Appley Bros. v. United States

Appley Bros. v. United States

Opinion

 [*721]  JOHN R. GIBSON, Circuit Judge.

Appley Brothers appeal the district court's dismissal of its action against the United States for losses as a result of the United States Department of Agriculture's negligent inspection of the Bird Grain Company warehouse, a federally licensed grain warehouse. The district court held that it lacked subject matter jurisdiction because the claims were barred by both the discretionary function exception and the misrepresentation exception to the Federal Tort Claim Act. 28 U.S.C. § 2680(a), (h) (1988 & Supp. 1993). Appley Brothers contend that the losses were caused by the negligent failure to follow specific agency regulations, and that the discretionary function and misrepresentation exceptions do not apply. We reverse and remand.

Appellants include a group of farmers and grain elevators who sold or stored grain at the Bird Grain warehouse, and Transamerica, issuer of warehouseman bonds covering the Bird Grain operation.  [**2]  For simplicity, as all appellants raise the same issues, we refer to all appellants as Appley Brothers.

Between March 29 and April 1, 1988, inspectors from the United States Department of Agriculture examined the Bird Grain operations and cited Bird Grain for a number of violations, including corn and soybean inventory shortages. On April 1, 1988, U.S.D.A. inspectors examined Bird Grain and prepared a WA-125 form or a Memorandum of Adjustments. This form showed that Bird Grain had corn and soybean inventory shortages, and had "previous show short positions." Specifically, the WA-125 showed that in May, September, and October 1987, and January 1988, Bird Grain had corn shortages as high as 8591 bushels, and soybean shortages in January and February 1987 of up to 921 bushels. The inspectors directed Bird Grain to eliminate these shortages. The April 1 inspection showed that Bird Grain was again deficient in corn by 6405 bushels and in soybean by 8159 bushels. The inspectors directed Bird Grain to remedy the deficiencies.

On August 5, 1988, U.S.D.A. inspectors conducted a special examination of Bird Grain. The stated purpose of the inspection was "to check compliance with WA-125 issued [**3]  4-1-88." The inspectors did not indicate on the report whether they checked the corn or soybean inventories, or whether they verified Bird Grain's compliance with the directive  [*722]  to eliminate previous show short positions. The outcome of the August 5 examination was that Bird Grain was cited for continuing problems with temporary storage bunkers but was otherwise allowed to continue in operation. After August 5, various farmers and grain elevators continued to deliver grain to Bird Grain for storage or purchase by it. Transamerica also issued a $ 233,000 warehouseman's bond effective for one year beginning September 23, 1988.

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