Austin v. United States ( 2014 )

OR|G|NAL
In the United States Court of Federal Claims Fl LED
No. 13-352C
Fi|ed: October10, 2014 UCT 1 0 2014
‘k * ~k * ~k * * * * * * ~k *
PHYLl_ls AusTlN and * m §§ Plaintiffs, Breach ofFEDER/*'- CLA|l\/IS
PENELOPE BURR|S, * Contract; Motion to Dismiss;
* Lack of Subject Matter
Plaintiffs, * Jurisdiction; Fai|ure to State a
* Claim; Federa| Crop insurance
v. * Reform and Department of
* Agricu|ture Reorganization Act
UN|TED STATES, * of 1994, 7 U.S.C. § 6901, et seq.
Defendant. *
'k 'k * ‘k * * 'k * ~k ~k ~k * 'k
Phy|lis Austin and Penelope Burris, Doniphan, |\/|O, ;Bs_e.
Zachary J. Su||ivan, Tria| Attorney, Commercial Litigation Branch, Civil Divisi0n,
United States Department of Justice, Washingt0n, D.C., for the defendant. With him
were Stuart F. De|ery, Assistant Attorney General, Civil Division, Robert E.
Kirschman, Jr., Director, Commercial Litigation, and Kirk T. Manhardt, Assistant
Director, Civil Divisi0n. Of Counsel, David W. Schaaf, United States Department of
Agricu|ture, Kansas City, MO.
0 P l N l 0 N
HORN, J.
F|ND|NGS OF FACT
Plaintiffs, Phyllis Austin and Penelope Burris, filed a transfer complaint in the
United States Court of Federa| Claims alleging breach of contract by the United States.
Plaintiffs previously filed a complaint against the United States Department of
Agricu|ture, Rural Deve|opment in the Circuit Court of Rip|ey County, l\/lissouri. At the
request of the defendant, the United States Department of Agricu|ture, Rural
Development, Rural Housing Service (USDA-RD, RHS), an agency of the United States
Department of Agricu|ture, the case was removed to the United States District Court for
the Eastern District of Missouri, S0utheastern Division. The government filed a motion
to dismiss in the Eastern District of l\/lissouri for lack of subject matterjurisdiction based
on the Tucker Act, 28 U.S.C. § 1491(a) (2012).1 Plaintiffs responded with a request that
the venue be changed to the United States Court of Federa| Claims. Piaintiffs’ motion
was granted on March 15, 2013, and the transfer case was received and filed in this
court on l\/lay 23, 2013. Pursuant to the Tucker Act, plaintiffs seek damages of at least
$25,000.00 for the breach of a contract entered into between plaintiffs and the USDA-
RD, RHS. in this court, defendant again moved to dismiss for lack of subject matter
jurisdiction and also for failure to state a claim.
in their second amended complaintz plaintiffs allege a variety of breach of
contract and tort claims, including:
1. The 502 direct loan‘°’ is an express and implied contract with the government.
2. Defendant withheld loan funds exceeding $28,000.00 based on invoices
submitted after BARCO Construction & Design Co. (BARCO) abandoned
construction. USDA-RD officials did not inspect the partially-completed home
or inventory materials at the site in order to verify the invoices.
3. Defendant accepted late lien waivers from BARCO with respect to the third
payment despite the requirement that lien waivers be submitted prior to
disbursement of funds.
4. Defendant breached the loan contract by refusing to allow substitute
performance insofar as defendant ignored or rejected four bids submitted by
new contractors to either winterize or complete construction of the home.
1 in the case in the United States District Court for the Eastern District of Missouri, the
Department of Justice, on behalf of the United States, filed a motion to dismiss this
matter, arguing that under the Tucker Act, the District Court lacked subject matter
jurisdiction to hear plaintiffs’ claims. After the case was transferred to this court, the
Department of Justice proceeded to argue that the Court of Federa| Ciaims also lacked
subject matter jurisdiction to hear plaintiffs’ claims. Although based on a review of the
allegations and the record currently before this court, there does not appear to be a
factual or legal basis for relief in this matter, the proper jurisdiction for the tort claims,
the particular constitutional claims, and the claims stemming from "adverse decisions" of
the USDA-RD, RHS would have been properly lodged the United States District Court,
not the United States Court of Federa| Claims.
2 Plaintiffs identify their transfer complaint filed in this court as an amended complaint,
On iViarch 25, 2014, plaintiffs filed an amended complaint, which they labeled "Second
Amended Complaint."
3 The loan was made pursuant to Section 502 of the Housing Act of 1949, Pub. L. No.
81-171, 63 Stat. 413 (codified as amended in scattered sections of Titie 42 of the United
States Code).
lt is well established that "‘subject-matter jurisdiction, because it involves a
court’s power to hear a case, can never be forfeited or waived."’ Arbaugh v. Y & H
Corg., 546 U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630
(2002)). "[F]ederal courts have an independent obligation to ensure that they do not
exceed the scope of their jurisdiction, and therefore they must raise and decide
jurisdictional questions that the parties either overlook or elect not to press." Henderson
ex re|. Henderson v. Shinseki, 131 S. Ct. 1197, 1202 (2011); § a_ls_q Gonzalez v.
Tha|er, 132 S. Ct. 641, 648 (2012) ("When a requirement goes to subject-matter
jurisdiction, courts are obligated to consider sua sponte issues that the parties have
disclaimed or have not presented."); Hertz Corg. v. Friend, 559 U.S. 77, 94 (2010)
("Courts have an independent obligation to determine whether subject-matter
jurisdiction exists, even when no party challenges it." (citing Arbaugh v. Y & H Corg.,
546 U.S. at 514)); Avid identification Sys., lnc. v. Crystal import Corg., 603 F.3d 967,
971 (Fed. Cir.) ("This court must always determine for itself whether it has jurisdiction to
hear the case before it, even when the parties do not raise or contest the issue."), [e_h’g
g gg g g denied, 614 F.3d 1330 (Fed. Cir. 2010), c_e;t_. denied, 131 S. Ct. 909(2011); Metabolite Labs., lnc. v. Lab. Corg. of Am. Ho|dings, 370 F.3d 1354, 1369 (Fed.
Cir.) ("Subject matterjurisdiction is an inquiry that this court must raise sua sponte, even
where . . . neither party has raised this issue." (citing Textile Prods., lnc. v. l\/lead Corg.,
134 F.3d 1481, 1485 (Fed. Cir.), gg denied g g g suggestion declined (Fed.
Cir. 1998)), gg g gg g g denied (Fed. Cir. 2004), g_e_rt_. granted ig jrg, 546
U.S. 975 (2005), gt dismissed g improvidently granted, 548 U.S. 124 (2006); Sgecial
Devices lnc. v. OEA lnc., 269 F.3d 1340, 1342 (Fed. Cir. 2001) ("[A] court has a duty
to inquire into its jurisdiction to hear and decide a case."); View Eng’g, lnc. v. Robotic
Vision Sys., lnc., 115 F.3d 962, 963 (Fed. Cir. 1997) ("[C]ourts must always look to their
jurisdiction, whether the parties raise the issue or not."). "Objecti0ns to a tribunal’s
jurisdiction can be raised at any time, even by a party that once conceded the tribunal’s
subject-matter jurisdiction over the controversy." Sebelius v. Auburn Reg’l Med. Ctr.,
133 S. Ct. 817, 824 (2013); § aig Arbaugh v. Y & H Corg., 546 U.S. at 506 ("The
objection that a federal court lacks subject-matter jurisdiction . . . may be raised by a
party, or by a court on its own initiative, at any stage in the litigation, even after trial and
the entry ofjudgment."); Cent. Pines Land Co. L.L.C. v. United States, 697 F.3d 1360,
1364 n.1 (Fed. Cir. 2012) ("An objection to a court’s subject matter jurisdiction can be
raised by any party or the court at any stage of litigation, including after trial and the
entry of judgment." (citing Arbaugh v. Y & H Corg., 546 U.S. at 506-07)); Rick’s
l\/lushroom Serv. lnc. v. United States, 521 F.3d 1338, 1346 (Fed. Cir. 2008) ("[A]ny
party may cha|lenge, or the court may raise sua s,oonte, subject matter jurisdiction at
any time." (citing Arbaugh v. Y & H Corg., 546 U.S. at 506; Folden v. United States, 379
F.3d 1344, 1354 (Fed. Cir.), gg g Qti_’g g g denied (Fed. Cir. 2004), gt
denied, 545 U.S. 1127 (2005); and Fanning, Philligs & Molnar v. West, 160 F.3d 717,
720 (Fed. Cir. 1998)); Pikulin v. United States, 97 Fed. Cl. 71, 76 (2011), aggeal
dismissed, 425 F. App’x 902 (Fed. Cir. 2011).
"Determination of jurisdiction starts with the complaint, which must be well-
p|eaded in that it must state the necessary elements of the plaintiff’s claim, independent
11
of any defense that may be interposed." Holley v. United States, 124 F.3d 1462, 1465
(Fed. Cir.) (citing Franchise Tax Bd. v. Constr. Laborers Vacati0n Trust, 463 U.S. 1, 9-
10 (1983)), ing denied (Fed. Cir. 1997); § ali Compliance Solutions Occupational
Trainers |nc. v. United States, No. 13-194C, 2014 WL 4557648, at *3 (Fed. C|., Sept. 3,
2014); K|amath Tribe Claims Comm. v. United States, 97 Fed. C|. 203, 208 (2011);
Gonzalez-l\/lcCaulley |nv. Grp., |nc. v. United States, 93 Fed. C|. 710, 713 (2010).
"C0nclusory allegations of law and unwarranted inferences of fact do not suffice to
support a claim." Bradley v. Chiron Corp., 136 F.3d 1317, 1322 (Fed. Cir. 1998) (citing
Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996) and 5A Char|es
A|an Wright & Arthur R. Mi|ler, Federa| Practice and Procedure § 1357 at 315-18
(1990)); § ali McZea| v. Sprint Nexte| Corp., 501 F.3d 1354, 1362 n.9 (Fed. Cir.
2007) (Dyk, J., concurring in part, dissenting in part).
in examining what must be pled in order to state a claim, under both RCFC
8(a)(2) and Ru|e (8)(a)(2) of the Federa| Rules of Civil Procedure, a plaintiff need only
state in the complaint "a short and plain statement of the claim showing that the pleader
is entitled to relief." RCFC 8(a)(2) (2014); Fed. R. Civ. P. 8(a)(2) (2014); w_e ali §
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The United States Supreme Court
stated:
While a complaint attacked by a Ru|e 12(b)(6) motion to dismiss does not
need detailed factual allegations, |Conley v. Gibson, 355 U.S. 41, 47
(1957)]; Saniuan v. American Bd. of Psychiatg¢ and Neurology, |nc., 40
F.3d 247, 251 (7th Cir. 1994), a plaintiff’s obligation to provide the
"grounds" of his "entitle[ment] to relief" requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of
action will not do, §§ Papasan v. Allain, 478 U.S. 265, 286 (1986) (on a
motion to dismiss, courts "are not bound to accept as true a legal
conclusion couched as a factual allegation"). Factual allegations must be
enough to raise a right to relief above the speculative level, § 5 C.
Wright & A. l\/lil|er, Federa| Practice and Procedure § 1216, pp. 235-36 (3d
ed. 2004) (hereinafter Wright & |Vliller) ("[T]he pleading must contain
something more . . . than . . . a statement of facts that merely creates a
suspicion [ot] a legally cognizable right of action"), on the assumption that
all the allegations in the complaint are true (even if doubtful in fact), se_e,
ig_., Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508, n.1 (2002); Neitzke
v. Williams, 490 U.S. 319, 327 (1989) ("Rule 12(b)(6) does not
countenance . . . dismissals based on a judge’s disbelief of a complaint’s
factual allegations"); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (a
well-pleaded complaint may proceed even if it appears "that a recovery is
very remote and unlikely") . . . . [VV]e do not require heightened fact
pleading of specifics, but only enough facts to state a claim to relief that is
plausible on its face.
Bell Atl. Corp. v. Twombly, 550 U.S. at 555-56, 570 (footnote and other citations
omitted; omissions in original); § ali Ashcroft v. lgbal, 556 U.S. 662, 678 (2009)
12
(citing Be|| Atl. Corp. v. Twombly, 550 U.S. at 555-57, 570); A&D Auto Sales |nc. v.
United States, 748 F.3d 1142, 1157 (Fed. Cir. 2014); Bell/Heegg v. United States, 739
F.3d 1324, 1330 (Fed. Cir.), Lh’g L r_e_h_’g g l_)g@ denied (Fed. Cir. 2014); Kam-
Almaz v. United States, 682 F.3d 1364, 1367 (Fed. Cir. 2012) ("The facts as alleged
‘must be enough to raise a right to relief above the speculative level, on the assumption
that all the allegations in the complaint are true (even if doubtful in fact)."’ (quoting §
Atl. Corg. v. Twombly, 550 U.S. at 557)); Totes-lsotoner Corg. v. United States, 594
F.3d 1346, 1354-55 (Fed. Cir.), ge_rt. denied, 131 S. Ct. 92 (2010); Bank of Guam v.
United States, 578 F.3d 1318, 1326 (Fed. Cir.) ("ln order to avoid dismissal for failure to
state a claim, the complaint must allege facts ‘plausib|y suggesting (not merely
consistent with)’ a showing of entitlement to relief." (quoting Be|| Atl. Corg. v. Twombly,
550 U.S. at 557)), Lh’g g ing g g denied (Fed. Cir. 2009), Lt. denied, 561
U.S. 1006 (2010); Cambridge v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009)
("[A] plaintiff must plead factual allegations that support a facially ‘plausible’ claim to
relief in order to avoid dismissal for failure to state a claim." (quoting Be|| Atl. Corp. v.
Twombly, 550 U.S. at 570)); Cag( v. United States, 552 F.3d 1373, 1376 (Fed. Cir.)
("The factual allegations must be enough to raise a right to relief above the speculative
level. Thls does not require the plaintiff to set out in detail the facts upon which the claim
is based, but enough facts to state a claim to relief that is plausible on its face." (citing
Be|| Atl. Corp. v. Twombly, 550 U.S. at 555, 570)), r_e_h_’g denied (Fed. Cir.), it denied,
557 U.S. 937 (2009); Vargas v. United States, 114 Fed. Cl. 226, 232 (2014);
Fredericksburg Non-Profit Housing Corg. v. United States, 113 Fed. Cl. 244, 253
(2013); Peninsula Grp. Capital Corp. v. United States, 93 Fed. Cl. 720, 726-27 (2010),
appeal dismissed, 454 F. App’x 900 (Fed. Cir. 2011); Legal Aid Soc’y of New York v.
United States, 92 Fed. Cl. 285, 292, 298, 298 n.14 (2010),
When deciding a case based on a lack of subject matterjurisdiction or for failure
to state a claim, this court must assume that all undisputed facts alleged in the
complaint are true and must draw all reasonable inferences in the non-movant’s favor.
g Erickson v. Pardus, 551 U.S. 89, 94 (2007) ("ln addition, when ruling on a
defendant’s motion to dismiss, a judge must accept as true all of the factual allegations
contained in the complaint." (citing Be|| Atl. Corp. v. Twomb|y, 550 U.S. at 555-56
(citing Swierkiewicz v. Sorema N. A., 534 U.S. at 508 n.1; Neitzke v. Williams, 490 U.S.
at 327; Scheuer v. Rhodes, 416 U.S. at 236))); Scheuer v. Rhodes, 416 U.S. at 236
("Moreover, it is well established that, in passing on a motion to dismiss, whether on the
ground of lack of jurisdiction over the subject matter or for failure to state a cause of
action, the allegations of the complaint should be construed favorably to the pleader."),
abrogated o_n other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982), recognized
by Davis v. Scherer, 468 U.S. 183, 190 (1984); United Pac. lns. Co. v. United States,
464 F.3d 1325, 1327-28 (Fed. Cir. 2006); Samish indian Nation v. United States, 419
F.3d 1355, 1364 (Fed. Cir. 2005); Boise Cascade Corg. v. United States, 296 F.3d
1339, 1343 (Fed. Cir.), Lh’g g ;e_h_’g g _b_zan_c denied (Fed. Cir. 2002), ga denied,
538 U.S. 906 (2003).
First, the government argues that any and all claims which sound in tort should
be dismissed for lack of jurisdiction under RCFC 12(b)(1). lt is correct that this court
13
does not possess jurisdiction over claims that sound in tort. § 28 U.S.C. § 1491(a)
("The United States Court of Federal C|aims shall have jurisdiction to render judgment
upon any claim against the United States founded either upon the Constitution, or any
Act of Congress or any regulation of an executive department, or upon any express or
implied contract with the United States, or for liquidated or unliquidated damages in
cases not sounding in tort."); s_e_eal@ Keene Cor .v. United States, 508 U.S. 200, 214
(1993); Rick’s Mushroom Serv. |nc. v. United States, 521 F.3d at 1343; Alves v. United
States, 133 F.3d 1454, 1459 (Fed. Cir. 1998); Brown v. United States, 105 F.3d 621,
623 (Fed. Cir.), Lh’g denied (Fed. Cir. 1997); Golden Pac. Bancorp v. United States, 15
F.3d 1066, 1070 n.8 (Fed. Cir.), Llt’_q denied, g bag suggestion declined (Fed. Cir.),
Lt. denied, 513 U.S. 961 (1994); Hampel v. United States, 97 Fed. C|. 235, 238, affl,
429 F. App’x 995 (Fed. Cir. 2011), ge_rt. denied, 132 S. Ct. 1105 (2012); Woodson v.
United States, 89 Fed. C|. 640, 650 (2009); McCullough v. United States, 76 Fed. C|. 1,
3 (2006), appeal dismissed, 236 F. App’x 615 (Fed. Cir.), Lh’g denied (Fed. Cir.), g<_-:L
denied, 552 U.S. 1050 (2007); Agee v. United States, 72 Fed. C|. 284, 290 (2006);
Zhengxing v. United States, 71 Fed. C|. 732, 739, affj, 204 F. App’x 885 (Fed. Cir.),
r£ll’_q denied (Fed. Cir. 2006). Therefore, plaintiffs’ claims which allege tortious actions
such as negligence by defendant’s employees are not cognizable in this court.
Second, the government argues that pursuant to RCFC 12(b)(6), those claims
which do not sound in tort also should be dismissed for failure to state a claim upon
which relief may be granted, because defendant did not breach any contractual duties
owed to plaintiffs. To have privity of contract with the United States government, and,
therefore, invoke the jurisdiction of the United States Court of Federal C|aims for its
breach of contract c|aim, plaintiff "must show that either an express or implied-in-fact
contract underlies [the] c|aim." Trauma Serv. Grp. v. United States, 104 F.3d 1321,
1325 (Fed. Cir. 1997). "For there to be an express contract, the parties must have
intended to be bound and must have expressed their intention in a manner capable of
understanding. A definite offer and an unconditional acceptance must be established."
Russell Corp. v. United States, 210 Ct. C|. 596, 606, 537 F.2d 474, 481 (1976), Lt.
denied, 429 U.S. 1073 (1977). implied-in-fact contracts are agreements "‘founded upon
a meeting of the minds, which, although not embodied in an express contract, is
inferred, as a fact, from conduct of the parties showing, in the light of the surrounding
circumstances, their tacit understanding."’ rauma Serv. Grp. v. United States, 104
F.3d at 1325 (quoting Hercules |nc. v. United States, 516 U.S. 417, 424 (1996) (quoting
Balt. & Ohio R.R. Co. v. United States, 261 U.S. 592, 597 (1923))); segall Kam-Almaz
v. United States, 682 F.3d at 1368; Bank of Guam v. United States, 578 F.3d at 1329
(citing Trauma Serv. Grp. v. United States, 104 F.3d at 1326); Bay View, |nc. v. United
States, 278 F.3d 1259, 1265-66 (Fed. Cir. 2001), r_<-:Lg L @tjg g bag denied, 285
F.3d 1035 (Fed. Cir.), _c_¢.=:_g denied, 537 U.S. 826 (2002); Westlands Water Dist. v.
United States, 109 Fed. C|. 177, 203 (2013); Peninsula Grp. Capita| Corp. v. United
States, 93 Fed. C|. at 728 (citing Balt. & Ohio R.R. Co. v. United States, 261 U.S. at
597; Russell Corp. v. United States, 210 Ct. C|. at 609, 537 F.2d at 482. Such an
agreement will not be implied "unless the meeting of minds was indicated by some
14
intelligible conduct, act or sign." Ba|t. & Ohio R.R. Co. v. United States, 261 U.S. at 598;
gmi Russe|l Cor .v. United States, 210 Ct. C|. at 609, 537 F.2d at 482.
As part of initiating the loan and construction process, plaintiffs received and
signed the following documents: (1) USDA RHS promissory note, (2) USDA RHS
Funding Commitment and Notification of Loan Closing, (3) USDA RHS Truth in Lending
Statements, (4) USDA-RD Deposit Agreement, (5) Settlement Statement (HUD-1),
signed by a settlement agent from But|er County Tit|e Company, LLC, (6) Deed of Trust,
only signed by the plaintiffs although the Grantee is indicated as the United States, and
(7) Construction Contract signed by Ms. Austin and the contractor. They also received a
Good Faith Estimate and an Applicant Orientation Guide. The USDA RHS Funding
Commitment and Notification of Loan Closing, USDA RHS Truth in Lending Statements,
and USDA-RD Deposit Agreement also were signed by Ms. Al|ison on the government’s
behalf.
lt is well settled that "[t]o recover for breach of contract, a party must allege and
estabiish: (1) a valid contract between the parties, (2) an obligation or duty arising out of
the contract, (3) a breach of that duty, and (4) damages caused by the breach." §
Carlos lrr. & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir. 1989). §
ali Barlow & Haun lnc. v. United States, No. 08-847L, 2014 WL 4802941, at *19 (Fed.
C|. Sept. 26, 2014). A breach of contract claim requires: "(1) an obligation or duty arising
out of the contract and (2) factual allegations sufficient to support the conclusion that
there has been a breach of the identified contractual duty." Bell/Heeg¢ v. United States,
739 F.3d at 1330 (citing Hercules lnc. v. United States, 24 F.3d 188, 198 (Fed. Cir.),
ing denied, ig b_a\_r§ suggestion declined (Fed. Cir. 1994), _affl, 516 U.S. 1049 (1996);
Trauma Serv. Grp. v. United States, 104 F.3d at 1325 ("To state a claim upon which
relief can be granted, [piaintiff] must allege either an express or an implied-in-fact
contract, and the breach of that contract."); San Carlos lrr. & Drainage Dist. v. United
States, 877 F.2d at 959).
in the above captioned case, plaintiffs try to allege the existence of both an
express and implied contract with the government. The breaches alleged by plaintiffs,
however, do not relate to any obligations which came into existence between the
plaintiffs and the government, and plaintiffs have not pointed to any duty which
defendant has breached. Plaintiffs try to rely on a statement in the Funding Commitment
and Notification of Loan Closing which requires that: "Written evidence the following
systems are functioning properly and meet all Rural Development requirements must be
submitted to Rural Development before loan closing or to the closing agent/attorney at
loan ciosing. Water System, Heating System, Waste Disposal, Piumbing System,
Electrical System." The Funding Commitment and Notification of Loan Closing
document is not a contractual agreement between plaintiffs and defendant. lt is a form
letter from the government to plaintiffs informing them of the approval of their loan. as
well as the terms of that loan. Plaintiffs also allege a breach of contract on the basis that
they were charged escrow despite the indication on the HUD Settlement Statement that
there would not be an escrow charge. The HUD Settlement Statement also is not a
contract between plaintiffs and the government, but rather a document prepared by a
15
third-party settlement agent and signed by the plaintiffs, but not by any government
official. There is no indication, nor have the plaintiffs alleged, that a settlement agent
has the authority to bind the government. Additiona||y, plaintiffs point to defendant’s
failure to comply with agency regulations; however, unless expressly incorporated, the
agency’s regulations are not part of the contract. § Smithson v. United States, 847
F.2d 791, 795 (Fed. Cir. 1988) ("We must, therefore, reject appe|lants’ contention that
the agency’s regulations formed an integral part of the Smithsons’ contract with FmHA
and that violation of any of those regulations can serve as a proper basis for the
complainants’ claims of breach of contract."), Lt. denied, 488 U.S. 1004 (1989).
Plaintiffs also assert in their complaint, albeit not in their response to the motion
to dismiss, that defendant has violated its duty of good faith and fair dealing. "All
government contracts contain an implied covenant of good faith and fair dealing." §
Australia Bank v. United States, 55 Fed. Cl. 782, 790 (2003), affl, 452 F.3d 1321 (Fed.
Cir. 2006). "However, the implied obligation ‘must attach to a specific substantive
obligation, mutually assented to by the parties."’ Detroit Housing Corp. v. United States,
55 Fed. Cl. 410, 417 (2003) (quoting Allstates Air Cargo, lnc. v. United States, 42 Fed.
Cl. 118, 124 (1998) (quoting State of Alaska v. United States, 35 Fed. Cl. 685, 704
(1996), a@, 119 F.3d 16 (Fed. Cir. 1997) (table), ge_rt. denied, 522 U.S. 1108 (1998)));
§ ali Ni ht Vision Cor . v. United States, 68 Fed. Cl. 368, 389 (2005) ("Clearly, the
case has at its predicate the existence of a valid, mutually assented-to contract, for
which a covenant arises that proscribes the government from interfering with
reasonable expectations flowing from that particular contract."), L, 469 F.3d 1369(Fed. Cir. 2006), Lt. denied, 550 U.S. 934 (2007). "Although the implied duty of good
faith and fair dealing attaches to every contract, what that duty entails depends in part
on what that contract promises (or disclaims)." Precision Pine & Timber lnc. v. United
States, 596 F.3d 817, 830 (Fed. Cir.), @t. denied 131 S. Ct. 997 (2011). Additiona||y, in
order for the plaintiffs to prevail on their claim that the government breached its duty of
good faith and fair dealing, plaintiffs also must overcome the presumption that
government officials act in good faith in the discharge of their duties. S_e§ ManTech
Comm. and lnfo. Sys. Corp. v. United States, 49 Fed. Cl. 57, 74 n. 26 (2001), L, 30
F. App’x 995 (Fed. Cir. 2002). To overcome this presumption, the plaintiffs must
produce "well-nigh irrefragable proof" of bad faith on the part of the government. Kalvar
Corg. v. United States, 211 Ct. Cl. 192, 198, 543 F.2d 1298, 1301-02 (1976), Qr_t.
denied, 434 U.S. 830 (1977) (quoting Knotts v. United States, 128 Ct. Cl. 489, 492, 121
F. Supp. 630, 631 (1954)). "‘Almost irrefragable proof’ amounts to ‘clear and convincing
evidence"’ of bad faith on the part of the government. Galen l\/ledical Assocs. lnc. v.
United States, 369 F.3d 1324, 1330 (Fed. Cir.) (quoting Am-Pro Protective Agency, lnc.
v. United States, 281 F.3d 1234, 1239-40 (Fed. Cir. 2002)), (Fed. Cir. 2004). "‘ln the
cases where the court has considered allegations of bad faith, the necessary
"irrefragable proof" has been equated with evidence of some specific intent to injure the
plaintiff."’ Galen l\/ledical Assocs. lnc. v. United States, 369 F.3d at 1330 (quoting
Torncello v. United States, 231 Ct. Cl. 20, 45, 681 F.2d 756, 770 (1982)); see also Am-
Pro Protective Agency, lnc. v. United States, 281 F.3d at 1240 (noting with approval
cases which compared bad faith variously with actions motivated by malice, conspiracy,
16
oppressive conduct, and with officials actuated by animus against a particular plaintiff)
(citing Ka|var Corp. v. United States, 211 Ct. C|. at 198, 543 F.2d at 1302). in this
regard, the record does not reflect that any government official acted with the specific
intent to injure plaintiffs or prevent the completion of their home.€ There is no evidence
that defendant’s actions were motivated by ill will against plaintiffs. The record simply
does not reflect the requisite malice or specific intent to injure.
in their response to the motion to dismiss, plaintiffs, for the first time, raise
constitutional claims based on the First, Fifth, and Fourteenth Amendments to the
United States Constitution. Although not properly pled in this court, none of these
constitutional claims are claims which this court has jurisdiction to review. The First
Amendment, standing alone, cannot be interpreted to require the payment of money for
an alleged violation, and, therefore, does not provide an independent basis for
jurisdiction in this court. § United States v. Connol|y, 716 F.2d 882, 887 (Fed. Cir.
1983), @. denied, 465 U.S. 1065 (1984) ("We agree with the Court of Claims that the
first amendment, standing alone, cannot be so interpreted to command the payment of
money."); Volk v. United States, 111 Fed. C|. 313, 326 (2013); Cox v. United States
105 Fed. C|. 213, 217, appeal dismissed (Fed. Cir. 2012) ("However, because the First
Amendment, standing alone, does not obligate the United States to pay money
damages, it cannot serve as the basis forjurisdiction in the Court of Federal Claims.").
Regarding plaintiffs’ claims for due process under the Fifth and Fourteenth
Amendments to the United States Constitution, the United States Court of Appeals for
the Federal Circuit has held that this court does not possess jurisdiction to consider
claims arising under the Due Process clauses of the Fifth and Fourteenth Amendments.
§ Crocker v. United States, 125 F.3d 1475, 1476 (Fed. Cir. 1997) (citing LeB|anc v.
United States, 50 F.3d 1025, 1028 (Fed. Cir. 1995)) (no jurisdiction over a due process
violation under the Fifth and Fourteenth Amendments); s_ee also Smith v. United States,
709 F.3d 1114, 1116 (Fed. Cir.) ("The law is well settled that the Due Process clauses
of both the Fifth and Fourteenth Amendments do not mandate the payment of money
and thus do not provide a cause of action under the Tucker Act." (citing LeB|anc v.
United States, 50 F.3d at 1028), Lrt. denied, 134 S. Ct. 259 (2013); in re United States,
463 F.3d 1328, 1335 n.5 (Fed. Cir.) ("[B]ecause the Due Process Clause is not money-
mandating, it may not provide the basis for jurisdiction under the Tucker Act."), Lh’g
L Lh’g g g denied (Fed. Cir. 2006), _ce_rt. denied §u_b_ gm Scho|| v. United
States, 552 U.S. 940 (2007); Acadia Tech. lnc. & Global Win Tech. Ltd. v. United
States, 458 F.3d 1327, 1334 (Fed. Cir. 2006); Collins v. United States, 67 F.3d 284, 288
(Fed. Cir.) ("[T]he due process clause does not obligate the government to pay money
damages."), Lh’g denied (Fed. Cir. 1995); Mullenberg v. United States, 857 F.2d 770,
773 (Fed. Cir. 1988) (finding that the Due Process clauses "do not trigger Tucker Act
jurisdiction in the courts"); l\/lurray v. United States, 817 F.2d 1580, 1583 (Fed. Cir.
6 The defendant did not have a role in the actual construction of plaintiffs’ home, and,
therefore, the United States is not the proper defendant in this court for claims brought
against the contractor BARCO relating to construction of the home.
17
1987) (noting that the Fifth Amendment Due Process clause does not include language
mandating the payment of money damages); Harper v. United States, 104 Fed. C|. 287,
291 n.5 (2012); Hampel v. United States, 97 Fed. C|. at 238; McCullough v. United
States, 76 Fed. C|. at 4 ("[N]either the Fifth Amendment Due Process Clause . . . nor the
Privileges and immunities Clause provides a basis for jurisdiction in this court because
the Fifth Amendment is not a source that mandates the payment of money to plaintiff.").
Due process claims "must be heard in District Court." Kam-Almaz v. United States, 96
Fed. C|. 84, 89 (2011) (citing Acadia Tech., |nc. & Global Win Tech., Ltd. v. United
States, 458 F.3d at 1334), a_ff’g, 682 F.3d 1364 (Fed. Cir. 2012); § ali Hampel v.
United States, 97 Fed. C|. at 238. Therefore, to the extent that plaintiffs are attempting
to raise allegations of Due Process violations, no such cause of action can be brought in
this court.
Defendant’s motion to dismiss also is based on the provisions of the
Reorganization Act and the Act’s implementing regulations, which establish specific
administrative procedures for processing claims arising from participation in specified
USDA programs. The purpose of the Act, as stated in 7 U.S.C. § 6901, was to provide
the Secretary of Agricu|ture with "the necessary authority to streamline and reorganize
the Department of Agricu|ture to achieve greater efficiency, effectiveness, and
economies in the organization and management of the programs and activities carried
out by the Department." 7 U.S.C. § 6901. One of the changes included in the
Reorganization Act was the creation of an independent Nationa| Appea|s Division (NAD)
within the USDA to review certain adverse agency decisions. §§ 7 U.S.C. § 6992(a)
(2012).
Determination of whether plaintiffs have filed their claims relating to USDA-RD,
RHS "adverse decisions" begins with the words in the Reorganization Act. The first step
in statutory construction is "‘to determine whether the language at issue has a plain and
unambiguous meaning with regard to the particular dispute in the case."’ Barnhart v.
Sigmon Coal Co., 534 U.S. 438, 450 (2002) (quoting Robinson v. Shell Oil Co, 519 U.S.
337, 340 (1997)); se_e ali Jimenez v. Quarterman, 129 S. Ct. 681, 685 (2009) ("As with
any question of statutory interpretation, our analysis begins with the plain language of
the statute."); Strategic Hous. Fin. Corp. of Travis Cnty. v. United States, 608 F.3d
1317, 1323 (Fed. Cir.) ("When interpreting any statute, we look first to the statutory
language."), Lh’g § Lh’g e_nb_arlg denied (Fed. Cir. 2010). The inquiry ceases "‘if the
statutory language is unambiguous and "the statutory scheme is coherent and
consistent."’ Barnhart v. Sigmon Coal Co., 534 U.S. at 450 (quoting Robinson v. Shell
Oil Co., 519 U.S. at 340). in interpreting the plain meaning of the statute, it is the court’s
duty, if possible, to give meaning to every clause and word of the statute. g Alaska
Dep’t of Envtl. Conservation v. EPA, 540 U.S. 461, 489 n.13 (2004) ("lt is, moreover, ‘a
cardinal principle of statutory construction’ that ‘a statute ought, upon the whole, to be
so construed that, if it can be prevented, no clause, sentence, or word shall be
superfluous, void, or insignificant."’ (quoting TRW |nc. v. Andrews, 534 U.S. 19, 31
(2001) (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)))); Williams v. Taylor, 529
U.S. 362, 404 (2000) (describing as a "cardinal principle of statutory construotion" the
rule that every clause and word of a statute must be given effect if possible). Similar|y,
18
the court must avoid an interpretation of a clause or word which renders other provision
of the statute inconsistent, meaningless, or superfluous. Y_e_ Duncan v. Wa|ker, 533
U.S. at 174 (noting that courts should not treat statutory terms as "surplusage").
When the statute provides a clear answer, the court needs to look no further. §
Barnhart v. Sigmon Coal Co.. 534 U.S. at 450; %_e all Am. Airlines lnc. v. United
States, 551 F.3d 1294, 1300 (Fed. Cir. 2008), re_h’ggranted, 319 F. App’x 914 (Fed. Cir.
2009). Thus, when the "‘statute’s language is plain, "the sole function of the courts is to
enforce it according to its terms."’ Johnson v. United States, 529 U.S. 694, 723 (2000)
(quoting United States v. Ron Pair Enters. lnc., 489 U.S. 235, 241 (1989) (quoting
Caminetti v. United States, 242 U.S. 470, 485 (1917))). ln such instances, the court
should not consider "conflicting agency pronouncements" or "extrinsic evidence of a
contrary intent." Weddel v. Sec’y of Dep’t of Health and Human Servs., 23 F.3d 388,
391 (Fed. Cir.) (noting that courts must not defer to agency interpretation contrary to the
intent of Congress evidence by unambiguous language) (citing Estate of Cowart v.
Nicklos Drilling Co., 505 U.S 469, 476 (1992) and Darby v. Cisneros, 509 U.S. 137, 147
(1993))), @_’g denied § g g suggestion declined (Fed. Cir. 1994). "[O]nly
language that meets the constitutional requirements of bicameralism and presentment
has true legal authority." Weddel v. Sec’y of Dep’t of Health and Human Servs., 23 F.3d
at 391 (citing |NS v. Chadha, 462 U.S. 919 (1983)).
Under the terms of the Reorganization Act, a "participant" in a USDA program
receiving an adverse agency decision may request an informal hearing on the "adverse
decision." 7 U.S.C. § 6995(a) (2012). A "participant" also may appeal an "adverse
decision" to the National Appeals Division. S_eg id_. § 6996(a). The statute provides:
(a) Appea| to Division for hearing
Subject to subsection (b) of this section, a participant shall have the right
to appeal an adverse decision to the Division for an evidentiary hearing by
a hearing officer consistent with section 6997 of this title.
g The statute defers the definition of the term "participant" to the implementing
regulations. § g § 6991(9). The relevant implementing regulation defines
"participant" as fo|lows:
Participant means any individual or entity who has applied for, or whose
right to participate in or receive, a payment, loan, loan guarantee, or other
benefit in accordance with any program of an agency to which the
regulations in this part apply is affected by a decision of such agency. The
term does not include persons whose claim(s) arise under:
(2) Programs governed by Federal contracting laws and regulations
(appealable under other rules and to other forums, including to the
19
Department’s [USDA] Board of Contract Appeals under 7 CFR part
24) . . . .
7 C.F.R. § 11.1.
The statute defines the terms "adverse decision" and "agency," as follows:
For purposes of this subchapter:
(1) Adverse decision
The term "adverse decision" means an administrative decision made by
an officer, employee, or committee of an agency that is adverse to a
participant The term includes a denial of equitable relief by an agency or
the failure of an agency to issue a decision or otherwise act on the request
or right of the participant. The term does not include a decision over which
the Board of Contract Appeals has jurisdiction.
(2) Agency
The term "agency" means any agency of the Department designated by
the Secretary or a successor agency of the Department, except that the
term shall include the following (and any successor to the following):
(E) The Rural Development Administration.
7 U.S.C. § 6991(‘|)-(2).
The statute also describes how judicial review of decisions from the NAD will be
conducted:
Judicia| review
A final determination of the Division [NAD] shall be reviewable and
enforceable by any United States district court of competent jurisdiction in
accordance with chapter 7 of Title 5.
l_cL § 6999. Further, the statute provides that judicial review is unavailable before a
claimant exhausts its administrative remedies:
(e) Exhaustion of administrative appeals
Notwithstanding any other provision of law, a person shall exhaust all
administrative appeal procedures established by the Secretary or required
20
5. Defendant altered the loan agreement without plaintiffs’ consent.
6. Defendant breached the loan contract when it required plaintiffs to repay the
full amount of the loan, despite the fact that a portion of the loan exceeding
$59,000.00 was placed in a supervised bank account. The promissory note
stated, "‘Borrowers promise to repay the loan funds they receive."’ (emphasis
in original). This was an abuse of discretion.
7. Defendant’s failure to allow plaintiffs the right to appeal an adverse decision
(converting the loan to permanent financing) was an abuse ofdiscretion.
8. Failing "to provide Plaintiffs with a safe modest home" was an abuse of
discretion.
9. Defendant breached the contract when it declined to hold the contractor to
"approved plans and federal building specifications over which they had
discretion."
10. Defendant breached the contract when it failed to follow the provisions of the
loan documents-the funding commitment and loan notifications required
written evidence that the water, electric, and septic systems were properly
functioning and met established requirements before loan closing.
11.Defendant breached a loan document when it charged plaintiffs escrow,
insofar as the HUD settlement statement clearly indicates plaintiffs would not
be charged escrow.
12."Defendants [sic] breached its duty of good faith and fair dealing."
“lS.Defendant discouraged numerous contractors from submitting formal bids to
complete plaintiffs’ home, either by ignoring them or by advising said
contractors that payment could be substantially delayed and would only be
made when construction was fully completed.
14.Defendant failed to communicate with plaintiffs regarding the loan’s status
and with respect to plaintiffs’ concerns about the construction company.
Defendant did not inform plaintiffs of their right to challenge adverse
determinations, nor did it facilitate completion of plaintiffs’ home.
15. Defendant converted plaintiffs’ loan into permanent financing without plaintiffs’
permission, and in violation of not only the loan documents, which require a
septic, plumbing, and electrical inspection by a third party, but also the USDA-
RD regulations.
16.Defendant seeks to enforce an invalid mortgage agreement under which
plaintiffs are required to pay excessive escrow, insurance, and taxes.
Plaintiffs were not informed of the escrow payments, and mortgage payments
3
by law before the person may bring an action in a court of competent
jurisdiction against-
(1) the Secretary;
(2) the Department; or
(3) an agency, office, officer, or employee of the Department.
jg § 6912(e).
ln addition to the clarity of the statutory language of the Reorganization Act, the
legislative history of the Act also indicates which USDA programs and activities are
intended to fall under the jurisdiction of the newly created NAD, as indicated in the
following question and answer included in the legislative record:
Question 1. List each of the USDA programs and activities that will be
appealable under the new National Appeals Division (NAD), which agency
these programs and activities are currently under, and how appeals are
now handled for them, including discrimination complaints by producers or
borrowers?
Answer. The following constitutes the programs and activities that will fall
within the new NAD, the agency such programs or activities currently are
under, and how appeals currently are handled for these activities and
programs:
(a) The loan, loan guarantee, and grant programs currently
contained within . . . the Rural Development Administration and
proposed for inclusion in the Farm Service Agency . . . including
farmer program loans, housing program loans, community and
business program loans; and all grants administered by the above
agencies . . . .
Questions Submitted by Congressman Stenholm re the National Appeals Division and
USDA Answers, H.R. Rep. No. 103-714, pt. 1, at 113 (1994), 1994 WL 461734, at *95.
(emphasis in original).
The legislative history of the Reorganization Act also indicates which "programs
and activities" are to be excluded from the jurisdiction of the NAD. Notably, the list of
excluded programs does not include the USDA Rural Development Assistance
Program:
Question 2. List each of the programs and activities that will not be
appealable under the new Division, with an explanation as to why they
were not included. Similarly, do you anticipate retaining any existing
USDA appeals procedures? lf so, which ones, and why?
21
Answer. The following is a list of the principal categories of programs and
activities that will not be appealable under the new NAD and the reasons
for their exclusion:
(g) Agency actions presently appealable to the Department of
Agricu|ture Board of Contract Appeals-such actions directly relate
to government procurement and are distinctly different from the
program-based appeals that the new NAD is designed to handle
[sic] a specific appeals process has been established by statute for
the actions.
With regard to the programs and activities falling within the purview
of the new NAD, the existing USDA appeal structures that apply to
appeals at the State, county, and local levels in large part, will be
retained to ensure continued accessibility, convenience, informality,
and expeditious response for program participants. ln addition,
those existing procedures applicable to programs and activities not
covered by the new NAD also will be retained. ln short, the scope
of the appeals system we have proposed for the new NAD would
include all appeals from decisions made under farm programs,
farmer loan programs, and other producer-related programs carried
out by the county-based USDA agencies, but would not include
appeals made under other, unrelated USDA programs. We believe
that expansion of the NAD’s role beyond these parameters would
create an extremely unwieldy mechanism for administrative
appeals, and would substantially distort the purpose to be served
by consolidating these producer-related and other similar appeals
authorities into a single entity within the Department.
g at 114-15. (emphasis in original).
Following the enactment of the Reorganization Act, the USDA issued
implementing regulations on the "National Appeals Division Rules of Procedures," which
track and amplify the statute. _S__e_e 7 C.F.R. § 11.1, et seq. The regulations define
"adverse decision" as:
Adverse decision means an administrative decision made by an officer,
employee, or committee of an agency that is adverse to a participant. The
term includes a denial of equitable relief by an agency or the failure of an
agency to issue a decision or otherwise act on the request or right of the
participant within timeframes specified by agency program statutes or
regulations or within a reasonable time if timeframes are not specified in
22
such statutes or regulations. The term does not include a decision over
which the [Civi|ian] Board of Contract Appea|s has jurisdiction.
7 C.F.R. § 11.1.
Again, detailing which USDA organizations the NAD was intended to cover, the
regulations, like the statute, define "Agency" to include "Rural Development (RD) . . .
g ln addition, the regulations include the following directives:
§ 11.2 Genera| statement.
(a) This part sets forth procedures for proceedings before the Nationa|
Appea|s Division within the Department . . . . The authority of the Hearing
Officers and the Director of the Division, and the administrative appeal
procedures which must be followed by program participants who desire to
appeal an adverse decision and by the agency which issued the adverse
decision, are included in this part.
(b) Pursuant to section 212(e) of the Federa| Crop insurance Reform and
Department of Agriculture Reorganization Act of 1994, Pub.L. 103-354
(the Act), 7 U.S.C. 6912(e), program participants shall seek review of an
adverse decision before a Hearing Officer of the Division, and may seek
further review by the Director, under the provisions of this part prior to
seeking judicial review.
§ 11.3 Applicabi|ity.
(a) Subject matter. The regulations contained in this part are applicable to
adverse decisions made by an agency, including, for example, those with
respect to:
(1) Denial of participation in, or receipt of benefits under, any
program of an agency;
(2) Compliance with program requirements;
(3) The making or amount of payments or other program benefits to
a participant in any program ofan agency . . . .
§ §§ 11.2-11.3.
l\/loreover, the USDA implementing regulation, like the statute, is explicit
regarding when and where disappointed claimants can seek judicial review:
23
§ 11.13 Judicia| review.
(a) A final determination of the Division shall be reviewable and
enforceable by any United States District Court of competent
jurisdiction in accordance with chapter 7 of title 5, United States Code.
@§11.13.
in sum, the Reorganization Act and the implementing regulations are clear that a
program "participant" must exhaust USDA administrative remedies, by seeking an
agency decision and, if disappointed, has the option to file an appeal at the NAD. lf the
program participant still is dissatisfied, the participant may then appeal to the
appropriate United States District Court. The implementing regulations regarding the
NAD and USDA-RD are consistent with the statute and reinforce the path a
disappointed program participant must follow.
The government consequently argues that the Reorganization Act precludes this
court’s jurisdiction over plaintiffs’ loan-based claims against USDA-RD, RHS, which,
therefore, should be dismissed for lack of jurisdiction under RCFC 12(b)(1). Plaintiffs’
claims relating to the terms of the loan, converting the loan from construction to
permanent financing status, and responding to new bids submitted by plaintiffs are
based on decisions made by USDA-RD, RHS. ln order to dispute such actions7,
plaintiffs were required to utilize specific administrative procedures implemented to
process claims arising from participation in the underlying USDA Rural Development
Assistance Program. Pursuant to the statute, such decisions could then be appealed to
the appropriate District Court. § 7 C.F.R. § 11.13. This court lacks jurisdiction to hear
attempts to appeal "adverse decisions" issued by USDA-RD, RHS.
CONCLUS|ON
Although the venue shifts faced by these ;D §_e_ plaintiffs are regrettable, this
court does not have jurisdiction over plaintiffs’ c|aims. Therefore, defendant’s motion to
7 Plaintiffs also allege that "[t]he Defendant abused its discretion and denied Plaintiffs
their right to appeal an adverse decision or about l\/lay 7th, 2012, when they converted
the loan to permanent financing and charged Plaintiffs the full loan amount . . . but failed
to provide Plaintiffs with a safe modest home." Plaintiffs also state, "Defendants’ [sic]
repeatedly failed to provide Plaintiffs with basic information concerning the status of
their loan . . . failed to provide the Plaintiffs options, as is their right, to challenge
determinations made . . . The record does not support plaintiffs’ al|egations. lt
appears that defendant repeatedly tried to contact plaintiffs about their loan status and
the possible conversion of their loan. Moreover, plaintiffs have not provided any
evidence in the numerous documents submitted to the court that plaintiffs ever tried to
avail themselves of the agency appeal process.
24
dismiss is GRANTED, and the plaintiffs’ complaint is D|SM|SSED. The C|erk of Court
shall enter JUDGMENT consistent with this opinion.
|T |S SO ORDERED.
/JL.W.
MAR|AN BLANK HORN
Judge
25
exceeded the amount they had been told. Plaintiffs were not given an
opportunity to review loan documents until after they were executed, "and
even then not all the loan documents were provided to them."
A|though not raised in their complaints filed in this court, in the plaintiffs’
response to defendant’s motion to dismiss in this court, plaintiffs assert the following
new claims:
1 .
USDA-RD, RHS erred in including the amount of food stamps plaintiffs
receive as a factor in calculating their adjusted income and mortgage
payment amounts.
l\/ls. Allison, a USDA-RD, RHS Area Specialist, placed undue influence on
plaintiffs to sign and initial forms without understanding what they were
signing.
USDA-RD, RHS had an "ldentity of interest in the Construction Contract" and
could have prevented the builder’s continued bad workmanship if it had so
desHed.
Defendant "violated Plaintiffs’ rights to the fruits of the loan contract by
retaliating against Plaintiffs when Plaintiffs contacted U.S. Congresswoman
Joanne Emerson, which was Plaintiffs’ Constitutional Right."
"Anita Dunning committed Fraud by repeating unsubstantiated allegations
made by the builder to a federal government entity."
USDA-RD, RHS used the "502 Loan Regulations to deny, ignore, threaten
and interfere with the utilization and successful completion of Plaintiff’s 502
Direct Loan and Ancillary Build Contract and the fruits thereof while denying
any obligation to [comply with] the same Regulations . . .
"Plaintiffs invoke the doctrine of Abuse of Rights . . .
Plaintiffs’ Fifth and Fourteenth Amendment due process rights have been
violated. USDA-RD, RHS unilaterally altered the contract and promissory
note. By materially revising the promissory note without plaintiffs’ knowledge,
a negotiable instrument was altered in such a manner as to create a
"completely different contract" and constitute forgery.
Plaintiffs request that they be awarded damages for the above claims in an amount
exceeding $25,000.00, as well as any other relief the court may deem just and proper.
Defendant argues, first, that any claims based on "adverse decisions" issued by
USDA-RD, RHS or that sound in tort should be dismissed for lack ofjurisdiction under
Rule 12(b)(1) of the Rules of the Court of Federal Claims (RCFC), and second, that
pursuant to RCFC 12(b)(6), the remaining claims should be dismissed for failure to state
4
a claim upon which relief may be granted. Defendant argues that pursuant to the
Federa| Crop insurance Reform and Department of Agricu|ture Reorganization Act of
1994, Pub. L. No. 103-354, 108 Stat. 3178 (codified at 7 U.S.C. §§ 6901 et seq. (2012))
(the Reorganization Act), this court does not have jurisdiction to review plaintiffs’ claims
based on "adverse decisions" issued by USDA-RD, RHS. Additionally, defendant
argues that for the claims which are not dismissed for lack of jurisdiction, those claims
fail to state a claim on which relief can be granted because defendant did not breach
any contractual duties owed to plaintiffs.
Plaintiffs are residents of Ripley County, Missouri, and plaintiff Ms. Phyllis Austin
"is the mother and primary caregiver" of plaintiff Ms. Penelope Burris. On July 29, 2010,
plaintiffs signed a USDA-RD Applicant Orientation Guide, which summarizes the RHS
lending program and procedures for once a loan is approved. Plaintiffs received a
USDA-RD, RHS Funding Commitment and Notification of Loan Closing approving their
application for a RHS Section 502 loan in the amount of $95,000.00 on November 24,
2010. Additionally, plaintiffs were issued RHS Truth in Lending Statements on
November 26, 2010, for both "New" and "Regular" construction projects. The Truth in
Lending Statements were signed by plaintiffs on December 12, 2010. On January 1,
2011, plaintiffs were provided with a Good Faith Estimate (GFE) originated by Kimberlin
Allison, a USDA-RD Area Specialist. The GFE provided a loan in the amount of
$95,000.00 with four percent interest for a term of thirty-three years, and provided
plaintiffs with an estimate of their settlement charges and loan terms. The Commitment
Letter was issued and signed by Ms. Allison on January 19, 2011 and by plaintiffs on
January 25, 2011. Revised Truth in Lending statements for both "New" and "Regular"
construction were re-issued on January 19, 2011, and again signed by plaintiffs.
A USDA-RD, RHS promissory note was issued to and signed by plaintiffs on
January 25, 2011. The RHS promissory note constitutes plaintiffs’ RHS Section 502
loan with four percent interest for a term of thirty-three years with a total loan amount of
$95,000.00.4 A Deed of Trust for Missouri was also issued and signed by plaintiffs on
the same day, listing plaintiff Ms. Austin as the Grantor and Ms. Anita J. Dunning, State
Director, USDA-RD, as the Trustee. On January 27, 2011 a deposit agreement was
issued by |Vls. Allison and l\/|ichelle Hobbs of USDA-RD and signed by plaintiff Ms.
Austin.
On January 26, 2011, plaintiffs entered into a construction contract with Brett
Robinson, doing business as BARCO. The terms of the contract provided that BARCO
would "furnish materials and perform the work for [plaintiffs] . . . for the consideration of
4 A copy of the RHS promissory note appears as an attachment to defendant’s motion
to dismiss with handwritten modifications to the document, including raising the interest
rate from 4.00 percent to 4.25 percent, changing the date the interest began accruing
from September 25, 2011 to May 7, 2012, and moving the day on which monthly loans
payment would be due from the twenty-fifth to the seventh day of each month. These
alterations to the RHS promissory note do not change the court’s analysis.
5
Eighty Eight Thousand Five Hundred Twenty dollars ($88,520.00)." The contract also
included a bid sheet from BARCO itemizing the materials and labor that comprised the
estimated cost of $88,520.00. The contract stated that BARCO was to begin work on
January 27, 2011 and complete the work by June 27, 2011. lt also provided that partial
payments would be made to BARCO in three intervals, not to exceed sixty percent of
the value of the work in place (less the aggregate of previous payments). The contract
included a general conditions sheet, which provided for the inspection of materials and
workmanship, and included a clause for the completion of work, stating that if BARCO
refused or failed to perform within the time specified, plaintiffs could, with USDA-RD’s
approval, terminate BARCO’s right to complete the contract.
After the commencement of constructlon, inspections took place on three dates,
and a report was generated from each inspection. The first inspection occurred on
February 8, 2011 and focused on the home’s footing. The report noted that construction
was seventeen percent complete. The second inspection occurred on March 31, 2011,
and the report noted that construction was thirty-five percent complete. The third
inspection occurred on April 18, 2011, and the reported noted that construction was
sixty percent complete. Plaintiff Austin paid BARCO with funds from USDA-RD shortly
after each inspection. Specifically, payments were made on February 11, 2011, March
31, 2011, and April 28, 2011 for $9,029.04, $9,560.16, and $13,278.00, respectively.
The relationship between l\/ls. Austin and BARCO began to deteriorate around
the time of the third inspection. Due to increased concerns with the quality of the
construction and lack of assistance from USDA-RD, l\/ls. Austin had hired Don Haefner
of Heartland Building inspections to conduct an inspection of the property on April 16,
2011. Mr. Haefner concluded that, among other problems, areas of the lot needed
adjustment so water could properly run off the property, the electrical junction box
needed to be moved, the roof was not properly installed, insulation needed to be
repaired in some places, portions of the siding needed replacement, doors were
installed backwards, windows were not installed in accordance with the manufacturer’s
instructions, and exposed wires needed to be fixed. Ms. Allison was informed of the
inspection results. Relations then disintegrated further. According to a Ripley County
Sheriff Department report, dated April 18, 2011, Ms. Austin called the police to report
verbal abuse and physical threats from BARCO owner Mr. Robinson’s wife, Kat
Robinson. On l\/lay 2, 2011, l\/ls. Austin contacted l\/lonica Sullivan at the Missouri
Department of Health and Senior Services, Division of Senior and Disability Services,
an agency that investigates abuse and exploitation of senior citizens and individuals
with disabilities. l\/ls. Austin reported that she had been threatened and verbally abused
by l\/lr. Robinson. Ms. Sullivan investigated Ms. Austin’s allegations and ultimately
memorialized her findings in a report.
Ms. Sullivan spoke with l\/ls. Austin by telephone and conducted a visit of her
home on l\/lay 5, 2011. During the l\/lay 5, 2011 home visit, Ms. Austin told l\/ls. Sullivan
that she did not want l\/lr. Robinson to install laminate flooring for numerous reasons
including the toxic chemicals contained in laminate materials and the non-durability of
laminate. l\/ls. Austin claimed she spoke with USDA-RD about the f|ooring, indicating a
6
preference for wood flooring, and was informed that Mr. Robinson did not know how to
install wood flooring. Ms. Austin claimed she found flooring that l\/lr. Robinson could
have installed. Ms. Austin also stated that she made several requests of |\/lr. Robinson
for specific installations in her home, including paint color, concrete pouring, and a
shower stall, but |\/lr. Robinson "complete|y ignored all of her requests." Ms. Austin also
alleged to Ms. Sullivan that she "signed one contract initial|y" but l\/|r. Robinson
"switched the contracts” and she "signed the second contract, not realizing it had been
changed." l\/ls. Austin told Ms. Sullivan that the contract provided that prior to each
payment to BARCO, l\/ls. Austin was to receive an itemized list of expenses, but she
was never given such a list, but nonethe|ess, USDA-RD continued to pay |\/lr. Robinson.
Ms. Austin recounted to l\/ls. Sullivan that she had hired Don Haefner5 to conduct
an independent inspection of the home. She told l\/ls. Sullivan that in his report, Mr.
Haefner noted that the wiring and electrical outlets in l\/ls. Burris’ room were improperly
installed. l\/ls. Austin told Ms. Sullivan that l\/lr. Robinson "hurried and put up drywall in
[Ms. Burris’] room and had insulation blow[n] in, so he would not have to redo the wiring
as it would be covered up." Ms. Austin also alleged that R38 insulation was required by
the contract, but |\/lr. Robinson used only R3O insulation. ln addition to the insulation
defects, Ms. Austin stated to Ms. Sullivan that |\/lr. Robinson’s workers did not seal
around the windows of the home and that the home was supposed to be made
wheelchair accessible, which it ultimately was not. Finally, Ms. Sullivan noted that,
according to l\/ls. Austin, USDA-RD informed her that although Mr. Robinson breached
the contract, Ms. Austin herself must terminate Mr. Robinson. Ms. Austin stated that she
refused to terminate l\/lr. Robinson because she feared being held liable for breach of
contract. l\/ls. Austin claimed she researched the issue and believed USDA-RD had the
power to terminate Mr. Robinson.
l\/ls. Sullivan next spoke with l\/ls. Allison, who told her that Ms. Austin had not
officially terminated |\/lr. Robinson, and Mr. Robinson maintained he had not quit. |\/lr.
Robinson also told USDA-RD that Ms. Austin would not let him on the property. l\/ls.
Sullivan was informed by Ms. Allison that the issue was now the responsibility of the
USDA-RD state office and the regional office was awaiting instruction on how to
proceed with the matter. l\/ls. Sullivan and |\/lr. Robinson met on June 21, 2011. in that
meeting, Mr. Robinson claimed that l\/ls. Austin had made several special requests,
including a claw foot tub for l\/ls. Burris, granite countertops, hardwood flooring, brass or
bronze metals, and soundproofed walls and a steel door for l\/ls. Burris’ bedroom. Mr.
Robinson also claimed that the inspector Ms. Austin independently hired had found
nothing wrong with the home upon inspection. Following her meeting with |\/lr. Robinson,
Ms. Sullivan finalized her report regarding l\/ls. Austin’s complaint against Mr. Robinson.
ln her report, l\/ls. Sullivan concluded that the degree of risk for l\/ls. Austin was "Low."
5 ln her report, l\/ls. Sullivan spelled the inspector’s name as "Heffner", however, for
consistency within this opinion the court has adopted the spelling utilized by the plaintiff,
“Haefner."
Additionally, l\/ls. Su||ivan noted that l\/ls. Austin’s allegations of verbal abuse by Mr.
Robinson "may have occurred" but they could not be substantiated without witnesses.
Greg Batson of USDA-RD sent a letter, dated June 23, 2011, to l\/ls. Austin
proposing two alternatives for proceeding with the construction of her home. The first
alternative was to proceed with BARCO as her contractor, the second was to pay
BARCO for the work completed to date, terminate the contract, and select another
contractor to complete the home with the remaining USDA-RD funds. Mr. Batson also
informed l\/ls. Austin that she was prohibited from removing or altering work completed
during construction. Additionally, he advised l\/ls. Austin that failure or refusal to make
final payment to BARCO could result in a mechanic’s lien being placed on her property,
which could ultimately lead to foreclosure. Plaintiffs decided to exercise the second
option, to hire a new contractor, and began a search to find a replacement for BARCO.
On November 10, 2011, Mr. Batson again wrote to l\/ls. Austin informing her that
USDA-RD had approved her to enter into a new construction contract to complete her
home. The letter detailed the remaining funds available to complete the construction, as
well as the procedural steps to be followed in order to complete the approval process.
Ms. Austin terminated BARCO as her contractor by letter dated November 16, 2011.
On December 12, 2011, Ms. Dunning of USDA-RD sent a letter to Ms. Austin stating
that despite the November 16, 2011 termination letter, it was USDA-RD’s position that
l\/ls. Austin severed the contract with Mr. Robinson on April 22, 2011 and had yet to
enter into a new contract with a qualified contractor. The December 12, 2011 letter
indicated that plaintiffs needed to select a qualified contractor by December 27, 2011,
and that failure to meet this deadline would result in USDA-RD converting their loan
from a construction loan to a permanent loan, which would also trigger the
commencement of their obligation to make mortgage payments. USDA-RD also advised
that it would winterize the home, at plaintiffs’ expense should the loan be converted.
Ms. Austin replied to l\/ls. Dunning’s letter on December 22, 2011, stating that it
was her position that BARCO had abandoned the job on May 3, 2011. She also noted
that BARCO had received a draw just a few days prior, on April 28, 2011. Ms. Austin
enclosed a certified inspector’s report with the letter and asserted that the report
indicates BARCO completed only thirty-five percent of the job. l\/ls. Austin indicated that
she had believed USDA-RD would send an inspector to inspect the home and inventory
materials, but that never occurred. Ms. Austin also reiterated that while she maintains
l\/|r. Robinson walked off the job on May 3, 2011, she formally terminated BARCO’s
contract by letter to Mr. Robinson on November 16, 2011. Ms. Austin noted that she felt
USDA-RD had not been receptive to her requests, and she needed to take efforts, with
or without USDA-RD’s assistance, to protect her investment in the property. She also
requested a pre-construction conference to enable her to obtain a contract with a new
builder.
On January 12, 2012, l\/ls. Austin entered into a new construction contract with
Bob Ruminer, and on February 3, 2012, Mr. Batson sent a letter to l\/ls. Austin providing
instructions on how to proceed with Mr. Ruminer’s new bid. in his letter, l\/|r. Batson
8
referenced a meeting between himse|f, Ms. Austin, plaintiffs’ attorney Paul Kidwe||, Angi
Reyno|ds of USDA-RD, and Mr. Ruminer regarding the progress of plaintiffs’ home and
the work Mr. Ruminer was to complete. The letter also stated that Mr. Ruminer was
supposed to have submitted a completion bid by January 25, 2012, but as of the date of
the letter it had not yet been received. Mr. Batson stated that the bid must be received
by February 10, 2012 or USDA-RD would be obliged to convert the loan to permanent
financing status, which would commence the requirement for plaintiffs to make
payments on the loan.
On February 15, 2012, |\/lr. Batson sent a follow-up letter to Ms. Austin confirming
a telephone conversation that had occurred the previous day between himself and Ms.
Austin. The letter noted that the telephone connection from the prior day had been
terminated prematurely. Mr. Batson advised that the USDA-RD National Office' had
instructed him to proceed with converting plaintiffs’ loan from construction status to
permanent financing. The letter provided instructions for Ms. Austin on how to complete
the home, noting that she should contact her contractor and impress upon him the
importance of submitting a timely bid.
On February 24, 2012, Ms. Austin submitted a bid to USDA-RD from Mike Hardin
of Ray|ee Construction for $51,770.00. |\/lr. Batson replied to Ms. Austin by letter on
March 14, 2012, stating that Mr. Hardin’s bid could not be accepted because it
exceeded $26,685.00, the remaining available balance of USDA-RD funding for
plaintiffs’ construction project. Mr. Batson also noted that Mr. Hardin’s bid contained
work for items that had already been completed by BARCO. |\/lr. Batson offered Ms.
Austin the option either to cancel the remaining funds or to disburse such funds into a
supervised bank account in order to ultimately continue construction. Under either
option, the loan would be converted from a construction loan to permanent financing.
|\/lr. Batson requested that l\/|s. Austin reply no later than l\/larch 21, 2012.
On Apri| 4, 2012, Mr. Batson sent a subsequent letter to l\/ls. Austin noting that
USDA-RD had not received a reply to its l\/larch 14, 2012 letter. He noted that the
proposed action by USDA-RD was to convert plaintiffs’ loan from construction status to
permanent financing and to cancel all remaining funds, resulting in a permanent loan in
the amount of $68,315.00. The letter also noted that the cancellation of remaining funds
meant no additional funding from USDA-RD would be available to plaintiffs and the
completion of the home would become plaintiffs’ responsibility. Fina|ly, the letter advised
that failure to make payments on the loan would result in forec|osure. On Apri| 27, 2012,
I\/lr. Batson sent another letter to Ms. Austin noting that she had yet to respond to
repeated requests from USDA-RD for her to select a financing option for the remaining
funds. The letter noted that USDA-RD had decided not to cancel the remaining funds,
resulting in the entire amount of plaintiffs’ $95,000.00 loan being converted to
permanent financing. The letter stated the conversion of the loan would commence on
May 7, 2012.
From lVlay 23, 2012 to December 24, 2012 plaintiffs received monthly billing
statements for the payment of their loan. From July 23, 2012 onward the bills increased
9
in the amount due because Ms. Austin ceased making payments on the loan. Prior to
ceasing payments on the |oan, |\/|s. Austin appears to have made two separate
payments, on Ju|y 1, 2012 and Ju|y 7, 2012, each in the amount of $580.56. On March
26, 2013, Ms. Dunning sent a letter to |\/|s. Austin enclosing a Notice of Trustee’s Saie of
plaintiffs’ property for default in the payment of debt on their |oan. The Trustee’s sale
was scheduled for l\/lay 6, 2013.
On June 1, 2011, prior to plaintiffs bringing suit in this court, BARCO had filed a
lawsuit against Ms. Austin and Ms. Burris in the Circuit Court of Ripley County, l\/lissouri.
ln its complaint, BARCO alleged breach of contract by l\/ls. Austin and l\/ls. Burris for
failing to pay for work performed, altering Mr. Robinson’s work, and threatening him and
his emp|oyees. BARCO sought damages in the amount of $56,652.80. Judgment was
entered in favor of BARCO for damages in the amount of $35,000.00, plus costs. Ms.
Austin and Ms. Burris filed a motion to set aside the judgment on the basis that their
defense attorney in the lawsuit, Paul Kidwell, had been previously disbarred, but had
failed to inform Ms. Austin and Ms. Burris of that fact. An order and judgment setting
aside the judgment and jury verdict in favor of BARCO was granted.
D|SCUSS|ON
When determining whether a complaint filed by a gg s_e plaintiff is sufficient to
invoke review by a court, _r@ s_e plaintiffs are entitled to liberal construction of their
pleadings. g Haines v. Kerner, 404 U.S. 519, 520-21 (requiring that allegations
contained in a j@ g complaint be held to "|ess stringent standards than formal
pleadings drafted by lawyers"), Lh’g denied, 405 U.S. 948 (1972); se_e ali Erickson v.
Pardus, 551 U.S. 89, 94 (2007); Hughes v. Rowe, 449 U.S. 5, 9-10 (1980); Estel|e v.
Gamb|e, 429 U.S. 97, 106 (1976), Lifg denied, 429 U.S. 1066 (1977); Matthews v.
United States, 750 F.3d 1320, 1322 (Fed. Cir. 2014); Diamond v. United States, 115
Fed. Cl. 516, 524 (2014). "However, "‘[t]here is no duty on the part of the trial court to
create a claim which [the plaintiff] has not spelled out in his pleading."’ Lengen v.
United States, 100 Fed. Cl. 317, 328 (2011) (alterations in original) (quoting Scogin v.
United States, 33 Fed. Cl. 285, 293 (1995) (quoting C|ark v. Nat’l Travelers Life lns. Co.,
518 F.2d 1167, 1169 (6th Cir. 1975))); se_e aig Bussie v. United States, 96 Fed. Cl. 89,
94, L, 443 F. App’x 542 (Fed. Cir. 2011); l\/linehan v. United States, 75 Fed. Cl. 249,
253 (2007). "While a ;B §§ plaintiff is held to a less stringent standard than that of a
plaintiff represented by an attorney, the pg Y_ p|aintiff, nevertheless, bears the burden
of establishing the Court’s jurisdiction by a preponderance of the evidence." Riles v.
United States, 93 Fed. Cl. 163, 165 (2010) (internal citations omitted) (citing Hughes v.
Rowe, 449 U.S. at 9 and Taylor v. United States, 303 F.3d 1357, 1359 (Fed. Cir.)
("Plaintiff bears the burden of showing jurisdiction by a preponderance of the
evidence."), Lh’g M@h’g gm denied (Fed. Cir. 2002)); Yggls_o Harris v. United
States, 113 Fed. Cl. 290, 292 (2013) ("Although plaintiff’s pleadings are held to a less
stringent standard, such leniency ‘with respect to mere formalities does not relieve the
burden to meet jurisdictional requirements."’ (quoting Minehan v. United States, 75 Fed.
ci. 31253».
10