United States v. Gonzales & Gonzales Bonds and Ins. Agency, Inc.

Full title: UNITED STATES OF AMERICA, Plaintiff, v. GONZALES GONZALES BONDS AND…

Court: United States District Court, N.D. California

Date published: Aug 16, 2011

No. C-09-4029 EMC (N.D. Cal. Aug. 16, 2011)

Opinion

No. C-09-4029 EMC.

August 16, 2011

ORDER GRANTING PLAINTIFF'S MOTION FOR VOLUNTARY PARTIAL REMAND (Docket No. 55)

EDWARD CHEN, Magistrate Judge

I. FACTUAL AND PROCEDURAL BACKGROUND

The United States' motion for voluntary partial remand of 11 bonds came on for hearing before the Court on August 12, 2011. Docket No. 55. Plaintiff United States of America, on behalf of the Secretary of the Department of Homeland Security, brought this suit to collect a debt from Gonzales Gonzales Bonds and Insurance Agency, Inc. and American Surety Company, Inc. based on Defendants' alleged violations of four immigration bonds which resulted in administrative bond breach determinations. Defendants have filed counterclaims to rescind and/or cancel 17 additional and separate bond breach determinations and to be refunded the amount already paid, alleging the Department of Homeland Security made incorrect breach determinations. The United States seeks voluntary partial remand for 11 of the 17 bonds, in order to rescind and refund the bond breach determinations due to administrative errors.

After considering the parties' submissions and oral argument, the Court enters the following order.

II. FACTUAL AND PROCEDURAL BACKGROUND

The United States, on behalf of the Department of Homeland Security ("DHS"), filed suit against G G and American Surety Company, Inc. ("G G/ASC" or "Defendants") to collect debt based on Defendants' alleged failure to substantially comply with obligations under four bonds. See Compl. ¶¶ 1-4. DHS is given discretionary authority over the management of both the detention and removal of illegal aliens. Compl. ¶ 14. Immigration and Customs Enforcement ("ICE") is the department within DHS charged with apprehending and detaining inadmissable and deportable aliens. Compl. ¶ 15. When an alien is detained by ICE, certain conditions allow the alien to be released during removal proceedings pursuant to a custody determination, which includes the posting of a cash or surety delivery bond. Compl. ¶¶ 15-16. ASC is a surety certified to issue bonds for the benefit of the United States and G G is an agent of ASC. Compl. ¶¶ 11-12. The surety of the bond is the obligor, and when a surety posts a bond through an agent, the agent becomes a co-obligor; these two parties are jointly and severally liable for the agent's actions regarding the bond. Compl. ¶¶ 24-25.

If the obligor fails to ensure that the alien complies with his/her obligations to the United States, such as appearing upon written request by DHS for delivery bonds, or ensuring an alien departs the United States on or before a certain date for voluntary departure bonds, the ICE Field Office Director determines whether a "substantial violation" of the terms contained in the Bond has occurred; if so, the bond is declared breached. Compl. ¶¶ 21, 29. When the ICE Field Office Director makes this determination, the Director issues a Notice-Immigration Bond Breached form which is sent to the obligor and/or co-obligor, and the obligor is given 30 days to appeal the administrative declaration of breach to the Administrative Appeals Office. Compl. ¶¶ 29, 31. If no appeal is taken, the administrative decision is final. Compl. ¶ 34.

The United States alleges that G G/ASC failed to deliver aliens as they were obligated to do under 25 different bonds, and thus, substantially breached their obligations, causing the Field Office Director to declare the bonds breached. See Compl. ¶¶ 1-4.¹ The United States seeks to recover the principal amount owed as well as interest, penalties, and handling charges for each of the bonds. Compl. ¶ 93.

1 These 25 bonds are part of three suits that have been consolidated before this Court. The instant case, No. 09-4029, comprises 4 bonds; Case No. 10-2417 comprises 18 bonds; and Case No. 10-0182 comprises 3 bonds. See Docket Nos. 33 (relating Case No. 10-0182), 46 (relating Case No. 10-2417), 52 (consolidating the cases for all purposes).

Defendants G G/ASC answered these allegations and filed 17 counterclaims against DHS and Janet Napolitano in her capacity as Secretary of DHS. Countercl. ¶¶ 1-2. G G/ASC counterclaim that DHS itself breached the terms of 17 different immigration bonds and that DHS's breach determinations with respect to G G were consequently improper. See id. Defendants paid the principal on the bonds that were declared breached. See id. ¶ 16. The breaches G G/ASC allege stem from requirements under the Amwest settlements, such as failing to send certain forms and provide certain instructions to aliens. Id. ¶ 1.² Defendants seek, inter alia, refund of payments made on the bonds and rescission of the bond breach determinations and/or cancelling the bonds. See Docket No. 9 at 49. The United States filed a motion for voluntary partial remand back to the agency of 11 of those 17 bond breach determinations in order to rescind the breach determinations based on "administrative errors." See Docket No. 55. These 11 bonds are for Benitez, Castellanos Molina, Cristobal-Silba, Escobar-Larin, Gao, Gonzalez-Sanchez, Lin, Kim, Zheng, Mato Marcos-Hernandez, and Edgar Alvarez. Id. In their reply, the United States also indicates that G G/ASC will receive a refund or a credit for the amount paid on the 11 bonds that the United States seeks to remand and rescind. See Docket No. 58 at 3.

2 The parties in this case have an extensive litigation history. In 1993, Gonzales Gonzales Bonds and Insurance Agency, Inc. ("G G"), Farwest Insurance Company ("Farwest"), Amwest Surety Insurance Co. ("Amwest"), and Immigration and Naturalization Services, predecessor in interest to the Department of Homeland Security ("DHS"), became involved in litigation over the obligations each party had in regards to immigration bonds posted by Amwest, Farwest, and G G. See Docket No. 48 (Memorandum Order). In 1995, these parties entered into a settlement agreement known as "Amwest I" where DHS agreed to change several policies in regards to the execution of future immigration bonds. Id. In 1997, the parties entered into another settlement agreement known as "Amwest II" which incorporated the terms of Amwest I, and also provided for guidance to DHS in implementation of the policies relating to immigration bond contracts between the parties. Id.

On May 24, 2011, the Court's Order advised the parties that the Court was amenable to partial remand but requested that the government provide specific information about the "administrative errors" to assure the Court that the remand request was not made in bad faith. See Docket No. 61. The Court explained:

The court is amenable to remand of the eleven bond breach determinations, particularly given the government's representation that `G G/ASC will receive a refund or credit for the amount paid on the 11 bonds' . . . In order to demonstrate to the court, however, that remand is proper, the government will need to do more than cite broadly to `administrative errors' in the bond breach determinations. Defendants have averred that the government may be seeking to avoid meaningful review of ongoing problems within DHS, and the court accordingly needs greater assurances that the request for remand is in good faith. (citation omitted). If the government's request ultimately reflects `substantial and legitimate' concerns on the part of DHS, remand is likely appropriate.

Docket No. 61. The Court ordered the government to file a declaration "setting forth: (1) the specific administrative errors that DHS has identified in its initial breach determinations, and (2) the procedures DHS intends to put in place in order to avoid these errors in the future." Id.

The United States filed the declaration of Walter Le Roy, Chief of the Bond Management Unit ("BMU"), Enforcement and Removal Operations for ICE. See Docket No. 62. Mr. Le Roy describes that for each of the bonds, breach was determined because the alien was not surrendered on the specified date. See Docket No. 62. However, DHS cannot establish that they complied with their own procedures for their obligations under the bonds, which is why rescission of the breach determinations are appropriate. Id. Mr. Le Roy describes the 11 bonds and lists an error for each bond that he found upon review of the Record of Proceeding ("ROP"). Id. Mr. Le Roy describes that nothing in the ROP confirms that certain procedures as required by either the Amwest settlements or the bonds themselves were followed. Id. For example, in the Benitez bond, nothing in the ROP confirms that DHS waited three days to send a Form I-166 to the alien after sending a form I-340 to the obligor as required by the bond form. Id. Some of the errors identified by Mr. Le Roy are the same errors which G G/ASC identified as well. For example, G G/ASC allege that for the Cristobal-Silba bond, DHS failed to send notice of breach within 180 days as was required by the bond form. Countercl. ¶ 48. DHS agrees that nothing in the ROP for the Crtistobal-Silba bond confirms that a breach notice was sent within 180 days. See Docket No. 62 at 4. G G/ASC also allege that for many of the bonds, DHS failed to send a fully completed "Questionnaire Worksheet" with demand letters as is required by the Amwest settlements. See Countercl. ¶¶ 55, 62, 76. Mr. Le Roy's declaration describes that for many of the 11 bonds, nothing in the ROP confirms that the new address was included in the "Questionnaire Worksheet," which presumably would mean they were not fully complete. See Docket No. 62.

Mr. Le Roy's declaration also describes that "ICE has required its employees who process bond paperwork to attend several training sessions focused on bond policies and procedures. Last year, ICE conducted three different nationwide training sessions in May, June, and August of 2010." Docket No. 61. He states that ICE employees receive notifications when bond breach determinations are reviewed and found to contain defects, and in that way receive feedback, and that a full day of training for all ICE employees who process bond paperwork will be held in the summer of 2011. Id.

In response to Mr. Le Roy's declaration, G G/ASC submitted the declaration of Raul Atler, President of G G since 1984. See Docket No. 78. In his declaration, Mr. Atler explains that he found 33 errors in his review of the 11 bonds — in contrast to the 11 errors that DHS admits. Id.

III. DISCUSSION

A. General Legal Standard

In SKF USA, Inc. v. United States, 254 F.3d 1022, 1028 (Fed. Cir. 2001), the court explained that an "agency may request a remand (without confessing error) in order to reconsider its previous position . . . [in those instances] the reviewing court has discretion over whether to remand." Id. at 1029; See Southwestern Bell Tel. Co. v. Fed. Communications Comm'n, 10 F.3d 892, 896 (D.C. Cir. 1993) (noting that the court had granted the Commission's motion for remand for purposes of reconsideration); Anchor Line Ltd. v. Federal Maritime Com., 299 F.2d 124, 125 (D.C. Cir. 1962) (noting that "when an agency seeks to reconsider its action, it should move the court to remand or to hold the case in abeyance pending reconsideration by the agency"). It is within the Court's discretion whether to grant a remand request, and the Court may deny it "if the agency's request is frivolous or in bad faith." SKF USA, 244 F.3d at 1029. If the agency's request for remand reflects substantial and legitimate concerns, then remand will usually be appropriate. Id.

B. The United States' Request for Voluntary Partial Remand

G G/ASC argue that the United States' request to remand is an effort to avoid judicial review. See Docket No. 56. G G/ASC claim that DHS' approach is reactionary, as DHS seeks remand to perform more thorough investigations only when faced with the possibility of judicial review. Id. Defendants also claim that DHS failed to provide the specific information this Court requested regarding the errors and future review procedures. Id. DHS counters that it is attempting to provide G G/ASC with the relief they requested, namely the rescission and refund of the bond breach determinations. See Docket No. 58.

The Court finds that the United States' request for voluntary partial remand is in good faith and reflects substantial and legitimate concerns. See, e.g., Citizens Against the Pellissippi Parkway Extension, Inc. v. Mineta, 375 F.3d 412, 416 (6th Cir. 2004) (noting that it can be "an abuse of discretion to prevent an agency from acting to cure the very legal defects asserted by plaintiffs challenging federal action"); Ohio Valley Envtl. Coalition v. Aracoma Coal Co., 556 F.3d 177 (4th Cir. W. Va. 2009) (explaining that an agency's change in interpretation justifies a remand back to the agency). In this case, DHS has not only identified that errors were made, but has also indicated which specific errors were made, and is willing to rescind the breach determinations on remand, giving G G/ASC precisely the relief it had requested. Cf. Lutheran Church-Missouri Synod v. FCC, 141 F.3d 344, 348-49 (D.C. Cir. 1998) (finding bad faith where the agency sought remand based on a new "policy statement" that was nonbinding, where the agency could not promise any particular decision on remand, and where the Court determined that the agency was merely employing "novel" tactics to avoid judicial review); Corus Staal BV v. United States, 387 F. Supp. 2d 1291, 1296 (Ct. Int'l Trade 2005) (denying a remand request because the requesting party could not point to an error, or even the possibility of an error). Furthermore, some of the errors the United States identified were the same errors G G/ASC had brought up in their counterclaims. There is no dispute whether errors were made; both parties agree that errors were made. While G G/ASC argue that the errors cited by the United States are not exhaustive, the United States still admits that administrative errors were made, and thus there is a sufficient basis for determining that the bond breach determinations should be rescinded. DHS' request to remand to rescind the breach determinations is thus an indication of good faith. See Gleason Indus. Prods., Inc. v. United States, 31 C.I.T. 396, 398 (Ct. Int'l Trade 2007) ("When, however, the agency requests remand to correct a mistake or address some other substantial and legitimate concern, it is far more sensible for a court to defer to the agency whose expertise, after all, consists of administering the statute.").

In arguing that DHS requests remand in bad faith, G G/ASC rely heavily on Former Employees of BMC Software, Inc. v. U.S. Secretary of Labor, 454 F.Supp.2d 1306 (Ct. Int'l Trade 2006). However, BMC Software is not analogous to the instant case. In that case, the court expressed concern with the Department of Labor's frequent pattern of requesting remand in order to "sweep much of the worst of its dirt under the rug." Id. at 1353-54; see also id. at 1334 ("In this case, like so many others in recent years, the agency's investigation was a shockingly cursory process. In short . . . it exalts form over substance to characterize as an `investigation' the Labor Department's superficial review of the Workers' petition at the agency level.") (citations omitted).

Here, however, G G/ASC does not cite to any evidence showing a pattern by DHS of frequently seeking voluntary remand in order to perform more thorough investigation in immigration bond breach determinations. While Defendants do cite to the litigation history between the two parties, specifically the Amwest agreements which suggests a problem with DHS' procedures, that evidence does not reflect that DHS has a habit of routinely seeking voluntary partial remand in an effort to evade judicial review. Defendants merely point to a vague theory that in the future, DHS will continue to "declare breaches of immigration bonds without adequate review." Docket No. 56 at 4. This is insufficient to indicate bad faith, especially where both parties agree that errors were made with respect to the bonds at issue. See Shakeproof Assembly Components Div. of Ill. Tool Works, Inc. v. United States, 412 F. Supp. 2d 1330 (Ct. Int'l Trade 2005) (granting a voluntary remand request, and finding that "[a]t best, [the party opposing remand] has demonstrated the mere possibility that Commerce may have been improperly motivated to seek voluntary remand . . . [but] [a]gainst this possibility, the Court must weigh the justification for voluntary remand advanced by Commerce . . . [T]he Court finds this justification compelling").

In sum, the United States is offering G G/ASC the relief it requested. Based on the fact that DHS has provided a list of specific errors for each bond, including many errors which G G/ASC agree were made, the Court finds that the United States' request for voluntary partial remand of the 11 bonds is made in good faith based on substantial and legitimate concerns. Accordingly, the Court GRANTS the United States' motion for voluntary partial remand.

IV. ADJUDICATION PLAN

At the August 12, 2011 status conference, the Court indicated its concern that the litigation could become unmanageable if the parties seek to add substantial quantities of new bonds to their ongoing dispute. The Court therefore orders the parties to meet and confer to develop a proposed adjudication plan so that the Court can address in an orderly way the bellwether bonds and issues raised by the parties' claims and counterclaims, and any defenses thereto. The United States shall also file its answer to G G/ASC's counterclaims according to the deadline already in place. Should G G/ASC desire to file an amended counterclaim to add any new bonds, they are directed to obtain consent from the United States or leave of the Court.

The Court will hold a further status conference on September 23, 2011, at 10:30 a.m. The parties are directed to file a joint case management statement including their proposed adjudication plan by September 16, 2011.

This order disposes of Docket No. 55.

IT IS SO ORDERED.