Harrington v. Sterling

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re: 	Chapter 7
EVERTON ALOYSIUS STERLING . 	Case No. 14-12608 (SHL)
Debtor.
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WILLIAM K. HARRINGTON
the UNITED STATES TRUSTEE, 	Adv. No. 15-01288 (SHL)
Plaintiff,
vs.
EVERTON ALOYSIUS STERLING,
Defendant.
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EVERTON ALOYSIUS STERLING ,
Third-Party Plaintiff,
vs.
JACOB LEW, SECRETARY OF THE
UNITED STATES TREASURY, YANN
GERON, TRUSTEE, FOX ROTHSCHILD
LLP, RICHARD J. FOX, OFFICE OF THE
UNITED STATES TRUSTEE, LORETTA E.
LYNCH, OFFICE OF THE UNITED STATES
DEPARTMENT OF JUSTICE, THOMAS J.
CURRY, OFFICE OF THE COMPTROLLER
OF CURRENCY, and John and/or Jane Doe
No. 1 to John and/or Jane Doe, No. 50 Inclusive,
the last 50 name persons Being unknown
to Petitioner/Plaintiff, the persons and
parties Intended being entities or corporations,
Third-Party Defendants.
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MEMORANDUM OF DECISION
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A P P E A R A N C E S:
UNITED STATES ATTORNEY FOR THE
SOUTHERN DISTRICT OF NEW YORK
Counsel for the Third-Party Federal Defendants
86 Chambers Street, Third Floor
New York, New York 10007
By: 	Emily E. Bretz, Esq.
Stephen Cha-Kim, Esq.
EVERTON A. STERLING
Pro Se
c/o General Post 341
Bronx, NY 10469-9998
UNITED STATES DEPARTMENT OF JUSTICE
OFFICE OF THE UNITED STATES TRUSTEE
201 Varick Street, Room 1006
New York, New York 10014
By: 	Andrea B. Schwartz, Esq.
FOX ROTHSCHILD LLP
Counsel for Chapter 7 Trustee
100 Park Avenue, Suite 1500
New York, New York 10017
By: 	Yann Geron, Esq.
SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
Before the Court is a motion (the “Motion”) [ECF No. 18] by the United States
Government (the “Government”) seeking to dismiss Mr. Sterling’s amended third-party
complaint (the “Amended Third-Party Complaint”) in the above-captioned adversary
proceeding [ECF No. 11]. 1 Mr. Sterling’s Amended Third-Party Complaint alleges that
certain named government officials negligently administered his Chapter 7 bankruptcy
case. Mr. Sterling claims that these individuals improperly denied him a discharge of his
1 	Unless otherwise specified, references to the Case Management/Electronic Case Filing (“ECF”)
docket are to this adversary proceeding.
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debts in his bankruptcy case and that he assigned his debts to the United States. The
Government’s Motion argues that Mr. Sterling’s lawsuit is barred by the doctrine of
sovereign immunity. The Government contends that the United States should be
substituted as the sole defendant pursuant to the Federal Tort Claims Act, but that Mr.
Sterling has failed to exhaust his administrative remedies for any such federal tort claims.
In addition, the Government asserts that Mr. Sterling’s Amended Third-Party Complaint
fails to state a claim. Mr. Geron, the Chapter 7 trustee and his counsel, Fox Rothschild
LLP, join in the Government’s request to dismiss the Amended Third-Party Complaint
for failure to state a claim. 2 For the reasons stated below, the Court grants the Motion
and dismisses the Amended Third-Party Complaint.
BACKGROUND
On September 15, 2014, Mr. Sterling filed a voluntary bankruptcy petition under
Chapter 7 of the Bankruptcy Code. See Voluntary Petition (Chapter 7) [Case No. 14-
12608, ECF No. 1]. On the same day, Yann Geron (the “Chapter 7 Trustee”) was
appointed as interim Chapter 7 Trustee and later was appointed as the permanent Chapter
7 Trustee pursuant to 11 U.S.C. § 702(d). See Complaint Objecting to Debtor’s
Discharge Pursuant to 11 U.S.C. §§ 727(a)(3), 727(a)(5), and 727(a)(6) (“Trustee
Compl.”) ¶ 15 [ECF No. 1]. 3 Shortly thereafter, Mr. Sterling filed his schedules of assets
and liabilities and statement of financial affairs. See Schedules [Case No. 14-12608, ECF
2 	See Joinder by Chapter 7 Trustee and his Counsel of Motion for an Order Dismissing Third-Party
Complaint (the “Joinder”) [ECF No. 28].
3 	These background facts are taken from the allegations in Mr. Sterling’s Amended Third-Party
Complaint, the Trustee’s Complaint, and filings in Mr. Sterling’s Chapter 7 bankruptcy case and this
adversary proceeding. For purposes of this Motion, all the allegations in Mr. Sterling’s Amended Third-
Party Complaint are accepted as true. The statements in the Trustee’s Complaint are not taken for their
truth but rather only as allegations to help explain the posture of this adversary proceeding and Mr.
Sterling’s bankruptcy case.
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Nos. 8, 10]; Statement of Financial Affairs [Case No. 14-12608, ECF No. 8-1]; see also
Trustee Compl. ¶ 11.
In October 2014, the Chapter 7 Trustee convened the first meeting of creditors.
See Notice of 341(a) Meeting of Creditors [Case No. 14-12608, ECF No. 5]; see also
Trustee Compl. ¶ 26. The United States Trustee alleges that, at the meeting, Mr. Sterling
was unable to clearly answer questions regarding where he had acquired the funds to
purchase one of the properties listed on Schedule A. See Trustee Compl. ¶¶ 27–29. The
United States Trustee alleges that Mr. Sterling claimed he had transferred the property to
the United States pursuant to 12 U.S.C. § 95. See id. ¶ 30. The United States Trustee
alleges that the Chapter 7 Trustee determined that he was unable to complete his
examination of Mr. Sterling and said he would inform Mr. Sterling of what information
would be needed at a later date. See id. ¶ 31.
In January 2015, the Chapter 7 Trustee convened the second meeting of
creditors. See id. ¶ 33. The United States Trustee alleges that Mr. Sterling refused to
answer any questions at that meeting, stating that he did not consent to the questions and
that the matter had been discharged pursuant to 12 U.S.C. § 95a(2). See id. Mr. Sterling
subsequently filed a number of documents purporting to convey ownership of his debts to
the United States. See Aff. of Fact and Surrender of the Alledge [sic] Debtor
Defendant/Legal Person/Legal Entity “Everton Aloysisus Sterling” (“Sterling Aff.”) at 1–
3 [Case No. 14-12608, ECF No. 34]; Birth Registration Documents of Everton Sterling
[Case No. 14-12608, ECF No. 34-1]; see also Trustee Compl. ¶ 34 (listing documents
filed with the Clerk’s Office). Several of these documents were sent to various
departments of the New York State government and the federal government. See Sterling
Aff. at 3.
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In April 2015, the United States Trustee filed a Bankruptcy Rule 2004 application
requesting various documents from Mr. Sterling, including federal and state tax returns,
pay statements, documents relating to applications for credit, loans, or letters of credit,
and books and records relating to any business in which Mr. Sterling had an interest. See
Application for FRBP 2004 Examination at 3 [Case No. 14-12608, ECF No. 37]; see also
United States Trustee’s Document Request, attached as Exh. B to Decl. of Richard Fox in
Support of the Application for FRBP 2004 Examination [Case No. 14-12608, ECF No.
37-1]. The Court granted the application and directed Mr. Sterling to appear for an oral
examination. See Order, dated May 13, 2015 [Case No. 14-12608, ECF No. 38]. The
United States Trustee alleges that Mr. Sterling failed to produce any of the documents
requested or explain his failure to do so and that he failed to appear for the oral
examination. See Trustee Compl. ¶¶ 40–41.
During his bankruptcy case, the Court granted relief from the automatic stay to
the note and mortgage holder as to three pieces of real property owned by Mr. Sterling.
See In re Everton Aloysius Sterling, 543 B.R. 385 (Bankr. S.D.N.Y. 2015). In that
decision, the Court rejected various legal theories asserted by Mr. Sterling, including but
not limited to his contention that he transferred his property to the United States under 12
U.S.C. § 95a(2) and his arguments associated with the so-called sovereign citizen
movement. See id. at 399–400.
In July 2015, the United States Trustee filed this adversary proceeding objecting
to Mr. Sterling’s discharge pursuant to Sections 727(a)(3), (a)(5), and (a)(6) of the
Bankruptcy Code, for his alleged failure to produce information regarding his financial
condition or business transactions, failure to account for the information contained in his
Chapter 7 petition, his schedules, and statement of financial affairs, and failure to appear
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for the oral examination. See Trustee Compl. ¶¶ 47–48, 51, 56–58. The merits of the
United States Trustee’s Complaint have not yet been adjudicated.
In August 2015, Mr. Sterling filed his Third-Party Complaint, which includes four
counterclaims. See Third-Party Compl. ¶¶ 24–35 [ECF No. 3]. The Third-Party
Complaint names four defendants: (1) William K. Harrington, “the Plaintiff Trustee in
the Adversarial Proceeding” (the “United States Trustee”);4 (2) Jacob Lew, Secretary of
the Treasury; (3) Yann Geron, Chapter 7 Trustee; and (4) Richard W. Fox, a former trial
attorney at the Office of the United States Trustee. See id. ¶¶ 3–6. The first claim alleges
that the United States Trustee negligently failed to afford Mr. Sterling relief from his
debts, as required by federal statutes, including 12 U.S.C. § 95(a)(2), 18 U.S.C. § 8, 31
U.S.C. § 3113, and House Joint Resolution (HJR) 192, June 5, 1933. See id. ¶¶ 14, 24–
25. The second claim alleges malfeasance by the United States Trustee for failing to
discharge Mr. Sterling’s debts, pursuant to the same laws that he cites to as a basis for the
negligence claim. See id. ¶¶ 26–28. The third claim alleges that the United States
Trustee breached his fiduciary duty by failing to discharge Mr. Sterling’s debts. See id.
¶¶ 29–32. Finally, the fourth claim alleges abuse of process by the United States Trustee
for failing to acknowledge Mr. Sterling’s affidavits in support of the discharge of his
debts. See id. ¶¶ 33–35. Mr. Sterling seeks relief in the form of indemnification and
discharge from his debt obligations. See id. ¶¶ 38–39.
Mr. Sterling subsequently filed the Amended Third-Party Complaint, which
added Loretta E. Lynch, United States Attorney General, and Thomas J. Curry,
4 	Mr. Sterling did not name Mr. Harrington as a defendant in the caption of his Third-Party
Complaint, but Mr. Harrington is referred to by name within the body of the Third-Party Complaint. See
Third-Party Compl. ¶ 3.
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Comptroller of the Currency, as third-party defendants. See Amended Third-Party
Compl. ¶¶ 7–8. While not explicitly stated in the Amended Third-Party Complaint, it
appears that Mr. Sterling alleges negligence by the Attorney General and the Office of
the Comptroller of the Currency (the “OCC”) for failing to ensure his debts were
discharged. See id. ¶¶ 26–34.5 Mr. Sterling also contends that the United States Trustee
erred by failing to include the Secretary of the Treasury, the Attorney General, the
Department of Justice, and the OCC in its complaint as proper parties and that it
misapplied the Bankruptcy Code in denying Mr. Sterling the discharge of his debts. See
Third-Party Compl. ¶ 34; Amended Third-Party Compl. ¶¶ 45–46.
The Government filed its Motion seeking dismissal of Mr. Sterling’s Amended
Third-Party Complaint for lack of subject matter jurisdiction and failure to state a claim
under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), respectively. See Motion
at 7. As an initial matter, the Government argues that Mr. Sterling’s claims against these
federal employees acting in their official capacity sound in tort and, therefore, he is
required to bring such claims under the Federal Tort Claims Act (the “FTCA”). See id. at
5–6. Under the FTCA, the Government argues that it should be substituted as the sole
defendant, and such FTCA claims are barred for lack of subject matter jurisdiction
because Mr. Sterling failed to first exhaust his administrative remedies as required under
28 U.S.C. § 2675(a). See id. at 5–6, 10–11. As part of its Motion, the Government filed
declarations from representatives for the OCC, the Department of Justice, the Department
of the Treasury, and the Office of the United States Trustee, with each declaration stating
5 	Mr. Sterling’s Amended Third-Party Complaint contains the same allegations as those in his
original Third-Party Complaint, in addition to adding two defendants, the United States Attorney General
and Office of the Comptroller of the Currency, as discussed above. The Court will cite to both the original
Third-Party Complaint and the Amended Third-Party Complaint, as appropriate.
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that none of these agencies had received notice of a claim under the FTCA from Mr.
Sterling. See Decl. of Beth Ann Reisberg (“Reisberg Decl.”) ¶ 6 [ECF No. 19]; Decl. of
Elijah Jenkins (“Jenkins Decl.”) ¶ 3 [ECF No. 20]; Decl. of Brian J. Sonfield (“Sonfield
Decl.”) ¶ 2 [ECF No. 21]; Decl. of Paul Bridenhagen (“Bridenhagen Decl.”) ¶ 4 [ECF
No. 26]. The Government also argues that Mr. Sterling fails to state a claim for
negligence, abuse of process, breach of fiduciary duty, or malfeasance under New York
law. See Motion at 13–18. The Government notes that Mr. Sterling’s claims rely
primarily on “redemptionist” or “sovereign citizen” legal theories that have consistently
been rejected by courts. See id. at 13–15. Finally, the Government argues that Mr.
Sterling’s malfeasance claim to the extent it alleges any sort of misrepresentation or
deceit, and his abuse of process claim, are barred for lack of subject matter jurisdiction
because the FTCA does not waive the Government’s sovereign immunity for such
intentional torts. See id. at 9–10.
Mr. Sterling subsequently filed a motion to strike, which the Court will treat as an
opposition to the Motion. See Motion to Strike [ECF No. 36]. Mr. Sterling argues that
the Government should not be substituted as the defendant because he asserts claims
against the individually named defendants, not the United States. See id. at 2, 15.6 Mr.
Sterling also urges that the declarations submitted by the Government should not be
admitted, arguing that those individuals lack the knowledge or standing to submit such
evidence. See id. at 2, 12–13.
6 	The Motion to Strike is not paginated and thus, for purposes of clarity, the Court refers to the ECF
page numbers associated with the Motion.
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DISCUSSION
A. Legal Standards
Federal Rule of Civil Procedure 12(b)(1), applicable to bankruptcy proceedings
under Federal Rule of Bankruptcy Procedure 7012(b), provides for dismissal for lack of
subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1); Fed. R. Bankr. P. 7012(b). As
the party seeking to invoke the jurisdiction of the court, the plaintiff bears the burden of
establishing subject matter jurisdiction. See Makarova v. United States, 201 F.3d 110,
113 (2d Cir. 2000). Dismissal for lack of subject matter jurisdiction is appropriate when
the “court lacks the statutory or constitutional power to adjudicate it.” Id. “When
considering a motion to dismiss for lack of subject matter jurisdiction . . . a court must
accept as true all material factual allegations in the complaint.” Shipping Fin. Servs.
Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998). In addition, a court “may consider
affidavits and other materials beyond the pleadings to resolve the jurisdictional question.”
Margiotta v. Kaye, 283 F. Supp. 2d 857, 861 (E.D.N.Y. 2003).
“It is axiomatic that the United States may not be sued without its consent and
that the existence of consent is a prerequisite for jurisdiction.” United States v. Mitchell,
463 U.S. 206, 212 (1983). The FTCA, however, waives the sovereign immunity of the
United States for tort claims by providing jurisdiction in the federal courts for:
claims against the United States, for money damages . . . for . . . injury or
loss of property, or personal injury or death caused by the negligent or
wrongful act or omission of any employee of the Government while acting
within the scope of his office or employment, under circumstances where
the United States, if a private person, would be liable to the claimant in
accordance with the law of the place where the act or omission occurred.
28 U.S.C. § 1346(b)(1); see also 28 U.S.C. § 2674 (“The United States shall
be liable, respecting the provisions of this title relating to tort claims, in the
same manner and to the same extent as a private individual under like
circumstances.”).
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Liranzo v. United States, 690 F.3d 78, 85 (2d Cir. 2012). The FTCA provides the
exclusive remedy for such claims. See 28 U.S.C. § 2679(b)(1); see also Carelock v.
United States, 2015 WL 5000816, at *4 (S.D.N.Y. Aug. 20, 2015) (“Under the FTCA,
the exclusive remedy for personal injury arising or resulting from the negligent or
wrongful act or omission of any employee of the Government while acting within the
scope of his office or employment is a lawsuit against the United States.”) (internal
quotations and citation omitted). The FTCA waiver of sovereign immunity includes
claims of negligence committed by federal employees in the course of their employment.
See Dolan v. U.S. Postal Serv., 546 U.S. 481, 484 (2006); 28 U.S.C. § 1346(b)(1). “The
United States’ waiver of immunity under the FTCA ‘is to be strictly construed in favor of
the government.’” Liranzo, 690 F.3d at 84 (quoting Long Island Radio Co. v. NLRB, 841
F.2d 474, 477 (2d Cir. 1988)).
“When federal employees are sued for damages for harms caused in the course of
their employment, the [FTCA] generally authorizes substitution of the United States as
the defendant.” Hui v. Castaneda, 559 U.S. 799, 801 (2010). “The FTCA, however,
precludes tort suits against federal agencies. The only proper federal institutional
defendant in such an action is the United States.” Rivera v. United States, 928 F.2d 592,
609 (2d Cir. 1991) (citing 28 U.S.C. § 2679(a)). The Attorney General is authorized
under 28 U.S.C. § 2679(d) to certify that a federal employee named in a civil suit was
acting within the scope of his or her employment when performing the conduct that
serves as the basis for the suit. See 28 U.S.C. § 2679(d)(1). On certification, the United
States is substituted as the party defendant. See id.; Osborn v. Haley, 549 U.S. 225, 241
(2007). Assuming officials were acting within the scope of government business, courts
have regularly upheld certifications for substitution under the FTCA, even for intentional
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conduct. See, e.g., Asto v. Mirandona, 372 F. Supp. 2d 702, 710 (E.D.N.Y. 2005)
(finding, based on the record, “any allegedly defamatory statements made by [the federal
employee] were made within the scope of his employment,” and upholding certification
by the United States Attorney and concluding the United States was properly substituted
as the party defendant).
Before filing a federal tort claim against the Government, the FTCA requires that
a plaintiff exhaust his or her administrative remedies by presenting the claim to the
appropriate federal agency and having the agency render a decision on that claim. See 28
U.S.C. § 2675(a). The relevant federal regulation provides that
a claim shall be deemed to have been presented when a Federal agency
receives from a claimant, his duly authorized agent or legal representative,
an executed Standard Form 95 or other written notification of an incident,
accompanied by a claim for money damages in a sum certain for injury to
or loss of property, personal injury, or death alleged to have occurred by
reason of the incident . . . .
28 C.F.R. § 14.2(a). As the Supreme Court has observed, the presentment requirement of
Section 2675 is intended to increase the judicial system’s efficiency by offering agencies
the opportunity to resolve claims before they reach the courts. See McNeil v. United
States, 508 U.S. 106, 111–12 (1993); S. Rep. No. 89-1327, at 2 (1966), as reprinted in
U.S.C.C.A.N. 2515, 2516 (the claim exhaustion requirement is intended to “ease court
congestion and avoid unnecessary litigation, while making it possible for the Government
to expedite the fair settlement of tort claims asserted against the United States.”).
Accordingly, “[a]ny limitations imposed by the waiver statute, whether they be
substantive, procedural, or temporal, are to be strictly applied against the claimant.”
Millares Guiraldes de Tineo v. United States, 137 F.3d 715, 719 (2d Cir. 1998).
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Federal Rule of Civil Procedure 12(b)(6), is also applicable under Federal Rule of
Bankruptcy Procedure 7012. It provides that a complaint must be dismissed if it fails to
state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). Courts
deciding a motion to dismiss for failure to state a claim must accept all factual allegations
as true and draw all reasonable inferences in favor of the non-moving party. See Ganino
v. Citizens Utilities Co., 228 F.3d 154, 161 (2d Cir. 2000); Hilaturas Miel, S.L. v.
Republic of Iraq, 573 F. Supp. 2d 781, 797 (S.D.N.Y. 2008). “To survive a motion to
dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “[T]his does not mean
that a claim must contain detailed factual allegations to survive a Rule 12(b)(6) motion to
dismiss.” Eastman Chem. Co. v. Nestle Waters Mgmt. & Tech., 2012 WL 4474587, at *4
(S.D.N.Y. Sept. 28, 2012) (internal quotations and citation omitted). Rather, a claim is
facially plausible “when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal,
556 U.S. at 678 (citing Twombly, 550 U.S. at 556). Whether a claim is facially plausible
is a “context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 679. Meeting the plausibility standard requires a
complaint to plead facts that show “more than a sheer possibility that a defendant has
acted unlawfully.” Id. at 678. “A pleading that offers labels and conclusions or a
formulaic recitation of the elements of a cause of action will not do.” Id. (internal
quotations and citation omitted). Likewise, “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing
Twombly, 550 U.S. at 555).
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In determining whether to dismiss a case under Rule 12(b)(6), courts may
consider documents incorporated by reference or attached to the complaint as well as
“documents either in plaintiffs’ possession or of which plaintiffs had knowledge and
relied on in bringing suit.” Halebian v. Berv, 644 F.3d 122, 130 n.7 (2d Cir. 2011)
(citation omitted). “Although ‘complaints drafted by pro se plaintiffs are to be construed
liberally, [ ] they must nonetheless be supported by specific and detailed factual
allegations sufficient to provide the court and the defendant with’ a fair understanding of
the conduct at issue and the basis for recovery.” In re Residential Capital, LLC, 2013
WL 5273128, at *4 (Bankr. S.D.N.Y. Sept. 18, 2013) (quoting Kimber v. GMAC Mortg.,
LLC (In re Residential Capital, LLC), 489 B.R. 489, 494 (Bankr. S.D.N.Y. 2013); see
also Barone v. United States, 2014 WL 4467780, at *5 (S.D.N.Y. Sept. 10, 2014) (stating
the court is required to construe a pro se plaintiff’s allegations liberally but
“[n]onetheless, pro se plaintiffs must satisfy the requirement of Rule 12(b)(6) that the
complaint must be plausible on its face.”).
B. The Amended Third-Party Complaint Must be Dismissed Given Sovereign
Immunity and the Failure to Exhaust Under the FTCA
In his Amended Third-Party Complaint and subsequent filings, Mr. Sterling
maintains that he has no claims against the Government, nor any claim under the FTCA.
See Third-Party Compl. ¶¶ 3–6, 24–35; Amended Third-Party Compl. ¶¶ 3–8; Motion to
Strike at 2, 10, 15. Instead, he argues that he has claims against individual government
officials for actions related to the administration of his Chapter 7 bankruptcy filing. See
Third-Party Compl. ¶¶ 3–6, 24–35; Amended Third-Party Compl. ¶¶ 3–8, 16–17, 35–46;
Motion to Strike at 2, 10, 15.
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For its part, the Government requests that the Court certify under the FTCA that
the defendants United States Trustee Harrington, Attorney General Lynch, Comptroller
Curry, Secretary Lew, and Mr. Fox acted in their official capacities under 28 U.S.C. §
2679(d)(3). This section allows an employee to petition the court to find and certify that
the employee was acting within the scope of his or her office or employment. See B & A
Marine Co. v. Am. Foreign Shipping Co., 23 F.3d 709, 715 (2d Cir. 1994) (“[I]n the
absence of a certification by the Attorney General, the statute [28 U.S.C. § 2679] permits
the court to certify.”) (citing 28 U.S.C. § 2679(d)(3)); see also Cates v. Williams, 2009
WL 723021, at *5 (S.D.N.Y. Mar. 19, 2009) (“An express petition for certification is not
required and a brief on behalf of named defendants may serve as a petition to certify that
they were employees acting within the scope of their employment.”).
The Court finds that such certification is proper here. The Amended Third-Party
Complaint only alleges negligent or wrongful conduct by these individuals while acting
in the scope of their employment as Government employees.7 For example, Count I
alleges negligence by the United States Trustee for failure to execute certain laws in the
administration of Mr. Sterling’s bankruptcy case. See Amended Third-Party Compl. ¶¶
35–36; Third-Party Compl. ¶¶ 24–25. Similarly, Count II alleges malfeasance by the
United States Trustee in his “official duty,” and Count III alleges a breach of fiduciary
duty by the United States Trustee, stating he may be sued in his “official capacit[y]” as
the representative of the estate. See Amended Third-Party Compl. ¶¶ 37–43; Third-Party
Compl. ¶¶ 26–32. Finally, Count IV alleges abuse of process for the United States
7 	The Government’s Motion states that the U.S. Attorney would be willing to provide the
certification itself if the Court so requests. See Motion at 7 n.8. But the Court concludes that such a step is
not necessary given that the Amended Third-Party Complaint only alleges conduct by federal employees
within the scope of their employment.
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Trustee’s supposed “misapplication” of the Bankruptcy Code. See Amended Third-Party
Compl. ¶¶ 44–46; Third-Party Compl. ¶¶ 33–35. As all of these claims complain of
negligent or wrongful acts by federal employees acting within the scope of their
employment, Mr. Sterling’s sole remedy is a suit against the United States. See 28
U.S.C. §§ 1346(b)(1), 2679(b)(1); see also Castro v. United States, 34 F.3d 106, 110 (2d
Cir. 1994) (“[A] claimant's exclusive remedy for nonconstitutional torts by a government
employee acting within the scope of his employment is a suit against the government
under the FTCA.”). Therefore, the Court agrees that the United States must be
substituted as the defendant pursuant to 28 U.S.C. § 2679(d).
Properly construing Mr. Sterling’s Amended Third-Party Complaint as a tort
claim against the United States, the FTCA requires that he present his claims to the
proper agency before filing a suit in civil court. See 28 U.S.C. § 2675(a). This
requirement is jurisdictional. See Vailette v. Lindsay, 2014 WL 4101513, at *5
(E.D.N.Y. Aug. 18, 2014). Accompanying the Motion, the Government submitted
declarations from each agency that Mr. Sterling named as defendants, confirming that
Mr. Sterling has not submitted an administrative claim to that agency pursuant to 28
U.S.C. § 2675(a). See Reisberg Decl. ¶ 6; Jenkins Decl. ¶ 3; Sonfield Decl. ¶ 2;
Bridenhagen Decl. ¶ 4. These declarations confirm that none of the individuals or
agencies named as defendants received “an executed Standard Form 95 or other written
notification of an incident, accompanied by a claim for money damages in a sum certain”
as required under federal regulations. 28 C.F.R. § 14.2(a). Mr. Sterling’s failure to
submit a claim is critical given that the Second Circuit has noted that this requirement
must be “adhered to strictly.” Keene Corp. v. United States, 700 F.2d 836, 841 (2d Cir.
1983).
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The only submission that Mr. Sterling appears to have made to a federal agency is
one to the OCC, which appears to have simply received a copy of a state court filing
made in the matter of 222 Funding Associates v. Latou Realty Corp., Everton, Sterling,
et. al., in the Supreme Court of the State of New York, Bronx County, titled “ALL
ASSETS IN THE NAME OF LATOU REALTY CORP., EVERTON STERLING/,
SECURED PARTY INTERST HAS BEEN ASSIGNED TO THE UNITED STATES OF
AMERICA PURSUANT TO 12 U.S.C. 95 a §2.” See Reisberg Decl. ¶ 7. While Mr.
Sterling’s submission to the OCC stated that he assigned his debts to the United States,
Mr. Sterling did not include information necessary to administer his claim. See Reisberg
Decl. ¶ 11.
The materials sent to the OCC fail to meet the legal requirements for a claim in
several respects. First, the material sent to the OCC lacks any context regarding its
content or why the OCC received it. See Reisberg Decl. ¶¶ 7, 10–11. Second, the
material lacks any detailed information about the content of the alleged claim and indeed
it is not entirely clear how it relates to the Amended Third-Party Complaint allegations
against the United States Trustee. See id. ¶¶ 7, 10–11. Before the OCC could attempt to
investigate Mr. Sterling’s claim, therefore, it would first have to determine what the
materials were, investigate their relationship to the OCC, and determine why Mr. Sterling
submitted them. Putting the burden of such an investigation on the OCC or any other
agency would require a substantial reallocation of resources from normal agency
objectives and activities to the investigation of FTCA claims. See Santiago-Ramirez v.
Sec’y of Dep’t of Defense, 984 F.2d 16, 19 (1st Cir. 1993) (stating to satisfy notice
requirement under Section 2675, the agency “must have enough information that it may
reasonably begin an investigation of the claim.”); Warren v. U.S. Dep’t of Interior
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Bureau of Land Mgmt., 724 F.2d 776, 780 (9th Cir. 1984) (stating Section 2675(a)
“requires the claimant . . . to file (1) a written statement sufficiently describing the injury
to enable the agency to begin its own investigation, and (2) a sum certain damages
claim.”). Courts have consistently rejected excusing the claim exhaustion requirement in
instances like this. See, e.g., Yunkeung Lee v. United States, 570 F. App’x 26, 27 (2d Cir.
2014) (finding plaintiff did not exhaust administrative remedies under Section 2675(a)
where he did not respond to multiple requests for supporting documentation and had only
provided the agency with “conclusory statements”); White-Squire v. U.S. Postal Serv.,
592 F.3d 453, 455, 458 (3d Cir. 2010) (rejecting an exception to the claim exhaustion
requirement where the claimant did not submit complete information regarding the sum
of her claim).
Therefore, because the claim exhaustion requirement is jurisdictional, and Mr.
Sterling has failed to meet it, the Court lacks subject matter jurisdiction over the claims in
the Amended Third-Party Complaint. See, e.g., Mohamed v. F.B.I., 2015 WL 6437369,
at *6 (S.D.N.Y. Oct. 21, 2015) (concluding it lacked jurisdiction over FTCA claims
because the pro se plaintiff did not exhaust his administrative remedies before filing suit),
appeal filed (2d Cir. Nov. 20, 2015). 8
C. The Amended Third-Party Complaint Must be Dismissed for Failure to State
a Claim Upon Which Relief Can be Granted
Even if the Court were somehow to excuse Mr. Sterling from the FTCA’s claim
exhaustion requirement, the Amended Third-Party Complaint must still be dismissed for
8 	The Court notes that as to Mr. Sterling’s abuse of process claim, the United States also has not
waived its sovereign immunity for such an intentional tort claim and it must be dismissed for lack of
subject matter jurisdiction. See 28 U.S.C. § 2680(h); see also Wilson v. United States, 959 F.2d 12, 14 (2d
Cir. 1992) (citing statute).
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failure to state a claim. To successfully plead a claim to relief, a complaint must state on
its face sufficient facts to establish “more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678. As a threshold matter, all of Mr. Sterling’s
complaints relate to the denial of his discharge in his bankruptcy case. See Third-Party
Compl. ¶¶ 24–35; Amended Third-Party Compl. ¶¶ 35–46. But the question of whether
he is eligible to receive a discharge has not yet been decided; the United States Trustee
has filed this adversary proceeding seeking to deny him a discharge but the merits of the
non-dischargeability lawsuit have not yet been litigated by this Court. See Trustee
Compl. ¶¶ 43–48, 50–51, 53–58 (relying on Sections 727(a)(3), (a)(5), and (a)(6) of the
Bankruptcy Code to deny Mr. Sterling a discharge); cf. Binder & Binder, P.C. v. Finnie
(In re Finnie), 2007 Bankr. LEXIS 1895, at *26 (Bankr. S.D.N.Y. May 29, 2007) (stating
that because plaintiff sought “a remedy that is, at best, contingent on future and uncertain
developments, its cause of action against the [d]ebtor does not present a ripe controversy
and should be dismissed.”).
Moreover, Mr. Sterling’s claims are fatally flawed as a matter of law. Mr.
Sterling relies on several statutes and other authority that are common to arguments
asserted by sovereign citizen groups. See Third-Party Compl. ¶¶ 7, 14–15, 17; Amended
Third-Party Compl. ¶¶ 9, 16–17, 19, 31, 48. Courts have uniformly rejected such
arguments. See Paul v. New York, 2013 WL 5973138, at *3 (E.D.N.Y. Nov. 5, 2013)
(rejecting plaintiff’s contentions and holding that “sovereign citizens” are “subject to the
laws of the jurisdiction in which they reside”) (citation omitted) (citing cases); see also
Gauthier v. Kirkpatrick, 2013 WL 6407716, at *17 n.18 (D. Vt. Dec. 9, 2013) (noting
courts have described sovereign citizen ideology as “completely without merit,” “patently
frivolous,” and “having no conceivable validity in American law”) (citations omitted).
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This Court has previously addressed and rejected Mr. Sterling’s sovereign citizen
arguments in his underlying bankruptcy case. See In re Everton Aloysius Sterling, 543
B.R. at 399 n.9 (finding Mr. Sterling’s arguments to be similar to those raised by
proponents of the sovereign citizen movement and stating “[s]uch arguments have been
uniformly rejected by the courts.”).
Indeed, some of the arguments raised by Mr. Sterling in his Amended Third-Party
Complaint are the same ones that were specifically addressed and rejected in the Court’s
prior decision. For example, in his Amended Third-Party Complaint, Mr. Sterling
frequently cites 12 U.S.C. § 95a(2). See Amended Third-Party Compl. ¶¶ 9, 16, 17, 19,
31, 48; see also Third-Party Compl. ¶¶ 7, 14–15, 17. But this statute is omitted from the
current version of the United States Code. Even before it was omitted, however, the
statute related to the President’s authority to regulate transactions involving foreign
parties during times of war. See In re Everton Aloysius Sterling, 543 B.R. at 399;
Whitfield v. Lopez, 2015 WL 6128866, at *4 (E.D.N.Y. Oct. 16, 2015) (concluding
plaintiff did not have a right of action under Section 95a(2) as that statute authorized “the
President of the United States to regulate foreign transactions during war time” and
dismissing plaintiff’s claims under that statute as frivolous). Mr. Sterling’s claims do not
involve foreign parties, nor do they relate to an international conflict.
Mr. Sterling is no more successful in his reliance on 18 U.S.C. § 8. That statute
addresses what constitutes an obligation or other security of the United States:
The term “obligation or other security of the United States” includes all
bonds, certificates of indebtedness, national bank currency, Federal Reserve
notes, Federal Reserve bank notes, coupons, United States notes, Treasury
notes, gold certificates, silver certificates, fractional notes, certificates of
deposit, bills, checks, or drafts for money, drawn by or upon authorized
officers of the United States, stamps and other representatives of value, of
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whatever denomination, issued under any Act of Congress, and canceled
United States stamps.
18 U.S.C. § 8; see Third-Party Compl. ¶¶ 7, 14–15, 17; Amended Third-Party Compl. ¶¶
9, 16, 17, 19, 31, 48. As this statute applies only to publicly issued obligations, it does
not relate to any private obligation held by Mr. Sterling. Indeed, Mr. Sterling presents no
plausible explanation as to why and how the United States would assume his personal
debt obligations. See Third-Party Compl. ¶¶ 10–11, 13–16; Amended Third-Party
Compl. ¶¶ 15, 18, 30–32; Motion to Strike at 12; cf. In re Everton Aloysius Sterling, 543
B.R. at 399 (rejecting Mr. Sterling’s argument that he had transferred all his property to
the United States where his “proof” of the transfer was various documents and UCC
filings he had prepared, published and recorded alleging that he assigned property to the
United States of America).
A third statute Mr. Sterling cites is 31 U.S.C. § 3113(a), which provides in part
that “the people of the United States” may “make gifts to the United States Government
to be used to reduce the public debt . . . .” 31 U.S.C. § 3113(a); see Third-Party Compl.
¶¶ 7, 14–15, 17, 37; Amended Third-Party Compl. ¶¶ 9, 16, 17, 19, 31, 48. The statute
also provides that “[t]he Secretary and the Administrator each may reject a gift under this
section when the rejection is in the interest of the Government.” 31 U.S.C. § 3113(b).
The Court cannot fathom how this statute would support Mr. Sterling’s claim that the
United States Government is somehow responsible for his debts. Finally, Mr. Sterling
cites House Joint Resolution (HJR) 192, June 5, 1933, which relates to the exchange of
Federal Reserve notes for gold. See Third-Party Compl. ¶¶ 7, 14–15, 17, 37; Amended
Third-Party Compl. ¶¶ 9, 16, 17, 19, 31, 48. Once again, however, this joint resolution
does not relate to the debts of Mr. Sterling.
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Thus, whether taken individually or together, these legal authorities do not
support in any way Mr. Sterling’s claim that the United States Government—or the
named individual defendants—improperly denied him a discharge or otherwise
improperly failed to recognize that he had transferred his debts to the United States. Nor
has Mr. Sterling even attempted to set forth the elements under New York law for the tort
theories in his Amended Third-Party Complaint. Thus, Mr. Sterling has failed to allege
any plausible claims against the individual Government defendants, Mr. Geron, and his
counsel Fox Rothschild. See Amended Third-Party Compl. ¶¶ 35–46; see also Iqbal, 556
U.S. at 678. As Mr. Sterling has failed to state a claim upon which relief can be granted
the Amended Third-Party Complaint must be dismissed under Rule 12(b)(6). See Megna
v. Food & Drug Admin., 2009 WL 749900, at *1 (E.D.N.Y. Mar. 17, 2009), aff'd sub
nom. Megna ex rel. Megna v. Food & Drug Admin., 377 F. App'x 113 (2d Cir. 2010)
(dismissal of claim was proper where no federal cause of action existed to support the
claim).
CONCLUSION
For the reasons stated above, the claims in the Amended Third-Party Complaint
are barred by the doctrine of sovereign immunity and fail to state claims for which relief
can be granted. Therefore, the Court grants the Government’s motion to dismiss and the
relief requested in the Joinder. The Government shall submit a proposed order consistent
with this Decision. The proposed order must be submitted by filing a notice of the
proposed order on the Case Management/Electronic Case Filing docket, with a copy of
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the proposed order attached as an exhibit to the notice. A copy of the notice and
proposed order shall also be served upon Mr. Sterling.
Dated: New York, New York
October 19, 2016
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
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