Lillemoe v. United States Department of Agriculture ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
BRETT LILLEMOE, et al.,
Plaintiffs,
v.
No. 15-cv-2047 (DLF)
UNITED STATES DEPARTMENT OF
AGRICULTURE, FOREIGN
AGRICULTURAL SERVICE,
Defendant.
MEMORANDUM OPINION
Plaintiffs Brett Lillemoe and GTR, LLC bring this suit against the U.S. Department of
Agriculture’s Foreign Agricultural Service (FAS), which administers a federal program designed
to finance U.S. agricultural exports. They assert that FAS violated the Administrative Procedure
Act (APA) by selectively applying its program regulations and policies. Before the Court is
FAS’s Renewed Motion for Summary Judgment, Dkt. 89, and FAS’s Renewed Partial Motion to
Dismiss for Lack of Standing, Dkt. 90. For the reasons that follow, the Court will grant in part
FAS’s Partial Motion to Dismiss and grant FAS’s Motion for Summary Judgment.
I. BACKGROUND
As explained in detail in this Court’s earlier Memorandum Opinion, Lillemoe v. U.S.
Dep’t of Agric., Foreign Agric. Serv., 344 F. Supp. 3d 215 (D.D.C. 2018), FAS administers the
Export Guarantee Program (GSM-102) on behalf of the Commodity Credit Corporation (CCC).
Am. Compl. ¶ 7, Dkt. 25; see also 7 U.S.C. § 5622; 7 C.F.R. § 1493, et seq. The GSM-102
program is designed to encourage exports of agricultural commodities by financing exports of
these products. See 7 U.S.C. § 5622(a)–(b). According to the plaintiffs, in a “typical”
transaction under the GSM-102 program, a U.S. exporter negotiates an export sale with an
importer in a qualifying region and applies to FAS for a GSM-102 guarantee based on the sale.
Lillemoe, 344 F. Supp. 3d at 220. If the application is approved, the importer then causes a
foreign bank issues a letter of credit (LC) in favor of the U.S. exporter. Id. Meanwhile, the U.S.
exporter assigns its right to payment on the LC to a U.S bank and the foreign bank can refinance
its obligations under the LC to repay the U.S. bank on deferred terms. Id. The GSM-102
program guarantees that obligation to the U.S. bank, so that if the foreign bank defaults, the U.S.
bank can recover a portion of its losses from the government. Id. In essence, the transaction
embodies a government-backed loan from the U.S. bank to the foreign bank. Id.
In their complaint, the plaintiffs allege that some program participants use a different
transaction structure called a “rented trade flow.” Under this structure, two separate transactions
occur: (1) a physical sale of goods between an entity shipping the goods (or “Actual Exporter”)
and a foreign importer (or “Consignee”); and (2) a purely financial “sale” between a “GSM
Exporter” and a “GSM Importer,” who submit the guarantee applications to FAS. Id. at 221.
The GSM Exporter acquires the right to use bills of lading (BLs) and other shipping documents
for a fee, and they qualify for the guarantee by using photocopies of these documents. Id. The
GSM Exporter and GSM Importer then “rent” the trade flow through an offsetting sale and
repurchase, whereby the underlying goods are sold from the Actual Exporter to the GSM
Exporter, from the GSM Exporter to the GSM Importer, and from the GSM Importer back to the
Actual Exporter, without the goods ever physically changing hands. Id.
Lillemoe and his company, GTR, claim that FAS approved their “rented trade flow”
transactions since at least 2009. See id. at 222. But according to the plaintiffs, in 2012, FAS
adopted a de facto policy in which it singled them out and refused to approve their “rented trade
2
flow” applications, while at the same time approving others’ applications that were based on the
same structure. See id. at 222–24.
The plaintiffs’ claim centers on a series of events that took place from late 2012 to 2013.
They allege that in Fall 2012, FAS personnel contacted Lillemoe to request additional
information about the transaction structures underlying several of GTR’s recent and pending
program applications. Id. at 222. Lillemoe responded that this transaction structure—the so-
called “rented trade flow”—had been vetted by FAS officials in 2009 and other program
participants were using the same structure. Id. On December 28, 2012, FAS denied the 15
pending guarantees and stated that “any future applications utilizing the same structure will also
be denied.” Id. The plaintiffs allege that based on this representation, they then withdrew three
pending applications in January 2013 that used “rented trade flows” and requested that FAS
refund their application fees. Id. FAS denied this request. Id. at 222–23. The plaintiffs also
allege that in January 2013, FAS delayed approval of three other applications for transactions
with Bancolombia that allegedly did not use the “rented trade flow” structure. Id. at 223. After
FAS took two weeks to approve these guarantees, Bancolombia pulled out of the transactions,
and FAS again declined to reimburse the fees for one of the guarantees. Id. In another instance
later in 2013, the plaintiffs allege that an FAS official informed Deutsche Bank, a U.S. bank with
which the plaintiffs had several pending guarantees, about potential “discrepancies” in GTR’s
documents, ultimately causing Deutsche Bank to terminate its relationship with the plaintiffs. Id.
FAS also refused to refund the fees paid in connection with these guarantees. Id. ¶ 223–24.
In 2015, the plaintiffs were indicted for conspiracy and wire fraud based on false
documentation they submitted in the GSM-102 program, and FAS subsequently suspended them
from the program. See Def.’s First Mot. for Summ. J. Ex. A at 1–2, Dkt. 59-2. In November
3
2016, Lillemoe was convicted at trial, and FAS debarred him and GTR from participating in the
program until April 28, 2020. Id. at 1, 3. In December 2019, the Second Circuit Court of
Appeals affirmed his conviction. See United States v. Calderon, 944 F.3d 72, 84 (2d Cir. 2019).
The plaintiffs filed this suit in 2015, bringing claims under the APA, Fifth Amendment,
and Bivens. See Compl., Dkt. 1. On September 25, 2018, the Court dismissed all but the APA
claims. See Lillemoe, 344 F. Supp. 3d at 233. The Court concluded that the plaintiffs had
plausibly alleged a claim under the APA because FAS did not provide reasons for treating the
plaintiffs differently than other similarly situated applicants. See id. at 227–28.
On February 22, 2019, FAS filed a motion for summary judgment, Dkt. 59, and on April
26, 2019, it filed a partial motion to dismiss for lack of standing, Dkt. 72. The Court denied the
motion for summary judgment without prejudice on September 30, 2019, concluding that FAS
failed to directly address the plaintiffs’ claim that FAS rejected the plaintiffs’ applications based
on the alleged “rented trade flow” structure while simultaneously approving other participants’
applications that used “rented trade flows.” See September 30, 2019 Order at 6–7, Dkt. 86. On
October 21, 2019, the Court held a hearing on FAS’s partial motion to dismiss, and denied the
motion without prejudice so that FAS could file an omnibus submission to address the
outstanding issues. See Def.’s Mot. for Extension of Time, Dkt. 87; October 25, 2019 Minute
Order.
On November 19, 2019, the defendants filed this renewed Motion for Summary
Judgment, Dkt. 89, and renewed Partial Motion to Dismiss for Lack of Standing, Dkt. 90. For
the reasons that follow, the Court will grant both motions. 1
1
Also before the Court is the plaintiffs’ Motion for Discovery, Dkt. 94, and FAS’s Motion for
Protective Order, Dkt. 100. Discovery is generally not permitted in APA cases unless a party
4
II. MOTION TO DISMISS
A. Legal Standard
Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may move to
dismiss an action or claim when the court lacks subject-matter jurisdiction. Fed. R. Civ. P.
12(b)(1). A motion for dismissal under Rule 12(b)(1) “presents a threshold challenge to the
court’s jurisdiction.” Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987). Federal district
courts are courts of limited jurisdiction, and it is “presumed that a cause lies outside this limited
jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Thus, “the
plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence.”
Moran v. U.S. Capitol Police Bd., 820 F. Supp. 2d 48, 53 (D.D.C. 2011) (citing Lujan v. Defs. of
Wildlife, 504 U.S. 555, 561 (1992)).
“When ruling on a Rule 12(b)(1) motion, the court must treat the complaint’s factual
allegations as true and afford the plaintiff the benefit of all inferences that can be derived from
the facts alleged.” Jeong Seon Han v. Lynch, 223 F. Supp. 3d 95, 103 (D.D.C. 2016) (internal
quotation marks omitted). Those factual allegations, however, receive “closer scrutiny” than
they would if the court were considering a Rule 12(b)(6) motion for failure to state a claim. Id.Also, unlike in the Rule 12(b)(6) context, a court may consider documents outside the pleadings
“can demonstrate unusual circumstances justifying a departure from this general rule.” Texas
Rural Legal Aid, Inc. v. Legal Servs. Corp., 940 F.2d 685, 698 (D.C. Cir. 1991). Discovery is
warranted only if (1) the agency “deliberately or negligently excluded documents that may have
been adverse to its decision,” (2) background information was needed “to determine whether the
agency considered all the relevant factors,” or (3) the “agency failed to explain administrative
action so as to frustrate judicial review.” City of Dania Beach v. F.A.A., 628 F.3d 581, 590 (D.C.
Cir. 2010) (internal quotation omitted). The plaintiffs make no showing that FAS deliberately or
negligently excluded documents from the administrative record, and the Court concludes that the
record is sufficient for judicial review. See infra Part III.B. The plaintiffs thus have not
demonstrated any “unusual circumstances” supporting additional discovery. The Court will deny
the plaintiffs’ motion for discovery and deny as moot FAS’s motion for a protective order.
5
to evaluate whether it has jurisdiction, but it still must “accept all of the factual allegations in
[the] complaint as true.” See Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C.
Cir. 2005) (internal quotation marks omitted). If, at any point, the court determines that it lacks
jurisdiction, the court must dismiss the claim or action. Fed. R. Civ. P. 12(b)(1), 12(h)(3).
B. Analysis
In its partial motion to dismiss, FAS argues that the plaintiffs lack Article III standing as
to their APA claim that FAS adopted a de facto policy of denying their “rented trade flows”
applications while approving those of other program participants. To establish standing, a
plaintiff must demonstrate (1) a concrete injury in fact that is (2) fairly traceable to the
defendant’s action and (3) redressable by a favorable judicial decision. Summers v. Earth Island
Inst., 555 U.S. 488, 493 (2009). The plaintiff “must demonstrate standing separately for each
form of relief sought.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S.
167, 185 (2000). When evaluating whether a plaintiff has standing, a court “must accept as true
all material allegations of the complaint, and must construe the complaint in favor of the
complaining party.” Warth v. Seldin, 422 U.S. 490, 501 (1975).
The Court previously permitted the plaintiffs to seek two forms of equitable relief:
(1) restitution of fees they paid to FAS for their failed GSM-102 transactions and (2) injunctive
relief ordering FAS to cease applying its policy with respect to “rented trade flows” arbitrarily.
See Lillemoe, 344 F. Supp. 3d at 225–27.
1. Reimbursement of Fees
FAS concedes that the plaintiffs have standing to challenge FAS’s decision to deny the
plaintiffs’ requests to reimburse their application fees with respect to three GSM-102
applications for transactions in Turkey. Def.’s Reply in Support of its First Mot. to Dismiss at 1,
6
Dkt. 76. But the Court “has an independent obligation to assure that standing exists, regardless
of whether it is challenged by any of the parties.” Summers, 555 U.S. at 499.
The plaintiffs have met their burden with respect to the application fees related to the
Turkey transactions. First, the plaintiffs have shown that they suffered an injury when FAS
declined to reimburse the application fees. See Am. Compl. ¶ 53. Second, this injury is fairly
traceable to the conduct challenged by the plaintiffs—FAS’s alleged policy of selectively
banning the plaintiffs from using “rented trade flows.” Id. The plaintiffs allege that they
withdrew the Turkey applications because of FAS’s representations to Lillemoe that it would no
longer approve transactions that used the “rented trade flow” structure. Id. ¶¶ 53–54. Finally, a
favorable decision by this Court would enable the plaintiffs to recover these fees. Thus, the
plaintiffs have standing to challenge FAS’s alleged policy of selectively banning the plaintiffs’
use of rented trade flows to the extent that it caused them to lose the fees on the Turkey
guarantees.
But the plaintiffs do not have standing to challenge FAS’s refusal to reimburse the fees
related to the Bancolombia and Deutsche Bank transactions. The plaintiffs allege in the
complaint that FAS violated the APA by rejecting “GSM-102 applications submitted by GTR
because of its use of rented trade flows under the Program while approving GSM-102
applications from other participants that used the same structure.” Am. Compl. ¶ 92. The scope
of the plaintiffs’ APA claim is thus limited to an alleged FAS policy that “selectively
prohibit[ed] the plaintiffs from using rented trade flows while simultaneously approving
applications from other participants using the same structure.” Lillemoe, 344 F. Supp. 3d at 227.
Because the plaintiffs concede that they did not use “rented trade flows” in the three
Bancolombia transactions, see Am. Compl. ¶ 55, or the seven Deutsche Bank transactions, see
7
Am. Compl. ¶ 70, these transactions are not fairly traceable to the challenged conduct, and a
favorable decision from this Court could not redress those injuries. Accordingly, the plaintiffs
cannot seek reimbursement of fees from these GSM-102 transactions in this case.
2. Injunctive Relief
The plaintiffs lack standing for the injunctive relief they seek—an order prohibiting “FAS
from unequally applying its regulations in the future.” Pls.’ Opp’n to Def.’s Renewed Mot. to
Dismiss at 1, Dkt. 91. 2 For claims of equitable relief based on future injury, a plaintiff faces “a
more rigorous burden to establish standing.” United Transp. Union v. ICC, 891 F.2d 908, 913
(D.C. Cir. 1989). When plaintiffs seek injunctive relief, “past injuries alone are insufficient to
establish standing.” Dearth v. Holder, 641 F.3d 499, 501 (D.C. Cir. 2011). A plaintiff instead
must show “ongoing injury” or face “an immediate threat of injury.” Id. The “threatened injury
must be certainly impending to constitute injury in fact,” and “allegations of possible future
injury are not sufficient.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013) (internal
quotation marks and citation omitted) (emphasis in original). Future injuries with merely an
“objectively reasonable likelihood” of occurring are not adequate to establish standing. Id.The series of injuries the plaintiffs allege here are either past injuries that injunctive relief
cannot redress or possible future injuries that are too speculative. The plaintiffs allege that FAS
acted arbitrarily by denying fifteen of GTR’s pending GSM-102 applications involving “rented
2
It is unclear whether the plaintiffs request declaratory relief in addition to injunctive relief. In
its Memorandum Opinion on FAS’s original motion to dismiss, the Court concluded it would
permit the plaintiffs’ “request that FAS be ordered to apply its [regulations] equally to similarly
situated applicants.” Lillemoe, 344 F. Supp. 3d at 226. In their brief, the plaintiffs argue that
they seek “a finding that FAS disparately applied its regulations to Plaintiffs.” Pls.’ Opp’n to
Def.’s Renewed Mot. to Dismiss at 1. Regardless of whether the plaintiffs seek declaratory relief
in addition to injunctive relief, the same standing analysis applies. See Lyons, 461 U.S. at 104;
Golden v. Zwickler, 394 U.S. 103, 109 (1969).
8
trade flow” agreements, id. ¶ 49; delaying authorization of three other applications, id. ¶¶ 56–58;
raising issues with Deutsche Bank about “discrepancies” in GTR’s supporting documentation,
causing Deutsche Bank to end its business with GTR, id. ¶¶ 69–74; and failing to refund the
plaintiffs’ application fees without explanation, id. ¶¶ 53; 58; 75. But all of these are past
injuries, and the plaintiffs have not established that they are suffering any continuing harm from
them. See Los Angeles v. Lyons, 461 U.S. 95, 105 (1983) (holding that plaintiff seeking
injunctive relief who alleges past harm has no standing if there is no real and immediate threat
the harm would occur again).
The plaintiffs also allege a possibility of future injury, but this injury will occur only if
the plaintiffs reenter the GSM-102 program and face continued disparate treatment, and both
conditions are too speculative. The plaintiffs are currently debarred from the GSM-102 program
until April 28, 2020, see Def.’s First Mot. for Summ. J., Ex. A, and as such, they cannot yet
submit any applications. In a declaration, Lillemoe suggests that he could participate in the
program once his debarment ends, but he does not specify whether he actually plans to submit an
application. See Pls.’ Opp’n to Def.’s Renewed Mot. to Dismiss Ex. 3 (First Lillemoe Decl.) ¶
67, Dkt. 92-1. But even if Lillemoe does intend to participate in the program again, his claimed
injury lacks concreteness because he does not provide any specifics about his plans for future
participation. See Lujan, 504 U.S. at 564 (“such ‘some day’ intentions—without any description
of concrete plans, or indeed even any specification of when the some day will be—do not
support a finding of the ‘actual or imminent’ injury that our cases require.”).
Moreover, the Second Circuit recently upheld Lillemoe’s criminal conviction, see
Calderon, 944 F.3d at 84, and it is unclear whether Lillemoe will be able to submit an
application to the GSM-102 program while he is serving his 15-month sentence. The plaintiffs’
9
counsel also suggested during a motions hearing that Lillemoe must overcome “other hurdles”
before he can apply for a GSM-102 guarantee again. October 21 Hr’g Tr. at 44:14–:20. Further,
approving any future GSM-102 application falls within the discretion of FAS personnel, see 7
C.F.R. § 1493.70(b), so it is speculative at best whether the plaintiffs will subject to the same
treatment as they faced in the past.
Lastly, even if the plaintiffs could apply to the program once their debarment ends, the
transactions covered by GSM-102 involve the participation of several additional parties—an
importer, a foreign bank, and a U.S. bank—so it is unclear whether these other parties will agree
to work with the plaintiffs in the future. This mere possibility of future injury rests on too many
inferences for the Court to conclude that injury is “certainly impending.” See Conference of
State Bank Supervisors v. Office of Comptroller of Currency, 313 F. Supp. 3d 285, 296–97
(D.D.C. 2018).
The plaintiffs’ alternative argument that they have standing to challenge the harm that
FAS allegedly inflicted upon their reputation similarly fails. See Pls.’ Opp’n to Def.’s Renewed
Mot. to Dismiss at 10–12. Injury to reputation can “suffice for purposes of constitutional
standing.” McBryde v. Comm. to Review Circuit Council Conduct & Disability Orders of
Judicial Conference of U.S., 264 F.3d 52, 57 (D.C. Cir. 2001). But, as they are here, “claims of
reputational injury can be too vague and unsubstantiated” to support standing. McBryde, 264
F.3d at 57. For one, the plaintiffs have not shown how the alleged harms—the rejection of 15
applications, the refusal to reimburse application fees, the delayed decisions on three other
applications, and the discussion with Deutsche Bank about GTR’s deficient paperwork—broadly
impacted their reputations in the structured trade finance market. All of these interactions
occurred primarily between the plaintiffs and FAS, a far cry from the “public reprimand” for
10
which the Court found standing in McBryde. Id. at 56. The plaintiffs also have not shown any
reputational harm that is “fairly traceable” to FAS’s actions. Lillemoe himself states that he had
been under criminal investigation since October 2011, and that federal investigators had
questioned and served subpoenas on “numerous clients” of his as early as 2011. 3 First Lillemoe
Decl. ¶ 63. Thus, any reputational injury to the plaintiffs likely derives from a wholly separate
government action than the one the plaintiffs challenge in this lawsuit. See Foretich v. United
States, 351 F.3d 1198, 1214 (D.C. Cir. 2003) (“Reputational injury that derives directly from
government action will support Article III standing to challenge that action” (emphasis added)).
And to the extent that the plaintiffs allege that FAS approached Deutsche Bank to deliberately
harm their reputations, as detailed in infra Part III.B.4., the record does not bear this out. To the
contrary, the record reveals that an employee from Deutsche Bank reached out to representatives
at FAS raising issues with “discrepancies” in the documentation from GTR. Administrative
Record (AR) 666. The plaintiffs provide no evidence that FAS “deliberately defamed them
before Deutsche Bank,” Am. Compl. ¶ 72, and on a Rule 12(b)(1) motion, the Court may
consider materials outside the pleadings to evaluate whether it has jurisdiction, such as
“undisputed facts evidenced in the record.” See Herbert v. Nat’l Acad. of Scis., 974 F.2d 192,
197 (D.C. Cir. 1992).
Lastly, the plaintiffs have failed to show that this alleged reputational injury is ongoing.
See Lyons, 461 U.S. at 105. The reputational injuries at issue in the cases cited by the plaintiffs
both involved continuing harm to reputations—in McBryde, the reprimand causing the injury
3
In fact, during this period and throughout 2012, FAS continued to approve the plaintiffs’
GSM-102 applications. See Am. Compl. ¶ 41. And the plaintiffs themselves allege that their
disparate treatment began in late 2012. See Pls.’ Reply in Support of its Discovery Mot. at 17,
Dkt. 104 (“A substantial part of Plaintiffs’ case is based on FAS not singling Plaintiffs out until
December 28, 2012”).
11
“continue[d] to be posted on the web site of the Fifth Circuit Court of Appeals,” McBryde, 264
F.3d at 57, and in Forteich, the challenged federal statute that “effectively brand[ed]” the
plaintiff “a child abuser and an unfit parent” remained on the books, Foretich, 351 F.3d at 1214.
Here, the plaintiffs have not established that FAS’s alleged policy of selectively prohibiting the
plaintiffs from engaging in “rented trade flows” has continued to cause them reputational harm.
In sum, it is unclear whether the plaintiffs actually suffered any “concrete” reputational injury
that is “fairly traceable” to FAS’s actions. See Summers, 555 U.S. at 493. The plaintiffs have
therefore failed to establish that they have standing to seek the requested injunctive relief.
III. MOTION FOR SUMMARY JUDGMENT
A. Legal Standard
A court grants summary judgment if the moving party “shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). A
“material” fact is one with potential to change the substantive outcome of the litigation. See
Liberty Lobby, 477 U.S. at 248; Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006). A
dispute is “genuine” if a reasonable jury could determine that the evidence warrants a verdict for
the nonmoving party. See Liberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at 895. Here, the
plaintiffs seek review of agency action, invoking the APA’s requirement that a court “hold
unlawful and set aside” any aspect of a final agency action that is “arbitrary [and] capricious, an
abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). In an APA
case, summary judgment “serves as the mechanism for deciding, as a matter of law, whether the
agency action is supported by the administrative record and otherwise consistent with the APA
standard of review.” Sierra Club v. Mainella, 459 F. Supp. 2d 76, 90 (D.D.C. 2006). In other
12
words, “the entire case . . . is a question of law” and the district court “sits as an appellate
tribunal.” Am. Biosci., Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (footnote and
internal quotation marks omitted).
Arbitrary and capricious review is “fundamentally deferential—especially with respect to
matters relating to an agency’s areas of technical expertise.” Fox v. Clinton, 684 F.3d 67, 75
(D.C. Cir. 2012) (alteration adopted and internal quotation marks omitted). A court “is not to
substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm
Mut. Auto. Ins., 463 U.S. 29, 43 (1983). Rather, its review is limited to whether the agency
“relied on factors which Congress has not intended it to consider, entirely failed to consider an
important aspect of the problem, [or] offered an explanation for its decision that runs counter to
the evidence before the agency, or is so implausible that it could not be ascribed to a difference
in view or the product of agency expertise.” Agape Church v. FCC, 738 F.3d 397, 410 (D.C.
Cir. 2013) (quoting State Farm, 463 U.S. at 43).
In conducting this inquiry, a court does “not look at the agency’s decision as would a
scientist, but as a reviewing court exercising [its] narrowly defined duty of holding agencies to
certain minimal standards of rationality.” Am. Trucking Ass’ns v. Fed. Motor Carrier Safety
Admin., 724 F.3d 243, 249 (D.C. Cir. 2013) (alteration adopted and internal quotation marks
omitted); see also Chem. Mfrs. Ass’n v. EPA, 28 F.3d 1259, 1263 (D.C. Cir. 1994) (describing
the standard as “indulgent”). “Even an agency ‘decision of less than ideal clarity’ should be
upheld ‘if the agency’s path may be reasonably discerned.’” Anacostia Riverkeeper, Inc. v.
Jackson, 798 F. Supp. 2d 210, 222 (D.D.C. 2011) (quoting State Farm, 463 U.S. at 43)). The
party challenging an agency’s action as arbitrary and capricious bears the burden of proof.
Pierce v. SEC, 786 F.3d 1027, 1035 (D.C. Cir. 2015).
13
B. Analysis
Agency action is arbitrary and capricious under the APA if “the agency offers insufficient
reasons for treating similar situations differently.” Muwekma Ohlone Tribe v. Salazar, 708 F.3d
209, 216 (D.C. Cir. 2013) (citing Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1022
(D.C.Cir.1999)). A “fundamental norm of administrative procedure requires an agency to treat
like cases alike.” Westar Energy, Inc. v. Fed. Energy Regulatory Comm’n, 473 F.3d 1239, 1241
(D.C. Cir. 2007).
The plaintiffs allege that they were treated differently than similarly situated participants
in the GSM-102 program because FAS operated according to a “de facto” unwritten policy that
prohibited the plaintiffs from using the “rented trade flow” model but allowed others to do so.
See Pls.’ Opp’n to Def.’s Renewed Mot. to Dismiss at 2. Rather than challenging any one
decision by FAS, the plaintiffs insist they are challenging FAS’s alleged de facto policy as a
whole. See Pls.’ Opp’n to Def.’s First Mot. for Summ. J. at 5–10, Dkt. 64.
As circumstantial evidence that FAS maintained a “policy” of singling them out, the
plaintiffs highlight four actions by FAS: (1) its December 28, 2012 rejection of 15 of the
plaintiffs’ GSM-102 applications that used the “rented trade flow” structure and FAS’s
accompanying statement that it would deny “any future applications utilizing the same
structure,” see Am. Compl. ¶ 50; (2) its failure to refund GTR’s fees for several GSM-102
guarantees in Turkey that the plaintiffs allegedly terminated based on their understanding of
FAS’s position on “rented trade flows,” see id. ¶ 53; (3) its delayed approval of several of the
plaintiffs’ GSM-102 guarantees in South America and its refusal to refund the fees for one of the
guarantees, see id. ¶¶ 56–58; and (4) its decision to raise “discrepancies” in the plaintiffs’ GSM-
102 documents with Deutsche Bank—causing Deutsche Bank to stop doing business with the
14
plaintiffs—and its subsequent refusal to reimburse the corresponding fees, see Am. Compl. ¶¶
70–75.
But these four actions do not demonstrate that FAS had an “unwritten” policy of treating
the plaintiffs differently than other GSM-102 program participants. Indeed, Amy Slusher, the
Acting Senior Director of the Credit Programs Division at FAS, provided sworn testimony that
FAS “did not treat Lillemoe or his company, GTR, any differently from other GSM-102
applicants.” First Slusher Decl. ¶ 32, Dkt. 89-2. Moreover, the administrative record shows that
even after FAS’s alleged discriminatory conduct, FAS approved more than 21 applications from
GTR in 2013. See id. ¶ 29; AR 949. And as set forth below, each of FAS’s four actions is
amply supported by the record, and therefore, was not arbitrary and capricious. Apart from these
four, discrete adverse actions, the plaintiffs are unable to identify, and the record does not
contain, any evidence that FAS had an overarching policy to selectively ban the plaintiffs from
engaging in “rented trade flows.” For these reasons, the plaintiffs have failed to establish the
existence of a de facto policy of arbitrary treatment towards them. 4 See Celotex Corp. v. Catrett,
4
FAS also argues that the plaintiffs’ claim of selective treatment fails because it does not
identify any “final agency action,” as is required for judicial review under the APA. See Def.’s
Reply in Support of its Renewed Mot. for Summ. J. at 9 n. 6, Dkt. 99; Def.’s First Mot. for
Summ. Judgment at 6–9, Dkt. 59-1. Because the Court concludes that the record contains no
evidence that FAS had a de facto policy of treating the plaintiffs differently than other program
participants, there is no final agency action for the Court to review. See 5 U.S.C. § 704; Bennett
v. Spear, 520 U.S. 154, 177–78 (1997) (holding an agency action is final if it is both “the
consummation of the agency’s decisionmaking process” and a decision by which “rights or
obligations have been determined” or from which “legal consequences will flow”). This case is
akin to Bark v. United States Forest Serv., 37 F. Supp. 3d 41 (D.D.C. 2014), in which the court
granted summary judgment in favor of the U.S. Forest Service against a challenge to an alleged
“policy and practice” of permitting park concessioners to charge fees for parking. Id. at 50.
There, plaintiffs pointed to “no written rules, orders, or even guidance documents of the Forest
Service that set forth the supposed policies challenged,” and they could not attach a “‘policy’
label to their own amorphous description” of the agency’s practices. Id. Similarly, in this case,
the administrative record contains “no written rules, orders or even guidance documents”
supporting the plaintiffs’ “amorphous description” of FAS’s alleged “policy” of discrimination.
15
477 U.S. 317, 323 (1986) (holding that Rule 56 mandates the entry of summary judgment against
a party “who fails to make a showing sufficient to establish the existence of an element essential
to that party’s case, and on which that party will bear the burden of proof at trial”).
1. The December 28, 2012 Letter
FAS’s explanation for denying the plaintiffs’ guarantee applications in its December 28,
2012 letter meets the “minimal standards of rationality” required to survive arbitrary and
capricious review. See Am. Trucking Ass’ns v. Fed. Motor Carrier Safety Admin., 724 F.3d at
249.
FAS asserts that it made its decision “largely based on the insufficiency of the responses
by GTR to questions from FAS relating to the twelve previously approved guarantees.” First
Slusher Decl. ¶ 28. From December 2011 to May 2012, FAS approved and issued 12 GSM-102
guarantees to GTR in connection with the export of breeding cattle and horses. First Slusher
Decl. ¶ 8. These applications listed the importer as A. Charles Trading, id. ¶ 9, but in
contravention of the applicable GSM-102 regulations, the applications did not contain “a
statement that the commodity will be shipped directly to the importer in the destination country,”
First Slusher Decl. ¶ 10; see 7 C.F.R. § 1493.40(a)(3) (2012). Because FAS routinely inquires
when GSM-102 applications do not contain this statement, FAS asked GTR to provide the name
of the importer’s presence of business in the destination country. Id. GTR later provided the
name, address, and contact information for the importer’s presence of business in Moscow. Id.Separately, Cristina Bergomi, an employee of HSBC Bank, emailed FAS on October 3,
2012 regarding an attempt to acquire financing through the Export-Import Bank of the United
States (Ex-Im Bank) for “the purchase of cattle from Az Tx Cattle Company of Hereford Texas”
by Bryansk Meat Company, LLC, a Russian importer. Id. ¶ 11; AR 90. According to Bergomi,
16
the same bills of lading underlying HSBC’s export transaction were already used for GSM-102
guarantees with FAS. First Slusher Decl. ¶ 12; AR 86–90. 5 After an investigation, FAS
determined that the bills of lading identified by FAS corresponded with GTR’s 12 GSM-102
guarantees involving breeding cattle and horses. First Slusher Decl. ¶¶ 15–16.
Mark Rowse, the director of FAS’s Credit Division at the time, sent an email to Lillemoe
stating that he had learned that “the shipments reported under the referenced guarantees
registered by GTR were also likely the basis of an application under a program of” the Ex-Im
Bank. AR 94. Rowse explained that “these guarantees were in fact shipped directly to a Russian
importer other than A. Charles Trading by a U.S. exporter other than GTR” and that “neither the
name of that Russian bank nor the Russian importer appears in any documentation that you
submitted in obtaining the GSM-102 guarantees or reporting your exports.” Id. Rowse then
requested more information from the plaintiffs about these guarantees, including a description of
“how GTR executed an export sale of cattle and horses to Russia when the sale of the same cattle
and horses had been executed by parties entirely unrelated to the GTR transactions represented in
your application.” Id.
On November 8, 2012, the plaintiffs’ attorney, Mark Larsen, responded to Rowse’s
email, stating that the structure of these transactions was similar to the structure Lillemoe had
discussed with FAS personnel in 2009. See First Slusher Decl. ¶ 20; AR 327–29. Previously, in
2009, Lillemoe had presented to FAS personnel a certain transaction model it sought to use for
5
As noted in the Court’s prior Memorandum Opinion, FAS had concerns about “the risk that
two or more parties might each apply for a GSM-102 guarantee based on the same shipment or
BL.” Lillemoe, 344 F. Supp. 3d at 230. And in their complaint, the plaintiffs represent that
“precautions are taken to prevent the shipment from being double-counted under the program,
i.e., not used to obtain multiple GSM guarantees.” Am. Compl. ¶ 24.
17
exports under the GSM-102 program. AR 2–19. 6 Lillemoe asserts that at the meeting, Rowse
“assured me in person that FAS did not see anything in the transaction presented that it violated
the GSM Regulations.” First Lillemoe Decl. ¶ 36. But Slusher claims that at the time, FAS
officials “did not have a clear understanding of [the structure of the transaction] and its
implications.” Id. ¶ 5. And the administrative record supports Slusher’s characterization. For
example, Slusher’s notes from the meeting have a section entitled “Issues?” that raises questions
such as “How does exporter certify that goods are being shipped to foreign buyer on guarantee?”
AR 8–9. 7 According to Slusher, FAS did has “not approved” any structure similar to the one
shown at the 2009 meeting. First Slusher Decl. ¶ 20. 8
Larsen’s response to Rowse further stated that “GTR is not familiar with involvement by
[the Ex-Im Bank] in connection with the goods” covered by the guarantees at issue. AR 327.
But Larsen never explained why the bills of lading were duplicated in separate transactions.
While FAS had been investigating the issue with the Ex-Im Bank, GTR submitted 15
new GSM-102 applications on October 24, 2012. First Slusher Decl. ¶ 14. On November 20,
6
The plaintiffs allege in the complaint that the diagram they showed FAS personnel at this
meeting represented a “rented trade flow.” See Am. Compl. ¶ 28.
7
Subsequent emails from FAS personnel also show they had questions about the model that
Lillemoe presented in 2009. On May 13, 2009, one FAS official wrote that the flow chart shown
by Lillemoe “is in negation to our regulations.” AR 13. Another wrote “[m]y opinion is yes it
does violate the Regulations because the party listed as the importer on the Guarantee is not in
fact the importer of record, and the goods are not shipped to the Importer.” AR 17. Slusher
herself wrote at the time “we are all struggling with it.” Id.
8
Larsen’s email on November 8, 2012 also included a chart mapping out the structure of the
2012 transactions, but this chart was different than the one presented to FAS in 2009. AR 333.
The 2012 transactions included an additional step in the flow of goods, whereby the GSM
Importer would sell the goods back to the GSM Exporter. Id. Slusher says this “raised a concern
for FAS that Mr. Lillemoe’s transactions did not constitute a shipment to the importer.” Second
Slusher Decl. ¶ 11.
18
2012, not even two weeks after the correspondence between Rowse and Larsen about the issues
with the prior 12 applications, Larsen emailed Rowse asking when GTR’s 15 new applications
would be approved. See First Slusher Decl. ¶ 21; AR 409–10. Rowse asked to set up a phone
call to discuss the new applications, but Larsen requested that their correspondence remain in
writing. First Slusher Decl. ¶ 22; AR 412. Accordingly, Rowse subsequently posed a series of
questions to Larsen on December 4, 2012. First Slusher Decl. ¶ 23; AR 473. The first question
asked GTR to explain discrepancies in cattle prices. Id. The second laid out the structure
described in Larsen’s November 8, 2012 email and asked GTR how this transaction
“constitute[d] an export of any cattle under the payment guarantee.” Id. The third asked “how
cattle shipped by AzTx to Bryansk Meat Company as consignee and notify party can be used by
GTR, LLC as evidence that goods were shipped from the U.S. to the named importer on the
payment guarantee, A. Charles Trading” and “what relationship exists between Bryansk and A.
Charles Trading.” Id.
In a December 7, 2012 email, Larsen addressed Rowse’s first question but not the second
two, and instead referred Rowse to his November 8, 2012 email. AR 477. Larsen again
followed up with Rowse on December 11, 2012, stating that “the pending applications present
nothing new or novel in any respect” from the plaintiffs’ earlier applications. AR 479.
On December 28, 2012, Rowse sent Lillemoe and Larsen an email rejecting the 15
pending GSM-102 applications. AR 485–86. Rowse noted that, based on GTR’s other 12
guarantees that overlapped with the Ex-Im Bank transaction, he had reason to believe the
applications’ statement that “the commodity will be shipped directly to the importer in the
destination country” was not correct. Id. He stated that “[a]s Mr. Larsen indicated that the
pending applications present nothing new or novel, I can only conclude that these are based upon
19
the same transaction structure” as the previous 12 applications that FAS had been investigating,
finally stating that “any future applications utilizing the same structure will also be denied.” Id.
FAS’s decision to reject GTR’s 15 applications based on Rowse’s lack of response was
not arbitrary and capricious. FAS had legitimate concerns about the prior 12 transactions, since
these bills of lading had also been used in conjunction with the Ex-Im Bank transaction. In light
of these concerns, FAS was reasonable in scrutinizing GTR’s other transactions—in which
millions of government dollars were at stake—more closely. FAS accordingly proceeded
rationally by asking GTR addition questions relating to the 15 new applications. See id. ¶ 23.
And when Lillemoe’s attorney failed to supply additional documents or answers to these
questions, FAS had reason to believe that the 15 applications could also raise similar problems as
the earlier 12 applications. Because “agency’s path may reasonably be discerned” from the
information provided in Slusher’s declaration and in the administrative record, see Pub. Citizen,
Inc. v. F.A.A., 988 F.2d 186, 197 (D.C. Cir. 1993), FAS did not act arbitrarily and capriciously
when it denied the plaintiffs’ 15 GSM-102 guarantee applications.
The record also supports Slusher’s assertion that FAS did not treat the plaintiffs
differently than other GSM-102 program participants. See id. ¶ 32. Several months after
Rowse’s letter to Lillemoe, FAS also raised concerns with Cargill, GSTS LLC, and Grove
Services, Inc. about the same transaction structure, in which the commodities were not shipped
to the importer on the GSM-102 application. On November 8, 2012, Rowse told Cargill that
FAS was “no longer feeling comfortable with” the type of transaction where Cargill is not the
shipper. AR 447. On August 21, 2013, Rowse told Cargill that FAS “only see[s] application so
[it doesn’t] necessarily know what everyone else is doing” and that “exporters must certify they
are shipping to importer.” AR 614. On September 30, 2013, FAS personnel “conducted
20
conversations” with GSTS and Grove Services similar to those they had with Lillemoe. First
Slusher Decl. ¶ 39. Those conversations were prompted by a review of live animal transactions
to Russia that FAS conducted from May 2013 to September 2013 to “determine whether there
were similar issues as those identified in October 2012” with respect to GTR’s transactions that
were flagged by the Ex-Im Bank. Id. For GSTS, Rowse “questioned certain anomalies evident
in the guarantee application” such as the application indicating that GSTS was shipping directly
to the importer, while “the bills of lading indicate[d] lots of different consignees.” Id. ¶ 39; see
also AR 662. For Grove Services, Rowse asked Grove to certify that the “goods/cattle will be
shipped to importer in Russia.” AR 664. Because there were multiple parties on the bills of
lading, he asked whether there was a contractual relationship between Grove, the intervening
purchaser and the importer. Id.; see also First Slusher Decl. ¶ 40. He continued that he was
“concerned about cert[ifications] and who is moving cattle.” AR 664. These conversations,
while perhaps not as formal as the letter to the plaintiffs, show that FAS employees had similar
conversations with other participants and treated the plaintiffs in a similar manner as those other
participants.
For his part, Lillemoe asserts in his declaration that other companies, such as GDC,
Grove Services and GSTS engaged in transactions using the “rented trade flow” structure from
2013 to 2016. First Lillemoe Decl. ¶¶ 48–51. According to FAS, however, GDC has not
participated in the GSM-102 program since 2012. Second Slusher Decl. ¶ 21, Dkt. 99-1. But
even assuming Lillemoe’s statement is true, FAS explains—and Lillemoe admits—that the
transactions used in the GSM-102 program were highly complicated, and FAS typically could
not discern the underlying structure of the transaction based on the documents before it. See id. ¶
16 (“FAS cannot tell the structure of a transaction based on the information submitted in an
21
exporter’s GSM-102 application for a payment guarantee.”); Second Lillemoe Decl. ¶ 17, Dkt.
103-1. The GSM-102 program requires that exporters apply before the commodities are shipped.
Second Slusher Decl. ¶ 18. Under the regulations in effect before 2014, the exporter only had to
provide FAS with the “name and address of the exporter; name and address of the importer;
name and address of the intervening purchaser, if any; and name and location of the foreign bank
issuing the letter of credit” as well as “information about the commodity and requested terms of
the GSM-102 payment guarantee.” Id. ¶ 16; see also 7 C.F.R. § 1493.40(a) (2012). Nothing
required program participants to provide information or documents about the underlying
structure of the transaction. Second Slusher Decl. ¶ 16. And exporters cannot possibly show
FAS a bill of lading when they apply to the program, because the commodities have not actually
shipped yet. Id. ¶ 18.
Further, the administrative record reveals that FAS was unclear about the transactions
and relied heavily on the parties’ representations about their structures. For instance, Rowse told
Lillemoe in a January 9, 2013 phone call that “we had neither the resources nor time to preview
each transaction and we depended upon the declarations in the application.” AR 536. Rowse
told Cargill at the August 21, 2013 meeting that “[w]e’re dependent on what people tell us. We
don’t do transactional due diligence.” AR 616. Far from prohibiting a certain type of transaction
for the plaintiffs while deliberately authorizing the same for other parties, these conversations
show that FAS was not clear about the structures of the transactions it was approving. Simply
because these transactions were not fully vetted by FAS does not mean that FAS acted arbitrarily
towards the plaintiffs.
22
2. The Turkey Guarantees
Next, the plaintiffs allege that they withdrew several Turkey guarantees that FAS had
already approved on September 25, 2012, and FAS refused to reimburse the application fees
without explanation. See Am. Compl. ¶ 53. According to the plaintiffs, they withdrew these
guarantees because they were concerned that FAS would not honor the guarantees, since FAS
had barred the “rented trade flow” structure. Pls.’ Opp’n to Def.’s Renewed Mot. for Summ. J.
at 20, Dkt. 93; AR 488–89. But nothing in the record supports the plaintiffs’ assumption that
FAS would refuse to honor the guarantees. Under FAS’s governing regulations at the time, once
a guarantee was issued, FAS would pay the guarantee it even if it ended in default. See 7 C.F.R
1493.300 (2013). Indeed, FAS did not retroactively annul the coverage of the plaintiffs’ 12
guarantees that the Ex-Im Bank flagged as involving the same bill of lading. First Slusher Decl.
¶ 31. According to Slusher, “because the guarantees had already been assigned to a U.S. bank,
and FAS had no information indicating that the assignee bank had any knowledge of the
underlying defects in the transactions,” the regulations required that FAS “honor the guarantees
in the event of default.” Id.
Further, FAS declined to refund the application fees for the guarantees based on a
straightforward application of its regulations. Under the regulations in place at the time of the
Turkey guarantees, FAS’s “approval of the application will be final and refund of the guarantee
fee will not be made after approval unless the GSM determines that such refund will be in the
best interest of [the Commodity Credit Corporation].” 7 C.F.R. § 1493.70(d) (2013). Slusher
asserts that “it has always been FAS policy” that once the Director of the FAS Credit Programs
Division signs the payment guarantee, the application is considered approved. Second Slusher
Decl. ¶ 37. FAS gave GTR the final approval for the Turkey guarantees in September 2012. See
23
AR 491; AR 508; AR 520. And FAS applied its longstanding policy by refusing to refund
application fees on guarantees that it had approved months before Lillemoe attempted to
withdraw them. FAS thus acted reasonably toward the plaintiffs when it declined to reimburse
the application fees on the Turkey guarantees.
3. The Bancolombia Guarantees
The plaintiffs also invoke FAS’s delay in approving the Bancolombia guarantees as
further evidence that FAS treated GTR differently than other program participants. See Am.
Compl. ¶ 56–58. GTR submitted the three Bancolombia applications on December 14, 2012 and
December 17, 2012. See First Slusher Decl. ¶ 33; AR 548; AR 563; AR 574. On January 9,
2013, Rowse called Lillemoe and explained that these applications contained a statement that
“the goods would be shipped directly to his importer.” AR 536. He told Lillemoe that if he was
comfortable with these certifications, FAS would approve them. Id. On January 10, 2013,
Lillemoe sent Rowse an email that he was comfortable with the transactions, see AR 538, and
Rowse directed his staff to approve the applications, see AR 540. The plaintiffs then canceled
these guarantees 2.5 hours later. AR 542. The record does not indicate that FAS treated these
applications differently by delaying their approval. Rather, FAS had concerns about whether,
following the Ex-Im Bank issue just three months prior, GTR could certify that the goods would
be shipped directly to the importer. FAS raised the issue with Lillemoe, and once he signed off
on it, FAS approved the applications almost immediately. The record contains no evidence that
FAS unduly delayed these applications because it was selectively enforcing a policy against the
plaintiffs.
The plaintiffs also argue that once GTR canceled the guarantees, FAS “inexplicably
refused” to refund the fees associated with only one of them. See Pls.’ Opp’n to Def.’s Renewed
24
Mot. for Summ. J. at 21. But again, in evaluating whether to refund the fees, FAS directly
applied its own regulations. By the time the plaintiffs canceled the Bancolombia applications,
Rowse had only signed one of the them, so only one was considered approved under FAS policy.
See Second Slusher Decl. ¶ 37; see also AR 587–89. Because Rowse had not yet signed the
other two guarantees, FAS refunded the fees corresponding with those applications. Second
Slusher Decl. ¶ 37. FAS’s “decision to hold to its bright-line test,” see Pls.’ Reply in Support of
its Mot. for Discovery at 25, Dkt. 103, is hardly an arbitrary action—FAS applied its established
policy in a way that was consistent with its own binding regulations. FAS therefore acted
reasonably with respect to the Bancolombia guarantees.
4. The Deutsche Bank Guarantees
The plaintiffs’ final example of discriminatory treatment is FAS’ alleged interference in
its relationship with Deutsche Bank. See Am. Compl. ¶¶ 72–74. According to the plaintiffs, in
December 2013, Rowse raised issues with Deutsche Bank about discrepancies in GTR’s
documents and caused Deutsche Bank to cease doing business with the plaintiffs. See Pls.’
Opp’n to Renewed Mot. for Summ. J. at 22–23.
But the administrative record shows that FAS treated GTR reasonably with respect to its
interactions with Deutsche Bank. On November 25, 2013, Rudy Effing, a Deutsche Bank
employee, contacted FAS because it noticed discrepancies in certain documents that the
plaintiffs had presented to it in connection with several GSM-102 guarantees. First Slusher Decl.
¶¶ 48–49; AR 666. The email listed five discrepancies in the documents submitted by the
plaintiffs. Id. Previously, FAS had issued seven guarantees to the plaintiffs that they sought to
assign to Deutsche Bank. AR 727–28.
25
On December 4, 2013, Deutsche Bank sent a second email to FAS with revised
documents that GTR had given it. AR 872–78. In these revised documents, the bills of lading
“appeared to have been altered from the original set” and certain contract numbers appearing on
the bills of lading originally submitted “had been removed from the revised set of documents.”
Second Slusher Decl. ¶ 41; see also AR 684–86; AR 875–77. Later that day, FAS had a call
with Effing, and according to Slusher’s notes from that call, Rowse indicated that based on the
documents, he had questions about “whether sales are compliant” with the GSM-102 program.
AR 880. Effing said that he was “not happy about structure where someone applies for
guarantee who is nowhere on the shipping docs.” AR 881.
On December 6, 2013, Rowse and Lillemoe held a telephone conversation in which
Rowse told Lillemoe he had discussed the problems with the documents with Deutsche Bank.
First Slusher Decl. ¶ 53. During that call, Rowse raised the altered bills of lading with Lillemoe,
and Lillemoe denied changing them. AR 889–91. Rowse also told Lillemoe that FAS had not
yet determined whether the problems invalidated the guarantee, and Lillemoe said he would
move forward with the transactions if Deutsche Bank accepted assignment. AR 891. On
December 10, 2013, Lillemoe told FAS that Deutsche Bank would not accept assignment for the
seven GTR guarantees. First Slusher Decl. ¶ 54; AR 727–28.
The record shows that Deutsche Bank approached the FAS with issues about
discrepancies in the plaintiffs’ documents, and FAS acted reasonably by conducting
conversations with the relevant parties: Lillemoe and Deutsche Bank. Rowse was up front with
Lillemoe about his discussions with Deutsche Bank, and he did not indicate either way whether
FAS would annul coverage of the guarantees. In fact, FAS never annulled coverage on the
guarantees, First Slusher Decl. ¶ 56, and Deutsche Bank refused to take assignment of the
26
guarantees “of its own accord,” id. ¶ 54. The record therefore does not support the claim that
FAS was “defaming GTR and Mr. Lillemoe to his business associates and customers and by
interfering in his business relationships.” Am. Compl. ¶ 69.
The plaintiffs argue that FAS was the one to initiate contact with Deutsche Bank and
raise issues with GTR’s transaction structure. See Pl.’s Opp’n at 22. Plaintiffs’ sole support for
this claim is Rowse’s decision to copy Deutsche Bank on his correspondence about the GTR
transaction that was flagged by the Ex-Im Bank in October 2012. Id. As a preliminary matter, it
is eminently reasonable that Rowse copied Deutsche Bank on this email, because Deutsche Bank
was the assignee on the transactions that were duplicative with the bills of ladings used for the
Ex-Im Bank transactions, and in the event of any default, Deutsche Bank would file any claim
for loss with FAS. See Second Slusher Decl. ¶ 13. Deutsche Bank also continued to do business
with GTR after this correspondence. Id. ¶ 14. In addition, the subsequent communication
between Deutsche Bank and FAS occurred over a year after the Ex-Im Bank emails and involved
an entirely different set of GSM-102 guarantees. Id. ¶ 38.
The parties appear to dispute whether, on December 4, 2013, Effing told Rowse he
“wants to find [a] reason not to pay” on the guarantees, see AR 881, or vice versa, see Lillemoe
Decl. ¶ 60. But this dispute is not material. Even assuming Rowse discussed annulling the
guarantees with Deutsche Bank, this does not suggest that Rowse was acting arbitrarily toward
GTR. Rather, any such discussion would have been reasonable given the discrepancies Deutsche
Bank flagged in GTR’s guarantee documentation and FAS’s legitimate concern that GTR’s bills
of lading had been altered.
The plaintiffs also take issue with FAS’s decision not to reimburse their application fees
on the seven guarantees on which Deutsche Bank refused to take assignment. See Pls.’ Opp’n to
27
Def.’s Renewed Mot. for Summ. J. at 23. FAS declined to reimburse the application fees for
these seven guarantees because, again, based on FAS’s regulations and established policy, the
guarantees had already been approved by FAS. The transaction failed because Deutsche Bank
refused to accept the assignments, an event that occurred long after FAS approved the
guarantees. In a letter to Lillemoe on April 16, 2014, FAS cited to 7 C.F.R. § 1493.709(d) and
noted that “failure of a U.S. assignee bank to accept the payment guarantee is not a circumstance
under which CCC refunds payment of fees.” AR 926. The plaintiffs appealed this decision to
the Administrator of FAS, who denied the appeal. AR 934. The Administrator told GTR that it
was up to Deutsche Bank whether to take assignment of the guarantee, and that nothing
precluded the plaintiffs from requesting another U.S. bank to take assignment. Id. FAS itself
conducted a review of the decision to deny the fee reimbursements, and it has provided multiple
legitimate reasons to justify its decision. FAS has thus shown that its conduct with respect to
Deutsche Bank was not arbitrary and capricious and that it had legitimate reasons for denying the
plaintiffs’ request to reimburse their application fees.
28
CONCLUSION
For the foregoing reasons, the Court grants in part FAS’s Renewed Partial Motion to
Dismiss for Lack of Standing, Dkt. 90, and accordingly, the plaintiffs’ claims for injunctive relief
and for reimbursement of their program fees from the Bancolombia and Deutsche Bank
transactions are dismissed without prejudice. In addition, the Court grants FAS’s Renewed
Motion for Summary Judgment, Dkt. 89, with respect to the plaintiffs’ claim for reimbursement
of their program fees from the Turkey transactions. The Court also denies the plaintiffs’ Motion
for Discovery, Dkt. 94, and denies as moot FAS’s Motion for Protective Order, Dkt. 100. A
separate order consistent with this decision accompanies this memorandum opinion.
________________________
DABNEY L. FRIEDRICH
United States District Judge
April 27, 2020
29