17-1599
   Esrey v. United States

                    UNITED STATES COURT OF APPEALS
                        FOR THE SECOND CIRCUIT

                            SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@).       A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.

        At a stated term of the United States Court of Appeals for
   the Second Circuit, held at the Thurgood Marshall United States
   Courthouse, 40 Foley Square, in the City of New York, on the
   5th day of January, two thousand eighteen.

   PRESENT: DENNIS JACOBS,
            REENA RAGGI,
            CHRISTOPHER F. DRONEY,
                 Circuit Judges.
   _____________________________________

   WILLIAM T. ESREY, RONALD T. LEMAY,
             Plaintiffs-Appellants,

             -v.-                                    17-1599

   UNITED STATES OF AMERICA,
            Defendant-Appellee.

   ____________________________________

   FOR PLAINTIFFS-APPELLANTS:   GEORGE M. CLARKE III (with
                                Mireille R. Oldak, Allison M. De
                                Tal, and Daniel A. Rosen on the
                                brief), Baker & McKenzie LLP,
                                Washington, D.C. and New York, NY.


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FOR DEFENDANT-APPELLEE:      ELIZABETH M. TULIS (with
                             Christopher Connolly on the
                             brief), Assistant United States
                             Attorneys, for Joon H. Kim, Acting
                             United States Attorney for the
                             Southern District of New York, New
                             York, NY.

     Appeal from a judgment of the United States District Court
for the Southern District of New York (Oetken, J.).

     UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.

     William Esrey and Ronald LeMay (“the plaintiffs”) appeal
from an order of the United States District Court for the
Southern District of New York (Oetken, J.) dismissing for lack
of subject matter jurisdiction their complaint against the
United States under the Federal Tort Claims Act (“FTCA”), 28
U.S.C. §§ 2671-80. On de novo review, we affirm. See Makarova
v. United States, 

, 113 (2d Cir. 2000). We assume
the parties’ familiarity with the underlying facts, the
procedural history, and the issues presented for review.

     The FTCA’s broad waiver of sovereign immunity for tort
claims against the government is subject to several exceptions.
See Kosak v. United States, 

, 851-52 (1984). As
relevant here, the FTCA does not waive sovereign immunity for
claims “arising out of . . . misrepresentation.” 28 U.S.C.
§ 2680(h). For purposes of this exception, “a
misrepresentation may result from the failure to provide
information, as well as from [the] provi[sion] [of] information
that is wrong.” Ingham v. E. Air Lines, Inc., 

,
239 (2d Cir. 1967) (emphasis added). And the exception
“applies to claims arising out of negligent, as well as
intentional, misrepresentation.” Block v. Neal, 

,
295 (1983).

     The plaintiffs’ complaint alleges that the Internal Revenue
Service (“IRS”), in violation of the laws of New York, aided
and abetted Ernst & Young (“EY”) in breaching a fiduciary duty
EY owed to the plaintiffs. Essentially, the plaintiffs claim
that the IRS took steps to conceal from the plaintiffs the fact

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that EY was the subject of a criminal investigation that created
a conflict of interest for EY in its representation of the
plaintiffs in a civil audit before the IRS. The plaintiffs
claim that they were injured by this concealment because, if
they had known at the time of their audit that EY was under
criminal investigation, they could have used that information
to (1) convince their then-employer, an EY client that
eventually terminated the plaintiffs over concerns arising from
the audit, to instead terminate EY; and (2) pursue their
arbitration claim against EY for fiduciary-duty breach in a more
cost-effective manner.

     “A plaintiff may not by artful pleading avoid [§ 2680(h)
of the FTCA].” Dorking Genetics v. United States, 

,
1265 (2d Cir. 1996). “In determining the applicability of the
§ 2680(h) exception, a court must look, not to the theory upon
which the plaintiff elects to proceed, but rather to the
substance of the claim which he asserts.” Lambertson v. United
States, 

, 443 (2d Cir. 1976).

     Although the plaintiffs style their claim as one for
“aiding and abetting a fiduciary-duty breach,” the gravamen of
that claim is that the IRS wrongfully withheld information from
them. Indeed, in their complaint, the plaintiffs allege that
they suffered their principal injuries because the “IRS . . .
helped EY to hide information” and “[a]s a result of . . . the
IRS’s active concealment” of its criminal investigation and
audit of EY’s tax practices. App’x at 8-9. The alleged
conduct that was “essential” to the plaintiffs’ claimed
injuries was the IRS’s non-communication of information.

. Accordingly, the claim “aris[es] out
of . . . misrepresentation” under 28 U.S.C. § 2680(h), and no
court is statutorily accorded jurisdiction to hear it.

     The plaintiffs attempt to evade the misrepresentation
exception by identifying two “non-concealment” acts that they
allege in their complaint. Appellant’s Br. at 24. First, they
point to allegations that the IRS removed the word “penalty”
from a press release regarding the IRS’s audit of EY. Second,
the plaintiffs contend that the IRS’s failure to prohibit EY


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from representing them in audit proceedings due to a conflict
of interest was not an act involving a representation.

     The plaintiffs’ arguments are unavailing. As to the first
argument, the allegation that the IRS decided to remove the word
“penalty” amounts to an allegation that the IRS misrepresented
to the public the nature of the IRS’s concern with EY’s tax
shelter practices. This claim centers on the “communication
of information on which the recipient relies,” and is therefore
barred by the misrepresentation exception. 

. Similarly, the plaintiffs’ second argument fails,
because the plaintiffs’ theory is that by failing to prohibit
EY from representing them, the “IRS . . . helped EY to hide
information from [the] Plaintiffs[,] knowing that such
information would have been critical to [the] Plaintiffs’
evaluation of whether to trust EY.” App’x at 8. This claim
too concerns communicating information to the plaintiffs, and
therefore the plaintiffs fail to allege “the breach of a
cognizable duty owed to [them] which is ‘distinct from any duty
to use due care in communicating information.’” Dorking

(quoting 

).

     We have considered the plaintiffs’ remaining arguments and
find them to be without merit. For the foregoing reasons, we
AFFIRM the judgment of the district court.

                        FOR THE COURT:
                        Catherine O’Hagan Wolfe, Clerk of Court




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