Chapman v. United States

In the United States Court of Federal Claims
No. 12-183L
(Filed: January 30, 2017)
)
CLARENCE CHAPMAN, et al., )
)
Plaintiffs, ) Motion to Amend Complaint or
) Substitute Real Party in Interest;
v. ) Invalid Assignment; Statute of
) Limitations; Relation-back; RCFC 15;
THE UNITED STATES, ) RCFC 17
)
Defendant. )
)
Stephen C. Smith, Boise, ID, with whom was Dane A. Bolinger, Boise, ID, for
plaintiffs.
Terry M. Petrie, Environment and Natural Resources Division, United States
Department of Justice, Denver, CO, for defendant.
ORDER ON PLAINTIFFS’ MOTION FOR LEAVE TO FILE A SECOND
AMENDED COMPLAINT
Pending before the court is plaintiffs’ motion (ECF No. 54), filed September 30,
2016, for leave to file a second amended complaint in the above-captioned Fifth
Amendment takings case pursuant to Rule 15 of the Rules of the Court of Federal
Claims (“RCFC”). Plaintiffs seek to correct minor factual errors and technicalities and
add a legal basis that plaintiffs contend will allow them to recover attorneys’ fees and
other expenses. Plaintiffs also seek to substitute Debra Rogers as a party and substitute
her for Clarence E. Chapman as a plaintiff in Claim VI of the complaint under RCFC
15, 17, or 24. Defendant the United States (“the government”) does not object to
plaintiffs’ proposed amendments but opposes the addition or substitution of Ms. Rogers.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This case arises from a fire that started in July 2007 in Idaho (the “Poe Cabin
Fire”). Compl. ¶ 1. Plaintiffs include Clarence E. Chapman and Helen Ann Chapman
and other landowners in Idaho who all allege that a backfire set by the government,
intended to control the spread of the Poe Cabin Fire, burned their real and personal
property. Plaintiffs claim that the permanent destruction of their property requires the
government to provide just compensation. Compl. ¶¶ 41, 48, 55, 63, 70, 80; First Am.
Compl. ¶¶ 46, 53, 60, 68, 75, 85; Proposed Second Am. Compl. ¶¶ 47, 54, 61, 69, 76,
83.
In addition to claims related to the alleged taking of property owned by Clarence
and Helen Chapman, Mr. Chapman in Claim VI of the complaint has been seeking just
compensation for the alleged taking of property that belonged to Debra Rogers. 1 In
2011, Ms. Rogers sold and transferred to Mr. Chapman “any and all claims, demands,
and cause(s) of action of any kind whatsoever . . . against the United States” related to
the 2007 fire. Def.’s Resp. Ex. 1 (Assignment of Claim); Pls.’ Reply Ex. A at 1-2
(same). The assignment agreement further stated that only Mr. Chapman “may in his
own name and for his own benefit prosecute, collect, settle, compromise, and grant
releases on said claim as he in his sole discretion deems advisable.” Id. In exchange
for the assignment, Mr. Chapman paid Ms. Rogers and her then-husband, Richard
Caciano, $500 and promised to pay them 40 percent of the net proceeds from any suit or
settlement for damages based on the assignment. Pls.’ Reply Ex. A at 3.
The alleged taking and Mr. Chapman’s assignment are identified in the original
complaint filed in this court on March 20, 2012 and in the first amended complaint.
Compl. ¶¶ 72-81; First Am. Compl. ¶¶ 77-86. The alleged value of Ms. Rogers’s
timber and property taken by the government is $591,788. Compl. ¶ 81; First Am.
Compl. ¶ 86.
In October 2012, the court granted the government’s motion to dismiss the case
for failure to state a claim upon which relief can be granted pursuant to RCFC 12(b)(6).
See Chapman v. United States, 107 Fed. Cl. 47 (2012). The decision did not address the
assignment. See id. Plaintiffs appealed. See ECF No. 18. In October 2013, the Federal
Circuit granted the government’s unopposed motion to vacate the court’s decision and
remand the case in light of the Federal Circuit’s decision in TrinCo Inv. Co. v. United
States, 722 F.3d 1375 (Fed. Cir. 2013). See ECF No. 19 (motion, decision, and
mandate).
In its answer to the complaint (ECF No. 27), filed January 24, 2014 (more than
six years after the alleged taking), the government asserted that Claim VI was barred by
the Anti-Assignment Act, 31 U.S.C. § 3727. Plaintiffs filed a first amended complaint
on April 15, 2015 (ECF No. 37-1). Plaintiffs disputed that the Anti-Assignment Act
barred Claim VI and maintained the claim in their first amended complaint. The
1
Counsel for plaintiffs stated at oral argument that Ms. Rogers was and remains the owner of
the land where the alleged taking occurred.
2
government reiterated its Anti-Assignment Act defense in its answer to the first
amended complaint (ECF No. 39), filed April 29, 2015.
In a joint status report (ECF No. 52), filed August 26, 2016, after the parties
completed fact discovery and expert depositions, the government stated that it would
file a motion for summary judgment with regard to Claim VI and Mr. Chapman’s right
to maintain the claim related to Ms. Rogers’s property on the grounds that the claim is
barred by the Anti-Assignment Act. Plaintiffs’ counsel stated that he believed the
assignment “can be effectively unwound by the Cacianos and Chapman agreeing to
rescind that agreement” and that “[t]he procedural aspect of . . . Debra [Rogers] not
being a named party to this litigation could be remedied by amending the Complaint . . .
.” Id. at 2.
On September 30, 2016, plaintiffs filed their motion for leave to file a second
amended complaint, in which Ms. Rogers is identified as a plaintiff. Plaintiffs argue
that Ms. Rogers should be added as a party under Rule 15 of the Rules of the Court of
Federal Claims (“RCFC”) or substituted as the real party in interest under Rule 17.
Plaintiffs also argue that she should be allowed to intervene under Rule 24. The
government filed its opposition (ECF No. 59) on November 1, 2016. Plaintiffs filed
their reply in support of the motion (ECF No. 62) on November 28, 2016 and
supplemental briefing was completed on January 23, 2017 (ECF No. 66).
Oral argument was heard on January 25, 2017.
II. LEGAL STANDARDS
A party may amend its pleading pursuant to RCFC 15(a)(2) with the court’s
leave. RCFC 15(a)(2) provides that “[t]he court should freely give leave when justice
so requires.” RCFC 15(c)(1)(B) states that “[a]n amendment to a pleading relates back
to the date of the original pleading when . . . the amendment asserts a claim or defense
that arose out of the conduct, transaction, or occurrence set out--or attempted to be set
out--in the original pleading.” The Federal Circuit has found that “[i]n the absence of
any apparent or declared reason—such as . . . futility of amendment, etc.—the leave
sought should, as the rules require, be ‘freely given.’” A & D Auto Sales, Inc. v. United
States, 748 F.3d 1142, 1158 (Fed. Cir. 2014) (quoting Foman v. Davis, 371 U.S. 178,
182 (1962)). This court has found that granting leave to amend a pleading would be
futile if the amended complaint would fail to state a claim upon which relief can be
granted, see Marchena v. United States, 128 Fed. Cl. 326, 330 (2016) (citing Kemin
Foods, L.C. v. Pigmentos Vegetales Del Centro S.A. de C.V., 464 F.3d 1339, 1354-55
(Fed. Cir. 2006); Meyer Grp., Ltd. v. United States, 115 Fed. Cl. 645, 650 (2014)), or if
the proposed amendment would fail for lack of jurisdiction or is “facially meritless and
frivolous,” Smith v. United States, 120 Fed. Cl. 455, 458 (2015) (quoting St. Paul Fire
& Marine Ins. Co. v. United States, 31 Fed. Cl. 151, 155 (1994)). A claim that is barred
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by the statute of limitations would be futile. See, e.g., Jackson v. United States, No.
2016-2253, 2016 WL 6518563, at *3 (Fed. Cir. Nov. 3, 2016) (per curiam) (affirming
denial of motion to amend the complaint where, because the plaintiff’s claims “were
either outside the Claims Court’s jurisdiction or time-barred, any amendments would
have been futile”).
Under RCFC 17(a)(1), “[a]n action must be prosecuted in the name of the real
party in interest.” RCFC 17(a)(3) provides that “[t]he court may not dismiss an action
for failure to prosecute in the name of the real party in interest until, after an objection,
a reasonable time has been allowed for the real party in interest to ratify, join, or be
substituted into the action.” After the real party in interest has been substituted, “the
action proceeds as if it had been originally commenced by the real party in interest.”
RCFC 17(a)(3). This court has found that RCFC 17(a) “applies not only to entire
actions, but also to separate claims within an action.” Holland v. United States, 62 Fed.
Cl. 395, 401 (2004) (citation omitted); see also Advanced Magnetics, Inc. v. Bayfront
Partners, Inc., 106 F.3d 11, 19-20 (2d Cir. 1997) (interpreting Rule 17 of the Federal
Rules of Civil Procedure).
III. DISCUSSION
For the reasons set forth below the court concludes that Ms. Rogers may be
substituted for Mr. Chapman as the real party in interest and that her claim will relate
back to the filing of the original complaint under RCFC 17(a). 2
The Federal Circuit has stated that RCFC 17(a) “sets forth the broad and general
principle that actions should be brought in the name of the real party in interest and that
courts should be lenient in permitting ratification, joinder, or substitution of that party.”
First Hartford Corp. Pension Plan & Tr. v. United States, 194 F.3d 1279, 1289 (Fed.
Cir. 1999). As noted above, RCFC 17(a)(3) provides that “[t]he court may not dismiss
an action for failure to prosecute in the name of the real party in interest until, after an
objection, a reasonable time has been allowed for the real party in interest to ratify, join,
or be substituted into the action” and after a real party in interest has been substituted,
“the action proceeds as if it had been originally commenced by the real party in
interest.” In determining whether to allow substitution or joinder of a real party in
interest under RCFC 17(a), this court has considered “1) whether the defendant will be
prejudiced, 2) whether the factual allegations of the complaint will change, and 3)
whether the defendant is aware of the relevant parties.” Holland, 62 Fed. Cl. at 401-02;
see also Textainer Equip. Mgmt. Ltd. v. United States, 115 Fed. Cl. 708, 716-17 (2014)
(denying request to substitute a real party in interest under RCFC 17(a) where plaintiffs
waited several months to move for substitution and relation back would “plac[e] a
2
Because the court concludes that substitution is proper under RCFC 17, the court does not
reach plaintiffs’ alternative arguments to amend the complaint under RCFC 15 or to allow for
intervention under RCFC 24.
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greater burden on the government to accommodate plaintiffs’ inability to resolve
questions of ownership which existed from the outset of this case”).
The government argues that substituting Ms. Rogers for Mr. Chapman should
not be permitted on the ground that a taking claim by Ms. Rogers is now time-barred
under the six-year statute of limitations set in 28 U.S.C. § 2501. According to the
government, allowing Ms. Rogers to be substituted as the real party in interest would
impermissibly circumvent the jurisdictional bar to her claim.
Plaintiffs argue in response that because it is not disputed that Ms. Rogers, as the
property owner, is the real party in interest, and because the government has known of
her property interest from the initiation of this lawsuit, the government is not prejudiced
by substituting Ms. Rogers for Mr. Chapman and her claim should proceed “as if it had
been originally commenced by the real party in interest.”
This court has consistently found that under RCFC 17(a) where an action is
“commenced by one who arguably has an interest in the enforcement of the claim and
the real party in interest is later brought into the litigation, the joinder or substitution of
the real party in interest relates back for limitations purposes to the date of the original
pleading.” Castle v. United States, 48 Fed. Cl. 187, 194 (2000), aff’d in part and rev’d
in part on other grounds, 301 F.3d 1328 (Fed. Cir. 2002); see also Textainer Equip.
Mgmt. Ltd. v. United States, No. 08-610C, 2013 WL 1984382 (Fed. Cl. May 15, 2013)
(citing Holland, 62 Fed. Cl. at 401); Holland v. United States, No. 95-524, 2005 WL
6115375, at *1-3 (Fed. Cl. May 12, 2005) (following Holland, 62 Fed. Cl. at 395, and
citing Castle); Am. Heritage Bancorp v. United States, 53 Fed. Cl. 723, 729 (2002)
(quoting Castle); S. California Fed. Sav. & Loan Ass’n. v. United States, 52 Fed. Cl.
444, 457 (2002) (“Because joinder or substitution [under RCFC 17(a)] has the same
effect [as] if the action had originally been commenced in the name of the real party in
interest, the new Plaintiff is automatically considered to have filed on time.” (quotation
marks and alterations omitted)); Bank of Am., FSB v. United States, 51 Fed. Cl. 500,
512-15 (2002) (quoting Castle), aff’d sub nom. Bank of Am., FSB v. Doumani, 495 F.3d
1366 (Fed. Cir. 2007); Admiral Fin. Corp., 51 Fed. Cl. 366, 369 (2002) (citing and
distinguishing Castle), aff’d, 329 F.3d 1372 (Fed. Cir. 2003). Correction in parties has
thus been permitted even after the statute of limitations governing the action has run.
To the extent that the government is arguing that the statute of limitations is always a
bar to substituting a real party in interest under RCFC 17(a), the argument is rejected.
As the above-cited cases demonstrate, this court has allowed substitution of the real
party in interest after the statute of limitations has run based on RCFC 17(a).
The real issue in this case therefore is whether substitution is appropriate where
the party seeks substitution of the real party in interest upon concluding that an
assignment is invalid. The court understands the government to be arguing that this
court has only allowed substitution of a real party in interest where a suit was filed on
5
behalf of the party seeking substitution or where the party seeking substitution was
directly affiliated with the parties that filed the suit. Plaintiffs argue that it does not
matter that the claim was not filed on behalf of Ms. Rogers, although she retained an
interest in the proceeds from any award, or that Ms. Rogers and Mr. Chapman do not
have an affiliated interest in the subject property. Plaintiffs contend that this case
should not be viewed any differently than Holland, 62 Fed. Cl. at 395, where following
invalidation of an assignment the real party in interest was joined as a plaintiff under
RCFC 17(a) and its claims related back to the date the original complaint was filed.
The court finds that substitution of the real party in interest where an assignment
is invalid may be permitted and that the claim may relate back to the filing of the
original complaint. In particular, the court finds that the purpose of Rule 17(a) is to
allow for substitution in order to avoid forfeitures of just claims. It is for this reason
that Rule 17(a)(3) provides that “[t]he court may not dismiss an action for failure to
prosecute in the name of the real party in interest until, after an objection, a reasonable
time has been allowed for the real party in interest to ratify, join, or be substituted into
the action.” In this connection, the court finds enlightening the Advisory Committee
Notes accompanying the 1966 amendments to Rule 17 of the Federal Rules of Civil
Procedure, upon which RCFC 17 is based. The Advisory Committee Notes state that
“[m]odern decisions are inclined to be lenient when an honest mistake has been made in
choosing the party in whose name the action is to be filed . . . It is intended to prevent
forfeiture . . . when an understandable mistake has been made.”
Thus, courts have allowed substitution of the real party in interest where the legal
effectiveness of an assignment is challenged, the assignment is set aside, and there is no
evidence of bad faith or an attempt to deceive the defendant. Where the original
complaint gives the defendant notice of the particulars of the claim and there are no
allegations of deceit or prejudice, the court sees no reason why substitution should not
be allowed. See Advanced Magnetics, 106 F.3d at 20-21.
Here, a review of the initial complaint and first amended complaint reveals that
the government was put on notice of the taking claim based on damage to Ms. Rogers’s
property at the outset of this litigation. Substituting Ms. Rogers for Mr. Chapman
would not change any of the factual allegations regarding the takings claim at issue.
The government concedes that it has been on notice of the claim associated with Ms.
Rogers’s property and would not be prejudiced by her being substituted as the real party
in interest.
The initial complaint and first amended complaint also put the government on
notice that Mr. Chapman was pursuing the claim based on an assignment in which he
would retain 60 percent of an award and Ms. Rogers would receive 40 percent. While
the assignment does not purport to authorize Mr. Chapman to bring a claim on Ms.
Rogers’s behalf, it is clear from the complaint that Ms. Rogers, as the property owner,
6
had an interest in the claim. The government does not assert, and there is no evidence
to suggest, that the assignment was made to deceive the government or that the claim
was a “bad faith” attempt to avoid the statute of limitations.
In these circumstances, the court finds that Ms. Rogers may be substituted as the
real party in interest and may pursue Claim VI in her own name. In addition, her claim
will relate back to the date of the original complaint under the express terms of RCFC
17(a).
IV. CONCLUSION
For the reasons discussed above, plaintiffs’ motion for leave to file a second
amended complaint is GRANTED. The plaintiff shall have until February 10, 2017 to
file a revised Second Amended Complaint to reflect the current status of Ms. Rogers’s
ownership of the property at issue in Claim VI of the complaint and to correct minor
factual errors and technicalities as agreed to by the government. The government shall
file a response to the Second Amended Complaint by March 13, 2017. The court will
also allow for reopening of discovery for the limited purpose of deposing Ms. Rogers.
The parties shall file a joint status report setting forth a proposed schedule for pre-trial
filings by May 8, 2017.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Senior Judge
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