Carlos Zelaya v. United States
2015 U.S. App. LEXIS 5041
| 11th Cir. | 2015Background
- Plaintiffs Zelaya and Glantz invested in CDs sold through entities controlled by R. Allen Stanford and lost most of their investments when Stanford’s Ponzi scheme was revealed; SEC had multiple investigations from 1997–2004 but did not bring enforcement until 2009.
- Plaintiffs sued the United States under the Federal Tort Claims Act (FTCA) alleging negligence based on two statutory duties: (1) SEC’s alleged duty under 15 U.S.C. § 78eee(a)(1) to notify SIPC when a registered broker-dealer is in or approaching financial difficulty (the “notification claim”); and (2) SEC’s alleged duty under 15 U.S.C. § 80b-3(c) to revoke or act on Stanford Group’s registration amendments (the “registration claim”).
- District court dismissed the registration claim under the FTCA’s discretionary-function exception and later dismissed the notification claim under the FTCA’s misrepresentation exception, concluding the United States retained sovereign immunity; plaintiffs appealed.
- The Eleventh Circuit reviewed jurisdiction de novo, examined FTCA prerequisites (28 U.S.C. §§ 1346(b)(1), 2674) and chapter 171 exceptions (28 U.S.C. § 2680), and considered whether a state-law tort analogue existed for FTCA liability.
- The panel held (1) § 80b-3(c) does not impose the specific duty Plaintiffs ascribed for registration amendments and, alternatively, even if it did the discretionary-function exception would bar liability; and (2) Plaintiffs’ notification claim is effectively a claim based on non-communication/misrepresentation and is barred by § 2680(h).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 80b-3(c) imposed a duty on SEC to act on registration amendments (registration claim) | § 80b-3(c) requires SEC to revoke or act when later information shows a registrant is unfit | § 80b-3(c) governs initial registration decisions; suspension/revocation is governed by § 80b-3(e) and SEC discretion | § 80b-3(c) does not impose the duty Plaintiffs claim; registration claim dismissed |
| Whether discretionary-function exception (28 U.S.C. § 2680(a)) bars the registration claim | Even if duty exists, SEC’s failure was not protected discretionary policy abuse | Investigatory and enforcement decisions are discretionary and policy-grounded | Discretionary-function exception applies; registration claim barred |
| Whether § 78eee(a)(1) required SEC to notify SIPC and whether that failure gives rise to FTCA liability (notification claim) | SEC’s silence violated a mandatory statutory duty to notify SIPC and caused Plaintiffs’ economic loss | Failure to notify is a failure to communicate and is barred by the FTCA’s misrepresentation exception (§ 2680(h)) | Plaintiffs’ injury arose from non-communication; misrepresentation exception applies; notification claim barred |
| Whether the absence of a state‑law tort analogue defeats FTCA jurisdiction | FTCA allows suit for garden‑variety state torts; federal duties insufficient unless analogous state duty exists | Either Texas or D.C. law supplies no special‑relationship or Good Samaritan tort that would impose the claimed duties on a private actor | Court noted likely lack of state-law analogue but resolved case on § 2680 exceptions; remand on state‑law analogue unnecessary |
Key Cases Cited
- United States v. Dalm, 494 U.S. 596 (sovereign immunity and waiver principles)
- Alden v. Maine, 527 U.S. 706 (state sovereign immunity principles)
- F.D.I.C. v. Meyer, 510 U.S. 471 (FTCA waiver and subject‑matter jurisdiction)
- Indian Towing Co. v. United States, 350 U.S. 61 (governmental functions and FTCA applicability)
- Berkovitz v. United States, 486 U.S. 531 (discretionary‑function two‑part test)
- United States v. Gaubert, 499 U.S. 315 (policy grounding of discretionary‑function exception)
- Varig Airlines v. United States, 467 U.S. 797 (legislative history showing protection for regulatory agencies)
- United States v. Neustadt, 366 U.S. 696 (definition of misrepresentation for § 2680(h))
- Block v. Neal, 460 U.S. 289 (distinguishing duties to communicate from distinct operational duties)
- United States v. Shearer, 473 U.S. 52 (broad interpretation of "arising out of" in § 2680)