United States District Court, S.D. New York
C.D. OF NYC INC., and D.J. OF AMERICA, INC., d/b/a DIAJEWEL OF AMERICA, Plaintiffs,
UNITED STATES POSTAL SERVICE, Defendant.
The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
OPINION and ORDER
Plaintiffs are diamond and jewelry merchants in Manhattan.
Plaintiffs claim that two of their own employees conspired with
two employees of the United States Postal Service ("U.S.P.S." or
"Postal Service") to convert plaintiffs' jewelry. According to
the complaint, plaintiffs' two employees would deliver packages
of jewelry, along with an original and one copy of a manifest, to
the Rockefeller Center Post Office, and the two Postal Service
employees would accept the packages on behalf of the Postal
Service. The Postal Service employees would indicate receipt of
all packages listed on the original manifest, and the plaintiffs'
employees would return that manifest to plaintiffs. However, on
the duplicate manifest kept in U.S.P.S. records, the Postal
Service employees would strike some of the packages and then
would keep those packages for themselves. This conduct allegedly
continued for nearly two years, resulting in approximately $1.5
million in jewelry never reaching plaintiffs' customers.
Plaintiffs bring claims for conversion, money had and received,
unjust enrichment, negligent supervision, concerted action, and
civil conspiracy. Plaintiffs seek $1.5 million in damages, plus
attorneys' fees, costs, expenses, and disbursements.
The U.S.P.S. moves to dismiss plaintiffs' claims for lack of subject matter jurisdiction pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(h)(3), and for failure to state a claim
upon which relief may be granted pursuant to Federal Rule of
Civil Procedure 12(b)(6). For the reasons that follow, the Postal
Service's motion is granted and plaintiffs' claims are dismissed.
I. 12(b)(1) and 12(b)(6) Standards
Federal Rule of Civil Procedure 12(b)(1) provides for the
dismissal of a complaint when the federal court lacks
jurisdiction over the subject matter. Because a lack of subject
matter jurisdiction renders other defenses moot, a court usually
gives first consideration to a motion to dismiss under Rule
12(b)(1). Friedman v. United States, No. 01 Civ. 7518 (LTS)
(RLE), 2003 WL 1460525 at *5 (S.D.N.Y. Mar. 18, 2003); Prestop
v. Hamlett, No. 99 Civ. 2747 (GBD), 2001 WL 363676 at *6
(S.D.N.Y. Apr. 12, 2001). Where the defendant challenges the
legal, and not the factual, sufficiency of the plaintiff's
jurisdictional allegations, the district court takes all facts
alleged in the complaint as true, and draws all reasonable
inferences in favor of the plaintiff. Robinson v. Gov't of
Malaysia, 269 F.3d 133, 140 (2d Cir. 2001) (citations omitted).
However, when jurisdictional facts are called into question,
id., "jurisdiction must be shown affirmatively, and that
showing is not made by drawing from the pleadings inferences
favorable to the party asserting it." Shipping Fin. Servs. Corp. v. Drakos,
140 F.3d 129, 131 (2d Cir. 1998) (citation omitted); Smith v. Potter,
208 F. Supp. 2d 415, 417 (S.D.N.Y. 2002) (citations omitted).
On review of a motion to dismiss for failure to state a claim
upon which relief can be granted, pursuant to Federal Rule of
Civil Procedure 12(b)(6), a court must accept the plaintiff's
allegations of fact as true, and must draw all reasonable
inferences in the plaintiff's favor. Potter,
208 F. Supp. 2d at 417 (citations omitted).
II. Sovereign Immunity, Consent to Suit, and Exceptions
Under the principle of sovereign immunity, "the United States
may not be sued without its consent and . . . the existence of
consent is a prerequisite for jurisdiction." Adeleke v. United
States, 355 F.3d 144, 150 (2d Cir. 2004) (citations omitted);
see Guccione v. United States, 670 F.Supp. 527, 529 (S.D.N.Y.
1987). Pursuant to the Federal Tort Claims Act ("FTCA"),
28 U.S.C. §§ 1346, 2671 et seq., the United States has consented
to suit under certain limited circumstances:
[The district courts] shall have exclusive
jurisdiction of civil actions on claims against the
United States, for money damages, . . . for injury or
loss of property, or personal injury or death caused
by the negligent or wrongful act or omission of any
employee of the Government while acting within the
scope of his office or employment, under
circumstances where the United States, if a private
person, would be liable to the claimant in accordance
with the law of the place where the act or omission
occurred. 28 U.S.C. § 1346(b)(1). As a further limitation to
the scope of consent, § 2680 of the FTCA enumerates
various exceptions to the waiver of sovereign
immunity, including § 2680(b) (the "Postal Matter
Exception") and § 2680(h) (the "Intentional Torts
Exception"). Because the United States' consent to
suit is a prerequisite for jurisdiction, claims that
fall within the enumerated exceptions, or claims that
do not satisfy the requirements of § 1346(b)(1), must
be dismissed for lack of subject matter jurisdiction.
See Dorking Genetics v. United States,
76 F.3d 1261, 1263-64 (2d Cir. 1996); Birnbaum v. United
States, 588 F.2d 319, 322 (2d Cir. 1978).
Congress has also waived the Postal Service's sovereign
immunity by providing, in the Postal Reorganization Act ("PRA"),
that the Postal Service may "sue and be sued."
39 U.S.C. § 401(1). However, the scope of that waiver of immunity is not
without limits with respect to tort claims. Specifically, §
409(c) of the PRA limits the § 401(1) waiver by providing that
any tort claim against the Postal Service is subject to the
remedies and restrictions of the FTCA. 39 U.S.C. § 409(c) ("[The
FTCA] shall apply to tort claims arising out of activities of the
Postal Service."); see Smith v. Potter, 187 F. Supp. 2d 93
98 (S.D.N.Y. 2001); see also Loeffler v. Frank, 486 U.S. 549
557, 108 S. Ct. 1965, 1970, 100 L. Ed. 2d 549 (1988) ("Congress expressly included several . . . specific limitations on the
operation of the sue-and-be-sued clause [including § 409].");
Franchise Tax Bd. v. United States Postal Serv., 467 U.S. 512
519, 104 S. Ct. 2549, 2553, 81 L. Ed. 2d 446 (1984) (noting the
applicability of the FTCA to the Postal Service via § 409(c));
Active Fire Sprinkler Corp. v. United States Postal Serv.,
811 F.2d 747
, 753 (2d Cir. 1987) ("One might note that the PRA also
incorporated the provisions of the [FTCA]. And by doing so,
Congress explicitly has narrowed the waiver of immunity contained
in the `sue or be sued' clause of section 401(1)." (citations
omitted)). Tort claims brought against the Postal Service,
therefore, are subject to the limitations on sovereign immunity
expressed in the FTCA.
A. Postal Matter Exception
Under 28 U.S.C. § 2680(b), the government's waiver of sovereign
immunity in the FTCA does not extend to "[a]ny claim arising out
of the loss, miscarriage, or negligent transmission of letters or
postal matter." The Court of Appeals for the Second Circuit
analyzed this provision in Marine Insurance Co. v. United
States, 387 F.2d 812 (2d Cir. 1967), a case involving a package
of jewels that "was stolen while it was in the normal flow of
mail" by a federal employee. Id. at 813, 815. The employee was
apprehended and convicted, and the Second Circuit held that the
Postal Matter Exception barred the plaintiff's claim for recovery against the United States. Id. at 813-14.
The Second Circuit, in Birnbaum, specifically upheld the
decision in Marine Insurance: "The claim in Marine Insurance
was . . . [for the] "loss" [of the package] from the postal
system," and therefore "fell within the postal exception."
Birnbaum, 588 F.2d at 328 n. 20.
The relevant facts in this case are indistinguishable from the
facts in Marine Insurance. As in Marine Insurance, the
plaintiffs' packages were allegedly stolen from the mails and
thus all plaintiffs' claims fall squarely within the Postal
Matter Exception. For this reason alone the Court lacks
jurisdiction over all plaintiffs' claims, as the root of all the
claims is the conversion of the packages.
B. Intentional Torts Exception
The FTCA provides, in § 2860(h), that "[a]ny claim arising out
of assault, battery, false imprisonment, false arrest, malicious
prosecution, abuse of process, libel, slander, misrepresentation,
deceit, or interference with contract rights" is excepted from
the FTCA's waiver of sovereign immunity i.e., the federal
government does not consent to suit for these torts or for claims
arising out of these torts. While the question whether this
provision bars suits for all intentional torts is open to debate,
compare Guccione v. United States, 847 F.2d 1031, 1036 (2d
Cir. 1988) ("[T]he United States is not liable for the intentional torts of those carrying out its business. . . ."),
with Birnbaum, 588 F.2d at 328 ("Although [§ 2680(h)] might
be construed as excepting all intentional torts, the Government
does not urge that reading upon us."), at the very least the
enumerated torts are excepted from the waiver of sovereign
Furthermore, the statute bars claims "arising out of" the
enumerated torts. The Second Circuit has repeatedly stated that
claims for the enumerated torts cannot simply be clothed "in the
garb of negligence," thus avoiding the restrictions of the FTCA.
See Guccione, 847 F.2d at 1034 (quoting Johnson v. United
States, 788 F.2d 845, 850 (2d Cir. 1986)). Indeed, the Supreme
Court of the United States has held that, absent a special,
independent duty of care that does not depend on the employment
status of the intentional tortfeasor, a negligence claim that is
based on one of the enumerated intentional torts is barred.
Sheridan v. United States, 487 U.S. 392 (1988).
The Intentional Torts Exception serves as an additional barrier
to several of plaintiffs' claims which, according to plaintiffs,
"arise out of three torts: (a) conversion; (b) the fraudulent
misrepresentations in the postal manifests; and (c) the post
office's incredible negligence that permitted such clearly
foreseeable misrepresentations and theft to take place
repeatedly, uninterrupted, for close to two years." Plaintiffs' Memorandum in Opposition ("Pl. Mem.") at 11. To the extent that
plaintiffs' claims for money had and received, unjust enrichment,
negligent supervision, concerted action, and civil conspiracy
arise out of the fraudulent misrepresentations in the postal
manifests, those claims fall within the Intentional Torts
Exception and this Court lacks jurisdiction over those claims on
III. Jurisdictional Barriers Under New York Law
Under 28 U.S.C. § 1346(b), the general jurisdictional provision
of the FTCA, for a plaintiff to pursue an FTCA claim against the
government, the United States must be amenable to suit as if a
private person under the law of the state where the act or
omission occurred. Because the alleged conversions took place in
New York, New York law applies here.
A. Conversion, Civil Conspiracy, and Concerted Action
New York, like most states, recognizes the doctrine of
respondeat superior, by which an employer may be vicariously
liable for the torts of an employee if the employee's conduct is
within the scope of his or her employment. See W. Page Keeton
et al., Prosser and Keeton on the Law of Torts §§ 69-70
(5th ed. 1984) (hereinafter Prosser). The scope of
employment is "highly indefinite," as many methods, "even . . .
quite improper ones, of carrying out the objectives of the
employment," may be grounds for holding an employer liable for an
employee's torts. See Prosser § 70.
Courts in New York are agreed, however, that theft by an
employee is not within the scope of the employment, and employers
are not held liable for thefts by employees. See Island
Associated Coop., Inc. v. Hartmann, 500 N.Y.S.2d 315 (2d Dep't
1986); Benjamin v. Brooklyn Trust Co., 57 N.Y.S.2d 816 (2d
Dep't 1945). See also Saghezi v. Reno, No. 94 Civ. 8291
(HB), 1996 WL 524338 (S.D.N.Y. Sept. 16, 1996); Int'l
Fragrances, Inc. v. M.V. "San Martin I," No. 90 Civ. 6972 (LJF),
1992 WL 93220 (S.D.N.Y. Apr. 21, 1992). Instead, theft by an
employee is an example of frolic and detour:
If a servant steps outside of his employment to do
some act for himself, not connected with the master's
business, there is no more responsibility for what he
does than for the acts of any stranger. If he has no
intention, not even in part, to perform any service
for the employer, but intends only to further a
personal end, his act is not within the scope of the
Prosser § 70; see Island Associated, 500 N.Y.S.2d at 316
(holding that "torts committed for personal motives unrelated to
the furtherance of the employer's business" cannot be within the
scope of the employment).
Furthermore, an employer who has no notice of suspicious
activity and no reason for suspicion can assume that employees
are performing their work with integrity. See Benjamin,
57 N.Y.S.2d at 817; Ehrich v. Guaranty Trust Co.,
186 N.Y.S.2d 103, 107 (1st Dep't 1921) ("An employer is not bound to
assume that an employee, whom he has no reason to suspect of dishonesty, will or
may commit a crime. On the contrary, the presumption is that he
will do right and not wrong." (citations omitted)).
Plaintiffs refer to Rudge v. Laidlaw-Coggeshall, Inc.,
465 N.Y.S.2d 591 (2d Dep't 1983), and Sports Car Centre v. Bombard,
672 N.Y.S.2d 201 (4th Dep't 1998), as examples of cases where
an employer was held liable for an employee's misappropriation of
checks made payable to the employer. These two cases appear to
represent a minority view in contradiction to the general view
that employers are not liable for theft by employees. Also, the
conduct in these cases was much closer to the scope of the
employment than the conduct alleged by plaintiffs, i.e., the
employees in these two cases had the authority to accept checks
on behalf of their employers.
The alleged thefts committed by the Postal Service employees
are not within the scope of their employment. In no way can it be
said that the "business" of the Postal Service is to convert its
patrons' mail, so in no way were the employees here carrying out
the business of their employer. Indeed, no allegation has been
made that the employees were acting out of any motive other than
personal pecuniary gain.
In addition, no allegation has been made that the Postal
Service had any reason to be suspicious of its employees, or to
doubt the integrity of the employees' performance of their work. At best, plaintiffs draw the unreasonable conclusion that,
because the alleged conversions took place over almost two years,
the Postal Service must have known of the conversions. For these
reasons, plaintiffs' conversion claim is not cognizable under New
York law and is therefore barred by § 1346 (b)(1) of the FTCA.
Moreover, under New York law, no substantive tort of civil
conspiracy exists. See Smith v. Fitzsimmons,
584 N.Y.S.2d 692, 695 (4th Dep't 1992); Falle v. Metalios,
517 N.Y.S.2d 534, 536 (2d Dep't 1987). Thus, because plaintiffs' underlying
claim of conversion is not cognizable under New York law,
plaintiffs' conspiracy claim is similarly barred by the FTCA.
It is unclear to the Court what sort of claim plaintiffs are
attempting to assert as "concerted action." The language of the
pleading is language of civil conspiracy. Because plaintiffs made
no attempt to explain this cause of action in their Memorandum,
and because, as best this Court can tell, the claim is
essentially a civil conspiracy claim, the concerted action claim
is also dismissed.
B. Negligent Supervision
While New York does recognize a cause of action for negligent
hiring and supervision, "[l]iability will attach on such a claim
only when the employer knew or should have known of the
employee's [tortious] propensities." Yeboah v. Snapple, Inc.,
729 N.Y.S.2d 32, 33 (1st Dep't 2001) (citation omitted). Where there is no showing that defendant employers knew of such
propensities, or that there had been any indication that would
have alerted the employer to the possibility of tortious conduct,
the torts of the employee cannot be considered reasonably
foreseeable and, under New York law, a negligent supervision
claim must be dismissed. Id.; see Well v. Rambam,
753 N.Y.S.2d 512, 514 (2d Dep't 2002) ("A necessary element of a
cause of action alleging negligent supervision . . . is that the
employer knew or should have known of the employee's propensity
for the conduct which caused the injury." (quotation and citation
omitted)); Detone v. Bullit Courier Serv., Inc.,
528 N.Y.S.2d 575, 576 (1st Dep't 1988) (reversing a jury verdict in favor
of plaintiffs because of plaintiffs' failure to prove that
defendant had "knowledge of the employee's propensity for the
sort of behavior which caused the injured party's harm."
As noted above, no allegation has been made that the Postal
Service had any reason to know of its employees' tortious
propensities. This claim, therefore, cannot stand under New York
law and this Court lacks jurisdiction under the FTCA.
C. Unjust Enrichment and Money Had and Received
The equitable claim of unjust enrichment will lie only if a
plaintiff can show "that the defendant was enriched, that such
enrichment was at plaintiff's expense, and that the circumstances were such that in equity and good conscience the defendant should
return the money or property to the plaintiff." Dolmetta v.
Uintah Nat'l Corp., 712 F.2d 15, 20 (2d Cir. 1983) (citation
omitted). Similarly, money had and received "is an equitable
cause of action premised upon unjust enrichment . . . [where] one
party possesses money that in equity and good conscience [the
party] ought not to retain and that belongs to another." Hamlin
Beach Camping, Catering, & Concessions Corp. v. State of New
York, 756 N.Y.S.2d 354, 358 (3d Dep't 2003) (quotations and
As noted above, New York law will not hold the Postal Service
liable for conversion committed by its employees where the Postal
Service did not have reason to know of its employees' tortious
propensities. Equity and good conscience, therefore, do not
demand that the Postal Service be held accountable for the
conduct of its employees who may have been unjustly enriched at
plaintiffs' expense or who may possess property that belongs to
plaintiffs. Thus, these claims are barred by the jurisdictional
provision of the FTCA.
Having found that plaintiffs' claims are not cognizable under
New York law for purposes of jurisdiction under § 1346(b)(1) of
the FTCA, this Court finds in the alternative, and for the same
reasons, that all plaintiffs' claims should be dismissed under Federal Rule of Civil Procedure 12(b)(6).
This Court does not have jurisdiction, pursuant to
28 U.S.C. §§ 1346(b)(1), 2680(b), or 2680(h), over plaintiffs' claims.
Alternatively, plaintiffs fail to state claims under New York law
upon which relief can be granted. Thus, all plaintiffs' claims
are dismissed. The Clerk of the Court is instructed to close this
case and remove it from the Court's active docket.
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