Bartlett et al v. United States Department of Agriculture et al
Filing
37
ORDER denying 28 Motion for Leave of Court to Conduct Jurisdictional Discovery. Plaintiffs shall file a response to the 25 Motion to Dismiss on or before 3/28/2012. Signed by Chief Judge Linda R Reade on 2/27/2012. (skm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
PETER BARTLETT et al.,
Plaintiffs,
No. 11-CV-72-LRR
vs.
ORDER
UNITED STATES DEPARTMENT OF
AGRICULTURE et al.,
Defendants.
____________________
TABLE OF CONTENTS
I.
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II.
PROCEDURAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III.
FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B. Events Prior to Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Motion to Dismiss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV.
ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
A.
Jurisdictional Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
B.
Equitable Estoppel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.
Stone v. United States . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.
Office of Personnel Management v. Richmond . . . . . . . . . 12
3.
Parmenter v. Federal Deposit Insurance Corporation . . . . 13
4.
Harrod v. Glickman . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C.
Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
D.
Alternative Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
V.
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2
2
3
7
I. INTRODUCTION
The matter before the court is Plaintiffs’ “Motion for Leave of Court to Conduct
Jurisdictional Discovery” (“Motion for Jurisdictional Discovery”) (docket no. 28).
II. PROCEDURAL BACKGROUND
On July 11, 2011, Plaintiffs filed a Complaint (docket no. 2) against Defendants,
seeking a declaratory judgment and a writ of mandamus.
On October 13, 2011,
Defendants filed a “Motion to Dismiss Plaintiffs’ Complaint” (“Motion to Dismiss”)
(docket no. 25).
On October 25, 2011, Plaintiffs filed an unopposed “Motion for
Extension of Time to Respond to Defendants’ Motion to Dismiss Plaintiffs’ Complaint”
(“Motion for Extension of Time”) (docket no. 26). On October 26, 2011, the court
granted the Motion for Extension of Time and directed Plaintiffs to respond to the Motion
to Dismiss by November 30, 2011. See Order Extending Time to Respond to Motion to
Dismiss (docket no. 27). On November 30, 2011, instead of responding to the Motion to
Dismiss, Plaintiffs filed the Motion for Jurisdictional Discovery. On December 23, 2011,
Defendants filed a Resistance (docket no. 31). On January 17, 2012, Plaintiffs filed a
Reply (docket no. 34). The court finds that a hearing is unnecessary. The Motion for
Jurisdictional Discovery is fully submitted and ready for decision.
III. FACTUAL BACKGROUND
A. Parties
Plaintiffs are thirty-eight Iowa citizens and other entities—including several
corporations, one limited liability company and one general partnership—that farm crops
in various counties throughout Iowa. Plaintiffs seek relief against six government entities
and officials, alleging that Defendants failed to pay Plaintiffs the amount required for
certain crop losses under the Supplemental Revenue Assistance Payment Program (“SURE
program”) pursuant to 19 U.S.C. § 2497.
Defendant United States Department of Agriculture (“USDA”) is the department
of the federal government responsible for implementing the SURE program. Defendant
Farm Service Agency (“FSA”), a division of the USDA, is the federal agency responsible
for implementing the SURE program. Defendant Thomas J. Vilsack is the Secretary of
2
the USDA. Defendant Bruce Nelson is the Acting Administrator of the FSA. Defendant
Iowa State Farm Service Agency, a division of the FSA, is responsible for implementing
the SURE program in Iowa. Defendant John Whitaker is the Executive Director of the
Iowa State Farm Service Agency. Plaintiffs are suing the individual Defendants solely in
their official capacities.
B. Events Prior to Suit
The SURE program became effective in 2008. The purpose of the SURE program
is to provide financial assistance in the form of a monetary payment to eligible farmers for
crop production and/or quality losses sustained as a result of a natural disaster. See 7
U.S.C. § 1531(b). During the 2008 crop year, Plaintiffs sustained losses and sought
payment under the SURE program. Plaintiffs believe that Defendants used the wrong
“Price Election figures” and improperly calculated Plaintiffs’ SURE program guarantees,
resulting in underpayment or no payment for Plaintiffs’ losses. Complaint at 14. Each
Plaintiff appealed the initial SURE program payment determination to each Plaintiff’s
respective county FSA Committee. The FSA Committee for each Plaintiff’s respective
county mailed each Plaintiff a letter denying the appeals. Defendants maintain that the
letters informed Plaintiffs “that they could then appeal the County Committee
determination to the State Committee or the National Appeals Division [(“NAD”)].”
Memorandum in Support of Motion to Dismiss (docket no. 25-1) at 3. Plaintiffs maintain
that the letters indicated that Plaintiffs had exhausted their administrative remedies and
could proceed with a suit in federal court.
The last paragraph of the first-issued FSA County Committee letter stated,
The county committee has determined that the issues raised in
this appeal are not appealable. You may seek a review of the
county committee’s determination by filing with either the FSA
State Executive Director or the [NAD] Director a written
request no later than 30 calendar days after the date you
receive this notice according to the FSA appeal procedures
3
found at 7 CFR Part 780 or the NAD appeal procedures found
at 7 CFR Part 11. If you believe that this issue is appealable,
you must write to either the FSA State Executive Director or
the NAD Director at the applicable address shown and explain
why you believe this determination is appealable. If you
choose to seek an appeal ability review of this determination
with the FSA State Executive Director, you need not send the
NAD Director any information. If you seek an appeal ability
review with the NAD Director, provide FSA a copy of your
request. If you request an appeal ability review by the State
Executive Director and the State Executive Director
determines that the issue is not appealable, you will be
afforded the right to request an appeal ability review by the
NAD Director.
....
If you do not file an appealability review request, your
administrative appeal process has been exhausted.
Plaintiff Vierkandt Farms Appeal Letter, Plaintiffs Exhibit 1-7 (docket no. 28-2) at 15-16.
The subsequent FSA County Committee letters that were sent to each additional Plaintiff
included similar language.
The events leading up to the issuance of the letters are contested. Attorneys Brant
Kahler, Douglas E. Gross and Sean Patrick Moore, with the law firm of Brown, Winick,
Graves, Gross, Baskerville & Schoenebaum, P.L.C. (“BrownWinick”), represent Plaintiffs
in this action. Attorney Gross submitted a Declaration as Plaintiffs Exhibit 1 to the Motion
for Jurisdictional Discovery, in which he averred that Kevin Vierkandt, a partner of
Plaintiff Vierkandt Farms, first approached him regarding Defendants’ administration of
the SURE program during the summer of 2010. See Gross Declaration, Plaintiffs Exhibit
1 (docket no. 28-2) at 2-6. BrownWinick agreed to represent Vierkandt Farms in its
attempt to seek payment under the SURE program.
On September 13, 2010,
BrownWinick sent a letter to the Hardin County FSA requesting that the amount of
Vierkandt Farms’ SURE program payment be recalculated. On October 1, 2010, the
4
Hardin County Executive Director, Sandy Hoversten, replied with a letter stating that
Vierkandt Farms was not entitled to a payment under its 2008 SURE program application.
The letter indicated that Vierkandt Farms had the right to request reconsideration of that
decision from the Hardin County FSA Committee within thirty calendar days.
On October 13, 2010, the Hardin County FSA Committee held a hearing on
Vierkandt Farms’ request for reconsideration. Attorneys Gross and Kahler appeared for
Plaintiffs, and Hardin County Executive Director Hoversten and the three members of the
Hardin County FSA Committee also appeared. Iowa State FSA employee Kevin McClure
participated in the hearing via telephone. Attorney Gross averred that, during the hearing,
McClure stated that the “Price Election” issue Vierkandt Farms appealed was not an
appealable issue “because it was an issue of general applicability under the SURE
[p]rogram that the Hardin County FSA Committee did not have the authority to change.”
Id. at 3. Attorney Gross averred that he was aware of the “administrative appeals process
that Vierkandt Farms would have to go through in order to have its case heard in federal
district court.” Id. Attorney Gross averred that he spoke to McClure on October 18,
2010, and expressed his “concern[] about wasting everyone’s time and money going
through the fruitless and futile FSA/NAD appealability review process, just to end up
litigating the appeal in federal district court in the end anyway.” Id. at 4. Attorney Gross
further averred:
McClure stated that he agreed with me and further indicated
that, to avoid the waste of resources inherent in the FSA/NAD
appealability review process, he would ensure that the Hardin
County FSA’s letter denying Vierkandt Farms’ appeal would
contain language stating that Vierkandt Farms’ administrative
appeals process had been exhausted at the county level.
Id.
On October 19, 2010, Attorney Gross sent the following email to Attorney Kahler:
Talked to McClure. He is going to write a letter for the
5
county committee that will say that it is not an appealable
decision and that we have exhausted our administrative
remedies. He wants us to get to district court without going
through a fruitless NAD process.
Plaintiffs Exhibit 1-6 (docket no. 28-2) at 14. Attorney Gross attached this email to his
Declaration. See id. Attorney Gross further averred that, on October 20, 2010, he
received a letter from Hoversten denying Vierkandt Farms’ appeal, and that, “[a]s
promised by . . . McClure, the letter stated that the issue [Vierkandt Farms appealed] was
not an appealable issue, and the last sentence of the letter stated that ‘[i]f you do not file
an appealability review request, your administrative appeal process has been exhausted.’”
Gross Declaration, Plaintiffs Exhibit 1 at 4.
Subsequently, BrownWinick obtained thirty-seven additional clients with issues
identical to the issues Vierkandt Farms raised and appealed. Attorney Gross averred:
McClure worked with BrownWinick to establish a uniform
process for each Plaintiff to develop an administrative record
at the county level, to ensure that each Plaintiff’s appeal to the
county level was dealt with in an efficient and timely manner,
and to allow Plaintiffs to appeal the “Price Election” issue
directly from the county level to federal district court.
....
True to . . . McClure’s word, the final sentence of the
denial letter received by each Plaintiff was the same as the
final sentence in the October 20, 2010 denial letter received by
Vierkandt Farms; namely, “[i]f you do not file an appealability
review request, your administrative appeal process has been
exhausted.” Plaintiff Peter Bartlett Appeal Letter, Defendants
Exhibit A (docket no. 25-3) at 2. [B]ased on my conversations
with . . . McClure and the express language of the denial
letters received by each Plaintiff, I understood that: (1) the
“Price Election” issue raised by each Plaintiff was an issue
that was not appealable through the FSA/NAD appeals
process; (2) each Plaintiff had exhausted its administrative
process at the county level; and (3) each Plaintiff had the right
to immediately pursue the “Price Election” issue in federal
6
district court.
Id. at 5-6 (internal citation altered). Accordingly, after Plaintiffs received notice that their
appeals at the county level had been denied, Plaintiffs initiated the instant action.
C. Motion to Dismiss
Defendants filed the Motion to Dismiss for lack of jurisdiction pursuant to Federal
Rule of Civil Procedure 12(b)(1) and failure to state a claim upon which relief can be
granted pursuant to Federal Rule of Civil Procedure 12(b)(6). However, the Motion to
Dismiss is based largely on the claim that Plaintiffs failed to exhaust their administrative
remedies. Defendants argue that “[t]o bring an action in district court against USDA,
Plaintiffs must first bring their claim to the [NAD]” under 7 U.S.C. § 6912(e).
Memorandum in Support of Motion to Dismiss at 10-11. In the McClure Declaration that
Defendants attached to the Motion to Dismiss, McClure averred that “[f]ollowing an
appeal to and decision by each of their respective County Committees, none of
the . . . Plaintiffs sought further review within the USDA” and “the NAD has never issued
a final decision with regard to any of the . . . Plaintiffs.” McClure Declaration (docket
no. 25-2) at 2-3.
Attorney Gross responded to the McClure Declaration, stating:
In the numerous contacts and conversations that I have
had with . . . McClure over the past 13 months, at no time
did . . . McClure ever inform me that our agreement to allow
Plaintiffs to appeal the “Price Election” issue directly from the
county level to federal district court would no longer be
honored, nor did . . . McClure ever give me any reason to
believe that BrownWinick’s reliance on such agreement was
mistaken or misplaced. As a result, when I read the Motion to
Dismiss . . . , I was shocked that Defendants would assert and
rely on an exhaustion defense. I was particularly outraged
that . . . McClure would file a Declaration with the [c]ourt
under oath stating that Plaintiffs failed to exhaust their
administrative remedies, and yet, at the same time, fail to
inform the [c]ourt of his conversations and agreement with me
7
to the contrary.
Gross Declaration, Plaintiffs Exhibit 1 at 6.
IV. ANALYSIS
In the Motion for Jurisdictional Discovery, Plaintiffs maintain that they intend to
argue, in their resistance to the Motion to Dismiss, that “Defendants should be equitably
estopped from raising an exhaustion defense due to the representations” McClure made to
Plaintiffs’ counsel. Motion for Jurisdictional Discovery at 3. Plaintiffs argue that
“[b]ecause the majority of the evidence necessary for Plaintiffs to prove their equitable
estoppel defense is in the possession, custody and/or control of Defendants, it is necessary
that Plaintiffs be allowed to conduct jurisdictional discovery to obtain such evidence prior
to the time at which this [c]ourt rules on Defendants’ Motion to Dismiss.” Id. In the
event that the court denies Plaintiffs’ Motion for Jurisdictional Discovery, Plaintiffs request
that the court grant them an additional thirty days from the date of the court’s order to file
a resistance to the Motion to Dismiss. Defendants resist the Motion for Jurisdictional
Discovery and argue that the facts of this case do not support the use of the doctrine of
equitable estoppel against the government.
A. Jurisdictional Discovery
Because there is no defined statutory procedure for district courts to follow when
ruling on a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure
12(b)(1), “the mode of its determination is left to the trial court.” Johnson v. United
States, 534 F.3d 958, 964 (8th Cir. 2008). Thus, trial courts have discretion in deciding
whether to allow a party to engage in jurisdictional discovery. See id. “Courts look to
decisions under [Federal Rule of Civil Procedure] 56 for guidance in determining whether
to allow discovery on jurisdictional facts.” Id. at 965. “To request discovery under Rule
56([d]), a party must file an affidavit describing: (1) what facts are sought and how they
are to be obtained; (2) how these facts are reasonably expected to raise a genuine issue of
8
material fact; (3) what efforts the affiant has made to obtain them; and (4) why the affiant’s
efforts were unsuccessful.” Id.
In his Declaration, Attorney Kahler explains that the evidence Plaintiffs seek to
obtain from additional discovery is set forth in attached interrogatories and requests for
production of documents that he prepared for Defendants. See Kahler Declaration,
Plaintiffs Exhibit 2 (docket no. 28-3) at 2; see also Plaintiffs Exhibits 3-5 (docket nos. 28-4
through 28-6). Attorney Kahler averred that BrownWinick, on Plaintiffs’ behalf, made
two previous attempts to seek the evidence that Plaintiffs now seek through jurisdictional
discovery. Specifically, Attorney Kahler averred that he and another BrownWinick
attorney engaged in numerous conversations with Defendants’ counsel of record, but
Defendants’ counsel respectfully declined to consent to Plaintiffs’ request to conduct
jurisdictional discovery. Additionally, Attorney Kahler averred that, as a second means
of obtaining the jurisdictional discovery, he prepared and mailed a Freedom of Information
Act (“FOIA”) request letter, in which he requested documents pertaining to the operation
of the SURE program in Iowa for the 2008 crop year. Attorney Kahler averred that “the
information, documents and other evidence sought by Plaintiffs through the jurisdictional
discovery process pertains to Plaintiffs’ assertion that Defendants should be equitably
estopped from asserting an exhaustion defense.” Kahler Declaration, Plaintiffs Exhibit 2
at 3.
Thus, the Kahler Declaration sets forth sufficient information to apprise the court
of the facts Plaintiffs seek through jurisdictional discovery and how they are to be
obtained, the efforts Plaintiffs previously made to obtain these facts and why Plaintiffs’
efforts were unsuccessful. Plaintiffs argue that, through jurisdictional discovery, they will
obtain evidence to show that the government should be equitably estopped from presenting
an exhaustion of administrative remedies defense to Plaintiffs’ Complaint. However, even
if Plaintiffs were to obtain the evidence they seek, it would not support a claim of equitable
9
estoppel against the government.
B. Equitable Estoppel
The court recognizes that the Supreme Court of the United States has left open the
issue of whether, and under what circumstances, equitable estoppel may be applied against
the government. See, e.g., Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 422 (1990)
(noting that it has left the issue open and complaining that “Courts of Appeals have taken
our statements as an invitation to search for an appropriate case in which to apply estoppel
against the [g]overnment, yet we have reversed every finding of estoppel that we have
reviewed”). Some Courts of Appeals and district courts have seized on the Supreme
Court’s unwillingness to adopt a flat rule that estoppel may not run against the government
under any circumstances and have elected to apply equitable estoppel against the
government in certain cases. See, e.g., Watkins v. U.S. Army, 875 F.2d 699, 711 (9th
Cir. 1989) (estopping the United States Army from relying on a reenlistment regulation
to bar the reenlistment of a homosexual soldier). In Chien-Shih Wang v. Attorney General
of the United States, 823 F.2d 1273, 1276 (8th Cir. 1987), the Eighth Circuit Court of
Appeals explained, “The Supreme Court has never upheld an estoppel against the United
States.
Neither, however, has the Supreme Court or this court accepted the
position . . . that the government may not be estopped as a matter of law.”
“In order to establish a claim of equitable estoppel against the government,
[Plaintiffs] must prove: (1) a false representation by the government; (2) the government’s
intent to induce [Plaintiffs] to act on the misrepresentation; (3) [Plaintiffs’] lack of
knowledge or inability to obtain the true facts; (4) [Plaintiffs’] detrimental reliance; and
(5) affirmative misconduct by the government.” Mejia-Perez v. Gonzales, 490 F.3d 1011,
1012 (8th Cir. 2007). It is not clear what type of conduct qualifies as “affirmative
misconduct”; however, the Eighth Circuit has made clear that negligence does not
constitute affirmative misconduct. See Clason v. Johanns, 438 F.3d 868, 872 (8th Cir.
10
2006) (declining to apply equitable estoppel against the government after appellant relied
on the statements of an FSA officer because, “[a]t most, the FSA officer’s comments were
the product of negligence”). Some commentators have opined that the Supreme Court has
“indicate[d] that government employee misconduct must be severe, perhaps to the point
of official illegality, before the [Supreme] Court will estop government action.” 33
Charles Alan Wright & Charles H. Koch, Jr., Federal Practice and Procedure: Judicial
Review § 8407 (1st ed.) (citing Schweiker v. Hansen, 450 U.S. 785 (1981)).
The court finds that the following controlling cases are particularly relevant to the
court’s consideration of whether to allow Plaintiffs to pursue jurisdictional discovery for
the sole purpose of uncovering evidence to support its equitable estoppel argument.
1.
Stone v. United States
In Stone v. United States, 286 F.2d 56 (8th Cir. 1961), the Eighth Circuit Court of
Appeals considered the application of the doctrine of equitable estoppel against the
government. The defendant in Stone worked as a producer, buyer and seller of wool in
Lucas County, Iowa. Id. at 57. The Wool Act of 1954 established a wool program, that
the USDA implemented, under which certain incentive payments were made for the sale
of wool. Id. at 56-57. In 1955, the defendant contacted the Lucas County A.S.C. Office
Manager and asked what he needed to do to qualify for the incentive payments. Id. at 57.
The Office Manager mistakenly told the defendant that he could sell the wool shorn from
the sheep on his farms to his wool house, so long as the sales were adequately documented.
Id. The defendant later submitted two applications for incentive payments, demonstrating
that he acted as both the buyer and the seller in the wool transactions.
Id.
The
government paid the defendant under the applications; however, the defendant’s
transactions did not actually qualify for payment under the Act.
Id. at 56-57.
Consequently, the government filed suit against the defendant and sought repayment. The
defendant argued the defense of estoppel “by reason of the alleged acts and advice of the
11
representative of the Commodity Credit Corporation.” Id. at 57. The Eighth Circuit
summarily dismissed the defendant’s estoppel argument, stating, “Of this it is enough to
say that the United States is neither bound nor estopped by acts of its officers or agents in
entering into an arrangement or agreement to do or cause to be done what the law does not
sanction or permit.” Id. at 59 (quoting Utah Power & Light Co. v. United States, 243
U.S. 389, 408-09 (1917)).
2.
Office of Personnel Management v. Richmond
In Richmond, 496 U.S. at 417-18, the Supreme Court considered whether the
appellant, a retired Navy employee, could assert the doctrine of equitable estoppel against
the federal government after he was given erroneous advice from a federal employee. The
appellant was eligible for a disability annuity under 5 U.S.C. § 8337(a) because he had
impaired eyesight that prevented him from doing his job. Id. at 416. The appellant
worked part-time as a school bus driver and had an opportunity to earn extra money by
working overtime. Id. at 417. However, under 5 U.S.C. § 8337(a), an individual is no
longer eligible for disability benefits if he or she is restored to an earning capacity
comparable to the current rate of pay for the position the individual held at the time he or
she retired. Id. at 416. The appellant, concerned that he might lose his disability benefits,
contacted an employee relations specialist at the Navy Public Works Center’s Civilian
Personnel Department for advice. Id. at 417-18. The specialist erroneously told the
appellant that he could take on the extra work without losing his disability benefits. Id.
Consequently, when the appellant performed the additional work, his income exceeded the
statutory eligibility limits, the Office of Personnel Management (“OPM”) discontinued
payments and the appellant lost his disability benefits for a six-month period. Id. at 418.
The appellant sought review of OPM’s decision to deny benefits by the Merit
Systems Protection Board (“MSPB”). Id. MSPB denied the appellant’s petition for review
and the appellant appealed the case to the Court of Appeals for the Federal Circuit. Id.
12
The Federal Circuit reversed. Id. The Supreme Court reversed the Federal Circuit, noting
that, despite language in some of its cases recognizing that there may be some
extraordinary circumstances in which estoppel would apply against the government, “we
have reversed every finding of estoppel that we have reviewed.” Id. at 419-22.
The Supreme Court explained that “equitable estoppel will not lie against the
[g]overment as it lies against private litigants,” id. at 419, and declined to adopt the
position “that the terms of a statute should be ignored based on the facts of individual
cases,” id. at 432. The Supreme Court explained:
It ignores reality to expect that the [g]overnment will be able
to “secure perfect performance from its hundreds of thousands
of employees scattered throughout the continent.” Hansen v.
Harris, 619 F.2d 942, 954 (2d Cir. 1980) (Friendly, J.,
dissenting), rev’d sub nom. Schweiker, 450 U.S. at 785. To
open the door to estoppel claims would only invite endless
litigation over both real and imagined claims of misinformation
by disgruntled citizens, imposing an unpredictable drain on the
public fisc. Even if most claims were rejected in the end, the
burden of defending such estoppel claims would itself be
substantial.
Id. at 433 (internal citations altered). The Supreme Court ultimately held that estoppel
against the government could not apply to situations were a claimant seeks public funds,
because “courts cannot estop the Constitution.” Id. at 434. However, the Supreme Court
declined to decide “[w]hether there are any extreme circumstances that might support
estoppel in a case not involving payment from the Treasury.” Id.
3.
Parmenter v. Federal Deposit Insurance Corporation
In Parmenter v. Federal Deposit Insurance Corporation, 925 F.2d 1088, 1089 (8th
Cir. 1991), appellants leased and harvested farm land but were not paid under the terms
of the lease after the bank that held a security interest on the crop became insolvent. The
Federal Deposit Insurance Corporation (“FDIC”) was appointed receiver, and appellants
maintained that an FDIC employee guaranteed that appellants would be paid under the
13
lease. Id. Appellants relied upon the employee’s statements and expended a considerable
amount of money harvesting the crops. Id. at 1090-91. When appellants were not paid,
they sued the FDIC. Id. at 1089. The Eighth Circuit found that the parties had not
adequately presented to the district court the issue of whether the employee had actual
authority to bind the FDIC. Id. at 1094. Consequently, the Eighth Circuit remanded that
issue to the district court for consideration. Id. at 1094-95. However, the Eighth Circuit
rejected appellant’s argument that the FDIC should be equitably estopped from asserting
the employee’s lack of authority to bind the FDIC. Id. The Eighth Circuit explained,
“‘The doctrine found in agency law of apparent authority does not apply to the
government.’” Id. at 1094 (quoting Pia v. United States, 7 Cl. Ct. 208, 211 (1985)). The
Eighth Circuit discussed the Supreme Court’s holding in Richmond, 496 U.S. 414, and
found that the doctrine of equitable estoppel likely did not apply to the facts before it. Id.
at 1095. The Eighth Circuit continued:
In any event, it has been held the “government [cannot be]
estopped from asserting lack of authority as a defense.”
United States v. Killough, 848 F.2d 1523, 1526 (11th Cir.
1988). This court has stated “‘[w]hatever form in which the
[g]overnment functions, anyone entering into an arrangement
with the [g]overnment takes the risk of having accurately
ascertained that he who purports to act for the [g]overnment
stays within the bounds of his authority.’” Leimbach v.
Califano, 596 F.2d 300, 305 (8th Cir. 1979) (quoting Fed.
Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947)).
Id. (internal citations altered). The Eighth Circuit then found that appellants never
inquired whether the FDIC employee had actual authority to bind the FDIC and,
consequently, appellants “‘assumed the risk that [the FDIC employee] was acting within
his authority.’” Id. (quoting Miles Farm Supply, Inc. v. United States, 14 Cl. Ct. 753, 757
(1988)).
14
4.
Harrod v. Glickman
In Harrod v. Glickman, 206 F.3d 783, 785 (8th Cir. 2000), the Eighth Circuit
addressed an appeal that vegetable farmers raised after they sustained weather-related crop
damage in 1989. The vegetable farmers had previously sought and received disaster relief
payments from the USDA. Id. Such payments were only available to farmers who
suffered a crop loss of 50% or more due to weather-related conditions. Id. at 786. The
vegetable farmers later discovered that their crops had also been damaged when the
farmers applied a defective chemical to the crops. Id. at 785-86. Consequently, the
farmers filed suit against the maker of the defective chemical, E.I. DuPont de Nemours
and Company (“DuPont”). Id. at 786. Four days before the farmers’ case against DuPont
went to trial, the USDA’s regional counsel’s office told them that the government would
not be seeking reimbursement for the disaster relief benefits due to a new regulation. Id.
at 786, 793. The regulation at issue was a statute preventing the government from seeking
reimbursement for certain payments made in error after ninety days; however, the statute
was enacted after the payments were made, and it was not clear whether the statute applied
retroactively. Id. at 791.
During the civil case, the farmers informed the district court that the USDA did not
intend to seek reimbursement. The district court then allowed DuPont to inform the jury
about the government benefits the farmers received due to the weather-related damages.
Id. at 786. During the civil trial, the farmers maintained that only 30% of their crops were
damaged by weather, and not the 50% required in order to receive disaster relief payments
from the USDA. Id. The government then sought reimbursement for the disaster relief
payments it wrongfully made to the farmers. Id. The farmers argued, among other things,
that they were entitled to equitable estoppel against the government because they relied on
a government attorney’s oral statement that the USDA would not seek reimbursement. Id.
at 793. The farmers argued that their reliance adversely affected the outcome of their trial
15
against DuPont because the jury reduced their damages by the amount of the government
benefits they had received. Id. The Eighth Circuit held:
The alleged informal statement of the government’s attorney
cannot operate to expand the scope of a statute to apply
retroactively where Congress has not expressly provided for
retroactive effect. See Heckler v. Cmty. Health Servs. of
Crawford Cnty., Inc., 467 U.S. 51, 63 (1984) (noting “those
who deal with the [g]overnment . . . may not rely on the
conduct of [g]overnment agents contrary to law”). Given the
overwhelming weight of the cases holding that estoppel will
not lie against the government, it was, in our view,
unreasonable for the [farmers] to rely on the oral statement of
the government’s attorney, particularly when the retroactive
effect of the new rule was questionable. We see no basis on
which to estop the government from recouping the funds
erroneously paid to the [farmers] in this case.
Id.
C. Discussion
These cases—and other Supreme Court and Eighth Circuit cases considering the
application of equitable estoppel—demonstrate that the doctrine is not generally available
in suits against the federal government. See, e.g., Schweiker, 450 U.S. at 785; Merrill,
332 U.S. at 380; Clason, 438 F.3d at 868; N.D. ex rel. Olson v. Ctrs. for Medicare &
Medicaid Servs., 403 F.3d 537 (8th Cir. 2005); Morgan v. Comm’r, 345 F.3d 563 (8th
Cir. 2003). While the doctrine might apply in extraordinary or exceptional circumstances,
the court is not aware of any case before either the Supreme Court or the Eighth Circuit
where the federal government has been equitably estopped because a government
representative gave faulty advice or erroneous information. In their Reply, Plaintiffs
attempt to distinguish their case because McClure, the government employee who
purportedly told Plaintiffs they did not need to exhaust their administrative remedies, is not
a low-level employee, but rather “a high-ranking FSA official charged with the
responsibility of overseeing and managing the implementation and operation of the SURE
16
[p]rogram throughout the entire State of Iowa.” Reply at 6. Plaintiffs have not provided
the court with any evidence to support its claim that McClure is an especially high-ranking
federal government official, nor have Plaintiffs cited any authority to support its position
that McClure’s rank as a government employee should impact the court’s analysis.
Regardless of McClure’s rank as a government employee, there are no extreme
circumstances present in this case that would justify the court’s application of estoppel
against the federal government. See Richmond, 496 U.S. at 434; see also United States
v. Bonderer, 139 F. Supp. 391, 393-95 (W.D. Mo. 1956) (refusing to apply the doctrine
of equitable estoppel against the federal government, despite the defendant’s reliance on
statements by the Secretary of Agriculture).
The facts Plaintiffs allege in the Motion for Jurisdictional Discovery do not support
a finding of affirmative misconduct by the government. Cf. Morgan, 345 F.3d at 566-67
(discussing the “heavy burden” to prove affirmative misconduct). Furthermore, Plaintiffs
do not allege that McClure knowingly made false statements to Plaintiffs with the intent
to induce Plaintiffs to rely on those statements. Consequently, even if the court granted
Plaintiffs leave to conduct jurisdictional discovery and Plaintiffs were able to prove
everything that they allege in their Motion for Jurisdictional Discovery, the doctrine of
equitable estoppel would not apply against the government under the facts of this case.
Even if the court were to assume McClure intentionally encouraged Plaintiffs to file
suit directly in federal district court with the intent to lure Plaintiffs into failing to exhaust
their administrative remedies, this case would still not support the application of equitable
estoppel against the government. In the Motion for Jurisdictional Discovery, Plaintiffs
submit that evidence regarding two of the elements required to prove their equitable
estoppel defense, namely evidence of lack of knowledge and detrimental reliance, is
already in their possession. However, Plaintiffs cannot demonstrate a “lack of knowledge
or inability to obtain the true facts,” nor can they show reasonable “detrimental reliance.”
17
Mejia-Perez, 490 F.3d at 1012.
Plaintiffs admit that they knew they were required to exhaust their administrative
remedies and that they were looking for a way to avoid that requirement. Plaintiffs’
counsel maintains that they thought they had reached an agreement with McClure to avoid
the statutes requiring exhaustion. Although the court is sympathetic to Plaintiffs’ claims,
the court cannot find that Plaintiffs’ counsel’s reliance on a purported agreement with a
government employee to avoid the law was reasonable. Cf. Falcone v. Pierce, 864 F.2d
226, 230 (1st Cir. 1988) (finding that it was unreasonable to rely on advice of a
government agent because “those who deal with the [g]overment are expected to know the
law and may not rely on the conduct of [g]overnment agents contrary to law” (quoting
Heckler, 467 U.S. at 63)). Furthermore, Plaintiffs had the knowledge and ability to
research whether McClure actually had authority to bypass federal statutes and regulations.
Plaintiffs did not take any steps to verify the legitimacy of the purported agreement before
relying on McClure’s statements. Cf. id.
Consequently, even if Plaintiffs were able to obtain evidence to support the three
elements for which they now seek discovery—false representation, intent to induce and
affirmative misconduct—Plaintiffs are unable to establish the two elements for which
evidence is already in their control. The court shall therefore deny the Motion for
Jurisdictional Discovery because, even if Plaintiffs obtained the evidence they seek, such
evidence would not support an equitable estoppel defense.
D. Alternative Request
In the event that the court denies Plaintiffs’ Motion for Jurisdictional Discovery,
Plaintiffs request that the court grant them an additional thirty days from the date of the
court’s order to file a resistance to the Motion to Dismiss. The court shall grant Plaintiffs’
alternative request.
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V. CONCLUSION
In light of the foregoing, the Motion for Jurisdictional Discovery (docket no. 28)
is DENIED. Plaintiffs shall file a response to the Motion to Dismiss (docket no. 25) on
or before March 28th, 2012.
IT IS SO ORDERED.
DATED this 27th day of February, 2012.
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