Midland Farms, LLC v. United States Department of Agriculture et al
Filing
30
OPINION AND ORDER granting 11 Motion to Dismiss Defendant NAU Country Insurance, Inc. Signed by U.S. District Judge Roberto A. Lange on 7/23/2014. (JLS)
FILED
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
CENTRAL DIVISION
MIDLAND FARMS, LLC,
Plaintiff,
vs.
UNITED STATES DEPARTMENT OF
AGRICULTURE, RISK
MANAGEMENT AGENCY,
FEDERAL CROP INSURANCE
CORPORATION, and NAU
COUNTRY INSURANCE, INC.,
Defendants.
I.
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JUL 232014
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CIV 13-3029-RAL
OPINION AND ORDER
GRANTING MOTION TO
DISMISS DEFENDANT
NAUCOUNTRY
INSURANCE, INC.
INTRODUCTION
NA U Country Insurance, Inc. ("NA U") has filed a Motion to Dismiss the Complaint filed
by Plaintiff Midland Farms, LLC ("Midland"), Doc. II. Midland's Complaint has two counts.
Doc. 1. Count I seeks judicial review of an agency decision under, among other statutes, the
Administrative Procedure Act ("AP A"), 5 U .S.C. § 70 I, et seq., and names as Defendants for that
claim the United States Department of Agriculture ("USDA"), the Risk Management Agency
("RMA"), and the Federal Crop Insurance Corporation ("FCIC") (collectively "Agency
Defendants"). Doc. 1 at
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41-42. Count II seeks a declaratory judgment and names as
Defendants for that claim not only the Agency Defendants, but also NAU. Doc. I at ~~ 43-45.
This Court grants NAU's motion to dismiss without prejudice to refiling after arbitration for the
reasons explained below.
II.
BACKGROUND & FACTS
A.
Crop Insurance Program
In 1938, Congress passed the Federal Crop Insurance Act ("FCIA n ), 7 U.S.C. § 1501, et
seq., "to promote the national welfare by improving the economic stability ofagriculture through
a sound system of crop insurance and providing the means for the research and experience
helpful in devising and establishing such insurance." Alliance Ins. Co. v. Wilson, 384 F.3d 547,
549 (8th Cir. 2004) (quoting 7 U.S.C. § 1502). The FCIA created the federal crop insurance
program and established Defendant FCIC.
7 U.S.C. § 1503.
FCIC is a wholly-owned
government corporation situated within another Agency Defendant, the USDA, that administers
and regulates the federal crop insurance program. See id.; Alliance Ins. Co., 384 F.3d at 549.
Congress created Defendant RMA in 1996 to operate and manage FCIC.! Am. Growers Ins. Co.
v. Fed. Crop Ins. Corp., 532 F.3d 797, 798 (8th Cir. 2008).
Originally, FCIC provided crop insurance coverage directly to producers. Alliance Ins.
Co., 384 F.3d at 549. In 1980, Congress revised the FCIA to encourage FCIC to contract with
approved, private insurance companies to sell and service crop insurance policies and have FCIC
reinsure those policies. Ace Prop. & Cas. Ins. Co. v. Fed. Crop Ins. Corp., 440 F.3d 992,994
(8th CiT. 2006) (citing 7 U.S.C. §§ 1508(k)(1), 1508(b)(1)). Most crop insurance policies now
are offered privately through an approved insurance provider ("AlP") and reinsured by FCIC,
rather than issued by FCIC directly. See id. The terms and conditions of these policies are
mandated by FCIC, published at 7 C.F.R. § 457.8, and are referred to as the "Basic Provisions."
See Skymont Farms v. Fed. Crop Ins. Corp., No. 4:09-cv-65, 2012 WL 1193407, at *5 (E.D.
Tenn. Apr. 10,2012) (noting that 7 C.F.R. § 457.8 "sets forth the 'Basic Provisions' that are
!The United States Court ofAppeals for the Eighth Circuit has treated RMA and FCIC as one
organization. See Am. Growers Ins. Co., 532 F.3d at 798. This Court too will refer to these entities
jointly as FCIC.
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included in each crop insurance policy .... n); Bissettev. Rain & Hail, LLC, No. 5:10-CV-40-D,
2011 WL 3905059, at *1 (E.D.N.C. Sept. 2, 2011) ("The crop insurance policy is a uniform
policy, with terms and conditions mandated by RMA and published in the Code of Federal
Regulations."). Midland and NAU agree that the Basic Provisions apply to their dispute and that
the Basic Provisions' arbitration clause covers Midland's claims ofentitlement to coverage under
the crop insurance policies. Doc. 1 at
~~
25-26; Doc. 12 at 2, 9; Doc. 22 at 2, 5 (Midland
admitting that its "policy claims are the subject of a pending, mandatory arbitration[], and
[Midland] acknowledges that the arbitrator would be the proper finder of any disputed fad').
B.
Facts
NAU does not dispute the facts alleged in Midland's Complaint for purposes ofits motion
to dismiss. NAU is a Minnesota corporation that is an AlP of crop insurance policies reinsured
by FCIC. Doc. 1 at ~ 2. Midland is an Iowa limited liability corporation which owns farmland
in Haakon and Stanley Counties in South Dakota. Doc. 1 at ~ 1.
In March of2008, Midland leased over 35,000 acres offarmland in Haakon and Stanley
Counties to members of the Hardes family ("the Hardes").2 Doc. 1 at ~~ 8-9. In the Fall of
2008, the Hardes obtained four federally reinsured multi-peril crop insurance policies3 ("the
Policies") from NAU for its winter wheat crop. Doc. 1 at ~ 10. Midland and the Hardes
amended their lease in October of 2008 to require that the Hardes obtain crop insurance and
2The Complaint alternatively refers to "the Hardes" and "the Hardeses." Doc. 1 at ~ 8. The
Amended Default Judgment names them as having the last name "Hardes." Doc. 1-10. "Hardes"
is the name on the Farm Lease, Doc. 1-1, and is the name that this Opinion and Order will use in
referring to Midland's tenants.
3Suc h multi-peril crop insurance policies cover numerous risks including fire, flood, and
drought among other hazards. Am. Growers Ins. Co., 532 F.3d at 798.
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transfer the right to indemnification under the Policies to Midland. Doc. 1 at, 12. Although the
Hardes obtained crop insurance, they did not assign immediately the right to indemnity to
Midland. Doc. 1 at" 10, 13.
In early 2009, the Hardes defaulted on their lease with Midland. Doc. I at, 13. Owing
money to both Midland and to other creditors, the Hardes assigned the right to indemnification
under the Policies to creditors other than Midland, and NAU appears to have approved at least
onesuchassignment. Doc. 1 at" 16-17,22. In February of2009, Midland obtainedajudgment
from a South Dakota state court requiring, among other things, that the Hardes transfer to
Midland the Policies' indemnification rights. Doc. 1 at, 18. In July of2009, the Hardes finally
executed transfer of coverage and assignments of indemnity forms in favor of Midland. Doc.
1 at ,21; Doc. 1-14 at 2. In September 2009, Midland filed a notice of claim with NAU for
proceeds from the Policies. Doc. 1 at,23; Doc. 1-14. NAU denied Midland's claims. Doc. 1
14.
After NAU denied Midland's claims, "[Midland] and Defendant NAU entered into
policy-mandated claims arbitration before the American Arbitration Association." Doc. 1 at,
25. The Basic Provisions require that questions of policy interpretation arising in arbitration be
submitted to FCIC for its interpretation and any such interpretation binds the arbitrator. Doc. 1
at, 26. Both parties submitted requests for interpretation to FCIC on certain policy provisions,
including provisions relating to transferring and assigning coverage. Doc. 1 at" 27 -33. FCIC's
interpretations were favorable to NAU. Doc. 1 at , 29. Midland appealed the adverse
interpretations and exhausted its administrative remedies. Doc. I at ,,37-38.
Midland thereafter filed its Complaint asserting that this Court has jurisdiction pursuant
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to the APA, the judicial review section ofregulations applicable to the USDNs National Appeals
Division codified at 7 C.F.R. § 11.13,4 the FCIA, and federal question jurisdiction under 28
U.S.C. § 1331. Doc. 1 at 1 6. Midland's Complaint does not allege diversity jurisdiction under
28 U.S.C. § 1332. Rather, Midland averred that its "cause of action arises from Defendant
RMNs adverse response to a request for interpretation of certain administrative procedures of
the Agency Defendants" and that "[a]ll ofthe wrongs complained ofherein arise from regulatory
interpretations made by the Agency Defendants[.]" Doc. 1 at 114, 7.
Midland makes specific jurisdiction allegations regarding each count. The Complaint
alleges jurisdiction over Count I based on the APA, USDA administrative regulations, and the
FCIA. Doc. I at 1 41. Midland in Count I names the Agency Defendants but not NAU as a
defendant. See Doc. 1 at 11 41-42.
Count II seeks a declaratory judgment and is asserted against both NAU and the Agency
Defendants. Doc. 1 at 11 43-45. Midland seeks the following declaration jUdgment:
(a) Plaintiff was entitled to have the transfers [of coverage] ...
approved upon submission of its . . . Transfer of Coverage
applications;
(b) Plaintiff was thereby entitled to coverage under the Policies;
(c) Defendant NAU is bound to grant Plaintiff the protections
afforded by the transferred Policies; and
(d) To the extent that Plaintiff has experienced a covered loss
during the insurance period, indemnity shall be due and payable.
Doc. 1 at
1 45.
Midland, in Count II, alleges that U[i]nsofar as this Court has obtained
jurisdiction to review the actions ofthe Agency Defendants and the transferability ofthe Policies
4S ection 11.13 outlines when a litigant may seek judicial review under the AP A of an
administrative determination made by the National Appeals Division of the USDA. See 7 C.F.R.
§ 11.13. N AU does not dispute that Midland has exhausted its administrative remedies and that the
Agency Defendants' determinations are ripe for judicial review under § 11.13.
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in question, declaratory judgment is warranted in this case pursuant to [The Declaratory
Judgment Act, 28 U.S.c. § 2201] and 28 U.S.C. § 1331." Doc. I at,-r 44. Midland prays for this
Court to "declare its judgment that [Midland] is entitled to coverage under the subject Policies,
and to the protections and indemnity afforded thereunder; ... and for such other and further
relief as may be just and proper." Doc. I at,-r 45. Midland also makes a jury demand. Doc. I
at 13, Part v.
NAU moved to dismiss under Rule 12(b)(I), Rule 12(b)(3), and Rule 12(b)(6) of the
Federal Rules ofCivil Procedure. Doc. II. NAU makes two arguments in support ofits motion:
(I) that it is not a proper defendant in an APAjudicial review action, and (2) that the declaratory
judgment remedies Midland seeks in Count II must be resolved in the mandatory pending
arbitration. Doc. 12 at 7-8. Midland does not dispute that its claims against NAU are subject
to mandatory arbitration. For example, Midland's brief states that "Defendant NAU correctly
asserts that Plaintiffs policy claims are the subject of a pending, mandatory arbitration action,
and [Midland] acknowledges that the arbitrator would be the proper finder of any disputed fact."
Doc. 22 at 5 (footnote omitted). Midland also "fully expects to return to arbitration once its
remedies for regulatory review have been exhausted." Doc. 22 at 7. Despite these admissions,
Midland opposes NAU's motion to be dismissed from the declaratory judgment action.
III.
DISCUSSION
A.
Standard of Review
NAU's motion to dismiss is for lack of subject matter jurisdiction regarding the claim
against NAU under Rule 12(b)(I) of the Federal Rules of Civil Procedure. To succeed on a
motion under Rule 12(b)(1), "the complaint must be successfully challenged on its face or on the
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factual truthfulness of its averments." Titus v. Sullivan, 4 F .3d 590, 593 (8th Cir. 1993). In a
facial challenge, the plaintiffs factual allegations about jurisdiction are presumed true and the
motion will be granted ifthose allegations fail to allege an element necessary to establish subject
matter jurisdiction. rd. In a factual challenge, the court may consider facts other than those plead
in the complaint in order to resolve the factual dispute. rd. "Jurisdictional issues, whether they
involve questions oflaw or of fact, are for the court to decide." Osborn v. United States, 918
F.2d 724, 729 (8th Cir. 1990). The party asserting jurisdiction bears the burden to show
jurisdiction exists. See Ark. Blue Cross & Blue Shield v. Little Rock Cardiology Clinic, P.A.,
551 F.3d 812,816 (8th Cir. 2009).
NAU's motion appears to mount a facial, rather than factual, attack on Midland's
Complaint.
NAU neither disputes Midland's factual averments nor points to evidence
challenging them. Thus, this Court will restrict "itself to the face of the pleadings, and the
non-moving party receives the same protections as it would defending against a motion brought
under Rule 12(b)(6)." Jones v. United States, 727 F.3d 844, 846 (8th Cir. 2013) (quoting
Osborn, 918 F.2d at 729 n.6).
NAU also invokes Rule 12(b)(6) as a grounds for its motion to dismiss for "failure to
state a claim upon which relief can be granted." NAU's motion to dismiss truly is a facial
challenge under Rule 12(b)(l).
See Serotte, Reich & Wilson, LLP v. Montante, No.
05-CV-284S, 2009 WL 3055294, at *6 (W.D.N.Y. Sept. 21,2009) (dismissing APA action for
lack of subject matter jurisdiction because, among other reasons, it was brought against an
improper defendant). Regardless, the standard for such a facial challenge under Rule 12(b)(l)
is the same as under Rule 12(b)(6). See Jones, 727 F.3d at 846. In deciding whether to grant
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such a motion to dismiss, a court must assume all facts in the complaint are true and must make
all reasonable inferences in favor of the plaintiff.
u.s. ex reI. Raynor v. Nat'l Rural Utils. Coop.
Fin. Corp., 690 F.3d 951, 955 (8th Cir. 2012). In doing so, however, "the complaint must
contain sufficient facts, as opposed to mere conclusions, to satisfy the legal requirements ofthe
claim to avoid dismissal." Quinn v. OcwenFed. BankFSB,470 F.3d 1240, 1244 (8th Cir. 2006)
(per curiam) (quoting DuBois v. Ford Motor Credit Co., 276 F.3d 1019, 1022 (8th Cir. 2002)).
B.
Subject Matter Jurisdiction Under the APA
Midland's Complaint asserts federal question jurisdiction under 28 U.S.C. § 1331 based
on the APA, rather than diversity jurisdiction under 28 U .S.C. § 1332. "Federal courts are courts
of limited jurisdiction, and a district court's federal question jurisdiction extends only to 'civil
actions arising under the Constitution, laws, or treaties of the United States.'" Mamot Feed Lot
& Trucking v. Hobson, 539 F.3d 898, 902 (8th Cir. 2008) (quoting 28 U.S.C. § 1331).
Generally, a claim "arises under" federal law when "federal law creates a private right of action
and furnishes the substantive rules of decision[.]" Mims v. Arrow Fin. Servs .. LLC, 132 S. Ct.
740, 748-49 (2012). liThe presence or absence of federal-question jurisdiction is governed by
the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a
federal question is presented on the face of the plaintiffs properly pleaded complaint."
Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).
Midland admits that the text ofthe AP A does not permit suits against private defendants.
Doc. 22 at 10. Nevertheless, Midland argues that its declaratory judgment action against NAU
and the Agency Defendants arises under the AP A. Doc. 22 at 8-10. The AP A is not an
independent source ofjurisdiction, Cohen v. United States, 650 F.3d 717, 723 (D.C. Cir. 2011),
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nor does it provide a private right of action against a private party, see W. Radio Servs. Co. v.
Qwest Corp., 530 F.3d 1186, 1195 (9th Cir. 2008) (citing 5 U.S.C. §§ 702, 706(2)(A». Rather
the APA "provides a generic cause of action in favor ofpersons aggrieved by agency action[.]"
Cohen, 650 F.3d at 723 (citation and internal quotation marks omitted). The APA permits n[a]
person suffering legal wrong because of agency action, or adversely affected or aggrieved by
agency action within the meaning of a relevant statute," to obtain "judicial review thereof." 5
U.S.C. § 702. The statute permits suits against "the United States, the agency by its official title,
or the appropriate officer." 5 U.S.C. § 703; see also W. Radio Servs. Co., 530 F.3d at 1195 ("In
such actions for judicial review, suit is against the agency itself or, in some cases, agency
officials. "); Serotte, 2009 WL 3055294, at *6 (holding immigrationjudge not a proper defendant
in APA suit). NAU is not such a governmental agency or officer and thus is not subject to
federal jurisdiction as a defendant under the AP A.
Midland's main assertion ofjurisdiction over NAU-that this Court obtained jurisdiction
over the declaratory judgment action in Count II against NAU n[i]nsofar as this Court has
obtained jurisdiction to review the actions of the Agency Defendant"-is incorrect. See Doc.
1 at, 44. No provision of the AP A or other jurisdictional statute extends federal jurisdiction to
NAU simply because this Court has jurisdiction under the APA over the Agency Defendants.
Midland also argues that the declaratory judgment action against NAU is permitted
because actions under the AP A may be styled as declaratory judgment actions. Doc. 22 at 10.
The APA provides that n[t]he form of proceeding for judicial review is the special statutory
review proceeding relevant to the subject matter in a court specified by statute or, in the absence
or inadequacy thereof, any applicable form of legal action, including actions for declaratory
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judgments" that are filed "in a court of competent jurisdiction." 5. U.S.C. § 703. While the
AP A permits declaratory judgment actions as a means of obtaining judicial review of agency
decisions, the statutory limitations of who may be sued in an AP A action remain in place. See
5 U.S.C. § 703. The AP A's allowance ofdeclaratory judgment actions against the United States,
an agency, or certain government officers does not mean that the APA extends federal
jurisdiction to a declaratory judgment action against a private party such as NAU. See id.
Midland next argues that although the APA does not expressly permit suits against
private parties, the action against NAU is nevertheless permissible because n[t]o the extent that
Defendant FCIC's administrative decision is favorable to [Midland] and adverse to [NAU],
[NAU] would also be entitled to bring its own action for judicial review under the [APA]." Doc.
22 at 9. This is an interesting argument, but does not justify ignoring the express limitation
under 5 U.S.C. § 703 over who can be named as a defendant under the AP A. Of course, there
presently is no adverse determination from FCIC being challenged by NAU. If Midland's
argument in this regard were accepted, then a plaintiff in an AP A action would have to join all
persons and entities that might be directly impacted by reversal of the agency decision, which
is not what the APA contemplates or authorizes. See 5 U.S.C. § 703; W. Radio Servs. Co., 530
F.3d at 1195 (citing 5 U.S.C. §§ 702, 706(2)(A)).
Midland cites to Harrell & Owens Farm v. Federal Crop Insurance Corp., No.
4:09-CV-217-FL, 2011 WL 1100265 (E.D.N.C. Mar. 23, 2011), insupportofitsargument. Doc.
22 at 9. In Harrell & Owens Farm, the parties entered policy mandated arbitration, sought
interpretations from FCIC, obtained interpretations, and completed arbitration. 2011 WL
1100265, at *1-2. After arbitration, the plaintiff filed for judicial review under the AP A against
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the Agency Defendants and then sought vacation of the arbitration award against its insurance
company opponent under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10. Id. at *2. The
district court stayed the motion to vacate, considered the judicial review action, upheld the
Agency Defendants' interpretation, and, in a separate opinion, confirmed the arbitration award.
Id. at *2, 8. The procedural situation here is quite different. In Harrell & Owens Farm, the court
had a different independent source offederal jurisdiction over the private party-the FAA-than
it had over the Agency Defendants. See id. at *2. Here, Midland sued NAU prior to completing
mandatory arbitration, does not invoke jurisdiction under the FAA, and instead relies on
jurisdiction under the AP A.
Midland finally argues that NAU is a necessary party in its judicial review action and
"[f]ailure to join a
non~governrnental
defendant with interests in the outcome of an action
brought under the [APA] is grounds for dismissal." Doc. 22 at 9-10. Midland, however, did not
sue NAU in Count I seeking judicial review ofFCIC interpretations, which belies the argument
that NAU is a necessary party for judicial review under the AP A. 5 Rather, the Complaint names
NAU as a defendant only in a separate Count II claiming entitlement to coverage under the
Policies.
Midland's concern that its judicial review action would have been dismissed had it not
SMidland appropriately identifies which entities it sues separately in its two counts and
clearly identifies NAU as a defendant only in Count II. See 5 Charles Alan Wright et. aI, Federal
Practice & Procedure § 1248, p. 443 (3d ed. 2004) ("Similarly, in order to state a claim for relief,
actions brought against multiple defendants must clearly specify the claims with which each
individual defendant is charged."); see also Fromkin v. Indymac Bank FSB, No.
10-CV-8014-PCT-PGR, 2010 WL 2541167, at *3 (D. Ariz. June 18, 2010)(holding that complaint
must state which specific defendants the claim is alleged against to put defendants on notice and
provide them the "opportunity to properly defend themselves against this cause of action").
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joined NAU is misplaced. Joinder is required if a party is "necessary and indispensable" under
Rule 19 of the Federal Rules of Civil Procedure. Bailey v. Bayer CropScience L.P., 563 F.3d
302,308 (8th Cir. 2009); see also U.S. ex reI. Steele v. Turn Key Gaming, Inc., 135 F.3d 1249,
1251 (8th Cir. 1998) (per curiam) ("Under Federal Rule of Civil Procedure 19, a nonparty is
indispensable to an action [such that dismissal would be warranted] if (1) the nonparty is
necessary; (2) the nonparty cannot be joined; and (3) the action cannot continue in equity and
good conscience without the nonparty."). A party is necessary either if the court cannot, in the
absence of the party in question, accord complete relief between the existing parties to the suit,
Fed. R. Civ. P 19(a)(I), or the person claims an interest in the subject matter of the action, Fed.
R. Civ. P. 19(a)(2). NAU's absence in the judicial review action has no effect on this Court's
ability to review the Agency Defendants' interpretations and accord relief. See Knox v. U.S.
Dep't ofInterior, 759 F. Supp. 2d 1223, 1237 (D. Idaho 2010). The judicial review action will
"stand or fall" on the Agency Defendant's interpretations, not on any arguments that NAU might
advance.
Id.
NAU has an interest in this Court upholding the Agency Defendants'
interpretations, which were favorable to NAU, but NAU is seeking dismissal. For Rule 19(a)(2)
to apply, the party's absence must leave protection of the party's interest impaired or impeded,
or leave the present party at risk of incurring multiple or inconsistent obligations. Fed. R. Civ.
P. 19(a)(1)(b)(i-ii); see also Knox, 759 F. Supp. 2d at 1237; Sykes v. Hengel, 220 F.R.D. 593,
597 (S.D. Iowa 2004). NAU's absence does not leave its interests at risk. The Agency
Defendants, whose interpretations were favorable to NAU, have every incentive to advocate for
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the propriety of their interpretations regardless of NAU's involvement. 6 See id.; Sykes, 220
F .R.D. at 597 (holding that party was not necessary because existing party shared its interests and
adequately represented it).
Midland cites to Lac Du Flambeau Band of Lake Superior Chippewa Indians v. Norton,
327 F. Supp. 2d 995 (W.D. Wis. 2004), for its contention that, had it not named NAU as a
defendant, NAU could have moved to dismiss for Midland's failure to join NAU. Doc. 22 at 9.
In Lac Du Flambeau Band, plaintiffs sought to invalidate a contract between an Indian tribe and
a state through an APA action, but did not join the state or the tribe. 327 F. Supp. 2d at 998,
1000. The case was dismissed for failing to join the tribe because the tribe's interests in the
contract were in jeopardy, because the existing defendants would not adequately represent the
tribe, and because a party to a contract being challenged generally is indispensable to the
litigation. Id. at 1000; see also Dawavendewa v. Salt River Project AgUc. Improvement & Power
Dist., 276 F.3d 1150, 1157 (9th Cir. 2002) ("[A] party to a contract is necessary, and if not
susceptible to joinder, indispensable to litigation seeking to decimate that contract. "). Unlike the
situation in Lac Du Flambeau Band, NAU's contract is not being challenged and the Agency
Defendants can adequately defend the propriety of their interpretations. Jurisdiction over NAU
based on the AP A is lacking.
C.
Jurisdiction Under the FCIA and Declaratory Judgment Act
In addition to invoking the APA, Midland's Complaint alleges jurisdiction over NAU
6Moreover, NAU has notice of this suit and may seek pennission of the Court to submit a
brief amicus curiae if it deems its interests inadequately protected by the Agency Defendants'
briefing. See~, Hard Drive Prods .. Inc. v. Does 1-1,495,892 F. Supp. 2d 334,337 (D.D.C. 2012)
(stating that it is within the district court's discretion to grant a motion for leave to file an amicus
curiae brief).
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based on the FCIA, the Declaratory Judgment Act, 28 U.S.C. § 2201, and § 1331. 7 None of
these statutes provide federal question jurisdiction over NAU under the circumstances ofthis
case. At the outset, § 1331 does not provide an independent source ofjurisdiction, U.S. ex reI
FTC v. Larkin, Hoffman, Daly & Lindgren, Ltd., 841 F. Supp. 899,903 (D. Minn. 1993) (citing
Merrell Dow Pharm. v. Thompson, 478 U.S. 804 (1986)), but grants district courts jurisdiction
over "all civil actions arising under the Constitution, laws, or treaties of the United States," 28
U.S.C. § 1331. "In order to invoke federal jurisdiction under Section 1331, a plaintiffs claim
must be based on some federal law independent of that statute." U.S. ex reI FTC, 841 F. Supp.
at 903.
The FCIA does not provide federal question jurisdiction over the declaratory judgment
action in Count II against NAU because the FCIA only creates a cause of action against FCIC.
See~, Wanamakerv.
Lawson, 871 F. Supp. 2d 735, 739 (E.D. Tenn. 20 12)("These provisions
[of the FCIA] specifically provide for exclusive federal jurisdiction over lawsuits filed arising
from crop insurance policies, but only provide for such jurisdiction as to suits against the
'Corporation,' meaning the Federal Crop Insurance Corporation (,FCIC'), or the 'Secretary,'
meaning the Secretary of Agriculture. These sections make no provision for suits filed against
the private insurance companies issuing reinsured policies or the local insurance agencies or
agents.") (internal citation and footnote omitted); Halfmann v. USAG Ins. Servs., Inc., 118 F.
Supp. 2d 714,719 (N.D. Tex. 2000) (liThe [FCIA's] language includes no grant regarding suits
against agents or companies selling insurance reinsured by the FCIC. "); Bullard v. Sw. Crop Ins.
7Midland also cites USDA administrative regulations pertaining to judicial review, but those
do not provide an independent basis for federal jurisdiction over NAU.
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Agency, Inc., 984F. Supp. 531,536 (E.D. Tex. 1997) ("[T]he FCIA does not include a provision
which so clearly and explicitly grants a cause of action to insured claimants against private
insurance companies."). Thus, Midland may not invoke the FCIA as the source of federal
question jurisdiction over NAU. See Mims, 132 S. Ct. at 748-49.
The Declaratory Judgment Act likewise does not provide this Court with federal question
jurisdiction over NAU. "[T]he Declaratory Judgment Act ... does not provide an independent
basis for federal jurisdiction." Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010) (quoting Victor
Foods, Inc. v. Crossroads Econ. Dev., 977 F.2d 1224,1227 (8th Cir. 1992». The Declaratory
Judgment Act "does not 'extend' the 'jurisdiction' of the federal courts[,]" Medtronic, Inc. v.
Mirowski Family Ventures, LLC, 134 S. Ct. 843, 848 (2014) (quoting Skelly Oil Co. v. Phillips
Petroleum Co., 339 U.S. 667, 671 (1950», it only enlarges "the range of remedies available[,]"
Skelly Oil Co., 339 U.S. at 671; see also Pub. Water Supply Dist. No. 10 ofCass Cnty.. Mo. v.
City of Peculiar, Mo., 345 F.3d 570, 572 (8th Cir. 2003). Federal district courts can grant
declaratory relief under the Declaratory Judgment Act in "a case of actual controversy within its
jurisdiction[.]" 28 U.S.C. § 2201. Therefore, an independent source of jurisdiction, such as
diversity or federal question jurisdiction, must exist before a federal court can order declaratory
relief. State of Mo. ex reI. Mo. Highway & Transp. Comm'n v. Cuffley, 112 F.3d 1332, 1334
(8th Cir. 1997).
None of the statutes the Complaint relies upon-the APA, the FCIA, § 1331, and the
Declaratory Judgment Act--confer federal question jurisdiction over NAU. Thus, this Court
must grant NAU's motion to dismiss for failing to establish subject matter jurisdiction over NAU
in Count II.
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D.
Diversity Jurisdiction Assertion and Arbitration
Midland Fanns argues for the first time in its Brief in Opposition to Dismissal that this
Court has diversity jurisdiction under 28 U.S.C. § 1332 over NAU and the declaratory judgment
action in Count II. Doc. 22 at 10. Diversity jurisdiction was not alleged in the Complaint. See
Doc. 1. Subject matter jurisdiction is determined by the allegations ofjurisdiction outlined in
the complaint. Caterpillar, Inc., 482 U.S. at 392. Midland could have sought leave to amend its
Complaint under Rule 15 of the Federal Rules of Civil Procedure, but it chose not to do so.
Midland may not amend its Complaint through an argument raised in a brief in opposition to a
motion to dismiss. See Thomas v. United Steelworkers Local 1938, 743 FJd 1134, 1140 (8th
Cir. 2014) (stating that courts which disallow amendment of complaints through a brief in
opposition to summary judgment were "persuasive" and holding a party must comply with Rule
15 ofthe Federal Rules of Civil Procedure to amend a complaint); Misischia v. St. John's Mercy
Health Sys., 457 FJd 800, 805 (8th Cir. 2006) (holding district court did not abuse its discretion
when it denied leave to amend a complaint requested through a brief in opposition to a motion
to dismiss); Pennsylvania ex reI. Zimmerman v. PepsiCo, Inc., 836 F.2d 173,181 (3rd Cir. 1988)
("[I]t is axiomatic that the complaint may not be amended by the briefs in opposition to a motion
to dismiss.") (quoting Car Carriers. Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.
1984)); Middlebrooks v. Godwin Corp., 722 F. Supp. 2d 82, 87 n.4 (D.D.C. 2010) ("[P]laintiff
failed to include these allegations in her complaint, and plaintiff may not amend her complaint
by the briefs in opposition to a motion to dismiss.").
Midland's Complaint does allege that it is an Iowa limited liability corporation which
leased 35,000 acres of fann Iand to the Hardes. Midland also names NAU as being a Minnesota
16
corporation. The Amended Default Judgment attached to the Complaint contained a monetary
judgment against the Hardes and in favor of Midland for in excess of$I.9 million. Doc. 1-10.
Yet, no allegation appears in the Complaint of there being in excess of $75,000, exclusive of
interest and costs, at issue and no attachment to the Complaint reveals how much genuinely is
at issue between Midland and NAU. Midland might have been able to invoke diversity
jurisdiction as a basis to name NAU, but did not do so.
Even so, the outcome would be only marginally different if Midland's Complaint had
pleaded diversity jurisdiction, because this Court would then be obliged to compel arbitration
of the claim against NAU contained in Count II.8 Midland and NAU agree that Midland's crop
insurance policy claims-that is, claims that Midland is entitled to the proceeds of the crop
insurance policies that it seeks in Count II-are subject to a mandatory arbitration provision.
Thus, NAU seeks dismissal of the Complaint as to NAU or in the alternative a stay of
proceedings on Count II pending arbitration. NAU cites to cases that involve the FAA, 9 U.S.C.
§ 1, et seq. See Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 730 (7th Cir. 2005); Hensel
v. Cargill, Inc., 198 F.3d 245 (6th Cir. 1999) (per curiam); Sparling v. Hoffman Constr. Co .. Inc.,
864 F.2d 635,638 (9th Cir. 1988); Jacobsen v. J.K. Pontiac GMC Truck, Inc., No. 01 C 4312,
2001 WL 1568817, at *2 (N.D. Ill. Dec. 10, 2001); Weidert v. Hanson, 309 P.3d 435, 436
(Wash. 2013).
"Congress passed the [FAA] 'to reverse judicial hostility to arbitration agreements and
to place arbitration agreements on equal footing with other contracts. III Dakota Foundry, Inc. v.
8NAU argues that dismissal is appropriate based on the arbitration clause, Doc. 12 at 1, but
Midland disagrees, Doc. 22 at 4. This Court need not address that argument since dismissal is
warranted for lack of subject matter jurisdiction.
17
Tromley Indus. Holdings, Inc., 891 F. Supp. 2d 1088, 1096 (D.S.D. 2012) (quoting Keymer v.
Mgmt. Recruiters Int'I. Inc., 169 F.3d 501, 504 (8th Cir. 1999)). The FAA provides that "[a]
written provision in ... a contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out ofsuch contract or transaction ... shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract." 9 U.S.C. § 2. Section 4 of the FAA, however, provides only a
"limited grant offederal court jurisdiction." Northport Health Servs. of Ark., LLC v. Rutherford,
605 F.3d 483, 486 (8th Cir. 20 I 0). It permits a party to seek an order to compel arbitration in
"any United States district court which, save for such agreement, would have jurisdiction under
Title 28 ... [over] the subject matter of a suit[.]" 9 U.S.c. § 4. The phrase "'save for [the
arbitration] agreement' ... directs the federal court to 'assume the absence of the arbitration
agreement and determine whether it would have jurisdiction under title 28 without it.'"
Northport, 605 F.3d at 487 (quoting Vaden v. Discover Bank, 556 U.S. 49, 62 (2009)). "In
nearly all cases, a party filing a § 4 petition to compel arbitration will allege as an independent
basis of federal jurisdiction either a federal question under 28 U.S.C. § 1331, or diversity of
citizenship under 28 U.S.C. § 1332(a)." Id. at 486.
Thus, the FAA does not provide an independent basis for federal jurisdiction here. If
Midland had invoked diversity jurisdiction in its Complaint against NAU, then this Court would
have to send to arbitration Midland's claims against NAU in Count II. The claims made in Count
II are the very same claims that the crop insurance contract envisions will be decided by an
arbitrator. Either way, Midland cannot proceed at this time in this Court against NAU.
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IV. CONCLUSION
For the reasons explained in this Opinion and Order, it is hereby
ORDERED that Defendant NAU's Motion to Dismiss, Doc. 11, is granted without
prejudice to refiling if there is in the future reason to enforce any arbitration award in favor of
Midland and against NAU.
Dated July
~3t"~2014.
BY THE COURT:
ROBERTO A. LANGE
UNITED STATES DISTRICT JUDGE
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