American Growers Ins. v. Federal Crop Ins. Corp., CIV.1-01-CV-10059.

• Decision Date: 26 June 2002
• Docket Number: No. CIV.1-01-CV-10059.,CIV.1-01-CV-10059.
• Parties: AMERICAN GROWERS INSURANCE COMPANY, Plaintiff, v. FEDERAL CROP INSURANCE CORPORATION, a Corporation within the United States Department of Agriculture, Risk Management Agency, and agency of and within the United States Department of Agriculture, and Phyllis W. Honor, Acting Manager of the Federal Crop Insurance Corporation and Acting Administrator of Risk Management Agency, Defendants.
• Court: U.S. District Court — Southern District of Iowa

210 F.Supp.2d 1088

AMERICAN GROWERS INSURANCE COMPANY, Plaintiff, v. FEDERAL CROP INSURANCE CORPORATION, a Corporation within the United States Department of Agriculture, Risk Management Agency, and agency of and within the United States Department of Agriculture, and Phyllis W. Honor, Acting Manager of the Federal Crop Insurance Corporation and Acting Administrator of Risk Management Agency, Defendants.

No. CIV.1-01-CV-10059.

United States District Court, S.D. Iowa, Western Division.

June 26, 2002.

Patrick B. Griffin, Kutak Rock LLP, Omaha, NE, Frank W. Pechacek, Jr., Bruce B. Green, Willson & Pechacek PLC, Council Bluffs, IA, for plaintiff.

Gary L. Hayward, Asst. U.S. Atty., Des Moines, IA, Kevin W. McArdle, U.S. Dept of Justice, Civil Division, Washington, DC, for defendants.

ORDER

LONGSTAFF, Chief Judge.

Before the Court is defendants' motion to dismiss filed February 7, 2002. Plaintiff filed a resistance on March 15. No reply brief was filed, but on May 17 defendant filed a supplemental brief in support of its motion. Thereafter, plaintiff filed a supplemental resistance on May 28 and a June 18 supplement to their supplemental resistance.

I. BACKGROUND

Plaintiff is a Nebraska corporation with its principal place of business in Council Bluffs, Iowa. It provides farmers with multiple peril crop insurance ("MPCI"). The Federal Crop Insurance Corporation ("FCIC"), defendant, created pursuant to 7 U.S.C. section 1503, is organized within the United States Department of Agriculture ("USDA"), and regulates the crop insurance industry. The other defendants are the Risk Management Agency ("RMA"), an entity created in 1996 pursuant to 7 U.S.C. section 6933 to supervise the FCIC, and Phyliss Honor, who is both the acting manager of the FCIC and acting administrator of the RMA.

The FCIC provides approved insurance providers, such as American Growers, with crop reinsurance programs. American Growers entered into a Standard Reinsurance Agreement ("SRA") with the FCIC in 1995 that was effective for the 1996 crop year.¹ Through this agreement, the FCIC supported American Growers' efforts to sell and provide farmers with MPCI. It was a cooperative financial agreement, and was subject to the terms of 7 U.S.C. sections 1501 et seq. and governing federal regulations at 7 C.F.R. part 400.²

American Growers issued its policies to farmers for the 1996 crop year based on conditions established by the FCIC. On December 7, 1995, the FCIC adopted some rules and regulations that changed the conditions for "prevented planting coverage" under the MPCI polices that American Growers had issued for the 1996 crop year. American Growers asserts that these new conditions established by the FCIC were not based on actuarially sufficient and sound determinations, and that the FCIC failed to adjust its coverage and indemnification rates in an actuarial sound fashion. American Growers then experienced increased costs and losses for the 1996 crop year after paying claims made by farmers because of the changes made by the FCIC.

After its demands for payment from the FCIC were denied, American Growers filed an appeal with the Board of Contract Appeals ("the Board") on September 25, 1998, and naming the FCIC as respondent. On June 15, 2000, a three member panel of administrative judges issued a decision granting the FCIC's motion for summary judgment. Thereafter, American Growers filed its complaint with this Court on November 27, 2001 seeking damages rather than asking for a review of the decision of the Board. In Count I of the complaint, American Growers alleges a breach of the 1996 SRA between American Growers and FCIC. Count II alleges a violation of the Federal Crop Insurance Act, 7 U.S.C. sections 1501 et seq.; and Count III asserts defendants violated "American Growers' contract rights, and effected a deprivation of American Growers' property without due process of law, and/or effected a taking of American Growers' property without just compensation, in violation of the Fifth Amendment to the United States Constitution." See Complaint at ¶ 55.

II. APPLICABLE LAW & DISCUSSION

Defendants argue that their motion to dismiss should be granted pursuant to Federal Rule of Civil Procedure 12(b)(1) as this Court lacks subject matter jurisdiction to hear some claims against certain defendants, and under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted with respect to the remaining matters. In its supplemental resistance, American Growers indicates that it "intends" to voluntarily dismiss Phyllis Honor as a defendant in this action. See Plaintiff's Supplemental Resistance to Motion to Dismiss, at 2 n. 1. Based on this assertion by plaintiff, the Court will grant defendants' motion insofar as it seeks to dismiss Honor from this action.

A. Standard of Review

When considering a motion to dismiss, a court will accept as true all factual allegations in the complaint. McSherry v. Trans World Airlines, Inc., 81 F.3d 739, 740 (8th Cir.1996) (citing Leatherman v. Tarrant Co. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 163-65, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993)). A motion to dismiss will be granted "only if no set of facts would entitle the plaintiff to relief.'" Id. (citing Conley v. Gibson, 355 U.S. 41, 45-47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

B. Whether American Growers May File this Action for Damages Against the FCIC

In this case, American Growers previously filed a claim of breach of the SRA by the FCIC with the Board of Contract Appeals. That administrative claim was denied. American Growers does not seek to have this Court review that administrative decision, but rather seek damages and assert that the decision of the Board has no effect on this Court's ability to hear its claims. Plaintiff relies on the Federal Crop Insurance Act ("FCIA") statement that the FCIC

may sue and be sued in its corporate name, but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against [the FCIC] or its property. The district courts of the United States, including the district courts of the District of Columbia and of any territory or possession, shall have exclusive original jurisdiction, without regard to the amount in controversy, of all suits brought by or against [the FCIC]. ... Any suit against [the FCIC] shall be brought in the District of Columbia, or in the district wherein the plaintiff resides or is engaged in business.

7 U.S.C. § 1506(d). While it is clear from the face of the statute that the FCIC may be sued in this Court, and that this Court shall have "exclusive original jurisdiction" of such matters, the "sue and be sued" language does not address the effect of a prior administrative decision or whether administrative remedies must be exhausted. Id.

In 1994, as a part of a congressional act on the reorganization of the Department of Agriculture, the issue of exhaustion of administrative appeals in this context was addressed. That legislation provided that:

Notwithstanding any other provision of law, a person shall exhaust all administrative appeal procedures established by the Secretary or required by law before the person may bring an action in a court of competent jurisdiction against —

(1) the Secretary;

(2) the Department; or

(3) an agency, office, officer or employee of the Department.

7 U.S.C. § 6912(e). The administrative appeal procedures, which section 6912(e) states "shall" be exhausted, were established by the Secretary and are set forth in 7 C.F.R. section 400.169. The procedure requires a claimant like American Growers to request a final administrative determination regarding a disputed matter, which must initially be decided by the Deputy Administrator of Insurance Services. See 7 C.F.R. § 400.169(a). The decision then becomes an appealable final administrative determination of the FCIC and may be appealed to the Board of Contract Appeals. See 7 C.F.R. § 400.169(d). This is the administrative procedure that was followed by American Growers in this case, and the Board made a decision adverse to American Growers' position.

American Growers now asserts that section 1506(d) allows them to file the current action in this Court, not as an appeal of the administrative decision, but rather as an original action. American Growers appears to assert that it was not required to exhaust its administrative remedies, and may file this action without this Court considering the decision of the Board or reviewing the administrative record. This Court disagrees.

The plain language of section 6912(e) states that notwithstanding any other provision, which would include section 1506, administrative remedies have to be exhausted before an action in this Court can be heard. This requirement is not in conflict with the grant of "exclusive original jurisdiction" to the United States district courts of matters brought against the FCIC. This Court's original jurisdiction is not divested by the administrative exhaustion requirements, and the two statutes are not in conflict. See, e.g., Weinberger v. Salfi, 422 U.S. 749, 757, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975) (finding court divested of jurisdiction only when statute explaining exhaustion of administrative remedies contained "sweeping and direct" statutory language that went beyond a requirement of administrative exhaustion; in Weinberger the statute at issue was "sweeping and direct" as it instructed claims at issue could not be brought pursuant to 28 U.S.C. section 1331). The Court finds that when Congress enacted section 6912(e), it did so against the backdrop of principles of collateral estoppel, res judicata, and administrative estoppel. See Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 107-108, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991) (holding that collateral estoppel and res judicata generally apply to the final determinations of administrative bodies,...