Baas v. Garland Real Estate, Llc et al

MOTION to Dismiss for Lack of Jurisdiction

D.N.M.February 3, 2017

1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO EDWARD P. BAAS, Plaintiff, v. Civ. No. 2:17-cv-00132 SECRETARY OF VETERAN AFFAIRS; VENDOR CONNECT, LLC; GARLAND REAL ESTATE, LLC; JAYLEN GARLAND, Defendants. MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION Plaintiff Edward P. Baas filed suit against four defendants, including the “Secretary of Veteran Affairs” (“VA”), for breach of contract. According to Plaintiff, he signed a contract with the VA to purchase a house, but the VA was unable to sell due to issues with the drywall. Plaintiff seeks specific performance, which is not an available remedy against the federal government in breach of contract actions. Nor could Plaintiff collect money damages, because the contract at issue does not provide for damages in the event of nonperformance. To the contrary, the contract specifically permits the seller of the property to rescind the contract if the property is damaged before closing or if the seller is unable to deliver the property as advertised. Under Federal Rule of Civil Procedure 12(b)(1), the VA therefore moves to dismiss the breach of contract claim against it for lack of subject-matter jurisdiction. Concurrence in this motion was sought but not received. Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 1 of 10 2 FACTUAL BACKGROUND Plaintiff filed this suit in state court on December 29, 2016 against the Secretary of Veteran Affairs; Vendor Connect, LLC; Garland Real Estate, LLC; and Jaylen Garland. (Doc. 1-2 at 1.) The VA Regional Loan Center in Phoenix, AZ received the Complaint by mail on January 3, 2017. (Id.) Suit against the Acting Secretary of Veterans Affairs, Robert D. Snyder, in his official capacity constitutes a suit against the U.S. Department of Veteran Affairs, a United States agency. Hafer v. Melo, 502 U.S. 21, 26 (1991). VA timely removed the case to federal court on January 27, 2017. (Doc. 1.) According to the Complaint, Plaintiff signed a contract to purchase a house owned by the VA in Tularosa, New Mexico. (Compl. ¶ 12.) He secured conventional financing and scheduled an appraisal. (Id. ¶ 13.) Prior to the appraisal, Defendant1 “approved the destruction of the walls within the house, thereby making the required appraisal impossible for a conventional loan.” (Id. ¶ 14.) Plaintiff asked Defendant to repair the damage or give credit towards the purchase price of the house. (Id. ¶¶ 15-16.) Defendant first agreed, but then later stated nothing was going to be done. (Id. ¶¶ 16-17.) Plaintiff offered to fix the damage at his own expense, but was not allowed in the house to do so. (Id. ¶ 18.) While the property was listed for sale, VRM Mortgage Services (a private company acting on behalf of VA under 38 C.F.R. § 36.4345(f)) discovered discoloration on the walls. Exhibit 1 (Declaration of Brad Blancett) ¶¶ 2, 5. Potential buyers were required to sign a release to view the property. Id. ¶ 5. VRM, via a bid process, had the discolored drywall removed to prevent further moisture damage. Id. ¶ 5. VRM practice is to not remediate and/or replace drywall when damage 1 The Complaint does not specify which of the defendants took these actions. For purposes of this motion, the VA will assume Plaintiff refers to the VA Defendant in the relevant paragraphs. Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 2 of 10 3 occurs due to water or discoloration. Id. ¶ 5. Conventional financing would likely be unavailable for the property because of the damage to the drywall. Id. ¶ 8. VRM could not let Buyer into property to make repairs himself before closing due to liability issues. Id. ¶ 9. Under the contract for sale, Plaintiff agreed that VA “at its sole discretion may rescind the Contract of Sale of the Property and return the Purchaser’s Earnest Money under any of the following conditions: Property is damaged prior to the Closing Date, [or] Seller is unable to deliver the Property as advertised . . . .” Exhibit 2 (Contract for Sale) at 3. VRM terminated the Contract for Sale and signed the termination release for Buyer’s earnest money, which had been held by a title company. Exhibit 1 ¶ 10. Plaintiff brings a single cause of action for breach of contract. (Compl. ¶¶ 19-21.) Plaintiff specifies that the total damages are over $10,000 (id. ¶ 8), but requests only specific performance (an order to repair the damage and sell the property), attorney’s fees, interest, and court costs (id. at 4). STANDARD OF REVIEW Pursuant to Federal Rule of Civil Procedure 12(b)(1), a complaint must be dismissed for lack of subject matter jurisdiction if the action “does not ‘arise under’ the Federal Constitution, laws or treaties (or fall within one of the other enumerated categories of Art. III, S[ection] 2, [of the Constitution], or is not a case or controversy’ within the meaning of that section; or the cause is not one described by any jurisdictional statute.” Baker v. Carr, 369 U.S. 186, 198 (1962). Motions to dismiss pursuant to Rule 12(b)(1) may take two forms. In the first form, the movant asserts that the allegations in the complaint on their face fail to establish the court’s subject matter jurisdiction. “In reviewing a facial attack on the complaint, a district court must accept the allegations in the complaint as true.” Holt v. United States, 46 F.3d 1000, 1002 (10th Cir. 1995) Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 3 of 10 4 (citation omitted). In the second form, the movant may present evidence challenging the factual allegations in the complaint “upon which subject matter jurisdiction depends.” Id. at 1003. “When reviewing a factual attack on subject matter jurisdiction, a district court may not presume the truthfulness of the complaint’s factual allegations . . . but reference to evidence outside the pleading does not convert the motion to a Rule 56 motion.” Id. In this breach of contract action, the VA attaches a declaration from the Vice President of Client Operations for VRM Mortgage Services as Exhibit 1, and the contract between it and Plaintiff as Exhibit 2. ARGUMENT I. This Court Lacks Subject-Matter Jurisdiction Over Plaintiff’s Claims. The federal government is immune from liability absent its consent, and the terms of that consent define a court’s jurisdiction to entertain a suit against the government. United States v. Mitchell, 445 U.S. 535, 538 (1980). Absent a specific waiver, sovereign immunity bars the suit. F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994). Subject-matter jurisdiction is a threshold issue. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-95 (1998) (separation of powers requires a federal court to determine whether it has jurisdiction before reaching the merits of a case). There is a presumption that a cause lies outside the limited jurisdiction of the federal courts. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). As the party averring jurisdiction, Plaintiff bears “the burden of establishing the contrary.” Id.; see also Wilshire Oil Co. of Tex. v. Riffe, 409 F.2d 1277, 1282 (10th Cir. 1969) (“the party invoking the jurisdiction of the court, has the burden of pleading and proving the existence of jurisdiction”); McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 182-83, 189 (1936) (party asserting jurisdiction may not be relieved of the burden of showing that it is properly in court). Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 4 of 10 5 Two potential sources of a waiver of sovereign immunity are implicated in this case: the Tucker Act (sometimes referred to as the Big Tucker Act) and the Little Tucker Act. The Big Tucker Act waives the United States’ sovereign immunity from claims founded upon an express or implied-in-fact contract with the United States. 28 U.S.C. § 1491(a)(1). “It is hornbook law that the [Big] Tucker Act . . . does two things: (1) it confers jurisdiction upon the Court of Federal Claims over the specified categories of actions brought against the United States, and (2) it waives the Government’s sovereign immunity for those actions.” Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005). As the United States Court of Appeals for the Federal Circuit has stated, “[i]n construing a statute waiving the sovereign immunity of the United States, great care must be taken not to expand liability beyond that which was explicitly consented to by Congress.” Fidelity Constr. Co. v. United States, 700 F.2d 1379, 1387 (Fed. Cir. 1983). Courts have therefore held that “[t]he Tucker Act itself does not create a substantive cause of action; in order to come within the jurisdictional reach and the waiver of the Tucker Act, a plaintiff must identify a separate source of substantive law that creates the right to money damages. In the parlance of Tucker Act cases, that source must be ‘money-mandating.’” Fisher, 402 F.3d at 1172; see also United States v. Mitchell, 445 U.S. 535 (1980). The “money mandate” must come from the contract itself or a separate statute or regulation. Fisher, 402 F.3d at 1172. The Big Tucker Act vests jurisdiction over contract claims against the government exclusively in the United States Court of Federal Claims. 28 U.S.C. § 1491(a)(1). The Little Tucker Act, on the other hand, permits plaintiffs to bring their breach-of-contract claims in U.S. district courts around the country—such as this Court. 28 U.S.C. § 1346(a)(2). The catch is that the Little Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 5 of 10 6 Tucker Act applies only “where plaintiffs seek no more than $10,000 in damages.” Robbins v. U.S. Bureau of Land Mgmt., 438 F.3d 1074, 1081 (10th Cir. 2006). Plaintiff here has alleged that his claim is for more than $10,000 in damages. (Compl. ¶ 8). Jurisdiction would therefore lie only in the United States Court of Federal Claims. See Dahn v. United States, 127 F.3d 1249, 1255 n.3 (10th Cir. 1997). The Court must dismiss the case for lack of subject-matter jurisdiction. II. This Case Should Not Be Transferred to the Court of Federal Claims. Section 1631, Title 28, of the United States Code permits a court to transfer an action “to any other such court in which the action or appeal could have been brought.” 28 U.S.C. § 1631. Crucially, “before a court may properly transfer under § 1631, ‘the district court in which the action originally was filed must ascertain that the proposed transferee court is one in which the action could have been brought at the time it was filed.’” Viernow v. Euripides Dev. Corp., 157 F.3d 785, 794 n.16 (10th Cir. 1998) (quoting 17 Moore’s Federal Practice, § 111.53 (3d ed.)) (alterations and some quotation marks omitted). Thus, transfer is only proper if, among other things, the transferee court would have subject-matter jurisdiction over the claims. Terra Partners v. AG Acceptance Corp., No. 14-cv-1112 JCH/KK, 2015 WL 4567257, at *3 (D.N.M. July 24, 2015). The U.S. Court of Federal Claims would lack jurisdiction over Plaintiff’s claim against the VA. “The Little Tucker Act and its companion statute, the Tucker Act, do not themselves create substantive rights, but are simply jurisdictional provisions that operate to waive sovereign immunity for claims premised on other sources of law.” United States v. Bormes, 133 S. Ct. 12, 16–17, 184 L. Ed. 2d 317 (2012) (citation, internal quotation marks, alterations, and footnote omitted). The U.S. Court of Appeals for the Federal Circuit, which establishes precedent governing the U.S. Court of Federal Claims, has held that: Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 6 of 10 7 When a complaint is filed alleging a Tucker Act claim based on a Constitutional provision, statute, or regulation, see 28 U.S.C. § 1491(a)(1), the trial court at the outset shall determine, either in response to a motion by the Government or sua sponte (the court is always responsible for its own jurisdiction), whether the Constitutional provision, statute, or regulation is one that is money-mandating. If the court’s conclusion is that the Constitutional provision, statute, or regulation meets the money-mandating test, the court shall declare that it has jurisdiction over the cause, and shall then proceed with the case in the normal course. For purposes of the case before the trial court, the determination that the source is money- mandating shall be determinative both as to the question of the court’s jurisdiction and thereafter as to the question of whether, on the merits, plaintiff has a money- mandating source on which to base his cause of action. If the court’s conclusion is that the source as alleged and pleaded is not money- mandating, the court shall so declare, and shall dismiss the cause for lack of jurisdiction, a Rule 12(b)(1) dismissal—the absence of a money-mandating source being fatal to the court’s jurisdiction under the Tucker Act. Fisher v. United States, 402 F.3d 1167, 1173 (Fed. Cir. 2005). Plaintiff’s claims would fail under this test for two reasons. First, his request for specific performance is a remedy unavailable against the government for a breach of contract claim. Plaintiff does not request any other remedies. Second, Plaintiff would be unable to recover money damages even were he to request them. Plaintiff does not allege the existence of a money- mandating contract, statute, or regulation. Indeed, the contract at issue here demonstrates not only that no damages are mandated in the event of breach, but also that the government retained the right to rescind the contract under the circumstances of this case. A. The Remedy of Specific Performance Is Unavailable. Courts have long held that “neither the Tucker Act, nor the Little Tucker Act, authorize relief other than money damages for such contract claims.” Robbins v. U.S. Bureau of Land Mgmt., 438 F.3d 1074, 1081 (10th Cir. 2006) (citing United States v. Jones, 131 U.S. 1, 19 (1889), and Lee v. Thornton, 420 U.S. 139, 140 (1975)). Thus, neither this Court nor the Court of Federal could issue the remedy Plaintiff requests. Beck v. Sec’y of Health & Human Servs., 924 F.2d 1029, 1036 Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 7 of 10 8 (Fed. Cir. 1991) (“[T]he Claims Court has no general equitable power to issue injunctions in cases other than those in which such power has explicitly been granted”); Phang v. United States, 87 Fed. Cl. 321, 326 n.10 (Fed. Cl. 2009) (“this court does not have jurisdiction to grant specific performance in this non-bid-protest context unless it is tied and subordinate to a monetary award” (internal quotation marks omitted)). In short, “the Tucker and Little Tucker Acts impliedly forbid federal courts from ordering declaratory or injunctive relief, at least in the form of specific performance, for contract claims against the government.” Robbins, 438 F.3d at 1082 (internal quotation marks and footnote omitted). Because that is the only relief Plaintiff requests, the Federal Claims Court would not be able to adjudicate his claim. B. The Contract Does Not Mandate Damages. Even if Plaintiff were to request money damages, he could not recover any because he does not allege the existence of a money-mandating contract. “[F]or a plaintiff’s claim to be jurisdictionally sound, there must exist a contract, distinct from the Tucker Act itself, that specifically allows the monetary relief plaintiff requests”—otherwise known as a money- mandating contract. Martinez v. United States, 48 Fed. Cl. 851, 856 (Fed. Cl. 2001) (internal quotation marks and alterations omitted); see also Bridges v. Sec’y of Air Force, 955 F.2d 49, 1992 WL 26779, at *1 (10th Cir. 1992); United States v. Testan, 424 U.S.392, 398 (1976). The contract2 here is clearly not money-mandating. “[A] statute or regulation is money- mandating for jurisdictional purposes if it ‘can fairly be interpreted as mandating compensation 2 Plaintiff would be required to attach his contract with the government to his Complaint were he to proceed in the Court of Federal Claims. Bristol Bay Area Health Corp. v. United States, 110 Fed. Cl. 251, 261 (2013). While Plaintiff did not do so, the government was able to obtain a copy of the contract and has attached it as Exhibit 2. Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 8 of 10 9 for damages sustained as a result of the breach of the duties it imposes.’” Fisher, 402 F.3d at 1173 (quoting United States v. Mitchell, 463 U.S. 206, 217 (1983)) (alterations omitted). Under the contract in this case, no damages are owed even if Plaintiff’s allegations are correct. The contract clearly warns Plaintiff that “Seller at its sole discretion may rescind the Contract of Sale of the Property and return the Purchaser’s Earnest Money under any of the following conditions: Property is damaged prior to the Closing Date, [or] Seller is unable to deliver the Property as advertised.” Exhibit 2 at 3. That is exactly what happened in this case: the Seller removed discolored drywall, and was thus unable to deliver the Property as advertised. Exhibit 1 ¶ 5. The Seller had a right to rescind the contract in these circumstances and release the earnest money back to Plaintiff, which it did. Id. ¶ 10. Subject-matter jurisdiction does not lie in this Court or in the Court of Federal Claims. This action should not be transferred, but instead the claim against the VA should be dismissed for lack of subject-matter jurisdiction. CONCLUSION The Court should dismiss the breach-of-contract claim against the Secretary of Veterans Affairs without prejudice for lack of subject-matter jurisdiction, and remand the claim against the remaining defendants to state court. Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 9 of 10 10 Respectfully submitted. DAMON P. MARTINEZ United States Attorney /s/ filed electronically on 2/3/2017 KAREN F. GROHMAN Assistant United States Attorney District of New Mexico P.O. Box 607 Albuquerque, NM 87103 505-346-7274 Karen.Grohman@usdoj.gov CERTIFICATE OF SERVICE I hereby certify that on February 3, 2017, Defendant Secretary of Veterans Affairs filed through the United States District Court CM/ECF System the foregoing document, causing it to be served by electronic means on all counsel of record. Defendant additionally served via First Class Mail the following parties who have not agreed to be served by electronic means: Edward P. Baas 1518 Alaska Ave Alamogordo, NM 88310 Garland Real Estate, LLC 212 Wednesday Hadley Las Cruces, NM 88005 Erica Ramirez, Vendor Connect, LLC Houston Office Location 4201 Cypress Creek Pkwy Suite 310 Houston, TX 77068 /s/ filed electronically on 2/3/2017 KAREN F. GROHMAN Assistant United States Attorney Case 2:17-cv-00132-CG-GJF Document 3 Filed 02/03/17 Page 10 of 10 1 Case 2:17-cv-00132-CG-GJF Document 3-1 Filed 02/03/17 Page 1 of 2 Case 2:17-cv-00132-CG-GJF Document 3-1 Filed 02/03/17 Page 2 of 2 2 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 1 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 2 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 3 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 4 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 5 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 6 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 7 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 8 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 9 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 10 of 11 Case 2:17-cv-00132-CG-GJF Document 3-2 Filed 02/03/17 Page 11 of 11