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CAPITAL BONDING CORP v. DEPARTMENT OF HOMELAND SECURITY

United States District Court, E.D. Pennsylvania


March 18, 2004.

CAPITAL BONDING CORPORATION, Plaintiff
v.
DEPARTMENT OF HOMELAND SECURITY, As successor in interest to The Immigration and Naturalization Service, ROBERT P. WIEMANN, as Director of the Administrative Appeals Office of the Immigration and Naturalization Service, ASA HUTCHINSON, as Under Secretary for Border and Transportation Security in Department of Homeland Security, and ROBERT BEVILACQUA, as Director of Debt Management of the Immigration and Naturalization Service Now Part of the Office of Administration within the Department of Homeland Security, Defendants

The opinion of the court was delivered by: JAMES KNOLL GARDNER, District Judge

OPINION

This matter is before the court on Defendants' Motion to Dismiss Amended Complaint and Supporting Memorandum of Law filed August 27, 2003.*fn1 Defendants seeks to dismiss plaintiff's Complaint because they contend that the claims presented are mooted by two Settlement Agreements*fn2 entered into by the parties. In the alternative, defendants claim that this court lacks jurisdiction over the matter, and that plaintiff's claims may only be raised before the United States Court of Federal Claims. Finally, defendants argue that Count IV of plaintiff's Complaint fails to state a claim upon which relief may be granted.

  Because we conclude that plaintiff's attempt to invalidate the settlement contract between the parties must be resolved before the merits of Counts I through III of plaintiff's Complaint may be addressed, and because Page 3 jurisdiction over the settlement contracts lies with the United States Court of Federal Claims, we transfer plaintiff's claims concerning the settlement agreements to the Court of Federal Claims. We further conclude that Count IV of plaintiff's Complaint raises a nonjusticiable issue, and, therefore, fails to state a claim upon which relief may be granted. Accordingly, we dismiss Count IV. Finally, because the Court of Federal Claims must resolve issues pertaining to the validity of the Settlement Agreements before we may address Counts I through III, we place the remainder of this action in civil suspense pending further Order of the undersigned. After the Court of Federal Claims has resolved the issue of the validity of the Settlement Agreements, the undersigned will reactivate this case from civil suspense.

  PROCEDURAL HISTORY

  Plaintiff Capital Bonding Corporation ("Capital") commenced this civil action on March 21, 2003 by filing a five-count Complaint against defendant Department of Homeland Security ("DHS") and defendant Robert P. Wiemann, Director of the Administrative Appeals Office of the Immigration and Naturalization Service ("INS"). This initial Complaint averred breach of contract, breach of the duties of good faith and fair dealing, promissory estoppel, unjust enrichment, and Page 4 fraud in the inducement. On May 27, 2003 defendants*fn3 responded to plaintiff's initial Complaint by filing a motion to dismiss.

  On June 9, 2003 Plaintiff filed an Amended Complaint. In the Amended Complaint, plaintiff added defendants Asa Hutchinson, Under Secretary for Border and Transportation Security in Department of Homeland Security, and Robert Bevilacqua, Director of Debt Management of the INS.

  The Amended Complaint contains four counts. These counts are styled: (I) Judicial Review of AAO Decisions; (II) Judicial Review of the Agency's Failure to Acknowledge Validity of Defenses on Bonds Associated With File Review; (III) Judicial Review Based on the Congressional Review Act; and (IV) Review of Agency's Failure to Enact Suggested Reforms. Although it is not listed as a count, plaintiff also seeks a declaratory judgment that two Settlement Agreements entered by plaintiff and the government are voidable by plaintiff. Plaintiff contends that federal question jurisdiction is conferred on the court by the following statutes: 5 U.S.C. § 701-706; 28 U.S.C. § 1331; and 28 U.S.C. § 2201-2202. Page 5

  Defendants filed the within motion to dismiss plaintiff's Amended Complaint on August 27, 2003.

  FACTS

  Based upon the allegations in plaintiff's Amended Complaint, the following are the pertinent facts.*fn4 Capital and its agents, on behalf of sureties Frontier Insurance Company, Connecticut Indemnity Company, Highland Insurance Company, Aegis Security Insurance Company, and HARCO National Insurance Company, posted many immigration bonds with DHS.*fn5 Capital and the surety companies were co-obligors on these immigration bonds.*fn6 Capital was and is responsible for performing the duties set forth in the bonds.*fn7

  Over 98% of the bonds are "delivery" bonds under which DHS has a right to demand an alien's surrender at a specified location, at a specified time.*fn8 If Capital fails to Page 6 produce an alien as required, the bond is considered to be breached.*fn9 Page 7

  If the government sends a notice of breach to Capital, then Capital has 30 days in which to file an administrative appeal with the Administrative Appeals Office (AAO).*fn10 In an appeal to the AAO, Capital may assert a number of defenses.*fn11 If a defense is determined to be valid, then the bond may be cancelled or the breach rescinded.*fn12

  In the event that Capital fails to appeal, the defenses are rejected by the AAO, or the AAO dismisses the appeal, then DHS sends notice of the breach to the office of Debt Management and Collection, which then sends an invoice to Capital.*fn13

  Capital claims that there have been numerous occasions when the AAO has rejected a valid defense. In 2001 Capital had a number of these unpaid invoices on breached Page 8 immigration bonds.*fn14 Because Capital believed that it had a number of meritorious defenses to many of these invoices, Capital in November 2001 requested DHS to conduct a review of a sampling of the breached invoices.*fn15 Page 9

  In August 2002 Capital and DHS*fn16 entered into a settlement Agreement ("2002 Agreement") whereby Capital was to pay DHS an initial payment of $3,000,000 in six semi-monthly payments of $500,000.*fn17 Under the 2002 Agreement, Capital was to make additional payments of $500,000 monthly until any additional amount due was satisfied.*fn18 Finally, Capital and DHS agreed to conduct a joint review of a sample of the breached bonds to determine the percentage of breached bonds to which Capital had a valid defense.*fn19

  Capital and DHS conducted the file review during September 2002.*fn20 The 2002 Agreement required that the parties "attempt to jointly determine the actual amount" Capital owed the government.*fn21 In the event the parties could not agree, DHS was to make a good faith determination of Capital's liability.*fn22 Page 10

  Capital and the government did not reach an agreement concerning Capital's liability.*fn23 Capital argued that its liability should have been reduced by 35%.*fn24 The government contended that Capital's liability should be reduced by 18%.*fn25

  On February 21, 2003 Capital and DHS entered in an additional Agreement ("2003 Agreement") which altered the payment schedule.*fn26

  Capital contends that it is not required, and is unable, to pay the government for the breached bonds. Plaintiff claims that the government has failed to credit it for cases with applicable, valid defenses and has breached bonds when Capital has, in fact, surrendered the alien in question.

  STANDARD FOR MOTION TO DISMISS Page 11

  When considering a motion to dismiss, the court must accept as true all factual allegations in the Complaint and construe all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiff. Jurimex Kommerz Transit G.M.B.H. v. Case Corp., 65 Fed. Appx. 803 (3d Cir. 2003) (citing Lorenz v. CSX Corp., 1 F.3d 1406, 1411 (3d Cir. 1993)). A Rule 12(b)(6) motion should be granted "if it appears to a certainty that no relief could be granted under any set of facts which could be proved." Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir. 1997). But a court need not credit a Complaint's "bald assertions" or "legal conclusions" when deciding a motion to dismiss. 132 F.3d at 906. (Citations omitted.)

  When weighing a motion to dismiss, the court may consider the Complaint, attachments to the Complaint and "public records deemed to be undisputedly authentic." Greer v. Smith, 59 Fed. Appx. 491, 492 n.1 (3d Cir. 2003). Plaintiff has attached numerous documents to its Complaint, including copies of both the 2002 Agreement and the 2003 Agreement. Because these documents are both attachments to the Complaint and public records, we consider the documents to be undisputedly authentic. See City of Pittsburgh v. West Penn Power Company, 147 F.3d 256, 259 (3d Cir. 1998). Page 12 Accordingly, in disposing of this motion, we considered both the averments of, and attachments to, the Complaint.

  DISCUSSION

  Counts I through III

  In Counts I through III of plaintiff's Complaint, plaintiff seeks to have the court review adverse decisions by the AAO, DHS's failure to acknowledge the validity of Capital's defenses to certain surrender bonds, and DHS's rules under the Congressional Review Act*fn27. In the 2003 Agreement, plaintiff contracted away its right to state each of these claims. Thus, the operative issue is the force and validity of the 2003 Agreement.*fn28

  In the Settlement Agreements, the parties agreed to limit Capital's ability to seek redress for a myriad of wrongs in this court. Specifically, "Capital . . . waive[s] its right under the August 2002 Agreement or otherwise to litigate adverse decisions by the Administrative Appeals Office ("AAO") or issues raised by those decisions, that were raised on or Page 13 before January 31, 2004." Furthermore, the 2003 Agreement contains the following language in paragraph 4:

Capital agrees that from the date of execution of this Agreement forward, it shall file no appeal or challenge to a bond breach in any forum that asserts, directly or indirectly, any of the following defenses:
a. defective, incomplete, or unsigned bond questionnaires;
b. lack of compliance with the Paperwork Reduction Act;
c. lack of compliance with the Congressional Review Act;
d. delivery of an alien following the expiration of any applicable mitigation period.
e. the alleged right to advance notice of immigration hearings.
Thus, plaintiff may only raise the issues presented in Counts I through III if the Settlement Agreements are invalidated.

  Although no count seeks to invalidate the Settlement Agreements, plaintiff requests declaratory judgment*fn29 that the contracts are voidable by plaintiff. Although plaintiff does not assert any legal justification for the desired remedy, in the last Wherefore clause of plaintiff's Amended Complaint plaintiff seeks to void the Settlement Agreements and to proceed with Counts I through III.*fn30 Page 14

  Because of plaintiff's request for declaratory judgment to void the contract, we are presented with a contractual claim, which, if granted, would have the immediate consequence of invalidating an agreement requiring plaintiff to pay the government a minimum of $3,000,000. Under these facts, there are two applicable statutes of jurisdictional significance: the Tucker Act*fn31 and the Little Tucker Act*fn32.

  Both the Tucker Act and the Little Tucker Act permit plaintiffs to sue the government regarding contractual disputes. Specifically, the Little Tucker Act permits district courts and the Court of Federal Claims concurrent jurisdiction over any "claim against the United States, not exceeding $10,000 in amount, founded . . . upon any express or implied contact with the United States . . . in cases not sounding in tort." 28 U.S.C. § 1346. Page 15

  The Tucker Act, however, defines the jurisdiction of the Court of Federal Claims as reaching "any claim against the United States founded . . . upon any express or implied contract with the United States . . . not sounding in tort." 28 U.S.C. § 1491. Accordingly, contractual claims against the United States in excess of $10,000 are within the exclusive jurisdiction of the United States Court of Federal Claims.

  Plaintiff's claim is contractual in nature and the amount in controversy exceeds $10,000. Plaintiff's attempt to recast its action as (1) an action for declaratory judgment as opposed to a contractual claim, and (2) an action in equity as opposed to at law does not save this action from the Court of Federal Claims jurisdiction. "Court of Federal Claims jurisdiction cannot be circumvented by such artful pleading and, accordingly, we customarily look to the substance of the pleadings rather than their form." Brazos Electric Power Cooperative, Inc. v. United States, 144 F.3d 784, 787 (Fed. Cir. 1998).

  As noted above, while plaintiff does not articulate any legal basis for a declaration that the Settlement Agreements are voidable, plaintiff avers facts which indicate that plaintiff relies on a contractual theory. Moreover, in its response, plaintiff expressly states that it relies on Page 16 contractual theory. There is neither an averment nor a basis for finding that this action sounds in tort. Accordingly, we conclude that this is a contract claim.

  Furthermore, the amount in controversy exceeds $10,000. If we were inclined to grant plaintiff's declaratory judgment, it would result in the cancellation of a contractually agreed debt that plaintiff owes the government. "Cancellation of debt owed to the federal government under such circumstances is just as much a form of monetary damages for purposes of the Tucker Act as the direct payment by the federal government of conventional monetary damages." Brazos, 144 F.3d at 787.

  In this case, a cancellation of the Settlement Agreements would obviate the need for plaintiff to pay the government a minimum of $3,000,000. Accordingly, the Little Tucker Act is inapplicable, and this matter is squarely within the framework of the Tucker Act.

  Thus, we conclude that the Tucker Act requires the United States Court of Federal Claims to hear plaintiff's claim for a declaratory judgment to void the Settlement Agreements. As we interpret the language of the 2002 and 2003 Settlement Agreements, quoted at page 9 above, Capital agreed not to litigate or appeal any matter pertaining to the Page 17 settlement agreements. Therefore, if the Settlement Agreements are valid, the within matter is moot.

  We have determined that only the United States Court of Federal Claims may determine if the Settlement Agreements are valid. If that court determines that the agreements are valid, then the undersigned will dismiss the within action as moot. If, on the other hand, the Court of Federal Claims determines that the Settlement Agreements are invalid, then the within case will proceed to trial before this court on Counts I through III of plaintiff's Amended Complaint.

  Because of the foregoing, plaintiff's declaratory judgment claim must be disposed of before any further action may be taken in regard to Counts I through III. Accordingly, we transfer plaintiff's declaratory judgment claim to the United States Court of Federal Claims, see 28 U.S.C. § 1631, and place Counts I through III in civil suspense pending further Order by the undersigned after determination of the validity of the Settlement Agreements by the Court of Federal Claims.

  Count IV

  In Count IV, plaintiff seeks to have the court

  enjoin the defendants from any and all collection activities related to any alleged Page 18 breaches of delivery bonds until the Agency conducts a comprehensive study of reforms which will shift the emphasis of its bond program from collecting money to removing aliens who have [been] found to have no legal right to remain in the United States and either enacts the reforms or explains to the Court's satisfaction why they will not further the goal of removing illegal aliens.

 Amended Complaint, page 27.

  In essence, plaintiff argues that DHS' current bond policy is more directed at producing revenue from companies like Capital, then increasing surrenders of aliens. To that end, plaintiff asks the undersigned to distill the various policy options available to DHS to increase alien surrenders and choose the best among them. In the process of so doing, plaintiff requests that the court supervise DHS as it conducts a comprehensive internal review of its surrender policy. We decline plaintiff's invitation.

  Count IV presents a controversy over a political question apportioned to a coordinate branch of government and is nonjusticiable. "A controversy is nonjusticiable — i.e., involves a political question — where there is "a textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it. . . ." Nixon v. United States, 506 U.S. 224, 228, 113 S.Ct. Page 19 732, 735, 122 L.Ed.2d 1, 8 (1993) (quoting Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 710, 7 L.Ed.2d 663, 686 (1962)); see New Jersey v. United States, 91 F.3d 463 (1996).

 

The political question doctrine excludes from judicial review those controversies which revolve around policy choices and value determinations constitutionally committed for resolution to the halls of Congress or the confines of the Executive Branch. The Judiciary is particularly ill suited to make such decisions, as "courts are fundamentally underequipped to formulate national policies or develop standards for matters not legal in nature."
Japan Whaling Association v. American Cetacean Society, 478 U.S. 221, 230, 106 S.Ct. 2860, 2866, 92 L.Ed.2d 166, 178 (1986)(quoting United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1379 (D.C. Cir. 1981), cert. denied, 455 U.S. 999 (1982)).

  The United States Constitution provides that "[t]he executive Power shall be vested in a President of the United States of America." U.S. Const. Art. II, § 1. In this case, the President has delegated his authority to the Department of Page 20 Homeland Security. See 3 U.S.C. § 301; 6 U.S.C. § 111-113; 6 U.S.C. § 203; 6 U.S.C. § 251. It is the responsibility of the Department of Homeland Security to implement and enforce the law concerning aliens. See New Jersey, 91 F.3d at 470; Cf. Bowsher v. Synar, 478 U.S. 714, 760, 106 S.Ct. 3181, 3205, 92 L.Ed.2d 583, 617-618 (1986) (explaining role of executive branch officials). To that end, DHS has implemented a number of policies concerning the surrender of aliens.

  It is clear from its Amended Complaint that Capital is displeased with the surrender policy DHS has chosen to implement. However, plaintiff does not aver that DHS's policy violates any law. Rather, plaintiff argues that there are other policies that would better effectuate the law. Such a position does not confer standing upon plaintiff.

  The doctrine of standing serves to identify those disputes which are appropriately resolved through the judicial process. Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 1723, 109 L.Ed.2d 135, 145 (1990). It is not for this court to weigh different policy options and decide how best to enforce the law. Moreover, it is not for the undersigned to supervise an Executive agency's policy review. This court lacks the institutional competency to perform this Page 21 task appropriately. See New Jersey, 91 F.3d at 470.

  This issue is Constitutionally relegated to the Executive branch. DHS is better equipped and suited to discover what issues exist that pertain to the surrender of aliens. As such, DHS is in a better position to decide how best to effectuate the law governing aliens residing in the United States.

  If this were a case where plaintiff could identify a law or Constitutional provision that DHS's current policy violated, then our analysis might differ. Clearly, "not `every case of controversy which touches on foreign relations lies beyond judicial cognizance.'" New Jersey, 91 F.3d 470 (quoting Baker v. Carr, 369 U.S. 186, 211, 82 S.Ct. 691, 707,

  7 L.Ed.2d 663, 682 (1962)). But in the absence of such an allegation, we abstain from any decision on the matter. Accordingly, count IV is dismissed.

  CONCLUSION

  For all the foregoing reasons, we grant in part and deny in part defendants' motion to dismiss. Because Count IV presents a nonjusticiable claim, we dismiss that count from plaintiff's Complaint. Further, we transfer plaintiff's claim Page 22 for a declaratory judgment regarding the Settlement Agreements to the United States Court of Federal Claims. Finally, we place the remainder of the within action in civil suspense pending further Order by the undersigned.


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