Opposition Brief — Agredano v. United States

DEC 6

No. 10-99

Jn the Supreme Court of the United States

FRANCISCO JAVIER RIVERA AGREDANO, ET AL..

PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

NEAL KUMAR KATYAL

Acting Solicitor General

Counsel of Record

TONY WEST

Assistant Attorney General

JEANNE E. DAVIDSON

PATRICIA M. MCCARTHY

DEVIN A. WOLAK

Attorneys

Department of Justice

Washington, D.C 20530-0001

SupremeCtBriefs@usdop.gov

(202) 514-2217

QUESTIONS PRESENTED

Petitioners brought a breach-of-contract suit against

the United States in the Court of Federal Claims seek-

ing compensation for damages they incurred after the

vehicle in which they were traveling, which petitioner

Rivera Agredano had purchased at a forfeiture auction

conducted by United States Customs and Border Pro-

tection (Customs), was stopped by Mexican authorities

and found to contain hidden marijuana. The questions

presented are as follows:

1. Whether the court of appeals correctly concluded

that the sale agreement between petitioner Rivera

Agredano and Customs did not inelude an implied-in-

fact warranty that the vehicle would be free of contra-

band.

2. Whether the court of appeals erred in declining to

consider petitioners’ subsidiary arguments regarding

emotional distress damages and petitioner Calderon

Leon’s purported status as an intended third-party ben

eficiary of the contract.

3. Whether the court of appeals abused its discretion

in declining to transfer petitioners’ Federal Tort Claims

Act claims to the United States Court of Appeals for the

Ninth Circuit.

—

TABLE OF CONTENTS

Opinions below

Jurisdiction

Statement

Argument

Conclusion

TABLE OF AUTHORITIES

Cases:

ABF Capital Corp. v. Osley, 414 F.3d 1061 (9th Cir.

2005), cert. denied, 546 U.S. 1138 (2006)

Anderson v. United States, 344 F.3d 1343 (Fed. Cir.

2003)

Centex Corp. v. United States, 395 F.3d 1283

(Fed. Cir. 2005)

Cervantes v. United States, 3:

2003)

Christianson v. Colt Indus. Operating Corp.,

486 U.S. 800 (1988)

Crenega Gardens v. United States, 194 F.3d 1231

(ed. Cir. 1998), cert. denied, 528 U.S. 820 (1999)

D&N Bank v. United States, 331 F.3d 1374

(Fed. Cir. 2003)

Fairmont Shipping Corp. v. Chevron Int'l Oil Co.,

O11 F.2d 1252 (2d Cir.), cert. denied, 423 U.S. 838

(1975)

Little River Lumber Co. v. United States, 7 Cl. Ct

492 (1985) ..

Cases—Continued: Page

Pr CLSLON Pine we Timber. Ine. v.l nited State ip

296 F.3d 817 (Fed. Cir. 2010), petition for cert.

pending, No. 10-341 (filed Sept. 8, 2010) ........ 6

Rodriguez v. United States, 862 F.2d 1558 (Fed. Cir.

SOD ns oie bala RES Eee LQ)

Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp.,

350 U.S. 124 (1956) .. Pe Pr ere - ee

Sosa v. Alvarez-Machain, 542 U.S. 692 (2004) .......... 3

l/nited States v. Marcus, 130 S. Ct. 2159 (2010) ....... 3

Statutes and rules:

Kederal Tort Claims Act

28 U.S.C.1291 ... “7 Q)

28 U.S.C. 1295(a)(3) ee

28 U.S.C. 1346(b).... eer

oe Ud. IGBE . ccs. SY

28 U.S.C. 2671-2680 2

28 U.S.C. 2680(k) .... 2

Tucker Act, 28 U.S.C. 149] 3

Fed. R. App. P.:

Rule 4(a)(1)(B) a

Rule 4(a)(7)(A)(i) 9)

Jn the Supreme Court of the Cinited States

No. 10-99

kRANCISCO JAVIER RIVERA AGREDANO, ET AL..

PETITIONERS

VU,

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-8) is

reported at 595 F.3d 1278. The opinion of the Court of

Federal Claims (Pet. App. 9-101) is reported at 82 Fed.

Cl. 416.

JURISDICTION

The judgment of the court of appeals was entered on

February 17, 2010. A petition for rehearing was denied

on April 16, 2010 (Pet. App. 118-119). The petition for a

writ of certiorari was filed on July 14, 2010. The juris

diction of this Court is invoked under 28 U.S.C, 1254(1).

STATEMENT

1. In September 2001, petitioner Rivera Agredano

purchased a used 1987 Nissan Pathfinder at an auction

(1)

~

of forfeited vehicles conducted by United States Cus

toms and Border Protection (Customs). Pet. App. 2, 21-

22. The vehicle had been seized by Customs and for

feited when its previous owner attempted to transport

marijuana across the Mexican border into the United

States. /bid.

The auction’s sales literature contained two express

warranty disclaimers. The first disclaimer said that

“lalll merchandise is sold on an ‘AS IS, WHERE IS’

basis, without warranty or guarantee as to condition,

fitness to use, or merchantability stated, implied, or oth-

erwise.” Pet. App. 2, 23. The second disclaimer stated

that Customs provided no warranties “regarding any

aspect of the vehicle or its ability to operate.” 593 F.3d

1278-1279 (2010).

Unbeknownst to either party, the vehicle contained

a significant amount of concealed marijuana. Pet. App.

2. Approximately four months after the sale, petitioner

Rivera Agredano was traveling in the vehicle in Mexico

with petitioner Calderon Leon when the two men were

stopped at a checkpoint by Mexican authorities, who

inspected the vehicle and found the hidden marijuana.

Id, at 2,25. Petitioners were arrested and spent approx-

imately one year in Mexican prison before being ordered

released by a Mexican appellate court. /d. at 2-3, 37.

2. In November 2002, petitioners filed a civil tort

action against the United States in the United States

District Court for the Southern District of California.

Pet. App. 3, 105. Petitioners invoked the Federal Tort

Claims Act (FTCA), 28 U.S.C. 13846(b), 2671-2680. The

district court dismissed petitioners’ FTCA claims, hold-

ing that the FTCA’s “foreign country” exception (28

U.S.C. 2680(k)) barred the suit because the injuries for

which petitioners sought relief had occurred in Mexico.

Pet. App. 111-113; see Sosa v. Alvarez-Machain, 542

U.S. 692, 712 (2004).

The district court stated, however, that it would per

mit petitioners to amend their complaint to allege con

tract claims against the United States under the Tucker

Act, 28 U.S.C. 1491. See Pet. App. 114. Petitioners sub

sequently amended their complaint to allege only

contract claims, and they stipulated that their FTCA

claims would be dismissed without prejudice.

No. 3:02-ev-02243-B-NLS, Docket entry No. 92 (S.D.

Cal. Feb. 3, 2005). The parties also stipulated that the

amended complaint would be transferred to the Court of

Federal Claims (CFC). /bid.

3. The district court transferred petitioners’ amend

ed complaint to the CFC, and the United States moved

to dismiss the suit. The CFC granted the motion to dis

miss with respect to the claims brought by petitioner

Calderon Leon on the ground that Calderon Leon was

not an intended third-party beneficiary of the contract

between petitioner Rivera Agredano and the United

States. 70 Fed. Cl. 564, 579 (2006). The court conclud

ed, however, that petitioner Rivera Agredano had ade-

quately stated a claim against the United States for

breach of contract. Pet. App. 38-39.

After a tmnial, the CFC held that Customs had

breached an implied-in-fact warranty that the vehicle it

sold to petitioner Rivera Agredano did not contain con

traband. See Pet. App. 9-101. The court stated that an

implied warranty arose from “a meeting of minds” be-

tween the parties, with Customs communicating a “tacit

understanding” that it had complied with its regulatory

procedures requiring the removal of contraband from

vehicles prior to sale, and petitioner reasonably assum

ing that the United States would not sell a vehicle con

taining illegal contraband. Jd. at 71-72. The court

awarded $550,854 in damages to petitioner Rivera

Agredano. /d. at 101. The damages award did not in

clude petitioner Rivera Agredano’s requested compensa

tion for emotional distress, which the court concluded

was not warranted based on the evidence. /d. at 100

101.

4. The court of appeals reversed. Pet. App. 1-&.

Citing established Federal Circuit precedent, the court

held that an implied-in-fact warranty could not be based

solely upon the expectation that Customs had fulfilled a

regulatory duty. /d. at 4-5 (citing D & N Bank v. United

States, 331 F.3d 1374, 1378-1379 (2003)). The court also

stated that petitioners’ claim of an implied warranty was

“further undermined” by Customs’ express disclaimers,

including a statement in the sale literature that Customs

made no warranties “regarding any aspect of the vehicle

or its ability to operate.” /d. at 5. The court of appeals

stated that it was “incongruous to find that Customs

impliedly warranted what it expressly disclaimed.” J/d.

at 6.

Judge Dyk concurred. Pet. App. 6-7. He concluded

that “[aJbsent a contractual warranty disclaimer,” the

sale of an automobile by the government to a private

purchaser “likely carries with it an implied-in-fact war-

ranty of fitness, including a warranty that the vehicle

does not contain illegal drugs.” /d. at 7. Because the

contract here “explicitly disclaimed all warranties,”

however, Judge Dyk agreed that the vehicle was not

covered by any implied-in-fact warranty. /bid

ARGUMENT

Petitioners contend (Pet. 9, 12, 14-17) that the sale

agreement between petitioner Rivera Agredano and the

United States included an implied-in-fact warranty that

—

o

the vehicle did not contain contraband. The court of

appeals correctly rejected that argument, and its deci-

sion does not conflict with any decision of this Court. or

another court of appeals. Petitioners further contend

(Pet. 20-27) that the court of appeals erred by failing to

address subsidiary issues related to petitioner Rivera

Agredano’s emotional distress damages and petitioner

Calderon Leon’s third-party beneficiary status, and by

failing to transfer their FTCA claims to the Ninth Cir-

cuit. The court of appeals properly declined to address

those issues. Further review is not warranted.

1. Petitioners argue that the court of appeals ap-

plied an improper standard of review to evaluate the

CFC’s decision that the sales contract between peti-

tioner Rivera Agredano and the United States contained

an implied-in-fact warranty that the vehicle was free of

contraband. Petitioners further contend that the court

of appeals’ ruling conflicts with this Court’s decision in

Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp.,

350 U.S. 124 (1956). Petitioners’ arguments are pre-

mised on a misunderstanding of the court of appeals’

decision.

a. The court of appeals did not adopt a new standard

for reviewing a trial court’s factual findings. In fact, the

court stated that it would “review the [CFC’s] decision

* * * for clear error on findings of fact.” Pet. App. 4.

But the question whether the vehicle sales contract con-

tained an implied-in-fact warranty is a mixed question of

fact and law, which is subject to de novo review. See

Cienega Gardens v. United States, 194 F.3d 1231, 1239

(Fed. Cir. 1998), cert. denied, 528 U.S. 820 (1999).

In holding that the contract did not include an

implied-in-fact warranty, the court of appeals stated

that “it is incongruous to find that Customs impliedly

6

warranted what it expressly disclaimed.” Pet. App. 6.

Far from creating any new standard, the court of ap-

peals simply applied the contract-law axiom that obliga-

tions created under implied contract terms cannot be

incons:stent with obligations created by express con-

tract terms. See, e.g., Centex Corp. v. United States, 395

I'.3d 1283, 1304-1306 (Fed. Cir. 2005). Indeed, the Fed-

eral Circuit’s decision in Precision Pine & Timber, Inc.

v. United States, 596 F.3d 817 (2010), petition for cert.

pending, No. 10-341 (filed Sept. 8, 2010), cited the deci-

sion in this case in support of the proposition that im-

plied contractual duties “cannot * * * create duties in-

consistent with the contract’s provisions.” Jd. at 831.

Even without these express disclaimers, petitioners

have identified no conflict among the circuits with re-

spect to the court of appeals’ holding that as a matter of

law, “La]n agency’s performance of its regulatory or sov-

ereign functions does not create contractual obliga-

tions.” D & N Bank v. United States, 331 F.3d 1374,

1378-1379 (Fed. Cir. 2003); see Pet. App. 5-6. To estab-

lish that the government assumed a contractual obliga-

tion to perform its regulatory duties properly, the plain-

tiff must demonstrate “an objective manifestation of

voluntary, mutual assent” to that effect. Anderson v.

United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003).

Petitioners presented no evidence of such an under-

standing here. To the contrary, the CFC acknowledged

that its implied-warranty holding was based solely on

the fact that federal law requires Customs to search

seized vehicles for contraband before offering them for

sale. Pet. App. 63-67. Without disturbing any of the

predicate facts found by the trial court, the court of ap-

peals held that this regulatory duty was insufficient to

support the existence of an implied-in-fact warranty. /d.

7

at 5 (“[T]he source of any responsibility on the part of

Customs to search vehicles and remove contraband is its

regulatory function and failure to adequately perform

this responsibility does not provide a contractual rem-

edy.”). That holding is supported by well-established

legal principles, and it raises no issue warranting this

Court’s review.

b. Petitioners also contend (Pet. 12) that the court

of appeals’ holding conflicts with this Court’s decision in

Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp.,

350 U.S. 124 (1956). That decision is inapposite. In

Ryan Stevedoring, the plaintiff shipowner hired the de-

fendant to perform stevedoring services for the ship-

owner’s cargo operations. /d. at 1383. The Court held

that a contractual agreement to perform stevedoring

services “necessarily includes [an] obligation not only to

stow [cargo], but to stow [it] properly and safely.” /bid.

The Court’s decision was based on a structural aspect of

maritime law known as the “absolute duty of seaworthi-

ness,” which “requires shipowners, regardless of fault,

to pay for accidents caused by stevedores,” thereby leav-

ing shipowners without recourse against negligent ste-

vedores. Fairmont Shipping Corp. v. Chevron Int’l Oil

Co., 511 F.2d 1252, 1258 (2d Cir. 1975), eert. denied, 423

U.S. 838 (1975). This case, by contrast, does not involve

the application of maritime law; petitioner Rivera

Agredano did not contract for Customs to provide him

with any service; and Customs expressly disclaimed all

warranties in the auction sales literature. Pet. App. 6-7.

2. Petitioners also contend (Pet. 21-27) that certio-

rari should be granted because the court of appeals did

not address whether emotional distress damages were

available to petitioner Rivera Agredano in this case, or

whether petitioner Calderon Leon is an intended third-

a)

party beneficiary to the contract. The CFC determined

that petitioner had not presented sufficient evidence of

emotional distress. Pet. App. 101. The CFC also held,

after reviewing the relevant provisions of the Uniform

Commercial Code and case law from various jurisdic-

tions, that passengers in a vehicle are not intended

third-party beneficiaries of a contract for sale of the

vehicle. 70 Fed. Cl. 564, 578-579 (2006).

Petitioner identifies no conflict in the courts of ap-

peals on these issues. In any event, the court of appeals

appropriately declined to consider those subsidiary is-

sues because the court’s resolution of those questions

would have no effect on the outcome of the case. Pet.

App. 6. Even if Rivera Agredano had adequately proved

emotional injuries resulting from his arrest and impris-

onment, or Calderon Leon had established his status as

an intended third-party beneficiary of the sale contract,

neither petitioner could obtain any recovery in this suit

without first demonstrating that the government had

breached an implied contractual promise that the vehicle

did not contain marijuana. As the court of appeals cor-

rectly expiained, those issues were “rendered moot” by

the court’s holding that the vehicle sale contract did not

contain an implied-in-fact warranty. bid.

3. Finally, petitioners contend (Pet. 20-21) that the

court of appeals erred by failing to transfer their FTCA

claims to the United States Court of Appeals for the

Ninth Circuit pursuant to 28 U.S.C. 1631. The amended

complaint that was transferred to the CFC contained

only contract claims. See No. 3:02-cv-02243-B-NLS,

Docket entry No. 92 (S.D. Cal. Feb. 3, 2005) (stipulating

that amended complaint would allege “only contract

claims”); see also Pet. App. 38 (stating that petitioners’

amended complaint included only contract claims). For

9

at least two reasons, the Federal Circuit did not abuse

its discretion in declining to transfer to the Federal Cir-

cuit petitioners’ appeal of the dismissal of their FTCA

claims.

First, there is no evident jurisdictional basis for

transferring to the Ninth Circuit any portion of this ap-

neal. Petitioners did not seek to appeal either the dis-

trict court’s November 2004 order granting summary

judgment for the government on petitioners’ FTCA

claims, or the district court’s February 2005 order dis-

missing those claims without prejudice. See Pet. App.

38. The time for appealing those orders directly has

long since passed. See Fed. R. App. P. 4(a)(1)(B)

(“When the United States or its officer or agency is a

party, the notice of appeal may be filed by any party

within 60 days after the judgment or order appealed

from is entered.”); ef. Fed. R. App. P. 4(a)(7)(A)(i) and

Gi); ABF Capital Corp. v. Osley, 414 F.3d 1061, 1064

(9th Cir. 2005) (stating that when judgment is not set

forth in separate document, judgment is deemed entered

150 days from entry on civil docket), cert. denied,

546 U.S. 1138 (2006). Under 28 U.S.C. 1631, a federal

trial or appellate court that does not have jurisdiction

over an action or appeal may transfer the action or ap-

peal to a court that does. Petitioners’ appeal in this

case, however, was from the final judgment entered by

the CFC. Because the Federal Circuit rather than the

Ninth Circuit had jurisdiction over that appeal, see 28

U.S.C. 1291, 1295(a)(3), the transfer mechanism was

unavailable here.

Second, even if Section 1631 authorized transfer, the

decision to transfer an action or appeal is discretionary,

and a court is not required to undertake that course if

transfer would be futile. See Christianson v. Colt

10

Indus. Operating Corp., 486 U.S. 800, 819 (1988); Rodri-

guez v. United States, 862 F.2d 1558, 1560 (Fed. Cir.

1988); Little River Lumber Co. v. United States, 7 Cl.

Ct. 492, 494 (1985). If petitioners’ request for transfer

to the Ninth Circuit is viewed as an attempt to obtain

direct appellate review of the district court’s order dis-

missing their FTCA claims, the appeal is untimely. See

p. 9, supra. And as the district court correctly recog-

nized, petitioners’ FTCA claims are barred in any event

by the statute’s “foreign country” exception.’

In addition, even if Customs officials could be shown

to have acted negligently in failing to discover the mari-

juana secreted within the car, their conduct did not

breach any duty owed to petitioners at the time the in-

spection occurred. Rather, petitioners’ FTCA claims

necessarily depend on the premise that the government

acted tortiously in later selling them a car that (unbe-

knownst to Customs) contained marijuana. To find on

that basis that the government breached a tort-law duty

owed to petitioners would effectively negate the Federal

Circuit’s holding that the disclaimers communicated in

connection with the vehicle sale adequately protected

the United States from contract liability.

Petitioners argue (Pet. 7, 11) that the court of appeals’ decision con-

flicts with the Ninth Circuit’s decision in Cervantes v. United States,

330 F.3d 1186 (2003), in which a purchaser who was arrested and im-

prisoned after hidden marijuana was found in a seized vehicle that he

purchased from the United States was allowed to recover under the

FTCA. As petitioners acknowledge, the plaintiff in that case was

arrested in California, and the FTCA’s “foreign country” exception

therefore was not at issue. /d. at 1187-1188. In any event, petitioners’

FTCA claims are not before this Court, so any conflict with Cervantes

does not provide a basis for this Court’s review.

1]

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

NEAL KUMAR KATYAI

Acting Solicitor General

[ONY WEST

Assistant Attorney General

JEANNE EF. DAVIDSON

PATRICIA M. MCCARTHY

DEVIN A. WOLAK

Attorneys

DECEMBER 2010