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XP Vehicles, Inc. v. Department of Energy

United States District Court, D. Columbia.

July 14, 2015

XP VEHICLES, INC., et al., Plaintiffs,
DEPARTMENT OF ENERGY, et al., Defendants

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For XP VEHICLES, INC., Plaintiff: Daniel Zachary Epstein, LEAD ATTORNEY, David T. Fischer, CAUSE OF ACTION, Washington, DC; Reed D. Rubinstein, LEAD ATTORNEY, DINSMORE & SHOHL LLP, Washington, DC; Karen Marie Groen, CHIEF OVERSIGHT COUNSEL, CAUSE OF ACTION, Washington, DC.

For LIMNIA, INC., Plaintiff: Daniel Zachary Epstein, LEAD ATTORNEY, CAUSE OF ACTION, Washington, DC; Reed D. Rubinstein, LEAD ATTORNEY, DINSMORE & SHOHL LLP, Washington, DC.

For U.S. DEPARTMENT OF ENERGY, Defendant: Peter J. Phipps, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC.

For STEVEN CHU, individually and in his official capacity as Secretary of U.S. Department of Energy, LACHLAN SEWARD, individually and in his official capacity as Director of Advanced Technology Vehicle Manufacturing Loan Program, Defendants: Mary Hampton Mason, LEAD ATTORNEY, DEPARTMENT OF JUSTICE, Torts Branch, Civil Division, Washington, DC; Peter J. Phipps, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC.

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KETANJI BROWN JACKSON, United States District Judge.

Congress has authorized the Department of Energy (" the DOE" ) to offer direct financial support to the manufacturers of clean energy vehicles and related components. See 42 U.S.C. § 17013 (2012). In accordance with this statutory mandate, the DOE administers various loan programs, including the Advanced Technology Vehicle Manufacturing (" ATVM" ) Loan Program, which is designed to provide direct loans to manufacturers of energy-efficient vehicles. The DOE also administers the Section 1703 Loan Guarantee Program (" LG Program" ), pursuant to which the agency guarantees loans for advanced technology projects that result in the avoidance or reduction of air pollutants. Plaintiff XP Vehicles, Inc. (" XPV" ) is a now-dissolved California-based corporation that applied to the DOE in November of 2008 for an ATVM loan for the manufacture of a light-weight, energy-efficient sport utility vehicle. XPV partnered with Plaintiff Limnia, Inc. (" Limnia" ), a Delaware-based corporation that developed an energy storage system to power XPV's proposed vehicle. Limnia, too, applied to the DOE for loan assistance, seeking both an ATVM loan and an LG Program loan guarantee in February of 2009. The DOE denied both Plaintiffs' loan requests, and XPV and Limnia have now filed a seven-count complaint against the DOE, its Secretary Ernest Moniz in his official capacity, former Secretary of Energy Steven Chu in his individual capacity, and former Director of the ATVM Loan Program Lachlan Seward in his individual capacity (collectively, " Defendants" ), alleging that the DOE's decisionmaking process with respect to these loan programs was infused with cronyism and political favoritism

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and that their applications were denied unfairly and arbitrarily.[1] In essence, Plaintiffs maintain that, instead of reviewing applications impartially and on the merits, Defendants used the ATVM Loan Program and LG Program to reward political patrons, in violation of the Constitution's due process and equal protection guarantees and in contravention of the Administrative Procedure Act (" APA" ), 5 U.S.C. § § 701-706 (2012).

Before this Court at present are two motions to dismiss Plaintiffs' complaint: one from the DOE and Moniz (" the Official Capacity Defendants" ), and one from Chu and Seward (the " Individual Capacity Defendants" ). The Official Capacity Defendants make various threshold jurisdictional arguments, including sovereign immunity, lack of standing, and ripeness; on the merits, they argue both that XPV lacks the capacity to sue because it is a dissolved corporation and that Plaintiffs have failed to state a claim upon which relief can be granted. The Individual Capacity Defendants adopt the Official Capacity Defendants' dismissal arguments, and further argue that XPV's claims are barred by the statute of limitations; that no Bivens action exists for the alleged constitutional violations; and that, even if a remedy did exist, Chu and Seward are protected by qualified immunity.

As explained further below, this Court concludes that, although it does have jurisdiction over the claims Plaintiffs make in their complaint, all of XPV's claims and most of Limnia's claims must be dismissed in their entirety. XPV's claims against the Official Capacity Defendants must be dismissed because, as a dissolved corporation, XPV does not have the capacity to sue for injunctive relief, and XPV's claims against the Individual Capacity Defendants must be dismissed because no Bivens action exists that will permit XPV to recover monetary damages from those defendants. Limnia's constitutional claims fail in a similar fashion, both because there is no Bivens action and also because Limnia has not alleged facts that are sufficient to state a constitutional claim. But Limnia's two APA claims--which arise out of the denial of its ATVM loan application, on the one hand, and the processing of its LG Program application, on the other--survive the pending motions to dismiss because Limnia has adequately alleged that the DOE's denials of Limnia's ATVM Loan Program and LG Program applications were the result of arbitrary and capricious agency action in violation of the APA. Consequently, the Official Capacity Defendants' motion to dismiss will be GRANTED IN PART and DENIED IN PART, and the Individual Capacity Defendants' motion to dismiss will be GRANTED in full. A separate order consistent with this opinion will follow.


A. The DOE's Implementation Of The ATVM Loan Program And The LG Program

1. The ATVM Loan Program

In 2007, Congress enacted the Energy Independence and Security Act (" EISA" ), Pub. L. 110-140, § 136, 121 Stat. 1492, 1514-16, with the express purpose of

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" mov[ing] the United States toward greater energy independence and security" and " increas[ing] the efficiency of products, buildings, and vehicles[.]" Id. at 1492. To this end, the EISA imposed heightened fuel economy standards, see id. § 102, and it also introduced several new financial assistance programs designed to further the objective of promoting the efficient use of energy resources, see, e.g., id. § 131 (providing grants to encourage the use of electric vehicles); id. § 135 (providing loan guarantees for the domestic manufacture of vehicle batteries). The Advanced Technology Vehicle Manufacturing Loan Program--referred to throughout this opinion as " the ATVM Loan Program" --was one of these initiatives. See id. § 136.

Under the ATVM Loan Program, the DOE provides a total of $25 billion in direct loans to the manufacturers of " advanced technology vehicles" and the " qualifying components" of such vehicles, so long as these manufacturers are engaged in certain eligible activities. 42 U.S.C. § 17013(d)(1).[2] The EISA specifies that ATVM loan applicants must submit applications to the Secretary of the DOE, and that upon receiving such loan applications, " [t]he Secretary shall select eligible projects" using criteria listed in the statute. Id. § 17013(d)(2)-(3). Specifically, by statute, a successful " award recipient" --

(A) is financially viable without the receipt of additional Federal funding associated with the proposed project;
(B) will provide sufficient information to the Secretary for the Secretary to ensure that the qualified investment is expended efficiently and effectively; and
(C) has met such other criteria as may be established and published by the Secretary.

42 U.S.C. § 17013(d)(3). Furthermore, under the DOE's implementing regulations, an ATVM loan applicant must be " [a]n automobile manufacturer that can demonstrate an improved fuel economy" or " [a] manufacturer of a qualifying component[,]" 10 C.F.R. § 611.100(a) (2015), and the regulations also require such applicants to provide, inter alia, a description of " the nature and scope of the proposed project[,]" which must include " key milestones and [the] location of the project" and a " detailed explanation of how the proposed project qualifies" for loan assistance, id. § 611.101.

The DOE has adopted a two-step procedure for evaluating ATVM loan applications. First, the agency engages in " eligibility screening" -- i.e., it determines whether the application contains the required information; whether the applicant satisfies the eligibility criteria; and whether the terms of the requested loan comport with the applicable statutory requirements. Id. § 611.103(a). The regulations state in no uncertain terms that the DOE " can at any time reject an application, in whole or in part, that does not meet these [eligibility] requirements." Id. If the application survives eligibility screening, the DOE will then move on to the second stage of the application process, which consists of a substantive merits review of the

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application. Id. § 611.103(b). The regulations establish that this review will be based on factors such as the project's " technical merit" and whether the proposed loan conditions adequately protect the government investment by providing sufficient security, priority of lien position, and percentage of the project to be financed with the loan. Id.

Significantly, the regulations that govern the ATVM Loan Program also state that " [o]nly an Agreement executed by a duly authorized DOE Contracting Officer can contractually obligate the government to make a loan" under the program. Id. § 611.105(a). And the regulations make clear that the " DOE is not bound by oral representations made during the Application stage, or during any negotiation process." Id. § 611.105(b).

2. The LG Program

The Section 1703 Loan Guarantee Program was established as part of the Energy Policy Act of 2005. See Pub. L. No. 109-58, § 1701-04, 119 Stat. 594, 1117-22 (codified at 42 U.S.C. § § 16511-14). The statute is aimed at promoting new and improved technologies that " avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases[,]" 42 U.S.C. § 16513(a), and it authorizes the DOE to guarantee loans for certain environmentally-friendly, energy-efficient projects, id. Among the categories of projects that are specified as qualifying for this loan program are " [h]ydrogen fuel cell technology" and " production facilities for the manufacture of fuel efficient vehicles or parts of those vehicles, including electric drive vehicles[.]" Id. § 16513(b).

Like the regulations that govern the ATVM Loan Program, the LG Program regulations set out a comprehensive but non-exhaustive list of " information and materials" that must be submitted as part of an application, including " [a] description of how and to what measurable extent the project avoids, reduces, or sequesters air pollutants and/or anthropogenic emissions of greenhouse gases, . . . [a] description of the nature and scope of the proposed project, . . . [and a] detailed description of the overall financial plan for the proposed project[.]" 10 C.F.R. § 609.6(b). Moreover, similar to the ATVM Loan Program, the regulations specify that " [o]nly a Loan Guarantee Agreement executed by a duly authorized DOE Contracting Officer can contractually obligate DOE to guarantee loans or other debt obligations[,]" id. § 609.10(a), and that the " DOE is not bound by oral representations made" at any stage in the application process, id. § 609.10(b).

However, unlike the ATVM Loan Program application process, the LG Program regulations require " [p]ayment of [an] Application filing fee" as part of an LG Program application, and the regulations specifically state that the " DOE will not consider any Application complete" until the application fee is paid. Id. § 609.6(b)(2), (c). Moreover, LG Program applications that satisfy all of the applicable requirements are ultimately subjected to " a competitive process" in which all applications are evaluated according to a series of factors and compared to each other. Id. § 609.7(a)-(b). To facilitate this process, prior to accepting applications for a loan guarantee, the DOE issues public solicitations for specific types of projects that it is looking to support, and it entertains LG Program applications pursuant to that solicitation. Id. § 609.3(a). For example, Plaintiff Limnia submitted the LG Program application that is at issue in the instant case in response to a DOE solicitation in June of 2008 for loan guarantee applications related to " projects in the United States that employ energy efficiency, renewable energy,

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and advanced transmission and distribution technologies[.]" U.S. Dep't of Energy, DE-FOA-0000005, Loan Guarantee Solicitation Announcement 2 (2008) (" LG Solicitation Announcement" ). The solicitation set a deadline of February 26, 2009, for any such applications, and noted that " [a]ll applicants must remit twenty-five percent (25%) of the application fee . . . upon submission of their applications to [the] DOE." Id. at 7. The solicitation also provided a schedule to determine the particular fee amount for each applicant, advising applicants " to make proper arrangements to assure that Treasury receives such fees on behalf of DOE by the dates specified[,]" and including instructions for the wire transfer. Id. at 9; see also id. at 59 (providing details for wire transfer).[3]

B. The Facts Of The Instant Case

Plaintiffs' complaint makes various assertions of fact regarding the circumstances surrounding the DOE's consideration and processing of XPV's ATVM loan application and Limnia's ATVM Loan Program and LG Program applications. These allegations, many of which are related below, must be accepted as true for the purpose of evaluating Defendants' motions to dismiss.

1. XPV's ATVM Loan Application

XPV is a now-dissolved " green technology" company that applied for an ATVM loan in December of 2008, seeking to fund the research and development of " an advanced technology, family-friendly SUV-style vehicle[.]" (Am. Compl., ECF No. 26, ¶ ¶ 1, 3, 14.) XPV's application asserted that its proposal fulfilled the requirements of the DOE's ATVM Loan Program because XPV planned to used " polymer plastics and skinned expanded foam pressure membranes to replace metal doors, body panels, hoods and roofs on a lightweight alloy frame[,]" and in so doing, XPV would produce an extremely light-weight vehicle that was also safe in operation because it employed " wraparound, pre-deployed 'airbag'" technology. ( Id. ¶ 17.)

According to the complaint, on December 2, 2008, Defendant Seward--the director of the ATVM Loan Program at that point in time--" acknowledged receipt" of XPV's application and " requested additional information[,]" which XPV provided. ( Id. ¶ 22.) Then, on December 31, 2008, Seward allegedly sent a letter to XPV indicating that XPV's application was " substantially complete" ( id. ¶ 22; Ex. 2 to Am. Compl., ECF No. 26-1, at 11), which led XPV to believe that the DOE had deemed XPV a " qualified applicant" such that the agency " would begin processing XPV's ATVM Loan Program application . . . no later than the end of December 2008, and that the review would take a matter of weeks, consistent with normal commercial lending practices" (Am. Compl. ¶ ¶ 23-24). Instead, XPV alleges that its application was " 'set-aside' in favor of applications from politically-connected government cronies [because] Defendants had 'fixed' the ATVM Loan Program process to benefit political donors" ( id. ¶ 26), as explained further below.

The complaint asserts that, beginning in the spring of 2009--approximately four months after XPV submitted its ATVM

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loan application--XPV had a series of interactions with the DOE relating to the status of XPV's ATVM loan application. First, Plaintiffs allege that, on April 23, 2009, the DOE's Chief of Staff and Senior Investment Officer, Jason Gerbsman, notified XPV that its " substantially complete" application had " been assigned to both a technical eligibility and merit review team, as well as a financial viability analysis team[,]" and that " [t]he technical team is very close to finishing their evaluations on both eligibility and project merit, and the financial team will be launching a more detailed and interactive due diligence phase of the XPV application review very soon." ( Id. ¶ 27 (alteration omitted).) This communication was allegedly followed by an offer of an in-person meeting to " discuss 'next steps'" ( id. ¶ 28); then, on May 28, 2009, Gerbsman purportedly met with an XPV representative, at which point Gerbsman allegedly told XPV that " 'everything looked good'" and that its application was " 'fully compliant and [had] passed technical review'" ( id. ¶ ¶ 29). Furthermore, according to the complaint, the DOE also declined to provide XPV with the same types of " special assistance" with the application process that it gave XPV's competitors during this period because, " as DOE staff put it, XPV's application was so good that special assistance was unnecessary." ( Id. ¶ 31; see also id. ¶ 36 (alleging that the DOE staff made optimistic statements to XPV over a seven-week period beginning in June of 2009).)

Notwithstanding the reassurances that members of the DOE staff allegedly provided to XPV during the application process, the DOE denied XPV's ATVM loan request on August 21, 2009. ( Id. ¶ 37.) The rejection letter, which Defendant Seward signed (and which XPV has filed as an exhibit to the complaint) asserted that the DOE was " not in a position to [make an] award [to] every eligible application[,]" and suggested that the XPV's application did not pass the DOE's merit review. (Ex. 3 to Am. Compl., ECF No. 26-1, at 13; see also Am. Compl. ¶ 38.)[4] Seward further explained generally that " the program [must] choose applications that are mostly likely to use the limited loan proceeds in a way that will best achieve the goals of the program." (Ex. 3 to Am. Compl. at 13.)

XPV alleges that it immediately requested both a statement regarding the specific grounds for the agency's denial of its application and a copy of the DOE's merit review documents. (Am. Compl. ¶ ¶ 39, 40.) XPV also allegedly placed a phone call to the DOE within five days of the denial ( id. ¶ 42); according to the complaint, the DOE staff person with whom the XPV representative spoke pulled the company's application file and orally provided myriad reasons for the denial, none of which XPV believed was valid ( id. ¶ ¶ 43-45).[5] The complaint also alleges that, during this phone conversation, Defendant Seward entered the room and cut the conversation off abruptly, directing the staff person to tell XPV that the DOE would send a letter to XPV outlining more fully the reasons that its loan application was denied. ( Id. ¶ 52.)

The complaint alleges that no such letter was forthcoming. ( Id. ¶ 53.) Thus, on September 21, 2009--approximately one month after the denial letter issued--XPV

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sent the DOE a written request for reconsideration of the denial of its ATVM loan application. ( Id. ¶ 54; Ex. 4 to Am. Compl., ECF No. 26-1, at 15.) In this written request, XPV pointed out that the reasons for the denial that the DOE staffer had provided on the phone were contrary to the information in XPV's application (Ex. 4 to Am. Compl. at 15), and XPV also asked the DOE to respond to a list of fifteen specific questions pertaining to its review of XPV's application ( id. at 16-18).

Approximately one month later, on October 23, 2009, Seward responded in writing to XPV's reconsideration request, providing a more detailed explanation for the denial of XPV's application. ( See Am. Compl. ¶ ¶ 55-63; Ex. 5 to Am. Compl., ECF No. 26-1, at 21.) The Seward letter did not claim that XPV had failed to meet any of the eligibility requirements set forth in the ATVM Loan Program's regulations (Am. Compl. ¶ 64), and it thus seemingly addressed the merits of XPV's proposal. Seward explained that XPV's proposed technology " appeared from the application to be at a development stage and not yet ready for commercialization[,]" which was a " significant weakness[.]" (Ex. 5 to Am. Compl. at 21.) Moreover, the project's " impact on fuel economy . . . was determined to be weak" ; the storage system for hydrogen was " unproven and potentially impractical for a consumer vehicle" ; and the company's " claims for reductions in petroleum use . . . were deemed to be unrealistic[.]" ( Id. )

2. Limnia's ATVM Loan Application

Limnia is a green technology company that, unlike XPV, is still in operation. ( Id. ¶ ¶ 2-3.) Limnia filed a loan application through the ATVM Loan Program in February of 2009 to produce an " advanced technology vehicle energy storage system" -- i.e., a vehicle battery. ( Id. ¶ 68.) Limnia and XPV are sister companies, and Limnia's proposed energy storage system was the power source for XPV's proposed lightweight SUV. ( Id. ¶ ¶ 3, 12, 68.)

The DOE rejected Limnia's ATVM application on April 10, 2009, on the ground that Limnia's energy storage system was a stand-alone charging station, not equipment to be installed in a vehicle, and thus was not a " qualifying component" under 42 U.S.C. § 17013(d)(1). ( Id. ¶ 69; Ex. 6 to Am. Compl., ECF No. 26-1, at 24.) Limnia requested reconsideration of this determination, noting that its energy storage system did, in fact, have to be installed inside a vehicle in order to be used, and that it actually was designed for this purpose. ( Id. ¶ 70.) On May 13, 2009, the DOE rejected Limnia's ATVM loan application for a second time, giving Limnia the same reason that it had proffered in the first denial. ( Id. ¶ 71.) The DOE did, however, request further information from Limnia that would allow it to reevaluate Limnia's application. ( Id. ; Ex. 8 to Am. Compl., ECF No. 26-1, at 30-31.) According to the complaint, Limnia responded to this letter on June 3, 2009, by providing the requested information and seeking reconsideration of its application once again. (Am. Compl. ¶ 72.) Plaintiffs allege that, as of the time the instant complaint was filed, the DOE had not responded to Limnia's request for another review. ( Id. ¶ ¶ 71-73.)

3. Limnia's LG Program Application

Around the same time that Limnia applied for an ATVM loan, it also applied for an LG Program loan guarantee, pursuant to the aforementioned solicitation that the DOE published in June of 2008. ( Id. ΒΆ 77.) Plaintiffs allege that, prior to Limnia's submission of its application in February of 2009, then-Secretary Chu had stated ...

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