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Lee v. Schultz

United States District Court, D. South Dakota, Southern Division

March 19, 2015

RALPH LEE, Plaintiff,
v.
MARK SCHULTZ, Defendant and Third-Party Plaintiff,
v.
UNITED STATES OF AMERICA and UNITED STATES FISH AND WILDLIFE SERVICE, Third-Party Defendants.

MEMORANDUM OPINION AND ORDER DENYING IN PART AND GRANTING IN PART THIRD-PARTY DEFENDANTS' MOTION TO DISMISS

LAWRENCE L. PIERSOL, District Judge.

Third-Party Defendants (United States) moves this Court, pursuant to Fed.R.Civ.P. 12(b), to dismiss Third-Party Plaintiffs (Schultz's) claim for indemnity and contribution under the Federal Tort Claims Act (FTCA) and the Administrative Procedure Act (APA). Based on the following, the motion relative to the FTCA is denied, while the motion relative to the APA is granted.

BACKGROUND

The material facts of the case are not in dispute. Plaintiff Ralph Lee (Lee) and Schultz own adjoining properties in Moody County, South Dakota. Surface water flows in its natural and ordinary course over Lee's land, the dominant property. While the surface water would typically drain into a drainage ditch, referred to as the "exit ditch, " located on Schultz's property, Lee claims that Schultz has failed to properly clear the exit ditch, which has resulted in obstruction due to overgrowth. As a result, water has pooled upon ten acres of Lee's property.

Schultz maintains that his land, namely the exit ditch, is burdened by a conservation or wetland easement owned by the United States Fish and Wildlife Service (the Service). In 2009, an attorney for both Schultz and Lee sent a letter to the Service requesting permission to clear the exit ditch of the obstructing overgrowth. A Deputy Project Leader for the Service responded with his own letter indicating that were the parties to clear the exit ditch as proposed, criminal charges could be forthcoming pursuant to the National Wildlife Refuge Administration Act. Nothing in the record indicates that any formal steps were taken by either Lee or Schultz to resolve the matter.

Three years after the Service's Project Leader responded to Lee and Schultz's informal request, Lee filed a complaint against Schultz in Moody County, South Dakota for negligence, nuisance, and declaratory and injunctive relief as to the parties' drainage rights. In his answer to the Complaint, Schultz asserted that he was legally incapable of complying with Lee's request and, therefore, Lee's prayer for relief should be barred. Schultz then brought a timely third-party claim against the United States for indemnification and contribution in the event that Schultz is found liable to Lee for money damages.

The action is now in this Court pursuant to the United States' notice of removal due to Schultz's claims for money damages against the United States, implicating the FTCA. The United States is asking this Court to dismiss Schultz's Third-Party Complaint in its entirety for lack of subject matter jurisdiction based upon (1) Schultz's failure to formally file and exhaust an administrative claim or appeal with the Service as mandated by the FTCA; (2) Schultz fails to state a relevant source of subject matter jurisdiction for claims that are controlled by the APA; and (3) Schultz fails to state a source of subject matter jurisdiction for claims not controlled by either the FTCA or the APA.

DISCUSSION

The Federal Tort Claims Act

Under the FTCA, a claimant is proscribed from bringing an action for money damages against the United States "unless the claimant shall have first presented the claim to the appropriate Federal agency and his claim shall have been finally denied by the agency in writing..." 28 U.S.C. § 2675(a).[1] Thus, in order for this Court to have subject matter jurisdiction over the case, the provisions of the FTCA, or some other statute bestowing subject matter jurisdiction, must be complied with. "Federal courts are not courts of general jurisdiction and have only the power that is authorized by Article III of the Constitution and statutes enacted by Congress pursuant thereto." Crow Creek Sioux Tribe v. Bureau of Indian Affairs, 463 F.Supp.2d 964. 966 (C. D. S.D. 2006). "The party claiming federal subject matter jurisdiction has the burden of proving it exists.'" M.J. Farms, Ltd. V. U.S. Fish and Wildlife Service, 593 F.Supp.2d 907, 910 (W.D. La. 2008) (quoting People's Nat'I Bank v. Office of Comptroller of Currency, 362 F.3d 333, 336 (5th Cir. 2004)).

In order for a Federal court to have subject matter jurisdiction of a claim arising under the FTCA, the claimant must first present the matter to the appropriate administrative agency (i.e., the United States Fish and Wildlife Service) and allow it to be decided with finality by that agency. Stated differently, a claimant may not pursue a tort claim against the United States in District Court until "(i) the agency finally denies the administrative claim, or (ii) six months pass without a final denial of the administrative claim - whichever comes first. " Kodar v. United States, 879 F.Supp.2d 218, 225 (D. R.I. 2012).

"The Supreme Court... recognized that the most natural reading of § 2675(a) indicates that Congress intended to require complete exhaustion of Executive remedies before invocation of the judicial process :'" Mader v. U.S., 654 F.3d 794, 807 (8th Cir. 2011) (quoting McNeil v. United States, 506 U.S. 106, 112 (1980))(emphasis in original). "[A] claim that fails to satisfy § 2675(a)'s requirements remains inchoate, unperfected, and not judicially actionable." Id. The exhaustion doctrine, as it is known, is rooted "in the principles of federalism and comity." Crow Creek Indian Tribe, 463 F.Supp.2d at 969. Exhausting agency processes both protects the specific agency's authority and promotes judicial efficiency. Id. An agency's authority is promoted by avoiding premature judicial interruption and allowing a record to be developed through the agency's special expertise. See id. Moreover, by allowing the agency to develop the record and undertake its own factfinding, judicial efficiency is accelerated because judicial repetition, or supplantation, of agency factfinding can be halted. See id.

In the case at bar, when the dispute revolving around the exit ditch first arose, the interests of Lee and Schultz's aligned, as evidenced by the pair retaining the same counsel to send a letter to the Service requesting permission to clear the exit ditch. The Service responded to the parties' letter October 2009, which denied Lee and Schultz's request and detailed the maximum charges that could be imposed on the parties were they to clear the ditch as proposed.[2] After receiving the Service's letter, neither party took any further action. It wasn't until Lee sued Schultz three years later that Schultz is seeking relief albeit in this Court and not the Service.

"The doctrine of exhaustion of administrative remedies typically is applied to ensure that senior officials in a government agency have authoritatively ruled, in accordance with available procedures, on an issue that a party attempts to bring to court based on a preliminary decision of a subordinate official." Miller v. Air Line Pilots Ass'n, 108 F.3d 1415, 1418 (D.C. Cir. 1997). See 33 Charles Alan Wright & Charles H. Koch, Jr., FEDERAL PRACTICE AND PROCEDURE § 8398 (1st ed. 2014). Indeed, the Service has in place a mechanism to ensure that a senior official is provided an opportunity to review tort claims. See Declaration of Sharon Brenna in Support of Motion to Dismiss Third-Party Complaint, ¶ 2 [hereinafter Brenna Declaration]. Were Lee and Schultz's claim filed with the Service's adjudicatory body, the Service would have been afforded meaningful opportunity to factfind and apply its expertise, which are two of the driving principles behind the ...


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