Lyndon v. United States

TROY LYNDON, Plaintiff, v. UNITED STATES OF AMERICA, et al., Defendants.

CIV. NO. 20-00034 JMS-RT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

September 25, 2020

ORDER DISMISSING FIRST AMENDED COMPLAINT WITHOUT LEAVE TO AMEND

I. INTRODUCTION

On September 15, 2020, pro se Plaintiff Troy Lyndon ("Plaintiff" or "Lyndon") filed a First Amended Complaint ("FAC") against Defendants United States of America; the Securities & Exchange Commission ("SEC"); SEC employees Lucee Kirka ("Kirka"), Carol Shau ("Shau"), and Karen Matteson ("Matteson") (collectively, the "SEC officials" or "SEC Defendants"); and "others not yet known or determined" (collectively, "Defendants"), asserting claims pursuant to the Federal Tort Claims Act, 28 U.S.C. §§ 1346, 2671-2680, based on Defendants' conduct in connection with the litigation of a prior action—SEC v. Lyndon, Civ. No. 13-00486 SOM-KSC, 2014 WL 12614447 (D. Haw. 2014) ("Lyndon"). ECF No. 36. Pursuant to a prior order granting leave, Plaintiff is proceeding in forma pauperis. See ECF No. 27 at PageID #109, Lyndon v. United States, 2020 WL 3405530, at *2 (D. Haw. 2020).

For the reasons set forth below, the FAC is DISMISSED without leave to amend.

II. STANDARDS OF REVIEW

The court must screen the pleading for each civil action commenced in forma pauperis under 28 U.S.C. § 1915(a). District courts are required to sua sponte dismiss a complaint or claim that is "frivolous or malicious[,] . . . fails to state a claim on which relief may be granted[,] or . . . seeks monetary relief against a defendant who is immune from such relief." 28 U.S.C. § 915(e)(2)(B); see Lopez v. Smith, 203 F.3d 1122, 1126-27 (9th Cir. 2000) (en banc) (stating that 28 U.S.C. § 1915(e) "not only permits but requires" the court to sua sponte dismiss an in forma pauperis complaint that fails to state a claim).

Plaintiff is appearing pro se; consequently, the court liberally construes the FAC. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987) (per curiam). The court also recognizes that "[u]nless it is absolutely clear that no amendment can cure the defect . . . a pro se litigant is entitled to notice of the complaint's deficiencies and an opportunity to amend prior to dismissal of the action." Lucas v. Dep't of Corr.,66 F.3d 245, 248 (9th Cir. 1995); see also Crowley v. Bannister, 734 F.3d 967, 977-78 (9th Cir. 2013).

III. BACKGROUND

The relevant factual and procedural background of this case is set forth in two prior orders: (1) a June 19, 2020 order dismissing Plaintiff's Complaint and granting leave to amend the FTCA claims, ECF No. 27 at PageID #111-14, 2020 WL 3405530 at *2-3 (D. Haw. June 19, 2020) ("June 19 Order"); and (2) a September 1, 2020 order denying a stay of this action pending resolution of outstanding Freedom of Information Act ("FOIA") requests, ECF No. 35 at PageID #195-98. The court only recites the facts necessary to provide context to the present Order.

The June 19 Order explained that Plaintiff's tort claims "all fall within the FTCA's statutory exception to waiver of sovereign immunity," but that this exception could be set aside if Plaintiff amends his claims to allege facts showing that "Defendant SEC officials are . . . 'investigative or law enforcement officers' as defined by 28 U.S.C. § 2680(h)." ECF No. 27 at PageID #120. The June 19 Order further explained that § 2680(h) defines investigative or law enforcement officers as those who are "empowered by law to execute searches, to seize evidence, or to make arrests for violations of Federal law." Id. at PageID #129.

To this end, the FAC alleges¹ that around March 2011, "the SEC opened an 'order of investigation' to search for wrongdoing [by Plaintiff's company], including criminal fraud." FAC ¶ 22, ECF No. 36 at PageID #205; see Ex. A, ECF No. 36-1. The FAC identifies Shau as "a[n] [SEC] staff accountant," Kirka as "an [SEC] investigator and attorney," and Matteson as "a litigating attorney for [the] SEC" in Lyndon. FAC ¶¶ 24, 44, ECF No. 36 at PageID #206, 209. In 2012, "Shau, Kirka and others were present to receive documented testimony from [Plaintiff's] company's auditors." Id. ¶ 38, ECF No. 36 at PageID #208. In September 2013, the SEC filed a civil complaint "alleging fraud" against Plaintiff, "threaten[ing] [Plaintiff] with criminal prosecution, [and] informing him that he was under criminal investigation." Id. ¶ 44, 46, ECF No. 36 at PageID #209-10. "[I]n late 2014, the FBI served Lyndon with a subpoena to appear before a grand jury," but after receiving a letter from Plaintiff, "the US Attorney cancelled[that] appearance" and "no charges were filed." Id. ¶ 89, ECF No. 36 at PageID #218.

Sometime after the Lyndon judgment was entered, Plaintiff submitted several FOIA requests to the SEC for the "full record of the auditors' testimony, the audit work and the relevant financial information." Id. ¶ 92, ECF No. 36 at PageID #219. Excerpts of the auditors' testimony show that "the SEC had received 'work papers', including financial records and documents, . . . on July 6, 2012." Id. ¶ 94, ECF No. 36 at PageID #219.

IV. DISCUSSION

For the reasons discussed below, the court finds that the FAC fails to allege sufficient facts showing that the SEC Defendants are investigative or law enforcement officers as defined by § 2680(h), and thus, Plaintiff's FTCA claims are barred by sovereign immunity.

A. Legal Standard

Unless waived, claims against the United States, federal agencies, and federal officials in their official capacities are barred by sovereign immunity. See FDIC v. Meyer, 510 U.S. 471, 475 (1994) ("Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit."); see also Hodge v. Dalton, 107 F.3d 705, 707 (9th Cir. 1997) ("The doctrine of sovereign immunity applies to federal agencies and to federal employees acting within their officialcapacities."). A waiver of sovereign immunity must be "unequivocally expressed"; and any limitations and conditions upon the waiver "must be strictly observed and exceptions thereto are not to be implied." Lehman v. Nakshian, 453 U.S. 156, 160-61 (1981) (citations omitted). And Plaintiff, being "[t]he party who sues the United States[,] bears the burden of pointing to such an unequivocal waiver of immunity." Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983).

Congress has waived the United States' sovereign immunity under the FTCA for "injury arising out of the negligent or wrongful conduct of any federal employee acting within the scope of the employee's employment." DaVinci Aircraft, Inc. v. United States, 926 F.3d 1117 1121 (9th Cir. 2019) (citing 28 U.S.C. §§ 1346(b)(1), 2674, 2679(b)(1)).² The FTCA does not "authorize suits against [a] federal agency." 28 U.S.C. § 2679(a). See also FDIC v. Craft, 157 F.3d 697, 706 (9th Cir. 1998) ("The FTCA is the exclusive remedy for tortious conduct by the United States, and it only allows claims against the United States. Although such claims can arise from the acts or omissions of United States agencies . . . , an agency itself cannot be sued under the FTCA."); Dichter-Mad Family Partners, LLP v. United States, 709 F.3d 749, 761 (9th Cir. 2013) (quotingCraft). Thus, where a federal official was acting within the scope of his office or employment, "the United States shall be substituted as the party defendant." 28 U.S.C. § 2679. Moreover, the FTCA waives sovereign immunity only for damages claims against the United States; the statute does not subject the United States to claims for injunctive relief. See Westbay Steel, Inc. v. United States, 970 F.2d 648, 651 (9th Cir. 1992).

But Congress also carved out exceptions to waiver under the FTCA for certain torts. Among other things, the FTCA expressly retains the United States' sovereign immunity for claims "arising out of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights." 28 U.S.C. § 2680(h). The phrase "arising out of" is interpreted broadly to include all injuries that are dependent upon one of the enumerated torts having been committed. United States v. Shearer, 473 U.S. 52, 55 (1985) ("Section 2680(h) does not merely bar claims for assault or battery; in sweeping language it excludes any claim arising out of assault or battery."); see DaVinci Aircraft, Inc., 926 F.3d at 1123 ("[I]f the governmental conduct underlying a claim falls within an exception outlined in section 2680, the claim is barred, no matter how the tort is characterized."); Pauly v. USDA, 348 F.3d 1143, 1151-52 (9th Cir. 2003) (noting that the FTCA did not waive sovereign immunity for misrepresentation and fraudclaims); Kim v. United States, 940 F.3d 484, 492 (9th Cir. 2019) (finding fraudulent concealment claim barred under the FTCA as "arising out of . . . misrepresentation or deceit") (quoting 28 U.S.C. § 2680(h)); Stanford v. Clayton, 2018 WL 8963448, at *2 (D.D.C. July 5, 2018) ("[C]laims for malicious prosecution and abuse of process arising from the acts of SEC officials []are barred under the FTCA."); Daisley v. Riggs Bank, NA, 372 F. Supp. 2d 61, 77-78 (D.D.C. 2005) (dismissing civil conspiracy claim based on tortious interference with contract rights as barred by the FTCA's intentional-tort exception to waiver of sovereign immunity).

Congress limited applicability of this carve-out by providing that the intentional-tort exception does not apply (i.e., the United States' sovereign immunity is waived) to claims arising out of "assault, battery, false imprisonment, false arrest, abuse of process, or malicious prosecution" committed by "investigative or law enforcement officers." 28 U.S.C. § 2680(h). "For the purpose of this subsection, 'investigative or law enforcement officer' means any officer of the United States who is empowered by law to execute searches, to seize evidence, or to make arrests for violations...