Eleventh Circuit Fails to Hold Government Accountable for Federal Tort Claims Act

In 2012, Evergreen Marine, Ltd. (“Evergreen”), purchased a yacht in reliance on the U.S. Coast Guard’s representation that the vessel was unencumbered by a mortgage or other lien. However, there was, in fact, a mortgage (of nearly $700,000) on the vessel held by M&T Bank, who later seized the vessel to foreclose on its mortgage.  The Coast Guard admitted that despite its prior representations to the contrary, a mortgage had been recorded in 2003, but the paper record had not been electronically recorded when the agency moved to a digital index. After settling with the mortgage holder, Evergreen sued the United States under the Federal Tort Claims Act (“FTCA”) arguing that the U.S. Coast Guard’s National Vessel Documentation Center (“NVDC”) breached federal statutory duties: (1) to maintain an accurate index of mortgages and (2) to deny the foreign transfer of a U.S. documented vessel encumbered by a mortgage.

The District Court dismissed the lawsuit citing lack of subject-matter jurisdiction and concluding that the United States enjoyed sovereign immunity from Evergreen’s claims pursuant to the FTCA’s misrepresentation exception. The FTCA’s misrepresentation exception under 28 U.S.C. § 2680(h) bars any claim “[a]rising out of . . . misrepresentation, deceit, or interference with contract rights.” This includes claims arising out of both intentional and negligent misrepresentation. On appeal, the Eleventh Circuit Court of Appeals found that the misrepresentation exception applied because “the essence of the claim[s] involves the government’s failure to use due care in obtaining and communicating information.”

To read the 11th Circuit’s opinion, please click here.

For more information about the Court’s decision, please do not hesitate to contact us at info@chaloslaw.com.