Van De Grift v. State ( 2013 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2013 UT 11IN THE
SUPREME COURT OF THE STATE OF UTAH
JON VAN DE GRIFT, et al.,
Appellants,
v.
STATE OF UTAH, et al.,
Appellees.
No. 20110994
Filed March 5, 2013
Third District, Salt Lake
The Honorable Paul G. Maughan
No. 110909827
Attorneys:
Marcus R. Mumford, Salt Lake City, for appellant
John E. Swallow, Att’y Gen., Peggy E. Stone, Asst. Att’y Gen.,
Salt Lake City, for appellee
ASSOCIATE CHIEF JUSTICE NEHRING authored the opinion of the
Court, in which CHIEF JUSTICE DURRANT, JUSTICE DURHAM,
JUSTICE PARRISH, and JUSTICE LEE joined.
ASSOCIATE CHIEF JUSTICE NEHRING, opinion of the Court:
INTRODUCTION
¶1 Appellants, who were defrauded by an individual on parole
from a Utah prison, appeal the district court’s determination that the
Governmental Immunity Act renders the State immune from
Appellants’ claims alleging negligent supervision of the parolee. We
affirm.
BACKGROUND
¶2 Appellants filed a complaint in district court alleging that
“[t]he multi-state Madison Group [Ponzi] scheme, which defrauded
Plaintiffs of over $27,000,000 . . . , was masterminded by Utah
[convict] and parolee Richard Higgins while he was on parole . . . . ”
Mr. Higgins’s conditions of parole prohibited him from leaving the
state of Utah, handling other people’s money, or being self-
VAN DE GRIFT v. STATE
Opinion of the Court
employed. According to Appellants’ complaint, “The State . . . did
not adequately supervise Higgins, and, as a result, he was able to
travel extensively, take in and defraud investors of millions of
dollars, and execute a multi-state real estate investing scheme
through . . . companies he owned and operated, that turned out to be
a $60,000,000 . . . Ponzi scheme.”
¶3 Appellants’ complaint alleged causes of action against the
State for negligent supervision, gross negligence, failure to warn,
and negligent misrepresentation. The State filed a motion to dismiss
based on governmental immunity. Utah Code section 63G-7-301(4)
waives governmental immunity from suit if the injury is caused “by
a negligent act or omission of an employee committed within the
scope of employment.” The State relied on subsection (5) of the
Governmental Immunity Act, which lists exceptions to that waiver
“if the injury arises out of, in connection with, or results from . . .
deceit . . . [or] a misrepresentation by an employee whether or not it
is negligent or intentional.”1
¶4 Appellants responded that because immunity is an
affirmative defense, it was procedurally inappropriate to raise it in
a motion to dismiss. They further argued that the deceit exception
to immunity should apply only to deceit by a government employee,
not to deceit by a third party. Appellants conceded, however, that
the State was immune from the cause of action for negligent
misrepresentation by a State employee.
¶5 The district court granted the State’s motion to dismiss. The
court determined that the causes of action for negligent supervision,
gross negligence, and failure to warn arose out of Mr. Higgins’s
deceit. Appellants filed a timely notice of appeal. We have
jurisdiction pursuant to Utah Code section 78A-3-102(3)(j).
1
UTAH CODE § 63G-7-301(5)(b), (f). The State also argued that it
was immune under the exception for injury arising out of “the
incarceration of any person in any state prison, county or city jail, or
other place of legal confinement.” Id. § 63G-7-301(5)(j). The district
court did not reach this issue and, although the State briefed it as an
alternate ground for affirming the dismissal of Appellants’
complaint, our analysis under the deceit exception renders it
unnecessary for us to address the incarceration exception.
2
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STANDARD OF REVIEW
¶6 “A trial court’s decision to dismiss a case based on gov-
ernmental immunity is a determination of law that we afford no
deference. . . . Because the propriety of a 12(b)(6) dismissal is a
question of law, we give the trial court’s ruling no deference and
review it under a correctness standard.”2
ANALYSIS
¶7 Appellants argue that the district court erred when it rejected
their arguments that subsection (b) of the Governmental Immunity
Act does not apply to their case. They also argue that the district
court erred when it granted a motion to dismiss based on an
affirmative defense. We affirm the district court’s dismissal of
Appellants’ complaint.
I. THE STATE IS IMMUNE UNDER THE UTAH
GOVERNMENTAL IMMUNITY ACT’S
DECEIT EXCEPTION
¶8 “Generally, to determine whether a governmental entity is
immune from suit under the [Governmental Immunity] Act, we
apply a three-part test, which assesses (1) whether the activity
undertaken is a governmental function; (2) whether governmental
immunity was waived for the particular activity; and (3) whether
there is an exception to that waiver.”3 The only issue in dispute in
this case is whether Appellants’ claims fall within an exception to the
waiver. Specifically, the parties dispute whether the exception listed
in subsection (b) applies. Subsection (b) provides an exception to the
waiver of governmental immunity for any “injury [that] arises out
of, in connection with, or results from . . . assault, battery, false
imprisonment, false arrest, malicious prosecution, intentional
trespass, abuse of process, libel, slander, deceit, interference with
contract rights, infliction of mental anguish, or violation of civil
rights.”4 Appellants argue that the trial court misinterpreted the
statute under plain language analysis, principles of statutory
2
Hall v. Utah State Dep’t of Corr., 2001 UT 34, ¶ 11, 24 P.3d 958(internal quotation marks omitted).
3
Blackner v. State, 2002 UT 44, ¶ 10, 48 P.3d 949.
4
UTAH CODE § 63G-7-301(5)(b) (emphasis added).
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VAN DE GRIFT v. STATE
Opinion of the Court
construction, and controlling precedent. We address these issues in
turn.
A. The Plain Language of the Statute Applies the
Exception to Third-Party Tortfeasors
¶9 “When interpreting a statute, we look first to its text.”5
When possible, we “carry out the legislative purpose of the statute
as expressed through the enacted text.”6 This is not the first time we
have had occasion to analyze Utah Code section 63G-7-301(5)(b).
Cases from this court interpreting subsection (b) have uniformly
held that the plain language of the statute forecloses Appellants’
argument that the intentional torts listed must be committed by an
employee of the State. In Ledfors v. Emery County School District, a
minor complained to his school that “two fellow students had
assaulted him several times.”7 Although the principal indicated he
would handle the problem, the minor was left unsupervised and the
two students “viciously beat” him.8 We held that the government
was immune from suit because subsection (b) “plainly does not
allow suit against a governmental entity if the underlying ‘injury . . .
arises out of’ an assault or battery.”9 Although the battery was
committed by two students, not government employees, the court
held that “the employment status of the assailant is irrelevant to the
question of immunity.”10 It reasoned that “[t]he determinant of
immunity is the type of conduct that produces the injury, not the
status of the intentional tort-feasor whose conduct is the immediate
cause of the injury.”11
¶10 Taylor ex rel. Taylor v. Ogden City School District, decided
three years after Ledfors, also dealt with the assault or battery
5
Richards v. Brown, 2012 UT 14, ¶ 23, 274 P.3d 911.
6
Id.7
849 P.2d 1162, 1163 (Utah 1993).
8
Id.9
Id. at 1165 (alteration in original).
10
Id. at 1166.
11
Id.
4
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exception in subsection (b).12 In that case, a middle school student
pushed another student’s hand through a window. The plaintiff
sued the school for negligently failing to install safety glass in the
window.13 The court again held that the governmental entity was
immune under subsection (b). It cited Ledfors to explain that the
exception “places no importance on the status of the assailant.”14
Appellants in this case place great weight in the Taylor dissent,
which found the statutory language ambiguous and used legislative
history to conclude that Ledfors was wrongly decided.15 Indeed, in
dissenting, concurring, and majority opinions, this court has
repeatedly criticized the broad scope of subsection (b).16 The
legislature considered, but never passed, an amendment narrowing
12
927 P.2d 159, 163 (Utah 1996).
13
Id. at 160.
14
Id. at 164.
15
Id. at 167 (Durham, J., dissenting) (“The legislative history of the
Act, viewed in the context of its purposes, strongly suggests that the
most reasonable interpretation of [subsection (b)] is that the
governmental entity retains immunity only where the injury is the
result of an assault or battery committed by a government employee.”).
16
See, e.g., Sanders v. Leavitt, 2001 UT 78, ¶ 40, 37 P.3d 1052(Durham, J., concurring) (“I feel constrained by stare decisis to join
in the result of Part B of the majority’s analysis. I wish to note,
however, what I consider to be an ongoing problem created by this
court’s construction of [subsection (b)], one that I believe should be
addressed by the legislature.”); Taylor, 927 P.2d at 166 (Durham, J.,
dissenting) (“If the ‘arises out of’ language [in subsection (b)] applies
to any private individual, its very breadth could lead to absurd and
unfair results.”); Malcolm v. State, 878 P.2d 1144, 1147 (Utah 1994)
(“In holding that the state defendants are immune from suit [under
subsection (b)], we are not unmindful of the grievous wrong done
to plaintiff, nor do we discount the severity of her resulting physical
and emotional injuries. Indeed, on these facts, the immunity from
suit imposed by the legislature may seem unconscionably broad.
Nevertheless, the remedy lies with that same legislature.” (internal
quotation marks omitted)).
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VAN DE GRIFT v. STATE
Opinion of the Court
the scope of this exception.17 We therefore hold that under the broad
scope of subsection (b), the deceit exception immunizes the
government from suit even if the tortfeasor is not a government
employee.
¶11 We find unpersuasive Appellants’ argument that this case is
distinguishable from our precedent analyzing subsection (b)’s
assault and battery exceptions because the injury here arose from
deceit. Subsection (b) lists “assault, battery, false imprisonment,
false arrest, malicious prosecution, intentional trespass, abuse of
process, libel, slander, deceit, interference with contract rights,
infliction of mental anguish, [and] violation of civil rights.”18 The
distinction between the first two intentional torts on that list (assault,
battery) and the tenth (deceit) does not affect our plain language
analysis of the statute. The assault, battery, and deceit exceptions all
immunize the government from suit even if the tortfeasor is not a
government employee.
B. Applying the Deceit Exception to Third-Party Tortfeasors
Does not Violate Rules of Statutory Construction
¶12 Both parties believe that subsection (5)(f) of the
Governmental Immunity Act supports their interpretation of
subsection (b).19 The subsection (f) exception applies when the
injury arises out of “a misrepresentation by an employee whether or
not it is negligent or intentional.” The State provides two different
definitions of “deceit” in its brief. First, citing Bennett v. Jones, Waldo,
Holbrook & McDonough,20 it contends that “Plaintiffs do not dispute
that their injuries resulted from the tort of deceit,” which consists of
five elements:
17
See Taylor, 927 P.2d at 169 n.7 (Durham, J., dissenting). In 1995,
the Utah Senate introduced a bill that would have added language
to the governmental immunity statute stating that “except that this
exception does not apply when . . . the assault or battery was not
committed by an employee of a governmental entity” but the House
never voted on the bill before the end of the session. Id.
18
UTAH CODE § 63G-7-301(5)(b).
19
Id. § 63G-7-301(5)(b), (f).
20
2003 UT 9, ¶ 74, 70 P.3d 17.
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1. A false representation of fact made by the
defendant[.]
2. Knowledge or belief of the defendant that the
representation was false (often called scienter).
3. An intention to induce the defendant to act or
refrain from acting in reliance.
4. Justifiable reliance by plaintiff upon the
representation in taking action or in refraining from
it.
5. Damage suffered by plaintiff [as a result].21
Later in its argument, however, the State cites the Oxford English
Dictionary to argue that “[d]eceit is ‘the action or practice of
deceiving someone by concealing or misrepresenting the truth.’”
The State then contends that under this definition, subsection (f)’s
exception for misrepresentation by a government employee would
be superfluous if subsection (b) covers deceit by government
employees only. Appellants reply that under the dictionary
definition the State provides, “the State could never be sued for
negligence that could somehow be tied to the misrepresentations of
a non-governmental employee.”
¶13 We clarify that subsection (b) contemplates only the
intentional tort of deceit. It appears in a list of other intentional torts.
Furthermore, Rapp v. Salt Lake City analyzed the deceit exception in
subsection (b) and found immunity because a “review of plaintiff’s
complaint compels a conclusion that it is a tort action, alleging
deceit.”22 Jones, Waldo, which set out the elements in the intentional
tort of deceit, quoted Tenneco Oil Co. v. Joiner.23 Tenneco Oil examines
the Restatement (Second) of Torts and Prosser, the Law of Torts to
21
Id. (alterations in original) (citation omitted).
22
527 P.2d 651, 655. The court quoted section 525 of the
Restatement (First) of Torts to define deceit: “One who fraudulently
makes a misrepresentation of fact, opinion, intention or law for
the purpose of inducing another to act [or] refrain from action in
reliance thereon in a business transaction is liable to the other for
the harm caused to him by his justifiable reliance upon the
misrepresentation.” Id.23
2003 UT 9, ¶ 74.
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VAN DE GRIFT v. STATE
Opinion of the Court
clarify that there is a difference between “[f]raud or deceit, in an
intentional sense” and “negligent misrepresentation.”24 In the
Governmental Immunity Act, subsection (f) is broader than
subsection (b). Subsection (f) covers misrepresentation by a
government employee, even if it is negligent or does not amount to
deceit. Deceit in subsection (b) refers to the intentional tort of deceit,
not any action that could colloquially be described as deceitful.
¶14 While this statutory construction is required by the text, it
leads to some anomalous results in application that are worth
noting. For one thing, the statute as written—immunizing all deceit
but only some misrepresentation—puzzlingly affords greater
immunity for the more culpable misconduct. That seems backwards.
And even if that anomaly could be explained—e.g., by the notion
that more culpable conduct might predictably cause greater harm
and thus implicate a greater need to minimize governmental
liability—the statute as written implicates another anomaly that is
even more troubling: It retains immunity for employee
misrepresentations, but not for non-employee ones.
¶15 We see no rational policy basis for this application of the
Governmental Immunity Act. It cannot be explained by any
difference in the degree of harm, as the employee and non-employee
cases both involve the same misrepresentation (and thus presumably
the same harm). The only difference is the identity of the underlying
tortfeasor, and it seems backward to provide immunity in the
circumstance where the government retains greater control (over its
employees) but not where its control is minimal (as with non-
employees).
¶16 These anomalies do not rise to the level of absurdities
justifying a decision to override the statutory text. But they are
sufficiently troubling that they seem worth flagging for
consideration by the legislature in the event it sees fit to revisit the
statute.
24
Tenneco Oil Co. v. Joiner, 696 F.2d 768, 773 (10th Cir. 1982).
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C. The Analysis of the Permit Exception in Francis v. State
is Distinguishable
¶17 Appellants next contend that Francis v. State,25 which applied
a separate subsection of the Governmental Immunity Act, compels
the conclusion that the status of the tortfeasor matters.
¶18 In Francis, the Utah Division of Wildlife Resources (DWR)
classified a bear that disrupted a campsite located on federal land as
a “Level III nuisance” but gave up searching for it without alerting
the people at the campsite of the danger.26 When the bear killed a
boy at the campsite, his parents sued the State for negligence. The
DWR argued that it was immune from suit under Utah Code section
63G-7-301(5)(c), which provides that governmental entities retain
immunity “if the injury arises out of, in connection with, or results
from . . . the issuance, denial, suspension, or revocation of, or by the
failure or refusal to issue, deny, suspend, or revoke, any permit,
license, certificate, approval, order, or similar authorization.” The
State argued the permit exception applied because the boy’s death
“arose out of the State’s negligent failure to ask the [United States
Forest Service] to close the site where the attack occurred.”27
¶19 The Francis court conducted a plain language analysis and
concluded that “to fall within the permit exception, the governmental
entity claiming immunity must have either (a) issued, denied,
suspended, or revoked or (b) failed or refused to issue, deny,
suspend, or revoke” a permit.28 Appellants argue that because in
Francis the entity that issued the permit mattered, the entity that
commits the intentional tort should also matter. But Francis
specifically distinguished its subsection (c) permit analysis from case
law analyzing subsection (b).29 Furthermore, Francis explained that
“the federal government had exclusive control over any authorization
to use the campsite in question.”30 “[T]he federal government was
the only entity that had the authority to issue, deny, suspend, or
25
2010 UT 62, 248 P.3d 44.
26
Id. ¶ 6.
27
Id. ¶ 8.
28
Id. ¶ 15.
29
Id. ¶ 17.
30
Id. (emphasis added).
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VAN DE GRIFT v. STATE
Opinion of the Court
revoke any permit . . . or similar authorization related to the
campground . . . [and] the State did not perform any act that falls
within the scope of the permit exception.”31 The negligence alleged
in Francis was therefore completely unrelated to the permit
exception. In contrast, the complaint in this case alleges that absent
the State’s negligence, no deceit would have occurred.
¶20 Finally, we acknowledge that some subsections of the
Governmental Immunity Act contemplate injury caused only by
government actors, while others do not. For example, subsection (u)
applies to any injury that arises out of “unauthorized access to
government records, data, or electronic information systems by any
person or entity,” clearly contemplating injuries caused by non-
employees.32 On the other hand, subsection (f) explicitly applies to
misrepresentation “by an employee.”33 Subsections (b) and (c) are
not so explicit. But Francis and Ledfors are reconcilable because an
exception for permits and authorizations clearly contemplates
government action while an exception for assault, battery, or deceit
does not.
D. Subsection (b) Applies Even Though Appellants’
Causes of Action Allege Negligence, not Deceit
¶21 Appellants next argue that none of the waiver exceptions
apply because they “are suing for negligent supervision and failure
to warn,” not deceit, and the Governmental Immunity Act “does not
immunize the State from its negligence simply because there may be
another proximate cause of the harm suffered.” In Ledfors, we found
“no merit” to the “argument that the injuries alleged . . . arose from
the failure to supervise rather than from a battery.”34 And we have
consistently “rejected claims that have reflected attempts to evade
these statutory categories by recharacterizing the supposed cause of
the injury.”35 Taylor held that subsection (b)’s “language demands
only that there be some causal relationship between the injury and
31
Id. ¶ 16.
32
UTAH CODE § 63G-7-301(5)(u).
33
Id. § 63G-7-301(5)(f).
34
Ledfors, 849 P.2d at 1166.
35
Id.; see also Taylor, 927 P.2d at 163.
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the risk provided for.”36 Subsection (b) applies in this case because,
but for Mr. Higgins’s deceit, Appellants’ injuries would not have
occurred.37
¶22 We also reject Appellants’ contention that Doe v. Arguelles38
“recogniz[ed] the viability of claims against the State for negligent
supervision of a parolee” without restriction. That case nowhere
mentions the assault or battery exceptions, nor was an argument
addressing those exceptions presented in the parties’ briefs. Malcolm
v. State, on the other hand, established immunity under the assault
or battery exceptions in a case alleging negligent supervision of a
parolee.39
II. THE DISTRICT COURT DID NOT ERR WHEN IT
GRANTED THE STATE’S MOTION TO DISMISS
¶23 Finally, Appellants argue that the dismissal of their
complaint on the basis of governmental immunity was untimely.
The court must “accept[] the factual allegations in the complaint as
true” when it determines or reviews a motion for judgment on the
pleadings.40 And “[i]mmunity is an affirmative defense which must
be proved by the defendant.”41 But “[i]n some instances . . . the
existence of the affirmative defense may appear within the
complaint itself.”42 In their complaint, Appellants alleged that the
parolee “defrauded” them. As we explained above, “fraud or deceit,
in an intentional sense,” consists of five elements that together
36
927 P.2d at 163 (internal quotation marks omitted).
37
See id. (“In this case, there is undoubtedly ‘some’ causal
relationship between Zachary’s injury and Trenton’s assault upon
him. But for the assault, Zachary’s injuries would not have
occurred.”).
38
716 P.2d 279 (Utah 1985).
39
878 P.2d 1144, 1146–47 (Utah 1994).
40
Moss v. Parr Waddoups Brown Gee & Loveless, 2012 UT 42, ¶ 3, 285
P.3d 1157 (internal quotation marks omitted).
41
Nelson ex rel. Stuckman v. Salt Lake City, 919 P.2d 568, 574 (Utah
1996).
42
Tucker v. State Farm Mut. Auto. Ins. Co., 2002 UT 54, ¶ 8, 53 P.3d
947 (citing as an example a statute of limitations defense).
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VAN DE GRIFT v. STATE
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establish a cause of action in tort.43 Although neither the complaint
nor the response sets out these elements, the complaint’s explanation
of Mr. Higgins’s Ponzi scheme satisfies the elements of deceit. And
when the State responded that Appellants’ injuries arose out of
deceit, Appellants’ response was that the deceit exception in
subsection (b) was inapplicable to third parties, not that no deceit
occurred. Furthermore, on appeal, Appellants concede “the fact that
Appellants lost their investment in part due to Higgins’ deceit.” The
district court did not err when it determined, based on the
complaint, that the injuries alleged arose out of deceit and the State
was therefore immune.
CONCLUSION
¶24 Under the Governmental Immunity Act, the State is immune
from suit where the injury arises out of deceit. The complaint in this
case made clear that Appellants’ injury was the result of a third-
party’s deceit. We therefore affirm the district court’s dismissal of
Appellants’ complaint.
43
Supra ¶ 13 (“Tenneco Oil examines the Restatement (Second) of
Torts and Prosser, the Law of Torts to clarify that there is a difference
between ‘[f]raud or deceit, in an intentional sense’ and ‘negligent
misrepresentation.’”).
12