Cedar Lane Farms, Corp. v. Besancon et al

Filing 18

Memorandum Opinion and Order: The motion to dismiss filed by the Department of Energy (Doc. No. 15 ) is granted. Further, having dismissed the Department of Energy for lack of subject matter jurisdiction, there is no independent basis for jurisdiction over any remaining claims and defendants, and they are, therefore, dismissed without prejudice. (Doc. No. 7 ). Judge Sara Lioi on 3/28/2017. (P,J)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

CEDAR LANE FARMS, CORP.,
PLAINTIFF,
vs.
WILLIAM BESANCON, et al.,
DEFENDANTS.

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CASE NO. 5:16-cv-1390
JUDGE SARA LIOI
MEMORANDUM OPINION
AND ORDER

Before the Court are motions to dismiss filed by defendants William Besancon and Sandra
Besancon (the “Besancons”) (Doc. No. 7) and by defendant United States of America Department
of Energy (the “DOE”) (Doc. No. 15 [“Mot.”]). Plaintiff filed briefs in opposition to each motion.
(Doc. No. 13 and Doc. No. 16 [“Opp’n”], respectively). The DOE filed a reply with respect to its
motion. (Doc. No. 17 [“Reply”].)
The Besancons assert failure to state a claim and failure to join a party under Fed. R. Civ.
P. 12(b)(6) and (7). The DOE asserts lack of subject matter jurisdiction under Fed. R. Civ. P.
12(b)(1).
For the reasons set forth herein, the DOE’s motion to dismiss (Doc. No. 15) is granted. As
a result of that dismissal, the Court dismisses the remainder of the case without prejudice,
expressing no view as to the merits of the Besancon’s motion to dismiss (Doc. No. 7).

I. BACKGROUND
On June 8, 2016, plaintiff Cedar Lane Farms, Corp. (“CLF”), an Ohio corporation with its
principal place of business in Wooster, Ohio, (Complaint, Doc. No. 1 [“Compl.”] ¶ 1),1 filed a
complaint against the Besancons, Ohio residents (id. ¶ 2), and the DOE, seeking declaratory
judgments that these defendants have no ownership interest in certain assets described in the
complaint. Jurisdiction over the claim against the DOE was based upon 28 U.S.C. § 1331. The
claim against the Besancons was premised on supplemental jurisdiction under 28 U.S.C. § 1367(a).
The complaint alleges that CLF leases from the Besancons a portion of real property in
Wayne County, Ohio. (Compl. ¶ 7.) In May 2001, CLF and Touchstone Research Laboratory, Ltd.
(“TRL”) entered into a Subrecipient Agreement relating to an algae research project (“the project”)
that TRL had agreed to complete on behalf of the DOE. (Id. ¶¶ 8, 9.)2 As part of the project, CLF
agreed to sublet a portion of the property to TRL, and several assets itemized in the complaint
(“Algae Assets”) were purchased and constructed on the property. (Id. ¶¶ 11, 12.) The Subrecipient
Agreement, which terminated on August 12, 2014 (id. ¶ 13), contained the following provision:
At the conclusion of this project, . . . TRL will, if necessary make a formal request
to the [DOE] to have the ownership of the [Algae Assets] . . . transferred from the
[DOE] to TRL. Upon receiving title from the [DOE], TRL will transfer title of the
[Algae Assets] . . . to [CLF]. [CLF] will reimburse TRL for any reasonable costs it
incurs in the process of obtaining and transferring title to [CLF]. TRL cannot
guarantee that the [DOE] will transfer ownership at the end of the project and
therefore title may reside with DOE even after the completion of the project.

1

Under well-settled law, the factual allegations of the complaint are taken as true for purposes of a motion to dismiss.

A copy of the Subrecipient Agreement, designated “Exhibit A,” was filed as a supplement to the complaint. (See
Doc. No. 5-1.)
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(Ex. A at 31.3) CLF alleges that, by way of a General Conveyance, Assignment, and Bill of Sale,
TRL disclaimed any ownership interest in the Algae Assets and released such ownership to CLF.
(Compl. ¶ 16; see also, Doc. No. 5-2, Exhibit B.)
In count one of the complaint, CLF seeks a declaratory judgment confirming that the DOE
has no ownership interest in the Algae Assets. (Compl. ¶¶ 18-20; Prayer ¶ (a).) In count two, it
seeks a similar declaratory judgment with respect to the Besancons, along with a declaration that
the Algae Assets are the personal property of CLF. (Id. ¶¶ 21-24; Prayer ¶ (b).)
II. DISCUSSION
The DOE seeks dismissal solely for lack of subject matter jurisdiction under Fed. R. Civ.
P. 12(b)(1). This motion is dispositive.
Federal courts are courts of limited jurisdiction and the law “presume[s] that a cause lies
outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377,
114 S. Ct. 1673, 128 L. Ed. 2d 391 (1994). The burden of establishing jurisdiction rests upon the
party asserting it. Id.
Challenges to subject-matter jurisdiction “‘come in two varieties: a facial attack or a factual
attack.’” Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012) (quoting Gentek
Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007)). A facial attack
questions the sufficiency of the pleading, and, in such case, the court “takes the allegations in the
complaint as true, just as in a Rule 12(b)(6) motion.” Wayside Church v. Van Buren Cnty., 847
F.3d 812, 816-17 (6th Cir. 2017) (internal quotation marks and citations omitted). “A factual
attack, on the other hand, raises a factual controversy requiring the district court to ‘weigh the

All page number references are to the page identification number generated by the Court’s electronic docketing
system.
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conflicting evidence to arrive at the factual predicate that subject-matter does or does not exist.’”
Id. at 817 (quoting RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1135 (6th Cir.
1996) (further citations omitted)).
Although an assertion of sovereign immunity is sometimes considered a factual attack, here
the nature of the attack is more facial because the motion “does not assert a need to examine the
truthfulness of Plaintiff’s allegations in order to determine the existence of subject matter
jurisdiction.” Graber v. Metro. Life Ins. Co., 855 F. Supp. 2d 673, 676 (N.D. Ohio 2012). Rather,
the motion “argues that Plaintiff’s complaint is facially insufficient to invoke subject matter
jurisdiction because it does not demonstrate that the [DOE] has waived sovereign immunity.” Id.
(citing Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004)).
It is well-settled that “[a]bsent a waiver, sovereign immunity shields the Federal
Government and its agencies from suit.” FDIC v. Meyer, 510 U.S. 471, 475, 114 S. Ct. 996, 127
L. Ed. 2d 308 (1994) (citations omitted). “Moreover, a waiver of the Government’s sovereign
immunity will be strictly construed, in terms of its scope, in favor of the sovereign.” Lane v. Pena,
518 U.S. 187, 192, 116 S. Ct. 2092, 135 L. Ed. 2d 486 (1996) (citations omitted).
DOE argues that plaintiff’s reliance on federal question jurisdiction under 28 U.S.C. § 1331
as the sole basis for subject matter jurisdiction fails because that general statute does not provide
a waiver of sovereign immunity. (Mot. at 83, citing Whittle v. United States, 7 F.3d 1259, 1262
(6th Cir. 1993).) Nor, the DOE argues, is the complaint saved by the Declaratory Judgment Act,
which is neither an independent basis for subject matter jurisdiction nor a waiver of sovereign
immunity. (Id. at 83-84, citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72, 70
S. Ct. 876, 94 L. Ed. 1194 (1950).)

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In opposition, plaintiff asserts that sovereign immunity has been waived via the
Administrative Procedure Act (“APA”), 5 U.S.C. § 551, et seq. Plaintiff argues that the APA “‘sets
forth the procedures by which federal agencies are accountable to the public and their actions are
subject to review by the courts.’” (Opp’n at 86-87, quoting Franklin v. Massachusetts, 505 U.S.
788, 796, 112 S. Ct. 2767, 120 L. Ed. 2d 636 (1992).) Under the APA, “[a] person suffering legal
wrong because of agency action, or adversely affected or aggrieved by agency action within the
meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702. The APA
defines “agency action” to include “the whole or a part of an agency rule, order, license, sanction,
relief, or the equivalent or denial thereof, or failure to act[.]” 5 U.S.C. § 551(13).
Plaintiff argues: “A lawsuit brought in a court of the United States ‘seeking relief other
than money damages . . . shall not be dismissed . . . on the ground that it is against the United
States.’” (Opp’n at 87, quoting § 702.) Plaintiff cites Muniz-Muniz v. United States Border Patrol,
741 F.3d 668, 672 (6th Cir. 2013) for the proposition that a party seeking relief on the basis of
agency action need not actually state a claim under the APA (which admittedly, plaintiff has not
done in the complaint), since the waiver of sovereign immunity applies “regardless of whether
plaintiff seeks review of ‘agency action’ or ‘final agency action’” as those terms are defined by
the APA. (Opp’n at 87, also citing Warin v. Dir., Dep’t of Treasury, 672 F.2d 590, 592 (6th Cir.
1982) (holding that § 702 operates as a waiver of sovereign immunity in actions for non-monetary
relief under 28 U.S.C. § 1331).)
Plaintiff argues that sovereign immunity is the sole basis for dismissal argued by the DOE
Motion, and that, under the case law cited in its brief, sovereign immunity has been waived for
purposes of seeking non-monetary relief. The Court only partially agrees with plaintiff.

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As noted in Warin, the legislative history of the APA unambiguously provides that the
purpose of the statute was to “remove … technical barriers to the consideration on the merits of
citizens’ complaints against the Federal Government, its agencies or employees.” Warin, 672 F.2d
at 592. In United States v. City of Detroit, 329 F.3d 515 (6th Cir. 2003), relied upon by MunizMuniz, the Sixth Circuit rejected the government’s assertion that the waiver of sovereign immunity
in the APA “applies only to complaints filed under the APA[,]” finding that to be a “restrictive
reading of section 702.” Id. at 521 (and citing cases from five other circuits that hold the same).
That said, before there is a right to judicial review under the APA, the Act requires that a
person either “suffer[ ] legal wrong because of agency action,” or be “adversely affected or
aggrieved by agency action within the meaning of a relevant statute[.]” 5 U.S.C. § 702. Indeed,
the legislative history explains that § 702 of the APA “eliminate[s] the defense of sovereign
immunity [1] as to any action in a Federal court seeking relief other than money damages and [2]
stating a claim based on the assertion of unlawful official action by an agency or by an officer or
employee of the agency . . . .” Warin, 672 F.2d at 592 (quoting legislative history) (alterations and
emphases added). In other words, for sovereign immunity to be waived by virtue of the APA, the
complaint must meet two requirements.
Here, although the complaint meets the first requirement of seeking non-monetary relief,
it does not (and the Court suspects it could not) meet the second requirement. The complaint simply
does not allege that the DOE acted unlawfully in any way – neither through action nor inaction.
(See Compl. ¶¶ 18-20.) Notably, the APA itself does not apply to discretionary agency action. See
5 U.S.C. § 701(a)(2). More importantly, Section H of the Subrecipient Agreement acknowledged
that TRL could not guarantee any agency action to effect transfer of ownership interest.

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Accordingly, there is no subject matter jurisdiction over any claim against the DOE, and it
is entitled to dismissal, the requirements of the APA for a waiver of sovereign immunity having
not been met by the complaint. The DOE’s Motion (Doc. No. 15) is granted.
III. CONCLUSION
For the reasons set forth above, the motion to dismiss filed by the Department of Energy
(Doc. No. 15) is granted. Further, having dismissed the Department of Energy for lack of subject
matter jurisdiction, there is no independent basis for jurisdiction4 over any remaining claims and
defendants, and they are, therefore, dismissed without prejudice.5

IT IS SO ORDERED.
Dated: March 28, 2017
HONORABLE SARA LIOI
UNITED STATES DISTRICT JUDGE

As noted, supra, “[t]he Declaratory Judgment Act does not create an independent basis for federal subject matter
jurisdiction.” Heydon v. MediaOne of Se. Mich., Inc., 327 F.3d 466, 470 (6th Cir. 2003) (citations omitted). “Thus,
before invoking the Act, the court must have jurisdiction already,” Id. (citation omitted).
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To the extent there may be supplemental jurisdiction under 28 U.S.C. § 1367, and the Court concludes there is none,
the Court would decline to exercise such jurisdiction.

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