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Clancy v. United States

United States District Court, D. Arizona

July 25, 2018

JOHN CLANCY, a single man; EDWARD MCMULLEN, a single man; and LAS CIEN CASAS, LLC., an Arizona company, Plaintiffs,
v.
UNITED STATES OF AMERICA; and UNITED STATES AIR FORCE, Defendants.

          ORDER

          Honorable Lynette C. Kimmins United States Magistrate Judge.

         Defendants United States of America and United States Air Force move to dismiss the Complaint filed by Plaintiffs John Clancy, Edward McMullen, and Las Cien Casas, LLC for lack of subject matter jurisdiction. (Doc. 12.) Plaintiffs filed an Objection to Motion to Dismiss and Defendants replied. (Docs. 13-2, 16.) Plaintiffs filed and later withdrew their response to Defendants' Reply. (Docs. 17, 18.) Plaintiffs filed a Motion to Supplement, and the motion was granted.[1] (Docs. 19, 25.) Defendants replied to the supplementary documents. (Doc. 26.) Both parties consented to Magistrate Judge Kimmins's authority to render a final judgment. (Doc. 23.) For the reasons discussed below, the Court grants in part and denies in part the Motion to Dismiss.

         FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiffs filed a complaint against Defendants, asserting the Federal Tort Claim Act (the “FTCA”), 28 U.S.C. §§ 1346(b), 2671-2680, as the basis for the Court's jurisdiction. (Doc. 1.) The following facts are taken from Plaintiffs' Complaint. Plaintiffs allege that, on or about February 8, 2016, an airman of the United States Air Force inadvertently started a fire on the real property known as Parcel number 302-24-007 (the “Property”) and caused damage to the Property. On March 9, 2016, Plaintiffs filed an administrative claim with Defendants pursuant to the FTCA. On April 13, 2016, Defendants offered Plaintiffs $2, 500 to settle the claim. Plaintiffs requested reconsideration. On July 13, 2017, Plaintiffs' administrative claim was denied. Plaintiffs sue for negligence and seek damages. The Property is owned by Las Cien Casas, LLC. Mr. Clancy and Mr. McMullen are the sole owners of Las Cien Casas, LLC.

         DISCUSSION

         Defendants moved to dismiss for lack of subject matter jurisdiction. First, Defendants argue that, because the Property is owned by Las Cien Casas, LLC, Mr. Clancy and Mr. McMullen have not been injured and do not have standing to sue. Second, Defendants contend that, although Las Cien Casas, LLC owns the Property, it failed to file an administrative claim with Defendants pursuant to the FTCA.

         Plaintiffs submitted to the Court: (1) a copy of the SF-95 Claim Form as originally submitted to Defendants; (2) a copy of the deed of the Property submitted along with the SF-95 Claim Form; and (3) Defendants' settlement offer. (Doc. 25.)

         Plaintiffs Mr. Clancy and Mr. McMullen

         Because the Property is owned by Las Cien Casas, LLC, Mr. Clancy and Mr. McMullen have not been injured and do not have standing to sue. It is a “fundamental rule” that even though a stockholder owns all of the stock in a corporation, he cannot sue as an individual for injury to the corporation. Erlich v. Glasner, 418 F.2d 226, 228 (9th Cir. 1969); Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 439-40 (9th Cir. 1979); Shell Petroleum, N.V. v. Graves, 570 F.Supp. 58, 62 (N.D. Cal), aff'd, 709 F.2d 593 (9th Cir. 1983). In responding to the Motion to Dismiss, Plaintiffs Mr. Clancy and Mr. McMullen did not dispute Defendants' argument based on standing. (Doc. 13-2.) Mr. Clancy and Mr. McMullen will be dismissed.

         Plaintiff Las Cien Casas, LLC

         The FTCA provides that “[a]n action shall not be instituted . . . 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 and sent by certified or registered mail.” 28 U.S.C. § 2675(a). Administrative exhaustion is a jurisdictional prerequisite to filing a FTCA suit. McNeil v. United States, 508 U.S. 106, 113 (1993). Federal Courts are courts of limited jurisdiction, and the burden of establishing such jurisdiction rests upon the party bringing the case to federal court. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

         Defendants argue that Las Cien Casas, LLC failed to file an administrative claim and the Court should enforce strict adherence with the exhaustion requirement. See McNeil, 508 U.S. at 113 (“[E]xperience teaches that strict adherence to the procedural requirements specified by the legislature is the best guarantee of evenhanded administration of the law.” (quoting Mohasco Corp. v. Silver, 447 U.S. 807, 826 (1980))). Defendants note that Box 2 on the SF-95 Claim Form asks for “claimant's personal representative if any” and directs the filer to the instructions on the reverse, which state that “[a] claim presented by the agent or legal representative must be presented in the name of claimant” and that “[i]f the incident involves more than one claimant, each claimant should submit a separate claim.” (Doc. 25-1.) The SF-95 Claim Form at issue only listed Mr. McMullen as the Claimant, with no indication that he was filing on behalf of the LLC or any evidence of his authority to act on behalf of the company. When asked for the name and address of the owner, if other than the claimant, Mr. McMullen wrote “same as claimant.” Therefore, Defendants allege that the administrative claim was filed on behalf of Mr. McMullen personally, not on behalf of Las Cien Casas, LLC.

         Plaintiffs counter that Mr. McMullen, at all times, was acting on behalf of Las Cien Casas, LLC, and Defendants were aware that the administrative claim was filed on behalf of the LLC. The deed that Plaintiffs submitted to Defendants with the SF-95 Claim Form states that the Property is owned by Las Cien Casas, LLC. The Court also reviewed a copy of Defendants' settlement letter to Mr. McMullen. The relevant part of Defendants' offer states: “I note that the property is actually owned by Las Cien Casas, LLC. Therefore, an authorized officer will have to sign the settlement agreement even if that officer is you, and the payment will be made to Las Cien Casas.”

         The Court finds that Plaintiff Las Cien Casas, LLC met its burden with respect to the exhaustion requirement. The exhaustion requirement serves two general purposes: to avoid unnecessary litigation by making it possible for the government to “expedite the fair settlement” of the claims, and to provide for a “more fair and equitable treatment” of private parties when they have claims against the government. Shipek v. United States, 752 F.2d 1352, 1354 (9th Cir. 1985). These two purposes are served when the claim gives the government sufficient notice to commence investigation, and the claimant places a value on the claim. Id. The Ninth Circuit held that only “minimal notice” is required to satisfy the exhaustion requirement. Id.; Avery v. United States, 680 F.2d 608, 611 (9th Cir. 1982) (reasoning ...


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