Labatte v. United States , 899 F.3d 1373 ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
TIMOTHY LABATTE,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2017-2396
______________________
Appeal from the United States Court of Federal
Claims in No. 1:16-cv-00798-BAF, Senior Judge Bohdan
A. Futey.
______________________
Decided: August 16, 2018
______________________
ERICK G. KAARDAL, Mohrman, Kaardal & Erickson,
P.A., Minneapolis, MN, argued for plaintiff-appellant.
MATTHEW PAUL ROCHE, Commercial Litigation
Branch, Civil Division, United States Department of
Justice, Washington, DC, argued for defendant-appellee.
Also represented by CHAD A. READLER, ROBERT E.
KIRSCHMAN, JR., MARTIN F. HOCKEY, JR.
______________________
Before PROST, Chief Judge, DYK and TARANTO, Circuit
Judges.
2 LABATTE v. UNITED STATES
DYK, Circuit Judge.
Timothy LaBatte appeals from a judgment of the
Court of Federal Claims (“Claims Court”), dismissing his
complaint for breach of contract for lack of subject-matter
jurisdiction. LaBatte v. United States, No. 16-798C, slip
op. at 15 (Fed. Cl. July 28, 2017). Because the court erred
in concluding that it lacked jurisdiction, we reverse and
remand.
BACKGROUND
When assessing a motion to dismiss for lack of sub-
ject-matter jurisdiction, we “accept as true all undisputed
facts asserted in the plaintiff's complaint and draw all
reasonable inferences in favor of the plaintiff,” in this
case, Mr. LaBatte. See Trusted Integration, Inc. v. United
States, 659 F.3d 1159, 1163 (Fed. Cir. 2011). Mr.
LaBatte’s complaint alleges the following.
In 1999, a group of Native American farmers filed a
lawsuit against the Secretary of Agriculture, alleging that
the United States Department of Agriculture (“USDA”)
had discriminated against them in the administration of
farm loan and other benefit programs, thereby violating
the Equal Credit Opportunity Act, 15 U.S.C. § 1691. The
district court certified a class, which included Mr.
LaBatte, a farmer and member of the Sisseton Wahpeton
Tribe of South Dakota. See Keepseagle v. Veneman, No.
99-3119, 2001 WL 34676944, at *15 (D.D.C. Dec. 12,
2001). Ultimately, the government reached a class-wide
settlement, known as the Keepseagle Settlement Agree-
ment (the “Agreement”). According to the Agreement, the
United States would provide a compensation fund totaling
$680 million.
The Agreement established a two track process, “A” or
“B,” for processing claims. Track A was limited to claim-
ants seeking a standard set of payments of $50,000 and
other limited relief. The Track A process used documen-
LABATTE v. UNITED STATES 3
tary evidence and was conducted with a paper only rec-
ord. Claimants had to demonstrate by substantial evi-
dence that they “applied, or attempted to apply, for a
specific farm [loan] at a USDA office” and that the loan
was “denied, provided late, approved for a lesser amount
than requested, encumbered by a restrictive condition(s),
or USDA failed to provide an appropriate loan service(s).”
J.A. 114–15. Track A did not require proof of discrimina-
tion.
Under Track B, a claimant could seek damages up to
$250,000. As with Track A, the determination was made
on a paper record and required allegations that the claim-
ant had applied for USDA loans and that the government
failed to properly process them. However, unlike Track A,
the claimant had to establish by a preponderance of the
evidence that the “treatment of the Claimant’s loan or
loan servicing application(s) by USDA was less favorable
than that accorded a specifically identified, similarly
situated white farmer(s).” J.A. 117. Track B provided
that the “identity of a similar situated white farmer”
could be established “by a credible sworn statement based
on personal knowledge by an individual who is not a
member of the Claimant’s family.” J.A. 118. A neutral
arbiter (the “Neutral”) was tasked with reviewing the
record without a hearing. The Agreement made clear
that there was no appeal once the Neutral made his
decision, as “Claim Determinations, and any other deter-
minations made under this Non-Judicial Claims Process
are final and are not reviewable by the Claims Adminis-
trator, the Track A Neutral, the Track B Neutral, the
District Court, or any other party or body, judicial or
otherwise.” J.A. 111. Under the terms of the Agreement,
“the United States [would] have no role in the Non-
Judicial Claims Process.” Id.
Mr. LaBatte filed his claim under the Track B pro-
cess, seeking $202,700.52 in damages. It appears to be
undisputed that Mr. LaBatte satisfies the relevant crite-
4 LABATTE v. UNITED STATES
ria for membership in the class. 1 Mr. LaBatte identified
two non-family persons who had personal knowledge of
the USDA’s treatment of similarly situated white farm-
ers. Mr. LaBatte’s witnesses were Russell Hawkins
(“Hawkins”) and Tim Lake (“Lake”).
Hawkins and Lake belonged to the same tribe as Mr.
LaBatte―the Sisseton Wahpeton Sioux Tribe of South
Dakota. At the time of the USDA’s alleged wrongdoing,
Hawkins was Mr. LaBatte’s Tribal Chairman. When Mr.
LaBatte prepared to submit a claim under the Settlement
Agreement’s Track B process, both Hawkins and Lake
worked for the Bureau of Indian Affairs (“BIA”), a gov-
ernment agency within the Department of the Interior.
Both men agreed to provide Mr. LaBatte with a sworn
declaration, detailing the USDA’s discriminatory acts to
meet the criteria of the Agreement. Based on conversa-
tions with Lake and Hawkins, Mr. LaBatte’s attorney
prepared preliminary declarations from Lake and Haw-
kins, intending to revise the drafts after further conversa-
1 Those criteria were:
a. Must be a Native American as defined
in the Agreement under Section II.BB.
b. Must have farmed, ranched, or at-
tempted to farm or ranch between
January 1, 1981 and November 24,
1999.
c. Must have applied to USDA in that
time period for participation in a farm
program.
d. A class member must have filed a dis-
crimination complaint with USDA ei-
ther individually or through a
representative.
LaBatte, slip op. at 2.
LABATTE v. UNITED STATES 5
tions with, and review by, those witnesses. Hawkins, in
his draft declaration, stated that
Tim LaBatte asked Mr. Charles Twitero, the
FmHa County Director about applying for a
$330,000 full Land Buying, Livestock Purchase
and Operating Expense Loan. I know Tim
LaBatte filled out an application. After returning
to Mr. Twitero’s office several times to discuss the
loan proposal, Mr. Twitero stated that he simply
could not help Tim LaBatte. . . . Mr. Twitero, as a
federal agent, was too busy with other loans to
non-Indians to service loans to Indian farmers.
He gave no loans to Indian farmers while giving
loans to non-Indian farmers. This was federal
loan discrimination.
J.A. 155. He also stated that he knew that “[n]on-Indian
farmers in the area were receiving loans in the amounts
Mr. LaBatte and other Indian farmers were requesting”
and provided the names of seven such non-Indian loan
recipients. J.A. 156. Lake’s draft declaration had similar
information. Lake pointed out that “Indian farmers like
Tim LaBatte received zero or nominal loans compared to
what the non-Indian farmers received. This was federal
loan discrimination against Tim LaBatte and others.”
J.A. 152. As required, Mr. LaBatte and his attorney
prepared to present the declarations from Lake and
Hawkins to the Track B Neutral.
After the initial declarations were prepared, but be-
fore Mr. LaBatte could finalize and revise the documents
and obtain signatures, the United States directed Haw-
kins and Lake not to sign the declarations or to assist in
revising the declarations. Hawkins and Lake were “di-
rected or instructed by federal governmental officials not
to sign declarations of facts that supported LaBatte’s
claim,” J.A. 64, and were instructed not to provide any
additional information to Mr. LaBatte, preventing Mr.
6 LABATTE v. UNITED STATES
LaBatte from revising or elaborating on the information
in the declaration. Mr. LaBatte alleges that “[b]oth
witnesses, former Tribal Chair Hawkins and Lake had
agreed to provide complete testimony and sign declara-
tions on LaBatte’s behalf for his Track B process claim,”
J.A. 74, and that, because of the government’s interfer-
ence, the declarations of Hawkins and Lake were unable
to be “review[ed], revis[ed], and ultimately execut[ed]
prior to the LaBatte Track B process filing.” Id. Mr.
LaBatte alleges that these actions by the government
breached the Agreement.
Because Mr. LaBatte was unable to submit finalized,
signed declarations, he instead submitted to the Neutral a
declaration from his lawyer that detailed his attempts to
obtain the information necessary. The declaration stated
that Mr. LaBatte had located two individuals, Hawkins
and Lake, who were willing to submit declarations in
support of Mr. LaBatte’s claim of discrimination, but,
because they were BIA employees, “the federal govern-
ment (the defendant in this case) would not allow them to
sign the declarations.” SAppx. 7. Mr. LaBatte attached
the unsigned initial draft declarations of Hawkins and
Lake.
On October 30, 2012, the Track B Neutral issued a fi-
nal determination denying Mr. LaBatte’s claim for having
“failed to satisfy the requirement of the Settlement
Agreement, through a sworn statement, that named
white farmers who are similarly situated to you received
USDA loans or loan servicing that was denied to you.”
J.A. 173.
On July 10, 2013, Mr. LaBatte filed a motion to inter-
vene in the proceedings underlying the Settlement
Agreement in the United States District Court for the
District of Columbia. Mr. LaBatte asserted, among other
things, that government officials had breached the Set-
tlement Agreement and its implied covenant of good faith
LABATTE v. UNITED STATES 7
and fair dealing, by preventing witnesses from signing
declarations and providing information. The court denied
Mr. LaBatte’s motion to intervene on the ground that it
did not possess jurisdiction over his claims. Mr. LaBatte
appealed the district court’s decision to the District of
Columbia, which affirmed, see Keepseagle v. Vilsack, 815
F.3d 28, 32 (D.C. Cir. 2016), explaining that the Settle-
ment Agreement’s enforcement clause provided the dis-
trict court with jurisdiction only to enforce the
distribution of the funds.
On July 5, 2016, Mr. LaBatte filed a complaint in the
Claims Court. Mr. LaBatte alleged that the government
“breached the Settlement Agreement and breached the
government’s duty of good faith and fair dealing resulting
in the loss of monetary damages,” J.A. 25, by ordering
Messrs. Hawkins and Lake not to sign and to refrain
“from testifying and providing evidence on behalf of
LaBatte’s claim.” J.A. 73. As damages, Mr. LaBatte
sought an award of his full Track B claim amount of
$202,700.52. The government moved to dismiss Mr.
LaBatte’s complaint for lack of subject-matter jurisdiction
and for failure to state a claim.
The Claims Court granted the government’s motion
and dismissed the complaint for lack of jurisdiction.
Although the court recognized that it had jurisdiction over
breach of settlement claims, the court concluded that it
lacked jurisdiction over Mr. LaBatte’s case. The court
decided that Mr. LaBatte had, in the Track B process of
the Settlement Agreement, waived his right to judicial
review to challenge the breach of the Agreement by the
United States, because the Agreement contained a finali-
ty clause. The court held that Mr. LaBatte “‘fail[ed] to
account for Agreement’s strong finality language declar-
ing all claim determinations final and unreviewable.’”
LaBatte, slip op. at 14–15 (quoting Keepseagle, 815 F.3d
at 34).
8 LABATTE v. UNITED STATES
Mr. LaBatte appealed, and we have jurisdiction pur-
suant to 28 U.S.C. § 1295(a)(3). We review decisions of
the Court of Federal Claims de novo with respect to
questions of law, including a dismissal for lack of subject-
matter jurisdiction. Banks v. United States, 741 F.3d
1268, 1275 (Fed. Cir. 2014).
DISCUSSION
I
The Claims Court erred in holding that the Agree-
ment barred Mr. LaBatte’s suit for breach of that agree-
ment. The Claims Court relied on language in the
Agreement that stated that “[t]he Claim Determinations,
and any other determinations made under this Non-
Judicial Claims Process are final and are not reviewable
by the Claims Administrator, the Track A Neutral, the
Track B Neutral, the District Court, or any other party or
body, judicial or otherwise.” J.A. 111. The court conclud-
ed that, by entering into the Agreement, “Mr. LaBatte
had contracted out his right to a judicial review.”
LaBatte, slip op. at 12.
However, the Agreement does not on its face bar
claims for breach of the Agreement, and Mr. LaBatte is
not requesting judicial review of the Track B Neutral’s
determination. Mr. LaBatte is simply alleging that the
government’s interference with the witnesses constituted
a breach of the Agreement. For instance, Mr. LaBatte
alleges that
During the claims process, government offi-
cials―who never denied their acts―deliberately
prevented witnesses from testifying who could
provide evidence of the USDA’s discrimination
against LaBatte. Under the terms of the Settle-
ment Agreement, the witnesses were required for
the claims process. The government’s deliberate
acts to prevent the testimony effectively destroyed
LABATTE v. UNITED STATES 9
evidence. The actions of the government were
purposeful and deliberate.
J.A. 85. Mr. LaBatte is clearly alleging a breach of the
Agreement.
There is no language in the Agreement that suggests
that breach of the Agreement would not give rise to a new
cause of action. Indeed, it is well established that a “suit
for breach of [a] settlement agreement alleges a new
cause of action which could not have been brought in the
previous suit.” Catullo v. Metzner, 834 F.2d 1075, 1078
(1st Cir. 1987). It is also well established that finality
provisions in settlements do not bar claims for breach of
the settlement. In the similar context where a party to a
settlement agreement waives the right to appeal an
adverse decision in the underlying litigation, we and other
courts have held that the waiver does not apply to claims
for breach of the settlement agreement itself. If an agen-
cy breaches a settlement agreement, “a waiver of appeal
rights will not be enforced.” Link v. Dep't of Treasury, 51
F.3d 1577, 1581 (Fed. Cir. 1995); see also Saksenasingh v.
Sec’y of Educ., 126 F.3d 347, 349–50 (D.C. Cir. 1997).
We see no basis for construing the finality provision in
the Agreement to bar suit for breach of the Agreement,
and we conclude that the Claims Court erred in determin-
ing that the Agreement precluded Mr. LaBatte’s suit for
breach of contract.
Finally, as to jurisdiction, the government argues that
“[t]here is no indication that the Settlement Agreement
contemplates a right to money damages in the event of a
breach and Mr. LaBatte fails to point to any provision to
the contrary.” Appellee Br. 23. In Holmes v. United
States, we held that in “a contract case, the money-
mandating requirement for Tucker Act jurisdiction nor-
mally is satisfied by the presumption that money damag-
es are available for breach of contract, with no further
inquiry being necessary.” 657 F.3d 1303, 1314 (Fed. Cir.
10 LABATTE v. UNITED STATES
2011). In Rocky Mountain Helium, LLC v. United States,
we held that when “there is a breach of a government
contract, ‘as with private agreements, there is a presump-
tion in the civil context that a damages remedy will be
available upon the breach of an agreement.’” 841 F.3d
1320, 1327 (Fed. Cir. 2016) (quoting Sanders v. United
States, 252 F.3d 1329, 1334 (Fed. Cir. 2001)). “Typically,
based on that presumption, ‘no further inquiry is re-
quired’ into whether money damages are available.” Id.
(quoting Holmes, 657 F.3d at 1314). This is true, even
when “there [was] no language in the agreements indicat-
ing that the parties did not intend for money damages to
be available in the event of breach.” Holmes, 657 F.3d at
1316. In this case, Mr. LaBatte’s allegations, and his
prayer for monetary relief, are more than sufficient to
establish jurisdiction in the Claims Court.
II
We next address whether the complaint sufficiently
alleges a breach. We conclude that Mr. LaBatte alleges a
breach of the Agreement by the government and that
dismissal for failure to state a claim is not appropriate.
Mr. LaBatte alleges that “the federal government
breached its obligations under the Settlement Agreement
and under the covenant of good faith and fair dealing, by
directly prohibiting its employees Hawkins and Lake from
testifying on LaBatte’s behalf.” J.A. 31. Mr. LaBatte
alleges numerous times that “prior to LaBatte submitting
his Track B claim application, the government directly
interfered with LaBatte’s claim process by preventing his
former Tribal Chairman Russell Hawkins [and Lake]
from testifying and providing evidence on behalf of
LaBatte’s claim.” J.A. 73. The government appears not to
contest the fact that Hawkins and Lake were given in-
structions not to sign the declarations or to assist Mr.
LaBatte in providing information to revise the declara-
tions.
LABATTE v. UNITED STATES 11
Mr. LaBatte alleges two theories concerning breach,
and we conclude that the allegations in Mr. LaBatte’s
complaint are more than sufficient to plausibly allege a
breach of the Agreement. The Agreement states that the
United States “shall have no role in the Non-Judicial
Claims Process.” J.A. 111. The complaint plausibly
alleges that the government’s actions breached that
provision by interfering with Mr. LaBatte’s ability to
secure necessary information, since the complaint alleges
that Mr. Hawkins and Mr. Lake are the only living wit-
nesses who could have provided the information necessary
for a Track B claim. The complaint also sufficiently
alleges a breach of the covenant of good faith and fair
dealing. The Restatement (Second) of Contracts § 205,
Comment d (1981), explains that the duty of good faith
and fair dealing prohibits “interference with or failure to
cooperate in the other party’s performance.” This is true,
even if “the actor believes his conduct to be justified.” Id.
The covenant “‘imposes on a party . . . the duty . . . to do
everything that the contract presupposes should be done
by a party to accomplish the contract’s purpose.’” Stock-
ton E. Water Dist. v. United States, 583 F.3d 1344, 1365
(Fed. Cir. 2009) (quoting 30 Richard A. Lord, Williston on
Contracts § 77.10 (4th ed. 1999)). The covenant prevents
parties from “act[ing] so as to destroy the reasonable
expectations of the other party regarding the fruits of the
contract.” Centex Corp. v. United States, 395 F.3d 1283,
1304 (Fed. Cir. 2005). If the government prevented Lake
and Hawkins from signing, revising, and updating their
declarations, the government would breach the covenant
of good faith and fair dealing, by interfering with Mr.
LaBatte’s ability to present his case to the Track B Neu-
tral.
However the government points out that “an act will
not be found to violate the duty (which is implicit in the
contract) if such a finding would be at odds with the terms
of the original bargain, . . . by conflicting with a contract
12 LABATTE v. UNITED STATES
provision.” Metcalf Constr. Co. v. United States, 742 F.3d
984, 991 (Fed. Cir. 2014). The government argues that
the Agreement sanctioned its conduct and that “the
Government’s actions were consistent with the Settlement
Agreement’s express terms.” Appellee Br. 25. Ironically,
the government relies on the provision of the Agreement
that Mr. LaBatte alleges to have been breached, the
provision stating that “the United States shall have no
role in the Non-Judicial Claims Process.” J.A. 111. The
Agreement defines the “United States” as “individually
and collectively, the Executive Branch of the United
States, its agencies, instrumentalities, agents, officers,
and employees.” J.A. 101. The government argues that
Hawkins and Lake, being government employees, cannot
play a role in the process by supplying evidence. Such a
prohibition would be unusual, and absent explicit lan-
guage, this provision cannot be read to prohibit govern-
ment employees from testifying or giving any information
in the claims process in their personal capacities. If the
government has the right to prevent employees from
testifying, that authority must come from some other
source.
Department of Interior regulations dictate that “it is
the Department’s general policy not to allow its employees
to testify.” 43 C.F.R. § 2.281(a). However, employees of
the government are allowed to testify to information that
they did not secure as a result of their government em-
ployment. The Department of Interior regulations recog-
nize this and provide that employees may “voluntarily
testify, while on their own time or in approved leave
status, as private citizens as to facts or events that are
not related to the official business of the Department,” as
long as they make clear “for the record that the testimony
represents [their] own views and is not necessarily the
official position of the Department.” 43 C.F.R.
§ 2.280(c)(5). Indeed, the regulations state that, the
“Department’s general policy not to allow its employees to
LABATTE v. UNITED STATES 13
testify or to produce Department records either upon
request or by subpoena” does not apply to “proceedings
covered by § 2.80(c),” i.e., testimony given in an employ-
ee’s personal capacity. Id. § 2.281(a).
Thus, under Interior’s regulations, Hawkins and Lake
should have been allowed to testify “as private citizens as
to facts or events that are not related to the official busi-
ness of the Department.” Id. § 2.280(c)(5). This would
have been no problem for Hawkins, who did not work for
the BIA at the relevant time when he made the observa-
tions about which he proposed to testify. While Lake was
a BIA employee when he observed the relevant events, his
testimony did not concern his work at BIA, but rather
information about USDA, where he was not employed. It
is not here clear whether Lake secured this information
as a result of his BIA employment. Under these circum-
stances, it may be that the regulations would not prevent
Lake from testifying or, even if they did, that the govern-
ment could not properly invoke them here. We leave this
issue to the Claims Court on remand. In any case, testi-
mony from a single witness (Hawkins) would have been
sufficient under the Agreement.
Next, the government argues that its actions could, at
most, be considered harmless error. In denying Mr.
LaBatte’s claim, the Neutral Administrator wrote
The evidence you submitted on this issue, the dec-
laration of your attorney, Erick G. Kaardal, runs
afoul of the Settlement Agreement’s requirement
that evidence on this issue, and on the issue of
whether you had filed a complaint of discrimina-
tion with USDA, has been established, “by a cred-
ible sworn statement based on personal
knowledge by an individual who is not a member
of the Claimant’s family.” (Settlement Agreement
IX.D.2.a). Since Mr. Kaardal’s declaration makes
clear that you obtained the information in the dec-
14 LABATTE v. UNITED STATES
laration from the two federal officials named, the
Settlement Agreement’s requirements have not
been met. Further, the statements in that decla-
ration purporting to establish that white farmers
received a benefit (loans) that you were denied,
lack the specificity necessary to establish that
those benefits were, in fact received by the white
farmers.
J.A. 173–74. The government concludes from this that
the government’s actions, even if wrongful, were harm-
less, because the actual declarations of Hawkins and Lake
would have been insufficient even if they had been signed.
We first note that the Neutral evidently rejected the
Hawkins and Lake declarations because they were not
signed, and then focused on the Kaardal Declaration (Mr.
LaBatte’s lawyer), rejecting it for not being based on
personal knowledge. The Neutral here only found that
the statements in “that declaration [i.e., the Kaardal
Declaration] lacked the required specificity.” J.A. 174.
Even if one can assume that the same specificity objection
would have been applied to the Hawkins and Lake decla-
rations if they had been signed, Mr. LaBatte’s complaint
makes clear that the declarations were supposed to con-
tain more information and would have been revised,
updated, and signed, had the government not prevented
Lake and Hawkins from cooperating.
Mr. LaBatte alleges that “[b]oth witnesses, former
Tribal Chair Hawkins and Lake had agreed to provide
complete testimony and sign declarations on LaBatte’s
behalf for his Track B process claim.” J.A. 74 (emphasis
added). Mr. LaBatte makes clear that the “declarations
for former Tribal Chair Hawkins and Lake were” unfin-
ished “drafts” that were “prepared for review, revision,
and ultimately execution.” J.A. 64. Mr. LaBatte has
alleged that, but for the government’s interference, he
would have been able to submit more detailed, and more
LABATTE v. UNITED STATES 15
specific, signed declarations. Such review and revision,
for example, could have provided more specificity concern-
ing whether the named white farmers were similarly
situated, what loans those farmers received, and what
dates they received the loans. Given this, the govern-
ment’s actions cannot be considered harmless error.
The government also argues that if Mr. LaBatte pre-
vails on his claims before the Claims Court, there is still
no possible remedy since the Keepseagle Settlement
program has been terminated. We are confident that if,
after further proceedings, the Claims Court finds that
there was a breach, the court will be able to decide on an
appropriate remedy to provide Mr. LaBatte what he
would have received in the Track B process absent the
breach. The Claims Court may consider whether recon-
stituting the Track B process for Mr. LaBatte is an ap-
propriate or necessary step in arriving at such a remedy.
CONCLUSION
We conclude that Mr. LaBatte has stated a claim for
relief that falls within the subject-matter jurisdiction of
the Claims Court.
REVERSED AND REMANDED