Associated Mortg. Bankers Inc. v. Carson

281 F.Supp.3d 5

ASSOCIATED MORTGAGE BANKERS INC., Plaintiff,

v.Ben CARSON, et al., Defendants.

Civil Action No. 17–0075 (ESH)

United States District Court, District of Columbia.

Signed November 15, 2017

Brian Michael Serafin, David M. Souders, Weiner Brodsky Kider PC, Washington, DC, for Plaintiff.

Kevin Paul VanLandingham, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

ELLEN SEGAL HUVELLE, United States District Judge

Before the Court is plaintiff's motion for reconsideration. The factual and procedural background is set forth in the Court's September 20, 2017 Memorandum Opinion granting in part, and denying in part, defendants' motion to dismiss. (ECF No. 23 ("MTD Op.").) In that Memorandum Opinion, the Court dismissed with prejudice plaintiff's claim for breach of the covenant of good faith and fair dealing ("Count II") for lack of subject matter jurisdiction because it is within the Tucker Act's exclusive jurisdiction. (MTD Op. at 7–8.) The Court denied defendants' motion to dismiss plaintiff's claim under 5 U.S.C. § 706(2)(A) of the Administrative Procedure Act ("APA") to the extent that it challenged an administrative judge's ("AJ") decision upholding the Department of Housing and Urban Development's ("HUD") offset against plaintiff ("Count I"). However, the Court noted that its review on Count I going forward would be confined to that issue: "This action will not include discovery or class certification. After the administrative record is filed, the Court will decide whether the AJ reached her decision in an arbitrary and capricious manner, or otherwise violated an applicable statute or regulation." (MTD Op. at 13.)

In its motion for reconsideration, plaintiff argues that (1) the Court should not have dismissed Count II for lack of jurisdiction because defendants did not explicitly argue for dismissal on that ground and the Court has jurisdiction under HUD's sue and be sued clause, 12 U.S.C. § 1702 ; (2) if the Court were to reach jurisdiction sua sponte and find against plaintiff, it should have dismissed Count II without prejudice; and (3) the Court should not have concluded that plaintiff could not maintain a class action on Count I without receiving briefings from the parties on class certification. For the reasons that follow, the Court grants the motion in part and denies the motion in part.¹

ANALYSIS

I. LEGAL STANDARD

Interlocutory decisions "may be revised at any time before the entry of a judgment." Fed. R. Civ. P. 54(b). However, a court "should be loathe" to grant a motion for reconsideration "in the absence of extraordinary circumstances such as where the initial decision was clearly erroneous and would work a manifest injustice." Marshall v. Honeywell Tech. Sols., Inc. , 598 F.Supp.2d 57, 59 (D.D.C. 2009) (citation omitted); see also Mohammadi v. Islamic Republic of Iran , 782 F.3d 9, 17 (D.C. Cir. 2015). "The moving party has the burden of showing that reconsideration is warranted, and that some harm or injustice would result if reconsideration were to be denied." Marshall , 598 F.Supp.2d at 60 ; see also Nat'l Ctr. for Mfg. Scis. v. Dep't of Def. , 199 F.3d 507, 511 (D.C. Cir. 2000) (noting that "a district court should not grant a motion for reconsideration unless the moving party shows new facts or clear errors of law which compel the court to change its prior position").

II. COUNT II

To begin, there is nothing improper about the Court dismissing plaintiff's Count II for lack of subject matter jurisdiction without briefing from the parties; a district court may conduct a subject-matter-jurisdiction inquiry sua sponte. Fed. R. Civ. P. 12(h)(3) ; NetworkIP, LLC v. FCC , 548 F.3d 116, 120 (D.C. Cir. 2008) ; see also Evans v. Suter , No. 09-5242, 2010 WL 1632902, at *1 (D.C. Cir. Apr. 2, 2010) (per curiam) (unpublished) (affirming the district court's denial of the appellant's motion for reconsideration, and explaining that "a district court may dismiss a complaint sua sponte ... when, as here, it is evident that the court lacks subject-matter jurisdiction").

Second, contrary to plaintiff's assertions, the Court was well aware of HUD's sue and be sued clause, 12 U.S.C. § 1702, when it dismissed Count II for lack for jurisdiction. (See MTD Op. at 9 n.7.) Section 1702 may waive HUD's sovereign immunity, but it is not an independent grant of jurisdiction. See Lightfoot v. Cendant Mortg. Corp. , ––– U.S. ––––, 137 S.Ct. 553, 561, 196 L.Ed.2d 493 (2017) (noting that "Fannie Mae's sue-and-be-sued clause is most naturally read not to grant federal courts subject-matter jurisdiction over all cases involving Fannie Mae. In authorizing Fannie Mae to sue and be sued ‘in any court of competent jurisdiction, State or Federal,’ it permits suit in any state or federal court already endowed with subject-matter jurisdiction over the suit"). The operative language in Lightfoot is virtually identical to 12 U.S.C. § 1702. Compare 12 U.S.C. § 1723a(a), with id. § 1702.

Plaintiff also argues in its reply that 28 U.S.C. § 1331 and 28 U.S.C. § 1332 could provide a basis for jurisdiction over Count II. As to 28 U.S.C. § 1332, the Court will not read a jurisdictional allegation into plaintiff's complaint as a ground for granting a motion to reconsider. Plaintiff's only cited jurisdictional ground in its complaint was 28 U.S.C. § 1331 (Compl. ¶ 6), which the Court already considered and rejected. And despite the arguments presented by plaintiff on its motion to reconsider, the Court still finds § 1331 to be an inadequate basis for exercising jurisdiction.

Plaintiff argues that Trans–Bay Engineers & Builders, Inc. v. Hills , 551 F.2d 370 (D.C. Cir. 1976), demonstrates that this Court has jurisdiction under 28 U.S.C. § 1331. In Trans–Bay , the plaintiff was a construction company that did not have a contract with HUD. Id. at 373–74. The plaintiff had entered into a construction contract with a non-profit corporation ("MORH") that was building a housing project for low and moderate income families. Id. MORH in turn had a contract with Advance Mortgage Corporation to provide "the mortgage financing for the project." Id. at 374. The Federal Housing Administration, "an organizational sub-unit of HUD," was administering a program that reduced the risk to mortgage lenders and owners of housing projects for low and moderate income families—i.e., MORH and Advance. Id. at 373–74. Therefore, HUD and MORH signed a "Regulatory Agreement" that "covered the owner's use of the loan funds, rental rates and many other obligations." Id. at 374.

The construction contract between the plaintiff and MORH authorized MORH to holdback 10% of the monthly construction payments to be payable 30 days after construction was completed if the plaintiff met certain preconditions. Id. at 374–75. The plaintiff met its obligations under the contract with MORH by June 30, 1973, but did not receive the holdback funds because Advance and HUD refused to release the funds. Id. at 375. "In October 1973, Advance and HUD agreed to release one half of that amount .... HUD took the position that the remainder of those funds could not, in the normal course, be released until after a ‘final closing’ of the mortgage financing had occurred for the project." Id. at 375 (footnotes omitted). That never occurred because MORH defaulted. Id. Advance assigned the mortgage to HUD, and HUD foreclosed on the mortgage without paying the plaintiff the remaining holdback funds. Id.

The plaintiff then sought "recovery against the Secretary and Advance as a third party beneficiary to the Building Loan Agreement, and alternatively under theories of suretyship, and equitable lien/unjust enrichment." Id. The district court entered summary judgment for HUD and Advance. Id. at 373.

On appeal, the D.C. Circuit examined jurisdiction and found that 12 U.S.C. § 1702 waived sovereign immunity, but did not reach the question of whether § 1702 also granted subject matter jurisdiction because it concluded that subject matter jurisdiction existed under 28 U.S.C. § 1332 and 28 U.S.C. § 1331. Id. at 376–78. As to § 1331, the D.C. Circuit concluded that equitable rights determined by federal common law were the source of the plaintiff's claims, not a "contract between" HUD and the plaintiff. Id. at 377 ; see also Molton, Allen & Williams, Inc. v. Harris , 436 F.Supp. 853, 857 (D.D.C. 1977) ("A close analysis of [ Trans–Bay ], however, reveals that federal question jurisdiction was found there because the plaintiff's claim was founded upon ‘equitable rights generated by HUD's course of activities pursuant to federal statutes.’ " (citing Trans–Bay , 551 F.2d at 377 )). In contrast, plaintiff's Count II is a claim that HUD breached the covenant of good faith and fair dealing in a contract between HUD and plaintiff. (See MTD Op. at 7.).

Plaintiff is correct that federal common law also governs contracts between HUD and plaintiff. But finding subject matter jurisdiction on this basis alone would eviscerate the Tucker Act's grant of exclusive jurisdiction. "If plaintiff's argument were to prevail, every Government contracts case where the waiver of sovereign immunity was not dependent solely on the Tucker Act could be brought in a federal district court because the federal common law of contracts provides the rules of decision in all Government contracts cases." Molton , 436 F.Supp. at 856. Following the rationale set forth in Molton , this Court will not read Trans–Bay as expansively as plaintiff would like, especially given the more recent controlling D.C. Circuit precedent holding that a plaintiff cannot "bypass Tucker Act jurisdiction by converting complaints which ‘at their essence’ seek money damages from the government into complaints requesting injunctive relief or declaratory actions." Kidwell v. Dep't of Army, Bd. for Corr. of Military Records , 56 F.3d 279, 284 (D.C. Cir. 1995). Given the lack of controlling or convincing precedent, the Court will not reconsider...