Life Partners Inc. v. United States
2011 U.S. App. LEXIS 17047
5th Cir.2011Background
- Life Partners buys life insurance policies at reduced price from elderly or terminally ill individuals and collects proceeds for investors.
- In 2002, Life Partners sought to purchase SBA employee S.D.'s Federal Employee Group Life Insurance policy after SBA assured it was unassigned.
- Unbeknownst to Life Partners, S.D.'s policy had been previously assigned; SBA employee Joan Redd had recorded the assignment but did not disclose it to Life Partners.
- SBA employee Sharon Taylor completed the assignment paperwork reflecting an SBA receipt of the assignment, despite knowledge of prior assignment.
- Life Partners paid S.D. for the policy, believing it was unassigned; four years later the SBA informed Life Partners of the prior assignment.
- Life Partners asserted administrative and negligence-based claims (record-keeping/administration) against the United States under the FTCA, which the district court dismissed for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Life Partners exhausted administrative remedies | Life Partners exhausted via admin claim and reconsideration | FTCA exhaustion satisfied only if claims were properly presented and investigated | Exhaustion satisfied; SBA had notice and opportunity to investigate |
| Whether the FTCA misrepresentation exception bars the claim | Injury arose from negligent record-keeping, not misrepresentation | Claim arises from misrepresentation and is barred by § 2680(h) | Barred; injury arose from misrepresentation, not independent negligence |
Key Cases Cited
- United States v. Neustadt, 366 U.S. 696 (Supreme Court, 1961) (misrepresentation exception broad; reliance not required to prove misrepresentation)
- Block v. Neal, 460 U.S. 289 (Supreme Court, 1983) (distinguished Neustadt; reliance-based misrepresentation barred similarly)
- Atkins v. United States, 225 F.3d 510 (5th Cir. 2000) (negligence in operational task not barred when misrepresentation is collateral)
- Ware v. United States, 626 F.2d 1278 (5th Cir. 1980) (misdiagnosis vs. injury; misrepresentation not the cause where government action directly caused damage)
- Saraw P'ship v. United States, 67 F.3d 567 (5th Cir. 1995) (two-step framework for misrepresentation analysis under FTCA)
- Commercial Union Ins. Co. v. United States, 928 F.2d 176 (5th Cir. 1991) (two-step analysis to determine whether a claim is barred by misrepresentation exception)
- Baroni v. United States, 662 F.2d 287 (5th Cir. 1981) (reliance on misrepresentation alone does not establish injury; focus on governmental action)