Jonson v. Federal Deposit Insurance Corp. , 877 F.3d 52 ( 2017 )

United States Court of Appeals
For the First Circuit
No. 17-1257
PAUL D. JONSON; NOREEN A. JONSON,
Appellants,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Barron, Selya, and Stahl,
Circuit Judges.
Elizabeth S. Dillon and Brian D. Fishman, with whom Cetrulo
LLP was on brief, for appellants.
John W. Guarisco, Counsel, Federal Deposit Insurance
Corporation, with whom Colleen J. Boles, Assistant General
Counsel, and Kathryn R. Norcross, Senior Counsel, were on brief,
for appellee.
December 8, 2017
STAHL, Circuit Judge.
Plaintiff-Appellant, Paul D. Jonson ("Jonson") commenced
two different actions against the Federal Deposit Insurance
Corporation ("FDIC"), challenging its decision to terminate his
employment.1 When the case reached the district court, the court
dismissed Jonson's complaint for lack of subject matter
jurisdiction. Jonson appeals the district court's decision.
First, Jonson disputes the district court's conclusion
that he waived his associational disability discrimination claim.
Second, Jonson requests that the Court transfer the case to the
Federal Circuit. Finding that both of Jonson's arguments on appeal
lack merit, we affirm.
I. Procedural History
Jonson worked at the FDIC for more than 20 years. In
2010, Jonson and his wife both filed for bankruptcy, they said, as
a result of expenditures they incurred in caring for their sick
daughter. In September 2011, both Jonson and his wife received a
bankruptcy discharge.
In November 2011, Jonson applied for a special short-
term assignment through the FDIC with the United States Treasury.
As a part of the background check required for this position,
1While Noreen A. Jonson is also a named party, the dispute
concerns the termination of Paul D Jonson. Therefore, this opinion
refers to the Plaintiff-Appellant, Paul D. Jonson, in the singular.
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Jonson disclosed the fact of his bankruptcy. On January 29, 2013,
the FDIC terminated Jonson's employment with the agency because of
his failure to meet the minimum standards of fitness and integrity
established and required by 12 U.S.C. § 1822(f)(4).
On February 28, 2013, Jonson exercised his rights,
pursuant to the Civil Service Reform Act of 1978, 5 U.S.C. § 1101et seq. ("CSRA"), by timely filing an appeal of his termination
with the Merit Systems Protection Board ("MSPB"). Jonson alleged
that (1) the basis proffered by the agency for his removal, the
minimum standards of fitness and integrity, were invalid; (2) the
termination violated the anti-discrimination provision of the
Bankruptcy Code, 11 U.S.C. § 525(a); and (3) the termination
constituted associational disability discrimination, in violation
of the Rehabilitation Act, 29 U.S.C. §§ 791, 794.
On June 14, 2013, the administrative law judge ("ALJ")
issued a ruling in Jonson's favor. The ALJ did not reach the
merits of Jonson's discrimination claims. Rather she determined
that the FDIC exceeded its authority in promulgating the minimum
standards regulations, the basis by which the FDIC terminated
Jonson, because it failed to obtain the concurrence of the Office
of Government Ethics ("OGE"). From that ruling, the FDIC took an
interlocutory appeal. The MSPB affirmed the ALJ's reversal of
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Jonson's removal and remanded the case to the ALJ to consider the
merits of Jonson's discrimination claims.2
On June 27, 2014, Jonson's counsel, by letter, withdrew
Jonson's discrimination claims with prejudice. The purpose of the
withdrawal was to enable Jonson to immediately return to employment
at the agency. Subsequently, the ALJ issued an initial decision,
ordering, as interim relief, that the FDIC reinstate Jonson.
The FDIC petitioned for review of the ALJ's initial
decision and the MSPB reversed its prior ruling, finding that the
minimum standards regulations had been properly promulgated.3 The
MSPB canceled the ALJ's order of interim relief and remanded the
matter to the ALJ and as part of that remand, required that Jonson
be given an opportunity to reinstate his discrimination claims.
The ALJ reopened the matter and authorized the parties
to engage in discovery. The FDIC propounded several discovery
requests to Jonson including, among other items, information
related to his discrimination claims. The ALJ ordered Jonson to
respond to the FDIC's discovery requests. Jonson failed to respond
2 The MSPB explained that "the FDIC was authorized to
promulgate minimum standards of employment, but it was required to
obtain [the Office of Government Ethics'] concurrence, which it
failed to do."
3 After the MSPB issued its original decision, the OGE
provided a declaration, explaining that the "FDIC was not required
to obtain [the OGE's] approval before promulgating the minimum
fitness regulations."
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to these requests and because of that failure, on October 8, 2015,
the FDIC moved for sanctions.
On December 4, 2015, during the pendency of the MSPB
proceeding, Jonson initiated an adversary proceeding before the
bankruptcy court pursuant to 5 U.S.C. § 7702(e), raising the same
discrimination claims he had raised before the MSPB.
Shortly thereafter, on December 7, 2015, the ALJ entered
an order imposing sanctions on Jonson for failure to comply with
her orders and prohibited Jonson from, among other things,
introducing evidence regarding his discrimination claims. The ALJ
also entered an order to show cause, directing Jonson to explain
why his case should not be dismissed. On December 22, 2015,
Jonson, with new counsel, filed a motion for reconsideration of
the December 7, 2015 order imposing sanctions and a response to
the order to show cause. On February 25, 2016, the ALJ granted in
part and denied in part Jonson's motion. The ALJ determined that
"all sanctions imposed . . . [would] remain in effect. However,
the appeal will not be dismissed."
On February 23, 2016, the FDIC filed a motion requesting
that the bankruptcy court dismiss the adversary proceeding, or, in
the alternative, abstain. The FDIC made several arguments in its
motion, most importantly that Jonson's case was no longer mixed
and the bankruptcy court lacked supplemental jurisdiction over his
claims. See 29 C.F.R. 1614.302 ("A mixed case [] is a complaint
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of employment discrimination filed with a Federal agency based on
race, color, religion, sex, national origin, age, disability, or
genetic information related to or stemming from an action that can
be appealed to the Merit Systems Protection Board (MSPB)."). On
the same day, the FDIC also filed a motion with the district court
requesting the withdrawal of the reference to the bankruptcy court.
Jonson agreed to the FDIC's request to withdraw the reference. On
May 17, 2016, the district court withdrew the reference of the
adversary proceeding from the bankruptcy court.
Before the district court addressed the FDIC's motion to
dismiss, the MSPB issued its final order, affirming the FDIC's
termination decision. On October 20, 2016, Jonson filed a "Notice
of Appeal" with the district court in which he stated that he
"formally appeal[ed] the decision of the MSPB, pursuant to 5 U.S.C.
§ 7703."
Thus, when the case came before the district court, it
had two procedural histories, one from the bankruptcy court and
one from the MSPB hearings. The court requested additional
briefing from the parties regarding whether "the two proceedings
are identical in terms of the issues they present and the burdens
on either party." Jonson requested that the case proceed in the
district court pursuant to 5 U.S.C. § 7702.44See PLAINTIFF'S SUPP. TO OPP. TO FDIC MOTION TO DISMISS
("this action should proceed (as it had for the nine months between
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Subsequently, the court granted the FDIC's motion to
dismiss, finding that the court lacked subject matter jurisdiction
because the case was no longer "mixed," a requirement for the
district court's jurisdiction. See Jonson v. FDIC, No. CV 16-
10518-RWZ, 2016 WL 7493958, at *3 (D. Mass. Dec. 30, 2016). In
addition, the court denied Jonson's subsequent motion to transfer
the case to the Federal Circuit. On March 13, 2017, Jonson timely
filed his notice of appeal.
II. Analysis
The CSRA constitutes "a comprehensive system for
reviewing personnel action[s] taken against federal employees."
United States v. Fausto, 484 U.S. 439, 455 (1988). CSRA claims
must first be presented to the agency-employer and, if pursued
further, reviewed by the MSPB. See Kloeckner v. Solis, 568 U.S.
41, 44-45 (2012). The MSPB initially refers an appeal to an ALJ,
who hears evidence and argument and issues an initial decision
after the record closes. See 5 U.S.C. § 7701(b)(1); 5 C.F.R. §§
1201.59, 12.111. That initial decision becomes a final order,
unless the employee petitions for review by the MSPB, which has
authority to review the initial decision and issue its own final
order. 5 C.F.R. §§ 1201.113, 1201.114, 1201.117. An employee
aggrieved by an MSPB final order may obtain judicial review by
when Jonson initiated the instant action, and when Jonson appealed
the MSPB's Final Order), pursuant to Section 7702 of the CSRA.")
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filing a petition in the United States Court of Appeals for the
Federal Circuit within 60 days. 5 U.S.C. § 7703(a)(1), (b)(1)(A).
If, however, the aggrieved employee is pursuing a "mixed
case," -- i.e. alleging that the adverse employment action was
based on discrimination in violation of certain anti-
discrimination provisions, such as Section 501 of the
Rehabilitation Act -- the employee instead obtains judicial review
of an adverse MSPB order by filing suit within thirty days in a
United States District Court. See 5 U.S.C. §§ 7702(a)(1)(B),
7703(b)(2); Kloeckner, 568 U.S. at 45-46, 50. Additionally, the
CSRA provides that for mixed cases, if the MSPB does not issue a
final order within 120 days after an MSPB appeal is filed, an
employee may file suit in the district court. 5 U.S.C.
§ 7702(e)(1)(B).
1. The District Court's Subject Matter Jurisdiction
We review "de novo a district court's dismissal for lack
of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1)."
United States v. Murphy, 45 F.3d 520, 522 (1st Cir. 1995). In
reviewing the district court's decision, the Court is "mindful
that the party invoking the jurisdiction of a federal court carries
the burden of proving its existence." Taber Partners, I v. Merit
Builders, Inc., 987 F.2d 57, 60 (1st Cir. 1993). Both parties
agree that the district court's subject matter jurisdiction rests
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on whether Jonson's case is "mixed."5 The district court concluded
that Jonson did not have a mixed case because of his failure to
reinstate or prosecute his Rehabilitation Act defense before the
MSPB, despite being given the right to do so, after expressly
withdrawing the claim with prejudice.
This Circuit has routinely held that an employee who
fails to exhaust available administrative remedies under the CSRA
is precluded from bringing a mixed case in federal district court.
See, e.g., Gonzalez v. Velez, 864 F.3d 45, 51-52 (1st Cir. 2017);
Rodriguez v. United States, 852 F.3d 67, 87 (1st Cir. 2017);
Irizarry v. United States, 427 F.3d 76, 78-79 (1st Cir. 2005).
This case presents a slightly nuanced version of the established
administrative exhaustion principle: whether a party who
withdraws a claim of discrimination in an MSPB proceeding, and
never reinstates the claim in that proceeding, may still have a
mixed case appropriate for judicial review before the district
court. Other circuits faced with this question have determined
that a waived discrimination claim results in a non-mixed case.
5 The district court also dismissed the claim for
discrimination under Section 525(a) of the Bankruptcy Code for the
independent reason that such claims are not cognizable in federal
court under the CSRA. See Jonson v. FDIC, No. CV 16-10518-RWZ,
2016 WL 7493958, at *3 (D. Mass. Dec. 30, 2016) (citing 5 U.S.C.
§ 7702). The Section 525(a) claim is not germane to the issues
before us (as it cannot confer "mixed" case status) and going
forward the only discrimination claim/affirmative defense that is
discussed is the Rehabilitation Act claim.
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See e.g., McAdams v. Reno, 64 F.3d 1137, 1144 (8th Cir. 1995) ("The
record indicates that McAdams abandoned her discrimination claims
at the MSPB. The district court thus properly determined that it
lacked jurisdiction to consider them."); Blake v. Dep't of Air
Force, 794 F.2d 170, 173 (5th Cir. 1986) ("We find that in the
case before us any discrimination claim, to the extent one ever
existed, was eliminated from the case and thus there is no subject
matter jurisdiction."); Stephens v. Connley, 842 F. Supp. 1457,
1459 (M.D. Ga. 1994), aff'd mem., 48 F.3d 537 (11th Cir.
1995)(unpublished table decision) ("If this court determines that
the discrimination claim has been eliminated, then the Court of
Appeals for the Federal Circuit would have exclusive jurisdiction
over plaintiff's case.").
As the court explained in Connley, 842 F. Supp. at 1459,
"[i]t is clear that a discrimination claim may be abandoned during
MSPB proceedings." While an explicit waiver is not required, see
id., in this case, Jonson's explicit withdrawal of his claim is
sufficient proof that his discrimination claim was abandoned. See
McMillan v. Mass. Soc. for Prevention of Cruelty to Animals, 140
F.3d 288, 310 (1st Cir. 1998) (noting that a party's voluntary
withdrawal of a claim relinquishes the right to pursue it later).
Jonson was given opportunities to re-allege his discrimination
claim, but failed to do so on multiple occasions. At no point
during the subsequent proceedings did Jonson present or attempt to
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present any evidence to support a discrimination claim. We cannot
find that Jonson's original complaint, which alleged a claim of
discrimination that was later withdrawn, without anything more, is
sufficient to create a mixed case. See Hill v. Dep't of Air Force,
796 F.2d 1469, 1471 (Fed. Cir. 1986) ("It was plainly not the
intent of Congress to enable manipulation of . . . jurisdiction by
the mere mention of discrimination in a petition for review.").
Finding that the district court lacked subject matter
jurisdiction, we turn to Jonson's next challenge on appeal.
2. Transfer to the Federal Circuit
"We review a refusal to transfer for abuse of
discretion." Cimon v. Gaffney, 401 F.3d 1, 6 (1st Cir. 2005).
After the district court dismissed the case for want of subject
matter jurisdiction, Jonson filed a motion for reconsideration,
or, in the alternative, to transfer the case to the Court of
Appeals for the Federal Circuit. Without issuing an opinion, the
district court denied Jonson's motion.
In making the transfer request before the district
court, Jonson's counsel argued that transfer was proper pursuant
to 28 U.S.C. § 1404(a), which provides for change of venue "[f]or
the convenience of parties and witnesses, in the interest of
justice" and "where it might have been brought or to any district
or division to which all parties have consented." On appeal,
Jonson's counsel concedes that the transfer request should have
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been pursued under 28 U.S.C. § 1631, but nonetheless, the district
court should have transferred the case in the interest of justice.
Jonson's failure to raise section 1631 before the
district court constitutes a waiver of the issue on appeal. See
Albion v. YMCA Camp Letts, 171 F.3d 1, 2 n.3 (1st Cir. 1999)
(deciding that where a party only raised 28 U.S.C. § 1404 and
§ 1406 as grounds for transfer, the court would not address the
applicability of 28 U.S.C. § 1631); see also Me. Green Party v.
Me., Sec'y of State, 173 F.3d 1, 4 (1st Cir. 1999) (finding waiver
when "the argument plaintiff presse[d] on appeal was not timely
asserted in the district court").
Further, even if the Court were to overlook Jonson's
waiver, the denial of transfer was nonetheless proper. Section
1631 provides that:
the court shall, if it is in the interest of
justice, transfer such action or appeal to any
other such court in which the action or appeal
could have been brought at the time it was
filed or noticed, and the action or appeal
shall proceed as if it had been filed in or
noticed for the court to which it is
transferred on the date upon which it was
actually filed in or noticed for the court
from which it is transferred.
(emphasis added).
Jonson's counsel contends that the transfer serves "the
interest of justice," namely because Jonson filed the instant
action with the "good-faith belief" that his associational
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disability discrimination claims were valid. While Section 1631
creates a presumption in favor of transfer, transfer is
inappropriate if it would not cure a want of jurisdiction. See
Lightfoot v. Cendant Mortg. Corp., 137 S. Ct. 553, 560 (2017) ("A
court of competent jurisdiction is a court with the power to
adjudicate the case before it.").
Regardless of the interest of justice argument, a transfer of
the case would not cure the want of jurisdiction. Jonson's claim
before the district court was filed pursuant to 5 U.S.C.
§ 7702(e)(1)(B). Unlike an appeal from a final MSPB order, which
may be brought before a district court or the Federal Circuit
depending on its mixed status, see 5 U.S.C. §§ 7702(a)(1),
7703(b)(1)(A) and (2), a section 7702(e)(1)(B) claim is only for
mixed cases and can only be brought in the district court. It
could never have been brought before the Federal Circuit. Further,
the Federal Circuit only has jurisdiction over final orders or
decisions of the MSPB. See 28 U.S.C. § 1295(a)(9); Weed v. Soc.
Sec. Admin., 571 F.3d 1359, 1361-62 (Fed. Cir. 2009). But, at the
time Jonson's section 7702 action was filed, his case was still
pending before the MSPB. There was no final order. As such,
Jonson's section 7702 claim could not have been filed in the
Federal Circuit at the time it was filed in the district court
because it was not a final order. Although Jonson may have been
led astray by his prior counsel, the Court cannot transfer a case
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in the interest of justice if the transfer fails to cure the
jurisdictional defect.
For these reasons, we affirm the district court's
decision.
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