United States District Court, D. Columbia
November 14, 2005.
SUBURBAN MORTGAGE ASSOCIATES, INC., Plaintiff,
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants.
The opinion of the court was delivered by: HENRY KENNEDY JR., District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Suburban Mortgage Associates, Inc. ("Suburban"),
brings this action against the United States Department of
Housing and Urban Development ("HUD"), and one of its
subagencies, the Federal Housing Administration ("FHA").
Suburban, a commercial mortgage lender, obtained FHA insurance
coverage for a mortgage loan it issued to a nursing home in
Providence, Rhode Island. After the borrower defaulted, Suburban
elected to assign the mortgage to HUD. After nearly a year of
inaction, HUD rejected the assignment on grounds of fraud or
material misrepresentation. Suburban now seeks declaratory and
injunctive relief that would require HUD to accept the assignment
of the mortgage and pay insurance proceeds to Suburban, and also
seeks review of HUD's determination that it engaged in fraud or
Presently before the court are defendants' motions to dismiss
for lack of subject matter jurisdiction [#22], or in the
alternative to transfer the case to the Court of Federal Claims
[#45], and Suburban's motions for a preliminary injunction [#3]
and for production of the administrative record [#38].*fn1 Upon consideration of the
parties' briefing, the accompanying submissions, and the argument
of counsel at a preliminary injunction hearing, the court
concludes that defendants' motion to dismiss must be granted in
part and denied in part; defendants' motion to transfer must be
denied; plaintiff's motion for a preliminary injunction must be
denied; and plaintiff's motion to produce the administrative
record must be granted.
A. HUD's Mortgage Insurance Program
The National Housing Act ("NHA"), 12 U.S.C. §§ 1701 et seq.,
authorizes HUD to insure mortgage loans, and empowers the
Secretary of HUD "to insure as hereinafter provided any mortgage
offered to him which is eligible for insurance as hereinafter
provided, and, upon such terms as the Secretary may prescribe, to
make commitments for the insuring of such mortgages prior to the
date of their execution and disbursement thereon." Id. §
1709(a). The FHA is the component of HUD responsible for
implementing the NHA's mortgage insurance program.*fn2 See
id. § 1708. HUD may insure mortgages which, among other
purposes, are issued for the development of nursing homes,
intermediate care facilities, and "assisted living facilities for
the care of frail elderly persons." Id. § 1715w(a).*fn3 To be eligible for mortgage insurance, the mortgage must
"[h]ave been made to, and be held by, a mortgagee approved by the
Secretary as responsible and able to service the mortgage
properly." Id. § 1709(b)(1). In addition, HUD may specify
"terms and provisions with respect to insurance, repairs,
alterations, payment of taxes, default, reserves, delinquency
charges, foreclosure proceedings . . . and other matters as the
Secretary may in his discretion prescribe." Id. § 1709(b)(7).
Once HUD has approved an application for insurance, "a
commitment shall be issued by the Commissioner setting forth the
terms and conditions upon which the mortgage will be insured."
24 C.F.R. § 200.46. Before HUD issues insurance coverage, the
mortgagee "shall certify to the Commissioner that it will conform
with terms and conditions established by the Commissioner for the
mortgagee's control of project funds." Id. § 200.51. HUD then
"indicate[s] the insurance of the mortgage by endorsing the
original credit instrument and identifying the section of the
[NHA] and the regulations under which the mortgage is insured and
the date of insurance." Id. § 200.100(a). This step is referred
to as `initial endorsement,' as opposed to `final endorsement,'
which occurs only "[w]hen all advances of mortgage proceeds have
been made and all the terms and conditions of the commitment to
the Commissioner's satisfaction," at which point HUD again
endorses the credit instrument. Id. § 200.100(b). Both HUD and
the lender are "bound from the date of initial endorsement . . .
by the provisions of the Contract Rights and Obligations" set
forth in 24 C.F.R. pt. 232. Id. § 200.100(c).
Mortgage lenders may opt to sell or retain loans they
originate. If a lender retains a loan, it must "service or
arrange for servicing of the loan." Id. § 202.5(e). Lenders
must "service loans in accordance with accepted practices of
prudent lending institutions"; must "have adequate facilities for contacting the borrower in the event of
default, and shall otherwise exercise diligence in collecting the
amount due"; and "remain responsible to [HUD] for proper
collection efforts, even though actual loan servicing and
collection may be performed by an agent of the lender." Id. §
201.41(a). Additionally, a lender receiving HUD mortgage
insurance may also issue securities in the amount of the mortgage
and then sell them to investors. Another component of HUD, the
Government National Mortgage Association ("GNMA"),
12 U.S.C. § 1717(a)(2)(A), is authorized to "guarantee the timely payment of
principal of and interest on such trust certificates or other
securities" that the lender may issue. Id. § 1721(g)(1).
A default on the mortgage occurs upon the "failure of the
mortgagor to make any payment due under or provided to be paid by
the terms of a mortgage insured under [the NHA]," Id. §
1713(g); see also 24 C.F.R. § 232.830(a). If the default
continues for a period of 30 days, the lender becomes entitled to
receive the benefits of the mortgage insurance.
12 U.S.C. § 1713(g); 24 C.F.R. § 232.830(c). If the borrower's default is not
cured within the 30-day grace period, the lender must then notify
the FHA Commissioner of the default in writing, within an
additional 30-day period. Id. § 232.850.
Upon the continuation of a default for 30 days, the lender has
the option of either assigning the mortgage to HUD, or else
proceeding to foreclosure. 12 U.S.C. § 1713(g);
24 C.F.R. § 232.865. If electing assignment, "the mortgagee shall be entitled
to receive the benefits of the insurance . . . upon assignment,
transfer, and delivery to the Secretary" of rights and interests
arising out of the mortgage; claims of the lender arising out of
the mortgage transactions; "all policies of title or other
insurance or surety bonds or other guaranties and any and all
claims thereunder"; any remaining balance on the mortgage loan
not advanced to the borrower; cash or property held by the lender as deposits made by
the borrower; and records relating to the mortgage transactions.
12 U.S.C. § 1713(g). The lender may alternately "proceed to
foreclosure on and obtain possession of" the mortgaged property,
and receive benefits of the insurance upon the "prompt conveyance
to the Secretary of title to the property"; and assignment to the
Secretary of all claims of the lender arising out of the mortgage
transaction or foreclosure proceedings, "except such claims as
may have been released with the consent of the Secretary." Id.
If the lender intends to file a claim for the benefits of the
loan insurance, it must file a claim "within 45 days after the
lender becomes eligible for the benefits of the loan insurance,
or within such later time as may be agreed upon by the
Commissioner in writing." 24 C.F.R. § 232.875.
Finally, the NHA provides that once the lender files a claim
according to the specified procedures and within the requisite
deadlines, HUD in most cases must accept the election of
any contract of insurance . . . executed by the
Secretary under this subchapter shall be conclusive
evidence of the eligibility of the loan or mortgage
for insurance, and the validity of any contract of
insurance so executed shall be incontestable in the
hands of an approved financial institution or an
approved mortgagee from the date of the execution of
such contract, except for fraud or material
misrepresentation on the part of such approved
financial institution or approved mortgagee.
12 U.S.C. § 1709(e) (emphasis added).
B. The Hillside Mortgage
Suburban sought to originate a mortgage loan in the amount of
$12,979,300 to Hillside Health Care Associates ("Hillside
Associates")*fn4 to fund the purchase and rehabilitation of
the former Jewish Home for the Aged in Providence, Rhode Island. Am.
Compl. ¶ 12. Suburban applied to HUD for insurance coverage on
the loan on December 10, 1997. Defs.' Mot. to Dismiss/Opp'n to
Prelim. Inj. ("Mot. to Dismiss"), Ex. D ("Crisafulli Decl.") ¶ 4.
HUD committed to insure the loan on June 29, 1998, id., and the
loan went to initial endorsement on August 19, 1998. Am. Compl. ¶
12. Suburban used the loan to issue a GNMA mortgage-backed
security, which it then sold to an investor. Id. ¶ 12. Suburban
also elected to retain and service the Hillside mortgage.
Crisafulli Decl. ¶ 7.
Prior to the loan closing, Suburban executed a Mortgagee's
Certificate setting forth its responsibilities, including a
provision that upon amortization of the principal, it would
require Hillside Associates to make monthly deposits into a
"Reserve Fund for Replacements." Withdrawals from this fund
required written permission from HUD, which also mandated
"[n]otices of any failure to receive the required deposits"
within 60 days. Defs.' Mot. to Dismiss, Ex. G, Attach. 7
("Mortgagee's Certificate"). In addition to requiring Hillside
Associates to make interest and principal payments, HUD also
required Suburban to provide for "[e]qual monthly payments as
will amortize the ground rents, if any, and the estimated amount
of all taxes, water charges, special assessments, and fire and
other hazard insurance premiums." 24 C.F.R. § 200.84(b)(3). Under the terms of the mortgage note executed between Suburban
and Hillside Associates on August 19, 1998, Hillside would pay
interest only from September 1, 1998 through July 1, 1999. On
August 1, 1999, Hillside Associates would begin paying
installments of both interest and principal, in the amount of
$82,359.92 per month. Defs.' Mot. to Dismiss, Ex. G, Attach. 8
("Mortgage Note."). The mortgage terms also required Hillside
Associates to begin making payments into the reserve for
replacements account and the escrow account on the same date.
Hillside Associates, meanwhile, received the necessary
regulatory approval to begin operating a nursing home at the
Hillside facility in April and May 1999. Am. Compl. ¶ 14.
Hillside, however, "struggled to fill enough beds to self-sustain
the facility," id. ¶ 15, and Hillside Associates accordingly
failed to make any of the required payments on August 1, 1999.
Id. ¶¶ 18, 20. Upon becoming aware of Hillside Associates'
default, Suburban states that it "followed FHA prescribed
guidance in an effort to avoid a default and an ensuing claim for
mortgage insurance." Id. ¶ 20. Specifically, Suburban allowed
Hillside Associates to "suspend deposits to the reserve for
replacement and to defer payments of principal until final
endorsement," and required the borrower "to enter into payment
plans with the City of Providence, Rhode Island to address
delinquent real estate taxes." Id. ¶¶ 21, 23. Suburban also
"negotiated an arrangement" with the investor who purchased the
GNMA-guaranteed security it issued in the amount of the Hillside
mortgage "in order to give the Mortgagor more time to resolve its
financial problems." Id. ¶ 25. Suburban asserts that it "failed to obtain FHA's prior
approval" before implementing the specified workout strategies
due to an "administrative oversight." Id. ¶ 18. Because
Suburban "was under the mistaken impression that the request for
deferral of principal had already been made and approval had been
granted from HUD, it did not believe that it was necessary to
instruct the Mortgagor to start making principal payments,"
although it "informally pressed" Hillside Associates to begin
making these payments. Def.'s Mot. to Dismiss, Ex. I at 7.
In HUD's view, though, Suburban simply failed to require
Hillside Associates to make the principal payments or payments
into the reserve for replacements fund at all, and "failed to
report these defaults to HUD." Defs.' Mot. to Dismiss at 12.
According to HUD, "Suburban did not seek HUD's permission to
permit Hillside [Associates] to forego any of these payments, so
all three defaults continued for three and one half years." Id.
at 13 (emphasis omitted). HUD states that is first learned of the
defaults in January 2003. Crisafulli Decl. ¶ 11. HUD also claims
that Suburban used impermissible workout strategies in attempting
to help Hillside Associates cure its default, such as allowing
the borrower to pay real estate taxes directly. Defs.' Mot. to
Dismiss, Ex. J ("Miller Decl.") ¶ 6. Sometime in 2003, HUD's
Office of the Inspector General began an audit of Suburban after
apparently discovering that it had originated HUD-insured
mortgages to three defaulted nursing homes and one financially
troubled nursing home. O'Rourke Decl., attach. ("Discussion Draft
Audit Report") at 2. The draft audit report noted "significant
irregularities in how Suburban Mortgage originated and serviced
HUD-insured loans to related entities," and recommended that HUD
pursue recovery "of more than $7.7 million in insurance losses"
and "terminate the $25.8 million in HUD-insured loans" to the
failed nursing homes, including Hillside. Id. at 3. Not surprisingly, Suburban paints a different picture of its
efforts. It claims that in January 2003 it "realized that it had
not received the necessary FHA approvals to defer amortization of
the mortgage note principal and to suspend payments to the
reserve for replacement fund." Am. Compl. ¶ 26. On April 11,
2003, HUD approved Hillside Associates' request to begin making
up the deficit in the reserve for replacements account, and
extended the deadline for Hillside Associates' submission of a
plan to achieve final endorsement on the mortgage. Defs.' Mot. to
Dismiss, Ex. G, Attach. 13. Suburban claims that "HUD also orally
approved payment of the unamortized principal at final
endorsement," Am. Compl. ¶ 29, a contention HUD disputes. On
January 21, 2004, HUD denied Suburban's request "to retroactively
defer commencement of amortization of the [Hillside] mortgage and
refused to proceed to final endorsement." Id. ¶ 31. After
Hillside failed to make its March 1, 2004 loan payment, Suburban
states that it notified HUD of the default. Id. ¶ 32.
On March 3, 2004, Antonio Giordano and Consultants, Inc.
petitioned the Superior Court of the State of Rhode Island to
appoint a receiver for the Hillside property. Defs.' Mot. to
Dismiss, Ex. N-3. The Superior Court appointed Allan Shine on the
same day as a temporary receiver, and made this appointment
permanent on March 29, 2004. Id., Exs. N-4, N-5. The Court also
enjoined all creditors from proceeding in any action against
Hillside in the absence of a Court order authorizing them to do
so. Id., Ex. N-4 ¶ 6. On December 6, 2004, the Superior Court
authorized Shine to sell Hillside "free and clear of all
mortgages, security interests, liens, claims, encumbrances and
interests. . . ." Pl.'s Mot. For Prelim. Inj., Ex. A ("Richards
Aff.") ¶ 40. On May 12, 2004, Suburban elected to assign the Hillside
mortgage to HUD.
HUD contends that, because it "was aware of certain problems
connected with [the Hillside] loan, as well as the HUD OIG audit
and an accompanying grand jury investigation, "HUD took no
immediate action on this election." Miller Decl. ¶ 12. On
December 21, 2004, HUD responded to Suburban's notice of
election, noting that "we understand that there are numerous
liens that may affect the priority of the lien covering the
Hillside Health Center loan," and that "we cannot commence
consideration of the acceptance of the assignment of the Hillside
Health Center loan until you provide us with satisfactory
evidence that the loan is a valid first lien and warrant in
writing that no act or omission by you has impaired its
validity." Id., attach. 2.
An attorney representing Suburban replied to HUD on January 5,
2005, responding to various title issues, denying that Suburban
committed any fraud or misrepresentation, contending that "HUD is
improperly using a borrower default as a basis to deny coverage
to an insured lender," and demanding that HUD accept Suburban's
election of assignment. Id., attach 3. Suburban filed suit in
this court on April 29, 2005, seeking a court order compelling
HUD to accept its election. That same day, then-FHA Commissioner
John Weichert wrote to J. Walsh Richards, Jr., Suburban's
president, stating that "[y]our election i[s] rejected on the
ground of fraud or material misrepresentation . . . as well as on
other grounds relating to the terms of the contract." Id.,
A. Subject Matter Jurisdiction
Subject matter jurisdiction is a "threshold matter" for the
court to resolve, because, in its absence "the court cannot
proceed at all in any cause." Steel Co. v. Citizens for a
Better Environment, 523 U.S. 83, 94 (1998) (quoting Ex parte
McCardle, 74 U.S. 506, 514 (1868)). HUD contends that the court
lacks subject matter jurisdiction over Suburban's suit because it
is, "in reality, a breach of contract suit in which the plaintiff
is attempting to get money out of the Government," Defs.' Mot. to
Dismiss at 21, and therefore may only be heard by the Court of
Federal Claims. Suburban responds that it is in fact seeking
"specific relief" from HUD's "unconstitutional, final agency
action," Pl.'s Opp'n at 2, 7, and is properly before this court.
When facing a motion to dismiss for lack of subject matter
jurisdiction, the plaintiff bears the burden of establishing the
court's jurisdiction. Lujan v. Defenders of Wildlife,
504 U.S. 555, 561 (1992). The court, however, should only dismiss a
complaint on such grounds "if it appears beyond doubt that the
plaintiff can prove no set of facts in support of [its] claim
which would entitle [it] to relief." Richardson v. United
States, 193 F.3d 545, 549 (D.C. Cir. 1999) (quotation omitted).
As an initial matter, "sovereign immunity shields the Federal
Government and its agencies from suit." FDIC v. Meyer,
510 U.S. 471, 475 (1994). To establish the court's subject matter
jurisdiction in an action against the United States, the
plaintiff must identify "an explicit statutory waiver" to federal
sovereign immunity. Bancoult v. McNamara, 227 F. Supp. 2d 144,
148 (D.D.C. 2002) (citing Meyer, 510 U.S. at 475; Lane v.
Peña, 518 U.S. 187, 192 (1996); Galvan v. Fed. Prison Indus.,
Inc., 199 F.3d 461, 463-64 (D.C. Cir. 1999)). The Administrative
Procedure Act provides a waiver of sovereign immunity for persons
"adversely affected or aggrieved by agency action within the
meaning of a relevant statute," provided that such persons are
"seeking relief other than money damages." 5 U.S.C. § 702. The
APA is inapplicable, however, "if any other statute that grants
consent to suit expressly or impliedly forbids the relief which is sought." Id. The APA also limits judicial review of
agency action to situations where "there is no other adequate
remedy in a court," id. § 704. In sum, then, "the APA excludes
from its waiver of sovereign immunity (1) claims for money
damages, (2) claims for which an adequate remedy is available
elsewhere, and (3) claims seeking relief expressly or impliedly
forbidden by another statute." Transohio Savings Bank v. Office
of Thrift Supervision, 967 F.2d 598, 607 (D.C. Cir. 1993). The
court next considers whether any of these three APA exclusions
apply to Suburban's claims.
1. Money Damages
The first relevant exception to the APA is that the Act only
waives sovereign immunity for suits "seeking relief other than
money damages," 5 U.S.C. § 702. Money damages are payments
"intended to provide a victim with monetary compensation for an
injury to the person, property, or reputation," as opposed to an
equitable action for specific relief, "which may include an order
providing for . . . the recovery of specific property or
monies." Bowen v. Massachusetts, 487 U.S. 879, 893 (1988)
(quoting Larson v. Domestic & Foreign Commerce Corp.,
337 U.S. 682, 688 (1949)). Money damages, then, may not simply be equated
with `money'; "[t]he fact that a judicial remedy may require one
party to pay money to another is not a sufficient reason to
characterize the relief as `money damages.'" Id. The difference
lies in the purpose behind the payment sought, as damages are
awarded to a plaintiff "to substitute for a suffered loss,
while specific remedies `are not substitute remedies at all, but
attempt to give the plaintiff the very thing to which he was
entitled.'" Maryland Dep't of Human Resources v. United States
Dep't of Health and Human Servs., 763 F.2d 1441, 1446 (D.C. Cir.
1985) (quoting D. DOBBS, HANDBOOK ON THE LAW OF REMEDIES 135
(1973)). Suburban seeks declaratory and injunctive relief setting aside
HUD's determination of fraud or misrepresentation and ordering
the agency to accept assignment of the Hillside mortgage. While
Suburban has characterized its relief in injunctive, rather than
monetary, terms, if it prevailed HUD would effectively be
compelled to make monthly payments to Suburban's GNMA investor
and to remit insurance premiums to Suburban. These payments,
however, would not be made as compensation for the injury
Suburban suffered as a result of HUD's actions; rather, they are
payments that HUD would have been obligated to make all along had
it, in Suburban's view, discharged its obligations. Accordingly,
while Suburban thus clearly hopes to recover monies from HUD,
this relief cannot properly be characterized as `money damages.'
Therefore, "the first limitation on the APA's waiver of the
government's sovereign immunity is not a bar" to the court's
exercise of jurisdiction. Holly Sugar Corp. v. Veneman,
355 F. Supp. 2d 181, 193 (D.D.C. 2005).
2. Adequate Remedy
This court's jurisdiction to review agency action is also
limited to "final agency action for which there is no other
adequate remedy in a court," 5 U.S.C. § 704. HUD argues that
Suburban indeed has another adequate remedy in court, namely a
suit for money damages in the Court of Federal Claims. Congress
has provided the Court of Federal Claims with jurisdiction to
"render judgment upon any claim against the United States founded
either upon the Constitution, or any Act of Congress or any
regulation of an executive department, or upon any express or
implied contract with the United States, or for liquidated or
unliquidated damages in cases not sounding in tort."
28 U.S.C. § 1491(a)(1) ("Tucker Act"). Although the Tucker Act itself
"contains no limitation on the type of relief it authorizes, the
Act has long been construed as waiving sovereign immunity only for claims seeking damages, and not for
those seeking equitable relief," Transohio, 967 F.2d at 608
(citing Richardson v. Morris, 409 U.S. 464, 465 (1973)
(internal citation omitted); ERWIN CHEMERINSKY, FEDERAL
JURISDICTION § 9.2 at 488 (1989)).
Here, HUD contends that "there can be no question that
Suburban's alleged past and prospective losses, were it to
prevail, would be fully compensable in money. This remains true
even if, as Suburban may urge, it were to go entirely out of
business as a result of the action that HUD has taken." Defs.'
Mot. to Dismiss at 23. HUD cites Energy Capital Corp. v. United
States, 302 F.3d 1314 (Fed. Cir. 2002), to support its
contention that Suburban's remedies available under the Tucker
Act would be "entirely adequate." Energy Capital, however, merely
sought to recover prospective profits allegedly lost as a result
of HUD's breach of contract, not injunctive relief, and
accordingly initiated its suit in the Court of Federal Claims.
See id. at 1316, 1318-20. Energy Capital provides no support
whatsoever for HUD's proposition that a company claiming that
allegedly improper agency action will drive it out of business in
the absence of injunctive relief has an "entirely adequate"
remedy in a suit for money damages. Furthermore, while some of
Suburban's claimed losses (such as insurance premiums or payments
to investors) may be easily reduced to a monetary sum, others may
prove much harder to fix (such as lost future profits), and yet
others may prove nearly impossible to quantify (such as the loss
of the company's reputation or its employees' jobs). Instead,
Suburban's claim that its entire existence as a going concern is
threatened by agency action, "anticipates the need for injunctive
relief" and "it is doubtful that a simple money judgment . . .
would be appropriate." Nat'l Ctr. for Mfg. Scis. v. United
States, 114 F.3d 196, 201 (Fed. Cir. 1997). Just as important, Suburban is looking to the court to provide
equitable remedies; the Court of Federal Claims, even if it ruled
in Suburban's favor, could not provide the relief sought, since
"except for certain narrowly defined circumstances, [it] is
prohibited from granting equitable relief." First Hartford Corp.
Pension Plan & Trust v. United States, 194 F.3d 1279, 1294 (Fed.
Cir. 1999); see also Massie v. United States, 226 F.3d 1318,
1321 (Fed. Cir. 2000) (Court of Federal Claims "had no authority"
to order equitable remedy such as specific performance).
Suburban, then, does not have another "adequate remedy" in court
which would prevent the APA from waiving sovereign immunity with
respect to its claims.
3. Expressly or Impliedly Forbidden
Finally, even if a plaintiff wishes to pursue claims seeking
relief other than money damages, and for which no other adequate
remedy may be obtained in court, the APA will not provide a
waiver of sovereign immunity "if any other statute that grants
consent to suit expressly or impliedly forbids the relief which
is sought." 5 U.S.C. § 702. Under the Tucker Act, claims based
upon breach of contract "exceeding the $10,000 jurisdictional
ceiling . . . are within the exclusive jurisdiction" of the Court
of Federal Claims. Waters v. Rumsfeld, 320 F.3d 265, 270 (D.C.
Cir. 2003) (quoting Goble v. Marsh, 684 F.2d 12, 15 (D.C. Cir.
1982); and citing United States v. Hohri, 482 U.S. 64, 72
(1987)).*fn5 When applied to contract claims, the Tucker Act "impliedly
forbids in APA terms not only district court awards of money
damages, which the Claims Court may grant, but also injunctive
relief, which the Claims Court may not." Transohio,
967 F.2d at 609. The APA, therefore, "does not waive sovereign immunity for
contract actions against the government," regardless of the
relief sought. Id. To the extent that Suburban seeks an
injunction ordering specific performance of a contract, then,
this court may not hear such claims.
Suburban's complaint asserts two grounds for relief. First,
Suburban argues that HUD and the FHA's "actions and belated
conclusion, without support, that Plaintiff committed fraud or
material misrepresentation violate Suburban's right to due
process," Am. Compl. ¶ 51. Second, Suburban "seeks specific
relief in the form of payment of the insured loan amount and the
reimbursement of the exact payments it made," id. ¶ 58. This
second count of Suburban's complaint, then, seeks an order
requiring defendants to pay monies allegedly owed under the
mortgage insurance agreement, essentially "the classic
contractual remedy of specific performance." Spectrum Leasing
Corp. v. United States, 764 F.2d at 891, 894 (D.C. Cir. 1985).
Here, while it may well be requesting "specific relief," Suburban
is simply asking the court to enforce the terms of its contract
with HUD. Under Transohio, this court clearly lacks
jurisdiction over such a claim.*fn6 See also Sharp v.
Weinberger, 798 F.2d 1521, 1524 (D.C. Cir. 1986) (court "know[s] of no case in which a court has asserted jurisdiction
either to grant a declaration that the United States was in
breach of its contractual obligations or to issue an injunction
compelling the United States to fulfill its contractual
As for Suburban's remaining claim, HUD asserts that it sounds
in contract; Suburban counters that it arises instead under the
APA. The district court will not have jurisdiction "where a
plaintiff casts his complaint as seeking equitable relief merely
as a pretext in an attempt to avoid the Court of Federal Claims'
exclusive jurisdiction." Bublitz v. Brownlee,
309 F. Supp. 2d 1, 7 (D.D.C. 2004) (citation omitted). At the same time, a court
"will not find that a particular claim is one contractually based
merely because resolution of that claim requires some reference
to a contract." Spectrum Leasing, 764 F.2d at 893. The court
must determine whether or not a claim is contractually based by
examining its "substance rather than the form" of the complaint.
Bliss v. England, 208 F. Supp. 2d 2, 6 (D.D.C. 2002) (citing
Brazos Elec. Power Coop. v. United States, 144 F.3d 784, 787
(Fed. Cir. 1998)). To properly undertake this evaluation, the
court must consider "both the source of the rights upon which the
plaintiff bases its claims" and the "type of relief sought (or
appropriate)." Megapulse, Inc. v. Lewis, 672 F.2d 959, 968
(D.C. Cir. 1982).
In Megapulse, the plaintiff corporation entered into a series
of contracts with a federal government agency (the Coast Guard)
for the demonstration and development of navigation transmitter
technology. The parties' contracts included provisions that data
first produced in performance of their agreement would become the
property of the government, while all other data would remain the
property of Megapulse. Id. at 961-62. After a dispute over the
Coast Guard's release of data in which Megapulse claimed a
proprietary interest, the company sought an injunction to prevent the release of the information, which it
claimed would violate the Trade Secrets Act. The district court
determined that it lacked subject matter jurisdiction over the
suit because it was in essence a contract dispute properly
adjudicated by the Court of Federal Claims. The D.C. Circuit
disagreed, finding that while the plaintiff was seeking relief
that would effectively hold the government in breach of contract,
it was not specifically asserting its rights under the contract,
but under a federal statute.*fn7
HUD here argues that because its "only relationship with
Suburban is a contractual one," Defs.' Reply at 2, Suburban's
claim cannot be adjudicated in this court. "All of Suburban's
claims flow directly from" HUD's endorsement of the Hillside
mortgage note on August 19, 1998, and "[w]ithout this
endorsement, which formed the contract between Suburban and HUD,
[Suburban] would have no claim at all against HUD." Defs.' Reply
at 2 (emphases omitted). This is an exceptionally broad
construction of the requirement that a court examine "the source
of the rights upon which the plaintiff bases its claims."
Megapulse, 672 F.2d at 968. In defendants' view, the simple fact that the parties first entered
into their relationship through a contract renders Suburban's
present claims entirely contractual and, hence, subject to the
exclusive jurisdiction of the Court of Federal Claims. Under this
interpretation, though, the plaintiff in Megapulse could not
have pursued its claim in district court either, simply because
the transaction between the parties in that case also began with
A party "may bring statutory and constitutional claims in
federal district court even when the claims depend on the
existence and terms of a contract with the government."
Transohio, 967 F.2d at 610 (citing Sharp, 798 F.2d at 1523).
In its remaining claim, Suburban does not seek a court order
compelling HUD to abide by the terms of the insurance contact,
but rather asks the court to find that HUD acted arbitrarily and
capriciously in determining that Suburban committed fraud or
misrepresentation. Under this claim, Suburban argues that it was
deprived of its right to due process by the manner in which HUD
acted, a claim which "[is] not founded only on a contract" but
which "stem[s] from a statute or the Constitution." Id. at 609.
Suburban is incorrect, however, that "setting aside Defendants'
conclusions will require HUD's acceptance of the assignment of
the Hillside mortgage." Pl.'s Opp'n at 8. While this is quite
obviously the outcome that Suburban desires, a review of HUD's
agency action will not necessarily yield this result. Rather, the
court must consider whether the administrative record available
to HUD at the time it decided to reject Suburban's assignment on
the grounds of fraud or misrepresentation adequately supports
that decision. Accordingly, HUD shall file with the court a copy
of the administrative record it relied upon in making its
determination with respect to the election of assignment. B. Preliminary Injunction
Suburban also moves the court for a preliminary
injunction*fn8 ordering HUD to accept Suburban's assignment
of the Hillside mortgage, and requiring the FHA to reimburse
Suburban for "for insurance proceeds owed as a result of a
mortgage default." Pl.'s Mot. for Prelim. Inj. at 2. A
preliminary injunction is an "extraordinary remedy." Cobell v.
Norton, 391 F.3d 251, 258 (D.C. Cir. 2004) (citing Mazurek v.
Armstrong, 520 U.S. 968, 972 (1997)). Factors the court
considers in determining whether a preliminary injunction should
issue include whether "(1) there is a substantial likelihood of
success on the merits; (2) plaintiff will be irreparably injured
if an injunction is not granted; (3) an injunction will
substantially injure the other party; and (4) the public interest
will be furthered by the injunction." Serono Labs., Inc. v.
Shalala, 158 F.3d 1313, (D.C. Cir. 1998) (citing Wash. Metro.
Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 843
(D.C. Cir. 1977)).
In this case, the court finds that Suburban has not met this
considerable burden. Most significantly, Suburban has failed to
demonstrate a likelihood of success on the merits. The injunction
Suburban requests is identical to the relief it seeks on the
merits. The parties sharply dispute many crucial material facts,
including whether Suburban followed HUD's guidance, whether
Suburban sought to mislead HUD, and whether Suburban took
adequate steps to preserve the validity and priority of the
Hillside mortgage. In the face of these numerous disputed facts,
the court cannot conclude that Suburban has a likelihood of
success, making a preliminary injunction particularly
inappropriate. III. CONCLUSION
For the foregoing reasons, it is this 14th day of November,
ORDERED, that defendants' motion to dismiss is GRANTED with
respect to Count II of Suburban's complaint and DENIED with
respect to Count I; and it is further
ORDERED, that defendants' motion to transfer and Suburban's
motion for a preliminary injunction are DENIED; and it is
ORDERED, that Suburban's motion to produce the administrative
record is GRANTED. Defendants shall file with the clerk of this
court the administrative record underlying the decision at issue
in this case by no later than November 28, 2005.
© 1992-2005 VersusLaw Inc.