Prosser v. Federal Agriculture Mortgage Corporation

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
JEFFREY J. PROSSER, et al., :
:
Plaintiffs, :
:
v. : Civil Action No. 08-0687 (JR)
:
FEDERAL AGRICULTURAL MORTGAGE :
CORPORATION, et al., :
:
Defendants. :
MEMORANDUM
The claim of pro se plaintiffs Jeffery Prosser and John
Raynor1 against the Federal Agricultural Mortgage Corporation
(Farmer Mac) and the U.S. Department of Agriculture (USDA)is
essentially that their financial support of the National Rural
Utilities Cooperative Finance Corporation (CFC) is unlawful
because it keeps CFC afloat so that CFC is not forced through
financial necessity to do business with the plaintiffs and
accommodate their business needs. CFC was originally named as a
defendant, but plaintiffs conceded its motion to dismiss. Dkt.
14. Farmer Mac and USDA now both move to dismiss for want of
subject matter jurisdiction. Those motions will be granted
because, although the complaint is long on conspiracy theories
and painstaking (if unilluminating) detail, it is fatally short
1
Although the complaint was filed pro se, Raynor is an
attorney.
on allegations of fact that would establish any of the required
three elements of plaintiffs’ standing.2
Background
On a motion to dismiss under Rule 12(b)(1), I must
consider the facts in the light most favorable to the plaintiff,
but I may appropriately give allegations of fact “closer
scrutiny” than under a Rule 12(b)(6) motion. See Macharia v.
United States, 334 F.3d 61, 64, 69 (D.C. Cir.2003); Nat’l Ass'n
of Home Builders v. U.S. Army Corps of Engineers, 539 F.Supp.2d
331, 337 (D.D.C. 2008). I may also “look beyond the allegations
contained in the complaint.” Jerome Stevens Pharm., Inc. v. Food
& Drug Admin., 402 F.3d 1249, 1253-54 (D.C. Cir. 2005).
Defendant Farmer Mac is a public, federally chartered
corporation created to establish a secondary market for
agricultural real estate and rural housing mortgage loans and to
increase the availability of financing at stable interest rates
for American farmers and rural homeowners. Cmpl. at 4, 9. In
order to comply with its mandate and fund its operations, Farmer
Mac can issue debt and invest some of the capital it raises. FM
MTD at 4-5. Defendant USDA is a government agency which, among
other things, is authorized by the Rural Electrification Act of
1936, as amended (REDLG) § 313A to guarantee the repayment of
2
This disposition under Rule 12(b)(1) makes it unnecessary
to address the alternative Rule 12(b)(6) ground of the
defendants’ motion.
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bonds issued by certain not-for-profit lenders if the proceeds of
the bonds are used to make loans for electrification or telephone
purposes. USDA MTD at 2.
CFC is a private not-for-profit cooperative association
which provides its members with financing to supplement the
USDA’s loan programs. CFC MTD at 2. Rural Telephone Finance
Cooperative (RTFC), which has never been a party to this action,
is a member of CFC and is also a private not-for-profit
cooperative association which provides financing to its rural
telecommunications members. CFC MTD at 2-3. CFC is the sole
lender to RTFC and manages its affairs under a management
agreement. Id.
Prosser was the beneficial owner of Innovative
Communication Corporation (ICC) and Virgin Islands Telephone
Corporation (Vitelco). Cmpl. at 23. Raynor was a board member
of those companies. Id. Vitelco was a member of RFTC and ICC
was an associate member of RTFC. Cmpl. at 23-24.
The complaint alleges -- and again, these allegations
are taken as true for purposes of the pending motion -- that CFC
uses RTFC as a “puppet” corporation; that, through a series of
complicated maneuvers, it redirects RTFC’s profits from loans
made to the telecommunications sector to subsidize its electric
sector members and to “cover up losses” on electric sector loans,
Cmpl. at 5-6, Pl. USDA Opp. at 12-13; and that all this was
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“obscured from the public by suspect accounting techniques.”
Cmpl. at 8-15.
CFC (the complaint goes on to allege) is also bankrupt
or virtually bankrupt. Cmpl. at 16. Farmer Mac and the USDA
“bailed out” CFC by purchasing billions of dollars of its
securities for greater than their market value and guaranteeing
billions in loans to CFC made by the Federal Financing Bank,
respectively. Cmpl. at 17-23. Both the USDA and Farmer Mac knew
or should have known about CFC’s improper use of RFTC’s profits
and its dire financial straits because they were evident from
publicly filed documents. Id. The USDA and Farmer Mac ignored
these problems, in part because of “cronyism.” Cmpl. at 20-23.
ICC discovered CFC’s use of RTFC’s profits and
threatened to bring a “derivative suit” against RTFC. Pl. FM
Opp. at 20-22. In retaliation, RTFC foreclosed on an ICC loan.
Id. RTFC had been financially damaged by CFC’s practice of
taking RTFC’s profits for its own use, but the “bailout” of CFC
by Farmer Mac and the USDA allowed CFC to fund RTFC’s pursuit of
foreclosure without accommodating ICC’s needs. Id. As a result
of the foreclosure litigation, ICC could not afford to and
stopped making payments on loans held by RTFC with the result
that ICC’s parent companies and ICC itself went into bankruptcy,
and ICC fired the plaintiffs, id.
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CFC’s use of RFTC’s profits and the “bailout” continue
today, and without them CFC would not be financially viable. Id.
Prosser’s recent attempts to conduct business with RFTC and CFC
have been rebuffed. Pl. USDA Opp. At 15.
The plaintiffs assert that Farmer Mac’s purchase of CFC
loans violated various statutory and regulatory provisions, and
that the USDA’s acts, although not “patently illegal,”
constituted unwise investments that were contrary to the spirit
of REDLG and made because of cronyism. PL. FM Opp. at 5-20; Pl
USDA Opp. at 2. The plaintiffs also assert that, by bailing out
CFC, Farmer Mac and the USDA aided and abetted what they allege
was CFC’s fraudulent use of RFTC’s profits and coverup of its
financial difficulties. Pl. FM Opp. at 17.
Analysis
“Article III standing is a prerequisite to federal
court jurisdiction, and . . . petitioners carry the burden of
establishing their standing.” Am. Library Ass'n v. F.C.C., 401
F.3d 489, 493 (D.C. Cir. 2005). To establish standing, a
plaintiff:
First, must have suffered an injury in fact-an invasion
of a legally protected interest which is (a) concrete
and particularized, and (b) actual or imminent, not
conjectural or hypothetical. Second, there must be a
causal connection between the injury and the conduct
complained of-the injury has to be fairly ...
trace[able] to the challenged action of the defendant,
and not ... th[e] result [of] the independent action of
some third party not before the court. Third, it must
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be likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision.
Id. Because these plaintiffs seek injunctive relief, they must
also allege that they are “likely to suffer future injury.” City
of Los Angeles v. Lyons, 461 U.S. 95, 105 (1983).
1. Injury
The injury plaintiffs allege “must affect [them] in a
personal and individual way.” Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 n. 1 (1992). The assertion of a generalized
injury or of a right to force the government to act in accordance
with the law will not support standing, Allen v. Wright, 468 U.S.
737, 753-755 (1984), nor will merely complaining about the
expenditure of taxpayer dollars, DaimlerChrysler Corp. v. Cuno,
547 U.S. 332, 343 (U.S. 2006). Plaintiffs have no standing to
bring a case on behalf of third parties who are strangers to this
suit, such as ICC, Vitelco, the members of RTFC of CFC, or others
who may own securities issued by the companies that are the
subject of this suit.3 See Power v. Ohio, 499 U.S. 400, 410
(1991).
3
Plaintiffs do not allege that they currently own any
investments in CFC, RTFC, ICC, Vitelco, or Farmer Mac, or any
securities issued by these companies or guaranteed by the USDA.
They do not allege that they have ever done business with Farmer
Mac or the USDA directly, or claim any present affiliation with
ICC or Vitelco, or any other member of RTFC or CFC. Nor do they
satisfy the criteria for an exception to the general bar on third
party standing. Powers, 499 U.S. at 411; Renal Physicians Ass'n
v. U.S. Dept. of Health and Human Services, 489 F.3d 1267, 1275-
1276 (D.C. Cir. 2007).
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It is difficult to pin down the exact injuries,
personal to them, of which these plaintiffs complain.4 They make
generalized allegations of harm to their “business interests and
reputation” and aver that they “will continue to suffer
additional irreparable harm as long as management of [CFC] is
retained because of the Farmer Mac and USDA unlawful funding”
Compl. at 25, 26. They do not have standing to bring claims for
“hypothetical” or “conjectural” harms, City of Los Angeles v.
Lyons, 461 U.S. at 103-104, but they provide no facts about the
alleged “business interests” and they do not say how, or among
whom, their reputations have been or will be injured. They are
more specific in their references to RTFC’s past and continued
rejection of an “offer” by Prosser that would “yield . . . RTFC
and Greenlight $250 Million” and RFTC’s general refusal to do
business with Prosser, but there is no suggestion in the
complaint or in their opposition to the pending motion that RTFC
is under any obligation to deal with the plaintiffs. Pl. USDA
Opp. at 15.
2. Causal Connection
Plaintiffs did lose their jobs but not, as far as can
be told from the record, for any reason traceable to the conduct
of which they complain. There is no allegation that the
4
Plaintiffs’ recitation of their future intent to file a
Racketeer Influenced and Corrupt Organizations Act claim against
CFC adds nothing to the analysis.
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defendants control or controlled CFC or RTFC, and no claim or
allegation that the defendants actually caused them direct injury
at all. Their factual proposition appears to be that if the
USDA and Farmer Mac had not illegally “bailed out” CFC, (1) CFC
and RTFC could not have foreclosed on ICC’s loans or would have
been forced to accommodate ICC by cutting a deal in the
subsequent litigation, and that plaintiffs would therefore have
kept their jobs or otherwise not been injured, and (2) CFC would
now be forced to deal with, and/or abandon its “bellicose and
openly hostile attitude” towards, Prosser. Pl. FM Opp. at 20-23.
The links in this chain of causality are all contingent
on speculative assumptions about the past and future acts and
motives of strangers to this suit, and even about market forces.
See Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 43 (1976).
When “[m]ost, if not all, of the individual links in the chain
[of causality] alleged by appellants depend on some allegation
that cannot be easily described as true or false,” such as when
the “links inescapably presume certain independent action[s] of
some third party not before” a court, the D.C. Circuit “routinely
refuse[s] to permit such predictive assumptions to establish
standing.” Fla. Audubon Soc. v. Bentsen, 94 F.3d 658, 670 (D.C.
Cir. 1996).
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3. Redressability
The plaintiffs provide no information as to how
satisfaction of their demands would provide them with redress.
“[T]o establish redressability at the pleading stage, [this
Circuit] require[s] more than a bald allegation; [it] require[s]
that the facts alleged be sufficient to demonstrate a substantial
likelihood that the third party directly injuring the plaintiff
would cease doing so as a result of the relief the plaintiff
sought.” Renal Physicians Ass'n v. U.S. Dept. of Health and
Human Services, 489 F.3d 1267, 1275 (D.C. Cir. 2007). The
plaintiffs ask for declarations that the challenged acts are
illegal and injunctive relief to prevent their continuation.
Cmpl. at 27-28. But declarations would not redress any supposed
past harm, and the injunctive relief would at best merely give
the plaintiffs a better chance at convincing RTFC to deal with
them. “[A] quest for ill-defined better odds is not close to
what is required to satisfy the redressability prong of Article
III.” Nat’l Wrestling Coaches Ass'n v. Dept. of Educ., 366 F.3d
930, 939 (D.C. cir. 2004).
Conclusion
Plaintiffs have failed sufficiently to allege any of
the required three elements of standing. Without standing, there
is no subject matter jurisdiction. Without subject matter
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jurisdiction, the complaint must be dismissed. Fed R. Civ Pro.
12(b)(1).
JAMES ROBERTSON
United States District Judge
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