Perez v. Blue Mountain Farms et al

Filing 89

ORDER GRANTING MOTION TO DISMISS COUNTERCLAIMS - granting 58 Motion to Dismiss for Lack of Jurisdiction. Signed by Chief Judge Rosanna Malouf Peterson. (CC, Case Administrator)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF WASHINGTON

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THOMAS E. PEREZ, Secretary of
Labor, United States Department of
Labor,
Plaintiff,

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NO: 2:13-CV-5081-RMP
ORDER GRANTING MOTION TO
DISMISS COUNTERCLAIMS

v.
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BLUE MOUNTAIN FARMS, BLUE
MOUNTAIN FARMS PACKING,
RYAN BROCK, SHIRLEY LOTT, and
JOHN AND JANE DOES I through XX,
Defendants.

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Before the Court is the Government’s Motion to Dismiss Counterclaims,

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ECF No. 58. The Court has reviewed the Government’s Motion and Reply as well

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as the Response filed by Defendants Blue Mountain Farms LLC, Blue Mountain

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Packing LLC, Great Columbia Berry Farm LLC, Applegate Orchards Inc., Ryan

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Brock, Shirley Lott, and Brandon Lott (collectively, “Blue Mountain”).

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ORDER GRANTING MOTION TO DISMISS COUNTERCLAIMS ~ 1

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BACKGROUND
The Government conducted a wage and hour investigation of Blue

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Mountain’s blueberry farming business in the summer of 2013. Based on its

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findings, the Government alleges in its First Amended Complaint that Blue

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Mountain violated the Fair Labor Standards Act and the Migrant and Seasonal

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Agricultural Worker Protection Act by withholding wages from its employees and

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by failing to comply with recordkeeping and disclosure requirements. See ECF

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No. 54 at 2-3.

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In its Answer, Blue Mountain claims that in the course of the investigation,

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the Government advised Blue Mountain that it had invoked the “hot goods”

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provision, 29 U.S.C. § 215(a)(1), forbidding the transportation, shipment, delivery,

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or sale of Blue Mountain’s blueberry crop. See ECF No. 55 at 8-9. Blue Mountain

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claims that the Government told one of Blue Mountain’s key customers that a hot

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goods objection had been placed on Blue Mountain’s berries. ECF No. 55 at 9.

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Because of the hot goods objection, the customer allegedly destroyed berries that it

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had received from Blue Mountain and refused to pay for them. ECF No. 55 at 9.

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Blue Mountain asserts four counterclaims, seeking a declaratory judgment

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that the Government’s application of the hot goods provision was unlawful,

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claiming that the Government committed the tort of intentional interference with a

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ORDER GRANTING MOTION TO DISMISS COUNTERCLAIMS ~ 2

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business expectancy, asserting that the Government was negligent in applying the

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hot goods provision, and seeking attorney fees. ECF No. 55 at 7-13.

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The Government moves to dismiss all of Blue Mountain’s counterclaims,

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contending that the Court lacks subject matter jurisdiction over the counterclaims

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because of the doctrine of sovereign immunity. ECF No. 58.

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ANALYSIS

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Rule 12(b)(1) governs motions to dismiss for lack of subject matter

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jurisdiction. Fed. R. Civ. P. 12(b)(1). “If the court determines at any time that it

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lacks subject-matter jurisdiction, the court must dismiss the action.” Fed. R. Civ.

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P. 12(h)(3). “Once challenged, the party asserting subject matter jurisdiction has

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the burden of proving its existence.” Rattlesnake Coal. v. E.P.A., 509 F.3d 1095,

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1102 n.1 (9th Cir. 2007).

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“Sovereign immunity is an important limitation on the subject matter

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jurisdiction of federal courts.” Vacek v. U.S. Postal Serv., 447 F.3d 1248, 1250

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(9th Cir. 2006). As a sovereign, the United States “is immune from suit unless it

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has expressly waived such immunity and consented to be sued.” Gilbert v.

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DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985). Furthermore, “a waiver of

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sovereign immunity is to be strictly construed, in terms of its scope, in favor of the

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sovereign.” Dep’t of Army v. Blue Fox, Inc., 525 U.S. 255, 261 (1999).

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ORDER GRANTING MOTION TO DISMISS COUNTERCLAIMS ~ 3

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1. Tort Counterclaims

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The Government contends that the Court lacks subject matter jurisdiction to

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consider Blue Mountain’s tort counterclaims because Blue Mountain failed to

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exhaust its administrative remedies. ECF No. 58 at 4-7.

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The Federal Tort Claims Act (“FTCA”) “provides that an ‘action shall not

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be instituted upon a claim against the United States for money damages’ unless the

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claimant has first exhausted his administrative remedies.” McNeil v. United States,

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508 U.S. 106, 107 (1993) (quoting 28 U.S.C. § 2675(a)). This requirement does

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not apply, however, to “claims as may be asserted under the Federal Rules of Civil

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Procedure by third party complaint, cross-claim, or counterclaim.” 28 U.S.C. §

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2675(a).

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Blue Mountain apparently does not dispute that it failed to exhaust its

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administrative remedies but instead argues that its counterclaims are permissible

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pursuant to the FTCA’s exception for counterclaims. See ECF No. 62 at 4-9, 11-

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12.

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The exception from the requirement to exhaust administrative remedies,

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however, is more limited than Blue Mountain acknowledges. When the United

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States sues, it “does not waive immunity as to claims which do not meet the ‘same

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transaction or occurrence test’ nor to claims of a different form or nature than that

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sought by it as plaintiff . . . .” Frederick v. United States, 386 F.2d 481, 488 (5th

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Cir. 1967); see also 6 Charles Alan Wright et al., Federal Practice and Procedure

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§ 1427 (3d ed.) (quoting Frederick, 386 F.2d 481). Thus, “[c]ounterclaims under

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the F.T.C.A. have been permitted only when the principal action by the United

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States was in tort and the counterclaim was compulsory in nature.” Spawr v.

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United States, 796 F.2d 279, 281 (9th Cir. 1986).

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Blue Mountain argues that Spawr’s discussion of this issue is dicta because

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the private parties in that case sued the United States as plaintiffs, rather than

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raising counterclaims. ECF No. 62 at 11. However, Spawr includes this

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discussion as an alternative basis for its conclusion, such that it is entitled at least

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to some weight. See Spawr, 796 F.2d at 281 (“Furthermore, because the Spawrs

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seek money damages for the imposition of a Denial Order, they make a claim ‘of a

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different form or nature’ from that sought by the Government as plaintiff in its

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proceedings under the Export Act.”). Moreover, contrary to Blue Mountain’s

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contention that district courts within the Ninth Circuit since have departed from

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Spawr, ECF No. 62 at 11, the only authority that Blue Mountain offers is in accord

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with the conclusion that FTCA counterclaims have been allowed only where the

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United States’ claim is based in tort. See United States v. Montrose Chem. Corp.

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of Cal., 788 F. Supp. 1485, 1491 n.2 (C.D. Cal. 1992) (“Here, the United States

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action was based exclusively on CERCLA. An action for natural resource

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damages under CERCLA ‘sounds basically in tort.’”).

ORDER GRANTING MOTION TO DISMISS COUNTERCLAIMS ~ 5

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Based on Ninth Circuit precedent and the strict construction of waivers of

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sovereign immunity, the Court finds that the FTCA’s exception from the

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requirement to exhaust administrative remedies applies only when the action

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brought by the United States also sounds in tort.

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Here, as Blue Mountain does not dispute, the Government’s principal action

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does not sound in tort. See ECF No. 62 at 11. Thus, because Blue Mountain failed

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to exhaust its administrative remedies in accordance with the FTCA, the Court

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finds that it lacks subject matter jurisdiction over Blue Mountain’s second and

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third tort counterclaims for intentional interference with business expectancy and

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negligence. The Court does not consider the parties’ remaining arguments

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regarding these claims.

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2. Declaratory Judgment

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Blue Mountain seeks a declaration that the Government exceeded its

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authority under the hot goods provision and that the Government’s application of

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that provision was unconstitutional. ECF No. 55 at 9-10. The Government moves

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to dismiss Blue Mountain’s request for declaratory judgment, arguing that Blue

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Mountain has not identified any waiver of sovereign immunity for its counterclaim

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under the Declaratory Judgment Act. ECF No. 58 at 9-10.

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“The Declaratory Judgment Act merely creates a remedy in cases otherwise
within the court’s jurisdiction; it does not constitute an independent basis for

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jurisdiction.” Morongo Band of Mission Indians v. Cal. State Bd. of Equalization,

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858 F.2d 1376, 1382-83 (9th Cir. 1988).

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Blue Mountain has not identified any applicable waiver of sovereign

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immunity, instead contending that the Court should exercise jurisdiction over the

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declaratory judgment counterclaim because the Court has jurisdiction over the tort

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counterclaims. See ECF No. 62 at 12. However, as discussed above, the Court

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lacks jurisdiction over Blue Mountain’s tort counterclaims, and there appears to be

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no waiver of sovereign immunity as to Blue Mountain’s counterclaim under the

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Declaratory Judgment Act. Thus, the Court lacks subject matter jurisdiction and

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will dismiss this counterclaim as well.

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3. Attorney Fees

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Blue Mountain concedes that, due to sovereign immunity, it may not seek

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attorney fees against the Government pursuant to 28 U.S.C. § 1927. ECF No. 62 at

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14. “[F]or this reason[,] Blue Mountain will agree to withdraw its attorney fee

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counterclaim, as pled.” ECF No. 62 at 14. However, Blue Mountain contends that

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it will seek fees through other authority. ECF No. 62 at 14. The Government

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objects to any attempt by Blue Mountain to amend its Answer to seek attorney fees

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on another basis. ECF No. 66 at 9.

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The Court dismisses Blue Mountain’s counterclaim regarding attorney fees

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pursuant to 28 U.S.C. § 1927 and makes no ruling regarding the propriety of fees

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pursuant to other authority.

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Accordingly, IT IS HEREBY ORDERED:
1. The Government’s Motion to Dismiss Counterclaims, ECF No. 58, is

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GRANTED.
2. Blue Mountain’s First, Second, and Third Counterclaims are

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DISMISSED WITH PREJUDICE; Blue Mountain’s Fourth

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Counterclaim, regarding attorney fees, is DISMISSED WITHOUT

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PREJUDICE.
The District Court Clerk is directed to enter this Order and to provide copies
to counsel.
DATED this 10th day of August 2015.

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s/ Rosanna Malouf Peterson
ROSANNA MALOUF PETERSON
Chief United States District Court Judge

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