Statewide Bonding, Inc v. U.S. Department of Homeland Security

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
STATEWIDE BONDING, INC, et al.,
Plaintiffs,
v. Civil Action No. 18-2115 (JEB)
U.S. DEPARTMENT OF HOMELAND
SECURITY, et al.,
Defendants.
MEMORANDUM OPINION
The Court once again addresses a dispute between various private actors in the
immigration-bond process and the federal officials responsible for oversight. Plaintiffs — two
bail-bond companies, a separate corporation guaranteeing the detainees’ compliance with the
bonds, and that company’s CEO — assert that the Government’s current administration of the
system violates their right to due process guaranteed by the United States Constitution, as well as
the Administrative Procedure Act. In support of these claims, they point to defective
documentation provided by Immigration and Customs Enforcement to non-citizens released on
bail. When these individuals fail to appear at court hearings, the bonds are breached, causing
significant damage to Plaintiffs’ business interests. While Plaintiffs may be justifiably
concerned, they have not pled cognizable causes of action here, despite this Court’s providing
them multiple opportunities to do so. It will therefore grant Defendants’ Motion for Judgment on
the Pleadings.
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I. Background
Factual Background
The Court has outlined the factual underpinning of this lawsuit in multiple prior
Opinions. See, e.g., Statewide Bonding v. DHS (Statewide II), 2019 WL 2477407, at *1–2
(D.D.C. June 13, 2019). Briefly, some non-citizens held in immigration-detention facilities may
be released while they await a hearing if they can post a monetary bond. See 8 C.F.R.
§§ 236.1(c), 103.6. Those unable to post their own bonds can turn to bail-bond companies such
as Plaintiffs Big Marco Insurance and Bonding Services, LLC and Statewide Bonding, Inc. See
ECF No. 32 (Second Amended Complaint), ¶ 24. These companies partner with sureties
(insurance companies certified by the Department of Treasury) to enter into bond agreements
with ICE. Id. The agreements secure bonds on behalf of non-citizens, and the companies
generally require bond seekers to provide collateral as security in the event of their failure to
appear. Id., ¶¶ 16, 25. If the non-citizen does not have sufficient collateral on hand, he can
strike up an arrangement with a third company, such as Plaintiff Nexus Services, Inc. Id., ¶ 16.
Nexus enters into separate contractual arrangements with the bail-bond companies to supply
collateral and guarantee a non-citizen’s appearance when required by ICE. Id., ¶¶ 27, 30. In
exchange, the non-citizen provides monthly payments to Nexus and agrees to GPS monitoring.
Id., ¶¶ 26–27.
This case arises from alleged flaws in the various documents given to non-citizens and
this tangle of private entities to ensure the released person’s attendance at immigration
proceedings. According to Plaintiffs, at his conditional release, a non-citizen receives a Notice
to Appear (NTA). Id., ¶ 31. The NTA informs him that he has been placed in removal
proceedings, sets out the allegations supporting removal, and should alert him of the date, time,
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and place of his immigration hearing. Id., ¶¶ 35–36; see also Pereira v. Sessions, 138 S. Ct.
2105, 2115 (2018) (“Conveying . . . time-and-place information to a noncitizen is an essential
function of a notice to appear.”). According to Plaintiffs, however, ICE consistently issues
NTAs to their clients that “do not contain a time and date, and the majority do not contain a
place, with respect to where the immigrant client is supposed to appear in court.” Second Am.
Compl., ¶ 38.
If the non-citizen does not appear for his hearing, ICE will send the bail-bond company
the second document at issue, a Notice to Produce Alien (NPA). Id., ¶¶ 48–49. The NPA alerts
the company of the non-citizen’s failure to appear and requires it to procure that person’s
appearance on a specific date. Id. If it fails to do so, the bond obligors will be deemed in breach
of the bond and required to pay an amount up to the full value of the bond. See Statewide II,
2019 WL 2477407, at *2; see also 8 C.F.R. § 103.6 (bond is breached “when there has been a
substantial violation of the stipulated conditions” of bond agreement). Plaintiffs allege that ICE
has been issuing NPAs demanding that they produce the subject immigrant within 10 days and
sometimes on an even tighter timeline. See Second Am. Compl., ¶ 51; see also id. (noting that
“[o]n more than one occasion, these NPAs have been received after the subject immigrant was to
be produced”). Such practices make it even harder for Plaintiffs to comply and result in an
increased number of bond breaches. Id., ¶¶ 52–59.
Procedural History
Plaintiffs filed their Complaint in September 2018, asserting that Defendants’
administration of this bond process violated both their due-process rights protected by the United
States Constitution and the Administrative Procedure Act. After Plaintiffs once amended their
Complaint, the Court dismissed it because they had not sufficiently articulated their standing to
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pursue such claims. See Statewide Bonding, Inc. v. DHS, 2019 WL 689987, at *1 (D.D.C. Feb.
19, 2019) (Statewide I). Accepting the Court’s offer to try again, Plaintiffs have once more
amended their Complaint, this time to clarify their injuries.
Like the previous one, this Second Amended Complaint asserts that the agency’s policy
or practice of making bond-breach determinations following the issuance of defective NTAs and
NPAs violates Plaintiffs’ due-process rights and the Administrative Procedure Act. More
specifically, they allege that the “defective” NTAs and NPAs preclude non-citizens from
attending their immigration hearings and the bail-bond companies from procuring their
appearances at subsequent proceedings. See Second Am. Compl., ¶¶ 1, 10. Plaintiffs have “no
reasonable opportunity to comply” with the terms of the bonds, and Defendants then “declare the
bonds in breach[,] . . . requir[ing Plaintiffs] to pay tens of thousands of dollars to the
Defendants.” Id., ¶ 59. A breach declaration, in turn, “threaten[s]” the “[c]ollateral that Nexus
has placed at risk to indemnify the bondsmen.” Id., ¶ 60. Plaintiffs allege that along with these
financial harms, ICE’s conduct also causes them “reputational harms for every bond declared in
breach.” Id., ¶ 65. This is so, they claim, because surety companies do not want to partner with
bail-bond companies with high bond “fail rates.” Id., ¶ 59. Plaintiffs assert that ICE has
declared 391 bond agreements in breach, to all of which at least one of them is a party. Id., ¶ 60.
Defendants moved to dismiss this Second Amended Complaint, arguing that Plaintiffs
had again failed to demonstrate standing. The Court denied that Motion. See Statewide Bonding
II, 2019 WL 2477407, at *1. While expressing “reservations about the legal basis for the[ ]
suit,” it found that Plaintiffs had at least “done enough to show they have standing to proceed.”
Id. Defendants now take up the Court’s implicit invitation to go beyond jurisdictional
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arguments, moving for judgment on the pleadings. In support of their Motion, they argue that,
even under the facts as pled, Plaintiffs cannot prevail on their claims as a matter of law.
II. Legal Standard
Federal Rule of Civil Procedure 12(c) authorizes a party to move for judgment on
the pleadings at any time “[a]fter the pleadings are closed –– but early enough not to delay trial.”
A party seeking judgment on the pleadings must demonstrate “that no material fact is in dispute
and that it is entitled to judgment as a matter of law.” Dist. No. 1 v. Liberty Maritime Corp., 933
F.3d 751, 760 (D.C. Cir. 2019) (quotation marks omitted). When deciding such a motion, courts
should view all facts and draw all inferences in the light most favorable to the non-moving party.
See Peters v. Nat’l R.R. Passenger Corp., 966 F.2d 1483, 1485 (D.C. Cir. 1992). A court should
grant a motion for judgment on the pleadings when “it is clear that no relief could be granted
under any set of facts that could be proved consistent with the allegations.” Lindsey v. Dist. of
Columbia, 609 F. Supp. 2d 71, 77 (D.D.C. 2009). The appropriate standard for reviewing a
12(c) motion is therefore similar but not identical to that applied to a motion to dismiss under
Rule 12(b). See Samuels v. Safeway, Inc., 391 F. Supp. 3d 1, 2 (D.D.C. 2019). In particular,
“while a Rule 12(b) motion may be based on procedural failures, including lack of subject-matter
jurisdiction . . . a Rule 12(c) motion centers upon the substantive merits of the parties’ dispute.”
Id. (quotation marks omitted).
Where the Court must consider “matters outside the pleadings” to reach its conclusion, a
motion for judgment on the pleadings “must be treated as one for summary judgment under Rule
56.” Fed. R. Civ. P. 12(d); see also Yates v. Dist. of Columbia, 324 F.3d 724, 725 (D.C. Cir.
2003) (same). At this stage, however, a Court can review “documents attached as exhibits or
incorporated by reference in the complaint” or “documents upon which the plaintiff’s complaint
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necessarily relies even if the document is produced not by the plaintiff in the complaint but by
the defendant.” Ward v. D.C. Dep’t of Youth Rehab. Servs., 768 F. Supp. 2d 117, 119 (D.D.C.
2011) (internal quotation marks omitted); see also Banneker Ventures, LLC v. Graham, 798 F.3d
1119, 1133 (D.C. Cir. 2015) (“A district court may consider a document that a complaint
specifically references without converting the motion into one for summary judgment.”). As
Defendants’ declaration merely spells out procedural steps that Plaintiffs do not dispute, the
Court may consider it in this 12(c) Motion.
III. Analysis
Defendants principally maintain that Plaintiffs have not alleged a valid claim under the
Due Process Clause because they have no constitutionally protected property interest in the
immigration bonds, and even if they did, the Government’s procedures are sufficient.
Defendants also assert that Plaintiffs’ APA claim founders for at least those same reasons. The
Court considers the counts in turn.
Due Process
The Fifth Amendment’s Due Process Clause prohibits the federal government from
depriving persons of “property” “without due process of law.” In examining a claim asserting a
denial of due process, courts “apply a familiar two-part inquiry: we determine whether the
plaintiffs were deprived of a protected interest, and, if so, whether they received the process they
were due.” Barkley v. U.S. Marshals Serv. ex rel. Hylton, 766 F.3d 25, 31 (D.C. Cir. 2014)
(internal quotation marks omitted). As mentioned above, Defendants contest Plaintiffs’ claim at
both steps. The Court concludes that, even assuming the bond agreements give rise to a
constitutionally protected interest, Plaintiffs have failed to establish that the Government has
deprived them of the process “due” under the Fifth Amendment. See Lujan v. G & G Fire
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Sprinklers, Inc., 532 U.S. 189, 196–97 (2001) (declining to address whether Plaintiff had alleged
constitutionally protected interest because its interests were “fully protected”); Barkley, 766 F.3d
at 31 (same).
At the start, there is no one-size-fits-all procedure the Government should employ to
protect against the unconstitutional deprivation of property. Rather, “due process is flexible and
calls for such procedural protections as the particular situation demands.” NB ex rel. Peacock v.
Dist. of Columbia, 794 F.3d 31, 44 (D.C. Cir. 2015) (quoting Mathews v. Eldridge, 424 U.S.
319, 334 (1976)). A plaintiff “is not entitled to perfect procedure or the procedures of his
choice.” English v. Dist. of Columbia, 815 F. Supp. 2d 254, 264 (D.D.C. 2011) (quotation
marks omitted). Instead, “[t]he fundamental requirement of due process is the opportunity to be
heard at a meaningful time and in a meaningful manner.” Mathews, 424 U.S. at 333 (quotation
marks omitted). In assessing the adequacy of a plaintiff’s “opportunity to be heard,” courts
employ the familiar three-factor test set forth in Mathews considering:
First, the private interest that will be affected by the official action;
second, the risk of an erroneous deprivation of such interest through
the procedures used, and the probable value, if any, of additional or
substitute procedural safeguards; and finally, the Government’s
interest, including the function involved and the fiscal and
administrative burdens that the additional or substitute procedural
requirement would entail.
Id. at 335. This Opinion will first set forth the process currently afforded private actors like
Plaintiffs and then examine whether this is sufficient under Mathews.
The Available Process
The Court begins with “a description of the procedures” surrounding bond-breach
determinations. Id. When DHS determines that a bond breach has occurred, there is no
automatic forfeiture of Plaintiffs’ property –– i.e., the money represented by the bonds
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themselves. Instead, “[i]f DHS determines that a bond has been breached, it will notify the
obligor of the decision, the reasons therefor, and inform the obligor of the right to appeal the
decision in accordance with the [relevant regulations].” 8 C.F.R. § 103.6. DHS fulfills this
obligation in multiple ways. For one, once a breach determination has been made, DHS must
“send notice of a breach of the bond to the obligor” on a Form I-323, which also alerts them of
their right to administrative appeal. See ECF No. 7 (Def. Opp. to TRO), Exh. A (ICE Form I-
352) at 2. (DHS also alerts obligors at the outset, via the bond agreement itself, that they will
have the opportunity to pursue an administrative appeal should they be found in breach of that
bond. Id.) During that administrative process, obligors are guaranteed independent review, can
submit briefs and evidence, and may avail themselves of counsel. See U.S. Citizenship and
Immigration Services, Administrative Appeals Office Practice Manual §§ 3.6–3.8; see also 8
C.F.R. § 103.3 (outlining administrative-appeals system). The AAO can afford challengers the
opportunity for oral argument “if the case involves an issue of particular significance and the
AAO determines that it would benefit from supplemental argument.” Id., § 3.8(f). Additionally,
after the AAO issues its decision, the appealing party can file a motion for reconsideration,
which also may include oral argument. Id., § 4.10.
Upon making a breach determination, DHS also “issues an invoice” to each of the
co-obligors on a bond “to notify the entity that owes a debt of the amount due along with other
information about the debt.” Def. Opp., Exh. 2 (Declaration of John Monette), ¶ 6. This invoice
informs the obligor that it has the right to “dispute the validity of the debt” through a written
request submitted within thirty days of the receipt of the invoice. Id., Exh. A (invoice) at 4. If a
timely written request is received, the “debt will be reviewed and collection will cease on the
debt” until “a written summary of the review is provided.” Id. This pre-deprivation review may
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result in a finding that the debt is invalid in its entirety, partially invalid, or valid. If the invoice
is not then timely paid, the agency sends a “demand letter,” which explains “why the debt is
owed,” along with supporting documentation “substantiating the validity of the breach
determination.” Monette Decl., ¶ 8. “ICE typically refers delinquent debt to Treasury” after 120
days. Id., ¶¶ 10–11.
Finally, because DHS regulations do not require exhaustion of administrative remedies, a
bond obligor can skip the administrative and written-appeal processes by immediately filing suit
in federal court. In fact, some bond obligors and the Government (when seeking to collect on
breached bonds) have done just that, asserting what are essentially breach-of-contract claims in
federal district courts across the country. See, e.g., United States v. Gonzales & Gonzales Bonds
& Ins. Agency, Inc., 728 F. Supp. 2d 1077, 1080 (N.D. Cal. 2010) (suit brought by United States
against bail-bond company to recover bond amounts where company counterclaimed bonds were
invalid because of failure to issue timely delivery demand); Safety Nat’l Cas. Corp. v. DHS, 711
F. Supp. 2d 697, 700–01 (S.D. Tex. 2008) (suit involving surety company’s challenge to 1400
immigration-bond-breach determinations); see also AAA Bonding Agency, Inc v. DHS, 447 F.
App’x 603, 610 (5th Cir. 2011) (referring to immigration bond as “contract” between co-obligors
and DHS and analyzing it according to ordinary principles of contract interpretation).
Finally, the Court notes that Plaintiffs Nexus and Mike Donovan (Nexus’s CEO) “have
no contractual relationship with ICE with respect to immigration bonds.” Def Opp., Exh. 1
(Declaration of Justin Gellert), ¶ 5. Their more attenuated relationship to these bond-breach
determinations may result in a loss of property, but it is not a loss occurring “at the hands of the
government.” NB, 794 F.3d at 42; see also id. (“[D]ue process offers no shield against purely
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private conduct.”). The Court has therefore focused its analysis on the procedural protections
afforded the bond obligors vis-à-vis the Government.
Constitutional Adequacy
Plaintiffs have failed to demonstrate the inadequacy of the above-chronicled smorgasbord
of procedural safeguards. Under the Mathews test, even assuming they have a substantial private
interest at stake here, they have not established a “risk of an erroneous deprivation” of property.
See 424 U.S. at 335. While Plaintiffs articulate deficiencies in the NPAs and NTAs, these
documents alone do not deprive any of them of their property until a final breach determination
has been made. And the Government then provides multiple means of contesting such breach
determinations.
Courts have found that where a due-process property interest derives from contract, this
interest “can be fully protected by an ordinary breach-of-contract suit.” LG Elecs. U.S.A., Inc. v.
Dep’t of Energy, 679 F. Supp. 2d 18, 34 (D.D.C. 2010) (quoting Lujan, 532 U.S. at 196). In
other words, Plaintiffs’ contract remedy alone may provide constitutionally adequate protection
given that “the process to which [a] plaintiff is due” where he challenges the Government’s
performance under a contract, like a bail-bond agreement, “is a post-deprivation suit for breach
of the contract.” Id. (quotation marks omitted); see also Suburban Mortg. Assocs., Inc. v. HUD,
480 F.3d 1116, 1128 (Fed. Cir. 2007) (“[A] claim that a government agency has violated a
party’s right to due process by refusing performance under a contract is substantively
indistinguishable from a breach of contract claim.”).
Yet, as mentioned above, Plaintiffs are not limited to a breach-of-contract suit in their
pursuit of relief; they have a panoply of appellate options. With regard to the administrative-
appeal process, Plaintiffs are guaranteed a neutral adjudicator, see Del. Riverkeeper Network v.
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FERC, 895 F.3d 102, 111 (D.C. Cir. 2018) (“Due Process requires an ‘impartial and
disinterested’ adjudicator.”) (quoting Marshall v. Jericho, Inc., 446 U.S. 238, 242 (1980)), as
well as multiple levels of review. Attesting to the sufficiency of this process, Statewide and Big
Marco have filed “hundreds of timely appeals with the AAO challenging ICE’s breach
determinations,” and they have enjoyed some success. See ECF No. 40 (Def. Reply) at 6 n.3;
see also id. (noting that AAO has issued multiple decisions in favor of obligors on the ground
that NPAs were fatally defective). Given these possible avenues of relief, Plaintiffs have not
demonstrated that “the available process was inadequate or that they were denied the
aforementioned protections.” Badgett v. Dist. of Columbia, 925 F. Supp. 2d 23, 31 (D.D.C.
2013).
In addition, “a procedural due process claim requires the plaintiff to identify the process
that is due.” Doe by Fein v. Dist. of Columbia, 93 F.3d 861, 870 (D.C. Cir. 1996). Yet Plaintiffs
here do not even suggest plausible alternative procedural safeguards that they would find
constitutionally adequate. It appears that what they are really unhappy about is that their late
appeals may not be accepted. Indeed, they argue that the “administrative option” is insufficient
because “breach determinations are final, so long as no appeal has been filed and accepted by the
AAO,” and the AAO is required by the relevant regulations to reject “untimely appeal[s].” ECF
No. 48 (Pl. Response) at 5; see also 8 C.F.R. §§ 103.5, 103.3(a)(2)(i) (outlining that obligor has
30 days to file an administrative appeal or motion for reconsideration of breach determination).
In other words, Plaintiffs seem to argue for a “process” devoid of any deadlines because they
have missed the deadline for challenging some of ICE’s breach determinations. Due Process,
however, does not require an agency to permit never-ending opportunities to appeal. In this case,
Plaintiffs simply “failed to take advantage of all the process due [to them].” Yates, 324 F.3d at
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726. Their procedural-due-process claims accordingly “cannot survive where Plaintiffs
themselves eschewed the opportunity to exploit the very procedural safeguards which they argue
they were denied.” Badgett, 925 F. Supp. 2d at 31.
As this Court recently observed in a companion case, Plaintiffs “have received more
process than other plaintiffs who likewise were not able to state a due-process claim.” Statewide
Bonding, Inc. v. DHS, 2019 WL 2076762, at *3 (D.D.C. May 10, 2019) (citing Graham v. Office
of Surface Mining Reclamation & Enforcement, 722 F.2d 1106, 1110–12 (3d Cir. 1983) (holding
scheme requiring payment of penalty into escrow before administrative appeal comported with
procedural-due-process requirements); Dewees v. United States, 272 F. Supp. 3d 96, 101
(D.D.C. 2017) (holding plaintiff had not stated procedural-due-process claim where he had “no
opportunity to appeal his [tax] penalty through administrative means or the U.S. Tax Court
before it was collected” because he could challenge in district court after penalty was assessed)).
The Government, in short, has not “deprive[d them] of the only process due,” Tate v. Dist. of
Columbia, 627 F.3d 904, 908 (D.C. Cir. 2010), and it is therefore entitled to judgment as a matter
of law on Plaintiffs’ constitutional claims.
Administrative Procedure Act
Plaintiffs also bring suit under the APA. They assert in their Complaint that ICE’s
issuance of flawed NTAs and NPAs violates that Act because it is “unlawful, unconstitutional, in
excess of authority, and an abuse of authority, inter alia, under the APA.” Second Am. Compl.,
¶ 69. As the Court previously mentioned, it appears that the “core of their APA claim[s] is that
they have been deprived of due process under the Constitution.” Statewide Bonding II, 2019
WL 2477407, at *6. Plaintiffs conceded as much at oral argument, “suggesting that their legal
claims may all collapse into due process.” Id. They reiterated this claim in their written
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submissions, arguing that they “have stated a claim for Due Process violations sufficient to state
a claim under the APA.” Pl. Resp. at 8. As Plaintiffs have not delineated an independent basis
for these counts, their APA claims rise, and in this case fall, with their constitutional claims.
Defendants are therefore entitled to judgment in their favor.
IV. Conclusion
For these reasons, the Court will grant Defendants’ Motion for Judgment on the
Pleadings. Though Plaintiffs have failed to plead a cognizable claim, the Court does not
foreclose the possibility that they may be able to do so in the future. The case is therefore
dismissed without prejudice. A separate Order so stating will issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: October 29, 2019
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