Prosser v. Sessions

          MEMORANDUM OPINION

          TREVOR N. MCFADDEN United States District Judge.

         Pro se Plaintiff Jeffrey Prosser is the debtor in a Chapter 7 bankruptcy and the beneficial owner of three companies in Chapter 11 bankruptcy. Compl. 3 n.5, 5, ¶ 3. Pro se Plaintiff John Raynor is a former director and outside counsel to one of Mr. Prosser's companies, has pursued legal claims against the National Rural Utilities Cooperative Finance Corporation, or CFC, and has been the defendant in what he characterizes as an extortionary adversary proceeding. Id. ¶ 4. Plaintiffs allege that CFC has engaged in an extensive scheme of accounting fraud and public corruption in violation of the Racketeer Influenced and Corrupt Organizations Act, or RICO. Through this lawsuit, they seek to compel Attorney General Jeff Sessions to intervene in Mr. Prosser's bankruptcy proceedings. They also seek to compel Treasury Secretary Steven Mnuchin to cease and desist funding CFC from the United States Treasury. Because Plaintiffs have failed to state a claim that entitles them to the requested intervention and have not shown standing to challenge CFC's funding, the Defendants' Motion to Dismiss will be granted.

         I. BACKGROUND

         Plaintiffs' Complaint and other filings focus mainly on allegations about CFC's misconduct. Although CFC is not a party to this case, Plaintiffs' allegations against CFC provide the basis for their request that the Attorney General intervene in Mr. Prosser's bankruptcy proceedings and that the Secretary of the Treasury discontinue funding of CFC.^[1]CFC is a tax-exempt, member-owned financing cooperative that supplements federal loan programs to support the generation and distribution of electricity in rural America. Id. ¶¶ 10-11. Plaintiffs allege that CFC engaged in extensive accounting fraud, including embezzling nearly $263 million in five years from the Rural Telephone Finance Cooperative, or RTFC, which CFC controls. Id. ¶¶ 30-56. Plaintiffs also allege that CFC corrupted public officials in the Virgin Islands, including several federal prosecutors and former Governor John Percy de Jongh, Jr., who was arrested for financial crimes. Id. ¶¶ 16, 21, 23. According to Plaintiffs, “Fraud and criminality is a systemic part of CFC's operations and without it, CFC cannot financially survive.” Id. ¶ 62.

         Plaintiffs allege that CFC has victimized them for their efforts to address its misconduct. Mr. Prosser alleges that he discovered CFC's accounting fraud when his three companies borrowed money from RTFC, which CFC controlled, and CFC embezzled funds from those companies. Id. at 3. Mr. Prosser says that, because he “raised the issue of Embezzlement, ” RTFC illegally foreclosed on loans that it made to his companies and forced Mr. Prosser and his companies into bankruptcy. Id. at 5.

         Mr. Raynor, a former director and outside counsel to at least one of Mr. Prosser's companies, alleges that he filed a civil False Claims Act complaint against CFC. Id. at 10. He also alleges that he provided information to the Department of Justice to encourage an investigation of potential RICO violations, potential criminal False Claims Act violations, and potential bank fraud, and that the Department of Justice responded by conducting an extensive criminal investigation. Id. at 10 & n.14, 14. Mr. Raynor says that he was forced to defend himself in an extortionary adversary proceeding. Id. at 10.

         Plaintiffs also allege that, in what they call the “ICC Bribery, ” CFC paid about $20 million in bribes to public officials “to facilitate the involuntary bankruptcy of New ICC [one of Mr. Prosser's companies] and to enlist the support of those public officials . . . in pursuing CFC's retaliatory agenda.” Pls.' Statement of Facts in Opp. to Mot. Dismiss 4-5. CFC arranged these bribes through a consultant and several court-appointed bankruptcy professionals in Mr. Prosser's bankruptcy proceedings. Id. at 4. According to Plaintiffs, CFC bribed two federal prosecutors, at least one witness in the bankruptcy proceedings, and a former Territorial Senator, Alvin Williams, who was arrested on six counts of bribery in 2012. Compl. 6-7. Plaintiffs also allege the Department of Justice forced the judge presiding over the bankruptcy proceedings to retire from the bench after a pattern of unsupportable decisions that suggested bribery. Id. at 7.^[2]

         The District Court for the U.S. Virgin Islands sealed at least some records in the criminal proceeding against former Territorial Senator Williams to protect the Department of Justice's ongoing criminal investigation. Id. at 8. Plaintiffs have tried to have these records unsealed, but without success. Id. at 8-9. Plaintiffs allege the sealed records would show that

(i) the foreclosure which resulted in the Prosser Bankruptcies was unlawful; (ii) the Bankruptcy proceedings in the Prosser Bankruptcies were completely and thoroughly corrupted and lacked any integrity whatsoever; (iii) the Bankruptcy proceedings in the Prosser Bankruptcies were not impartially adjudicated; and (iv) with the implied consent of the DOJ, the U.S. Treasury has funded CFC's pattern of racketeering activities in violation of the False Claims Act.

Id. at 9. This allegation is based at least in part on statements made to Mr. Prosser by a co-indictee of Mr. Williams. Id. at 8.

         Mr. Prosser and Mr. Raynor brought this case against the Attorney General and the Secretary of the Treasury in their official capacities, seeking an order from the Court compelling the Attorney General to intervene in Mr. Prosser's bankruptcy proceedings and directing the Secretary to cease and desist funding CFC. Id. at 37-38. Plaintiffs also filed a Motion for Miscellaneous Relief, seeking an order from the Court directing the Department of Justice to file under seal in this case: (1) the sealed documents from Mr. Williams' criminal case; and (2) any documents involving admissions by the bankruptcy judge that he did not impartially adjudicate Mr. Prosser's bankruptcy proceedings. Defendants moved to dismiss the case for failure to state a claim to the requested relief and for lack of standing.^[3]

         II. LEGAL STANDARD

         To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain sufficient factual allegations that, if true, “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility requires that a complaint raise “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Pleading facts that are “merely consistent with” a defendant's liability “stops short of the line between possibility and plausibility.” Twombly, 550 U.S. at 545-46. Thus, a court evaluating a motion to dismiss for failure to state a claim does not accept the truth of legal conclusions or “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 556 U.S. at 678. That said, it construes the complaint in the light most favorable to the plaintiff and accepts as true all reasonable inferences drawn from well-pled factual allegations. See In re United Mine Workers of Am. Emp. Benefit Plans Litig., 854 F.Supp. 914, 915 (D.D.C. 1994). Consideration is limited to “the facts alleged in the complaint, any documents either attached to or incorporated in the complaint and matters of which [the court] may take judicial notice.” Hurd v. D.C. Gov't, 864 F.3d 671, 678 (D.C. Cir. 2017).

         On a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of establishing jurisdiction. Georgiades v. Martin-Trigona, 729 F.2d 831, 833 n.4 (D.C. Cir. 1984). “Article III of the Constitution limits federal courts' jurisdiction to certain ‘Cases' and ‘Controversies.'” Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013) (quoting U.S. Const. art. III, § 2). “No principle is more fundamental to the judiciary's proper role in our system of government, ” and “[t]he concept of standing is part of this limitation.” Simon v. E. Kentucky Welfare Rights Org., 426 U.S. 26, 37 (1976). Article III standing requires an injury that is “concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.” Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 149 (2010). “While the district court may consider materials outside the ...