Lillemoe v. U.S. Dep't of Agric.
| Decision Date | 27 April 2020 |
| Docket Number | No. 15-cv-2047 (DLF),15-cv-2047 (DLF) |
| Parties | BRETT LILLEMOE, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF AGRICULTURE, FOREIGN AGRICULTURAL SERVICE, Defendant. |
| Court | U.S. District Court — District of Columbia |
Plaintiffs Brett Lillemoe and GTR, LLC bring this suit against the U.S. Department of Agriculture's Foreign Agricultural Service (FAS), which administers a federal program designed to finance U.S. agricultural exports. They assert that FAS violated the Administrative Procedure Act (APA) by selectively applying its program regulations and policies. Before the Court is FAS's Renewed Motion for Summary Judgment, Dkt. 89, and FAS's Renewed Partial Motion to Dismiss for Lack of Standing, Dkt. 90. For the reasons that follow, the Court will grant in part FAS's Partial Motion to Dismiss and grant FAS's Motion for Summary Judgment.
As explained in detail in this Court's earlier Memorandum Opinion, Lillemoe v. U.S. Dep't of Agric., Foreign Agric. Serv., 344 F. Supp. 3d 215 (D.D.C. 2018), FAS administers the Export Guarantee Program (GSM-102) on behalf of the Commodity Credit Corporation (CCC). Am. Compl. ¶ 7, Dkt. 25; see also 7 U.S.C. § 5622; 7 C.F.R. § 1493, et seq. The GSM-102 program is designed to encourage exports of agricultural commodities by financing exports of these products. See 7 U.S.C. § 5622(a)-(b). According to the plaintiffs, in a "typical" transaction under the GSM-102 program, a U.S. exporter negotiates an export sale with an importer in a qualifying region and applies to FAS for a GSM-102 guarantee based on the sale. Lillemoe, 344 F. Supp. 3d at 220. If the application is approved, the importer then causes a foreign bank issues a letter of credit (LC) in favor of the U.S. exporter. Id. Meanwhile, the U.S. exporter assigns its right to payment on the LC to a U.S bank and the foreign bank can refinance its obligations under the LC to repay the U.S. bank on deferred terms. Id. The GSM-102 program guarantees that obligation to the U.S. bank, so that if the foreign bank defaults, the U.S. bank can recover a portion of its losses from the government. Id. In essence, the transaction embodies a government-backed loan from the U.S. bank to the foreign bank. Id.
In their complaint, the plaintiffs allege that some program participants use a different transaction structure called a "rented trade flow." Under this structure, two separate transactions occur: (1) a physical sale of goods between an entity shipping the goods (or "Actual Exporter") and a foreign importer (or "Consignee"); and (2) a purely financial "sale" between a "GSM Exporter" and a "GSM Importer," who submit the guarantee applications to FAS. Id. at 221. The GSM Exporter acquires the right to use bills of lading (BLs) and other shipping documents for a fee, and they qualify for the guarantee by using photocopies of these documents. Id. The GSM Exporter and GSM Importer then "rent" the trade flow through an offsetting sale and repurchase, whereby the underlying goods are sold from the Actual Exporter to the GSM Exporter, from the GSM Exporter to the GSM Importer, and from the GSM Importer back to the Actual Exporter, without the goods ever physically changing hands. Id.
Lillemoe and his company, GTR, claim that FAS approved their "rented trade flow" transactions since at least 2009. See id. at 222. But according to the plaintiffs, in 2012, FAS adopted a de facto policy in which it singled them out and refused to approve their "rented tradeflow" applications, while at the same time approving others' applications that were based on the same structure. See id. at 222-24.
The plaintiffs' claim centers on a series of events that took place from late 2012 to 2013. They allege that in Fall 2012, FAS personnel contacted Lillemoe to request additional information about the transaction structures underlying several of GTR's recent and pending program applications. Id. at 222. Lillemoe responded that this transaction structure—the so-called "rented trade flow"—had been vetted by FAS officials in 2009 and other program participants were using the same structure. Id. On December 28, 2012, FAS denied the 15 pending guarantees and stated that "any future applications utilizing the same structure will also be denied." Id. The plaintiffs allege that based on this representation, they then withdrew three pending applications in January 2013 that used "rented trade flows" and requested that FAS refund their application fees. Id. FAS denied this request. Id. at 222-23. The plaintiffs also allege that in January 2013, FAS delayed approval of three other applications for transactions with Bancolombia that allegedly did not use the "rented trade flow" structure. Id. at 223. After FAS took two weeks to approve these guarantees, Bancolombia pulled out of the transactions, and FAS again declined to reimburse the fees for one of the guarantees. Id. In another instance later in 2013, the plaintiffs allege that an FAS official informed Deutsche Bank, a U.S. bank with which the plaintiffs had several pending guarantees, about potential "discrepancies" in GTR's documents, ultimately causing Deutsche Bank to terminate its relationship with the plaintiffs. Id. FAS also refused to refund the fees paid in connection with these guarantees. Id. ¶ 223-24.
In 2015, the plaintiffs were indicted for conspiracy and wire fraud based on false documentation they submitted in the GSM-102 program, and FAS subsequently suspended them from the program. See Def.'s First Mot. for Summ. J. Ex. A at 1-2, Dkt. 59-2. In November2016, Lillemoe was convicted at trial, and FAS debarred him and GTR from participating in the program until April 28, 2020. Id. at 1, 3. In December 2019, the Second Circuit Court of Appeals affirmed his conviction. See United States v. Calderon, 944 F.3d 72, 84 (2d Cir. 2019).
The plaintiffs filed this suit in 2015, bringing claims under the APA, Fifth Amendment, and Bivens. See Compl., Dkt. 1. On September 25, 2018, the Court dismissed all but the APA claims. See Lillemoe, 344 F. Supp. 3d at 233. The Court concluded that the plaintiffs had plausibly alleged a claim under the APA because FAS did not provide reasons for treating the plaintiffs differently than other similarly situated applicants. See id. at 227-28.
On February 22, 2019, FAS filed a motion for summary judgment, Dkt. 59, and on April 26, 2019, it filed a partial motion to dismiss for lack of standing, Dkt. 72. The Court denied the motion for summary judgment without prejudice on September 30, 2019, concluding that FAS failed to directly address the plaintiffs' claim that FAS rejected the plaintiffs' applications based on the alleged "rented trade flow" structure while simultaneously approving other participants' applications that used "rented trade flows." See September 30, 2019 Order at 6-7, Dkt. 86. On October 21, 2019, the Court held a hearing on FAS's partial motion to dismiss, and denied the motion without prejudice so that FAS could file an omnibus submission to address the outstanding issues. See Def.'s Mot. for Extension of Time, Dkt. 87; October 25, 2019 Minute Order.
On November 19, 2019, the defendants filed this renewed Motion for Summary Judgment, Dkt. 89, and renewed Partial Motion to Dismiss for Lack of Standing, Dkt. 90. For the reasons that follow, the Court will grant both motions.1
Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may move to dismiss an action or claim when the court lacks subject-matter jurisdiction. Fed. R. Civ. P. 12(b)(1). A motion for dismissal under Rule 12(b)(1) "presents a threshold challenge to the court's jurisdiction." Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987). Federal district courts are courts of limited jurisdiction, and it is "presumed that a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Thus, "the plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence." Moran v. U.S. Capitol Police Bd., 820 F. Supp. 2d 48, 53 (D.D.C. 2011) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)).
"When ruling on a Rule 12(b)(1) motion, the court must treat the complaint's factual allegations as true and afford the plaintiff the benefit of all inferences that can be derived from the facts alleged." Jeong Seon Han v. Lynch, 223 F. Supp. 3d 95, 103 (D.D.C. 2016) (internal quotation marks omitted). Those factual allegations, however, receive "closer scrutiny" than they would if the court were considering a Rule 12(b)(6) motion for failure to state a claim. Id. Also, unlike in the Rule 12(b)(6) context, a court may consider documents outside the pleadingsto evaluate whether it has jurisdiction, but it still must "accept all of the factual allegations in [the] complaint as true." See Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005) (internal quotation marks omitted). If, at any point, the court determines that it lacks jurisdiction, the court must dismiss the claim or action. Fed. R. Civ. P. 12(b)(1), 12(h)(3).
In its partial motion to dismiss, FAS argues that the plaintiffs lack Article III standing as to their APA claim that FAS adopted a de facto policy of denying their "rented trade flows" applications while approving those of other program participants. To establish standing, a plaintiff must demonstrate (1) a concrete injury in fact that is (2) fairly traceable to the defendant's action and (3) redressable by a favorable judicial decision. Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). The plaintiff "must demonstrate standing separately for each form of relief sought." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 185 (2000). When evaluating whether a plaintiff has standing, a court "must accept as true all material allegations of the complaint, and must construe the complaint...
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