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CAPITAL BONDING CORP v. DEPARTMENT OF HOMELAND SECURITY

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 ...


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