Muniz-Rivera v. United States

United States Court of Appeals
For the First Circuit

No. 02-2011

RUFINO MUNIZ-RIVERA, ET AL.,
Plaintiffs, Appellants,

v.

UNITED STATES OF AMERICA,
Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Héctor M. Laffitte, U.S. District Judge]

Before

Torruella, Circuit Judge,

Coffin, Senior Circuit Judge,

and Selya, Circuit Judge.

Ruth Santiago for appellants.
Steve Frank, Attorney, Appellate Staff, Civil Division, Dep't
of Justice, with whom Robert D. McCallum, Jr., Assistant Attorney
General, Guillermo Gil, United States Attorney, and Robert S.
Greenspan, Attorney, were on brief, for appellee.

April 7, 2003
 SELYA, Circuit Judge. This appeal requires us to address

the parameters of the Federal Tort Claims Act (FTCA), 28 U.S.C. §§

1346(b), 2671-2680, and, in particular, its misrepresentation and

discretionary function exceptions. The plaintiffs (appellants

here) are 108 persons who own a total of 67 residential properties

in Salinas, Puerto Rico. These homes are situated in two housing

developments that have undergone repeated flooding. Noting that

federal officials played a significant role in the planning,

siting, construction, and financing of the projects, the plaintiffs

seek to hold the government answerable in damages. They sue under

the FTCA, a statutory scheme that carves out a tort-based exception

to the federal government's sovereign immunity. But the FTCA's

exception to sovereign immunity itself contains exceptions.

Because the plaintiffs' claims, as stated, fall within spheres that

the FTCA abjures, we conclude that the district court properly

dismissed the amended complaint for lack of subject matter

jurisdiction. See Fed. R. Civ. P. 12(b)(1).

We afford plenary review to a district court's order of

dismissal for lack of subject matter jurisdiction. Corrada

Betances v. Sea-Land Serv., Inc., 248 F.3d 40, 44 (1st Cir. 2001).

At the pleading stage, such an order is appropriate only when the

facts alleged in the complaint, taken as true, do not justify the

exercise of subject matter jurisdiction. Royal v. Leading Edge

Prods., Inc., 833 F.2d 1, 1 (1st Cir. 1987). In line with the

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foregoing, we glean the relevant background information from the

plaintiffs' amended complaint, accepting the well-pleaded factual

averments contained therein and indulging all reasonable inferences

in the plaintiffs' favor. Valentin v. Hosp. Bella Vista, 254 F.3d

358, 365 (1st Cir. 2001).

The plaintiffs purchased their homes at various times

between 1973 and 1995. All of them obtained loans through the

Farmers Home Administration (FmHA), the Federal Housing

Administration (FHA), or some other federal agency. They attribute

their current predicament to the government's negligence.

In their view, the principal difficulty is that the

government sited the housing developments along the Nigua River

basin. That area has endured flooding both before and after the

developments were built. The amended complaint enumerates no fewer

than eight major floods (occurring in 1928, 1933, 1956, 1970, 1975,

1985, 1992, and 1996). Progressive soil movement has placed

unaccustomed strains on foundations, and most plaintiffs report

structural damage to walls, roofs, and floors. Moreover, poor

drainage results in a backflow of sewage whenever flooding occurs.

Over time, these conditions have taken their toll: the plaintiffs

say that their dwellings are now in "total ruin" and "unfit" for

human habitation. They themselves have experienced mental anguish

and emotional distress.

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 The plaintiffs filed unsuccessful administrative claims

with the appropriate agencies in 1998 and 2000 and, in the same

time frame, brought suit in the United States District Court for

the District of Puerto Rico.1 Their amended complaint alleges that

the government has had an intimate involvement with the planning

and construction of the housing developments. For example, federal

agencies (1) approved the specifications under which the dwellings

were built; (2) granted mortgage loans in which they reserved the

right to inspect the properties and obligated the plaintiffs to

execute any repairs that they requested; (3) compelled the sellers

of the homes to issue builders' warranties; and (4) retained the

right to insist upon certain types of insurance coverage. The

amended complaint proceeds to list a litany of acts and omissions

that form the basis for the government's putative liability. These

include the government's supposed failures to (1) inspect the

plaintiffs' properties with adequate care; (2) scrutinize the

topography and detect the substantial likelihood of future

flooding; (3) provide reasonable oversight during construction; (4)

warn the plaintiffs that their homes were in a floodway zone; (5)

require the plaintiffs to carry flood insurance (or advise them of

1
Originally, the plaintiffs asserted claims premised not only
on the FTCA but also on the Little Tucker Act, 28 U.S.C. §
1346(a)(2), and Puerto Rico law. In an unpublished order, the
district court dismissed all of the non-FTCA claims. See Muñiz-
Rivera v. United States, No. 98-2001 (D.P.R. Sept. 25, 2000).
Because the plaintiffs have not challenged that order, we confine
ourselves to a consideration of the FTCA claims.

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the need for it); and (6) take appropriate measures to protect the

houses from flooding.

The government responded to the plaintiffs' amended

complaint with a motion to dismiss. The district court, in a

scholarly opinion, granted the motion. Muñiz-Rivera v. United

States, 204 F. Supp. 2d 305 (D.P.R. 2002). The plaintiffs now

appeal that ruling. Although our reasoning differs slightly from

the district court's, we affirm the order of dismissal. See

Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204 (1st Cir.

1994) (explaining that an appeals court is "free to affirm the

judgment below on any independently sufficient ground made manifest

by the record").

The FTCA constitutes "a limited waiver of the federal

government's sovereign immunity" against private suits. Shansky v.

United States, 164 F.3d 688, 690 (1st Cir. 1999). The narrowing

adjective is necessary because there are a number of situations in

which the waiver will not attach. The government contends that the

plaintiffs' claims fall within the compass of these exceptions. If

so, the instant action is outside the ambit of federal subject

matter jurisdiction. See Hydrogen Tech. Corp. v. United States,

831 F.2d 1155, 1161 (1st Cir. 1987) (holding that the FTCA's

exceptions "define the limits of federal subject matter

jurisdiction in this area"). We test the government's hypothesis

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by classifying the plaintiffs' claims and then evaluating each

category of claims through the prism of the FTCA's exceptions.

The first category of claims includes the plaintiffs'

accusations that the government negligently failed to warn of the

danger of future flooding, advise the plaintiffs of the need for

flood insurance, and inform them that their homes were not

constructed stoutly enough to withstand the ineluctable forces of

nature. Despite the plaintiffs' disclaimers, these allegations

necessarily rest on the premise that the federal government had a

duty to exercise due care in communicating useful information

regarding the safety and security of the plaintiffs' properties;

that the plaintiffs reasonably relied on government officials to

fulfill this duty; and that the government let them down.

We need not decide whether the government owed such a

duty to the plaintiffs. Assuming, for argument's sake, that it

did, any breach of the duty would fall squarely within the FTCA's

misrepresentation exception.

The misrepresentation exception immunizes the United

States from liability for "[a]ny claim arising out of . . .

misrepresentation, deceit, or interference with contract rights."

28 U.S.C. § 2680(h). The exception extends to a wide range of

communicative activity (including failures of communication). The

leading case on this exception is United States v. Neustadt, 366

U.S. 696 (1961), in which a home buyer reasonably relied on an

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erroneous FHA appraisal. Id. at 698-700. In declaring that the

plaintiff's claim for ensuing economic harm was barred by the

misrepresentation exception, the Supreme Court observed that, in

enacting section 2680(h), Congress "clearly meant to exclude claims

arising out of negligent, as well as deliberate,

misrepresentation." Id. at 702. Thus, the exception insulates the

government against liability for conveying false or inaccurate

information. Id. at 706-07; see also Jimenez-Nieves v. United

States, 682 F.2d 1, 4 (1st Cir. 1982) (noting that

misrepresentation, as an independent tort, is comprised of the

dissemination of false information and the reliance by the

plaintiff upon that information). The case law makes manifest that

the prophylaxis of the misrepresentation exception extends to

failures of communication. See, e.g., JBP Acquisitions v. United

States, 224 F.3d 1260, 1265 (11th Cir. 2000); Green v. United

States, 629 F.2d 581, 584 (9th Cir. 1980).

In this case, the plaintiffs' first set of claims are

grounded in just such a theory of liability. The plaintiffs

contend that the government's intimate role in approving,

financing, and monitoring the housing projects implicitly conveyed

an assurance that the homes constituted secure domiciles, and that

the lack of any warning calculated to alert the plaintiffs to the

likelihood of future harm reinforced those implied assurances.

Even if such acts and omissions were negligent — a matter on which

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we take no view — the misrepresentation exception precludes the

assertion of a cause of action against the government based upon

either miscommunication or non-communication of the information in

question. See JBP Acquisitions, 224 F.3d at 1266 (holding that a

"failure to communicate, as well as direct miscommunication, is

encompassed by the misrepresentation exception"); Green, 629 F.2d

at 584 (noting that the misrepresentation exception "bar[s] suits

based on a failure to give any warning to injured parties").

The plaintiffs also accuse the government of negligently

inspecting their homes and failing to detect the likely problems

associated with future flooding. These claims are likewise

precluded by the misrepresentation exception. A negligent

inspection, in and of itself, cannot cause injury. Harm can occur

(and, thus, liability can attach) only if the inspection leads

either to the communication of inaccurate information or to a

failure to communicate precautionary information. See Farmers

State Sav. Bank v. FmHA, 891 F.2d 200, 202 (8th Cir. 1989) (holding

that injuries to FTCA plaintiffs who allege faulty inspection or

assessment are "caused by reliance on the representations of

government officials and not by reliance on an undertaking that

those officials performed negligently"); see also Comm'l Union Ins.

Co. v. United States, 928 F.2d 176, 179 (5th Cir. 1991) (holding

that the misrepresentation exception covers instances in which "the

chain of causation from the alleged negligence to the alleged

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injury depends upon the transmission of misinformation by a

government agent"). This takes us full circle — and brings the

negligent inspection claims within the purview of the

misrepresentation exception. See, e.g., Schneider v. United

States, 936 F.2d 956, 961-62 (7th Cir. 1991) (holding that the

misrepresentation exception precludes a suit seeking recovery for

damages from a federal agency's approval of defective building

materials); Baroni v. United States, 662 F.2d 287, 289 (5th Cir.

1981) (per curiam) (holding to like effect in connection with the

FHA's underestimation of the predicted flood line for a housing

development); cf. Preston v. United States, 596 F.2d 232, 238 (7th

Cir. 1979) (holding that an FTCA claim alleging negligent auditing

"amounts to an allegation of misrepresentation by implication").

We turn now to the second category of claims: those

related to the government's role in supervising the construction of

the plaintiffs' homes. Invoking the Supreme Court's decision in

Block v. Neal, 460 U.S. 289 (1983), the plaintiffs argue that the

misrepresentation exception does not apply and that the government

may be held liable in tort. We agree with the first half of this

argument but not with the second.

In Block, the Supreme Court ruled that although the

misrepresentation exception protects the federal government from

liability relating to the negligent communication (or non-

communication) of information, "it does not bar negligence actions

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which focus . . . on the Government's breach of a different duty."

Id. at 297. The Court further reasoned that if, as was alleged,

the FmHA undertook an active role in the construction of the

plaintiff's home (thus going far beyond mere assurances regarding

the quality of the structure), it might be held to have assumed an

additional duty under the Good Samaritan doctrine.2 Id. Such a

duty would obligate the government "to use due care to ensure that

the builder adhere to previously approved plans and cure all

defects before completing construction [which] is distinct from any

duty to use due care in communicating information." Id. Applying

Block, we hold that this second category of claims lies outside the

realm of the misrepresentation exception.

This does not mean, however, that the case should have

been allowed to proceed. The government also invokes the FTCA's

discretionary function exception. On this issue, Block is wholly

inapposite; although the Block Court found that the

misrepresentation exception did not bar the claim there at issue,

it noted explicitly that the question before it did not require

2
As a general matter, the Good Samaritan doctrine imposes a
duty of due care upon one who gratuitously undertakes to perform a
service upon which a plaintiff justifiably relies. See Restatement
(Second) of Torts §§ 323, 324A (1965). The doctrine is recognized
both in federal and Puerto Rico law. See Indian Towing Co. v.
United States, 350 U.S. 61, 69 (1955); Piñeiro Manzano v. Estado
Libre Asociado, 102 P.R. Dec. 795, 801-02 (1974). Puerto Rico law
is relevant on this issue because the FTCA requires a determination
of negligence to be made "in accordance with the law of the place
where the act or omission occurred." 28 U.S.C. § 1346(b)(1).

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consideration of "whether recovery is barred by any other provision

of the Tort Claims Act, including the exception for . . . a

discretionary function." Id. at 294 (citing 28 U.S.C. § 2680(a)).

The discretionary function exception insulates the United

States against "[a]ny claim . . . 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."

28 U.S.C. § 2680(a). Ascertaining whether the government may

invoke this exception involves a "familiar analytic framework."

Shansky, 164 F.3d at 690. First, an inquiring court must identify

the conduct that allegedly caused the harm. Id. at 690-91. Then,

in determining whether Congress sought to shelter that sort of

conduct from tort liability, the court must ask two interrelated

questions: (1) Is the conduct itself discretionary? (2) If so,

does the exercise of discretion involve (or is it susceptible to)

policy-related judgments? If both of these queries yield

affirmative answers, the discretionary function exception applies

and the government is shielded from liability. See United States

v. Gaubert, 499 U.S. 315, 322-23 (1991); Berkovitz v. United

States, 486 U.S. 531, 536-37 (1988); Irving v. United States, 162

F.3d 154, 162 (1st Cir. 1998) (en banc); see also United States v.

Varig Airlines, 467 U.S. 797, 809-10 (1984) ("It is neither

desirable nor intended that . . . the propriety of a discretionary

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administrative act should be tested through the medium of a damage

suit for tort.") (citation and internal quotation marks omitted).

The conduct that lies at the epicenter of the plaintiffs'

remaining claims involves the government's failure carefully to

supervise the construction of the housing projects and its

attendant failure to protect the residents from the easily

foreseeable string of floods. These allegations are best handled

discretely, as identifying the precise conduct in question resolves

much of the requisite analysis.

With respect to the duty to supervise construction, the

plaintiffs target the government's role in planning the housing

developments, siting the homes in a floodway zone, and allowing

them to be built in such a way that they could not withstand the

ravages of repeated flooding. The jurisprudence of the FTCA

permits us to classify these actions as non-discretionary only if

a federal statute, regulation, or policy specifically instructed

federal officials to follow a specified course of action. See

Gaubert, 499 U.S. at 322; Berkovitz, 486 U.S. at 536; Irving, 162

F.3d at 163. To fill this gap, the plaintiffs point to section 502

of the Housing Act of 1949, 42 U.S.C. § 1472 (2000), and the

implementing regulations that were in force when the Salinas

housing developments were built.3 These regulations, the

3
On June 12, 1980, the regulations cited by plaintiffs were
amended to disclaim any possible government liability. See
Planning and Performing Construction and Other Development

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plaintiffs asseverate, provided sufficient direction that the

conduct in question cannot be deemed discretionary. We therefore

examine the regulations' content and purpose.

Section 502 of the Housing Act authorized (and still

authorizes) the Secretary of Agriculture to extend financial

assistance to qualified individuals "to enable them to construct,

improve, alter, repair, or replace dwellings . . . in order to

provide them . . . with decent, safe, and sanitary living

conditions." Id. § 1471(a)(1). The regulations in force when

construction began in Salinas described the purpose of these loans

as being "to give families, who do not have sufficient resources .

. . an opportunity to have adequate homes." Neal v. Bergland, 646

F.2d 1178, 1180 (6th Cir. 1981) (quoting 7 C.F.R. § 1822.2). These

provisions operate at such a high level of generality that they are

of little use to the plaintiffs here. See Shansky, 164 F.3d at 691

(explaining that general directives are insufficient to brand

particular conduct as non-discretionary).

The plaintiffs refer to additional provisions in the

Housing Act and its implementing regulations that suggest that FmHA

must play a role that goes substantially beyond the mere provision

Amendment-Redesignation, 45 Fed. Reg. 39,789, 39,803 (1980)
(codified at 7 C.F.R. § 1924.9 (2002)). The revised rules, which
are still in force, alert borrowers that they are solely
responsible for making the necessary inspections to ensure the
quality of their homes. See 7 C.F.R. §§ 1924.9(a), 1924.9(b)(5)
(2002).

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of financing for home construction. For example, section 506 of

the Housing Act authorized (and still authorizes) the Secretary of

Agriculture to provide "technical services such as building plans,

specifications, construction supervision and inspection, and advice

and information regarding farm dwellings and other buildings." 42

U.S.C. § 1476(a). The earlier regulations suggested that providing

adequate supervision was obligatory. See 7 C.F.R. § 1822.7(a)

(1977) ("Supervision will be provided borrowers to the extent

necessary to achieve the objectives of the loan and to protect the

interests of the Government . . . ."); see also Block, 460 U.S. at

291 n.2 (describing the role of FmHA officials under that

regulatory regime in assisting borrowers to obtain construction and

inspection services).

These regulations cannot carry the weight that the

plaintiffs load upon them. Although they intimate that FmHA

officials are under an obligation to ensure that borrowers' homes

meet certain technical construction standards, they neither direct

the manner in which the supervision is to be carried out nor

specify the taking of the actions that the plaintiffs claim would

have prevented their plight. The regulations do not speak to

supervising the planning of a housing development, selecting its

location, or making the homes flood-proof at any cost. Deeming

administrative action to be non-discretionary requires a specific

and directly applicable prescription, see Fagot Rodriguez v. Costa

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Rica, 297 F.3d 1, 10 (1st Cir. 2002), and such a prescription is

lacking here. Because the plaintiffs point to no applicable

statute, regulation, or policy bearing the requisite degree of

specificity, we conclude that the conduct complained of was

discretionary. See Shansky, 164 F.3d at 691.

We next turn to the conduct at issue in the plaintiffs'

"failure to protect" claim. Here, the conduct complained of is

non-conduct, that is, inaction on the part of government officials,

resulting in a failure to erect levees or pursue a comparable

public works agenda in Salinas. The plaintiffs have offered no

statutory or regulatory provisions that provide explicit direction

regarding such subjects, and the lack of such directives brands the

inaction as discretionary. Fagot Rodriguez, 297 F.3d at 10;

Shansky, 164 F.3d at 691.

The short of it is that the plaintiffs can point to no

statutory or regulatory provision that requires the performance of

any of the charged non-communicative conduct. Consequently, that

conduct is within the purview of agency discretion. See Gaubert,

499 U.S. at 324-25 ("For a complaint to survive a motion to

dismiss, it must allege facts which would support a finding that

the challenged actions are not the kind of conduct that can be said

to be grounded in the policy of a regulatory regime.").

This brings us to the final question: Is this

discretionary conduct grounded in policy? There is a presumption

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that it is. See id. at 324; Irving, 162 F.3d at 168. In this

case, nothing alleged by the plaintiffs regarding either the

evolution of the housing projects or the lack of government action

to protect residents from floods undermines that presumption.

The driving force behind these claims is the notion that

the federal government did not do enough — but such hypothesized

interventions, virtually by definition, involve examination of

priorities and determinations of need that are at the heart of

policy-making. In a world of finite public resources, government

officials must weigh competing considerations in the selection,

location, and outfitting of housing projects. While such decisions

are often difficult to make (and easy to criticize in hindsight),

they are clearly susceptible to policy analysis. See Gaubert, 499

U.S. at 325; Irving, 162 F.3d at 168. For these reasons, courts

have acknowledged the central role of policy considerations in

implementing government loan programs and have held that the

discretionary function exception shields the government from FTCA

claims in similar circumstances. See, e.g., Lundstrum v. Lyng, 954

F.2d 1142, 1146 (6th Cir. 1991) (per curiam) (resting dismissal of

FTCA claim on the discretionary function exception because

government officials "engage[d] in policy judgments when deciding

the most effective and efficient methods to supervise and service

FMHA loan recipients"); Pennbank v. United States, 779 F.2d 175,

180 (3d Cir. 1985) (arriving at a similar result because "the

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processes and standards utilized by the agencies . . . clearly

involve[d] the exercise of discretion").

That ends this phase of our inquiry. We find that the

plaintiffs' claims against the government for negligently

supervising the planning and construction of the housing

developments and failing to protect home buyers are barred by the

FTCA's discretionary function exception. The plaintiffs have

suffered great hardships, but an FTCA action is not the proper

vehicle to demand accountability for arguably unwise or unthinking

decisions made pursuant to administrative discretion.

We need go no further. To recapitulate, we hold that the

plaintiffs' claims that the government negligently failed to warn,

to inform of impending danger, to mandate flood insurance, and to

inspect the homes are all barred by the FTCA's misrepresentation

exception. We hold that the plaintiffs' claims that the government

failed properly to supervise the planning and construction of the

housing projects and to take appropriate measures to prevent future

flooding are barred by the FTCA's discretionary function exception.

In combination, these holdings confirm that the district court

appropriately dismissed the plaintiffs' suit for want of federal

subject matter jurisdiction.4

4
Because these holdings are dispositive of all the plaintiffs'
claims, we need not address other defenses raised by the United
States, such as the incidence of the statute of limitations, the
effect of the change in the governing regulations as of June 12,
1980 (see supra note 3), and the applicability vel non of the Good

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Affirmed.

Samaritan doctrine to the facts of this case.

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