010 -- only after Donaldson received an “emergency
burn permit” from the State of Hawaii Department of Health -- VSE authorized
12
Donaldson to proceed with destruction. See Doc. No. 45-3, Watson Decl. Ex. B
(VSE email stating “you [Donaldson] are authorized to start preping [sic] seizure
(soaking) contents for destruction.”). The expectation was to finish within ninety
days. Id. But, by March 28, 2011, only about twenty-eight percent of those
fireworks had been destroyed. Doc. No. 45-6, Watson Decl. Ex. D. Destruction
was temporarily suspended, apparently (according to an email from Donaldson to
VSE) while Donaldson implemented a procedure to “take out the small plastic tube
that’s located and enclosed at the bottom of the cardboard tube [of the fireworks],”
which would “allow [Donaldson] to dispose of more firework by volume on
multiple burns on any given burn day.” Id.7 Destruction was expected to resume
in April 2011. Id.
On April 8, 2011, however, a fire and explosion occurred at the
storage facility. “The blast from the explosion was so great that debris was blown
over 150 feet from the front doors of the storage unit. Three vehicles parked
outside of the storage unit caught fire and burned from the intense heat and fire
from the explosion.” Doc. No. 1-2, Compl. ¶ 25 (Kelii). Donaldson employees
Bryan Cabalce, Justin Kelii, Robert Freeman, Neil Sprankle, and Robert Leahey
7
There is no indication that this email (from Donaldson to VSE) was forwarded to the
government, and the record does not otherwise indicate that the government knew of this
procedure, much less that it approved of it.
13
died during the incident.
B.
Procedural Background
1.
The Cabalce, Kelii, Freeman/Sprankle, and Irvine Actions
On May 24, 2012, suits were filed on behalf of all five decedents.
Plaintiffs Terrance D. Cabalce, individually and as personal representative of the
Estate of Bryan Dean Cabalce, and Gail Cabalce filed an action in the Circuit Court
of the First Circuit, State of Hawaii (“State Circuit Court”), seeking damages for
the death of Bryan Cabalce. See Doc. No. 1-2, Compl. (Cabalce). Three similar
suits were also filed in State Circuit Court by (1) George Joseph Kelii, individually
and as co-personal representative of the Estate of Justin Joseph Kelii; and other
Plaintiffs, see Doc. No. 1-2, Compl. (Kelii); (2) Heather Freeman, individually and
as personal representative of the Estate of Robert Kevin Donor Freeman, and
Martin William Sprankle, individually and as personal representative of the Estate
of Neil Benjiman Sprankle; and other Plaintiffs, see Doc. No. 1-2, Compl.
(Freeman/Sprankle); and (3) Charlize Leahey Irvine, individually and as personal
representative of the Estate of Robert Leahey, and other Plaintiffs, see Doc. No. 12, Compl. (Irvine).
All four actions assert state-law claims sounding in negligence,
wrongful death, ultra-hazardous activity, and premises liability. Each names the
14
same Defendants: VSE; Thomas E. Blanchard and Associates, Inc.; Richard Bratt;
HIDC Small Business Storage LLC; Hawaiian Island Development Co., Inc.;
Hawaiian Island Homes Ltd.; Hawaiian Island Commercial Ltd.; and Ford Island
Ventures, LLC. See, e.g., Doc. No. 1-2, Compl. ¶¶ 5-12 (Cabalce). Notably, none
of the actions names the United States as a Defendant.
On June 29, 2012, VSE removed Cabalce to this court pursuant to 28
U.S.C. §§ 1441, 1442 & 1446, and immediately filed an Answer and a Third-Party
Complaint against Donaldson and the United States. See Doc. No. 4 (Cabalce).
On July 2, 2012, VSE removed Kelii and Freeman/Sprankle, and also immediately
filed Answers and Third-Party Complaints against Donaldson and the United
States. See Doc. No. 4 (Kelii) & Doc. No. 5 (Freeman/Sprankle). Similarly, on
July 12, 2012, VSE removed Irvine (although it did not immediately file an
Answer and Third-Party Complaint). See Doc. No. 1-1, Notice of Removal
(Irvine). The cases were re-assigned to this court as related cases under Local Rule
40.2. See Doc. Nos. 23, 32.
A week after removing Irvine, on July 19, 2012, VSE filed an Answer
and a Third-Party Complaint against Donaldson and the United States in Irvine.
Doc. No. 6 (Irvine). At the same time, VSE Amended its Third-Party Complaints
against Donaldson and the United States in Cabalce, Kelii, and Freeman/Sprankle.
15
See Doc. No. 9 (Cabalce), Doc. No. 7 (Kelii), & Doc. No. 9 (Freeman/Sprankle).
As noted above, these Amended Third-Party Complaints are all nearly identical to
the Third-Party Complaint in Irvine.
2.
The Third-Party Complaints Against the United States
Filed pursuant to Federal Rule of Civil Procedure 14, the Third-Party
Complaints seek contribution and indemnity. Count One for “contractual
indemnity” is directed at Donaldson, based on the VSE-Donaldson subcontract
(Count One is not at issue in the present Motions). Counts Two and Three both
assert claims against the United States seeking “contribution and equitable
indemnity” under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. §§ 1346(b) &
2671 et seq. In particular, as to both Counts against the United States, VSE alleges
that:
CBP and ATF decided to preserve the Chang forfeiture
fireworks seized rather than destroy them as they do with
certain items that such agencies consider highly
dangerous, such as, for example, dynamite.
Doc. No. 9-1, Third-Party Compl. ¶ 26.
At all times relevant herein, the knowledge of ICE, CBP
and ATF concerning the potentially catastrophic danger
posed by the fireworks that constituted the Chang Seizure
was superior to the knowledge of VSE, and ICE, CBP,
and ATF were aware, or should have been aware, of their
position of such superior knowledge.
16
Id. ¶ 27.
ICE, CBP, and ATF should have advised VSE of the
potentially catastrophic danger of the Chang Seizure, but
failed to do so. ICE, CBP, and/or ATF either failed to
appreciate the potential danger, of which they should
have been aware, of the seized items, or were aware of
such risk but did not warn VSE of it.
Id. ¶ 28.
Count Two primarily alleges that the United States breached a duty to
warn. It alleges that “[t]he United States of America had a duty to disclose and
provide a warning as to the severe risk of harm posed by the fireworks that it
controlled, possessed and/or owned,” id. ¶ 54, and the United States “breached its
duty of care to those potentially harmed by the seized fireworks by failing to
provide sufficient warning of the potentially catastrophic danger posed by the
seized fireworks.” Id. ¶ 55.
Similarly, Count Three is based on a theory that the United States
breached a non-delegable duty arising because storage, dismantling, handling, and
disposal of fireworks constitutes “abnormally dangerous activity.” Id. ¶¶ 60-61. It
alleges that “the United States failed to warn VSE or VSE’s subcontractor
Donaldson concerning the potential for catastrophic risk of harm associated with
its property, i.e., the Chang Seizure.” Id. ¶ 62. It further alleges that the United
States “failed to exercise ordinary care with respect to the storage, dismantling,
17
handling or disposal of [its] property, i.e., the Chang Seizure fireworks.” Id. ¶ 64.
Likewise, it contends that the United States “failed to exercise ordinary care when
it decided to consign the Chang Seizure pursuant to the Prime Contract rather than
have ATF destroy the Change Seizure[.]” Id. ¶ 65. And it asserts that the United
States “failed to exercise ordinary care when it decided to consign the Chang
Seizure pursuant to the Prime Contract rather [than] have ATF destroy the Chang
Seizure, and such failure resulted in the subject incident.” Id. ¶ 66.
Accordingly, the Third-Party Complaints conclude that the breaches
by the United States “constituted a substantial factor in causing the subject
incident,” id. ¶ 67, and if “VSE is determined to be liable for claims arising out of
the subject incident, the United States is liable in contribution to VSE,” id. ¶ 69, or
is “obligated to equitably indemnify VSE.” Id. ¶ 70.
3.
The Motions
On September 21, 2012, the United States filed its Motions to Dismiss
the Third-Party Complaints. Doc. Nos. 45 (Cabalce), 34 (Kelii), 38
(Freeman/Sprankle) & 31 (Irvine). The respective Plaintiffs filed full or partial
substantive joinders in the government’s Motions to Dismiss. See Doc. Nos. 45
(Cabalce) (Memorandum in Support); 37 (Kelii) (Substantive Joinder); 50
(Freeman/Sprankle) (partial Joinder) & 35 (Irvine) (Substantive Joinder).
18
Previously, Plaintiffs in Cabalce, Freeman/Sprankle, and Irvine had
also filed Motions to Strike the Third-Party Complaints (as to claims against the
United States), and Plaintiffs in Kelii had filed a Joinder to the Motion in Cabalce.
Doc. Nos. 19 (Cabalce), 37 (Kelii), 40 (Freeman/Sprankle) & 28 (Irvine). The
Motions to Strike, brought pursuant to Federal Rule of Civil Procedure 14(a)(4),
seek the same or similar relief as the government’s Motions to Dismiss.
The remaining Defendants either took no position, or filed statements
of no opposition to both sets of Motions. VSE filed Oppositions to the Motions to
Dismiss and the Motions to Strike on October 8, 2012. Doc. Nos. 56-57
(Cabalce), 46 (Kelii), 51-52 (Freeman/Sprankle) & 46-47 (Irvine). Corresponding
Replies were filed by the United States and Plaintiffs on October 15, 2012 and
October 16, 2012. Doc. Nos. 67, 69 (Cabalce), 52 (Kelii), 61, 63
(Freeman/Sprankle) & 54 (Irvine). The Motions were heard on October 29, 2012.
III. STANDARDS OF REVIEW
A.
Rule 12(b)(1)
When the government moves to dismiss for lack of subject matter
jurisdiction under Rule 12(b)(1) on the ground that allegations implicate
discretionary functions, the court may consider the challenged pleadings, as well as
jurisdictional facts supplied by evidence properly before the court. See, e.g., Green
19
v. United States, 630 F.3d 1245, 1248 n.3 (9th Cir. 2011). “With a [Rule] 12(b)(1)
motion, a court may weigh the evidence to determine whether it has jurisdiction.”
Autery, 424 F.3d at 956. When a court considers evidence in a Rule 12(b)(1)
motion, it construes disputes of fact in favor of the non-movant. Dreier, 106 F.3d
at 847. When the discretionary function exception is invoked, the government
bears the burden of establishing that the discretionary function exception applies.
See Whisnant v. United States, 400 F.3d 1177, 1181 (9th Cir. 2005); Bear
Medicine v. United States, 241 F.3d 1208, 1213 (9th Cir. 2001).
B.
Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). This tenet -- that the court must accept as
true all of the allegations contained in the complaint -- “is inapplicable to legal
conclusions.” Id. at 678. Accordingly, “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id.
(citing Twombly, 550 U.S. at 555); see also Starr v. Baca, 652 F.3d 1202, 1216
20
(9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not simply
recite the elements of a cause of action, but must contain sufficient allegations of
underlying facts to give fair notice and to enable the opposing party to defend itself
effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
C.
Rule 14(a)(4) -- Motion to Strike
Rule 14(a)(4) provides that “[a]ny party may move to strike the
third-party claim, to sever it, or to try it separately.”
“The decision to allow a third-party defendant to be impleaded under
rule 14 is entrusted to the sound discretion of the trial court.” United States v. One
1977 Mercedes Benz, 708 F.2d 444, 452 (9th Cir. 1983). When exercising this
21
discretion, “the court should endeavor to effectuate the purpose of Rule 14,” 6
Charles A. Wright et al., Federal Practice & Procedure: Civil 3d § 1443 at 351
(2010), which is “to promote judicial efficiency by eliminating the necessity for the
defendant to bring a separate action against a third individual who may be
secondarily or derivatively liable to the defendant for all or part of the plaintiff’s
original claim.” Sw. Adm’rs Inc. v. Rozay’s Transfer, 791 F.2d 769, 777 (9th Cir.
1986).
IV. DISCUSSION
A.
The Context of the Motions Under Rule 14
The United States is challenging the sufficiency of Third-Party
Complaints brought under Rule 14. The Rule provides in part that “[a] defending
party may, as a third-party plaintiff, serve a summons and complaint on a nonparty
who is or may be liable to it for all or part of the claim against it.” Fed. R. Civ. P.
14(a)(1) (emphasis added).
Here, VSE seeks contribution or indemnity from the United States
under the FTCA, which waives -- subject to several statutory exceptions -- the
United States’ sovereign immunity for certain torts that are committed by “any
employee of the Government while acting within the scope of his office or
employment under circumstances where the United States, if a private person,
22
would be liable to the claimant in accordance with the law of the place where the
act or omission occurred.” 28 U.S.C. § 1346(b); see also 28 U.S.C. § 2674 (“The
United States shall be liable, respecting the provision of this title relating to tort
claims, in the same manner and to the same extent as a private individual under
like circumstances[.]”). And the FTCA’s waiver of sovereign immunity extends to
claims for contribution or indemnity against the United States as a third-party
defendant. See United States v. Yellow Cab Co., 340 U.S. 543, 556-57 (1951)
(“We therefore conclude that the Federal Tort Claims Act carries the Government’s
consent to be sued for contribution not only in a separate proceeding but also as a
third-party defendant.”); United Air Lines, Inc. v. Wiener, 335 F.2d 379, 401 (9th
Cir. 1964) (“The right of indemnity, where it exists, may be enforced against the
United States under the Tort Claims Act.”).8
But the primary question is not whether the United States acted
tortiously to VSE (or, conversely, whether the United States retains its sovereign
immunity as to VSE). Rather, because Third-Party Complaints are at issue, the
question is whether the United States potentially breached duties owed to
8
An FTCA action directly against the United States ordinarily requires exhaustion of
administrative remedies. See 28 U.S.C. § 2675(a) (“An action shall not be instituted upon a
claim against the United States for money damages . . . unless the claimant shall have first
presented the claim to the appropriate Federal agency[.]”). But this exhaustion requirement
“shall not apply to such claims as may be asserted under the Federal Rules of Civil Procedure by
third party complaint, cross-claim, or counterclaim.” Id.
23
Plaintiffs, even though Plaintiffs have not asserted claims directly against the
United States. This is because a proper third-party claim “may be asserted only
when the third party’s liability is in some way dependent on the outcome of the
main claim and the third party’s liability is secondary or derivative.” Teruya v.
Shaw, 2012 WL 3308872, at *3 (D. Haw. Aug. 10, 2012) (quoting Uldricks v.
Kapaa 382 LLC, 2007 WL 2694409, at *3 (D. Haw. Sept. 11, 2007)). “The crucial
characteristic of a Rule 14 claim is that [a] defendant is attempting to transfer to the
third-party defendant the liability asserted against [it] by the original plaintiff.”
Stewart v. Am. Int’l Oil & Gas Co., 845 F.2d 196, 200 (9th Cir. 1988) (quoting 6
Charles A. Wright et al., Federal Practice & Procedure § 1446 at 157 (1971)
(other citation omitted)). In short, “there is no right of contribution where the
injured person has no right of action against the third party defendant.” Kelly v.
Full Wood Foods, Inc., 111 F. Supp. 2d 712, 715 (D. Md. 2000) (citation omitted).
“[C]ases where the applicable state law permits contribution among
joint tortfeasors, regardless of whether the plaintiff has sued them all in the first
instance, are among the most obvious cases for impleader.” Teruya, 2012 WL
3308872, at *4 (citation omitted). Under Hawaii law, a defendant’s right to seek
contribution exists “among joint tortfeasors” under Hawaii Revised Statutes
24
(“HRS”) § 663-12.9 In turn, “the term ‘joint tortfeasors’ means two or more
persons jointly or severally liable in tort for the same injury[.]” HRS § 663-11
(emphasis added). “It need not be shown that the third party defendant is
automatically liable if the defendant loses the underlying lawsuit. It is sufficient if
there is some possible scenario under which the third party defendant may be liable
for some or all of the defendant’s liability to plaintiff.” Teruya, 2012 WL
3308872, at *3 (citation omitted).”
The court thus proceeds to address the Motions in this context,
mindful that the ultimate issue here is whether the United States can be a “joint
tortfeasor” for the April 8, 2011 deaths of the Donaldson employees.
B.
The United States’ Motions to Dismiss
In its Motions to Dismiss, the United States raises several independent
grounds for dismissal, i.e., grounds establishing that the United States cannot be a
joint tortfeasor. It relies foremost on statutory exceptions to the FTCA’s waiver of
immunity: the “independent contractor” exception (28 U.S.C. § 2671), the
“discretionary function” exception (28 U.S.C. § 2680(a)), and the “detained goods”
9
For VSE to establish a right to “equitable indemnity” from the United States, VSE
would have to demonstrate that the United States “is guilty of ‘active,’ ‘primary’ or ‘original’
fault, as opposed to the merely ‘passive,’ ‘secondary,’ or ‘implied’ fault of the indemnitee.” In
re All Asbestos Cases, 603 F. Supp. 599, 606 (D. Haw. 1984). That is, it would not be enough
merely to establish that the United States was a potential joint tortfeasor.
25
exception (28 U.S.C. § 2680(c)). If the United States retains sovereign immunity,
it cannot be a joint tortfeasor, and the Third-Party Complaints fail.10 It also argues
that, even if VSE could invoke federal jurisdiction under the FTCA for its thirdparty claims, the Third-Party Complaints otherwise fail to state a claim.
1.
Under the “Independent Contractor” Exception, the United States
Cannot Be Liable for Any Alleged Negligence by VSE or Donaldson
The FTCA only waives sovereign immunity for the United States’
own negligence. “The FTCA contains an explicit exception for contractors, such
that the federal government is not liable for torts committed by its contractors.”
United States v. Daniel, Mann, Johnson & Mendenhall, 355 F.3d 1140, 1146 (9th
Cir. 2004) (citing 28 U.S.C. §§ 1346(b), 2671)).11 That is, “the government cannot
be held vicariously liable for the negligence of an employee of an independent
contractor.” Yanez v. United States, 63 F.3d 870, 872 (9th Cir. 1995).
Under this “independent contractor” exception, the United States
cannot be liable for a contractor’s acts unless it exercises “federal authority to
10
If the FTCA does not apply, the court lacks subject matter jurisdiction over the United
States. It is a different question, however, whether federal subject matter jurisdiction otherwise
exists over the entire actions (if the Third-Party Complaints are dismissed). That question is at
issue in Plaintiffs’ separate Motions to Remand.
11
The FTCA generally waives liability for torts of “any employee of the Government,”
28 U.S.C. § 1346(b)(1). The FTCA defines that clause as including “officers or employees of
any federal agency.” 28 U.S.C. § 2671. And, in turn, the FTCA’s definition of “federal agency”
specifically “does not include any contractor with the United States.” Id.
26
control and supervise the ‘detailed physical performance’ and ‘day to day
operations’ of the contractor.” Autery, 424 F.3d at 956 (quoting Hines v. United
States, 60 F.3d 1442, 1446 (9th Cir. 1995)); see also Valadez-Lopez v. Chertoff,
656 F.3d 851, 858 (9th Cir. 2009) (“The government may be sued under the
[FTCA] for the actions of a government contractor and its employees only if the
contractor is acting as an agent of the government, i.e. ‘if the government has the
authority to control the detailed physical performance of the contractor and
supervise its day-to-day operations.’”) (citations and some internal quotation marks
omitted)). “[T]here must be substantial supervision over the day-to-day operations
of the contractor in order to find that the individual was acting as a government
employee.” Autery, 424 F.3d at 957 (quoting Letnes v. United States, 820 F.2d
1517, 1519 (9th Cir. 1987)) (emphasis added).
Applying these principles, surely VSE and Donaldson were
independent contractors -- and thus the United States cannot be even partly liable
for their alleged negligence. Neither the Complaints nor the Third-Party
Complaints allege (and the record contains no such evidence) that any government
employee or agency controlled or substantially supervised the day-to-day
destruction of the fireworks. Rather, all indications are that Donaldson and VSE
were performing under their respective contracts. No one disputes that Donaldson
27
and VSE devised and prepared the destruction plans (both the plan that CBP
approved on April 28, 2010, and the modified procedure discussed between
Donaldson and VSE on March 28, 2011). See Doc. No. 45-3, Watson Decl. Ex. A
at 5-6; Doc. No. 45-6, Watson Decl. Ex. D. And, indeed, the VSE prime contract
specifically declares that “[VSE] is ‘an Independent Contractor’ and shall obtain
all necessary insurance to protect Project Personnel from liability arising out of the
Contract.” Doc. No. 1-8, Fallon Decl. Ex. E (pt. 2) ¶ H.17.
At most, employees of CBP or ICE issued disposition instructions,
ordered fireworks to be destroyed, and approved a destruction plan pursuant to
retained authority under the prime contract. See also Doc. No. 56-6, O’Neill Decl.
Ex. 5 (providing evidence of a visit by government employees to the storage
facility). But even very specific governmental contractual authority is generally
insufficient to render the United States liable for acts of its contractors. See Autery,
424 F.3d at 957 (“Contractual provisions directing detailed performance generally
do not abrogate the contractor exception. The United States may ‘fix specific and
precise conditions to implement federal objectives’ without becoming liable for an
independent contractor’s negligence.”) (quoting United States v. Orleans, 425 U.S.
807, 816 (1976)). And even assuming the VSE contract gave the government the
ability to enforce safety regulations, VSE or Donaldson personnel were still not
28
“employees” for purposed of FTCA liability. See id. (“[T]he ability to compel
compliance with federal regulation does not change a contractor’s personnel into
federal employees.” (quoting Letnes, 820 F.2d at 1519)).
The focus, then, shifts entirely to whether there is any possibility that
the United States can be liable under the FTCA for its own acts in (1) management
decisions regarding the fireworks, such as deciding to consign the fireworks under
the VSE prime contract; (2) negligently failing to warn VSE or Donaldson; or
(3) negligently supervising the VSE prime contract, all as alleged in the ThirdParty Complaints.
2.
The “Discretionary Function Exemption” Shields the Government
from Negligent Management of the Fireworks, and from Failure to
Warn or Supervise its Independent Contractors
The “discretionary function exception” to the FTCA, 28 U.S.C.
§ 2680, provides in pertinent part:
The provisions of this chapter and section 1346(b) of this
title shall not apply to-(a) Any claim based upon an act or omission of an
employee of the Government, exercising due care, in the
execution of a statute or regulation, whether or not such
statute or regulation be valid, or based upon the exercise
or performance or the failure to exercise or perform a
discretionary function or duty on the part of a federal
agency or an employee of the Government, whether or
not the discretion involved be abused.
29
The United States argues that the exception bars all of the acts alleged against it in
the Third-Party Complaints. The court agrees.
a.
Analytical framework for the discretionary function exception
The purpose of the discretionary function exception is to “prevent
judicial ‘second-guessing’ of legislative and administrative decisions grounded in
social, economic and political policy through the medium of an action in tort.”
United States v. Gaubert, 499 U.S. 315, 323 (1991). The government has the
burden of proving the discretionary function exception. Meyers v. United States,
652 F.3d 1021, 1028 (9th Cir. 2011) (citing GATX/Airlog Co. v. United States, 286
F.3d 1168, 1173 (9th Cir. 2002)). “Whether a challenged action falls within the
discretionary function exception requires a particularized analysis of the specific
agency action challenged.” GATX/Airlog Co., 286 F.3d at 1174. A two-part test
applies to determine if the discretionary function exception bars an FTCA claim.
“First, for the exception to apply, the challenged conduct must be
discretionary -- that is, it must involve an element of judgment or choice.” Id. at
1173. This inquiry “looks at the ‘nature of the conduct, rather than the status of the
actor’ and the discretionary element is not met where ‘a federal statute, regulation,
or policy specifically prescribes a course of action for an employee to follow.’”
Myers, 652 F.3d at 1028 (quoting Terbush v. United States, 516 F.3d 1125, 1129
30
(9th Cir. 2008)). If a “mandatory directive” is violated, this first requirement is not
met (i.e., the exception does not apply) because “‘the employee has no rightful
option but to adhere to the directive.’” GATX/Airlog Co., 286 F.3d at 1173-74
(quoting Berkovitz v. United States, 486 U.S. 531, 536 (1988)).
Second, the court must then “determine whether [the exercise of]
judgment is of the kind that the discretionary function exception was designed to
shield.” Id. at 1174 (quoting Berkovitz, 486 U.S. at 536). “Only those exercises of
judgment which involve considerations of social, economic, and political policy
are excepted from the FTCA by the discretionary function doctrine.” Sigman v.
United States, 217 F.3d 785, 793 (9th Cir. 2000) (citing United States v. Varig
Airlines, 467 U.S. 797, 814 (1984)). “The focus is on ‘the nature of the actions
taken and on whether they are susceptible to policy analysis.’” GATX/Airlog Co.,
286 F.3d at 1174 (quoting Gaubert, 499 U.S. at 325). The decision at issue “‘need
not actually be grounded in policy considerations’ so long as it is, ‘by its nature,
susceptible to a policy analysis.’” Id. (quoting Nurse v. United States, 226 F.3d
996, 1001 (9th Cir. 2000)). “When a statute, regulation or agency guideline allows
a government agent to exercise discretion, it must be presumed that the agent’s acts
are grounded in policy when exercising that discretion.” Weissich v. United States,
4 F.3d 810, 814 (9th Cir. 1993) (citing Gaubert, 499 U.S. at 324). “Even if the
31
decision is an abuse of the discretion granted, the exception will apply.” Myers,
652 F.3d at 1028 (quoting Terbrush, 516 F.3d at 1129)).
b.
Application of the framework
i.
Consignment decisions
The court first addresses allegations that the United States was
negligent in managing the Chang Seizure, and that it can be held liable to Plaintiffs
for deciding (1) to consign the fireworks, rather than destroying them immediately,
and (2) to destroy them by contract, instead of having ATF destroy them itself. In
this regard, VSE alleges that “CBP and ATF decided to preserve the Chang
forfeiture fireworks seized rather than destroy them as they do with certain items
that such agencies consider highly dangerous, such as, for example, dynamite.”
Doc. No. 9-1, Third-Party Compl. ¶ 26. It further alleges that the United States
“failed to take reasonable steps to ensure that its property was properly stored,
maintained, handled, and disposed of.” Id. ¶ 45. Likewise, the Third-Party
Complaints allege that the United States “failed to exercise ordinary care when it
decided to consign the Chang Seizure pursuant to the Prime Contract rather [than]
have ATF destroy the Chang Seizure, and such failure resulted in the subject
incident.” Id. ¶ 66. The court easily concludes that all these actions fall squarely
within the discretionary function exception.
32
At the first step, VSE has not proffered (and the court has not found)
any directive such as a statute, regulation, or policy that precludes preservation of
fireworks for evidentiary value, or that requires destroying seized explosives
within a certain period of time. Nor has it identified any requirement that
precludes the government’s use of a contractor to handle and destroy seized
fireworks or explosives.12
Second, prosecutorial-type decisions by law enforcement agencies as
to whether and how to preserve potential evidence are inherently discretionary and
grounded in policy considerations. See, e.g., Moore v. Valder, 65 F.3d 189, 197
(D.C. Cir. 1995) (applying the discretionary function exemption, reasoning in part
that “[d]eciding whether to prosecute [and] identifying the evidence to submit to
the grand jury . . . are actions that . . . are quintessentially discretionary”); Gray v.
Bell, 712 F.2d 490, 516 (D.C. Cir. 1983) (“We thus hold that section 2680(a)
exempts the government from liability for exercising the discretion inherent in the
prosecutorial function of the Attorney General, no matter whether the challenged
decisions are made during the investigation or prosecution of offenses.”) (citation
12
Indeed, federal law authorizes the Department of the Treasury under the Department
of the Treasury Forfeiture Fund to pay “for the employment of outside contractors to operate and
manage properties or to provide other specialized services necessary to dispose of such
properties,” 31 U.S.C. § 9703(a)(1)(b)(2), and to pay for “the services of experts and consultants
needed by a Department of Treasury law enforcement organization to carry out the
organization’s duties relating to seizure and forfeiture.” 31 U.S.C. § 9703(a)(1)(H).
33
and internal marks omitted).
Moreover, the decision “to consign the Chang Seizure pursuant to the
Prime Contract rather [than] have ATF destroy the Chang Seizure” is obviously
discretionary, even assuming that ATF has “superior knowledge” regarding
explosives. The choice whether to use a contractor to manage seized and forfeited
items involves a judgment that weighs practical, economic, and policy
considerations. See, e.g., Bear Medicine, 241 F.3d at 1214 (concluding that a
decision to entrust timbering operations to a contractor involved weighing of
policy judgments, protecting the government from liability under the discretionary
function exception); Alinsky v. United States, 415 F.3d 639, 648 (7th Cir. 2005)
(barring FTCA claims under the discretionary function exemption, where alleged
injuries were caused by a contractor’s negligence “since the government acted
within its discretion to contract those responsibilities out to [the contractor]”);
Andrews v. United States, 121 F.3d 1430, 1440 (11th Cir. 1997) (applying the
discretionary function exception, reasoning that “[t]he law is clear that the
government may delegate its safety responsibilities to independent contractors in
the absence of federal laws or policies restricting it from doing so”). Indeed,
VSE’s Third-Party Complaints themselves allege that the contracting is done for
economic reasons. See Doc. 9-1, Third-Party Compl. ¶ 21 (“TEOAF depends on
34
the involvement of such contractors to carry out its functions, as TEOAF does not
maintain the necessary internal resources.”).
In short, the discretionary function exemption protects the United
States’ decisions regarding consigning and destroying the Chang Seizure by using
contractors. Even assuming such decisions were negligent, they cannot constitute
any basis for imposing liability under the FTCA (and thus cannot be a basis for
imposing contribution or indemnity to VSE from the United States).
ii.
Failure to warn (Count Two)
In Count Two, VSE contends that the United States breached a duty to
warn its contractors of the dangers of the fireworks that it seized. It incorporates
allegations that, because “the knowledge of ICE, CBP and ATF concerning the
potentially catastrophic danger posed by the fireworks . . . was superior to the
knowledge of VSE,” Doc. No. 9-1, Third-Party Compl. ¶ 27, the government
“should have advised VSE of the potentially catastrophic danger . . . but failed to
do so.” Id. ¶ 28. Under VSE’s theory, the United States thus “breached its duty of
care to those potentially harmed by the seized fireworks by failing to provide
sufficient warnings of [their] potentially catastrophic danger.” Id. ¶ 55.
Initially, by itself, this duty-to-warn theory is implausible, at least as
to potential liability of the government to these Plaintiffs under the facts of this
35
case. See Haworth v. State, 60 Haw. 557, 561, 592 P.2d 820, 823 (1979) (stating
general rule that “[t]he employer’s duty to provide a safe workplace does not
require him to eliminate risks which are inherent in the work, and he is further
relieved of responsibility for any unnecessarily dangerous conditions of which the
employee has notice”); Josue v. Isuzu Motors Am., Inc., 87 Haw. 413, 417, 958
P.2d 535, 539 (1998) (reiterating, in products liability context, that “faced with a
plain and palpable danger for purposes of a failure to warn claim, a court may
determine such danger to be open and obvious as a matter of law”) (citing Tabieros
v. Clark Equip. Co., 85 Haw. 336, 364, 944 P.2d 1279, 1308 (1997)).
The record is undisputed that Donaldson -- licensed to handle high
explosives under 18 U.S.C. ch. 40 -- prepared the destruction plan for VSE, and
that VSE obtained government approval only after Donaldson obtained the
necessary permit. VSE and Donaldson provided the government with detailed
safety parameters as part of the plan, not the other way around. See Doc. No. 45-8,
Relacion Decl. Ex. A at 5-6. Even assuming that the ATF has superior knowledge
of explosives in general, the contractors (and Donaldson in particular) were
required to have specialized expertise in destroying fireworks, and were required to
so train their employees. Nothing indicates that the government knew of any
hidden dangers in these particular fireworks. And following VSE’s argument to its
36
logical conclusion would mean that VSE and Donaldson were not qualified to
perform their contractual duties. As the government argues, “VSE . . . cannot
genuinely contend that the United States was under any duty to warn it,
[Donaldson], or their employees of the very hazards and dangers of which VSE
was already aware and had advised the United States of one year prior.” Doc. No.
45, Mot. at 28-29.
In any event, any duty United States had, as a matter of safety, to warn
its independent contractors of the dangers of the fireworks was discretionary. And,
under these facts, the two-part test for application of the discretionary function
exception is met.
At the first step of the analysis, as before, VSE fails to identify any
specific and mandatory statute, regulation, or policy requiring the United States to
warn its contractors of the dangers of handling fireworks (knowledge that VSE and
Donaldson were required to possess under the terms of the contracts). Even
assuming the government was required to retain some oversight authority, the
decisions whether and how to delegate safety responsibility -- i.e., whether to warn
or not -- for consigned goods (and for hazardous materials in particular), were
discretionary. See, e.g., Layton v. United States, 984 F.2d 1496, 1504 (8th Cir.
1993) (reasoning that, where the Forest Service had delegated safety responsibility
37
to a contractor and “where there is no regulatory requirement to issue a warning,
the government may decide whether or not to warn persons as a matter of its own
discretion”); cf. Varig Airlines, 467 U.S. at 819-20 (“When an agency determines
the extent to which it will supervise the safety procedures of private individuals, it
is exercising discretionary regulatory authority of the most basic kind.”).
And second, any contractual decisions resulting in a failure to warn of
safety concerns involved an exercise of judgment that balanced economic or policy
considerations. Numerous decisions have recognized that, in the absence of a
specific and mandatory regulation, a failure to warn is discretionary conduct
susceptible to policy analysis. See Bear Medicine, 241 F.3d at 1215 (“‘[A] general
statutory duty to promote safety . . . would not be sufficient.”) (citing Kennewick
Irrigation Dist. v. United States, 880 F.2d 1018, 1026 (9th Cir. 1989)). “[S]uch
decisions require the agency to establish priorities for the accomplishment of its
policy objectives by balancing the objectives sought to be obtained against such
practical considerations as staffing and funding.” Varig Airlines, 467 U.S. at 820;
see also In re Consolid. U.S. Atmospheric Testing Litig., 820 F.2d 982, 998 (9th
Cir. 1987) (“Formulating and issuing warnings requires the government ‘to
establish priorities . . . [and] is a matter that falls within the discretionary function
exception[.]”).
38
Some caselaw in contractual situations, however, has reasoned that
“once the Government has undertaken responsibility for the safety of a project, the
execution of that responsibility is not subject to the discretionary function
exception.” Bear Medicine, 241 F.3d at 1215; see also Myers, 652 F.3d at 1032
(applying same concept). That is, “[t]he decision to adopt safety precautions may
be based in policy considerations, but the implementation of those precautions is
not.” Myers, 652 F.3d at 1032 (quoting Terbush, 516 F.3d at 1133). But this
concept does not apply here. Nothing indicates that the government went beyond
its retained contractual authority to approve the destruction plan (a plan that
Donaldson submitted to VSE, and that VSE in turn, submitted to the government).
That is, the government did not affirmatively undertake responsibility for the
safety of the destruction of the Chang Seizure. Rather, the government’s duty to
warn of the dangers of the fireworks -- even assuming it owed such a duty to
Donaldson’s employees -- was delegated to VSE in the prime contract and, by
VSE, to Donaldson. It is a protected decision, falling within the discretionary
function exception. See Williams v. United States, 50 F.3d 299, 310 (4th Cir.
1995) (“Given that the decision to engage [a contractor] falls within the ambit of
the discretionary function exception, . . . assertions that the United States was
negligent in . . . not posting warning signs cannot prevail because these decisions
39
are embraced by the overarching decision to engage [the contractor].”).
iii.
Negligence based on “non-delegable duty” (Count Three)
Count Three, similar to the allegations of failure to warn in Count
Two, alleges that the government was negligent in managing the fireworks or
supervising its contract with VSE. See Doc. No. 9-1, Third-Party Compl. ¶ 64
(alleging the United States “failed to exercise ordinary care with respect to the
storage, dismantling, handling or disposal of [its] property, i.e., the Chang Seizure
fireworks”). It relies on a theory that the government was not allowed, as a matter
of state law, to delegate responsibility for safety concerning abnormally dangerous
activities. See id. ¶¶ 60-61 (alleging that handling and disposing of fireworks
constitutes “abnormally dangerous activity” and thus the United States “owed a
non-delegable duty in negligence to exercise ordinary care with respect to its
property”). Nevertheless, such management decisions also fall within the
discretionary function exception.
First, as analyzed above, VSE has not identified any specific and
mandatory federal regulation, statute, or policy precluding the government from
delegating safety functions, including those regarding warnings or supervision.
Likewise, no regulation prevents the United States from allowing VSE, in turn, to
subcontract supervision responsibility. And many cases hold that government
40
decisions as to how much it will supervise contractors are exercises of discretion.
See, e.g., Bibeau v. Pac. Nw. Research Found., Inc., 339 F.3d 942, 946 (9th Cir.
2003) (“[W]ithout some mandate, the decision not to supervise the Heller
Experiments was an act of discretion.”); Guile v. United States, 422 F.3d 221, 231
(5th Cir. 2005) (“Supervision of a contractor’s work, including the degree of
oversight to exercise, is inherently a discretionary function.”).
Absent any federal statute, regulation, or policy, VSE argues that state
law imposes a non-delegable duty on the United States to supervise the destruction
of the fireworks. See Makaneole v. Gampon, 60 Haw. 501, 777 P.2d 1183 (1989).
The parties then debate whether the United States may be liable for breaching nondelegable duties imposed under Hawaii law on employers involved in
ultrahazardous activities. Such a state-law duty, however, cannot constitute a
mandatory “regulation, statute, or policy” that removes discretion from the
analysis. See, e.g., Camozzi v. Roland/Miller & Hope Consulting Grp., 866 F.2d
287, 289 n.7 (9th Cir. 1989) (“The extent of the immunity of the United States to
suit is governed by section 2680(a), which cannot be preempted by state law.”). It
must be “a federal statute, regulation, or policy.” Berkovitz, 486 U.S. at 536
(emphasis added). Moreover, ultimately, the question is subsumed within the
discretionary function analysis itself, as the court explains next.
41
To impose a non-delegable duty, VSE looks to Makaneole in which
the Hawaii Supreme Court adopted the Restatement (Second) of Torts §§ 41613 and
427.14 Makaneole sets forth the “peculiar risk” exception to the general rule that
“the employer of an independent contractor is not liable for physical harm caused
to another by an act or omission of the contractor or his servants” set forth in the
Restatement (Second) of Torts § 409 (1965). That is, under Hawaii law, an
employer of an independent contractor generally has a non-delegable duty of
reasonable care to a contractor’s employees where ultrahazardous activity is
involved. Makaneole, 70 Haw. at 504, 777 P.2d at 1185.
Plaintiffs point out, however, that the Restatement (Second) of Torts
13
Section 416 provides:
One who employs an independent contractor to do work which the
employer should recognize as likely to create during its progress a
peculiar risk of physical harm to others unless special precautions
are taken, is subject to liability for physical harm caused to them
by the failure of the contractor to exercise reasonable care to take
such precautions, even though the employer has provided for such
precautions in the contract or otherwise.
14
Section 427 provides:
One who employs an independent contractor to do work involving
a special danger to others which the employer knows or has reason
to know to be inherent in or normal to the work, or which he
contemplates or has reason to contemplate when making the
contract, is subject to liability for physical harm caused to such
others by the contractor’s failure to take reasonable precautions
against such danger.
42
describes these sections as imposing “vicarious liability” on the employer:
The rules stated in the following §§ 416-429 . . . do not
rest upon any personal negligence of the employer. They
are rules of vicarious liability, making the employer
liable for the negligence of the independent contractor,
irrespective of whether the employer has himself been at
fault.
Restatement (Second) of Torts § 416-429 intro. note. Cf. Haworth, 60 Haw. at
560, 592 P.2d at 823 (“These duties are considered non-delegable, i.e. the
employer is vicariously liable for the negligent failure to perform such duties by
one he appointed to perform them.”). But any state law imposing vicarious
liability on the United States would clearly be inconsistent with the fundamental
principle under the FTCA that “the government cannot be held vicariously liable
for the negligence of an employee of an independent contractor.” Yanez, 63 F.3d
at 872. See Flynn v. United States, 631 F.2d 678, 681-82 (10th Cir. 1980) (“Even
if the inherently dangerous rule applies and §§ 416 and 427 are read together to
impose a liability for a ‘non-delegable duty,’ the United States may not be held
liable on any absolute liability theory.”) (citations omitted); but cf. Nofoa v. United
States, 132 F.3d 39, 1997 WL 796198, at *2-3 (9th Cir. Dec. 30, 1997) (finding,
under Hawaii law, “no inconsistency between liability under a non-delegable duty
theory and the rule against imposing vicarious liability on the United States”)
(mem.); Moffit v. United States, 978 F.2d 1265, 1992 WL 321029, at *5 (9th Cir.
43
Nov. 4, 1992) (applying Makaneole in FTCA suit) (mem.).
Fortunately, the court need not delve further into this thicket. Even
assuming the “peculiar risk” doctrine under Hawaii law is not “vicarous liability”
(and instead is “direct liability” under the FTCA), the United States would still be
protected by the discretionary function exemption if otherwise applicable.
Camozzi rejected the argument that the discretionary function exception is
inapplicable to a theory that the government “breached a nondelegable duty to
exercise reasonable care to insure the independent contractor protected its
employees from special risks.” 866 F.2d at 289 n.7. It reasoned that § 2680(a) “is
not overridden by state tort rules, including California’s ‘peculiar risk’ doctrine.”
Id. (citing Atmospheric Testing, 820 F.2d at 996-98). “The extent of the immunity
of the United States to suit is governed by section 2680(a), which cannot be
preempted by state law.” Id. (citation omitted).
And this concept is well established. See, e.g., Atmospheric Testing,
820 F.2d at 996 (distinguishing caselaw holding that the United States can be liable
under the FTCA for breaching “a ‘non-delegable duty to ensure safety precautions
were taken by an independent contractor’ where the work to be performed involves
special dangers” because the discretionary function exception overrides such a
breach); Roditis v. United States, 122 F.3d 108, 111 (2d Cir. 1997) (“[A]ny state
44
law nondelegable duty cannot, on its own, override the United States’ sovereign
immunity from suits for injuries caused by its independent contractors.”) (citing
cases); Akers v. United States, 2002 WL 32513820, at *4 (D. Or. Nov. 27, 2002)
(rejecting argument “that the discretionary function exception is inapplicable
because the United States breached nondelegable duties to ensure the safety of
anyone visiting the premises and to protect individuals engaging in inherently
dangerous activities” because “[principles] of [state] law are insufficient to
override the federal government’s immunity under § 2680(a)”); Morris v. United
States, 2009 WL 2486013, at *6 (D. Ariz. Aug. 12, 2009) (“Section 2680(a) is not
overridden by state tort rules”) (quoting Camozzi, 866 F.2d at 289 n.7).
In short, discretionary decisions are at issue regardless of state-law
policies (such as a non-delegable duty defined in Makaneole), and if those
decisions are otherwise “of the kind that the discretionary function exception was
designed to shield,” Berkovitz, 486 U.S. at 536, then the exception applies and the
United States cannot be a joint tortfeasor as alleged in Count Three.
And indeed, at the second step of the discretionary function test -- as
with the decision to contract for services -- caselaw has long held that these types
of government decisions regarding delegation and supervision of contractors are
fully protected by the discretionary function exception. See, e.g., Varig Airlines,
45
467 U.S. at 819-20 (“When an agency determines the extent to which it will
supervise the safety procedures of private individuals, it is exercising discretionary
regulatory authority of the most basic kind.”); Atmospheric Testing, 820 F.2d at
995-96 (concluding that negligent failure to supervise contractor’s compliance with
safety procedures falls within discretionary function exception); see also Wood v.
United States, 290 F.3d 29, 41 (1st Cir. 2002) (“Decisions regarding the exercise of
supervisory authority [over a contract] are traditionally the sort the discretionary
function exception was designed to encompass.”); Andrews, 121 F.3d at 1440
(“The discretionary function exception encompasses government decisions about
how and how much to supervise the safety procedures of independent
contractors.”); Kirchmann v. United States, 8 F.3d 1273, 1276-77 (8th Cir. 1993)
(reasoning that the government’s failure to adequately supervise a contractor’s
disposal of hazardous waste was a policy consideration protected by the
discretionary function exception); Layton, 984 F.2d at 1502-03 (similar).
Moreover, as analyzed above with Count Two’s allegations regarding
the general duty to warn, there are no allegations that the government went beyond
its retained contractual authority to approve destruction plans. That is, there is no
indication that the government affirmatively undertook other supervisorial
responsibilities related to the safety of the destruction of the Chang Seizure that
46
might remove actions from the discretionary function’s application. See Bear
Medicine, 241 F.3d at 1215 (“[O]nce the Government has undertaken
responsibility for the safety of a project, the execution of that responsibility is not
subject to the discretionary function exception.”). Rather, supervisorial
responsibilities were delegated to VSE in the prime contract, in an exercise of
discretion and by balancing economic and policy factors.15 Such decisions are
protected by the discretionary function exception.
Given the strength and depth of this authority, the court likewise
concludes that the government’s decisions regarding management and supervision
of VSE’s or Donaldson’s destruction of the Chang Seizure fall squarely within the
discretionary function exception. As with allegations regarding consignment
decisions and violations of a duty to warn, VSE’s third-party claim in Count Three
based on a non-delegable duty is also barred. Accordingly, the court lacks subject
matter jurisdiction over the United States.16
15
See, e.g., Doc. No. 1-7, Fallon Decl. Ex. E ¶ C.3 (requiring VSE to “provide all
services, materials, supplies, supervision, labor, and equipment, except that specified [in the
contract] as Government-furnished, to perform all property management and disposition work
set forth in [the contract]”); Id. ¶¶ C.3.1.1.3 & C.3.1.1.4 (providing that VSE is “responsible for
the performance and conduct of Project Personnel at all times,” including “any subcontracted
personnel”).
16
Because the discretionary function applies, the court need not reach whether the
“detained goods exception” under 28 U.S.C. § 2680(c) also bars the Third-Amended Complaints
against the United States. That is, the court need not reach whether the April 8, 2011 explosion
(continued...)
47
3.
A Claim for “Equitable Indemnity” Necessarily Fails
Finally, although it is not entirely clear whether a claim for “equitable
indemnity” is any different than a claim for contribution against a joint tortfeasor
(and even if such a claim could somehow survive the loss of jurisdiction over the
United States under the discretionary function exemption), the claim otherwise
fails. The United States and Plaintiffs point to the prime contract’s indemnity
provision, which requires VSE to “indemnify and hold the Government harmless”
unless “injury, or death is caused solely by the active negligence of the
Government or its employees.” Doc. No. 1-8, Fallon Decl. Ex. E (pt. 2) ¶ H.17.
Under this indemnity provision, the United States cannot be required to indemnify
VSE (even assuming it could be a joint tortfeasor) -- this clause plainly requires the
opposite. Moreover, the Third-Party Complaints do not allege that the deaths were
caused “solely by the active negligence of the Government or its employees.”
Rather, they only allege that the United States’ negligence was a “substantial
factor” in causing the incident (if Donaldson was not solely responsible). Doc. No.
9-1, Third-Party Compl. ¶¶ 56, 67-68.
16
(...continued)
“relates to” or “arises from the detention” of the seized fireworks and not from “independent
activities subsequent to it.” Cervantes v. United States, 330 F.3d 1186, 1189 (9th Cir. 2003).
Likewise, the court need not reach the government’s alternate argument that the Third-Party
Complaints fail to state a claim under Rule 12(b)(6) standards for lack of a duty under state law.
48
VSE argues that it is premature to apply the contractual indemnity
provision at this motion-to-dismiss stage, contending that this is an issue for
summary judgment and that the court may not even consider the contract. Doc.
No. 56, Opp’n at 26. The court disagrees. See United States v. Ritchie, 342 F.3d
903, 908 (9th Cir. 2003) (“A court may, however, consider certain materials -documents attached to the complaint, documents incorporated by reference in the
complaint, or matters of judicial notice -- without converting the motion to dismiss
into a motion for summary judgment.”); see also Marder v. Lopez, 450 F.3d 445,
448 (9th Cir. 2006) (“A court may consider evidence on which the complaint
‘necessarily relies’ if: (1) the complaint refers to the document; (2) the document is
central to the plaintiff's claim; and (3) no party questions the authenticity of the
copy attached to the 12(b)(6) motion.”). Indeed, VSE (not the government or the
Plaintiffs) proffered the contract in its Notice of Removal, and there is no dispute
as to its authenticity.
VSE also argues that the clause is void as against public policy or was
procured through “inequality of bargaining power.” Doc. No. 56, Opp’n at 29-30.
Such indemnity and hold harmless provisions, however, are valid under Hawaii
law if they are written in “clear and unequivocal language” (as is ¶ H.17 of the
VSE contract), especially where the contract is between sophisticated parties. See,
49
e.g., Keawe v. Hawaiian Elec. Co., 65 Haw. 232, 238, 649 P.2d 1149, 1153 (1982);
Kole v. Amfac, Inc., 665 F. Supp. 1460, 1463 (D. Haw. 1987). Even if the
government has substantial bargaining power, VSE cannot dispute that it is a
sophisticated entity with substantial bargaining power of its own -- it is a publiclytraded company with government contracts exceeding $2 billion, and the contract
as issue was valued at well over $25 million. See, e.g., Doc. No. 40-3, Alapa Decl.
Ex. 4 (Freeman/Sprankle). The clause is enforceable.
For these reasons (and because the United States retains sovereign
immunity), the Third-Party Complaints fail to state a claim for equitable
indemnity. See In re All Asbestos Cases, 603 F. Supp. at 606 (requiring the United
States to be “guilty of ‘active,’ ‘primary’ or ‘original’ fault, as opposed to the
merely ‘passive,’ ‘secondary,’ or ‘implied’ fault of the indemnitee”).
///
///
///
///
///
///
///
50
V. CONCLUSION
For the foregoing reasons, the United States’ Motions to Dismiss, and
the Plaintiffs’ Motion to Strike (including related joinders) are GRANTED. The
Third-Party Complaints are DISMISSED with prejudice against the United States
(but remain as to Donaldson).
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, November 29, 2012.
/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge
Cabalce et al. v. United States et al., Civ. No. 12-00373 JMS-RLP; Kelii et al. v. VSE Corp. et
al., Civ. No. 12-00376 JMS-RLP; Freeman et al. v. VSE Corp., et al., Civ. No. 12-00377 JMSRLP; Irvine et al. v. VSE Corp., et al., Civ. No. 12-00391 JMS-RLP; Order Granting (1) ThirdParty Defendant United States’ Motions to Dismiss Third-Party Complaints, and (2) Plaintiffs’
Motions to Strike Third-Party Complaints
51
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