Derrick Storms, Adrian Batlle, A1 Procurement, LLC v. United States, 13-CV-811 (MKB)

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Writing for the CourtMARGO K. BRODIE, United States District Judge
PartiesDERRICK STORMS, ADRIAN BATLLE, A1 PROCUREMENT, LLC, A1 PROCUREMENT JVH, A1 PROCUREMENT - TRANSPORTATION LEASING CORP., LLC, A1 PROCUREMENT, JVG, Plaintiffs, v. UNITED STATES OF AMERICA, DEPARTMENT OF VETERANS AFFAIRS, ERIC K. SHINSEKI, SCOTT W. GOULD, JOHN R. GINGRICH, DAVID H. ECKENRODE, THOMAS J. LENEY, JAN R. FRYE, WILLIAM A. COX, GREGORY VOGT, ERNEST MONTELEONE, DELIA ADAMS, JOHN FEDKEN HEUER, DENNIS FOLEY, JUSTINA HAMBERG, JAYSAN HWANG, ANDREA M. GARDNER-INCE, SUPERVISORS OF THE 8127 DEBARMENT COMMITTEE, SUPERVISORS OF THE CENTER FOR VETERANS ENTERPRISE, and JOHN/JANE DOES 1-100, Defendants.
Decision Date16 March 2015
Docket Number13-CV-811 (MKB)

DERRICK STORMS, ADRIAN BATLLE, A1 PROCUREMENT, LLC,
A1 PROCUREMENT JVH, A1 PROCUREMENT - TRANSPORTATION LEASING CORP.,
LLC, A1 PROCUREMENT, JVG, Plaintiffs,
v.
UNITED STATES OF AMERICA, DEPARTMENT OF VETERANS AFFAIRS,
ERIC K. SHINSEKI, SCOTT W. GOULD, JOHN R. GINGRICH,
DAVID H. ECKENRODE, THOMAS J. LENEY, JAN R. FRYE,
WILLIAM A. COX, GREGORY VOGT, ERNEST MONTELEONE, DELIA ADAMS,
JOHN FEDKEN HEUER, DENNIS FOLEY, JUSTINA HAMBERG, JAYSAN HWANG,
ANDREA M. GARDNER-INCE, SUPERVISORS OF THE 8127 DEBARMENT COMMITTEE,
SUPERVISORS OF THE CENTER FOR VETERANS ENTERPRISE, and JOHN/JANE DOES 1-100, Defendants.

13-CV-811 (MKB)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

March 16, 2015


MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge:

Plaintiffs Derrick Storms, Adrian Batlle, A1 Procurement, LLC, A1 Procurement JVH, A1 Procurement-transportation Leasing Corp., LLC and A1 Procurement, JVG bring the above-captioned action against Defendants the United States of America, Department of Veterans Affairs ("VA"), Erick K. Shinseki, Scott W. Gould, John R. Gingrich, David H. Eckenrode, Thomas J. Leney, Jan R. Frye, William A. Cox, Gregory Vogt, Ernest Monteleone, Delia Adams, John Fedkenheuer, Dennis Foley, Justina Hamberg, Jayson Hwang, Andrea M. Gardner-Ince, Supervisors of the 8127 Debarment Committee, Supervisors of the Center for Veterans

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Enterprise and unknown employees of the VA, "John and Jane Does 1-100," asserting claims pursuant to Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971) ("Bivens"), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Federal Tort Claims Act ("FTCA"), the Declaratory Judgment Act, and the Administrative Procedures Act ("APA"). (Sec. Am. Compl., Docket Entry No. 47.) Plaintiffs seek monetary damages as well as injunctive, declaratory and equitable relief. (Id. at 71-72.)

Defendants move to dismiss the Second Amended Complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The Court heard oral argument on September 23, 2014. At the oral argument, the Court dismissed Plaintiffs' RICO claim without prejudice for failure to allege two racketeering acts.1 For the reasons discussed below, the Court grants Defendants' motion to dismiss the Second Amended Complaint. Plaintiffs are permitted to amend the Second Amended Complaint as to their RICO claim and their claims under the Declaratory Judgment Act and the APA as to the VA's Center for Veterans Enterprise's ("CVE") denial of Plaintiffs' request for reconsideration of CVE's August 9, 2011 decision to remove A1 Procurement, LLC from the VA's Vendor Information Pages.

I. Background

Plaintiffs allege misconduct by Defendants in rendering certain decisions affecting Plaintiffs' ability to obtain set-aside government contracts through the VA's "qualified Service-Disabled, Veteran-Owned Small Business ("SDVOSB")" program, and in failing to pay

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Plaintiffs for their services pursuant to a contract for the use of a para-transit bus.

a. Qualification of A1 Procurement, LLC as a SDVOSB

According to the Second Amended Complaint, on April 7, 2010, the CVE, an office of the VA charged with evaluating applications from federal government contractors for potential inclusion in the VA's Vendor Information Pages ("VIP") database, determined that A1 Procurement, LLC ("A1") was an eligible SDVOSB and granted A1's application for inclusion in its VIP database.2 (Sec. Am. Compl. ¶ 37.) The VIP database includes all SDVOSBs and Veteran Owned Small Businesses ("VOSBs") that are verified to be at least 51% "owned and controlled" by a veteran or service-disabled veteran. (Id.) Inclusion in the VIP database is a prerequisite to bidding on certain contracts that are set aside for qualified veteran-controlled businesses. (Id. ¶ 2 n.1.) In granting A1's application, the CVE "unequivocally determined" that A1 was owned and controlled by Storms, a service-disabled veteran and A1's Chief Executive Officer ("CEO"), and that Storms was a 51% majority owner of A1. (Id. ¶¶ 12, 38.)

On April 25, 2011, Storms "criticized" Eckenrode, a CVE employee, for failing to remove unverified contractors from the VIP database in accordance with the Small Business Verification Act, and a "personal feud ensued" between Storms and Eckenrode. (Id. ¶¶ 38-39.) After this "disagreement," Eckenrode was appointed as Deputy Director of the CVE. (Id. ¶ 40.)

b. The CVE removal decision

On August 9, 2011, Eckenrode "abused" his position as Deputy Director of the CVE when he removed A1 from the VIP database "without good cause" (the "CVE Removal Decision"). (Id. ¶ 41.) A1 was removed from the VIP database because Storms' resume

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indicated that in addition to his role as CEO of A1, he served as President of Homeless Veterans of America, Inc., and as managing partner of Storms and Associates, P.A. (Id. ¶ 42.) The CVE "unscrupulously" decided that it could not determine, in light of his other responsibilities, that Storms controlled A1. (Id. ¶ 46.) The CVE Removal Decision was in retaliation for the "personal feud" between Storms and Eckenrode. (Id. ¶¶ 38-39, 45.) The CVE Removal Decision intentionally violated Plaintiffs' Fifth Amendment substantive due process rights and was made without "any clear evidence of disqualification of eligibility in the VIP database." (Id. ¶¶ 48-49.) Storms never received any compensation or benefits for "volunteering" at the Homeless Veterans of America ("HVA"), and he worked approximately three to four hours each month at HVA. (Sec. Am. Compl. ¶ 43.) Storms and Associates, P.A. is a "one-man law firm that . . . Storms started to support A1 in legal matters." (Id. ¶ 44.) Storms worked less than seventeen hours at Storms and Associates, P.A. over the course of two years. (Id.)

c. A1's request for reconsideration of the CVE Removal Decision

On August 23, 2011, A1 filed a request for reconsideration of the CVE's Decision ("Reconsideration Request"). (Id. ¶ 52.) A1 submitted a copy of its Reconsideration Request to Senator Marco Rubio's office at the same time that it submitted the request to the CVE. In its Reconsideration Request, A1 stated that Storms works full-time at A1, and only a few hours at HVA and Storms and Associates. (Id. ¶ 53.) After A1 contacted the CVE to determine the status of its Reconsideration Request, the CVE "intentionally misrepresented that it had not received" the Reconsideration Request "to intentionally inflict severe emotional distress" on Storms and Batlle. (Id. ¶ 58.) A1 contacted Senator Rubio's office to "inform him of the CVE's unethical and bad faith conduct" and Senator Rubio's office contacted the CVE on September 21, 2011. (Id. ¶¶ 60-61.) The CVE thereafter "changed its position and stated that it had timely

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received A1's [Reconsideration Request]" and that it would "render a decision . . . no later than October 28, 2011." (Id. ¶ 61.) In violation of 38 C.F.R. § 74.13(b), the CVE failed to issue a decision by October 28, 2011, thereby allegedly violating Plaintiffs' procedural due process rights by denying A1 "a meaningful process to review and respond to" the CVE Removal Decision. (Id. ¶ 62.) The CVE failed to timely issue a decision on A1's Reconsideration Request, waiting over two years "until being ordered to do so by this Court."3 (Id. ¶ 63 (citing Minute Entry dated Aug. 9, 2013 ("order[ing] Defendant Department of Veteran Affairs to rule on A1['s] pending request for reconsideration")).) On or about August 12, 2013, CVE denied A1's Reconsideration Request (the "Reconsideration Decision"). (Id. ¶¶ 131-32.) "The CVE took 2,280% longer to issue A1s decision than other decisions issued in August 2013." (Id. ¶ 65.)

d. Debarment

After A1 contacted Senator Marco Rubio's office to complain about CVE's delay in acting on their Reconsideration Request, on January 20, 2012, the VA "unlawfully" issued proposed debarment notices to Storms, Batlle, and A1. (Id. ¶ 69.) The proposed debarment notices advised them that the VA was initiating debarment proceedings against Storms, Batlle and A1 for "allegedly misrepresenting A1's SDVOSB status" while submitting a quotation as part of a bid for a government contract in November 2011. (Id. ¶ 69.)

In or about March 2012, Storms contacted Cox, a VA employee and designated point of contact for the VA 8127 Debarment Committee, to determine the status of the proposed debarment. (Id. ¶ 71.) Cox indicated that the 8127 Debarment Committee was considering

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"additional information not provided in the [d]ebarment [n]otices." (Id.) Storms told Cox that they had a "legal right to review and respond to any additional allegations not provided in the [d]ebarment [n]otices" and failure to provide them with the additional allegations violated their procedural due process rights. (Id.) Defendants refused to allow Storms, Batlle and A1 to review the additional allegations being considered in the debarment proceeding. (Id. ¶ 72.)

On May 2, 2012, Frye, the VA Debarring Official, issued notices of debarment to Storms, Batlle and A1 "debarring each for five (5) years from government-wide contracting with any federal agency," ("Debarment"). (Id. ¶ 74.) Defendants thereafter "intentionally and unlawfully publically humiliated" Storms, Batlle and A1 by posting their names on the VA 8127 Debarment Committee website and alerting the public to the five-year Debarment. (Id. ¶¶ 75-76.) The Debarment listed several grounds to debar Plaintiffs that were not mentioned in the proposed debarment notices. (Id. ¶ 77.) Defendants exceeded their jurisdiction and authority by, inter alia, debarring Storms, Batlle and A1 "on unlawful, unjustifiable and impressible grounds" and by debarring them from all federal agencies. (Id. ¶¶ 84, 89.)

On February 19, 2013, the Debarment was vacated by the VA.4 (See Docket Entry No. 9 at ECF 2.) Defendants inflicted severe emotional distress on Plaintiffs by stating in a submission to...

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