Safety National Casualty Corporation et al v. United States Department of Homeland Security et al

Filing 317

MEMORANDUM AND ORDER DEFERRING 314 Opposed MOTION for Judgment, GRANTING IN PART AND DENYING IN PART 309 MOTION to Dismiss (Signed by Judge Keith P Ellison) Parties notified.(sloewe, 4)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
AAA BONDING AGENCY, INC.,
Plaintiff,
V.
UNITED STATES DEPARTMENT OF
HOMELAND SECURITY, et al.,
Defendants.

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Civ. No. 4:05-cv-2159

MEMORANDUM AND ORDER
The following motions are pending before this Court: (1) a Motion to Dismiss the
Counterclaim and Complaint, filed by the United States Department of Homeland Security
(“DHS”); (2) a Motion for Judgment, filed by AAA Bonding Agency, Inc. (“AAA Bonding”);
and (3) a Motion for Repayment, also filed by AAA Bonding. After considering the submissions
of the parties and the applicable law, this Court finds that the Motion to Dismiss (Doc. No. 309)
should be granted in part and denied in part: it should be granted with regard to the counterclaim
and denied with regard to the complaint. The Motion for Repayment and the Motion for
Judgment are deferred to allow for further briefing by the parties.
I.

BACKGROUND
This Court has, on four prior occasions, detailed the procedural and factual background

of this lawsuit. (Docs. No. 113, 140, 159, 240.) The case originally involved Safety National
Casualty Corporation (“Safety National”), a surety company authorized by the Department of
Treasury to issue immigration delivery bonds, AAA Bonding, Safety National’s authorized
agent, and DHS. Safety National and AAA Bonding had entered into a number of bail bond
contracts for the purpose of procuring the release of undocumented immigrants from DHS
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custody by guaranteeing their appearance at the termination of immigration proceedings. DHS
determined, and the Administrative Appeals Office affirmed, more than 1,400 breaches of these
bond contracts.

Safety National and AAA Bonding filed this action to challenge DHS’s

determination of the bond breaches. DHS filed a counterclaim demanding payment on 1,421
bonds.
After years of litigation, DHS and Safety National reached a Settlement Agreement and
the Court dismissed Safety National from the case. (Doc. No. 263.) Meanwhile, DHS and AAA
Bonding continued to review bonds under the Agreed Procedures (which have been described in
earlier opinions). The Parties alerted the Court to a dispute over 26 bonds (Doc. No. 265 at 2),
but DHS decided to pursue only 24 (Doc. No. 267). Those 24 bonds were the subject of the
Parties’ Cross Motions for Summary Judgment. This Court granted DHS’s Motion for Summary
Judgment for all but one of the bonds. (Doc. No. 286.) The Fifth Circuit reversed and held that
the Settlement Agreement between DHS and Safety National released AAA Bonding from
liability for the bonds covered by the settlement. AAA Bonding Agency, Inc. v. U.S. Dep’t of
Homeland Sec., 596 Fed. Appx. 294 (5th Cir. 2015).
DHS subsequently filed its Motion to Dismiss the Counterclaim and Complaint pursuant
to Federal Rule of Civil Procedure 41(a)(2). (Doc. No. 309.) AAA Bonding opposed that
Motion and filed its Motion for Judgment and Motion for Repayment. (Doc. No. 314.) AAA
Bonding seeks:
1) “judgment in its favor and denial of the dismissal sought by DHS”;
2) “judgment in its favor reflecting full release of liability”;
3) “that the release reflected in the judgment should apply to all bonds encompassed by
the settlement . . .”; and
4) “return of payment that AAA Bonding made on bonds for which it is not liable.”

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Pl.’s Mot. for Judgment 1–2.

Specifically, AAA Bonding seeks reimbursement for

$1,008,310.51 that it paid to DHS in four installments, between October of 2012 and January of
2013, in connection with the Agreed Procedures.1
II.

MOTION TO DISMISS UNDER RULE 41(a)(2)
Federal Rule of Civil Procedure 41(a)(2) states that, once a responsive pleading has been

served, “an action may be dismissed at the plaintiff’s request only by court order, on terms that
the court considers proper.” This also applies to the dismissal of a defendant’s counterclaim.
Fed. R. Civ. P. 42(c). Whether to grant a Rule 41(a)(2) motion is committed to the district
court’s discretion. Hyde v. Hoffmann–La Roche, Inc., 511 F.3d 506, 509 (5th Cir. 2007).
“Unless the order states otherwise, [the dismissal] is without prejudice.”

Fed. R. Civ. P.

42(a)(2). Dismissal without prejudice is generally upheld “unless the defendant will suffer some
plain legal prejudice other than the mere prospect of a second lawsuit.” Hoffmann–La Roche,
Inc., 511 F.3d at 509 (quoting Ikospentakis v. Thalassic Steamship Agency, 915 F.2d 176, 177
(5th Cir. 1990)). “A plaintiff’s voluntary dismissal may substantially prejudice the defendant if
it effectively strips him of a defense that would otherwise be available. That [the] plaintiff may
obtain some tactical advantage over the defendant in future litigation is not ordinarily a bar to
dismissal.” Ikospentakis, 915 F.2d at 177–78. When a court finds that dismissal without
prejudice would harm the defendant, as contemplated in Hyde v. Hoffmann–La Roche, Inc. and
Ikospentakis, dismissal with prejudice is a potential solution. In Harris v. Devon Energy Prod.
Co., L.P., 500 F. App'x 267, 269 (5th Cir. 2012), for example, the Fifth Circuit found that a
dismissal without prejudice would “cause plain legal prejudice” to the defendant, so the appellate
court modified the district court’s judgment and dismissed the suit with prejudice.
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Those payments were made before DHS and Safety National executed their Settlement
Agreement.
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When a party dismisses its own action with prejudice, it operates as a final adjudication
on the merits and has res judicata effect. See 9 Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 2364 (3d ed.) (A voluntary dismissal with prejudice “is a complete
adjudication of the claims and a bar to a further action on them between the parties . . .”).
Although AAA Bonding opposes the voluntary dismissal, with prejudice, of DHS’s
counterclaim, it is in fact the most comprehensive relief available to AAA Bonding. The motion
for voluntary dismissal must be granted with regard to DHS’s counterclaim, and the
counterclaim is dismissed with prejudice. The complaint, however, is a different matter. A
defendant cannot voluntarily dismiss a plaintiff’s action under Rule 41(a)(2). DHS’s Motion to
Dismiss must be denied with regard to the complaint.
III.

MOTION FOR REPAYMENT
AAA Bonding made the four payments to DHS, totaling $1,008,310.51, before the

Settlement Agreement had been executed and the Fifth Circuit had ruled on its effects, at a time
when all parties believed—mistakenly—that AAA Bonding could be solely liable for a bond.
The payments were made under a mistake of law, but they were made voluntarily. Although
AAA Bonding complains that Safety National and DHS “surreptitiously excluded” AAA
Bonding from settlement discussions between Safety National and DHS, AAA Bonding has
identified no duress or compulsion in making the payments, nor has it established any fraud.
Pl.’s Mot. for Judgment 4 (Doc. No. 314).
DHS argues that the voluntary payment doctrine bars AAA Bonding’s recovery of the
$1,008,310.51. AAA Bonding argues that it should recover the money that it paid to DHS for
the bonds, but in its briefs, AAA Bonding does not reference any legal authority to rebut DHS’s
position regarding the voluntary payment doctrine. Parties are invited to submit additional

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briefing on this point, and are directed to cite to specific case law or other legal authority, if it
exists, to support their contentions.
IV.

CONCLUSION
For the foregoing reasons, the United States Department of Homeland Security’s Motion

to Dismiss is GRANTED IN PART and DENIED IN PART. AAA Bonding Agency, Inc.’s
Motion for Judgment and Motion for Repayment are DEFERRED. Parties have ten days to
submit briefing on the voluntary payment doctrine, citing legal authority, and to submit proposed
orders of final judgment consistent with this order and the Fifth Circuit’s rulings. Finally, along
with their proposed orders, parties should submit additional briefing that specifically addresses
the scope of this Court’s remaining jurisdiction now that the counterclaim has been dismissed;
namely, which bonds, if any, are still before this Court for the purpose of final judgment.
IT IS SO ORDERED.
SIGNED on this the 24th day of September, 2015.

KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE

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