CROWN HOLDINGS, LLC v. UNITED STATES POSTAL SERVICE
Filing
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ENTRY ON USPS' MOTION TO DISMISS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT - 7 Motion to Dismiss is GRANTED. Crown Holdings' Complaint is DISMISSED for want of subject matter jurisdiction. See Entry for details. Signed by Judge Richard L. Young on 12/9/2016. (LBT)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
CROWN HOLDINGS, LLC,
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Plaintiff,
vs.
UNITED STATES POSTAL SERVICE,
Defendant.
4:16-cv-00147-RLY-TAB
ENTRY ON USPS’ MOTION TO DISMISS OR, IN
THE ALTERNATIVE, FOR SUMMARY JUDGMENT
Plaintiff, Crown Holdings, LLC, owns a building that it leased to Defendant, the
United States Postal Service (“USPS”). Pursuant to the lease, USPS is required to pay
Crown Holdings an agreed amount in monthly rent. According to Crown Holdings,
USPS has not been paying the full amount. Rather, USPS has been deducting monies
from the monthly rent in order to reimburse itself for repairs it made to the roof of the
building in 2012, when the building was owned by a different entity.
Crown Holdings filed this action alleging four counts: (1) negligence, (2)
negligent omission, (3) mutual mistake, and (4) declaratory judgment and estoppel.
USPS now moves for either dismissal or summary judgment. The court holds that it
lacks subject matter jurisdiction over this suit because it is governed by the Contract
Disputes Act (“CDA”), 41 U.S.C. § 7101 et seq. Therefore, the court GRANTS USPS’
motion and dismisses the Complaint pursuant to Federal Rule of Civil Procedure
12(b)(1).
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I. Background
This case concerns real property located at 102 South Ferguson Street, Henryville,
Indiana 47126. (Filing No. 1, Complaint ¶ 7). USPS leased the building located on the
property from Waldrip Development of Indiana, LLC (“WDI”) in order to operate a Post
Office. (Id. ¶¶ 7, 9). In March 2012, a tornado damaged the building’s roof. (Id. ¶ 12).
After WDI failed to make the necessary repairs, USPS completed the repairs at its own
expense in November 2012. (Id. ¶¶ 17-18.)
In February 2013, Crown Holdings purchased the building at a Sheriff’s Sale and
obtained a Sheriff’s Deed. (Id. ¶ 19). On March 8, 2013, USPS sent a demand letter to
WDI requesting $45,274.42 in reimbursement for the repairs it completed. (Id. ¶ 20).
This letter was not sent to Crown Holdings. (Id.). USPS subsequently approached
Crown Holdings in order to discuss a potential assignment of the USPS-WDI lease. (Id.
¶ 21). Crown Holdings had no obligation to agree to an assignment; it could have entered
into a new lease with USPS. (Id. ¶ 45). Nevertheless, it agreed to an assignment of the
USPS-WDI lease. (Id. ¶ 21). During this negotiation, USPS did not disclose the repair
costs it incurred and did not disclose its intention to deduct those costs from future rent
payments. (Id. ¶¶ 22, 25).
More than a year after the assignment, USPS began deducting the cost of the roof
repairs from the rent it paid to Crown Holdings. (Id. ¶ 27). USPS made monthly
deductions from the rent for the majority of 2014. (Id. ¶ 28). USPS would not have been
able to deduct the cost of repairs from the rent if the parties had negotiated a new lease
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agreement. (Id. ¶ 47). Crown Holdings would not have agreed to the assignment if
USPS had disclosed its intention to deduct the cost of repairs. (Id. ¶ 29).
II. Legal Standard
USPS filed a motion to dismiss for lack of subject matter jurisdiction and failure to
state a claim, or, in the alternative, for summary judgment. The court proceeds only
under Rule 12(b)(1). “Motions to dismiss under Rule 12(b)(1) are meant to test the
sufficiency of the complaint, not to decide the merits of the case.” Ctr. for Dermatology
& Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588 (7th Cir. 2014). After a defendant
alleges that jurisdiction is lacking, it is the plaintiff who “bears the burden of establishing
that the jurisdictional requirements have been met.” Id. at 588-89. For purposes of
USPS’ motion, the court accepts Crown Holdings’ well-pleaded factual allegations as
true and construes all reasonable inferences in its favor. Id. at 588.
III. Discussion
USPS presents several arguments in support of its motion, but its chief contention
is that the court lacks subject matter jurisdiction because this suit is governed by the
CDA. 1 Initially, the court agrees with the premise. If the CDA actually governs this
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USPS advanced this argument as its primary basis for dismissal, but Crown Holdings failed to
meaningfully respond to it. Its only opposition is a brief, two-sentence paragraph that is both
conclusory and unsupported by any authority: “The claims asserted by Plaintiff against USPS in
this matter sound purely in negligence. Plaintiff has reserved its breach of contract claims for its
Contract Disputes Action against USPS filed on August 31, 2016.” (Filing No. 9 at 1). Oddly,
USPS then retorts that it is not aware of any CDA action filed against it by Crown Holdings.
Regardless, the court finds that Crown Holdings has waived this issue en toto by effectively
failing to respond to the argument. See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir.
2010) (“Failure to respond to an argument . . . results in waiver.”); United States v. Elst, 579 F.3d
740, 747 (7th Cir. 2009) (“Perfunctory and undeveloped arguments as well as arguments
unsupported by pertinent authority are waived.”). Because a plaintiff bears the burden of
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dispute, the court is without jurisdiction and must dismiss the Complaint. See Evers v.
Astrue, 536 F.3d 651, 657 (7th Cir. 2008) (concluding that if “the claims in Evers’s
complaint in the district court ‘related to’ his contract with [the Social Security
Administration],” then “the district court properly concluded that it lacked subject-matter
jurisdiction because the Contract Disputes Act is ‘precisely drawn’ to preclude such
claims from being entertained by federal district courts”). Accord B&B Trucking, Inc. v.
United States Postal Serv., 406 F.3d 766, 768 (6th Cir. 2005) (en banc) (“The CDA bars
district court jurisdiction if the court determines that a plaintiff’s claims against a
government agency are essentially contractual in nature.”) (quotation marks omitted).
Thus, the narrow question before the court is whether Crown Holdings’ suit falls within
the purview of the CDA.
The CDA provides, “Each claim by a contractor 2 against the Federal Government
relating to a contract shall be submitted to the contracting officer for a decision.” 41
U.S.C. § 7103(a)(1). The contracting officer is then required to issue a written decision
on the claim. 41 U.S.C. § 7103(d). That decision “is final and conclusive and is not
subject to review by any forum, tribunal, or Federal Government agency,” unless the
contractor timely pursues one of two options provided by the statute. 41 U.S.C. §
7103(g). Specifically, a contractor may either (1) appeal the decision to the agency’s
demonstrating the existence of jurisdiction once it is challenged, this waiver is fatal. Burwell,
770 F.3d at 588-89. As a finding in the alternative, the court fully analyzes the issue.
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The term “contractor” is defined as “a party to a Federal Government contract other than the
Federal Government.” 41 U.S.C. § 7101(7).
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board of contract appeals, or (2) file a claim in the United States Court of Federal Claims.
41 U.S.C. § 7104(a-b).
The CDA “applies to any express or implied contract . . . made by an executive
agency for,” inter alia, “the procurement of property, other than real property in being.”
41 U.S.C. § 7102(a)(1). According to the Federal Circuit, entering into a lease does not
constitute “the procurement of . . . real property in being” because “[a] leasehold does not
exist until a lease is entered into, and by entering into a lease the Government does not
acquire a pre-existing interest in the land; it establishes a new one.” Forman v. United
States, 767 F.2d 875, 879 (Fed. Cir. 1985). See CanPro Invs., Ltd. v. United States, 120
Fed. Cl. 17, 21 (2015) (explaining that Forman “distinguish[ed] newly created
leaseholds, which are subject to the CDA, from leaseholds held by another that the
government acquires through eminent domain, which fall outside the CDA”).
Crown Holdings does not dispute that the lease agreement between it and USPS
constitutes an express contract made by an executive agency for the procurement of
property. The question then is whether the claims in the Complaint relate to that
contract. See 41 U.S.C. § 7103(a)(1). In order to answer this question, the court
“examin[es] the facts alleged in the complaint to ascertain the source of [Crown
Holdings’] rights and the forms of relief requested (or appropriate) to vindicate those
rights.” Evers, 536 F.3d at 658. Critically, “the characterization or labeling of claims by
the pleader is not controlling.” Id. A contractor “cannot escape the precisely drawn
remedial framework outlined by the Contract Disputes Act merely by styling his
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complaint as one for redress of constitutional torts and regulatory violations rather than as
one for breach of contract--such a tactic, albeit crafty pleading, will not suffice.” Id.
Here, the court has little trouble concluding that all of Crown Holdings’ claims
relate to its contract with USPS. Even a cursory review of the Complaint reveals that the
source of each claim is the lease agreement. Specifically, Crown Holdings alleges: USPS
was negligent in failing to disclose that it intended to deduct monies from the rent owed
pursuant to the lease (Count 1 – negligence); USPS made a negligent omission in
negotiating the assignment of the USPS-WDI lease (Count 2 – negligent omission); both
parties made a mutual mistake in failing to address the roof repairs in the assignment of
the USPS-WDI lease (Count 3 – mutual mistake); USPS should be estopped from
deducting the cost of repairs from the rent owed pursuant to the lease (Count 4 –
declaratory judgment and estoppel). Clever labeling of each count does not change the
conclusion that this dispute has its genesis in the lease.
At bottom, Crown Holdings believes it has been wronged because USPS is not
remitting the full rent payment agreed to by the parties in the lease. Crown Holdings
admits as much in its Complaint. (See Complaint ¶ 60 (“There exists a real and present
controversy between Plaintiff and USPS regarding the amount due under the lease
agreement.”)). This allegation supports the court’s conclusion because, assuming Crown
Holdings prevails on the merits, its remedy would be an award of the withheld rent.
Calculating such an award would necessarily require review of the contract terms.
In light of these findings, the court holds that Crown Holdings can only resolve
this dispute by following the procedures set forth in the CDA. See Dalton v. Sherwood
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Van Lines, 50 F.3d 1014, 1017 (Fed. Cir. 1995) (“When the Contract Disputes Act
applies, it provides the exclusive mechanism for dispute resolution; the Contract Disputes
Act was not designed to serve as an alternative administrative remedy, available at the
contractor’s option.”). This conclusion requires dismissal of the Complaint for lack of
subject matter jurisdiction. See Evers, 536 F.3d at 657.
IV. Conclusion
Therefore, USPS’ Motion to Dismiss, or in the Alternative, for Summary
Judgment (Filing No. 7) is GRANTED. Crown Holdings’ Complaint is DISMISSED
for want of subject matter jurisdiction.
SO ORDERED this 9th day of December 2016.
Distributed Electronically to Registered Counsel of Record.
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