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ACE American Insurcance Co. v. Federal Crop Insurance Corp.

United States District Court, District of Columbia

September 20, 2016

ACE AMERICAN INSURCANCE COMPANY et al., Plaintiffs,
v.
FEDERAL CROP INSURANCE CORPORATION et al., Defendant.

          MEMORANDUM OPINION

          ROYCE C. LAMBERTH United States District Judge.

         I. BACKGROUND

         This case concerns a contract to reinsure crops. The Federal Crop Insurance Corporation (“FCIC”) is a government subsidized insurance provider that operates under the Federal Crop Insurance Act (“FCIA”), 7 U.S.C. §§ 1501-1524. FCIC is supervised by the Department of Agriculture's Risk Management Agency (“RMA”). FCIC does not provide insurance directly to the end policy holders, i.e. farmers. Rather, FCIC works with “approved insurance providers” (hereinafter “approved providers”) through a “standard reinsurance agreement” (hereinafter “standard agreement”).

         Plaintiffs are approved providers who allege that FCIC improperly modified the actuarial methodology that sets premiums for several crops. Specifically, plaintiffs allege that they entered into a five year standard agreement based upon representations from FCIC that the actuarial methodology underlying premiums would not change. It did.

         Per 7 C.F.R. § 400.169, plaintiffs began pursuing their administrative remedies by contesting the premium setting methodology with the Deputy Director of Insurance Services. When unsuccessful, they appealed to the Civilian Board of Contract Appeals (hereinafter “the Board”) pursuant to 7 C.F.R. § 400.169(d). Plaintiffs argued for relief on the following grounds: that the change in methodology violated 7 U.S.C. § 1508(k)(8), which limits renegotiation of financial terms and conditions in the standard agreement; breach of the duty of good faith and fair dealing; promissory estoppel; and reformation due to mutual mistake. The Board granted summary relief to FCIC. Plaintiffs proceeded to file this action “seeking relief relating to claims that are outside the scope of [the Board's] jurisdiction as well as those appealed to [the Board]. In the alternative, [p]laintiffs bring an original action seeking relief relating to claims that are outside the scope of [the Board's] jurisdiction and seek a declaration that the [Board's] Order is in error.” Comp. 5, ECF No. 1.

         FCIC now moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure (FRCP) 12(c) or, in the alternative, summary judgment under FRCP 56. Many of the background facts pertinent to this case have been explained in the Board's opinion that is attached to the complaint. CBCA Order, ECF No. 1-2. The Court will repeat those facts here only to the degree necessary. Given the interplay between the parties' arguments regarding issues relevant to FRCP 12(c) and FRCP 56, the Court addresses each count of plaintiff's complaint in sequence.

         II. ANALYSIS AND DISCUSSION

         a. Count One: Breach of Contract Under the Duty of Good Faith and Fair Dealing

         Plaintiff contends FCIC breached the duty of good faith and fair dealing contained in the standard agreement by adopting a new methodology that changed premium rates for soybeans and corn. Comp. 24. FCIC argues that this claim was already adjudicated by the Board and cannot now be re-litigated due to the doctrine of res judicata. Mem. Supp. Mot. J. Pleadings 9, ECF No. 40.

         Specifically, FCIC argues that res judicata applies to determinations of administrative agencies, Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 107 (1991), that the doctrine bars suits between the same parties based on the same cause of action, Apotex, Inc. v. FDA, 393 F.3d 210, 217 (D.C. Cir. 2004), and that claim one is the same cause of action that was dismissed by the Board, Mem. Supp. Mot. J. Pleadings 9. Moreover, FCIC argues that while plaintiffs could have challenged the Board's opinion under the Administrative Procedures Act (APA), they expressly elected not to do so and, FCIC argues, disclaimed such a challenge per their memorandum “Reply to Response to Motion for Entry of Scheduling Order, ” ECF No. 14. Id.

         Plaintiffs argue that 7 U.S.C. § 1506 gives district courts “exclusive original jurisdiction” and thus statutorily creates a right for a separate de novo action. Pl.s' Opp'n Mot. J. Pleadings 21, ECF No. 22. Plaintiffs also argue that if this Court does review under the APA, all claims should nonetheless be reviewed de novo, id. at 22, and that in the alternative the Board's decision was arbitrary and capricious, id. at 26.

         Notwithstanding Title VII, which is unique, plaintiffs are not entitled to a de novo proceeding in part given their own admission that the FCIA provides no standard of review. See Cabinet Mountains Wilderness/Scotchman's Peak Grizzly Bears v. Peterson, 685 F.2d 678, 685 (D.C. Cir. 1982) (“Since the ESA does not specify a standard of review, judicial review is governed by section 706 of the Administrative Procedure Act”). Supreme Court precedent is squarely on point: “in cases where Congress has simply provided for review, without setting forth the standards to be used or the procedures to be followed, this Court has held that consideration is to be confined to the administrative record and that no de novo proceeding may be held.” United States v. Carlo Bianchi & Co., 373 U.S. 709, 715 (1963). That is precisely the case here, as the FCIA creates “exclusive original jurisdiction” for federal courts but does not provide a standard of review. 7 U.S.C. § 1506.

         Defendant is also correct that plaintiffs are not bringing an APA challenge. See, e.g., Reply Resp. Mot. Entry Scheduling Order 1 (“The Complaint by its terms seeks relief that is independent of the request for review of agency action.”). Additionally, the complaint itself states:

Plaintiffs bring an original action seeking relief relating to claims that are outside the scope of [the Board's] jurisdiction as well as those appealed to [the Board]. In the alternative, Plaintiffs bring an original action seeking relief relating to claims that are outside the scope of [the Board's] jurisdiction and seek a declaration that the [Board's] Order is in error. All claims are premised on the same operative facts.

Comp. 5. The complaint never mentions a challenge under the APA, indeed terms such as “administrative procedures act, ” “APA, ” “arbitrary, ” or “capricious” do not appear at any point in the complaint. While it is true that plaintiffs discuss the APA in their opposition to defendant's motion, “[a] plaintiff may not amend his complaint through arguments in his brief in ...


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