Opinion
Case No. 21-cv-03184 (CRC)
2023-11-28
AMERICAN NEAR EAST REFUGEE AID, Plaintiff, v. UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT, Defendant.
Tamara Droubi, Anand Vijay Ramana, Vedder Price P.C., Washington, DC, for Plaintiff. Diana Viggiano Valdivia, DOJ-USAO, Civil Division, Washington, DC, for Defendant.
Tamara Droubi, Anand Vijay Ramana, Vedder Price P.C., Washington, DC, for Plaintiff.
Diana Viggiano Valdivia, DOJ-USAO, Civil Division, Washington, DC, for Defendant.
MEMORANDUM OPINION AND ORDER
CHRISTOPHER R. COOPER, United States District Judge.
American Near East Refugee Aid ("Anera"), which provides humanitarian assistance to refugees in the Middle East, has sued the United States Agency for International Development ("USAID") under the Administrative Procedure Act ("APA"). The claim arises out of the parties' 2013 Cooperative Agreement, under which USAID funded Anera to build water and sanitation infrastructure in the West Bank and Gaza. Specifically, Anera challenges as arbitrary and capricious USAID's decision that Anera could not use the agency's funds to pay a Palestinian sub-contractor for work performed on a water system in the West Bank. After the Court denied without prejudice USAID's motion to dismiss Anera's original complaint, Anera sought leave to file an amended complaint. The Court now determines that it has subject matter jurisdiction over Anera's new complaint and directs the parties to address further whether the complaint states a claim.
I. Background
Anera is a nonprofit organization that provides humanitarian assistance to refugees in the Middle East. Am. Compl. ¶ 2 [ECF No. 20]. Since 2005, Anera has worked with USAID to administer U.S. foreign-aid funds to support community and infrastructure development in the West Bank and Gaza. Id. ¶ 3. In 2013, Anera and USAID entered into a "Cooperative Agreement," under which USAID funded Anera to hire local sub-contractors to improve water and sanitation systems in the West Bank. Id. ¶¶ 3-4, 26, 28. The agreement, as well as federal law, required USAID to vet sub-contractors for terrorist links before approving them for subawards. Id. ¶¶ 5-6, 38. USAID also "reserve[d] the right to rescind approval for a subaward in the event that USAID subsequently [became] aware of information indicating that the subaward [wa]s contrary to U.S. law or policy prohibiting support for terrorism." Cooperative Agreement § A.10.1(d) [ECF No. 20-2]. Under the terms of the Cooperative Agreement, approved sub-contractors performed the work and invoiced Anera, which then drew on USAID award funds—via a letter of credit—to pay the sub-contractors. Am. Compl. ¶ 4; Cooperative Agreement § A.3(3).
In 2017, Anera contracted with a West Bank construction company, Abed El Ghaffar Doofish and Sons Company for General Contracting ("Doofish"), for work on a new water system. Am. Compl. ¶¶ 5, 36-37, 41. The project was valued at over $1.3 million. Id. ¶ 41. USAID vetted Doofish
The amount of the contract was denominated in new Israeli shekels, but for ease of reference the Court will use dollar conversions when provided by the parties. See Am. Compl. ¶¶ 7, 41.
under U.S. anti-terrorism regulations before approving it to receive funds under the Cooperative Agreement. Id. ¶¶ 37, 39; id., Ex. 1. Between September 2017 and February 2018, Anera paid Doofish over $680,000 in USAID award funds for its work. Am. Compl. ¶¶ 8, 43. Doofish completed additional work in 2018 valued around $360,000. Id. ¶¶ 9, 51-52. In April of that year, Anera sought to extend Doofish's subcontract and resubmitted its credentials for vetting. Id. ¶ 46. Two months later, USAID notified Anera that Doofish was no longer eligible to receive funds effective June 4, 2018. Id. ¶ 48; id., Ex. 3. In a letter sent on June 13, Anera sought approval to use USAID funds to pay Doofish for work completed before the agency made the ineligibility determination (the $360,000 amount). Am. Compl., Ex. 4. USAID rejected the request. Am. Compl., Ex. 5.
Anera administratively challenged the agency's denial of funding, and in March 2020, USAID issued a final decision upholding the denial. Am. Compl. ¶¶ 53-81; id., Ex. 13. Citing 18 U.S.C. § 2339B(a)(1), which prohibits the provision of material support to "a foreign terrorist organization," and the Cooperative Agreement's subaward-rescission provision, the agency explained that "based on information gathered as a result of its vetting process, USAID has determined that a payment to [Doofish] would constitute a violation of United States law." Id. at 2-3.
Should USAID choose to file a renewed motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court suggests it explain how a payment to Doofish would violate 18 U.S.C. § 2339B(a)(1) or, alternatively, whether another law proscribes payment. By its plain language, 18 U.S.C. § 2339B appears to prohibit payments only to organizations designated as "terrorist organization[s]" under the Immigration and Nationality Act ("INA"), 18 U.S.C. § 2339B(g)(6), which Anera contends Doofish was not, Am. Compl., Ex. 8 at 4-5.
This suit followed. Anera's original one-count complaint challenged as arbitrary and capricious, contrary to law, and unwarranted by the facts both (1) USAID's finding that Doofish was ineligible to receive U.S. aid funds due to its association with terrorist activity (the "re-award decision") and (2) the agency's denial of Anera's request to use U.S. award funds to pay Doofish for work performed prior to the ineligibility determination (the "reimbursement decision"). Compl. ¶¶ 71-79. The complaint noted that Doofish successfully pursued arbitration against Anera in the West Bank, winning an award of 1,314,543.17 new Israeli shekels plus 9% interest. Id. ¶¶ 62, 66. The complaint requested both declaratory relief and monetary compensation in the amount of the adverse arbitration award. Id. Prayer for Relief ¶¶ 1-4. USAID moved to dismiss Anera's original complaint. First Mot. Dismiss [ECF No. 11]. In a March 21, 2023 ruling, the Court ordered the parties to show cause as to whether the Court of Federal Claims has exclusive jurisdiction over this case under the Tucker Act. Mem. Op. & Order [ECF. No. 18]. The Court explained that it would decide the jurisdictional question and then, should it choose to exercise jurisdiction, permit the agency to file a renewed motion to dismiss. Id. at 14. Instead of responding to the show-cause order, Anera moved for leave to file an amended complaint. Mot. Leave to File Am. Compl. [ECF No. 21].
The proposed amended complaint advances the same APA claim and essentially repeats the supporting factual allegations
in the first complaint. See Am. Compl. However, it omits the prayer for compensatory money damages. See id. Prayer for Relief.
In its opposition, USAID suggests that the Court interpret the amended complaint as challenging only the reimbursement decision, and not the re-award decision. See Opp'n at 19 n.7. Though the Court has some questions about whether Anera administratively exhausted its challenge to the re-award decision, the Court will decline USAID's invitation to so limit the amended complaint. Because neither side has addressed whether a USAID statute or rule requires Anera to administratively exhaust issues before bringing suit under the APA, the Court will assume Anera is entitled to challenge the reaward decision as well. See United States v. Hughes, 813 F.3d 1007, 1010 (D.C. Cir. 2016) ("[Section] 10(c) of the Administrative Procedure Act, 5 U.S.C. § 704, imposes no prerequisite of administrative exhaustion unless it is 'expressly required by statute or agency rule.'") (quoting Darby v. Cisneros, 509 U.S. 137, 143, 113 S.Ct. 2539, 125 L.Ed.2d 113 (1993)).
Though Anera chose to file an amended complaint rather than a response to the show-cause order, the Court will stick to its original plan. It will consider whether the Tucker Act deprives it of jurisdiction, and (finding the act does not) give USAID another opportunity to seek dismissal of the amended complaint under Federal Rule of Civil Procedure 12(b)(6).
II. Legal Standards
A. Amending a Complaint
Federal Rule of Civil Procedure 15(a)(2) allows a plaintiff to file an amended complaint more than twenty-one days after an answer has been served only with the opposing party's consent or with leave of court. Fed. R. Civ. P. 15(a)(2). Leave to amend is to be "freely given when justice so requires" but may be denied due to "futility of amendment." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) (quoting Fed. R. Civ. P. 15(a)). The defendant bears the burden of showing that leave to amend should be denied. See, e.g., Howard v. George Washington Univ., No. 22-cv-02902 (JMC), 2023 WL 3231447, at *2 (D.D.C. May 3, 2023) (cleaned up).
Because an amended complaint is futile if it would not survive a motion to dismiss, courts assess proposed amendments under the standards of Federal Rule of Civil Procedure 12(b). Moldea v. N.Y. Times Co., 22 F.3d 310, 319 (D.C. Cir. 1994). Under Rule 12(b)(1), USAID contends that the Court of Federal Claims has exclusive jurisdiction over this case. Opp'n at 11-17.
USAID also contends that the amended complaint fails to state a claim under Federal Rule of Civil Procedure 12(b)(6). Opp'n at 17-19. Because the Court is deferring judgment on that issue, it will not address Rule 12(b)(6)'s standard at this time.
B. Lack of Subject Matter Jurisdiction
Under Rule 12(b)(1), a motion to dismiss may be granted when there is a "lack of subject-matter jurisdiction." Fed. R. Civ. P. 12(b)(1). The plaintiff carries the burden of establishing subject matter jurisdiction. Lujan v. Defs of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Courts reviewing a Rule 12(b)(1) motion must "construe the complaint liberally, granting the plaintiff the benefit of all inferences that can be derived from the facts alleged." Houseal v. McHugh, 962 F. Supp. 2d 286, 290 (D.D.C. 2013) (citing Barr v. Clinton, 370 F.3d 1196, 1199 (D.C. Cir. 2004)). But the Court "need not accept factual inferences drawn by plaintiffs if those inferences are not supported by facts alleged in the complaint, nor must the Court accept plaintiff['s] legal conclusions." Speelman v.
United States, 461 F. Supp. 2d 71, 73 (D.D.C. 2006).
III. Analysis
A Court must assure itself it has jurisdiction before proceeding to the merits. See Greenhill v. Spellings, 482 F.3d 569, 573 (D.C. Cir. 2007) ("Jurisdiction ... is an independent, preliminary issue.") (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)).
United States agencies "are generally immune from suit in federal court absent a clear and unequivocal waiver of sovereign immunity." Crowley Gov't Servs., Inc. v. Gen. Servs. Admin., 38 F.4th 1099, 1105 (D.C. Cir. 2022). Two statutes.' competing waivers are at issue. In APA section 702, Congress waived sovereign immunity for actions "seeking relief other than money damages and stating a claim that an agency ... acted or failed to act in an official capacity or under color of legal authority." 5 U.S.C. § 702. The waiver does not apply if another "statute that grants consent to suit expressly or impliedly forbids the relief which is sought." Id. In the Tucker Act, Congress also waived sovereign immunity for actions "founded ... upon any express or implied contract with the United States." 28 U.S.C. § 1491(a)(1). When a claim is founded on a contract, the Tucker Act "'impliedly forbid[s]' contract claims against the Government from being brought in district court under the waiver in the APA." Perry Capital LLC v. Mnuchin, 864 F.3d 591, 618-19 (D.C. Cir. 2017) (quoting Albrecht v. Comm. on Emp. Benefits, 357 F.3d 62, 67-68 (D.C. Cir. 2004)). The Tucker Act thus "create[s] a presumption of exclusive jurisdiction in the Court of Federal Claims." Franklin-Mason v. Mabus, 742 F.3d 1051, 1055 (D.C. Cir. 2014) (cleaned up). The Court will address jurisdiction under both statutes, starting with the Tucker Act.
A. The Tucker Act
The Tucker Act applies, and the Court of Federal Claims has exclusive jurisdiction, when three conditions are met: (1) The claim "is essentially a contract action," Albrecht, 357 F.3d at 68, (2) the claim "explicitly or 'in essence' seeks more than $10,000 in monetary relief from the federal government," Kidwell v. Dep't of the Army, Bd. for Corr. of Mil. Recs., 56 F.3d 279, 284 (D.C. Cir. 1995), and (3) the Court of Federal Claims can exercise jurisdiction over the claim, Tootle v. Sec'y of Navy, 446 F.3d 167, 176-77 (D.C. Cir. 2006). Because Anera's claim flunks the third requirement, the Court will focus its attention there.
For the Court of Federal Claims to have jurisdiction, a contract must contain "the four required elements of offer, acceptance, consideration, and proper government authority." San Antonio Hous. Auth. v. United States, 143 Fed. Cl. 425, 463 (2019); see also Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1997). In the context of government contracts, "consideration must render a benefit to the government, and not merely a detriment to the contractor." Metzger, Shadyac & Schwarz v. United States, 12 Cl. Ct. 602, 605 (1987). The benefit to the federal government must be "tangible" and "direct," rather than "generalized" or "incidental." St. Bernard Parish Gov't v. United States, 134 Fed. Cl. 730, 736 (2017), aff'd on other grounds, 916 F.3d 987 (Fed. Cir. 2019). See also 31 U.S.C. § 6305 ("An executive agency shall use a cooperative agreement" when its "principal purpose" is "to transfer a thing of value to the ... recipient to carry out a public purpose of support or stimulation," rather than to "acquir[e] (by purchase,
lease, or barter) property or services for the direct benefit or use of the United States Government." (emphasis added)).
The regulatory provisions governing USAID's use of cooperative agreements changed in December 2014, see 2 C.F.R. § 700.5, which was after Anera and USAID signed the Cooperative Agreement but before Anera contracted with Doofish, see Am. Compl. ¶ 28, 41. Both provisions reference and largely mirror the definition of cooperative agreements in 31 U.S.C. § 6305. See 22 C.F.R. § 226.11 (2014); 2 C.F.R. § 200.24 (2015).
The Court of Federal Claims in St. Bernard Parish Government v. United States explained the distinction between direct and incidental benefits in the context of a cooperative agreement between the United States and a Louisiana parish. 134 Fed. Cl. at 732, 735-36. Under the agreement, the parish sub-contracted with debris-removal companies to clear sediment from area watersheds in the wake of Hurricane Katrina, and the federal government reimbursed the parish for "actual costs." Id. at 735. The court found that the benefits to the federal government—"the restoration of a natural resource and a reduction in the amount of emergency funds" for future flooding emergencies—were not "direct benefit[s]." Id. at 735-36. See also Hymas v. United States, 810 F.3d 1312, 1328 (Fed. Cir. 2016) (the U.S. Fish and Wildlife Service did "not directly benefit" from cooperative farming agreements because the service did "not receive payment from ... farmers pursuant to the agreements" and any excess crops were "used by wildlife" or "retained by the farmers" (cleaned up)). By contrast, the court identified the kinds of "direct, tangible" benefits that constitute consideration for the federal government as including "service fee[s]," "areas and facilities" for federal use, and "enhancement of access" to federal property. St. Bernard, 134 Fed. Cl. at 735, 736 (citing Anchorage v. United States, 119 Fed. Cl. 709, 713-15 (2015)).
Like the agreement in St. Bernard, USAID and Anera's Cooperative Agreement did not confer direct, tangible benefits on the agency. The agreement's stated purpose was to "increase Palestinian access to water, sanitation and other small and medium scale community infrastructure." Cooperative Agreement § A.1. To achieve those ends, Anera agreed to "construct new and renovate existing water and sanitation networks," "improve the reliability of water delivery," and "[s]upport... the construction and renovation of health facilities, schools and youth centers." Id. § B.3. Nothing in the Cooperative Agreement, however, involved the payment of service fees or granted USAID or other U.S. agencies access to or use of the new infrastructure. A second objective of the Cooperative Agreement was for Anera "to [i]ncrease the impact of USAID-funded programs in health, democracy and governance, education and the private sector by addressing underlying infrastructure needs." Id. As in St. Bernard, any benefit USAID might have derived from an "increase" in the "impact of [these] programs" was a non-tangible, generalized benefit. See also Hymas, 810 F.3d at 1328 (generally "advanc[ing] [an] agency's overall mission" constitutes an "indirect[] benefit[]").
This is not to say that all cooperative agreements lack consideration. In a case the Court cited in its ruling on USAID's motion to dismiss Anera's initial complaint, a district court judge in Massachusetts found that USAID received consideration from cooperative agreements with Harvard University to "assist Russia in developing capital markets and foreign investments." United States v. President and Fellows of Harvard Coll., 323 F. Supp. 2d
151, 164-65 (D. Mass. 2004). The court did not assess whether the cooperative agreements fell within the ambit of the Tucker Act, but it did find that USAID stood to "receive[] a benefit" from the agreements. Id. at 164. Namely, the court held that the U.S. government "sought to benefit economically and otherwise from the facilitation of Russia's transition to a market economy through privatization." Id. at 165.
The Court declines to follow Harvard's holding for several reasons. First, the holding is not binding on this Court nor does the relevant part of the opinion draw on Claims Court or Federal Circuit cases. Second, the "benefit" USAID received from its agreement with Anera is more attenuated than the one in Harvard. Improving infrastructure in the West Bank and Gaza may be an important U.S. foreign policy objective, but, unlike Russian privatization, arguably, the U.S. does not stand to receive a financial benefit from improved water and sanitation systems in Palestine. Finally, if benefits as amorphous as the advancement of U.S. foreign policy interests could constitute consideration, then every cooperative agreement would transform into a contract. Federal law, however, clearly envisions different functions for the two types of agreements. See 22 C.F.R. § 226.11 (2014) ("A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by Federal statute.... Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government."). See also St. Bernard, 134 Fed. Cl. at 736 ("[P]ursuing the ... argument [that a generalized benefit constitutes consideration] to its logical conclusion, every cooperative agreement would become a contract since cooperative agreements often result in the government paying for some kind of beneficial improvement.").
Because the Cooperative Agreement did not confer a direct benefit on USAID, the consideration leg of the chair is missing, and USAID's argument that the Claims Court has jurisdiction topples over. And since the Claims Court lacks jurisdiction, the Tucker Act does not deprive this Court of jurisdiction. See Tootle, 446 F.3d at 176 ("We categorically reject the suggestion that a federal district court can be deprived of jurisdiction by the Tucker Act when no jurisdiction lies in the Court of Federal Claims.").
B. APA
The analysis does not end there, however. Having decided that the Tucker Act does not bar the Court from exercising jurisdiction, the Court still must find that Anera's claim falls within the APA's waiver of sovereign immunity. Congress waived immunity only for actions "seeking relief other than money damages." 5 U.S.C. § 702. The Supreme Court, however, has drawn a "distinction between an action at law for damages—which are intended to provide a victim with monetary compensation for an injury to his person, property, or reputation—and an equitable action for specific relief—which may include an order providing for ... the recovery of specific property or monies." Bowen v. Massachusetts, 487 U.S. 879, 893, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988) (cleaned up). "The fact that a judicial remedy may
Per Tootle, a district court does not lose jurisdiction over a claim when the Court of Federal Claims lacks jurisdiction. 446 F.3d at 176. But that does not mean the APA's waiver of sovereign immunity automatically applies. See id. at 177 ("If the Court of Federal Claims lacks jurisdiction, the only question is whether there is an affirmative congressional grant of jurisdiction to the federal district courts.").
require one party to pay money to another is not a sufficient reason to characterize the relief as 'money damages.'" Id.
In Bowen, Massachusetts challenged a Department of Health and Human Services decision disallowing the disbursement of over $6 million in Medicaid funds. Id. at 885-87, 108 S.Ct. 2722. The statutory provision at issue provided "that the Secretary 'shall pay' certain amounts for appropriate Medicaid services." Id. at 900, 108 S.Ct. 2722. Despite this money-mandating language, the Supreme Court found that Massachusetts's challenge "[wa]s not a suit seeking money in compensation for the damage sustained by the failure of the Federal Government to pay as mandated." Id. Rather, the suit sought "to enforce the statutory mandate itself, which happen[ed] to be one for the payment of money." Id.
Likewise here. Recall that Anera's original complaint explicitly sought monetary damages. The amended complaint, however, does not seek compensation for the harm caused by USAID's re-award and reimbursement decisions. Rather, Anera seeks only an order that USAID's interpretation of federal law was incorrect. See Am. Compl. ¶¶ 100-01 (challenging as arbitrary, capricious, and unwarranted by the facts USAID's application of various provisions, including 18 U.S.C. § 2339B and 2 C.F.R. § 200.403 (2013)). Though Anera's challenge might somehow result in it receiving authorization to draw on USAID funds, see, e.g., 2 C.F.R. § 200.403 (listing the requirements for "allowable" "costs"), at core it seeks "to enforce [a] statutory [and regulatory] mandate." Bowen, 487 U.S. at 900, 108 S.Ct. 2722. The APA therefore supplies jurisdiction.
Because the Court finds the Tucker Act does not deprive this Court of jurisdiction and Anera's claim falls within the APA's waiver of sovereign immunity, the amended complaint is not futile as to subject matter jurisdiction.
IV. Conclusion
For these reasons, it is hereby
ORDERED that [21] Plaintiff's Motion for Leave to Amend Complaint is GRANTED.
ORDERED that, should the Defendant choose to file a renewed motion to dismiss for failure to state a claim, it shall do so by January 9, 2024.
SO ORDERED.