United States District Court, D. Arizona
DAVID G. CAMPBELL, District Judge.
Defendant United States has filed a motion to dismiss (Doc. 114) the crossclaim of Defendants Lone Wolf Trading Company, L.L.C. and Andre Howard (Doc. 107). The motion is fully briefed. The Court will grant in part and deny in part the United States' motion.
On December 15, 2010, Border Patrol Agent Brian Terry was killed in the Arizona desert. See Doc. 1. Two years later, Brian Terry's parents ("Plaintiffs") sued several United States agents, Lone Wolf Trading Company, L.L.C. ("Lone Wolf"), and Lone Wolf's owner, Andre Howard. Id; Doc. 32. Plaintiffs claimed that the United States had devised a complex operation that came to be known as "Operation Fast and Furious." Doc. 1. As a part of this operation, United States agents allegedly requested Lone Wolf to sell guns to straw purchasers who then distributed the guns to Mexican drug cartels. Id. Plaintiffs alleged that the guns used to kill Brian Terry were initially acquired from Lone Wolf as a part of this operation. Id. Lone Wolf, in turn, filed a crossclaim against the United States agents, seeking indemnity and damages. Doc. 48.
In a series of orders, the Court dismissed Plaintiffs' claims against the various United States agents (Doc. 68); granted the United States' motion to substitute itself as a defendant with respect to the Lone Wolf's crossclaim (Doc. 70); and granted in part and denied in part Lone Wolf's motion to amend its answer and crossclaim (Doc. 105). This left standing Plaintiffs' state-law claims against Lone Wolf and Lone Wolf's crossclaim against the United States. The United States has now moved to dismiss Lone Wolf's crossclaim for lack of subject matter jurisdiction and failure to state a claim. Doc. 114. The United States also argues that the Court can no longer exercise supplemental jurisdiction over Plaintiffs' claims against Lone Wolf. Id. 
II. Lone Wolf's Crossclaim.
Lone Wolf's crossclaim recounts how federal agents approached Lone Wolf's owner, Andre Howard, and encouraged him to sell guns to particular purchasers as part of an ongoing criminal investigation. Id., ¶ 61. After several purchases, Howard asked the federal agents whether they were later retrieving the guns. Id., ¶ 64. The agents reassured Howard "that ATF was tracking the weapons and intercepting them[.]" Id., ¶ 65. Lone Wolf alleges that the federal agents in fact allowed the guns to be transferred to Mexican drug cartels. Id., ¶ 75.
During Lone Wolf and Andre Howard's initial participation in the operation, they suffered a variety of injuries. They allege that federal agents installed video cameras on their property and, without permission, operated the cameras twenty-four hours a day ( id., ¶ 78); that federal agents were behind a theft of numerous guns from Lone Wolf's store ( id., ¶ 81); and that federal agents performed "threat assessments" on Andre Howard in order to "harass and intimidate" him. Id., ¶¶ 83-85. Sometime later, at an unspecified date, Lone Wolf's participation in "Operation Fast and Furious" came to light. Id., ¶ 86. Because of this, Lone Wolf sustained financial and reputational losses as "legitimate gun purchasers" would no longer deal with the company. Id., ¶¶ 92, 99. Andre Howard experienced emotional distress and anxiety. Id., ¶¶ 96-98. The crossclaim also alleges that federal agents "published untrue accounts" of Lone Wolf's involvement in the operation, further damaging its reputation. Id., ¶¶ 87-88. Finally, federal agents encouraged Lone Wolf to help in the cover-up of the operation. Id., ¶¶ 89-90.
Lone Wolf has brought a claim for indemnity against any judgment Plaintiffs might win against it. Id., ¶¶ 100-08. Beyond this, the crossclaim focuses exclusively on the tort of negligence. Lone Wolf asserts that the United States had a duty to Lone Wolf because federal agents had agreed to prevent the transfer of guns purchased from Lone Wolf, thereby "assuming" a duty to prevent the transfer of those guns. Id., ¶¶ 109-14. Alternatively, the United States had a duty to Lone Wolf because it formed a "special relationship" with Lone Wolf. Id., ¶¶ 127-32 (citing Gibson v. Kasey, 150 P.3d 228 (Ariz. 2007)). The United States allegedly breached this duty by negligently allowing guns to be transferred to drug cartels. Doc. 107, ¶¶ 118-20. Alternatively, the United States breached its duty by failing to follow its own regulations. Id., ¶¶ 122-26.
Significantly, this negligence claim does not appear related to the injuries Lone Wolf suffered during its initial participation in the operation, namely, the improper use of video cameras, the theft of guns from Lone Wolf's store, and the performance of threat assessments. Nor does the claim appear related to the publication of "untrue accounts" of Lone Wolf's involvement ( id., ¶¶ 87-88), which would more appropriately be addressed by a claim for libel or slander. Rather, the focus is on the injuries Lone Wolf suffered because federal agents negligently allowed the transfer of Lone Wolf's guns to Mexican drug cartels. See id., ¶¶ 104, 111-14, 118-21, 123. Specifically, when the public learned of the operation and Lone Wolf's participation in it, Lone Wolf and Andre Howard suffered financial, reputational, and emotional injuries. The United States has not addressed whether a negligence claim for these injuries is cognizable under Arizona law, and the Court will not do so here. Rather, the United States attacks Lone Wolf's claim on other grounds.
The United States presents four arguments in support of its motion to dismiss: (1) 28 U.S.C. § 2680(h) bars Lone Wolf's tort claim because the claim is based on misrepresentations by federal agents; (2) the exclusive-liability provision of the Federal Employees' Compensation Act bars Lone Wolf's claim for indemnity; (3) the Federal Tort Claims Act's statute of limitations bars Lone Wolf's tort claim; and (4) the Court no longer has subject matter jurisdiction over Plaintiffs' claims against Lone Wolf.
Absent a waiver, sovereign immunity shields the federal government and its agencies from suit. F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994). The Federal Tort Claims Act ("FTCA") waives the federal government's sovereign immunity for torts committed by federal employees. 28 U.S.C. §§ 1346(b), 2674. The government retains its immunity as ...