Creation Upgrades, Inc. v. United States Department of Defense et al

Filing 64

OPINION AND ORDER GRANTING 54 MOTION to dismiss Amended Complaint; 22 MOTION to dismiss; and 36 MOTION to dismiss filed by United States Department of Defense, United States Department of the Navy, Department of the Navy Base Realignment and Cl osure Program Management Office. We DISMISS Plaintiff's Freedom of Information Act claim for failure to state a claim upon which relief can be granted. We also DISMISS Plaintiff's breach of contract claim for lack of jurisdiction. Judgment shall enter accordingly. Signed by Chief Judge Jose A Fuste on 9/25/09.(mrj)

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UNITED STATES DISTRICT COURT DISTRICT OF PUERTO RICO CREATION UPGRADES, INC., Plaintiff, v. UNITED STATES DEPARTMENT OF DEFENSE, et al., Defendants. Civil No. 08-2388 (JAF)

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OPINION AND ORDER Plaintiff, Creation Upgrades, Inc., brings this action against Defendants, U.S. Department of Defense, U.S. Department of the Navy, and the Department of the Navy's Base Realignment and Closure Program Management Office (BRAC PMO), alleging a Freedom of Information Act (FOIA) violation under 5 U.S.C. § 552 and a breach of contract claim under 28 U.S.C. § 1346(a)(2). (Docket Nos. 1; 52.) Defendants move

to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that their court-ordered compliance with the FOIA request obviates Plaintiff's claim for relief. (Docket Nos. 36; 47; 50; 54.)

Defendants also move to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that this court lacks subject matter jurisdiction to hear the breach of contract claim in Plaintiff's amended

complaint. (Docket No. 54.) Plaintiff opposes. (Docket Nos. 39; 62.)

Civil No. 08-2388 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 I. Factual and Procedural Synopsis

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We derive the following factual summary from Plaintiff's amended complaint; incorporated exhibits into the attached amended to the initial by complaint and and the

complaint

reference;

documents submitted by Defendants in compliance with court order. (Docket Nos. 52; 1; 47-2; 50-1.) In ruling on a motion to dismiss, we assume all of Plaintiff's allegations to be true and make all reasonable inferences in its favor. See Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008). Defendants are responsible for disposing of surplus property in the U.S. Navy's possession. At some point during 2007, Defendants prepared to hold an online auction for two parcels of land on the former Roosevelt Roads Naval Station in Ceiba, Puerto Rico (Sale Parcels I & II). Plaintiff alleges that the minimum bid to be used

in the planned auction for Sale Parcel II was set at $25,000,000. Defendants eventually chose, for reasons unknown, to forego an online auction in favor of a sealed bids process. Defendants issued an Invitation for Bids (IFB) on March 14, 2008, officially soliciting public bids for both parcels. (Docket No. 1-7.) The IFB called for sealed bids to be submitted by April 30, 2008. (Id.) The highest bid to surpass Defendants' undisclosed minimum acceptable bid price (Reserve Price) would obtain the property. (Id.) If no bids meeting

the Reserve Price were received, Defendants reserved the right to

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reject all sealed bids and instead conduct an online auction. (Id.) Plaintiff asserts that the Reserve Price for Sale Parcel II continued to be $25,000,000 despite the change in bidding mechanism. Plaintiff, a Puerto Rico corporation, submitted a timely bid in the amount of $27,027,000 for Sale Parcel II on April 25, 2009. Only two bids were received in the sealed process, with Plaintiff's being the highest. (Docket No. 25.) On May 13, 2008, Defendants informed Plaintiff by letter that its bid had not met the Reserve Price and that, therefore, Sale Parcel II would not be sold to it. This letter did not state the actual amount of the Reserve Price Plaintiff failed to meet. In response, Plaintiff submitted a FOIA request to

Defendants seeking disclosure of the "Winning Bid";1 the Reserve Price; the identity of the official(s) who set the Reserve Price; and the date on which the Reserve Price was set. This initial request was denied on June 23, 2008, by James E. Anderson, Director of the Navy BRAC PMO Southeast. (Docket No. 1-5.) In response to Plaintiff's request to reveal the identity of the "winning bidder," Anderson informed Plaintiff that no bidder had met the reserve price and that, consequently, there was no "successful bidder." Anderson also revealed to Plaintiff the existence of an

"internal working memorandum responsive to [its] request for the

"Winning Bid" is a term of art employed by Defendants in their IFB r e f e r e n c i n g the highest bid received that also conformed to the form and procedures o u t l i n e d in the IFB. (Docket No. 1-7.)

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disclosure of the Navy's Reserve Price and how it was established, when and by whom." (Id.) Anderson denied disclosure of this document, relying on the exemptions in 5 U.S.C. § 552(b)(4)-(5) for commercial or financial information that is privileged or confidential and for intra-agency memos and letters not available by law to a party other than an agency in litigation. In a letter dated July 7, 2008, Plaintiff requested the General Counsel of the Navy to reconsider the denial of its FOIA request. The General Counsel did not respond to Plaintiff's request within the statutorily mandated twenty-day period. See 5 U.S.C. § 552(a)(6) (A)(I). Plaintiff filed its initial complaint with this court on December 18, 2008, requesting that we order the production of

government documents to fulfill the FOIA request. Defendants did not answer the complaint but instead filed a motion to dismiss based solely on the 5 U.S.C. § 552(b)(5) exemption to agencies' FOIA obligations. (Docket No. 22.) Plaintiff concedes that "Defendants have released much of the information referred to" in the initial FOIA request. (Docket No. 52.) Through Defendants' motions and the court-ordered release of the "IFB Award Plan," Plaintiff has discovered the identity of the winning bidder, the reserve price, and the approval date of the IFB Award Plan. (See Docket Nos. 25; 50-2.) Defendants argue that, with the release of the complete version of the "IFB Award Plan," they have provided in full the internal memorandum referenced in their initial denial of

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Plaintiff's FOIA request. (Docket No. 50.) Plaintiff maintains that it has not received satisfactory answers to two inquiries in its original FOIA request: When the reserve price was set and by whom. (Docket No. 52.) In the amended complaint filed on August 20, 2009, Plaintiff added an additional claim for breach of contract under 28 U.S.C. § 1346(a)(2). (Docket No. 52.) Plaintiff maintains that the Reserve Price for Sale Parcel II was always $25 million and was only changed to $36 million at some point after Plaintiff submitted its bid but before the public opening of the bids. (Id. at 12.) By not

transferring Sale Parcel II to Plaintiff following receipt of its winning bid over the Reserve Price, Plaintiff alleges that Defendants have violated an implied contract that arose between the parties when Plaintiff submitted its bid in conformity with the IFB. The only remedy Plaintiff seeks for this breach is specific performance of the alleged contract. (Id. at 13.) Defendants move to dismiss Plaintiff's amended complaint,

incorporating by reference their previous motion to dismiss the FOIA claim and also moving to dismiss the additional contract claim for lack of jurisdiction. (Docket No. 54.) Defendants argue that the Contract Disputes Act, 41 U.S.C. §§ 601-609, preempts this court's jurisdiction. (Id. at 4-7) In the alternative, Defendants assert that this court lacks jurisdiction under 28 U.S.C. § 1346(a)(2). (Id. at 7.) Plaintiff opposes. (Docket No. 62.)

Civil No. 08-2388 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 A. FOIA Claim 1. Standard under Rule 12(b)(6) II. Analysis

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A defendant may move to dismiss an action against him, based solely on the complaint, for the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In assessing this motion, we "accept[] all well-pleaded facts as true, and we draw all reasonable inferences in favor of the

[plaintiff]." Wash. Legal Found. v. Mass. Bar Found., 993 F.2d 962, 971 (1st Cir. 1993). The complaint must demonstrate "a plausible entitlement to relief" by alleging facts that directly or inferentially support each material element of some legal claim. Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559 (2007)). "Specific facts are not necessary; the

statement need only give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Erickson v. Pardus,

551 U.S. 89, 93 (2007) (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 559). Federal Rule of Civil Procedure 12(d) states that whenever matters outside of the pleadings are presented on a 12(b)(6) motion and not excluded by the court, "the motion must be treated as one of summary judgment under Rule 56." Whenever this situation arises,

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"[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed R. Civ. P. 12(d).

The First Circuit has found exceptions to Rule 12(d) for documents whose authenticity is undisputed, official public records, documents central to the plaintiff's claim, or documents sufficiently

referenced in the complaint.

Rivera v. Centro Medico de Turabo,

Inc., 575 F.3d 10, 15 (1st Cir. 2009). 2. Analysis

The Freedom of Information Act was enacted "to open agency action to the light of public scrutiny." DOJ v. Reporters Comm. for

Freedom of the Press, 489 U.S. 749, 772 (1989) (citation omitted). The statute requires government agencies to "promptly" fulfill all document disclosure requests that reasonably describe the records requested and comply with each agency's established FOIA procedure. 5 U.S.C. § 552(a)(3)(A). An agency may deny access to requested information in its possession only when one of nine exemptions enumerated in 5 U.S.C. § 552(b) applies. An agency's denial of a FOIA request may be appealed to the agency head. Id. § 552(a)(6). Once

agency appeals have been exhausted, requesting parties may appeal to district courts to review an agency's denial of a FOIA request. Id.

§ 552(a)(4)(B). The District Court reviews such denials de novo. Id.; see also Church of Scientology, Int'l v. DOJ, 30 F.3d 224, 228 (1st Cir. 1994). The burden of proving § 552(b) exemptions rests with

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the defendant agency. Maynard v. CIA., 986 F.2d 547, 557-58 (1st Cir. 1993). In the present case, Defendants have provided a full copy of the "IFB Awards Plan," which, they assert, is the document referenced by James Anderson in his initial denial of Plaintiff's FOIA request. (Docket No. 50-1.) This document was not attached to Plaintiff's amended complaint or Defendants' motion to dismiss the amended complaint. (Docket No. 52.) Since the government has not yet filed

an answer in this case, the Plaintiff's amended complaint is the only pleading available for us to consider. As the IFB Award Plan is central to Plaintiff's claim, and as the complaint makes sufficient reference to it, we find that it falls under the exceptions to Rule 12(d) enumerated above. We, therefore, consider this as a 12(b)(6) motion and not under the more stringent Rule 56 summary judgment standard. Defendants argue that by disclosing a complete copy of the IFB Award Plan, they fulfilled the original FOIA request. This document

provides the Reserve Price, the method used to determine that price, and the date on which the plan received final approval. It also includes the signatures of the BRAC PMO personnel responsible for creating and approving the plan. As a result, there is no longer any

dispute as to the disclosure of the document identified in the Defendants' response to the initial FOIA request.

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This court finds no other FOIA claim on which relief could be granted in Plaintiff's amended complaint. Where the agency has fully disclosed all documents uncovered by its search in response to the initial FOIA request, there is no basis for judicial review unless the Plaintiff challenges the adequacy of the agency's search for documents. B. Plaintiff makes no such challenge in its complaint.

Contract Claim 1. Standard under Rule 12(b)(1)

Under Federal Rule of Civil Procedure Rule 12(b)(1), a defendant may move to dismiss an action against him for lack of federal subject matter jurisdiction. The party asserting jurisdiction has the burden of demonstrating its existence. See Skwira v. United States, 344 F.3d 64, 71 (1st Cir. 2003) (citing Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995)). Rule 12(b)(1) is a "large umbrella, overspreading a variety of different types of challenges to subject-matter jurisdiction."

Valentin v. Hosp. Bella Vista, 254 F.3d 358, 362-63 (1st Cir. 2001). A movant may base a challenge to the sufficiency of the plaintiff's assertion of subject matter jurisdiction solely on the pleadings. Id. at 363. In that case, we take the plaintiff's "jurisdictionallysignificant facts as true" and "assess whether the plaintiff has propounded an adequate basis for subject-matter jurisdiction." Id. at 363; see Pejepscot Indus. Park, Inc. v. Me. Cent. R.R. Co., 215 F.3d 195, 197 (1st Cir. 2000).

Civil No. 08-2388 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2. Analysis

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In order for a claim against the United States to survive a motion to dismiss, it must be brought under an "unequivocally

expressed" waiver of sovereign immunity. Muirhead v. Meacham, 427 F.3d 14, 17 (1st Cir. 2005). In the case at bar, Plaintiff brings its claim under 28 U.S.C. § 1346(a)(2). Defendants devote the lion's share of their argument to the notion that our jurisdiction over this case is preempted by the Contract Disputes Act (CDA), 41 U.S.C. §§ 601-609. (Docket No. 54.) The CDA, however, is completely

inapposite to this case. The statute encompasses neither the disposal nor procurement of real property.2 Plaintiff seeks redress for the breach of a contract for the sale of real property. Therefore, Defendants' argument that the CDA governs this contract dispute and preempts this court's jurisdiction fails. Our finding the CDA inapplicable to the instant case does not, however, conclude our jurisdictional analysis. Plaintiff has brought this action under the aegis of 28 U.S.C. § 1346(a)(2). This statute

grants concurrent jurisdiction to district courts and the Court of Federal Claims for all claims against the government not exceeding $10,000 and founded on "any express or implied contract with the

The only property-disposal contracts governed by the CDA are for the d i s p o s a l of "personal property." 41 U.S.C. § 602(a)(4). The disposal of real p r o p e r t y , on the other hand, is impliedly exempted from the CDA. Similarly, section 6 0 2 ( a ) ( 1 ) of the act expressly exempts procurement of "real property in being" from t h e ambit of the CDA. Id. § 602(a)(1) ("[T]his chapter applies to any express or i m p l i e d contract . . . entered into by an executive agency for ­ (1) the p r o c u r e m e n t of property, other than real property in being." (emphasis added)).

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Civil No. 08-2388 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 United States." 28 U.S.C. § 1346(a)(2). But this grant

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jurisdiction does not extend to "claims that seek primarily equitable relief." Berman v. United States, 264 F.3d 16, 21 (1st Cir. 2001).

Furthermore, in cases where the only relief requested is specific performance of a government contract (Docket No. 52 at 13), the First Circuit has explicitly denied this court's jurisdiction. See

Coggeshall Dev. Corp. v. Diamond, 884 F.2d 1, 3 (1st Cir. 1989) ("Federal Courts do not have the power to order specific performance by the United States of its alleged contractual obligations."). Thus, we lack jurisdiction under 28 U.S.C. § 1346(a)(2) to hear Plaintiff's claim for breach of contract. III. Conclusion For the reasons stated herein, we hereby GRANT Defendants' motion to dismiss. We DISMISS Plaintiff's Freedom of Information Act claim for failure to state a claim upon which relief can be granted. We also DISMISS Plaintiff's breach of contract claim for lack of jurisdiction. IT IS SO ORDERED. San Juan, Puerto Rico, this 25th day of September, 2009. s/José Antonio Fusté JOSE ANTONIO FUSTE Chief U.S. District Judge