                                                                                                                           Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-15-1996

Reo v. US Postal Service
Precedential or Non-Precedential:

Docket 96-5051




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Recommended Citation
"Reo v. US Postal Service" (1996). 1996 Decisions. Paper 45.
http://digitalcommons.law.villanova.edu/thirdcircuit_1996/45


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                    UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT

                           ______________

                            No. 96-5051
                           ______________

                           SHARON A. REO,

                                 vs.

                    UNITED STATES POSTAL SERVICE;
                      UNITED STATES OF AMERICA;
                         PATRICIA D'ESPOSITO

                     UNITED STATES OF AMERICA,

                                 Defendant/Third-Party Plaintiff,

                                 vs.

                         JOSEPH J. REO, JR.;
                            MARJORIE REO;

                                 Third-Party Defendants,

                                 vs.

                    STATE FARM INSURANCE COMPANY,

                                 Fourth-Party Defendant,

                             SHARON REO,

                                                  Appellant.

                           ______________

           Appeal from the United States District Court
                  for the District of New Jersey
                      (D.C. No. 93-cv-03632)
                          ______________

                       Argued June 6, 1996
         Before: BECKER and MANSMANN, Circuit Judges, and
SCHWARZER, District Judge

                       (Filed October 15, 1996)

                         STEVEN L. KESSEL, ESQUIRE
         (ARGUED)
                         Drazin & Warshaw
                        25 Reckless Place
                        Red Bank, NJ 07701-8909

                        Attorney for Sharon Reo, Appellant

                        WILLIAM G. COLE, ESQUIRE (ARGUED)
                        FRANK W. HUNGER, Assistant Attorney
                        General
                        FAITH S. HOCHBERG, United States
                        Attorney
                        Attorneys, Appellate Staff
                        Civil Division, Room 3617
                        Department of Justice
                        Washington, D.C. 20530-0001

                        Attorneys for United States of America

                          JAMES S. BRAATEN, ESQUIRE
                          Lomell, Muccifori, Adler,
                          Ravaschiere, Amabile & Pehlivanian
                          250 Washington Street
                          P.O. Box 787
                          Toms River, NJ    08754

                          Attorney for Joseph J. Reo, Jr. and
                          Marjorie Reo
                          ______________

                       OPINION OF THE COURT
                          ______________

SCHWARZER, District Judge:

         The question before us is whether the acceptance by a minor's
parents of an
administrative settlement of the minor's claim under the Federal Tort
Claims Act ("FTCA")
releases the United States from further liability where the settlement was
not judicially approved
as required by state law.
                        PROCEDURAL HISTORY
         On May 23, 1975, plaintiff Sharon Reo was playing in the front
yard at the New
Jersey home of her aunt, defendant Patricia D'Esposito. While a United
States Postal Service
employee was handing mail to her aunt, Sharon (who was only 21 months old
at the time)
apparently stepped off the curb and in front of the Postal Service truck.
As the truck drove away,
it struck Sharon, crushing the third and fourth fingers of her left hand.
         Sharon's parents, through their attorney, filed a tort claim on
her behalf. They
entered into an administrative settlement, accepting $2,500 to release her
claim. Neither
Sharon's parents nor the Postal Service sought judicial approval of the
settlement.
         Subsequent to the settlement, Sharon had three operations on her
fingers, which
remain deformed. On August 11, 1993, when she was 19 (legally an adult),
Sharon filed this
action. She seeks damages against the United States and against
D'Esposito. The United States
moved to dismiss the complaint as barred by the 1976 settlement and
release and the district
court granted the motion. Sharon dismissed the claim against her aunt.
Judgment was entered
on January 4, 1996; the notice of appeal was filed December 21, 1995
(after the court had
announced its decision to dismiss), and is timely under Federal Rule of
Appellate Procedure
4(a)(2). See Fed. R. App. P. 4(a)(2). We have jurisdiction under 28
U.S.C. § 1291 and reverse.
                                     DISCUSSION
         The FTCA subjects the United States to tort liability for
negligence. See28 U.S.C. §§ 1346(b), 2674. Under the FTCA, the United
States is liable "in the same manner
and to the same extent as a private individual under like circumstances .
. . ." 28 U.S.C. § 2674.
Thus, "the extent of the United States' liability under the FTCA is
generally determined by
reference to state law." Molzof v. United States, 502 U.S. 301, 305, 112
S.Ct. 711, 714, 116
L.Ed.2d 731 (1992).
         In order to promote the efficient disposition of claims against
the government, the
FTCA establishes an administrative system. The claimant is required to
file a claim with the
agency allegedly responsible for her injuries. 28 U.S.C. § 2675(a). The
agency then may choose
to pay the claim in full, to offer to settle the claim, or to deny the
claim within six months. Id.;
28 U.S.C. § 2672. If the agency denies the claim or does not make a final
disposition within six
months, the claimant may then file suit in federal court. 28 U.S.C. §
2675(a).
         Section 2672 of title 28 provides government agencies with the
authority to settle
tort claims administratively. It also provides that such settlements will
preclude a subsequent
suit:
               The acceptance by the claimant of any such award,
               compromise, or settlement [administrative
               settlement pursuant to this provision] shall be final
               and conclusive on the claimant, and shall constitute
               a complete release of any claim against the United
               States and against the employee of the government
               whose act or omission gave rise to the claim, by
               reason of the same subject matter.
Both parties agree that Reo did not herself settle the claim, and that the
question is whether her
parents could settle her claim on her behalf. See 28 C.F.R. § 14.10
(claimant is bound by
settlement entered into with claimant's "agent or legal representative").
         Under New Jersey Rule of Court 4:44, a parent cannot settle a
child's claim
without judicial approval, regardless of whether suit has been filed.
Colfer v. Royal Globe Ins.
Co., 519 A.2d 893 (N.J. Super. Ct. App. Div. 1986). Here, no judicial
approval was obtained,
and the settlement is therefore incomplete as a matter of state law.
         The government claims that New Jersey law simply does not apply -
- first, that
federal law defines who may settle a tort claim on behalf of another, and
second, that under
federal law no judicial approval is required for the settlement of a
minor's claim. Because we
find that state law governs here, we need not reach the second of these
contentions.
         Section 2672 does not define who may accept a settlement on
behalf of the
claimant. While the interpretive regulations indicate that a claimant's
"legal representative" can
bind the claimant to an administrative settlement, see 28 C.F.R. § 14.10,
the regulations provide
no guidance how "legal representative" should be defined. Nothing in the
legislative history of
section 2672 or in the drafting history of the regulations provides any
further guidance.
         In order to fill this gap, we turn to state law. Cf. Kamen v.
Kemper Financial
Services, Inc., 500 U.S. 90, 98, 111 S.Ct. 1711, 1717, 114 L.Ed.2d 152
(1991). Federal
legislation generally "builds upon legal relationships established by the
states, altering or
supplanting them only so far as necessary for the special purpose." Paul
M. Bator, et al. Hart and
Wechsler's The Federal Courts and the Federal System, 533 (3rd ed. 1988).
On the one hand,
where application of state law would impair the federal policy, or where
there is a "distinct need
for nationwide legal standards," federal standards must be developed. See
Mississippi Band of
Choctaw Indians v. Holyfield, 490 U.S. 30, 42, 109 S.Ct. 1597, 1605, 104
L.Ed.2d 29 (1989);
Kamen, 500 U.S. at 98, 111 S.Ct. at 1717.   On the other hand, where state
law on an issue is
well-developed, or where Congress specifically intends to subject federal
actors to local
standards, state law is preferred. See DeSylva v. Ballentine, 351 U.S.
570, 580-81, 76 S.Ct. 974,
980, 100 L.Ed. 1415 (1956); Reconstruction Finance Corp. v. Beaver County,
328 U.S. 204, 210,
66 S.Ct. 992, 995, 90 L.Ed. 1172 (1945). Thus, on issues such as
corporation law, see Kamen,
supra, commercial law, see United States v. Kimbell Foods, Inc., 440 U.S.
715, 728, 99 S.Ct.
1448, 1458, 59 L.Ed.2d 711 (1979), and family law, see DeSylva, supra,
state-law standards have
been used to fill the gaps in federal statutory schemes.
         The basic purpose of the FTCA is to subject the United States to
tort liability
under state law to the same extent as private individuals. State law thus
governs both the
creation of liability and the effect of a purported release of liability.
Green v. United States, 709
F.2d 1158, 1165 (7th Cir. 1983). Courts uniformly look to state law to
determine the validity of
settlements entered between the government and the claimant both before
the administrative
claim is filed, see, e.g., Montellier v. United States, 315 F.2d 180, 185
(2d Cir. 1963); Cordaro v.
Lusardi, 354 F. Supp. 1147, 1149-50 (S.D.N.Y. 1973); cf. Matland v. United
States, 285 F.2d
752, 754 (3rd Cir. 1961) (holding that state law governs release of
liability under FTCA; release
of joint tortfeasor therefore released United States), and after suit has
been commenced. See,
e.g., Reed by and through Reed v. United States, 891 F.2d 878, 881 n.3
(11th Cir. 1990)
(applying Florida law requiring court approval to enforce settlement of
minor's FTCA claim);
Dickun v. United States, 490 F. Supp. 136 (W.D.Pa. 1980).
         The government asserts that these cases do not apply, because the
release in this
case was executed after the claim was filed, but before litigation began.
This distinction might
make sense when comparing the effect of a release under the specific
authority of section 2672
on the settling party with the effect of such a release on other potential
claimants. See Schwarder
v. United States, 974 F.2d 1118, 1124 (9th Cir. 1992) (drawing this
distinction). But it does not
logically apply when determining if a party has settled. Under state law,
Reo's parents could not
compromise her position before filing the claim (without judicial
approval), and could not
compromise her claim after litigation commenced. There is nothing unique
about administrative
settlements that suggests that the authority of Reo's parents to settle
her claim should be broader
(or narrower) in this context than in others. The statute itself provides
no basis for distinction: a
provision authorizing administrative settlements, and making them final,
does not necessarily
lead to a conclusion that the enforceability of such settlements will be
governed by federal law
rather than state law. As stated by one district court, section 2672
simply "does not purport to set
up rules governing the validity, scope, or interpretation of releases
arising from its operation."
Robinson v. United States, 408 F. Supp. 132, 136-37 (N.D.Ill. 1976).
         This circuit has previously applied state law to determine the
validity and scope of
a release under section 2672. See Thompson v. Wheeler, 898 F.2d 406, 410
n.3 (3rd. Cir. 1990);
cf. Macy v. United States, 557 F.2d 391, 394 (3rd Cir. 1977) (same under
1346(b)). Turning to
state law again in this case is appropriate -- the rules governing
settlement of minor's claims are
embedded in the traditional state-law domain of contract, agency, and
family law. Rather than
developing a federal common law to govern such questions of authority to
settle another's claim,
we can instead rely on the well-established rules of the various States.
National uniformity is not
particularly important here, especially since Congress specifically
contemplated in the FTCA that
federal agencies would be held to the same standards as private
individuals. CompareReconstruction Finance Corp., 328 U.S. at 210, 66
S.Ct. at 995 (in subjecting federal corporation
to local real property taxes, Congress intended that "real property" be
defined under state laws),
with Mississippi Band of Choctaw Indians, 490 U.S. at 44-45, 109 S.Ct. at
1606-07 (because
Congress was concerned about the rights of Indian families vis-a-vis state
authorities, it was
unlikely that Congress would have intended to leave the scope of the
statute's key jurisdictional
provision subject to definition by state courts as a matter of state law).
The state law here does
not discriminate against the government, or run counter to the purposes of
the FTCA. SeeReconstruction Finance Corp., 328 U.S. at 210, 66 S.Ct. at
995. State law therefore should
govern.
         The primary focus of the government's brief, as well as of the
district court's oral
explanation of its decision, was on the 1966 amendment to the FTCA and on
the legislative
history that explains its purpose. Prior to 1966, the statute required
judicial approval of all
claims (not just those involving minors) where the government was to pay
more than $2,500.
P.L. 89-506. Congress eliminated the requirement of judicial approval in
1966, and the
legislative history is replete with statements about promoting quicker
settlements by doing away
with the necessity of court proceedings. See 1966 U.S.C.C.A.N. 2524.
Nothing in the statute or
the legislative history, however, indicates that Congress intended to
eliminate all possibility of
court proceedings, especially where the interests of minor children and
other incompetent
individuals were involved. Given that Congress was legislating against
the background of the
"ancient precept of Anglo-American jurisprudence" requiring court approval
of the settlement of
minor's claims, see Dacanay v. Mendoza, 573 F.2d 1075, 1079 (9th Cir.
1978), it would be
surprising if the 1966 amendment took away this longstanding protection
without comment.
Likewise, the implementing regulations contain no indication that
individuals otherwise
unauthorized to settle a claim alone (here, the parents) can nevertheless
settle a claim
administratively under the FTCA.
         We therefore hold that state law governs whether an individual
has the legal
authority to bind a claimant to an administrative settlement under the
FTCA.

         The government also contends that a rule requiring judicial
approval of minor's
settlements is impracticable, because there is no procedure in place by
which it could obtain
judicial approval. We do not find this argument compelling. That
judicial approval was required
for all administrative settlements before 1966 suggests that the
government is able to obtain such
approval when required.   Moreover, petitions to approve settlement of a
minor's claim are heard
routinely in both state and federal courts, and such petitions impose
little burden on courts or
parties. The parties to an administrative settlement of a minor's claim
need only follow the
procedures in place in either state or federal court for the approval of
minor's settlements.
         Finally, the government asserts that applying the state law
requirement of judicial
approval here allows Sharon to effectively toll the statute of limitations
based on her minority.
The government points to cases holding that the federal tort claims filing
period is not tolled for
minors. See e.g. Zavala v. United States, 876 F.2d 780, 783 (9th Cir.
1989); Jastremski v. United
States, 737 F.2d 666, 669 (7th Cir. 1984). But in this case, the six-
month limitations period
never began to run, because the agency did not formally deny the claim.
28 U.S.C. § 2401(b). If
the agency does not formally deny the claim, and has not finally disposed
of the claim within six
months after it was filed, "the claimant may wait indefinitely before
filing suit." Pascale v.
United States, 998 F.2d 186, 192-93 (3rd Cir. 1993); see also 28 U.S.C. §
2675(a) (claimant may
deem agency's failure to dispose of claim a denial of claim after six
months or at "any time
thereafter"). Here, the settlement was never judicially approved, and it
therefore is not final.
There was thus no final disposition of Sharon's claim, and the agency
never gave notice that the
claim was denied. Sharon retained the option to wait indefinitely, deem
the claim denied, and
file suit.
         The judgment of the district court is REVERSED and the matter is
REMANDED
for further proceedings consistent with this opinion. Costs awarded to
appellant.
