Hawaii ex rel. Atty Gen v. Fed Emergency Manage., Civil No. 99-00490SOM/FIY.

Citation78 F.Supp.2d 1111
Decision Date09 December 1999
Docket NumberCivil No. 99-00490SOM/FIY.
PartiesState of HAWAII, By and Through its ATTORNEY GENERAL, Plaintiff, v. FEDERAL EMERGENCY MANAGEMENT AGENCY; James Lee Witt, Director, Federal Emergency Management Agency; Lacy E. Sutter, Executive Associate Director, Federal Emergency Management Agency; Martha Z. Whetsone, Regional Director, Region IX, Federal Emergency Management Agency; Gary D. Johnson, Chief Financial Officer, Federal Emergency Management Agency; George J. Opfer, Inspector General, Federal Emergency Management Agency, Defendants.
CourtU.S. District Court — District of Hawaii

Michael S. Vincent, Office of the Attorney General-State of Hawaii, Honolulu, HI, for plaintiff.

Caroline L. Wolyerton, United States Department of Justice, Washington, DC, for defendants.

ORDER GRANTING PLAINTIFF'S MOTION TO SUPPLEMENT RECORD; ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT

MOLLWAY, District Judge.

I. INTRODUCTION.

This case arises out of the rubble of Hurricane Iniki, which devastated parts of Hawaii in September 1992.1 Hawaii was declared a major disaster and, as a result, received federal assistance for its cleanup. Defendant Federal Emergency Management Agency ("FEMA") assisted Plaintiff State of Hawaii ("State") by contracting with the United States Army Corps of Engineers ("ACOE") to rebuild various public schools, a hospital, a defense armory, and a community college ("Mission Assignments"). For this work, ACOE billed FEMA $12,167,381, which FEMA paid.2 FEMA claims that the State received or should have received payment for the work done by ACOE from its insurance carrier. FEMA therefore argues that the State had a double recovery; that is, that FEMA paid for the work done by ACOE while the State received insurance payments for that same work. Accordingly, pursuant to 42 U.S.C. § 5155(c), FEMA asserts that the State should reimburse FEMA $12,167,381.3

The State filed this action against Defendants for declaratory and injunctive relief. The State's major claim is that FEMA is wrongfully asserting that the State owes FEMA $12,167,381. The State argues that the insurance payments it received for the Mission Assignments were $7,423,481, or $4,743,900 less than FEMA's bill of $12,167,381. The State says that section 5155(c) is therefore inapplicable.4 Defendants moved for summary judgment on this claim, arguing that FEMA had determined that the State owed FEMA $12,167,381 and that FEMA's determination is entitled to deference. Under the facts presented to this court on this motion, an issue of fact exists as to whether FEMA's determination was arbitrary and capricious. FEMA has not presented evidence demonstrating more than bald conclusions that the State received $12,167,381 in duplicative benefits. Accordingly, summary judgment is denied as to the duplicative benefits claim.5

The State also claims that FEMA violated numerous statutory and regulatory provisions. However, the State has failed to demonstrate that FEMA waived its sovereign immunity with respect to those claims. Accordingly, those claims are dismissed.

Finally, the State alleges that FEMA violated the Administrative Procedure Act's rulemaking provisions. However, the State failed to demonstrate how FEMA's actions amounted to rules. Accordingly, FEMA's rulemaking claims are dismissed.

II. BACKGROUND FACTS.

On September 11, 1992, Hurricane Iniki hit Hawaii, causing major damage. Then-Governor John Waihee promptly asked the President of the United States to declare Hawaii a major disaster. Supp. Record at 6-8 (letter from John Waihee to the President (September 11, 1992)).6 President George Bush declared Hawaii a major disaster and authorized federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act ("Stafford Act"). Supp. Record at 9 (letter from George Bush to Wallace E. Stickney (September 12, 1992)).7

On or about September 12, 1992, the State and FEMA entered into the FEMA-State Agreement, in which FEMA agreed to provide assistance in the recovery effort from Hurricane Iniki. See Supp. Record at 10-16. That agreement made federal assistance available in accordance with the Stafford Act and applicable regulations found in Title 44, Code of Federal Regulations. The State agreed that it would ensure that insurance companies made full payment of eligible insurance benefits and that it would make "disaster victims" aware of their responsibilities to repay government assistance that was duplicated by insurance proceeds. Supp. Record at 13.

Early in the disaster response, FEMA provided "emergency protective work." This work was done by "tasking" ACOE under a "Mission Assignment Letter."8 Declaration of Roy C. Price (November 17, 1999) ¶ 7. ACOE was awarded contracts to repair roofs, windows, ceilings, floors, and other damage to various public schools, the Samuel Mahelona Hospital, a community college, and a defense armory. See Record, Vol. 1 at 1 (memorandum from Dennis White to Shirley Mattingly (February 28, 1997)); Record, Vol. 1 at 55 (letter appeal from Ray Williams to Roy C. Price (December 20, 1997)). FEMA paid ACOE $7,976,501 for repairs to the public schools, $2,474,879 for repairs to the hospital, $1,600,944 for repairs to the community college, and $115,057 for repairs to the armory. Record, Vol 1 at 2. The total cost of repairs paid by FEMA to ACOE was thus $12,167,381. Id.

The State received $45,722,627 as a total, lump-sum, insurance settlement arising out of the damage caused by Hurricane Iniki.9 Record, Vol. 4 at 2-4. Of this amount, the State argues that $7,423,481, rather than $12,167,381, is attributable to work done by ACOE as follows:10

                Insurance
                Site Proceeds
                Hanalei Elementary             $21,594
                Kilauea Elementary            $151,341
                King Kaumualii                 $77,395
                Kapaa Elementary              $559,604
                Anahola                             $0
                Wilcox Elementary              $88,942
                Kalaheo Elementary             $97,306
                Koloa                         $282,854
                Waimea Canyon                 $723,926
                Kekaha                         $53,675
                
                Waimea High                 $1,144,898
                Eleele Elementary             $131,330
                Kapaa High                    $892,702
                Kauai High                    $874,377
                Sam Mahelona Hospital       $1,349,960
                Kauai Community College       $973,576
                                            __________
                              Total = $7,423,481
                

Takemune Decl. ¶ 14; Record, Vol. 1 at 251.

Between February and December 1996, the federal Office of Inspector General conducted an audit of the State's insurance coverage for Hurricane Iniki repairs. Declaration of Jack Lankford (October 7, 1999) ¶ 3. The auditors determined that the State maintained insurance for its public buildings with coverage up to $150,000,000 and that the State had settled its claims for damage caused by Hurricane Iniki on a "loss-estimate basis" for $45,722,627. Record, Vol. 3 at 322; Record Vol. 4, at 2-4; Record, Vol. 13 at 172. The auditors concluded that the State had not reimbursed FEMA for the cost of repairs made by ACOE and funded by FEMA ($12,167,381), "even though the repairs were covered by insurance and the State received insurance proceeds for the repairs." Record, Vol. 1 at 1.

As a result of the audit, on April 22, 1997, FEMA concluded that the State owed FEMA $12,167,381 because the State had or should have received insurance payments for $12,167,381 worth of work paid for by FEMA. Record, Vol. 13 at 172 (letter from William L. Carwile, III, to Roy Price (April 22, 1997)). The State was notified that, if it disagreed with FEMA's determination, the State could submit an appeal to the Regional Director within sixty days, pursuant to 44 C.F.R. § 206.206. Id.

The State appealed FEMA's determination of duplicative benefits on September 19, 1997.11 See Record, Vol. 1 at 30-53. FEMA denied this appeal on December 20, 1997. Record, Vol. 1 at 54-63.

On February 23, 1998, the State took a further administrative appeal from FEMA's order dated December 20, 1997. Record, Vol. 1 at 64-78. This second appeal was also denied by FEMA on March 6, 1999. Record, Vol. 1 at 537-40. That denial stated that it was the "final decision on the matter."12 Record, Vol. 1 at 537.

III. STANDARD OF REVIEW.

FEMA bases its motion to dismiss or in the alternative for summary judgment on Rules 12(b)(1), 12(b)(6), and 56 of the Federal Rules of Civil Procedure.

A. Rule 12(b)(1) Standard.

A motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) may either attack the allegations of the complaint as insufficient to confer upon the court subject matter jurisdiction, or may attack the existence of subject matter jurisdiction in fact.13 Thornhill Publ'g Co., Inc. v. General Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir.1979). When the motion to dismiss attacks the allegations of the complaint as insufficient to confer subject matter jurisdiction, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Federation of African Amer. Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir.1996). When the motion to dismiss is a factual attack on subject matter jurisdiction, however, no presumptive truthfulness attaches to the plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the existence of subject matter jurisdiction in fact. Thornhill, 594 F.2d at 733.

Plaintiffs have the burden of proving that jurisdiction does in fact exist. Thornhill, 594 F.2d at 733. Conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss. Rosenbaum v. Syntex Corp., 95 F.3d 922, 926 (9th Cir.1996).

B. Rule 12(b)(6) Standard.

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal upon the "failure to state a claim...

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