[00:00:02] Speaker 00: Good morning. [00:00:02] Speaker 00: May it please the court? [00:00:03] Speaker 00: My name is Sarah Peters and I represent the appellants. [00:00:07] Speaker 00: May I reserve five minutes for rebuttal please? [00:00:12] Speaker 00: Here the plaintiff's claims fall within the government's waiver of sovereign immunity and the misrepresentation exception does not apply for two independent and independently sufficient reasons. [00:00:26] Speaker 00: First, because [00:00:28] Speaker 00: The exception only applies to the traditional tort of misrepresentation under the original intent of the FTCA, as recognized by the United States Supreme Court. [00:00:41] Speaker 00: And because plaintiff's claim here is not one for the tort of misrepresentation, since it does not involve the essential element of reliance by the plaintiffs, that alone is a reason to find that the misrepresentation exception does not apply. [00:00:58] Speaker 00: And then the second independently sufficient reason that the misrepresentation exception does not apply is because in enacting Section 120H of CERCLA, Congress suspended or limited the application of that exception by recognizing a specific duty on the part of the government to make disclosures that are mandatory and specific and intended to benefit a group of people under that statute. [00:01:28] Speaker 00: Turning to the first argument, the absence of reliance by the plaintiff. [00:01:33] Speaker 00: Congress's original intent, as interpreted by the United States Supreme Court, was that the misrepresentation exception would apply to the, quote, traditional and commonly understood legal definition of the tort of negligent misrepresentation, end quote. [00:01:51] Speaker 00: And that's from the Newstad case, US Supreme Court, at pages 706 to 707. [00:01:58] Speaker 00: So in other words, as was recognized by the First Circuit, then Judge Breyer and Jimenez Nieves, the exception does not apply to false statements that are just merely causal elements of other torts. [00:02:11] Speaker 00: um... rather it only applies to the tort of misrepresentation which necessarily involves the essential elements of a violation of the duty to use due care in gathering information and communicating information and involves the essential element of reliance. [00:02:27] Speaker 04: What do we do with the text of the statute, you know, 26 ADH, which says it's arising out of dot dot dot misrepresentation? [00:02:38] Speaker 04: Wouldn't that be [00:02:39] Speaker 04: suggest a broader reading? [00:02:42] Speaker 00: I think not. [00:02:44] Speaker 00: Under the Newstad case the US Supreme Court considered and stated expressly that this was not just the word misrepresentation or the word deceit but that by using that term misrepresentation in that exception Congress specifically was referring to [00:03:04] Speaker 00: that traditional tort. [00:03:05] Speaker 00: So I think there the Supreme Court has bindingly recognized to the contrary that it's a tort. [00:03:10] Speaker 04: That decision, Supreme Court decision, didn't really address the arising out of language. [00:03:14] Speaker 04: I mean, it mainly relied on legislative history. [00:03:17] Speaker 04: And I think we focus now more on the text and didn't really address that. [00:03:21] Speaker 04: So what do we do with that? [00:03:22] Speaker 04: I mean, do we just ignore it? [00:03:23] Speaker 04: Because it's right there. [00:03:24] Speaker 04: It says arising out of misrepresentation, et cetera. [00:03:28] Speaker 04: That's the question I'm struggling with. [00:03:30] Speaker 04: What do we do with that statutory language? [00:03:32] Speaker 00: Yeah, I guess to me that seems reconcilable with what a new stab the Supreme Court was finding in that it's a riot. [00:03:39] Speaker 00: The the the tort is arising out of a [00:03:43] Speaker 00: misrepresentation as defined by each of its elements. [00:03:47] Speaker 00: In other words, it's not just a misrepresentation that's embedded in the conduct somewhere, which is a mere causal element of the tort, but to say arising out of means arising out of that tort with each of its elements, including the essential element of reliance. [00:04:03] Speaker 02: It seems that, I don't know, I mean, I'm struggling with this a little bit, not just because of the text, but also because I don't know that Neustadt was really about this particular question we're talking about. [00:04:13] Speaker 02: It seems like there's a whole lot of cases that are trying to get at the question of what is the conduct being complained of and is the gravamen of that conduct really a misrepresentation or something else? [00:04:22] Speaker 02: In some cases, it's something else. [00:04:24] Speaker 02: Here, it does seem like the gravamen and the misconduct is a misrepresentation. [00:04:28] Speaker 02: That's the bad conduct. [00:04:29] Speaker 02: It's a more technical argument to say, well, but it has to be against my clients as opposed to a third party. [00:04:36] Speaker 02: I don't know that Newstat really gets at that issue. [00:04:39] Speaker 02: I'm not sure anybody's really got at that issue other than maybe the 11th Circuit. [00:04:43] Speaker 00: I think you're right, Your Honor, that Newstat isn't grappling with that issue in particular. [00:04:50] Speaker 00: Newstat, I think, is the place to start because it recognizes that this is a reference to the tort of misrepresentation as opposed to just the word. [00:04:59] Speaker 00: And then Jimenez-Nieves out of the First Circuit, as well as both the Fifth Circuit and Tenth Circuit, have each analyzed this in depth. [00:05:07] Speaker 00: And really, it is a matter of first impression in the Ninth Circuit. [00:05:11] Speaker 00: There's no other binding or persuasive circuit opinion cited by either side. [00:05:17] Speaker 00: So I think we really have those three cases to look [00:05:20] Speaker 00: two out of the first, fifth, and tenth circuits. [00:05:22] Speaker 00: Each of them, and in particular Jimenez and Nieves, does the deepest dive, where then Judge Breyer is saying it would, as we go through the traditional tort elements of misrepresentation, they do involve reliance. [00:05:35] Speaker 00: And it's not a technicality, but rather that tort is one that is defined by detrimental reliance. [00:05:42] Speaker 00: And the original intent of this statute was to get at and exclude that tort, as opposed to [00:05:49] Speaker 00: bizarre outcomes as the court referenced there. [00:05:52] Speaker 00: For example, if somebody were driving next to a coworker in a government truck and the coworker said, stop at the red light, okay, light's green, go, and that individual then struck somebody, that tort would involve a misrepresentation as one of its causal elements, but it would not be the tort of misrepresentation. [00:06:13] Speaker 02: Is that more getting at because the conduct that we're talking about is not, you know, the real thing you're complaining about is not a misrepresentation? [00:06:21] Speaker 02: Because that's where I'm getting hung up a little bit, because a lot of the cases involve that, to say, well, you're talking about negligent driving versus a misstatement, and here that claim is really more about negligent driving and not about what somebody said. [00:06:31] Speaker 02: Here it is about what somebody said, and we're trying to say, well, yes, but you said it to a different person, not to me, and that's the distinction. [00:06:38] Speaker 00: Well, the injury to the plaintiffs is not caused by their reliance on a misrepresentation, but rather by a property transaction. [00:06:46] Speaker 00: So the plaintiffs here, the current and former employees of the San Francisco Police Department who were stationed out at the shipyard by virtue of this lease, they were injured, physically injured by a property transaction that resulted in them being stationed there. [00:07:03] Speaker 00: That property transaction came about through [00:07:06] Speaker 00: misrepresentations by the United States Navy to the city of San Francisco, but that's not the tort since it was not the plaintiffs relying on those representations that led to their injury. [00:07:19] Speaker 02: I didn't understand your opening brief or to be arguing that this wasn't really a misrepresentation case at all. [00:07:27] Speaker 02: I thought this really was a misrepresentation case. [00:07:32] Speaker 00: I guess that might be a little bit ambiguous. [00:07:34] Speaker 00: So we're saying there very much was a misrepresentation, and we're not saying that that misrepresentation was off to the side or collateral or that it had little to do with this, but we're saying it's not a misrepresentation to claim in the sense of the traditional tort of misrepresentation. [00:07:48] Speaker 02: Right, but the conduct, the thing that's allegedly wrongful is the misrepresentation, is the misstatements of what was said. [00:07:57] Speaker 00: That's correct. [00:07:58] Speaker 00: I mean, it involves, of course, the negligence in gathering data, the negligence in the investigation. [00:08:04] Speaker 00: But ultimately, the tort was very much about a misrepresentation. [00:08:08] Speaker 01: But all six claims were dismissed, right? [00:08:12] Speaker 01: Or we're not talking about just a misrepresentation claim. [00:08:15] Speaker 01: There was also the negligent supervision claim. [00:08:18] Speaker 01: And the negligent supervision arises before there even is a misrepresentation. [00:08:24] Speaker 01: The injury in that claim would be caused by [00:08:28] Speaker 01: the lack of decontamination. [00:08:31] Speaker 01: But that was also dismissed as being all part of the misrepresentation. [00:08:35] Speaker 01: Do you agree with that, or do you think that should have been carved off and survived? [00:08:40] Speaker 00: I agree, and I think that's very insightful, Your Honor, that there were particular claims with regard to the negligent supervision that had nothing to do with the misrepresentation. [00:08:49] Speaker 00: That said, the upstream [00:08:52] Speaker 00: Conduct that led to the majority of our plaintiffs harm was that decision the property transaction that led to them being stationed there and so, you know, we're very much here to fight for the reversal of that sovereign immunity decision with respect to you know, there there is a subset of the claims that should not have been dismissed in either event, but the larger portion of our claims relate to that original property transaction and [00:09:17] Speaker 04: What do we do with our decision, Alexander? [00:09:19] Speaker 04: I mean, clearly, the facts of the case, there is no direct reliance, but we still said the exception applies. [00:09:27] Speaker 00: Yeah, so where the facts are lurking in the record that are not directly addressed by the court. [00:09:32] Speaker 04: But the fact, well, it's lurking. [00:09:34] Speaker 04: This is one of the critical facts in that case. [00:09:37] Speaker 04: It's not some extraneous fact hidden. [00:09:38] Speaker 04: It was very central to it. [00:09:40] Speaker 04: And the court there seemed to offer a rationale why it includes it. [00:09:44] Speaker 04: Maybe it didn't say so expressly, but did say the exception should be read broadly, and therefore it encompasses this. [00:09:51] Speaker 04: I mean, what do we do with that? [00:09:53] Speaker 00: Yeah, I think even though those facts were directly stated as being the facts of the case, under the Kiriulik Ninth Circuit decision, which draws a distinction between precedential and non-precedential analysis, there the distinction is whether the [00:10:08] Speaker 00: facts were actually brought to the attention of the court and ruled upon, or whether they were merely lurking in the record. [00:10:15] Speaker 00: And so I think under that distinction, those facts were, they were certainly there, they were certainly recognized as being the facts by the court, but they weren't addressed or analyzed, and there's no evidence that the plaintiffs there raised the argument that we're raising here. [00:10:30] Speaker 00: So there's no evidence that the court actually considered or analyzed that. [00:10:34] Speaker 00: Therefore, it's our position that decision is non-precedential. [00:10:40] Speaker 02: Are you going to talk about the circular side of the house? [00:10:42] Speaker 00: Yes. [00:10:43] Speaker 00: Okay. [00:10:43] Speaker 00: Yes, sir. [00:10:44] Speaker 00: So moving to the second independent argument, which is that Section 120H limits or suspends the application of the misrepresentation exception. [00:10:55] Speaker 00: Really the question there is whether Congress, in enacting that statute, recognized a specific duty which would then limit or suspend the application of the misrepresentation exception. [00:11:08] Speaker 00: Neustadt and CERN Industries are two cases which came to the opposite conclusion of the one that we're arguing for here, but which went through the analytical factors and really looked at what is the primary objective of the statute on the one hand. [00:11:25] Speaker 00: And also, does this statute recognize a specific duty or an obligation? [00:11:31] Speaker 00: Does it make some guarantee to some group of people? [00:11:34] Speaker 00: And whereas in those cases, the answers to both of those questions were in the negative, that the primary objective of the statute did not relate to the rights of the plaintiffs there, and also that there was no recognition of a specific duty. [00:11:50] Speaker 00: Here, the opposite is true. [00:11:52] Speaker 00: Here, Section 120H is one that actually includes the language covenant, warranting that this information is correct. [00:12:02] Speaker 00: and that there's a specific duty to provide specific information, which the Ninth Circuit has recognized that the congressional intent was to protect public health through those provisions. [00:12:14] Speaker 02: So has any court addressed this issue, whether CERCLA is essentially a carve out to the exception? [00:12:20] Speaker 00: Uh, no, Your Honor, not under the, not under the FTCA. [00:12:24] Speaker 02: Okay. [00:12:24] Speaker 02: Has any court found that any, any statute is an exception to this misrepresentation exception? [00:12:31] Speaker 00: Not to my knowledge. [00:12:32] Speaker 00: So there were no cases, um, that were on point here, which found in the same way that we're asking the court to find. [00:12:41] Speaker 00: But the analyses by Newstad, US Supreme Court decision, and the analysis by the Garland case, or Zorn Industries rather, are analyses that go through, these are the elements that are looked to, to determine whether there is a congressional intent. [00:12:59] Speaker 00: And I think, you know, it's not often that parties agree, but here, there's agreement that under certain circumstances, Congress can, [00:13:07] Speaker 00: limit or suspend the application of the misrepresentation exception. [00:13:11] Speaker 00: That's certainly recognized by the courts in Zorn Industries and the court in Newstad and acknowledged by the parties. [00:13:19] Speaker 00: And so really the question is just, are those factors present here or not? [00:13:23] Speaker 04: But in CERCLA, Congress already waived sovereign immunity to some extent in that they could file remediation lawsuits against the United States. [00:13:34] Speaker 04: So there's an express waiver of sovereign immunity, at least for remediation. [00:13:38] Speaker 04: So then we're supposed to presume that it then implicitly waived tort claims [00:13:47] Speaker 04: in CERCLA, it just seems odd that it expressly waives our immunity for certain remediation costs, but then we're supposed to infer that it implicitly waived it. [00:13:56] Speaker 00: I think it's a little bit different, Your Honor. [00:13:58] Speaker 00: I think that those express creations of rights of action are not the same thing as an express waiver of sovereign immunity, but rather under the Tucker Act, for example, there needs to be an explicit creation of a monetary right of action. [00:14:17] Speaker 00: And so there are certain places where we have that express creation of a right of action, but that's different than recognizing a specific duty. [00:14:25] Speaker 00: which is under Newstad and CERN industries, that's what's required in order to say, Congress here is recognizing a specific duty that or a guarantee and obligation that runs to a group of people. [00:14:38] Speaker 00: And so that means that they're limiting or suspending the application of the misrepresentation exception. [00:14:44] Speaker 00: That was the analytic framework in Newstad and in CERN industries. [00:14:48] Speaker 00: So, you know, applied here, it would come to the opposite. [00:14:50] Speaker 04: You know, FTCA isn't an obscure statute that Congress wouldn't be aware of. [00:14:56] Speaker 04: You know, it's not like the Longshoremen Act, which I know is our next case, which is maybe congressional members may not be aware of the details, but FTCA is very prominent if you're serving in Congress. [00:15:07] Speaker 04: for us to infer that Congress, you know, create this wave of sovereign immunity and got rid of that exception seems like a bit of a stretch. [00:15:20] Speaker 00: And I think we should, we should infer, the court should infer that they were aware of the FTCA. [00:15:24] Speaker 00: And that was indeed what the court stated in both new statins or in industries that Congress is presumed to have been aware. [00:15:32] Speaker 00: of the FTCA. [00:15:33] Speaker 00: I think the court should do the same here. [00:15:35] Speaker 00: But it was in that context that those courts said that this was the analytic framework that should be followed. [00:15:40] Speaker 00: And so we would just urge the court to follow the same analytic framework, not to depart from it, but to come to the opposite conclusion, because the facts here, the statute here, is so different. [00:15:50] Speaker 00: And with that, may I reserve the remainder of my time? [00:15:53] Speaker 00: Thank you. [00:16:19] Speaker 03: Your honors, and may it please the court, my name is Albert Lai on behalf of the United States, the appellee defendant in this matter. [00:16:27] Speaker 03: Case law from this circuit and from the Supreme Court determined the outcome of this case. [00:16:33] Speaker 03: Plaintiff appellants do not contest that their claims are, in fact, grounded in misrepresentation. [00:16:40] Speaker 03: And as a result, the FTCA's misrepresentation exception does apply. [00:16:46] Speaker 03: What plaintiff appellants are arguing for on appeal are exceptions to the misrepresentation exception. [00:16:54] Speaker 03: First, they're arguing that the exception should not apply in cases of third party reliance. [00:17:00] Speaker 03: That is, where a party other than the plaintiff relied upon the misrepresentation. [00:17:05] Speaker 01: Are the exceptions or essential elements? [00:17:08] Speaker 01: Doesn't Neufstadt and Bloch say that detrimental reliance is an essential element of the misrepresentation exception? [00:17:14] Speaker 03: No, Your Honor, the terms of the statute itself is withdrawing sovereign or rather withdrawing the waiver of sovereign immunity for any claim arising out of misrepresentation. [00:17:27] Speaker 03: And as this court has said in cases like Alexander and other decisions, what matters is the substance of the claims and not how the plaintiff has chosen to style their claims. [00:17:38] Speaker 03: Here, the substance of the claim [00:17:41] Speaker 03: is misrepresentation by the United States Navy. [00:17:45] Speaker 03: And as you heard now, plaintiff appellants do not contest that here at all on appeal. [00:17:52] Speaker 03: And so the exception presumptively applies. [00:17:56] Speaker 03: This court has also applied the misrepresentation exception on multiple occasions to cases of third party reliance. [00:18:04] Speaker 03: In Andrade, this court explicitly rejected the argument that plaintiff appellants make now and stated that, again, it's the gravamen of the claim that matters. [00:18:18] Speaker 03: And Andrade also noted that its holding flowed naturally from Alexander, another case of third party reliance. [00:18:26] Speaker 03: Lawrence is another example of third party reliance where this court applied the misrepresentation exception. [00:18:34] Speaker 03: In response to these Ninth Circuit cases, plaintiff-appellants cite a series of out-of-circuit decisions and district court cases from other circuits. [00:18:44] Speaker 03: But the cases that they cite are not even about third-party reliance. [00:18:49] Speaker 03: They are about what constitutes a misrepresentation claim. [00:18:54] Speaker 03: As Judge Bress, you pointed out earlier, in the First Circuit decision of Jimenez-Neves, decided in 1982, there the issue was a typographical error on a check provided by the Social Security Administration. [00:19:10] Speaker 03: And ultimately, what the court was grappling with was whether that constituted misrepresentation at all. [00:19:17] Speaker 03: And we see that in the hypothetical that the First Circuit posed and which plaintiff appellants cited in their briefing, in their opening brief, their reply brief, and here again before you. [00:19:27] Speaker 03: The hypothetical is what would happen if a government truck driver crossed a red light because their coworker told them the light was green? [00:19:36] Speaker 03: Well, that's a hypothetical about is that really misrepresentation or is that just negligent operation of the truck because the driver didn't look at the light themselves? [00:19:47] Speaker 03: Here, that's not even the issue at play. [00:19:51] Speaker 03: Here, plaintiff appellants have admitted their claims are grounded in misrepresentation. [00:19:57] Speaker 03: We see the same theme running through the rest of the cases that plaintiff appellants cite. [00:20:02] Speaker 03: In Sarah Partnership, decided by the Fifth Circuit in 1995, that was another case of a typographical error on mortgage coupon payments, which prevented the plaintiff from paying their mortgage. [00:20:17] Speaker 03: There, the Fifth Circuit again decided, well, that wasn't a claim of misrepresentation. [00:20:23] Speaker 03: That was this negligent processing of a mortgage. [00:20:27] Speaker 04: But do you agree that under traditional misrepresentation claim, common law claim, at the time the FTC was enacted, it didn't allow third party reliance? [00:20:38] Speaker 04: Your Honor, I don't think the FTCA spoke to that, because the FTCA was designed as a sort of- I know that's more of potentially new stuff, but do you agree that at the time the misrepresentation claim does not allow third-party reliance? [00:20:51] Speaker 03: Well, that's where the FTCA depends. [00:20:54] Speaker 03: The FTCA was intended to incorporate state tort law as an aspect of the waiver of sovereign immunity. [00:21:02] Speaker 03: So it has to be cognizable as a claim under state law to begin with. [00:21:06] Speaker 03: And so here, we're not even addressing that point yet. [00:21:09] Speaker 03: We're just addressing this exception and whether it would apply [00:21:13] Speaker 03: if the gravamen of the case is for misrepresentation. [00:21:17] Speaker 04: I know there are different ways to analyze it, but I'm just trying to confirm that you agree that third-party reliance isn't cognizable under traditional misrepresentation claim. [00:21:27] Speaker 03: Yes, if we look at the restatement of law, very general, basic, traditional third-party reliance would [00:21:36] Speaker 03: would not make for a misrepresentation claim, unless I believe there was some sort of special relationship between the parties. [00:21:42] Speaker 04: So your argument is, obviously, your friend on the other side is saying we have to look at what the common law was. [00:21:49] Speaker 04: So your argument is based more on you have to look at the gravamen of it. [00:21:53] Speaker 04: Is that your argument? [00:21:55] Speaker 03: Yes, your honor. [00:21:56] Speaker 03: If the entire case is based on misrepresentation and that is what caused the tort and what caused the injury, then the case is barred by the misrepresentation exception. [00:22:09] Speaker 04: What do we do with some of the language, again, by these cases a little bit, these vague language that says, well, we look at what the traditional tort was, the elements of it. [00:22:19] Speaker 04: What do we do with that language? [00:22:21] Speaker 03: Well, those decisions are coming from cases that, again, are not addressing this issue of third-party reliance. [00:22:29] Speaker 03: They're coming from cases like Neustadt, where this wasn't an issue. [00:22:33] Speaker 03: It's coming from cases like Jimenez-Neves, which, again, the core issue there was what is a misrepresentation claim and not what falls under the misrepresentation exception, really. [00:22:44] Speaker 03: And we see this theme continuing through the rest of the cases that plaintiff appellants are citing. [00:22:51] Speaker 02: So what cases have actually addressed this question in your view? [00:22:55] Speaker 03: So I have found two, Your Honor. [00:22:56] Speaker 03: Both are from the Fifth Circuit. [00:22:58] Speaker 03: One is Williamson versus the United States, decided in 1987. [00:23:03] Speaker 03: There, there was a misrepresentation made by the government to a farmer plaintiff's landlord. [00:23:11] Speaker 03: And again, the misrepresentation exception applied. [00:23:14] Speaker 03: And I can provide the pin sight for that as well. [00:23:16] Speaker 03: That's 815 F2D 368. [00:23:21] Speaker 03: The other one is Barone versus United States. [00:23:25] Speaker 03: That was also decided by the Fifth Circuit in 1981. [00:23:30] Speaker 03: their misrepresentations were made to developers as opposed to the plaintiff homeowners or I believe tenants and the misrepresentation exception applied. [00:23:42] Speaker 03: And in fact the Fifth Circuit said in that case either the misrepresentation exception applies or there's just no tort claim cognizable here under state tort law. [00:23:52] Speaker 03: and these are decisions that these cases really grapple with this this legal issue beyond just simply applying the exception in the way that you want roni does explicitly address the issue of third-party reliance and it applied the misrepresentation exception [00:24:09] Speaker 03: But, Your Honor, I don't believe that it's necessary to look outside this circuit. [00:24:14] Speaker 03: Lawrence, Alexander, and Andrade are all cases where there are third-party reliance, and this Court applied the misrepresentation exception in each of those cases. [00:24:24] Speaker 02: That's true. [00:24:24] Speaker 02: I don't know, though, how reasoned those were. [00:24:27] Speaker 02: Certainly the outcomes of those cases support you. [00:24:30] Speaker 02: But in terms of whether they're binding on us in the sense that they actually went through this issue that we're now debating, I don't know about that. [00:24:37] Speaker 03: Well, Andrade explicitly addressed it. [00:24:39] Speaker 03: And I understand that is a memorandum opinion, so it's not presidential. [00:24:44] Speaker 03: But memorandum opinions do reflect established law in this circuit. [00:24:49] Speaker 03: And Andrade pointed out, citing Alexander, this is a natural reading of Alexander. [00:24:55] Speaker 03: So I think those cases alone are enough to affirm the district court's decision on this point. [00:25:00] Speaker 02: What else is out there? [00:25:01] Speaker 02: You didn't mention the 11th Circuit in JBP. [00:25:05] Speaker 02: Is that supportive of your position? [00:25:07] Speaker 03: I'm not familiar with that decision, Your Honor. [00:25:10] Speaker 04: What do we do with the arising out of language in the statute? [00:25:14] Speaker 03: So as you mentioned earlier, Your Honor, I think the arising out of language can be read in a couple of ways. [00:25:22] Speaker 03: One is that as this circuit has said on a number of occasions, including in Alexander, [00:25:29] Speaker 03: Courts should be reading a complaint to see what the substance of the claims are. [00:25:37] Speaker 03: It's not about how a plaintiff chooses to style their claims. [00:25:41] Speaker 03: It's about really what is the gravamen of the case. [00:25:44] Speaker 03: And here, the gravamen of the case are misrepresentations allegedly made by the US Navy. [00:25:52] Speaker 03: And I'll also turn for a moment to address an earlier question from Judge Navarro. [00:25:56] Speaker 01: Thank you. [00:25:56] Speaker 01: I was going to ask you if you didn't. [00:25:58] Speaker 03: About negligent supervision. [00:26:00] Speaker 03: Well, if we look to the complaint itself, although the words negligent supervision are used, the claim is again grounded in misrepresentation because here the allegations are not that [00:26:16] Speaker 03: you know, that Tetra Check, the contractor at issue here, negligently remediated the building. [00:26:23] Speaker 03: Their entire claim is that the Navy allegedly knew the building was contaminated and did not do any remediation at all. [00:26:32] Speaker 03: So the claim isn't about negligent supervision of the contractor. [00:26:36] Speaker 03: And we can see this if we look at paragraph 93 of their complaint. [00:26:42] Speaker 03: They say, quote, [00:26:44] Speaker 03: In about and after 1995-1996, the Navy, both directly and through its negligent supervision of Tetratech EM and Tetratech [00:26:55] Speaker 03: EM Inc., Texas Tech's predecessor corporation PRC, made false, misleading, and incomplete disclosures to the city and failed to warn the city and its employees related to and regarding the release and use of hazardous substances at the subject leased property." [00:27:16] Speaker 01: And so isn't that the same as the 1983 block case where the US Supreme Court found that the defects in the home were caused by negligent supervision of the home construction, not by the reliance on the supervision reports? [00:27:29] Speaker 03: No, Your Honor, because in that case, there was actually a construction, right? [00:27:32] Speaker 03: Here, there's no remediation. [00:27:34] Speaker 03: There's nothing. [00:27:37] Speaker 03: Their allegations are basically the Navy and its contractor knew of the contamination and then chose to affirmatively lie to the city and the county to get the property transferred. [00:27:50] Speaker 03: So even though the words negligent supervision are used here, it's just misrepresentation. [00:27:55] Speaker 03: There's nothing that was supervised. [00:27:58] Speaker 01: So there was no clean up, no remediation? [00:28:00] Speaker 03: There was no clean up here. [00:28:01] Speaker 03: The whole claim is that we should have cleaned up and didn't. [00:28:05] Speaker 01: Okay, thank you for clarifying that. [00:28:07] Speaker 03: You're going to talk about this CERCLA issue? [00:28:09] Speaker 03: Yes, Your Honor. [00:28:11] Speaker 03: On the second issue, CERCLA section 120H1 does not suspend or limit the application of the misrepresentation exception. [00:28:20] Speaker 03: The Supreme Court addressed a similar argument in Neustadt, and there the argument was that the National Housing Act suspended the misrepresentation exception. [00:28:30] Speaker 03: The National Housing Act required the United States to conduct home appraisals to determine eligibility for mortgage insurance funds. [00:28:40] Speaker 03: And in that case, the plaintiff relied upon the home appraisal to purchase a home. [00:28:44] Speaker 03: The appraisal turned out to be incorrect, and the plaintiff sued. [00:28:49] Speaker 03: On appeal, the Supreme Court held that the misrepresentation exception barred the claim. [00:28:53] Speaker 03: And in addressing the argument that the National Housing Act suspended the misrepresentation exception, the Supreme Court noted that there is nothing in the language of the National Housing Act that indicated the misrepresentation exception was supposed to be suspended or limited in any way. [00:29:11] Speaker 03: And Congress was presumably aware of the FTCA when it enacted the National Housing Act. [00:29:17] Speaker 03: The same is true here of CERCLA. [00:29:20] Speaker 03: There's no language in CERCLA that indicates the FTCA was supposed to be limited or that the misrepresentation exception was supposed to be suspended. [00:29:29] Speaker 02: What is the test here? [00:29:30] Speaker 02: Does there need to be something in the statute that's specific? [00:29:34] Speaker 03: are you acknowledging that you know one could read the statute and sort of infer it it's just that not that inference is not permissible here well based on a rule of statutory construction all laws should be given their fullest effect so we should be given each giving each of these statues their full effects so unless the the statutes themselves are irreconcilable [00:29:57] Speaker 03: or there's some explicit language in the statute that says, you know, we're amending the Federal Tort Claim Act so that it doesn't apply in this case, then yes, both statutes need to be applied. [00:30:08] Speaker 02: And here, it is... I don't know if the Supreme Court has told us there needs to be a clear statement. [00:30:14] Speaker 02: I mean, that may be correct. [00:30:16] Speaker 02: I just don't know that there's any law that currently says that. [00:30:20] Speaker 03: Well, it's a rule of statutory construction, Your Honor. [00:30:23] Speaker 03: We must assume or we must give effect to the laws that Congress has passed. [00:30:28] Speaker 03: And here, we can give effect to all the words or all the laws Congress has passed by applying CERCLA, which required, in this case, the Navy to issue the mandatory notice about the substances that were on the property. [00:30:43] Speaker 03: And we can also apply the Federal Tort Claims Act, which has a misrepresentation exception so that there's no waiver of sovereign immunity for a tort claim. [00:30:53] Speaker 03: That doesn't eliminate the issue of a potential CERCLA claim or CERCLA remediation. [00:31:04] Speaker 01: CERCLA doesn't have a private right of action. [00:31:07] Speaker 03: Excuse me, Your Honor? [00:31:08] Speaker 01: CERCLA doesn't provide a private right of action. [00:31:12] Speaker 03: no not not in court for these reasons your honor we ask that you affirm the district court's decision this court has applied the misrepresentation exception on multiple occasions to cases of third-party reliance and there's nothing in the circular statute that would indicate that the [00:31:31] Speaker 03: FTC is suspended or limited in any way. [00:31:34] Speaker 04: So your argument is that in trying to see if there was a waiver of sovereign immunity or whether the exception applies, we don't have to rely solely on some language and new stat that suggests the strength of the word, whether there's a warranty or guarantee of accuracy. [00:31:57] Speaker 04: That's maybe one factor, but it's not the only factor. [00:32:01] Speaker 04: Yes sir, I think what- Because the language here in the statute of circle is stronger than what was in Newstad or Zern. [00:32:08] Speaker 04: It seems like the government does guarantee that certain accuracy of the statements. [00:32:12] Speaker 04: So your position is that may be one factor, but that's not the dispositive factor. [00:32:18] Speaker 03: Well, yes, Your Honor. [00:32:19] Speaker 03: In this case, the statute does have a very clear disclosure requirement. [00:32:24] Speaker 03: But that doesn't interfere with the application of the Federal Tort Claims Act either. [00:32:30] Speaker 03: Both laws can be given their full effect. [00:32:35] Speaker 03: If Your Honors have no further questions. [00:32:38] Speaker 04: Thank you. [00:32:39] Speaker 04: Thank you. [00:32:52] Speaker 00: Your Honors, I'd first like to address whether we can see that the claims are grounded in misrepresentation. [00:32:58] Speaker 00: I think there's an ambiguity. [00:33:00] Speaker 00: A statement can be a misrepresentation, a false statement, but that's different from saying that a claim is one that meets the legal elements of a claim of misrepresentation. [00:33:12] Speaker 00: And so while we very explicitly do allege that there are false statements that go to the core of our claims and of the tort at issue, [00:33:21] Speaker 00: We absolutely do not concede that any of the causes of action state the legal elements of a claim for misrepresentation. [00:33:28] Speaker 00: And that's not just a matter of style. [00:33:30] Speaker 00: So a rising out of language really focuses on not how is this claim titled, what is the header, but rather what is the true gravamen of that action. [00:33:41] Speaker 00: Here the gravamen of the action is not one that includes [00:33:45] Speaker 00: the reliance by the plaintiffs, which is an essential element of misrepresentation. [00:33:50] Speaker 00: So I just wanted to be clear about what it is, and it's not that I'm conceding here. [00:33:56] Speaker 00: Secondly, the government argued that each of the First Circuit, the Fifth Circuit, and the Tenth Circuit opinions were not, if I understood the argument correctly, were not really on point addressing this question about whether the first party reliance is an essential element. [00:34:14] Speaker 00: in order for the misrepresentation exception of the FTCA to apply. [00:34:18] Speaker 00: But to the contrary, each of those cases explicitly stated that that was an essential element. [00:34:24] Speaker 00: So Jimenez out of the First Circuit said, the requirement that the plaintiff himself has relied upon the false information makes sense if one sees the traditional tort as protecting the person's interest in obtaining true information when making up his mind about an important matter. [00:34:43] Speaker 00: at page four, that case is very much on point. [00:34:46] Speaker 00: Same with Seurat Partnership out of the Fifth Circuit. [00:34:50] Speaker 00: That case expressly stated the essence of an action for misrepresentation is the communication of misinformation on which the recipient relies. [00:35:01] Speaker 00: And there it was quoting, at page 5-71, it was quoting the Block versus Neal case, which Judge Navarro brought up. [00:35:09] Speaker 00: And likewise, the Tenth Circuit in a state of Trentidue [00:35:13] Speaker 00: stated that reliance is an essential component of a negligent misrepresentation claim at page 855. [00:35:19] Speaker 00: So each of those cases is not glancingly discussing this, but rather they each pivot on the question of whether or not there is first-party reliance or not. [00:35:29] Speaker 00: And in the Ninth Circuit, we don't have any case law that grapples with that issue. [00:35:34] Speaker 00: We believe this would be a matter of first impression for this court. [00:35:38] Speaker 00: And if the court goes the other way, which it obviously can do, it would create a circuit split. [00:35:43] Speaker 00: But we think the reasoning of the first, fifth, and tenth circuits are sound reasoning that are grounded in the core traditional meaning of that misrepresentation exception. [00:35:55] Speaker 04: Assuming that we require direct reliance for the misrepresentation exception to apply. [00:36:02] Speaker 04: close to it in the complaint. [00:36:04] Speaker 04: The complaint repeatedly says the SFPD, in reliance of the misrepresentations by the Navy, did this, subleased, et cetera. [00:36:12] Speaker 04: So isn't that pretty close to it? [00:36:15] Speaker 04: SFPD, when it negotiated and relied on the Navy's misrepresentations, presumably was acting on behalf of its employees. [00:36:25] Speaker 00: I think that's a really important distinction, that it was not acting on behalf of its employees. [00:36:30] Speaker 00: In other words, if we had a situation where the plaintiffs relied through an agent, even indirectly, but it was their reliance through somebody else. [00:36:39] Speaker 00: For example, in the medical context where somebody relies through a learned intermediary, the physician. [00:36:45] Speaker 00: In that context, that would be the tort claim of misrepresentation. [00:36:49] Speaker 00: But here, we don't have reliance by the plaintiff, direct or indirect. [00:36:54] Speaker 00: The city of San Francisco was not acting on behalf of its employees [00:36:58] Speaker 00: Rather, it was acting in engaging in a property transaction as part of a bigger contractual purchase deal that it was leasing out some of that land initially. [00:37:08] Speaker 00: And that led to, and foreseeably led to, the people who would be placed on that land being physically harmed. [00:37:15] Speaker 00: But they were not relying on that misrepresentation any more than the person injured by the vehicle that goes through the red light is relying on, you know, the best drivers relying on their behalf. [00:37:28] Speaker 04: Wouldn't employees presumably rely on their employer in terms of facility that it's safe? [00:37:37] Speaker 04: I don't think individuals themselves would. [00:37:39] Speaker 04: That's just, I think, a presumption that employees rely on their employers for the safety of the workplace. [00:37:45] Speaker 00: I think they don't have any agency in the decision. [00:37:48] Speaker 00: In other words, they're not making any decisions. [00:37:51] Speaker 00: The traditional tort usually is related to financial decision-making. [00:37:54] Speaker 00: These plaintiffs [00:37:55] Speaker 00: are not making any decisions at all. [00:37:57] Speaker 00: So they're not relying on anybody for anything. [00:38:00] Speaker 00: Rather, they are in terms of a misrepresentation. [00:38:04] Speaker 00: They're not receiving information and making decisions directly or indirectly based on that information. [00:38:10] Speaker 02: Let me just ask at the top of your rebuttal argument, [00:38:15] Speaker 02: I mean, you're arguing that the misrepresentation exception doesn't apply, but you nonetheless are bringing claims, state law claims for misrepresentation. [00:38:26] Speaker 02: Is there some possible dissonance here between these arguments? [00:38:31] Speaker 02: In other words, if you succeed in getting out of the FTCA exception, are you nonetheless bringing a cognizable claim for misrepresentation in the first place? [00:38:40] Speaker 00: I think that perhaps any express claims for misrepresentation should fail, you know, under state law claims for misrepresentation, but the complaint, the gravamen of our complaint is, first, there's no allegation of reliance by the plaintiffs, and the main complaint is about a property transaction that puts the plaintiffs there and results in their physical injury. [00:39:04] Speaker 00: So I think that would be an open question, whether this rule would foreclose that particular, you know, [00:39:09] Speaker 00: claim with respect to the state elements. [00:39:14] Speaker 00: And then turning to the CERCLA. [00:39:18] Speaker 04: If you could wrap up on your final point. [00:39:21] Speaker 00: Yes. [00:39:23] Speaker 00: That under CERCLA, we agree it's not just one factor, Your Honors. [00:39:27] Speaker 00: It's an array of factors, but all of them are aimed at the essential question of whether or not Congress recognized a specific duty. [00:39:35] Speaker 00: Here, the language is strong, recognizing that it did. [00:39:38] Speaker 00: So for all of these reasons, the misrepresentation exception does not apply, and we would ask the court to reverse the decision. [00:39:45] Speaker 00: Thank you. [00:39:47] Speaker 04: Thank you both for the very helpful argument. [00:39:49] Speaker 04: The case has been submitted.