National Union Fire Insurance Company of Pittsburgh, PA v. Navy Exchange Service CommandMOTION to Dismiss for Lack of Jurisdiction . DocumentS.D.N.Y.January 20, 2017 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff, v. NAVY EXCHANGE SERVICE COMMAND, Defendant. ECF CASE No. 16 Civ. 6270 (KPF) DEFENDANT’S MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION PREET BHARARA United States Attorney for the Southern District of New York Counsel for Defendant 86 Chambers Street, 3rd Floor New York, New York 10007 Telephone: (212) 637-2697 peter.aronoff@usdoj.gov Of Counsel: PETER ARONOFF Assistant United States Attorney Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 1 of 10 CONTENTS PRELIMINARY STATEMENT .................................................................................................... 1 BACKGROUND ............................................................................................................................ 1 ARGUMENT .................................................................................................................................. 2 A. Standard of Review .......................................................................................................... 2 B. Judicial Review of Contractual Disputes with the Government ...................................... 3 C. The Little Tucker Act Does Not Provide Jurisdiction for this Declaratory Claim Against the United States ...................................................................................................................... 5 D. The Little Tucker Act Also Does Not Provide Jurisdiction for This Claim Because It Is Subject to the Contract Disputes Act ....................................................................................... 6 E. The Administrative Procedure Act Does Not Waive the Government’s Sovereign Immunity for Plaintiff’s Claims .............................................................................................. 6 CONCLUSION ............................................................................................................................... 8 Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 2 of 10 1 PRELIMINARY STATEMENT Plaintiff National Union Fire Insurance Company of Pittsburgh, PA. (“National Union” or “plaintiff”) seeks a declaration that it is not liable under an insurance policy with the Navy Exchange Service Command1 (“NEXCOM” or the “government”). Disputes under this sort of contract may only be reviewed under the procedures of the Contract Disputes Act (“CDA”) and Tucker Act, which provide for a comprehensive administrative scheme and Article III review in the Federal Circuit. Plaintiff seeks to circumvent this remedial scheme by invoking the Little Tucker Act, 28 U.S.C. § 1346(a)(2). But the Little Tucker Act does not provide the district courts with jurisdiction to provide declaratory relief in disputes about federal contracts. Furthermore, the Little Tucker Act excepts from district court jurisdiction disputes, including this one, that are subject to the CDA and Tucker Act. Plaintiff cannot cure these problems by relying on the Administrative Procedure Act, because this action is essentially about contractual rights, and therefore not subject to the APA’s waiver of sovereign immunity. National Union’s complaint should therefore be dismissed for lack of subject matter jurisdiction. BACKGROUND The following facts, assumed true for the purposes of this motion, are drawn from the plaintiff’s complaint, ECF No. 1. This case arises from a dispute about payment under an insurance policy (the “Policy”) for payment of workers’ compensation benefits. Employers covered by the Longshore and 1 As explained in the government’s pre-motion letter, NEXCOM is a nonappropriated fund instrumentality within the Department of the Navy. It oversees retail stores known as Navy Exchanges, which operate in essence as military department stores, offering consumer goods, merchandise, and services to military members, their families, and other authorized patrons; it also has a number of other responsibilities. Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 3 of 10 2 Harbor Workers’ Compensation Act (“LHWCA”), 33 U.S.C. §§ 901-950, which applies to nonappropriated fund instrumentalities such as NEXCOM, see 5 U.S.C. §§ 8171-8173, must pay certain benefits to qualifying employees who are injured on the job. In 1987, National Union and NEXCOM entered into the Policy to insure some of NEXCOM’s LHWCA workers’ compensation expenses. See Compl. ¶ 5. Under the Policy, in exchange for NEXCOM’s payment of premiums, National Union agreed to cover NEXCOM’s LHWCA benefits for individual employees exceeding $500,000, with a maximum covered amount of $575,000 (that is, to cover each dollar of the benefits for any individual totaling between $500,000 and $1.075 million). See Compl. ¶ 6. According to the Complaint, in May of 1988, a NEXCOM employee, Mary Smith, was injured on the job. Compl. ¶ 7. In May of 2014, NEXCOM notified National Union for the first time of this injury and the benefits NEXCOM had paid out as a result. Compl. ¶¶ 9-12. The amount NEXCOM had then paid to Smith—which, according to the Complaint, was at least $840,000 as of May 14, 2014—was in excess of NEXCOM’s self-insured amount, and thus facially within the Policy’s coverage. See Compl. ¶ 12. In June of 2014, National Union replied by letter that any claim by NEXCOM was denied because NEXCOM had failed to provide timely notice, which National Union claimed was required by the Policy. Compl. ¶ 15. National Union has now brought this declaratory action seeking a determination that no claim related to Smith’s injuries would be covered by the Policy. ARGUMENT A. Standard of Review The government moves to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). “Dismissal of a case for lack of subject matter jurisdiction under Rule 12(b)(1) is proper when the district court lacks the statutory or Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 4 of 10 3 constitutional power to adjudicate it.” Ford v. D.C. 37 Union Local 1549, 579 F.3d 187, 188 (2d Cir. 2009) (internal quotation marks omitted). For a court to have the power to hear a suit against the United States, the plaintiff must show both an applicable waiver of the government’s sovereign immunity and a grant of subject matter jurisdiction to the court. See, e.g., Presidential Gardens Assocs. v. U.S. ex rel. Sec’y of Hous. & Urban Dev., 175 F.3d 132, 139 (2d Cir. 1999). In the instant case, both are lacking. An immunity waiver is a necessary prerequisite to jurisdiction—that is, no court has jurisdiction over claims against the United States unless Congress has provided an applicable waiver of the government’s sovereign immunity. See, e.g., F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994) (“[T]he terms of the United States’ consent to be sued in any court define that court’s jurisdiction to entertain the suit.”) (internal quotation marks and brackets omitted); Presidential Gardens, 175 F.3d at 139.2 But a waiver of sovereign immunity is not enough: because the federal courts have only limited jurisdiction, the plaintiff must also identify a grant of subject matter jurisdiction to the court for the type of dispute at issue. See Presidential Gardens, 175 F.3d at 139 (noting that “the issues of subject-matter jurisdiction and sovereign immunity are [] wholly distinct”) (internal quotation marks omitted). B. Judicial Review of Contractual Disputes with the Government This case arises out of a dispute under a contract—namely, the Policy—between the government and National Union, a private entity. Disputes under most government contracts are controlled by the procedures of the Contract Disputes Act, 41 U.S.C. § 7101 et seq. The CDA specifically covers contracts with NEXCOM. See 41 U.S.C. § 7102(a) (citing 28 U.S.C. § 1346(a)(2)). 2 Sovereign immunity protects both “the Federal Government and its agencies” from suit. Meyer, 510 U.S. at 475. Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 5 of 10 4 The first step in resolving a contractual dispute, whether initiated by the government or by the contractor, is to submit the dispute to a government contracting officer for a “written decision” on the claim. See 41 U.S.C. §§ 7103(a)(2), (3). Review of the officer’s decision may be sought either in the Court of Federal Claims, an Article I tribunal, see id. §§ 7104(a), (b), or with an administrative board, see id. § 7105. When the contract involves an agency under the armed services, such as NEXCOM, the relevant administrative board is the Armed Services Board of Contract Appeals, see id. §§ 7105(a), (e)(1)(A). In either case, appeal may be taken to the United States Court of Appeals for the Federal Circuit, an Article III court. See 41 U.S.C. § 7107(a)(1) (review of agency board decision); 28 U.S.C. § 1295(a)(3) (review of Court of Federal Claims decisions). The jurisdiction and powers of the Court of Federal Claims are established by the Tucker Act, 28 U.S.C. § 1491. With certain narrow exceptions not relevant here,3 the Tucker Act permits only monetary, and not equitable, relief in the Court of Federal Claims. See id. By statute, agency boards of contract appeals have precisely the same remedial powers as the Court of Federal Claims. See 41 U.S.C. § 7105(e)(2). Certain contractual disputes that seek less than $10,000 in damages may also be brought in federal district court under the so-called “Little Tucker Act,” 28 U.S.C. § 1346(a)(2). This is the statute plaintiff purports to rely on to establish the Court’s jurisdiction in this case, see Compl. ¶ 3. In relevant part, section 1346(a)(2) reads: The district courts shall have original jurisdiction, concurrent with the United States Court of Federal Claims, of: (2) Any [] civil action or claim against the United States, not exceeding $10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort, except that the 3 See 28 U.S.C. § 1491(b)(2) (providing power for equitable and declaratory relief in cases involving federal contract bidding). Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 6 of 10 5 district courts shall not have jurisdiction of any civil action or claim against the United States founded upon any express or implied contract with the United States or for liquidated or unliquidated damages in cases not sounding in tort which are subject to sections 7104(b)(1) and 7107(a)(1) of title 41. The statute provides both a waiver of the government’s sovereign immunity for claims it authorizes, and a grant of subject matter jurisdiction to the district courts to hear such claims. See C.H. Sanders Co. v. BHAP Hous. Dev. Fund Co., 903 F.2d 114, 119 (2d Cir. 1990). But the Act’s limited authorization for contract-based suits is subject to two important exceptions relevant here. Because the instant putative declaratory action falls within both exceptions, the Little Tucker Act does not provide jurisdiction for this action. C. The Little Tucker Act Does Not Provide Jurisdiction for this Declaratory Claim Against the United States First, in order to maintain parity between administrative suits in the Court of Federal Claims (and agency boards) and in district court, the Little Tucker Act has been read to permit only monetary, not equitable, relief. As explained by the Supreme Court in 1973 (making reference to the Court of Federal Claims’ predecessor, the Court of Claims), [28 U.S.C. § 1346(a)(2)] has long been construed as authorizing only actions for money judgments and not suits for equitable relief against the United States. The reason for the distinction flows from the fact that the Court of Claims has no power to grant equitable relief, and the jurisdiction of the district courts under the Act was expressly made concurrent with the Court of Claims. Richardson v. Morris, 409 U.S. 464, 465–66 (1973). That understanding remains good law. See, e.g., Presidential Gardens Associates v. U.S. ex rel. Sec’y of Hous. & Urban Dev., 175 F.3d 132, 143 (2d Cir. 1999); N. Star Alaska v. United States, 9 F.3d 1430, 1432 (9th Cir. 1993) (en banc); Sharp v. Weinberger, 798 F.2d 1521, 1523-24 (D.C. Cir. 1986) (Scalia, J.).; see also N.Y. v. U.S. Dep’t of Health & Human Servs., No. 07 Civ. 8621 (PAC), 2008 WL 5211000, at *16 n.7 (S.D.N.Y. Dec. 15, 2008) (holding no jurisdiction under section 1346(a)(2) for a declaratory claim against the United States). Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 7 of 10 6 Thus, this Court lacks jurisdiction under the Little Tucker Act to consider a declaratory judgment claim (or any other non-monetary claim) premised on the Policy. D. The Little Tucker Act Also Does Not Provide Jurisdiction for This Claim Because It Is Subject to the Contract Disputes Act Second, the Little Tucker Act itself expressly carves out of its jurisdictional grant disputes subject to the procedures of the CDA. See 28 U.S.C. § 1346(a)(2) (excepting from district court jurisdiction claims “subject to sections 7104(b)(1) and 7107(a)(1) of title 41,” the provisions defining the administrative review procedures of the CDA). As explained above, the CDA expressly applies “to any express or implied contract (including those of the nonappropriated fund activities described in sections 1346 and 1491 of title 28)”—that is, entities such as NEXCOM—if the contract is “made by an executive agency for . . . the procurement of services.” 41 U.S.C. § 7102(a)(2). The Policy, which is an express contract made by NEXCOM for the procurement of insurance services, falls within the plain language of the CDA’s scope. The Little Tucker Act therefore does not provide jurisdiction for the instant dispute. See Pollock v. Ridge, 310 F. Supp. 2d 519, 528 (W.D.N.Y. 2004). E. The Administrative Procedure Act Does Not Waive the Government’s Sovereign Immunity for Plaintiff’s Claims The sole basis for subject matter jurisdiction given in plaintiff’s complaint is 28 U.S.C. § 1346(a)(2), the Little Tucker Act. See Compl. ¶ 3. As described above, section 1346(a)(2) does not provide a relevant waiver of sovereign immunity or grant of subject matter jurisdiction in this case. In addition, however, plaintiff could not cure this defect by amending its complaint to invoke the Administrative Procedure Act. Although the APA provides a waiver of sovereign immunity applicable to certain claims against the government, that waiver does not apply here, Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 8 of 10 7 because the Little Tucker Act and Contract Disputes Act forbid a declaratory action on the insurance contract. By its terms, the waiver of sovereign immunity provided by section 702 of the APA does not apply “if any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought.” 5 U.S.C. § 702; see also Sprecher v. Graber, 716 F.2d 968, 974 (2d Cir. 1983). One set of statutes that impliedly forbids the APA’s waiver of sovereign immunity from applying is the Contract Disputes Act and Tucker Act. See Up State Fed. Credit Union v. Walker, 198 F.3d 372, 375 (2d Cir. 1999) (per curiam). That is, when a dispute is subject to the CDA because the claims at issue arise from a contract, a party cannot rely on the APA’s waiver of sovereign immunity. See, e.g., Weinberger, 798 F.2d at 1523; Serra v. U.S. Gen. Servs. Admin., 667 F. Supp. 1042, 1051-52 (S.D.N.Y. 1987) (noting that CDA and Tucker Act together provide an “adequate remedy,” and holding that the APA’s waiver of immunity is not proper for contractual dispute). Here, National Union seeks a declaration that it is not liable under the Policy. See Compl. ¶¶ 17-27. Thus, the rights National Union seeks to vindicate (if any) are created solely by the Policy, and the requested remedy relates solely to the parties’ obligations under the contract. Congress has provided for adjudication of this sort of straightforward contractual dispute by means of the CDA and Tucker Act, and therefore National Union may not proceed under the APA. Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 9 of 10 8 CONCLUSION Because National Union did not and cannot invoke a valid waiver of sovereign immunity or grant of subject matter jurisdiction for this contractual dispute, the complaint should be dismissed for lack of subject matter jurisdiction. Dated: January 20, 2017 New York, New York Respectfully submitted, PREET BHARARA United States Attorney By: /s/ Peter Aronoff PETER ARONOFF Assistant United States Attorney 86 Chambers Street, Third Floor New York, New York 10007 Telephone: (212) 637-2697 Facsimile: (212) 637-2717 E-mail: peter.aronoff@usdoj.gov Case 1:16-cv-06270-KPF Document 13 Filed 01/20/17 Page 10 of 10