Issues
(1) When an individual's suit against the government, brought under the Federal Tort Claims Act, is dismissed due to an exception to the government waiver of sovereign immunity, may a second suit on the same grounds be brought against government employees?
(2) Was the United States Court of Appeals for the Second Circuit the proper forum for an interlocutory appeal from the district court's denial of a motion to dismiss the second suit against the government employees?
Under the Federal Tort Claims ACT ("FTCA"), 28 U.S.C. ? 1346(b), the federal government must waive its sovereign immunity from suit to allow private parties to sue the United States for torts committed by federal employees during the scope of their employment. The FTCA also has a judgment bar provision, 28 U.S.C. ? 2676, which prevents a plaintiff from suing multiple times on the same FTCA claim. This case originated when Respondent Susan Hallock brought a claim under the FTCA against the United States after the federal government improperly seized and damaged her property. Her suit was subsequently dismissed because the claim fell within one of the exceptions to the United States' waiver of sovereign immunity under the FTCA. Petitioners Richard Will and his fellow Customs Services agents now argue that the dismissal of Susan Hallock's FTCA claim should bar Hallock from bringing the same claim under the FTCA against the federal employees involved in the seizure of her property. Ultimately, the Court must decide whether general res judicata principles should apply to bar Hallock's suit. The Court's decision may have large implications for The Court's decision may have large implications for judgment finality, and it may also have substantive implications for federal employees' amenability to suit under the FTCA.
As an initial matter, however, the Court must decide whether Will's interlocutory appeal to the Second Circuit was premature because the district court litigation did not formally conclude. Consequently, the Court may not even address the issue of the judgment bar provision's applicability, and the significance of the Court's decision will rest solely on its analysis of the collateral order doctrine.
Questions as Framed for the Court by the Parties
(1) Whether a final judgment in an action brought under 28 U.S.C. ? 1346(b) of the Federal Tort Claims Act, dismissing the claim on the ground that relief is precluded by one of the FTCA's exceptions to liability, 28 U.S.C. ? 2680, bars a subsequent action by the claimant against the federal employees whose acts gave rise to the FTCA claim?
(2) Did the Court of Appeals have jurisdiction over the interlocutory appeal of the District Court's order denying a motion to dismiss under the FTCA's judgment bar, 28 U.S.C. ? 2676?
Facts
Plaintiff Susan Hallock and her husband Richard Hallock operated a computer software business out of their home in Mohawk, New York. See Hallock v. Bonner, 387 F.3d 147, 150 (2d Cir. 2004). Due to identity theft, the United States Customs Services suspected that the Hillocks' home business involved the sexual exploitation of minors. See Id. In early June of 2000, these Customs Services agents sought and received a search warrant for the Hallock's residence from the United States District Court for the Northern District of New York. See Id. The warrant authorized the seizure of any of the Hallocks' property that might have been used in connection with child pornography. See Id. In executing their search warrant, the Customs Service agents seized all of the Hallocks' business computers and software, effectively taking all of the company's intellectual property. See Id. Once it became apparent that the Hallocks were victims of identity theft, Customs Services cleared the Hallocks of any wrongdoing and eventually returned the seized computers and software on December 21, 2000. See Id. Upon return of the seized items, the Hallocks refused to sign a waiver of their right to sue the federal government for any damage that might have resulted from the agents' seizure of their property. See Id.
The fact that the Hallocks reserved their right to sue was a wise move on their part, as four of the nine computer systems seized were permanently destroyed and several hard disk drives were completely lost, resulting in heavy losses to the Hallocks' business. See id. at 151. After exhausting their administrative remedies, the Hallocks sued the United States government under the Federal Tort Claims Act ("FTCA"), which allows a party to sue the government for torts committed by federal employees during their governmental employment. Hallock v. United States, 253 F. Supp. 2d. 361, 362-63 (N.D.N.Y. 2003) ("Hallock I"). The District Court dismissed the Hallocks' complaint, finding that the alleged government action fell under an exception of the FTCA that effectively precluded the plaintiffs from pursuing their claim. See Hallock v. Bonner, 387 F.3d at 151 (referring to 28 U.S.C. ? 2680(c)). Because the only claim that permitted the plaintiffs to bring their suit in federal court was their FTCA claim, once the court concluded that the exception was applicable, the court dismissed the case for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1). See Id.
Meanwhile, the Hallocks decided to sue the Customs Services agents who executed the search warrant and damaged the seized property. Hallock v. Bonner, 281 F. Supp. 2d 425, 426 (N.D.N.Y. 2003) ("Hallock II"). In this suit, Susan Hallock filed a Bivens action against the Custom Services agents directly on the same grounds as the prior suit against the government. See Hallock v. Bonner, 387 F.3d at 151. Eventually, for the reasons discussed above, the District Court dismissed Hallock I. See Id. Shortly thereafter, the defendants of Hallock II filed a motion to dismiss, claiming that 28 U.S.C. 2676, the so-called "judgment bar" provision of the FTCA, precludes plaintiffs from suing federal employees once plaintiffs have already received a judgment in a suit against the government. See Id. However, the District Court held that the court's dismissal of the Hallocks' claim in Hallock I did not amount to a "judgment" because the case was dismissed for lack of subject matter jurisdiction. Id. at 152. Thus, the court denied the defendants' motion to dismiss, effectively permitting the plaintiffs to continue with their second suit. See Id.
Federal employee defendants Richard Will and several other Customs Services agents appealed the district court's denial of the motion to dismiss to the Second Circuit Court of Appeals. See Id. The Second Circuit first declared that it could hear the case on interlocutory appeal via the collateral order doctrine; then the court affirmed the district court's decision allowing Hallock II to proceed. Id. at 152-54. Will then sought and received a writ of certiorari from the United States Supreme Court.
Analysis
I. Interlocutory Appeal
The Supreme Court is likely to first address the issue concerning the Second Circuit's authority to review this interlocutory appeal. Under general principles, an appeal in the federal courts is proper only when the District Court's order is a "final judgment"—that is, an order that leaves "nothing left for the court to do but execute the judgment." 28 U.S.C. 1291; Coopers & Lynbrand v. Livesay, 437 U.S. 463, 467 (1978). The order at issue in this suit is the district court's denial of the defendants' Rule 12(b)(6) motion in Hallock II, whereby the defendants averred that even if all of the plaintiffs' allegations are true, the plaintiffs still have not pleaded a case for which the court can grant relief. See Hallock v. Bonner, 387 F.3d at 152-53. By denying this motion, the court found that the plaintiffs indeed have stated a cause of action, thereby allowing the lawsuit to proceed. Clearly, then, the Court's order is not a "final judgment" since the litigation is merely in the beginning stages. Id. at 153. Thus, the Court of Appeals could only review the appeal if the appeal falls under one of the narrow exceptions to the "final judgment" rule.
The Collateral Order Doctrine
In rare instances, the Federal Courts of Appeals will allow an interlocutory appeal, whereby the appealing party is appealing a district court order that is not a final judgment. There are several such exceptions to the "final judgment" rule; pertinent to this case is the "collateral order doctrine" which emerged in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47 (1949). In that case, the Supreme Court emphasized that this exception is to be treated narrowly in order to determine the outcome of rights "too important to be denied review." Id. at 546.
There exists a 3-part test to determine whether the collateral order exception should apply to an interlocutory order. Hallock v. Bonner, 387 F.3d at 153. First, the order must have conclusively determined the disputed question; second, the order must "resolve an issue completely separate from the merits of the action"; and third, the order must be "effectively unreviewable on appeal from a final judgment." Id. (citation omitted).
Application of the 3-Prong Test
There is little dispute among the parties that the interlocutory order from Hallock II satisfies the first two prongs of the collateral order test. First off, the order constitutes a conclusive determination of the issue, the issue being whether the Judgment Bar provision applies to the Bivens action in Hallock II. Hallock v. Bonner, 387 F.3d at 153. Secondly, the issue is completely separate and distinct from the merits, which involve the negligent acts of Government employees. Id. The heart of the matter is whether this order is one that is effectively unreviewable on appeal. Id.
The Second Circuit ruled that the order is unreviewable after appeal and thus falls under the collateral order doctrine. The court reasoned that section 2676 confers on the defendants a right not to stand trial, and that an order adjudicating such a right is "effectively unreviewable on appeal." Id. The defendants, who are also the petitioners of this appeal, clearly agree that this suit was immediately reviewable because of the important right at stake, that is, the immunity from suit. See Brief for Petitioners at 14-17. The Hallocks, however, argue an adoption of the defendants' contention would render "every right that could be enforced appropriately by pretrial dismissal" as a right not to stand trial. See Brief for Respondents at 20-21.
Professor Clermont projects that, in ruling on this issue, the Supreme Court will limit the application of the collateral order doctrine to claims where a defense is intended to spare the defendant from trial, rather than a defense that shields him from liability. Professor Clermont believes that the appeal in this case falls in the latter category, and is thus "unappealable." Consequently, Professor Clermont believes that, if the Supreme Court rules as he predicts, the Court should not even reach the second issue since doing so would encourage claimants to appeal the unappealable. However, the existence of a circuit split on the second issue may prompt the Court to do so anyway.
II. Application of the Judgment Bar Provision
The Defendants argue that the plaintiffs cannot bring their Bivens suit forward against federal employees in Hallock II because they already received a judgment in a suit against the government in Hallock I. Hallock II, at 426. The thrust of the Defendants' argument rests on the so-called judgment bar provision, which states that: a "judgment in an action under section 1346(b) [of the FTCA]" against the United States "shall constitute a complete bar to any action by the claimant . . . against the employee of the government whose act . . . gave rise to the claim." 28 U.S.C. ? 2676.
Statutory Language
"Judgment"
The District Court in Hallock II concluded that the court's order in Hallock I was not the type of "judgment" which triggers the judgment bar provision, and that the defendants are thus not immune from this suit. Hallock II at 429. The court based its reasoning on a finding that the Hallock I court's order was a dismissal of the plaintiffs' suit pursuant to Rule 12(b)(1), not Rule 12(b)(6). Id. at 428. Both of these Federal Rules are tools for defendants with which to dismiss a plaintiff's suit, but on very different grounds.
12(b)(1) Dismissals
Under a Rule 12(b)(6) dismissal, a court finds that the plaintiff has not plead a case "for which relief can be granted." Fed. R. Civ. P. 12(b)(6). Such a dismissal is considered "on the merits" since the court is actually evaluating the merits of the plaintiff's potential suit. However, under a Rule 12(b)(1) dismissal for lack of subject matter jurisdiction, a court finds that it lacks the requisite Constitutional authority to review the plaintiff's claim. Such a dismissal is not "on the merits," but is rather a threshold procedural error. The court makes no judgment as to the merits of the plaintiff's claims; rather, the court is informing the plaintiff that she has mistakenly brought her suit in a Federal District Court.
Role of Res Judicata
Whether or not a dismissal is "on the merits" makes a determinative difference if a plaintiff attempts to bring her suit a second time. Res Judicata laws are the laws that govern claimants' abilities to bring forth their suits after an initial attempt. These laws bar claimants from retrying a suit for which they already received a judgment on the merits, such as a Rule 12(b)(6) dismissal. However, claimants are not barred from bringing forth a suit for the second time if their first suit was dismissed for a threshold error, such as a Rule 12(b)(1) dismissal. After all, res judicata laws are aimed to curb the injustice of "double-dipping" that could occur if a dissatisfied claimant were able to take a second stab at litigation, not to punish a claimant who simply filed in the wrong court. Significantly, the court in Hallock II first concluded that Hallock I was dismissed pursuant to Rule 12(b)(1). Hallock v. Bonner, 387 F.3d at 154-55. The court then applied general Res Judicata principles to the Judgment Bar provision when it held that a Rule 12(b)(1) dismissal should not bar a subsequent suit aimed at enforcing "substantive rights against the proper defendants." Hallock II at 428.
Petitioners Richard Will and company, however, argue that the court's dismissal of Hallock II was a final judgment, and that the plain language of the FTCA leaves no room for the District Court's interpretation. See Brief for Petitioners at 25. In ruling as it did, the Second Circuit departs from the Seventh Circuit, which has held that the judgment bar provision applies to bar a Bivens claim that was dismissed for lack of subject matter jurisdiction under Rule 12(b)(1). See Hoosier Bancorp of Indiana, Inc. v. Rasmussen, 90 F.3d 180 (7th Cir. 1996).
"An action under section 1346(b)"
The Second Circuit also looks to the language of section 2676 to support its finding. The court found that an action that is dismissed for lack of subject matter jurisdiction is not "an action under section 1346(b)" because it "was not properly brought under the FTCA in the first place and is a nullity." Hallock v. Bonner, 387 F.3d at 155.
The Petitioners argue, however, that this is clearly an action under section 1346(b), especially in light of the fact that it is this section which permitted the plaintiffs to file their suit in federal court in the first place. See Brief for Petitioners at 27. They point to language in the plaintiffs' complaint where the plaintiffs concede that this very section confers the district court with jurisdiction. Id. Moreover, they argue that the Supreme Court's construction of other FTCA provisions which are worded similarly to the judgment bar provision warrant its application in this case. Id. at 30. The Petitioners specifically refer to the phrase "actions under section 1346(b)" when they argue that the Second Circuit's interpretation of the judgment bar provision is incongruous with the Supreme Court's construction of other similarly worded FTCA provisions. Id. at 32-33.
Congressional Intent and Res Judicata Principles
The Supreme Court's resolution of the second issue is likely to involve an in-depth analysis of Congress' intent in passing the judgment bar provision. In this analysis, the Supreme Court will ask whether, in acting the judgment bar provision, Congress intended the general principles of res judicata to apply to the provision. These principles, as discussed above, would permit a plaintiff to sue a second time upon a Rule 12(b)(1) dismissal.
The Second Circuit decided that Congress's intent required that a key distinction be made between cases dismissed on the merits, and those dismissed on a threshold error, as was the case in Hallock I. Hallock v. Bonner, 387 F.3d at 155. In passing on section 2676, the court reasoned, Congress meant to prevent dual recovery from both the Government and its employees and to avoid the waste of resources in defending repetitive suits. Id. at 154. In this case, allowing the plaintiffs to proceed with Hallock II will not jeopardize Congress's intent since the plaintiff's suit in Hallock I was dismissed at the outset of litigation. In their brief, the Hallocks cite to congressional records as support for this assertion regarding the legislative history of the FTCA. See Brief for Respondents at 13. They also add that, by using classic res judicata terms such as "judgment" and "bar", Congress clearly intended to invoke res judicata principles. Id. at 12.
In their briefs, Petitioners rely most heavily on the text of the judgment bar provision and the FTCA in general as the superior tool with which to analyze this statute. See Brief for Petitioners at 30. Thus, there is little mention of Congress's intent with regards to of res judicata principles.
Discussion
The Federal Tort Claims Act ("FTCA") of 1946 provides federal courts with jurisdiction over damages suits brought against government employees acting within the scope of their employment. 28 U.S.C. ? 1346(b). Under the FTCA, the United States government must waive its sovereign immunity from suit, thus allowing private individuals to sue the federal government and its employees for wrongdoing. Id. The FTCA also has a provision that bars a subsequent FTCA claim on the same grounds after a final decision has been rendered on a previous FTCA suit. 28 U.S.C. ? 2676.
Petitioner Richard Will argues that, as an initial matter, the Court of Appeals had jurisdiction to hear his interlocutory appeal because the court's order in Hallock II was immediately reviewable because of the important right at stake, that is, immunity from suit. See Brief for Petitioner at 14-17. Will also argues that the district court's dismissal of the Hallocks' suit in Hallock I triggered the FTCA's judgment bar provision per section 2676, effectively immunizing the United States and its employees from further FTCA suit on the same grounds. See Brief for Petitioner at 25-31.
Respondent Hallock argues that the Court of Appeals lacked jurisdiction to hear Will's interlocutory appeal because a final decision on the merits had not been reached, essentially arguing for a narrow construction of the collateral order doctrine. See Brief for Respondent at 16-19. Respondent also counters that because Hallock I was barred by an exception to the government's waiver of sovereign immunity, that suit was not a proper FTCA action and therefore dismissal did not trigger the judgment bar provision. See Brief for Respondent at 34.
Interlocutory Appeal
The Supreme Court must decide whether the collateral order doctrine applies to permit an appeal of a district court's order denying a motion to dismiss under the judgment bar provision. Should the Court find that it does, the Court will be expanding the narrow exception of interlocutory appeals, and possibly inviting a floodgates of litigation over court orders. In the words of Kevin Clermont, a James and Mark Flanagan Professor of Law at Cornell Law School and specialist in the procedural aspects of litigation, "all claim preclusion denials would become appealable."
Should Hallock prevail on the issue of the Court of Appeals' ability to hear the interlocutory appeal, there will be fewer earlier appeals for parties in similar situations to that of Will and company. This could lead to conservation of judicial resources, the avoidance of harassing parties with numerous appeals, while curbing judicial second-guessing early on during the litigation. See Brief for Respondent at 16-19.
Judgment Bar Provision
A holding for Petitioners will provide a thick layer of protection for federal employees accused of wrongdoing during the scope of their employment. See Brief for Petitioner at 21-22. It would also insulate the government from liability by adopting the rule that even a dismissal based on a threshold error, such as an FTCA exception, would limit liability for future suits arising from the same events. See Brief for Petitioner at 38-40. Although it might seem harsh to bar a plaintiff's future claims for a improperly bringing a FTCA claim against the government, such a result could greatly conserve judicial resources, which, Petitioner argues, is consistent with the FTCA's purpose. See Brief for Petitioner at 12-14. Such a ruling would not only save governmental expenses and time, it would also allow government employees peace of mind in knowing that a dismissal like the one at issue here would immunize them from later suit. See Brief for Petitioner at 38-40, 14-17.
A ruling for Hallock will limit the FTCA's judgment bar provision to apply only to cases where the first suit against the government is dismissed for a decision on the merits. Thus, citizens who have been wronged by government employees can rest assured that a dismissal based on ignorance or mistake will not preclude them from trying their suit a second time. Of course, one must also wonder if such a ruling will discourage litigants from doing their homework before filing a suit, inevitably wasting federal resource. In order to protect itself and its employees to avoid incurring liability after the dismissal of an FTCA claim, a ruling in favor of Hallock could also force the federal government to make mandatory waivers such as the on which Hallock refused to sign. See Brief for Respondent at 43.
Either way, a ruling on this issue will also have broader procedural implications for the FTCA, other similar statutes, as well as res judicata principles. See Brief for Petitioner at 10-12. For example, a dismissal based on a threshold matter, such as a statutory exception, will likely no longer constitute a final decision under the FTCA barring subsequent litigation. See Brief for Petitioner at 10-12.
Conclusion
It was curious of the Supreme Court to specifically request that the parties argue the interlocutory appeal issue, since it is the judgment bar provision issue which has the Circuit Courts at odds. Due to the policy issues which the judgment bar provision implicates, one hopes that the Court will reach this issue, even if the Court finds this case unappealable as Professor Clermont predicts. Professor Clermont believes that the Second Circuit was right to apply general res judicata principles to the judgment bar provision. Since the FTCA provides an exception for the government's long-standing sovereign immunity from citizen suits, however, one wonders if the Supreme Court will find that the statute deserves unique treatment within the realm of res judicata.
Written by: Galit Avitan & Nick Wimbush
Acknowledgments
Additional Resources
- http://www.west.net/~smith/resjud.htm (for information on res judicata)
- http://www.lectlaw.com/def/f071.htm (for information on the FTCA)
- http://www.lectlaw.com/def/c178.htm (for information on the collateral order doctrine)