Professional Documents
Culture Documents
C.P. Chemical Company, Inc. v. United States of America and U.S. Consumer Product Safety Commission, 810 F.2d 34, 2d Cir. (1987)
C.P. Chemical Company, Inc. v. United States of America and U.S. Consumer Product Safety Commission, 810 F.2d 34, 2d Cir. (1987)
2d 34
55 USLW 2436
C.P. Chemical Company appeals from a judgment of the United States District
Court for the Southern District of New York (Brieant, J.) dismissing its
complaint against the United States and the Consumer Product Safety
Commission ("Commission" or "agency") under the Federal Tort Claims Act,
28 U.S.C. 1346(b), 2671-80 ("FTCA"), and the Consumer Product Safety
Act, 15 U.S.C. 2053(h) ("CPSA"), for lack of subject matter jurisdiction and
failure to state a claim. The suit arose from the Commission's ban on the use of
formaldehyde-emitting foam insulation, 47 Fed.Reg. 57,488 (1982). The Fifth
Circuit ruled, in Gulf South Insulation v. U.S. Consumer Product Safety
Commission, 701 F.2d 1137, 1148-50 (5th Cir.1983), that the ban was
improper because it was promulgated under the procedures of the CPSA, 15
U.S.C. 2057, 2058, 2079(d), rather than under the appropriate procedures of
the Federal Hazardous Substances Act, 15 U.S.C. 1261-1276. C.P. Chemical
alleged that the Commission erroneously included within the ban its insulation
product, Tripolymer 105, which emits no formaldehyde gas. The district court
held that the FTCA waiver of sovereign immunity does not extend to the
agency conduct forming the basis for this tort action against the United States
and the Commission. The court also held that the CPSA provides no predicate
for this action. For the reasons stated below, we affirm.
BACKGROUND
2
On August 24, 1984, C.P. Chemical timely filed suit in the United States
District Court for the Southern District of New York, seeking $700,000,000 in
damages on two causes of action identical to those asserted in its administrative
claim: (1) the Commission was grossly negligent in failing to follow the
appropriate rulemaking procedure; and (2) the Commission recklessly
disseminated false and derogatory information about Tripolymer 105.
Defendants moved to dismiss the complaint pursuant to Rules 9(b), 12(b)(1)
and 12(b)(6) of the Federal Rules of Civil Procedure, for lack of subject matter
jurisdiction and failure to state a claim. The district court entered final judgment
for defendants on three grounds: (1) that the Federal Tort Claims Act did not
waive sovereign immunity for nationwide agency conduct that could not be
committed by a private individual, 28 U.S.C. 1346(b), 2674; (2) that the
agency conduct at issue fell squarely within the discretionary function
exception, or other exceptions set forth in 28 U.S.C. 2680(h); and (3) that the
complaint did not state a claim within the jurisdiction of the CPSA, 15 U.S.C.
2053(h).
On appeal, C.P. Chemical contends that sovereign immunity has been waived
under the Federal Tort Claims Act, 28 U.S.C. 2680, because a private
individual would be held liable under New York law for tortious interference
with business, and because the agency failed to use "due care" when it applied
the wrong rulemaking procedure. C.P. Chemical also contends that the district
court erred in applying the discretionary function exception. Finally, C.P.
Chemical asserts that by failing to follow the appropriate rulemaking
procedure, the Commission's gross negligence was outside the bounds of its
authority and therefore did not constitute "agency action," so that a civil suit
would lie under section 2053(h) of the CPSA.
DISCUSSION
A. Federal Tort Claims Act
Purposes of the Act
8
When the FTCA was enacted, "[u]ppermost in the collective mind of Congress
were the ordinary common-law torts. Of these, the example which is reiterated
in the course of the repeated proposals for submitting the United States to tort
liability is 'negligence in the operation of vehicles.' " Dalehite v. United States,
346 U.S. 15, 28, 73 S.Ct. 956, 964, 97 L.Ed. 1427 (1953) (footnotes omitted).
The Dalehite Court's discussion of the FTCA's legislative history contains
ample evidence that while Congress intended to allow garden-variety tort suits
against the United States, 1 it was concerned with avoiding precisely the type of
liability appellant asserts here. Id. at 27, 73 S.Ct. at 963-64.
The House Report accompanying the bill that became the FTCA included the
specific statement that it is neither "desirable [n]or intended that the
constitutionality of legislation, or the legality of a rule or regulation, should be
tested through the medium of a damage suit for tort." H.R.Rep. No. 1287, 79th
Cong., 1st Sess. 6 (1945). See also Statement of Assistant Attorney General
Francis M. Shea, Hearings on H.R. 5733 and H.R. 6463 Before the House
Comm. on the Judiciary, 77th Cong., 2d Sess. 6, 25, 33 (1942). The earlier
Committee Reports echo this concern:
H.R.Rep. No. 2245, 77th Cong., 2d Sess. 10 (1942); S.Rep. No. 1196, 77th
Cong., 2d Sess. 7 (1942); House Hearings on H.R. 5373 and H.R. 6463, supra,
at 33.
12
In the case before us, the wrongful conduct at issue is an agency's failure to
select the appropriate rulemaking procedure in promulgating an administrative
regulation. Thus, we must decide whether the FTCA's limited waiver of
sovereign immunity extends to the Commission's procedural error in banning
UFFI under the Consumer Product Safety Act, rather than under the Federal
Hazardous Substances Act. In essence, appellant urges us to find a waiver of
sovereign immunity and allow a finding of tort liability for an agency's failure
We conclude, for the reasons given above, that the purposes of the Act would
not be served by such a finding. We also conclude that two specific provisions
of the statute itself preclude C.P. Chemical from establishing the requisite
waiver: the requirement that the government be held liable only if a private
person would be liable for the same conduct, 28 U.S.C. 1346(b), 2674, and
the provision excluding claims based upon the performance or nonperformance of a discretionary function, 28 U.S.C. 2680(a).
Section 1346(b) of the FTCA confers jurisdiction on district courts for claims
seeking money damages arising from tortious actions of employees of the
United States "under circumstances where the United States, if a private
person, 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). The plain meaning
of section 1346(b) is that the United States cannot be held liable when there is
no comparable cause of action against a private citizen. The language of 28
U.S.C. 2674 restates this threshold limitation on the FTCA's waiver of
sovereign immunity: "The United States shall be liable, respecting the
provisions of this title relating to tort claims, in the same manner and to the
same extent as a private individual under like circumstances...." The Supreme
Court, in addressing the congressional intent behind section 2674, concluded
that Congress limited the bases for the United States' liability to those
"circumstances that would bring private liability into existence." Feres v.
United States, 340 U.S. 135, 141, 71 S.Ct. 153, 157, 95 L.Ed. 152 (1950).
Thus, as to certain governmental functions, the United States cannot be held
liable, for no private analog exists. "[Q]uasi-legislative or quasi-adjudicative
action by an agency of the federal government is action of the type that private
persons could not engage in and hence could not be liable for under local law."
Jayvee Brand v. United States, 721 F.2d 385, 390 (D.C.Cir.1983); K.C. Davis,
5 Administrative Law Treatise 27:5, 27:16 (1984).
15
The provisions of this chapter and section 1346(b) of this title shall not apply to-17
18 Any claim based upon an act or omission of an employee of the Government,
(a)
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.
19
20
Appellants assert that our ruling in Myers & Myers, Inc. v. United States Postal
Service, 527 F.2d 1252 (2d Cir.1975), governs the case at bar and requires a
holding opposite to the D.C. Circuit's ruling in Jayvee Brand. In Myers, we
noted that the failure of the Postal Service to comply with its own regulations in
awarding a government contract might constitute negligence under state law, id.
at 1261, and we remanded the case, inter alia, for a determination of whether
such a failure amounted to actionable negligence under state law. See also
Madison v. United States, 679 F.2d 736, 741 (8th Cir.1982) (once government
adopts rules by which safety inspections would be conducted, it is obligated to
take reasonable steps to enforce compliance with those regulations; remanded
for a determination of whether a cause of action existed under Arkansas law).
However, appellant's reliance on Myers is misplaced. Myers presented a wholly
different issue from the one now before us. Myers involved an agency's
application of a pre-existing rule, rather than an agency's rulemaking procedure.
In the rulemaking process, an agency is involved in a higher order of policy
making, one involving a greater degree of discretion; it can promulgate a rule,
or decide not to do so, on the basis of policy considerations. Rule application,
on the other hand, is more mechanical and involves less discretion; the agency,
by promulgating the rule, has already asserted its broad policy choices.
22
Furthermore, this is not a case where an agency ignored its own regulations or
the clear mandate of statutory procedure. Rather, as discussed below, based on
a determination within its province, the Commission was required to follow one
of two routes in promulgating its regulation--the procedures prescribed by
either the CPSA or the FHSA. The Fifth Circuit determined that the
Commission made this underlying determination erroneously, and as a result
followed the wrong rulemaking procedure, Gulf South, 701 F.2d at 1149-50.
For that reason, inter alia, the ban on UFFI was void.
23
24
A risk of injury which is associated with a consumer product and which could
be eliminated or reduced to a sufficient extent by action under the Federal
Hazardous Substances Act ... may be regulated under this [Act] only if the
Commission by rule finds that it is in the public interest to regulate such risk of
injury under this [Act].
25
formal procedures of the Federal Hazardous Substances Act, rather than those
under the CPSA, unless it makes a finding either that the risk of injury could
not be regulated sufficiently under the FHSA, or that it is in the public interest
to proceed under the CPSA. Here, the Commission proceeded under the CPSA
after finding that both tests were met: (1) the protections afforded by the FHSA
were insufficient, because the FHSA is applicable only to household products,
15 U.S.C. 1261(q)(1)(B), and the Commission originally believed that the
danger posed by formaldehyde gas required the rule to extend to all buildings;
and (2) it was in the public interest to regulate UFFI under the CPSA to achieve
a speedy resolution to what was viewed as a dangerous situation.
26
Although the Fifth Circuit held that these findings were erroneous, they were
adopted by the Commission in the exercise of its discretion. The D.C. Circuit,
in Forester v. Consumer Product Safety Commission, 559 F.2d 774
(D.C.Cir.1977), noted that
27
[d]espite
the negative language of [this section], it broadens the [Commission's]
jurisdiction under the CPSA by permitting it in its sound discretion to regulate
products under [the CPSA] which formerly would have been subject to regulation
exclusively under the FHSA....
28
Id. at 784 n. 11 (emphasis added). Here, the Commission was required to inject
its "judgment of the best course," see Dalehite, 346 U.S. at 34, 73 S.Ct. at 967,
into its determination of whether the CPSA requirement had been met. Findings
that necessitate a balancing of policy considerations may require a reviewing
court to find that an agency erred and therefore used the wrong procedure, as
the Fifth Circuit did with the UFFI ban. Such an error, however, cannot form
the basis of governmental tort liability because of the discretionary function
exception.
Appellant contends that this suit is permitted against the United States by the
Consumer Product Safety Act, 15 U.S.C. 2053(h), which provides that 28
U.S.C. 2680(a) and (h) do not prohibit a claim that:
32
15 U.S.C. 2053(h) (emphasis added). We note that the CPSA does not alter
the threshold limitation on sovereign immunity imposed by 28 U.S.C.
1346(b) and 2674--threshold limitations that we hold above applicable to this
case.
35
36
Finally, inasmuch as the Commission was engaged in rulemaking-unquestionably "agency action" as defined in 5 U.S.C. 551(13)--when it
banned the use of UFFI and when it clarified that rule as including Tripolymer
105, appellant does not meet the necessary condition stated in 15 U.S.C.
2053(h)(2). "Agency action" includes "the whole or a part of an agency rule,
order, license, sanction, relief, or the equivalent or denial thereof, or failure to
act." 5 U.S.C. 551(13). A "rule" is defined as "the whole or a part of an
agency statement of general or particular applicability and future effect
designed to implement, interpret, or prescribe law or policy...." 5 U.S.C.
551(4). The actions of the Commission in rulemaking and in clarifying its rule
fit squarely within these definitions. Therefore we hold that 15 U.S.C.
2053(h) is of no avail to appellants.
CONCLUSION
37
For the reasons stated above, we hold that the district court correctly dismissed
the complaint for lack of subject matter jurisdiction and for failure to state a
claim. The judgment of the district court is affirmed.
Judge Mansfield participated in oral argument in this case and voted before his
death on January 7, 1987 in favor of the disposition reached in this opinion
The FTCA expressly provides that only the United States may be held liable
for torts committed by a federal agency, and not the agency itself. 28 U.S.C.
2679(a); see Myers & Myers, Inc. v. United States Postal Service, 527 F.2d
1252, 1256 (2d Cir.1975); Jayvee Brand v. United States, 721 F.2d 385, 388
(D.C.Cir.1983). There is therefore no basis for any claim against the
Commission in this action