NetJets Aviation, Inc. v. U.S. Dep't of Agric.
| Decision Date | 13 August 2021 |
| Docket Number | Civil Action 2:20-cv-4464 |
| Parties | NETJETS AVIATION, INC., et al., Plaintiffs, v. U.S. DEPARTMENT OF AGRICULTURE, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
This matter, in which the parties have consented to the jurisdiction of the Magistrate Judge, is before the Court on Defendant U.S. Department of Treasury's (“DOT”) Motion to Dismiss for Lack of Jurisdiction (Doc. 37) and Plaintiffs' Unopposed Motion for Leave to File Second Amended Complaint (Doc. 74-1). For the reasons that follow, DOT's Motion to Dismiss (Doc 37) is DENIED, and Plaintiff's Motion to Amend (Doc 74-1) is GRANTED. The Clerk is DIRECTED to docket Doc. 74-2 as the Second Amended Complaint.
Plaintiff NetJets Aviation, Inc. (“NJA”), a company incorporated in Delaware and headquartered in Columbus, Ohio, “provides private aviation flight and aircraft management services for a wide variety of aircraft.” (Doc. 28 at 1). Similarly, Plaintiff Executive Jet Management, Inc. (“EJM”), a company incorporated in Ohio and headquartered in Cincinnati, Ohio, “provides whole aircraft management services for private aircraft owners, which includes leasing those aircraft for charter flights . . .” (Id. at 2). Both companies are subsidiaries of NetJets Inc., a company also headquartered in Columbus, Ohio. (Id., ¶ 2).
As aircraft companies, NJA and EJM are subject to the Food, Agriculture, Conservation, and Trade Act (the “Act”). (Id., ¶ 10). The Act authorizes the U.S. Department of Agriculture (“USDA”) to establish and collect fees to cover the cost of agricultural quarantine and inspection services related to the arrival of commercial aircraft. (Id. (citing 21 U.S.C. § 136a(a))). Relevant here, the fees include Agricultural Quarantine and Inspection (“AQI”) Fees, Immigration User Fees (“IUF”), and Customs User Fees (“CUF”) imposed by the U.S. Customs and Border Protection (“CBP”) under 19 U.S.C. § 58(c). (Id., ¶¶ 10-22).
In 2020, CBP audited Plaintiffs. (Id., ¶¶ 35-55). The auditor found that Plaintiffs misclassified several flights as non-commercial and never paid the requisite fees. (Id., ¶¶ 37-39). USDA then billed Plaintiffs for the unpaid fees and for interest and statutory penalties. (Id., ¶ 44). EJM owed roughly $100, 000.00. (See Doc. 43 at 314; Doc. 64-1 at ¶ 7).
EJM challenged the USDA's imposition of fees, asserting that at least some of the flights at issue were fee exempt. (Doc. 28 at ¶ 53). Still, the USDA refused EJM's request to reduce the amount due and “forwarded its asserted claim against EJM to [DOT] for collection.” (Id., ¶ 55). DOT then billed EJM for the full amount in the audit report plus an additional charge for DOT's “costs for collection.” (Id.). This additional charge is a “cross-servicing fee, ” which DOT's Fiscal Service's Debt Management Service (“DMS”) charges to debt-referring agencies. (Doc. 71 at 4). For ease of discussion, the Court refers to the “cross-servicing fee” as simply “the Fee.” DOT calculates the Fee each fiscal year “to determine the percentage of collections necessary to recover these [debts].” (Id.). The Fee is the basis of EJM's claim against DOT. (See Doc. 51 at 1 ()). Specifically, EJM says the Fee is “improper and irrational.” (Doc. 72 at 1).
DOT, however, argues the Court cannot reach the merits of EJM's claim. In moving to dismiss, it makes two primary arguments: First, because it is protected by sovereign immunity, its actions in assessing the Fee are not subject to judicial review. Alternatively, DOT states it is simply following its statutory duty to assess a fee on a debt certified and referred to it by the USDA-making the USDA, not DOT-the proper party. (See generally Doc. 37). Unsurprisingly, Plaintiffs disagree. (See generally Doc. 51).
After the parties briefed DOT's Motion, the Court sought additional information. To that end, the parties agreed DOT would file declarations with supporting documents detailing its collection process and, thereafter, the parties would file supplemental briefs. (Doc. 63). The parties did so, and the matter is ripe for review. (See Docs. 70-72).
While DOT originally moved to dismiss on the pleadings, the parties have since submitted supplemental documents for the Court's consideration. Thus, DOT's Motion is best considered as one for summary judgment. Rule 12(d) of the Federal Rules of Civil Procedure permits the Court to convert the Motion in this way, but the parties must have “adequate notice” first. Max Arnold & Sons, LLC v. W.L. Hailey & Co., Inc., 452 F.3d 494, 504 (6th Cir. 2006). DOT, in its brief, contemplated the likelihood that the Court would convert their Motion (Doc. 71 at 7), and the parties discussed the same with the Court during their May 12, 2021, conference (Doc. 61). Each party took the opportunity to supplement the record and submit supplemental briefs. Accordingly, the Court treats DOT's Motion as one for summary judgment.
Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The party seeking summary judgment bears the initial “responsibility of informing the district court of the basis for its motion, and identifying those portions” of the record that demonstrate “the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). “The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)). A genuine issue of material fact exists if a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (). Consequently, the central issue is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52.
DOT makes three arguments for dismissal: (1) This Court does not have jurisdiction to review the Fee or DOT's other collection practices because the United States has not waived sovereign immunity; (2) Absent any such waiver, EJM does not have a cognizable claim under the Declaratory Judgment Act (“DJA”); and (3) Even assuming jurisdiction exists, DOT is not the proper party here. (See generally Doc. 37). The Court evaluates each argument in turn.
First, however, the Court notes the nature of DOT's Motion as it relates to both NJA and EJM respectively. As Plaintiffs' Response brief illustrates, “[t]he [Fee] is the whole point of EJM's claims against [DOT] . . . ” (Doc. 51 at 19). The Amended Complaint represents that the USDA “forwarded its asserted claim against EJM to [DOT] for collection.” (Doc. 28 at ¶ 55). There is nothing further in the Amended Complaint illustrating that NJA's alleged debt was also forwarded to DOT. (See generally id.). Accordingly, this Opinion and Order applies only to EJM's claims against DOT and not to any claims Plaintiffs may have against USDA or CBP.
As a threshold matter, the Court must decide whether it has jurisdiction to review DOT's collection practices. The jurisdictional question is two-fold. First, DOT, as an agency of the United States, enjoys sovereign immunity. Unless that immunity is explicitly waived, it is not subject to suit. Second, if sovereign immunity has been waived, the Court still must have subject matter jurisdiction over EJM's claims. FDIC v. Meyer, 510 U.S. 471, 483-84 (1994) (recognizing that sovereign immunity and jurisdiction are distinct questions, with immunity being “[t]he first inquiry”). For the reasons that follow, the Court finds sovereign immunity has been waived and subject matter jurisdiction exists.
“Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit.” FDIC v. Meyer, 510 U.S. 471, 475 (1994). Sovereign immunity is jurisdictional, and a federal agency may be sued only to the extent it consents to be sued. Id. Any such waiver of sovereign immunity “must be clear, express and unambiguous.” United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1325 (6th Cir. 1993). Plaintiffs bear the burden of showing that sovereign immunity has been waived; otherwise, the Court must dismiss their claims for lack of subject matter jurisdiction. Reetz v. United States, 224 F.3d 794, 795 (6th Cir. 2000).
Here EJM argues that sovereign immunity has been waived under the Administrative Procedure Act (“APA”) and specifically 5 U.S.C. § 702. (Doc. 51 at 17). That provision provides a broad waiver of sovereign immunity and “sets forth the procedures by which federal agencies are accountable to the public and their actions subject to review by the courts.” Franklin v. Massachusetts, 505 U.S. 788, 796 (1992). In pertinent part, § 702 says that ...
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