Swiggett v. PCS Phosphate Company, Inc.

Filing 47

ORDER granting 27 Motion to Dismiss for Lack of Jurisdiction; granting 39 Motion to Withdraw as Attorney; denying 43 Motion for Extension of Time; denying 44 Motion to Expand Defendant List; denying 45 Motion to Compel; and, dismissing as moot 46 Motion to Strike - Signed by District Judge Louise Wood Flanagan on 10/29/2012. (Baker, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
NO. 4:11-CV-169-FL

M. DALE SWIGGETT,
Plaintiff,

v.
PCS PHOSPHATE COMPANY, INC.,
Defendant.

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ORDER

This matter comes now before the court on defendant’s motion to dismiss for lack of
jurisdiction and motion for summary judgment,1 plaintiff’s counsel’s motion to withdraw, plaintiff’s
motions filed during the time this case has been stayed pending resolution of the motion to dismiss
and motion for summary judgment, and defendant’s motion to strike. For reasons given below,
counsel’s withdrawal is allowed, the motion to dismiss allowed as well, plaintiff’s remaining
motions denied, and the motion to strike denied as moot.
BACKGROUND
Motion to dismiss and for summary judgment has ripened in the case without any response
having been filed by plaintiff in this action, removed from Pamlico County Superior Court on
October 5, 2011, due to diversity of the parties where the amount alleged in controversy exceeds the
sum of $75,000.00. Plaintiff contends that defendant through its phosphate mining activity in
Aurora, North Carolina, has caused subsidence of the earth's surface, substantial injury to lands and
the improvements around it, increased salinity of groundwater, and contamination of wells to the
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On the docket at entry no. 27 appears defendant's motion to dismiss for lack of jurisdiction and motion for
summary judgment, supported by lengthy memorandum of law at entry no. 28, with reference to various exhibits,
plaintiff’s deposition, filed at entry no. 29, and declarations appearing between entry nos. 30 and 35, including of
defendant's counsel, C. Ray Holmes, Harvey Skip Lee, Mark Terry, Richard K. Spruill, and David A. Wiley.

point that they are unusable.

Plaintiff alleges that defendant’s conduct has rendered the land on

which plaintiff has built improvements ‘virtually uninhabitable and unusable for his improvement
purposes.’ Plaintiff seeks compensatory damages as well as punitive damages in unspecified
amounts.
Case management order was entered in December 2011, specifying among other things that
discovery is to close on August 31, 2012. Issues arose in discovery addressed in conference by the
magistrate judge of or relating to defendant’s provision of Rule 26 initial disclosures. There was
to be a show cause hearing March 5, 2012 where plaintiff's counsel had been admonished three
times for failing to file a financial disclosure statement on behalf of plaintiff; however, prior to
hearing this issue was rectified by plaintiff and the court discontinued the show cause hearing.
Plaintiff filed at the same time a "modification of complaint". That document was later stricken on
defendant's motion.
At the end of April, defendant moved, with consent of plaintiff's counsel, to extend the
mediation deadline where the parties did not believe mediation at the time set would be productive.
The court allowed that motion. While issues concerning plaintiff’s counsel’s failure to file notice
of appearance in this case have persisted, discovery appears to have continued. Reference is made
in the motion to withdraw to plaintiff’s failure to pay costs associated with his deposition, and to his
filing of petition in bankruptcy during pendency of the case without informing counsel, who reports
himself as being named a creditor in the bankruptcy proceeding. Defendant’s response illuminates
that the bankruptcy court dismissed plaintiff’s action. A motion to stay case deadlines, consented
to by plaintiff, through counsel, was granted by the court following defendant’s filing of its motion
to dismiss and motion for summary judgment. In the motion to stay, defendant expressly noted that

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the time period for any response to the earlier filed motion to dismiss and motion for summary
judgment had passed. Additional detail is provided concerning the course of the litigation to date
in defendant’s motion to stay.
COURT’S DISCUSSION
The court finds good cause to allow the motion to withdraw appearing on the docket at entry
no. 39, and does relieve counsel for plaintiff of this representation. Turning next to the motions
appearing at entry no. 27, the court focuses on the motion made pursuant to Rule 12(b)(1), resting
its decision upon a determination that it is without subject matter jurisdiction.
A. Standard of Review
Federal Rule of Civil Procedure 12(b)(1) provides for the dismissal of an action if the court
lacks subject matter jurisdiction. A party may attack subject matter jurisdiction on grounds that the
complaint fails to allege facts upon which subject matter jurisdiction can be based, or on grounds
that the jurisdictional facts in the complaint are not true. Adams v. Bain, 697 F.2d 1213, 1219 (4th
Cir. 1982). In the later case, “the district court is to regard the pleadings' allegations as mere
evidence on the issue, and may consider evidence outside the pleadings without converting the
proceeding to one for summary judgment.” Richmond, Fredericksburg & Potomac R. Co. v. United
States, 945 F.2d 765, 768 (4th Cir. 1991).
Generally, when the jurisdictional facts are intertwined with the merits of the case, the court
should “assume jurisdiction and proceed to the intertwined merits issues.” Kerns v. United States,
585 F.3d 187, 193 (4th Cir. 2009). Nevertheless, an exception to this rule which defendants rely
upon here exists where the claims are “wholly unsubstantial and frivolous.” Id. The Supreme Court
“has repeatedly held that the federal courts are without power to entertain claims otherwise within

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their jurisdiction if they are ‘so attenuated and insubstantial as to be absolutely devoid of merit,
wholly insubstantial, obviously frivolous, plainly insubstantial, or no longer open to discussion.’”
Davis v. Pak, 856 F.2d 648, 650-51 (4th Cir. 1988) (quoting Hagans v. Lavine, 415 U.S. 528, 53637 (1974)).
In this case, defendant argues that plaintiff’s jurisdictional allegations regarding subsidence
and groundwater salinity are so frivolous as to be properly disposed of pursuant to Rule 12(b)(1),
upon consideration of evidence and testimony in the record. Def’s Mem. at 13. Defendant argues
that plaintiff’s allegations regarding his injury and causation are wholly unsupported by any
competent, credible evidence, and that plaintiff therefore lacks standing to pursue his case. Id. at
14-21. Defendant also argues that plaintiff has failed to exhaust administrative remedies, thereby
providing an additional jurisdictional basis for dismissal. Id. at 22-25. For the reasons set forth
below, the court agrees that plaintiff’s jurisdictional allegations are frivolous, and that the court lacks
subject matter jurisdiction over this case.
B. Analysis
1. Standing
The court’s “jurisdictional inquiry includes both constitutional and prudential aspects of
standing.” Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 118 (4th Cir. 2004).
Constitutional standing requires a plaintiff to demonstrate (1) “an injury in fact” (2) a “causal
connection between the injury and the conduct complained of”; and (3) a “likelihood that the injury
‘will be redressed by a favorable decision.’” Benham v. City of Charlotte, N.C., 635 F.3d 129, 134
(4th Cir. 2011) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). “[P]rudential
standing encompasses the general prohibition on a litigant’s raising another person’s legal rights

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. . . and the requirement that a plaintiff’s complaint fall within the zone of interests protected by the
law invoked.” Elk Grove Unified School Dist. v. Newdow, 542 U.S. 1, 12 (2004) (citations
omitted). Constitutional standing is governed by federal law. See Phillips Petroleum Co. v. Shutts,
472 U.S. 797, 804 (1985).2 Prudential standing, by contrast, requires reference to state law in a
diversity case “to determine the nature of the litigant’s rights and whether he is entitled to assert the
claims he makes.” Gen. Tech., 388 F.3d at 118.
a. Injury in Fact and Causation
The most glaring deficiency in plaintiff’s lawsuit is that plaintiff relies upon no more than
speculation and supposition to draw a causal connection between defendant’s conduct and plaintiff’s
alleged injury. This deficiency is apparent from the face of the complaint, and it is confirmed even
more markedly upon consideration of the evidence presented by defendant. To establish injury in
fact, a plaintiff must show an “invasion of a legally protected interest” in a manner that is both
“concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Lujan, 504
U.S. at 560. To establish a causal connection, the injury alleged must be “fairly traceable to the
challenged action of the defendant, and not the result of the independent action of some third party
not before the court.” Id.; see Frank Krasner Enterprises, Ltd. v. Montgomery County, MD, 401
F.3d 230, 235 (4th Cir. 2005). Where a plaintiff relies upon a “conjectural and speculative” or
“hypothetical” chain of events to link the defendant’s conduct with plaintiff’s alleged harm, the court

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Although defendant relies primarily upon North Carolina law in discussing both constitutional and prudential
standing requirements, see Mem. at 14, “[s]tanding to sue in federal court is governed by federal law, even in
diversity cases based on state law claims and in actions removed from state court.” Kaiser-Flores v. Lowe's Home
Centers, Inc., CIV. 5:08-CV45-V, 2009 WL 762198, at *2 n.10 (W.D.N.C. Mar. 19, 2009); see Shavitz v. Guilford
County Bd. of Educ., 100 F. App'x 146, 150 n.1 (4th Cir. 2004) (noting that even where a “cause of action arises
under state law, the federal standing requirements of Article III still apply”); Wheeler v. Travelers Ins. Co., 22 F.3d
534, 537 (3d Cir. 1994) (“Although this appeal is in a diversity case which was removed to federal district court, we
apply federal law in determining [plaintiff’s] standing.”).

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lacks subject matter jurisdiction to entertain the lawsuit. Benham v. City of Charlotte, N.C., 635
F.3d 129, 137 (4th Cir. 2011).
As an initial matter, plaintiff’s alleged injury is vague and illusory. Plaintiff alleges he is a
real estate developer who built certain unspecified “improvements” on two tracts of land in Pamlico
County, one on NC Highway 55 and one on NC Highway 304. Am. Compl. ¶ 4. Although plaintiff
is not the owner of the land upon which the improvements were constructed, he claims he has
suffered “losses of expenses and costs in the construction of said improvements,” and he suggests
that he is not now able to recover profits that he originally expected to recoup from his work in
erecting structures on the two tracts of land. Id. ¶¶ 4, 12.
The causal chain between this alleged injury to expected profits and defendant’s mining
activities is broken by multiple speculative links and assumptions, not supported by factual
allegations in the complaint nor evidence in the record. First, activities and choices of independent
third parties, not party to this lawsuit, stand between the alleged losses and defendant’s challenged
actions. See Frank Krasner Enterprises, 401 F.3d at 235. For example, plaintiff suggests that
profits from his development work were expected to come from some unspecified development
contract between plaintiff and the landowners, C. R. Holmes Investments Inc. and C.R. H.
Investments LLC, who are not parties to the suit. Am. Compl. ¶¶ 4. But, the payment that plaintiff
is owed, and the manner in which it is paid, is dependent on the contractual arrangements between
plaintiff and that third party, and upon the third parties’ performance of that contract. Further,
whether the tracts of land at issue could be sold, and the extent and manner of the sale, depends
further on the market for the property, the costs of sale and development, taxes, fees, interest rates,
and many other economic factors wholly in the hands of third parties not before the court and

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divorced from the conduct of defendant.
In addition, the speculative and fanciful nature of plaintiff’s causation allegations is
compounded by the absence of factual allegations linking defendant’s mining activities with land
subsidence or water salinity on the land on which plaintiff constructed improvements. While
plaintiff alleges that defendant’s activities caused land and improvements to sink or subside “at or
near the mining site” in Aurora, North Carolina, ¶ 7, the court takes notice of the fact that Aurora
is approximately 15 miles from the properties identified in the complaint. See Def’s Mem. at 4.
Thus it is a matter of exceptional speculation, even paranoia, to allege that conduct at defendant’s
mining site caused land subsidence and water salinity 15 miles away in the subject properties.
Accordingly, it is not proper to accept as true plaintiff’s conclusory allegation that defendant’s
conduct in Aurora “caused the subsidence” at the subject properties. Compl. ¶ 9. Absent this
conclusory allegation, there is nothing in the complaint to link defendant’s conduct with alleged
subsidence and salinity on the subject property, much less plaintiff’s economic injury.
The court’s conclusion about the fanciful nature of plaintiff’s theory of causation, and the
court’s lack of jurisdiction to entertain this suit, is further confirmed by the overwhelming and
uncontradicted evidence demonstrating no causal link between defendant’s conduct and any
subsidence or salinity on the subject properties. As an initial matter, there is no evidence of land
subsiding or increasing in salinity on plaintiff’s property during the time period at issue in suit. See
Lee Decl., ¶¶ 3, 17-21; Terry Decl. ¶4. In addition, there is no evidence that defendant’s operations
caused any subsidence or increase in salinity on plaintiff’s property, approximately fifteen miles
removed from defendant’s mining activity. See Spruill Decl. ¶¶ 21-23; Wiley Decl. ¶¶ 16-19, 22.
Although plaintiff has had the opportunity through the period of discovery and in his deposition

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testimony to provide some cogent explanation for his theory of causation, he has failed to do so, and
instead confirmed the speculative nature of his claims. See e.g. Swiggett Dep. 60:10-17, 67:6-71:12,
137:7-16.
In sum, where plaintiff’s lack of standing is apparent from the allegations of the complaint,
and the frivolity of plaintiff’s position is further confirmed upon consideration of the evidence
presented by defendant, plaintiff’s suit must be dismissed for lack of subject matter jurisdiction
under Rule 12(b)(1).
b. Prudential Standing
This court also lacks subject matter jurisdiction over plaintiff’s suit based upon principles
of prudential standing. As noted above, the prudential standing inquiry generally requires
determination that plaintiff’s complaint falls within the “zone of interests” protected by the law
invoked, Elk Grove, 542 U.S. at 12, and this determination must be made with reference to state law
where plaintiff asserts state law claims. Gen. Tech., 388 F.3d at 118. Here, although plaintiff does
not specify the legal basis for his claims in the complaint, it appears he is asserting a claim for
damages under North Carolina law for trespass to property or nuisance. See Compl., ¶ 15; Am.
Compl., ¶¶ 4, 12.
To establish a claim for such torts under North Carolina law, plaintiff must allege among
other elements, injury and causation. See, e.g., Singleton v. Haywood Elec. Membership Corp., 357
N.C. 623, 627 (2003) (trespass); Pendergrast v. Aiken, 293 N.C. 201, 216 (1977) (nuisance). But,
where the alleged injury to the plaintiff is economic in nature, as here, North Carolina courts have
established a rule, which guides the court’s prudential standing analysis here, that there is no
cognizable injury from tortious conduct based upon speculative lost profits. Kitchen Lumber Co.

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v. Tallassee Power Co., 206 N.C. 515, 174 S.E. 427, 431 (1934) (“Where the profits lost by
defendant's tortious conduct proximately and naturally flow from his act, and are reasonably definite
and certain, they are recoverable; those which are speculative and contingent are not.”).
Where plaintiff here has asserted lost profits which are speculative and contingent on
numerous factors beyond defendant’s alleged conduct, North Carolina courts would not permit
recovery for the claims raised here by plaintiff. See Kitchen, 174 S.E. at 431. Accordingly,
prudential standing principles, informed by the contours of North Carolina law, provide an
additional basis for dismissal of plaintiff’s suit pursuant to Rule 12(b)(1).
2. Exhaustion
Plaintiff’s failure to exhaust state remedies is an additional jurisdictional defect which
requires dismissal under Federal Rule 12(b)(1). See Sandhill Motors, Inc. v. American Motors Sales
Corp., 667 F.2d 1112, 1115 (4th Cir. 1981) (affirming dismissal for lack of subject matter
jurisdiction where plaintiff failed to exhaust administrative remedies under North Carolina law).
In an action based on diversity, where “a North Carolina court would have declined to entertain the
action” due to “a failure to exhaust administrative remedies,” the federal court must likewise dismiss
the suit for lack of subject matter jurisdiction. Id. (citing Presnell v. Pell, 298 N.C. 715 (1979)).
“Where the legislature has provided by statute an effective administrative remedy, that
remedy is exclusive and its relief must be exhausted before recourse may be had to the courts.”
Presnell, 298 N.C. at 721. “This is especially true where a statute establishes, as here, a procedure
whereby matters of regulation and control are first addressed by commissions or agencies
particularly qualified for the purpose.” Id. “In such a case, the legislature has expressed an intention
to give the administrative entity most concerned with a particular matter the first chance to discover

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and rectify error,” and “only after the appropriate agency has developed its own record and factual
background upon which its decision must rest should the courts be available to review the
sufficiency of its process.” Id. at 721-22.
The North Carolina Environmental Management Commission, under the authority of the
Secretary of the North Carolina Department of Environment and Natural Resources, Division of
Water Resources (“DENR”), is charged with issuing permits for high-volume utilization of surface
waters or groundwater, such as defendant’s alleged activities here. See N.C. Gen. Stat. § 143215.15(a). Any “water user who is dissatisfied with a decision of the Commission concerning that
user’s or another user’s permit application or permit may commence a contested case under G.S.
150B-23,” providing for administrative remedies under the North Carolina Administrative Procedure
Act. N.C. Gen. Stat. § 143-215.15(c). Notably, the statue specifically provides for DENR’s review
of permits and authority to modify or revoke a permit, upon consideration of (1) “the physical and
chemical nature of any impairment of the aquifer or stream, adversely affecting its availability or
fitness for other water uses (including public use),” and (2) “injury to public health, safety or welfare
which would result if such impairment were not prevented or abated,” among other technical factors.
N.C. Gen. Stat. § 143-215.15(h).
Here, where plaintiff has effective administrative remedies at his disposal, directly suited to
the water-extraction concerns and theories plaintiff raises in this lawsuit, North Carolina law
requires plaintiff to seek administrative recourse prior to bringing suit. In particular, defendant
applied for groundwater withdrawal permits on April 28, 2011. See Am. Answer, Exh. A. While
N.C. Gen. Stat. § 143-215.15(h) provides a basis to thoroughly examine the potential injurious
impact of defendant’s activities on the subject properties, plaintiff did not timely challenge these

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permits before DENR, but instead filed this lawsuit. See Wiley Decl. ¶15. Where plaintiff had an
opportunity to raise his concerns before DENR upon defendant’s application for permits, and to seek
judicial review in accordance with the North Carolina Administrative Procedures Act, but failed to
do so, this court lacks subject matter jurisdiction to entertain his claims here. See Presnell, 298 N.C.
at 721; see also Flowers v. Blackbeard Sailing Club, 115 N.C. App. 349, 353 (1994) (dismissing suit
for lack of subject matter jurisdiction where plaintiff failed to exhaust administrative remedies
before the Coastal Resources Commission, concerning plaintiff’s complaint that defendant’s pier
encroached on the riparian boundary between plaintiffs’ and defendant’s property).
In sum the court lacks subject matter jurisdiction over this case due to lack of standing and
failure to exhaust administrative remedies, and plaintiff’s complaint therefore must be dismissed
pursuant to Rule 12(b)(1).3
3. Remaining Motions
Where the court lacks subject matter jurisdiction to allow this lawsuit to proceed further, the
court denies plaintiff’s motion for continuance, motion to compel records, and motion to “expand
defendants list.” First, allowing a continuance at this point is unwarranted both where plaintiff has
had ample time already to retain replacement counsel, and where retention of counsel would be
futile in rectifying a fundamentally flawed and frivolous lawsuit. Second, the information sought
by plaintiff in his motion to compel records would not alter the court’s analysis regarding plaintiff’s
standing, as plaintiff’s relationship with his business partner regarding “joint real estate development
projects,” Mot. to Compel at 1, merely illustrates one of many convoluted links in the hypothetical
and speculative chain of causation linking defendant’s conduct with plaintiff’s alleged injury.
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Lacking subject matter jurisdiction, the court does not reach defendant’s alternative basis for dismissal based upon
the running of the statute of limitations. See Def’s Mem. at 21-22.

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Moreover, the fact that plaintiff seeks to compel records from his business partner “in order to
determine if there has been an additional breach of contract” only serves to further confirm that
plaintiff’s economic losses are the result of contractual relationships and factors much apart from
defendant’s conduct. Finally, Plaintiff’s proposal to expand the list of defendants in this case is not
only out of time but also futile, where the proposed new allegations, barely cogent at all, suffer the
same deficiencies in standing and exhaustion discussed in the court’s analysis above. See Foman
v. Davis, 371 U.S. 178, 182 (1962). Accordingly, the court denies plaintiff’s motions, and where
these motions are without merit the court also denies as moot defendant’s motion to strike.
CONCLUSION
Based on the foregoing, defendant’s motion to dismiss for lack of jurisdiction (DE # 27) is
GRANTED, and this matter is DISMISSED. The alternative motion for summary judgment (DE
#27) is DENIED AS MOOT. The motion to withdraw as attorney (DE #39) is GRANTED. The
motions for extension of time, to expand defendant list, and to compel (DE #s 43, 44, 45) are
DENIED, and the motion to strike (DE # 46) is DENIED AS MOOT. The clerk is directed to close
this case.
So ordered, this the 29th day of October, 2012.

_______________________________________
LOUISE W. FLANAGAN
United States District Court Judge

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