Plaza Speedway Inc. v. United States

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
NOV 27 2002
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

PLAZA SPEEDWAY INC.,

Plaintiff - Appellee,

v.
No. 01-3186
UNITED STATES OF AMERICA;
DEPARTMENT OF THE ARMY,

Defendants - Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. No. 97-CV-1346-WEB)

Adam Bain, Trial Attorney, Tort Branch, Washington, D.C., United States Department of
Justice, Washington, D.C. (Robert McCallum, Jr., Assistant Attorney General, Civil
Division and J. Patrick Glynn, Director, Torts Branch, Civil Division, United States
Department of Justice, Washington, D.C.; James E. Flory, United States Attorney and
Robin B. Moore, Assistant United States Attorney, District of Kansas, with him on the
briefs), for Defendants-Appellants.

Randall K. Rathbun, Depew & Gillen, L.L.C., Wichita, Kansas, for Plaintiff-Appellee.

Before LUCERO, PORFILIO and MURPHY, Circuit Judges.

PORFILIO, Senior Circuit Judge.
 Plaintiff Plaza Speedway, Inc. (Speedway), operator of a dirt racetrack adjacent to

the Marshall Army Airfield at Fort Riley, Kansas, brought this Federal Tort Claims Act

(FTCA) and Comprehensive Environmental Response, Compensation and Liability Act

(CERCLA) action against the United States contending the Army had contaminated

Speedway’s groundwater and soil. The suit was based upon activities at the airfield

which the Government admitted resulted in the discharge of contaminants. The sole issue

on appeal is whether the district court erred in finding Speedway timely filed its

administrative claim under the FTCA’s two-year statute of limitations. Concluding the

district court misapplied the statute, we reverse.

The Government admits from the 1960’s through 1984, the Army used a shallow

35 to 40 foot wide fire pit on the premises of the airfield to train its civilian firefighter

force. Firefighters poured flammable liquids into the pit, ignited them, and extinguished

the flames. Although the Speedway racetrack is located on a large parcel of open land

adjacent to Marshall Airfield, it is uncontested that the fire pit was not visible from

Speedway’s property because a sizable berm concealed the pit from view.

When the current owners of the track, brothers Roger and Doug Thompson,

acquired the property in February 1989, they knew the Army had used jet fuels and

various chemicals in the course of its operations at the nearby airfield for some years.

Nonetheless, at the time of the purchase, the Thompsons did not test the wells on their

property or otherwise obtain an environmental assessment of the land.

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 Historically, water from the nearby Kansas River was used at the racetrack for

personal consumption, but track patrons did not like its taste. Although the Thompsons

and others nearby believed there was no health risk from drinking the water, and did so

themselves, they had municipal water hauled to the premises for their customers’ use. To

change this system, the brothers applied for a public water permit.

On April 9, 1993, following the application, the Kansas Department of Health and

Environment (KDHE) sampled well water on Speedway’s property and detected the

presence of solvents linked to cancer. The initial contamination report stated,

“investigation needed to see if the contamination is a result of on site activities, such as

the use of solvents to clean auto parts, or if it could arise from nearby military operations

at Fort Riley.” (emphasis added). The Thompsons did not see the written report until

January or February of 1995.

After the first inspection, on approximately August 23, 1993, Randolph Brown, an

Environmental Geologist in the remedial section of KDHE, called the Thompsons to

discuss the chemical contamination on Speedway’s premises. At trial, Mr. Brown did not

remember which Thompson brother he spoke to; neither brother recalled speaking with

Mr. Brown. Notwithstanding, in its Memorandum and Findings of Fact and Conclusions

of Law, the district court found the August 23, 1993 telephone call:

focused on the test results and concerned the possibility that Plaza
Speedway activities were the source of the contamination. Brown told
Thompson that he was going to send a list of questions, and he may have
told him that one of the [three] wells at the track had “VOCs” (volatile
organic compounds) in it. This information was not necessarily alarming

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 because there are VOCs in Wichita’s public drinking water. Brown did not
inform Thompson that the contaminated water was unfit for human
consumption or that water use should be restricted in any way. Brown did
not recall telling Thompson anything that would have put him on notice that
Fort Riley or some third party might have injured them. The purpose of the
telephone contact was to identify “potentially responsible parties” and to
question the Speedway’s own activities at the track.

In the district court’s view, the first formal information the Thompsons received

concerning contamination was a letter from Mr. Brown dated October 18, 1993. The

letter indicated hazardous substances were present in the groundwater and soil at

Speedway, and Speedway was considered a potentially responsible party. The

Thompsons received a second letter from KDHE, dated November 12, 1993, which

requested answers to questions concerning the use and storage of motor oils, fuels, and

solvents on Speedway property. Question 7 asked:

At the time you acquired the property on which your Facility is located, did
you know or have reason to know of any hazardous substances, pollutants,
contaminants, or hazardous wastes disposed of, or stored or released on, or
at your Facility?

In response, Doug Thompson stated, in part:

We were aware that the United States Army had conducted numerous
operations at Marshall Airfield in a close proximity to our area whereby jet
fuel, solvents and various chemicals were employed in a number of exercise
activities over the years.

Mr. Thompson further explained that he and his brother had been familiar with the

racetrack since its construction and that there had never been any hazardous substances at

the facility.

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 On October 13, 1995, Speedway filed an administrative claim with the Army,

alleging the Army’s fire training contaminated Speedway’s property. The Army never

acted upon this claim; nonetheless, the Government maintains Speedway’s filing of the

instant case constitutes Speedway’s election to deem the Army’s non-action a final

disposition of the claim within the context of 28 U.S.C. § 2675(a).1

Speedway filed its complaint in the district court on August 15, 1997. Prior to

trial, the Government moved for partial summary judgment, contending the court lacked

subject matter jurisdiction because Speedway filed its administrative claim outside the

FTCA’s two-year statute of limitations. The district court denied the motion, finding a

“serious dispute [exists] about when the plaintiff knew, or should have known, the

circumstances surrounding the contamination of its property.”

Following a bench trial, the district court concluded the Army’s negligent

operation of the fire pit was the source of Speedway’s contamination. The court awarded

Speedway $150,000 damages for diminished property value and granted Speedway

declaratory judgment in its CERCLA claim.

The Government appealed, challenging only the district court’s subject matter

jurisdiction. In its view, the date upon which the statute of limitations began to run was

August 23, 1993, when Mr. Brown first called the Thompsons. Therefore, Speedway’s

October 13, 1995 administrative claim exceeded the two-year limitation period.

1
This provision, which effectively prohibits an agency from denying a claimant
judicial redress due to the agency’s non-action, allows the claimant to file an action if the
agency has not made a final disposition of the claim within six months of filing.

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 “The determination of the district court’s subject matter jurisdiction is a question

of law which we review de novo.” Hart v. Dep’t of Labor ex rel. United States, 116 F.3d

1338, 1339 (10th Cir. 1997) (citation omitted). “We also review de novo a district court’s

ruling regarding the applicability of a statute of limitations.” Indus. Constructors Corp.

v. United States Bureau of Reclamation, 15 F.3d 963, 967 (10th Cir. 1994) (citation

omitted). Failure to file an FTCA claim within the two-year statute of limitations period

is a matter we review de novo. Hart, 116 F.3d at 1338.

We will not, however, disturb the district court’s factual findings unless they are

clearly erroneous. Manning v. United States, 146 F.3d 808, 812 (10th Cir. 1998)

(citation omitted). “A finding of fact is ‘clearly erroneous’ if it is without factual support

in the record or if . . . , after reviewing all the evidence, [we are] left with a definite and

firm conviction that a mistake has been made.” Id. (citation omitted). “[W]e view the

evidence in the light most favorable to the district court’s ruling and must uphold any

district court finding that is permissible in light of the evidence.” Id. at 813. (citation

omitted).

Through the FTCA, the United States waives its sovereign immunity from tort

claims, making itself liable “in the same manner and to the same extent as a private

individual under like circumstances.” 28 U.S.C. § 2674. However, “[a] tort claim against

the United States shall be forever barred unless it is presented to the appropriate Federal

agency within two years after such claim accrues.” 28 U.S.C. § 2401(b). “The purpose

behind 28 U.S.C. § 2401(b)–the limitations provision of the FTCA–is to require the

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reasonably diligent presentation of tort claims against the government.” Arvayo v. United

States, 766 F.2d 1416, 1418 (10th Cir. 1985) (citing United States v. Kubrick, 444 U.S.

111 (1979)). Furthermore:

Section 2401(b), like statutes of limitations generally, represents a
legislative judgment that it is unjust to fail to put the adversary on notice to
defend within a specified period of time, and that the right to be free of stale
claims in time comes to prevail over the right to prosecute them.

Id. at 1418-19 (citations omitted).

Both § 2401(b) and its legislative history are “silent as to the meaning of

‘accrues.’” Id. at 1419. Federal law controls the issue of when a federal cause of action

accrues, but “because the statute waives the sovereign immunity of the United States,

courts should be mindful to construe it in a manner which neither extends nor narrows the

waiver Congress intended.” Id.

In United States v. Kubrick, 444 U.S. 111, 120 (1979), the United States Supreme

Court stated, “the general rule under the Act has been that a tort claim accrues at the time

of the plaintiff’s injury.” However, the Court found an exception in medical malpractice

and latent injury cases, adopting therein the “discovery rule.” The discovery rule, which

holds a claim does not accrue until the injured party knows of both the existence and

cause of the injury, is followed to “protect plaintiffs who are blamelessly unaware of their

claim because the injury has not yet manifested itself or because the facts establishing a

causal link between the injury and the medical malpractice are in the control of the

tortfeasor or otherwise not evident.” Diaz v. United States, 165 F.3d 1337, 1339 (11th

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Cir. 1999). This court also applies the discovery rule to medical malpractice claims, see

e.g., Bradley v. United States, 951 F.2d 268, 270 (10th Cir. 1991), and to intentional

concealment cases, see e.g., Ballen v. Prudential Bache Sec. Inc., 23 F.3d 335, 336-37

(10th Cir. 1994).

While federal courts “generally apply a discovery accrual rule when a statute is

silent on the issue,” Rotella v. Wood, 528 U.S. 549, 555 (1980), the Supreme Court

explicitly has “not adopted that position as [its] own.” TRW Inc. v. Andrews, _ U.S. _ ,

122 S.Ct. 441, 447 (2001). The TRW Court rejected the Ninth Circuit’s view that unless

Congress expressly states otherwise, the discovery rule is read into every federal statute

of limitations. Id.

The Supreme Court has yet to say explicitly whether the discovery rule should be

extended to FTCA cases other than medical malpractice. In its published cases, neither

has this court. In Kynaston v. United States, 717 F.2d 506, 508 (10th Cir. 1983)

involving the liability of the United States under the Swine Flu Act, we said, “[u]nder the

FTCA a cause of action accrues at the time the plaintiff is injured, or, in a medical

malpractice action, when the plaintiff has discovered both his injury and its cause.”

Conversely, in Industrial Constructors, a FTCA/Bivens case for constitutional violations

and breach of contract, we declared, “[t]he statute of limitations begins to run when the

plaintiff knows or has reason to know of the existence and cause of the injury which is the

basis of his action.” 15 F.3d. at 969.

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 Although Kynaston and Industrial Constructors appear to apply inconsistent

accrual theories, a closer reading indicates they do not. In Industrial Constructors, we

affirmed the district court’s dismissal of the FTCA claim because plaintiffs’

administrative claim was incomplete and filed more than 6 months after the agency’s

denial. Id. at 968. We applied the discovery rule not to the FTCA action but rather to the

Bivens claim. Id. at 968-69. Therefore, with respect to application of the FTCA statute

of limitations, our recent decisions are in harmony.

In this circuit, the general statute of limitations accrual rule in non-medical

malpractice FTCA cases remains the injury occurrence, and not the discovery rule.

Nonetheless, we must consider whether the “general” rule is absolute.

In an unpublished Order and Judgment, a panel of this court applied the discovery

rule in an appeal involving damages arising out of a motor vehicle collision and

conspiracy. See Levy v. Swift Transp. Co., Inc., 194 F.3d 1320 (10th Cir. 1999).

Moreover, other circuits have applied the discovery rule in cases not involving medical

malpractice or latent injury. See e.g., Slaaten v. United States, 990 F.2d 1038, 1041 (8th

Cir. 1993) (unpublished); Gibson v. United States, 781 F.2d 1334, 1344 (9th Cir. 1986).

However, Slaaten was somewhat modified in K.E.S. v. United States, 38 F.3d 1027,

1030 n.2 (8th Cir. 1994), in which the Eighth Circuit Court of Appeals stated the

discovery rule applies “only in exceptional cases [in which] a reasonably diligent plaintiff

cannot immediately know of the fact of injury and its cause.” By comparison, the

Supreme Court and federal appellate courts regularly apply the discovery rule in suits

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brought under federal statutes other than the FTCA. See e.g., Rotella, 528 U.S. at 1080-

82 (RICO); Matson v. Burlington N. Santa Fe R.R., 240 F.3d 1233, 1235 (10th Cir.

2001) (FELA).

In this case, we believe the district court applied the discovery rule without

consideration of all the facts in evidence. The proper approach first requires a

determination of whether those facts dictate the application of the general occurrence

rule, or whether, as in K.E.S., this is an exceptional case in which the plaintiffs could not

have immediately known of the injury. If we determine the latter scenario applies, we

then decide when Speedway discovered its injury.

Addressing the first question, we believe this is an exceptional case warranting

application of the discovery rule. Without doubt the Government had been releasing

toxic substances into the fire pit long before the Thompsons acquired the racetrack

property. Accordingly, injury occurred when they took title to the polluted land. But

equally clear is that although both Thompson brothers knew the Army was doing

something on its property with some substances, neither knew of the toxic effect of the

conduct. Nor would it have been easy to discover what substances had been burned in the

fire pit because the berm screened Speedway’s view. Thus, contrary to Congressional

intent, strict application of the occurrence rule here would deny injured parties their right

to compensation under the FTCA.

The second question - when Speedway discovered the Army may have polluted its

property - must be answered in light of the purpose of the statute of limitations and the

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court’s corresponding duty. We must consider what is fair to the Plaintiff but also decide

“in a manner which neither extends nor narrows the waiver Congress intended.” Arvayo,

766 F.2d at 1419.

The Government avers the Thompsons had sufficient information in August 1993

to start the statute of limitations. Considering the racetrack’s “otherwise isolated location,

just adjacent to the Marshall Army Airfield” and the Thompsons’ actual knowledge of the

Army’s use of chemicals at the airfield, the Government urges “a reasonable person in the

Speedway’s position would have begun an inquiry into whether it had a cause of action

against the government for contamination.”

Relying on Arvayo, the Government contends Speedway had a duty to inquire into

the cause of its injury. However, Arvayo, a medical malpractice case, does not support

the Government’s argument that there is a “duty to discover” for purposes of the statute

of limitations in every FTCA case. Moreover, the facts in Arvayo are distinguishable.

The Arvayo’s son suffered brain damage after two strikingly different diagnoses of his

condition. Both diagnoses were made within a twenty-four hour period in 1979. The

Arvayos did not discover a possible causal connection between the delay in diagnosing

meningitis and their son’s brain damage until after August 1981. This court reversed the

district court’s holding in favor of the Arvayos, reasoning two diagnoses within twenty-

four hours, concomitant with the likelihood of brain damage, would lead reasonable

parents in the Arvayos’ position to make some type of inquiry. Id. at 1422. We held the

Arvayo’s administrative claim, filed after they fortuitously learned from their attorney of

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a causal connection between the delay in diagnosis and brain damage, was untimely

because it was brought outside the FTCA’s two-year statute of limitations. Id.

Dissenting, Judge McKay stated the issue as “whether the district court’s finding that

plaintiff’s medical malpractice claim was timely filed is clearly erroneous.” Id. at 1423

(McKay, J., dissenting). Citing Maughan v. SW Servicing, Inc., 758 F.2d 1381, 1387-88

(10th Cir. 1985), notably not a FTCA case, Judge McKay asserted “when a plaintiff knew

or with reasonable diligence should have known a cause of action is a question for the

finder of fact.” Id. at 1425.

The United States directs our attention to authority stressing the FTCA’s statute of

limitations is a “meritorious defense, in itself serving a public interest.” Kubrick, 444

U.S. at 117 (citing Guaranty Trust Co. v. United States, 304 U.S. 126, 136 (1938).

Further, the Government points to Robbins v. United States, 624 F.2d 971, 973 (10th Cir.

1980), for our statement that “a legally cognizable injury or damage begins the running of

[the FTCA’s statute of limitations] even though the ultimate damage is unknown or

unpredictable;” and Gustavson v. United States, 655 F.2d 1034, 1036 (10th Cir. 1981),

where we opined, “[l]ack of knowledge of the injury’s permanence, extent, and

ramifications does not toll the statute.”

The United States also argues that the district court erred by failing to find that

knowledge of contamination equals knowledge of an injury, relying on Muth v. United

States, 1 F.3d 246, 249-50 (4th Cir. 1993), and Warminster Tp. Mun. Auth. v. United

States, 903 F. Supp. 847, 851 (E.D. Pa. 1995). The Government argues that the Fourth

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Circuit Court of Appeals in Muth found plaintiff’s cause of action accrued when he

became aware that surrounding properties were contaminated, even though no

contamination had been detected on his property. Further, the United States asserts that

in Warminster, the District Court for the Eastern District of Pennsylvania held that

knowledge of contamination was sufficient for plaintiff’s cause of action to accrue.

In response, relying on Judge McKay’s dissent in Arvayo, Speedway asserts “[t]he

issue of when a plaintiff knew or with reasonable diligence should have known of a cause

of action is a question for the finder of fact.” 766 F.2d at 1425 (McKay, J., dissenting).

Speedway views the United States’ argument as two-fold: (1) Speedway was notified

prior to October 13, 1993 it had VOCs in its water; and (2) it knew in 1985 the Army

used “jet fuel, solvents and various chemicals” at Marshall Airfield. Speedway contends

that because Wichita’s public drinking water contained VOCs, the presence of these

solvents did not inform Speedway of the injury. Further, it argues that even if Mr.

Brown’s August 1993 phone call provided notice of the injury, nothing informed

Speedway of its cause. In sum, Speedway maintains its degree of knowledge was

insufficient to trigger the running of the statute of limitations.

The Government’s reliance on Muth and Warminster is misplaced. In Muth, the

Fourth Circuit held plaintiff’s claim untimely because plaintiff corresponded with the

Army, the EPA, and various elected representatives more than two years before filing an

administrative claim. 1 F.3d at 248. Moreover, that correspondence established plaintiff

was unequivocally aware his property was formerly used for TNT production,

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contaminants had been discovered adjacent to his property, and, as a result, “his property

had been rendered worthless.” Id. In Warminster, the plaintiff conceded it became

aware of the injury in 1979 and failed to file the appropriate administrative claim until

1994. 903 F. Supp. at 851. Similarly, Speedway unduly relies on the Arvayo dissent;

while compassionate and thoughtful, Judge McKay’s opinion lacks precedential value.

The district court based its statute of limitations holding on the testimony of Mr.

Brown, the Environmental Geologist with KDHE, concerning his August 23, 1993

telephone call to the Thompsons. On cross-examination, Mr. Thompson affirmed “our

conversation focused entirely on hey, I’m going to get you guys a potentially responsible

party request letter.” Mr. Brown only could recall that in the phone conversation, he told

one of the Thompsons that he would send them a list of questions about facility

operations and potential use of hazardous substances on their property; and summarized

the test results, saying something like “you have VOCs in your water.” Based on Mr.

Brown’s testimony, the district court held the August 23, 1993 telephone call was not

sufficient to start the statute of limitations, “because the call did not alert the Speedway

that it had actually sustained an injury,” and “the only ‘cause’ mentioned in this phone

call related to the possibility that the Speedway itself was responsible for the pollution

because of its operations at the track.”

Underlying the question of law in this appeal – subject matter jurisdiction – is a

question of fact, namely when the Thompsons knew or should have known of the

contamination. “The determination of the district court’s subject matter jurisdiction is a

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question of law which we review de novo,” Hart, 116 F.3d at 1339 (citation omitted), but

we must also give “due regard to the district court’s opportunity to judge the credibility of

witnesses,” id. (citing Fed. R. Civ. P. 52(a)), and be mindful that “the resolution of factual

issues and conflicting evidence [is] solely within the province of the district court.”

Cowles v. Dow Keith Oil & Gas, Inc., 752 F.2d 508, 511 (10th Cir. 1985). As the

Supreme Court noted in Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573-74

(1985):

[i]n applying the clearly erroneous standard to the findings of a district
court sitting without a jury, appellate courts must constantly have in mind
that their function is not to decide factual issues de novo. If the district
court's account of the evidence is plausible in light of the record viewed in
its entirety, the court of appeals may not reverse it even though convinced
that had it been sitting as the trier of fact, it would have weighed the
evidence differently. Where there are two permissible views of the
evidence, the factfinder's choice between them cannot be clearly erroneous.
(citations omitted).

Applying the above standards, significant facts in evidence that the district court

did not consider require reversal of its judgment. First, although the Thompsons did not

see the KDHE report concerning the contamination of their property until 1995, they

knew testing took place in 1993. Second, Mr. Thompson’s answer to Question 7

indicates he and his brother knew the Army used jet fuel, solvents, and various chemicals.

Third, evidence shows the racetrack did not have any neighbors other than Fort Riley.

Combined, these facts establish that through the August 23, 1993 telephone call,

Speedway knew or had reason to know when its property was acquired toxic substances

were present at the adjoining premises. Thus, when the Thompsons were notified on

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August 23, 1993 of the presence of contaminants in their well, they had reason to suspect

the source might have been the neighboring property. The two years thereafter was

adequate time for them to initiate inquiry into any possible harm. Because the district

court failed to take these facts into consideration, we believe its findings were clearly

erroneous.

The judgment of the district court is REVERSED and REMANDED

WITH INSTRUCTIONS to dismiss the complaint for lack of subject matter

jurisdiction.

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No. 01-3186, Plaza Speedway, Inc. v. United States

LUCERO, Circuit Judge, dissenting.

I am in full agreement with the majority’s scholarly opinion, save one issue. I

disagree with the conclusion that the district court clearly erred in finding Speedway did

not know of the contamination caused by the Army based on the August 23, 1993, phone

call from KDHE. Fealty to the deferential clear error standard of review compels

affirmance, and I respectfully dissent from the panel’s opposite determination.

As the majority acknowledges, the question of when a claim accrues under the

FTCA for purposes of starting the two-year statute of limitations— in this case, when a

person discovers his or her injury and its cause—is a factual determination. Although it

may have been reasonable for the district court to find that the August 23rd

communication combined with other evidence did give Speedway sufficient notice of its

injury and cause, it was equally reasonable for the court to find otherwise. See Anderson

v. City of Bessemer City, 470 U.S. 564, 573–74 (1985) (“If the district court’s account of

the evidence is plausible in light of the record viewed in its entirety, the court of appeals

may not reverse it even though convinced that had it been sitting as the trier of fact, it

would have weighed the evidence differently.” (emphasis added)). Speedway had no

direct knowledge of the specific activities taking place at the nearby Army facility, no

knowledge of the toxicity of the chemicals found on its property, and did not receive the
“Potentially Responsible Parties” letter until October 18, 1993. The district court found

that the August 23rd conversation “focused on the test results and concerned the

possibility that Plaza Speedway activities were the source of the contamination” and that

“Brown did not recall telling Thompson anything that would have put him on notice that

Fort Riley or some third party might have injured them.” Plaza Speedway, Inc. v. United

States, No. 97-1346 (D. Kan. filed April 12, 2001).

Even under de novo review, I would be inclined to adopt the district court’s

resolution of the matter. Certainly, viewing the evidence in the light most favorable to

the district court’s ruling, as I must under a deferential standard, I cannot say that the

district court’s factual finding regarding when Speedway’s tort claim accrued is

“implausible.”

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