United States v. Sandwich Isles Commc'ns, Inc.

• Decision Date: 26 August 2019
• Docket Number: Civ. No. 18-00145 JMS-RT
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. SANDWICH ISLES COMMUNICATIONS, INC., ET AL., Defendants. AND RELATED COUNTERCLAIMS AND THIRD-PARTY CLAIMS.
• Court: U.S. District Court — District of Hawaii

UNITED STATES OF AMERICA, Plaintiff, v. SANDWICH ISLES COMMUNICATIONS, INC., ET AL., Defendants.AND RELATED COUNTERCLAIMS AND THIRD-PARTY CLAIMS.

Civ. No. 18-00145 JMS-RT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

August 26, 2019

ORDER (1) GRANTING MOTIONS TO DISMISS AMENDED COUNTERCLAIMS OF DEFENDANT ALBERT HEE, ECF NOS. 132, 134; AND (2) DENYING HEE'S MOTION FOR PARTIAL SUMMARY JUDGMENT, ECF NO. 127

I. INTRODUCTION

This Order follows from the court's July 22, 2019 Order in this case that (1) partially granted a motion for summary judgment in favor of Plaintiff United States of America ("Plaintiff" or the "United States") against Defendant Sandwich Isles Communications, Inc. ("Sandwich Isles"), (2) dismissed counterclaims asserted by Sandwich Isles against the United States, and (3) dismissed counter- or third-party claims asserted by Sandwich Isles against government officials in their individual capacities. See ECF No. 161, United States v. Sandwich Isles Commc'ns, Inc., ___ F. Supp. 3d ___, 2019 WL 3293641 (D. Haw. July 22, 2019) (the "July 22, 2019 Order"). Here, the court addresses three motions regarding pro se co-Defendant Albert Hee's ("Hee") First Amended Counterclaim.

First, Hee seeks summary judgment on Count One ("Violation of the Fifth Amendment Takings Clause") of his counterclaim against the United States. ECF No. 127. Second, the United States¹ moves to dismiss all counts of Hee's counterclaim. ECF No. 132. And third, Pai, Hone, Gillett, and Mattey (collectively, the "Individual-Capacity Counter-Defendants"), move to strike or dismiss all counts asserted against them in their personal capacities. ECF No. 134.

The court decides the motions without an oral hearing under Local Rule 7.2(d). Based on the following, as well as for some of the reasons explained in the July 22, 2019 Order, the court (1) DENIES Hee's Motion for PartialSummary Judgment as to Count One of Hee's counterclaim (2) GRANTS the United States' Motion to Dismiss Hee's counterclaim; and (3) GRANTS the Individual-Capacity Counter-Defendants' Motion to Dismiss Hee's claims against them in their personal capacities.

II. DISCUSSION

The court relies on and incorporates the July 22, 2019 Order for this action's background and history, and thus the court does not set forth all the details alleged in the Complaint, and in Sandwich Isles' and Hee's counterclaims. Hee's counterclaim is similar to Sandwich Isles' counterclaim, and the motions to dismiss them involve some similar issues. Consequently, the July 22, 2019 Order's analysis (and dismissal) of Sandwich Isles' counterclaim is especially relevant in addressing the present motions. See Sandwich Isles, ___ F. Supp. 3d at ___, 2019 WL 3293641, at *11-20 (dismissing counterclaims for violations of the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. ("ECOA"); the Telecommunications Act, 47 U.S.C. § 254 et seq.; and claims based on Bivens v. Six Unknown Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971)).

Hee's counterclaim alleges four counts against both the United Statesand the Individual-Capacity Counter-Defendants:²

• Count One ("Violation of the Fifth Amendment Takings Clause"), alleging that "[i]t is a physical taking when Plaintiff USA sells Sandwich Isles infrastructure to another company," and "[i]t is a regulatory taking when Plaintiff USA reduces the amount of [Universal Service Funds ("USF")] Sandwich Isles is entitled to after Sandwich Isles has incurred expenses based on the amount of [USF] Plaintiff USA previously approved." For this, it alleges that "Sandwich Isles has incurred expenses based on the amount of [USF] Plaintiff USA previously approved."

• Count Two ("Violation of the Fifth Amendment Due Process Clause and the [Equal Credit Opportunity Act]"), alleging in part that "[a]t all times, Sandwich Isles has been owned by one or more Native Hawaiians," and "[i]t is a violation of the ECOA to discriminate against Sandwich Isles in any loan transactions."

• Count Three ("Violation of Good Faith and Fair Dealings"), alleging in part that

[t]he loan contracts [between the United States and Sandwich Isles] become unconscionable contracts of adhesion when Plaintiff USA drafts the contract based on Sandwich Isles receiving [USF], Plaintiff USA provides sufficient [USF] for over 10 years, Plaintiff USA reduces to $0.00 the amount of [USF] Sandwich Isles receives, then forecloses on the loancontracts and seeks to obtain any shortfall from Sandwich Isles, its former officers, directors and stockholder of its parent.

• Count Four ("Defamation and Slander") alleging, in part, that "Plaintiff USA and Counterclaim defendants have defamed and slandered me by making false statements to the public that they know or should have known and have the resources to determine are false."

ECF No. 126 at PageID #1703.

Given that background, the court proceeds directly to analyzing the three motions regarding Hee's counterclaim, starting with the motions to dismiss.

A. The United States' Motion to Dismiss

The United States argues under Federal Rule of Civil Procedure 12(b)(1) that, for several reasons, this court lacks jurisdiction over all counts of Hee's counterclaim. It makes a facial challenge to subject-matter jurisdiction. See, e.g., Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004) ("A Rule 12(b)(1) jurisdictional attack may be facial or factual. In a facial attack, the challenger asserts that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction.") (internal citation omitted).³ The court agrees that it lacks jurisdiction.

Initially, as to the Counts One, Two, and Three—the Fifth Amendment Takings claim, constitutional or ECOA violations based on race, and contractually-based bad faith violations—it is undisputed that Hee's counterclaim is alleging injury to Sandwich Isles, not to Hee. Count One alleges that Sandwich Isles' property has been taken and that the "Sandwich Isles has incurred expenses. . . ." Count Two alleges that "[i]t is a violation of the ECOA to discriminate against Sandwich Isles . . ." (not against Hee, who was not a party to any credit transactions with the United States). And Count Three alleges breaches of duties based on a contract between the United States and Sandwich Isles (where Hee was not a party to any of the loans at issue). ECF No. 126 at Page ID #1703 (emphases added).

Hee thus lacks standing to assert alleged violations that supposedly injured Sandwich Isles. See, e.g., Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (reiterating that Article III standing requires a plaintiff to "have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.") (citation omitted). It is not enough that Hee was an officer, owner, or shareholderof Sandwich Isles. See, e.g., EMI Ltd. v. Bennett, 738 F.2d 994, 997 (9th Cir. 1984) ("To have standing to maintain an action, a shareholder must assert more than personal economic injury resulting from a wrong to the corporation. A shareholder must be injured directly and independently of the corporation.") (quoting Shell Petroleum, N.V. v. Graves, 709 F.2d 593, 595 (9th Cir. 1983)) (internal citations omitted). See also Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 771-72 (2000) ("[T]he Art[icle] III judicial power exists only to redress or otherwise to protect against injury to the complaining party.") (quoting Warth v. Seldin, 422 U.S. 490, 499 (1975)). And a lack of Article III standing is jurisdictional. See, e.g., White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000) (reiterating that "standing . . . pertain[s] to a federal court's subject-matter jurisdiction under Article III") (citations omitted).

Hee responds by pointing to his right to defend against claims the United States has brought directly against him—(1) violations of the Federal Priority Statute, 31 U.S.C. § 3713, for preferential transfers while Sandwich Isles was "insolvent;" (2) violations of provisions of the Federal Debt Collection Procedures Act, 28 U.S.C. § 3304, for post-insolvency fraudulent transfers; and (3) beaches of fiduciary duty—and appears to argue that he has standing to challenge wrongs to Sandwich Isles because his liability is derivative of Sandwich Isles' liability. See ECF No. 143 at PageID #2133 ("[A]ny liability I personallyhave is [dependent] on Plaintiff USA's right to foreclose. If Plaintiff USA cannot foreclose, I do not have a personal liability."); id. at PageID #2134 ("[N]aming me as a defendant has created a direct interest in the fate of Sandwich Isles. If Sandwich Isles prevails, the charges against me are moot.").

But merely potentially benefitting from disposition of a co-defendant's defense or cause of action does not mean Hee suffered an "injury in fact" as necessary for Article III standing to assert affirmative claims.⁴ Hee is not precluded from at least attempting to raise defense arguments (nor from joining in any relief or defense that Sandwich Isles might raise); rather, he is precluded from seeking affirmative relief for himself on causes of action for which he has no standing.⁵

In any event, the court lacks jurisdiction for additional reasons. Under the Tucker Act, the United States Court of Federal Claims has exclusivejurisdiction over claims—like Counts One and Three—seeking relief for an unconstitutional taking or for a breach of contract against a federal agency (if seeking more than $10,000). See 28 U.S.C. § 1491(a)(1);⁶ Munns v. Kerry, 782 F.3d 402, 413-14 (9th Cir. 2015) ("Absent an independent waiver of sovereign immunity, due process and takings claims against the federal government in excess of $10,000 . . . fall under the exclusive jurisdiction of the United States Court of Federal Claims under the Tucker Act[.]") (citation omitted); E. Enters. v. Apfel, 524 U.S. 498,...