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Terrance C. Cabalce, et al v. Vse Corporation

January 31, 2013


The opinion of the court was delivered by: J. Michael Seabright United States District Judge

(Related Cases)



This consolidated Order rules on Motions to Remand filed by Plaintiffs in four related actions removed to this court by Defendant VSE Corporation ("VSE"): Cabalce, et al. v. VSE Corp., et al., Civ. No. 12-00373 JMSRLP ("Cabalce"); Kelii, et al. v. VSE Corp., et al., Civ. No. 12-00376 JMS-RLP ("Kelii"); Freeman, et al. v. VSE Corp., et al., Civ. No. 12-00377 JMS-RLP ("Freeman/Sprankle"); and Irvine, et al. v. VSE Corp., et al., Civ. No. 12-00391 JMS-RLP ("Irvine"). The cases are not consolidated, but instead were assigned to a single judge as related cases under Local Rule 40.2. Because most of the relevant pleadings and arguments are identical, it is appropriate to issue this consolidated Order in each action. Based on the following, the Motions are GRANTED, and all four actions are remanded to the First Circuit Court of the State of Hawaii ("State Court").


A. Factual Background and the November 29, 2012 Order

On November 29, 2012, this court issued an Order Granting (1) Third-Party Defendant United States' Motions to Dismiss, and (2) Plaintiffs' Motions to Strike Third-Party Complaints ("Nov. 29, 2012 Order"). Doc. No. 88 (Cabalce),*fn1 Cabalce v. VSE Corp., 2012 WL 5996548 (D. Haw. Nov. 29, 2012). The Nov. 29, 2012 Order extensively set forth the factual background of these actions, which arose from an April 8, 2011 fire and explosion in which Donaldson Enterprises, Inc. ("Donaldson") employees Bryan Cabalce, Justin Kelii, Robert Freeman, Neil Sprankle, and Robert Leahey were killed while working and handling a large cache of government-seized fireworks in or near a storage facility. Because the parties are well aware of the background as detailed in the Nov. 29, 2012 Order, the court does not repeat those facts here. Nevertheless, many of the rulings the court made in determining whether to dismiss the Third-Party Complaints against the United States are important -- indeed, dispositive -- in analyzing whether these actions should be remanded to State Court for lack of federal subject matter jurisdiction.*fn2

The court thus begins by summarizing relevant rulings made in the Nov. 29, 2012 Order.

The Nov. 29, 2012 Order dismissed VSE's Third-Party Complaints against the United States for lack of subject matter jurisdiction -- the United States cannot be liable under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 1346(b) et seq., for contribution or indemnity under the theories pled by Plaintiffs against VSE (and the other Defendants) in the Complaints, and as asserted by VSE against the United States in its Third-Party Complaints. That is, under Federal Rule of Civil Procedure 14(a)(1), the United States cannot be liable to VSE "for all or part of the claim against" VSE. Doc. No. 88, Nov. 29, 2012 Order at 22, 2012 WL 5996548 at *9. This conclusion was based on several rulings regarding the nature of the contractual relationship between VSE, its subcontractor Donaldson, and the Treasury Executive Office for Asset Forfeiture ("the government" or "the United States").

First, this court ruled that VSE was an "independent contractor" for purposes of the FTCA. "Under the 'independent contractor' exception [to the FTCA], the United States cannot be liable for a contractor's acts unless it exercises 'federal authority to control and supervise the "detailed physical performance" and "day to day operations" of the contractor.'" Id. at 26-27, 2012 WL 5996548 at *10 (quoting Autery v. United States, 424 F.3d 944, 956 (9th Cir. 2005)). This court reasoned:

Neither the Complaints nor the Third-Party Complaints allege (and the record contains no such evidence) that any government employee or agency controlled or substantially supervised the day-to-day destruction of the fireworks. Rather, all indications are that Donaldson and VSE were performing under their respective contracts.

No one disputes that Donaldson and VSE devised and prepared the destruction plans (both the plan that [the government] approved on April 28, 2010, and the modified procedure discussed between Donaldson and VSE on March 28, 2011). See Doc. No. 45-3, Watson Decl. Ex. A at 5-6; Doc. No. 45-6, Watson Decl. Ex. D. And, indeed, the VSE prime contract specifically declares that "[VSE] is 'an Independent Contractor' and shall obtain all necessary insurance to protect Project Personnel from liability arising out of the Contract." Doc. No. 1-8, Fallon Decl. Ex. E (pt. 2) ¶ H.17.

Id. at 27-28, 2012 WL 5996548 at *11. This court further explained:

At most, employees of [the government] issued disposition instructions, ordered fireworks to be destroyed, and approved a destruction plan pursuant to retained authority under the prime contract. See also Doc. No. 56-6, O'Neill Decl. Ex. 5 (providing evidence of a visit by government employees to the storage facility). But even very specific governmental contractual authority is generally insufficient to render the United States liable for acts of its contractors. See Autery, 424 F.3d at 957 ("Contractual provisions directing detailed performance generally do not abrogate the contractor exception. The United States may 'fix specific and precise conditions to implement federal objectives' without becoming liable for an independent contractor's negligence.") (quoting United States v. Orleans, 425 U.S. 807, 816 (1976)).

Id. at 28, 2012 WL 5996548 at *11. That is, VSE was not an agent of the United States, and thus the United States could not be vicariously liable for any negligence on the part of VSE. As a result, the Third-Party Complaints failed unless the United States could be found liable for its own alleged acts. Id.

Next, as to that question of potential government liability under the FTCA for its own acts, this court ruled that the United States was protected by the FTCA's discretionary function exemption, 28 U.S.C. § 2680(a). Specifically, the government's economic and policy-based decisions regarding consigning the fireworks, and contracting for their destruction (after retaining samples as evidence for use in prosecution), were purely discretionary. Id. at 33, 2012 WL 5996548 at *13. This is because

VSE has not proffered (and the court has not found) any directive such as a statute, regulation, or policy that precludes preservation of fireworks for evidentiary value, or that requires destroying seized explosives within a certain period of time. Nor has it identified any requirement that precludes the government's use of a contractor to handle and destroy seized fireworks or explosives.

Id. And as for the claim that the United States breached a duty to warn or supervise, such acts likewise involved discretionary, policy-based, decisions. The Nov. 29, 2012 Order reasoned:

The record is undisputed that Donaldson -- licensed to handle high explosives under 18 U.S.C. ch. 40 --prepared the destruction plan for VSE, and that VSE obtained government approval only after Donaldson obtained the necessary permit. VSE and Donaldson provided the government with detailed safety parameters as part of the plan, not the other way around. See Doc. No. 45-8, Relacion Decl. Ex. A at 5-6. Even assuming that the [Bureau of Alcohol, Tobacco, and Firearms] has superior knowledge of explosives in general, the contractors (and Donaldson in particular) were required to have specialized expertise in destroying fireworks, and were required to so train their employees. Nothing indicates that the government knew of any hidden dangers in these particular fireworks. . . . As the government argues, "VSE . . . cannot genuinely contend that the United States was under any duty to warn it, [Donaldson], or their employees of the very hazards and dangers of which VSE was already aware and had advised the United States of one year prior." Doc. No. 45, Mot. at 28-29.

Id. at 36-37, 2012 WL 5996548 at *14. In this regard, it is important that

[n]othing indicates that the government went beyond its retained contractual authority to approve the destruction plan (a plan that Donaldson submitted to VSE, and that VSE in turn, submitted to the government). That is, the government did not affirmatively undertake responsibility for the safety of the destruction of the Chang Seizure. Rather, the government's duty to warn of the dangers of the fireworks -- even assuming it owed such a duty to Donaldson's employees -- was delegated to VSE in the prime contract and, by VSE, to Donaldson.

Id. at 39, 2012 WL 5996548 at *15.

Finally, as to claims based on a "non-delegable" duty under Hawaii law -- claims that the government improperly managed inherently dangerous fireworks or wrongfully supervised its contract with VSE -- this court also determined that such decisions were discretionary. Id. at 40, 2012 WL 5996548 at *16. Moreover, such strict liability theories under state law are inconsistent with the FTCA's waiver of sovereign immunity, which is limited to claims of negligence by government employees. Id. at 41, 2012 WL 5996548 at *16 ("Such a state-law duty, however, cannot constitute a mandatory 'regulation, statute, or policy' that removes discretion from the analysis."); see also, e.g., Laird v. Nelms, 406 U.S. 797, 802-03 (1972) ("[T]he Federal Tort Claims Act did not authorize suit against the Government on claims based on strict liability for ultrahazardous activity.") (citation omitted). This court reasoned that:

VSE has not identified any specific and mandatory federal regulation, statute, or policy precluding the government from delegating safety functions, including those regarding warnings or supervision. Likewise, no regulation prevents the United States from allowing VSE, in turn, to subcontract supervision responsibility.

Nov. 29, 2012 Order at 40, 2012 WL 5996548 at *16. Absent any federal requirement, the government's economic and policy-based acts were discretionary, and state law non-delegable duty concepts cannot abrogate this federal exemption from the FTCA's waiver of sovereign immunity. Id. at 44, 2012 WL 5996548 at *17. This court reiterated that: there are no allegations that the government went beyond its retained contractual authority to approve destruction plans. That is, there is no indication that the government affirmatively undertook other supervisorial responsibilities related to the safety of the destruction of the Chang Seizure that might remove actions from the discretionary function's application. See [Bear Medicine v. United States, 241 F.3d 1208, 1215 (9th Cir. 2001)] ("[O]nce the Government has undertaken responsibility for the safety of a project, the execution of that ...

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