MARILYN HALL PATEL, District Judge.
Defendant Gonzales & Gonzales Bonds and Insurance Agency, Inc. ("G & G") is engaged in posting immigration bonds with the Department of Homeland Security ("DHS") for, inter alia, the release of aliens from detention pending a determination of the alien's immigration status. 8 C.F.R. § 236.1(c). Defendant American Surety ("ACS") is a federally-approved surety company for whom G & G posted immigration bonds. The United States (or "government") sued defendants to collect on certain breached immigration bonds. Now before the court is defendants' motion regarding the standard of review and discovery matters, and plaintiff's motion to dismiss the counterclaim. Having considered the parties' arguments fully and for the reasons set forth below, the court enters the following memorandum and order.
In 1993, G & G, Farwest Insurance Company ("Farwest"), Amwest Surety Insurance Co. ("Amwest"), and the DHS' predecessor in interest, Immigration and Naturalization Services, became embroiled in litigation regarding the parties' respective obligations with respect to immigration bonds posted by G & G, Farwest and Amwest. In 1995, the parties entered into a settlement agreement, which became known as "Amwest I." The DHS agreed to change several of its policies and implement them during the execution of future immigration bonds.
In 1997, the parties entered into another settlement agreement known as "Amwest II." The terms of Amwest I were incorporated into Amwest II, and required, inter alia, that the DHS send a field memorandum to its officers advising them of the agreed upon "comprehensive guidance for the implementation of the [Amwest I Agreement]." Docket No. 9 (Counterclaim), Exh. 2 (Amwest II agreement) ¶ 1; see also id., Exh. A to Exh. 2 (Field memo). Defendants contend this field memorandum was never sent, and consequently, DHS field officers do not know their obligations when they find breach of an immigration bond. However, the substance of many of the terms of the Amwest agreements are expressly stated in each immigration bond.
In 2003, G & G again filed suit against the DHS in the Central District of California alleging causes of action under the Administrative Procedure Act ("APA") and the Declaratory Judgment Act ("DJA"). After years of motion practice, G & G amended its complaint to replace its causes of action with a sole cause of action for money damages under 28 U.S.C. section 1346(a)(2) (the "Little Tucker Act"). In 2006, the district court transferred the entire action to the Court of Federal Claims. G & G appealed to the Federal Circuit, which held that G & G's claim was not one for monetary relief and, thus, was not within the purview of the Little Tucker Act. Therefore, the claim was dismissed for lack of jurisdiction. Gonzales & Gonzales Bonds & Ins. Agency, Inc. v. Dep't of Homeland Sec., 490 F.3d 940, 945-46 (Fed. Cir.2007).
In August 2009, the DHS simultaneously filed three lawsuits against G & G in San Francisco, Indianapolis and Memphis. The DHS' complaint for the action filed in San Francisco contains four bonds that its officers declared breached. It is undisputed that in each instance of breach, defendants posted an immigration surety bond conditioned on the delivery or voluntary departure of the bonded alien. In each instance, a DHS official determined that the surety bond was breached under 8 C.F.R. section 103.6(e). Defendants did not appeal these determinations. The United States now seeks payment of the principal amount of the bond.
Defendants counterclaim against the DHS claiming that seventeen additional and separate bond-breach declarations by the DHS were all improper. Although they have sent the DHS, under protest, payment equal to the principal amount of the bonds, they have refused to pay the interest, penalties and handling charges that had accrued subsequent to the breach determination. Defendants claim that the DHS' breach determination was in error and seek return of their payments. Specifically, they claim that the DHS itself breached the immigration bond by: 1) failing to send an I-340 demand as required; 2) failing to send G & G a fully completed Amwest Questionnaire and attach a photograph with every demand; 3) failing to acknowledge proof of the alien's voluntary
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed against a defendant for failure to state a claim upon which relief can be granted against that defendant. A motion to dismiss under Rule 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988). A motion to dismiss should be granted if a plaintiff fails to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This "plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, ___ U.S. ___, ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). "Determining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id., 129 S.Ct. at 1950.
"[A]llegations of material fact are taken as true and construed in the light most favorable to the non-moving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). The court need not, however, accept as true pleadings that are no more than legal conclusions or the "formulaic recitation of the elements of a cause of action." Iqbal, 129 S.Ct. at 1949-50 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "[A] court may take judicial notice of `matters of public record,'" Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir.2001) (quoting Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir.1986)), and may also consider "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading" without converting a motion to dismiss under Rule 12(b)(6) into a motion for summary judgment, Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir.2002). "The district court will not accept as true pleading allegations that are contradicted by facts that can be judicially noticed or by other allegations or exhibits attached to or incorporated in the pleading." 5C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1363 (3d ed. 2004).
The parties' major arguments all boil down to one essential issue: whether this action is akin to a mine-run civil suit, or whether the bonds are an administrative instrument such that their breach must be determined by the DHS in accordance with 8 C.F.R. section 103.6(e). Specifically, defendants seek de novo review of the government's breach determination, whereas the United States seeks the arbitrary and capricious standard of review generally employed in APA actions.
Defendants claim that the government lacks adequate fact-finding procedures, and therefore de novo review is appropriate. Alternatively, they claim that even if adequate procedures exist, the immigration bonds at issue are akin to ordinary commercial contracts, and therefore de
Facts determined by an agency are subject to de novo review when "the [agency] action is adjudicatory in nature and the agency factfinding procedures are inadequate." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); United States v. Healy Tibbitts Constr. Co., 713 F.2d 1469, 1474 n. 4 (9th Cir.1983). Defendants argue that the agency fact-finding process here is inadequate because there is no agency with appellate jurisdiction over the bond breach-determination, and because the agency is not required to review the alien's entire A-file before making its breach determination.
According to the regulatory scheme, if an alien fails to appear, "[t]he district director having custody of the file . . . shall determine whether the bond shall be declared breached or cancelled and shall notify the obligor on Form I-323 or Form I-391 of the decision, and, if declared breached, of the reasons therefor, and of the right to appeal . . . ." 8 C.F.R. § 103.6(e). The fact-finding procedures to be utilized by the district director in reaching this determination are not specified in the Code of Federal Regulations, nor do they appear elsewhere in the record. But cf. Docket No. 38 (Talley Dec.) (specifying the governing law that the district director must apply). The district director must, however, provide the reasons for his determination of breach in the notice of breach sent to the obligor. 8 C.F.R. § 103.6(e); see also Docket No. 1 (Complaint), Exh. B (Record of Proceedings) at 9 (Notice of breach). Once the district director has reached his decision, the obligor can challenge that decision either through the appeals process laid out in 8 C.F.R. section 103.3, or through a motion to reopen or reconsider as provided in 8 C.F.R. section 103.5.
Defendants argue that the agency fact-finding process is inadequate because the agency's appeals process is broken. Specifically, they contend that the Administrative Appeals Office ("AAO") lacks jurisdiction to hear appeals from bond-breach determinations. "The [AAO] is the appellate body which considers cases under the appellate jurisdiction of the Associate Commissioner, Examinations." 8 C.F.R. § 103.3(a)(1)(iv). "Decisions under the appellate jurisdiction of the Associate Commissioner, Examinations, are listed in § 103.1(f)(2) [sic] of [8 C.F.R.]." Id. § 103.3(a)(1)(ii).
The process for an AAO appeal is laid out in 8 C.F.R. section 103.3, which was not otherwise affected by the repeal of Section 103.1(f). The district director who determines that a bond has been breached must first notify the obligor of the decision, the reasons for the decision, and the right to appeal. 8 C.F.R. § 103.6(e). The obligor then has thirty days to appeal the decision to the AAO. Id. § 103.3(a)(2)(i). The obligor may also submit a brief with his appeal, including any evidence that he wishes the agency to consider. Id. § 103.3(a)(2)(i), (vi); see Docket No. 37 (Rhew Dec.) ¶ 4.
On March 1, 2003, the Secretary of the DHS issued a delegation vesting the Bureau of Citizenship and Immigration Services ("BCIS") with the "[a]uthority to exercise appellate jurisdiction over the matters described in 8 C.F.R. § 103.1(f)(3)(E) [sic] (iii) (as in effect on February 28, 2003)." Docket No. 36 (McNamara Dec.), Exh. A (Delegation) at 3; see also id. at 5 ("Officers and employees of the former Immigration and Naturalization Service . . . will, following their transfer to the BCIS, continue to exercise their authorities and responsibilities as they existed on February 28, 2003. . . .").
Defendants argue that the Secretary of the DHS did not validly delegate authority to the AAO to adjudicate appeals because the delegation was not published in accordance with 5 U.S.C. section 553. Under this Section, agencies are required to publish proposed substantive rules in the Federal Register at least 30 days before those rules become effective, and to consider any comments submitted by interested parties. Id. § 553(b)-(d). However, these "notice and comment" procedures are not required for "rules of agency organization, procedure or practice." Id. § 553(b)(A). Therefore, the Secretary's delegation of appellate jurisdiction to the AAO is valid without publication in the Federal Register, so long as it is a rule of agency organization, procedure or practice.
The Secretary of the DHS, in promulgating the final rule which deleted Section 103.1(f) specifically found that "[c]ompliance with 5 U.S.C. 553 as to notice of proposed rulemaking or delayed effective date is unnecessary as this rule relates to agency organization and management." Delegations of Authority, 68 Fed. Reg. 10,922, 10,922 (Mar. 6, 2003); see also 8 C.F.R. § 2.1 ("A delegation of authority or function may in the Secretary's discretion be published in the Federal Register, but such publication is not required."). The court, however, "need not accept the agency characterization at face value," Hemp Indus. Ass'n v. Drug Enforcement Admin., 333 F.3d 1082, 1087 (9th Cir.2003), and reviews de novo the question of whether the rule is procedural or substantive. See Gunderson v. Hood, 268 F.3d 1149, 1154 (9th Cir.2001).
"For purposes of the APA, substantive rules are rules that create law. These rules usually implement existing law, imposing general, extrastatutory obligations pursuant to authority properly delegated by Congress." S. Cal. Edison Co. v. Fed. Energy Regulatory Comm'n, 770 F.2d 779, 783 (9th Cir.1985). Procedural rules, on the other hand, "are those that are `legitimate means of structuring [the agency's] enforcement authority.'" Erringer v. Thompson, 371 F.3d 625, 633 n. 15 (9th Cir.2004) (alteration in original) (quoting Am. Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1055 (D.C.Cir.1987)). "A rule fits within this [procedural] exemption if it does not `alter the rights or interests of parties.' A rule that simply prescribes `the manner in which the parties present themselves or their viewpoints to the agency' does not alter the underlying rights or interests of the parties." Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 349 (4th Cir.2001) (quoting JEM Broad. Co. v. Fed. Comm. Comm'n, 22 F.3d 320, 326 (D.C.Cir.1994)). A procedural rule does not become substantive merely because it has a substantive impact, as by denying parties the opportunity to appeal if they fail to comply with certain procedures. Sequoia Orange Co. v. Yeutter, 973 F.2d 752, 757 (9th Cir.1992).
The above cases demonstrate that changes in the timing, requirements or manner in which an application or petition is made are generally considered procedural changes. See, e.g., Erringer, 371 F.3d at 633 n. 15 (finding that a rule requiring Medicare contractors to develop local coverage determinations to qualify for automated review is procedural); Inova Alexandria Hosp., 244 F.3d at 349-50 (finding that a rule dismissing appeals for failure to timely file is procedural); JEM Broad. Co., 22 F.3d at 327 (finding that a rule dismissing incomplete applications without opportunity to amend was procedural). The delegation promulgated by the Secretary here does not alter the
Defendants argue that independent of AAO jurisdiction, the fact-finding procedures utilized by the DHS are inadequate because the agency does not review all relevant information. Specifically, they claim that because information might exist in an alien's A-file that could contradict the bond-breach determination, the agency's procedures are inadequate. The agency's fact-finding procedures, however, include an opportunity for the obligor appealing the bond-breach determination to submit evidence that contradicts the breach determination. Once a bond-breach determination has been made, the obligor may appeal, and may submit a brief and any pertinent evidence with his appeal. 8 C.F.R. §§ 103.6(e), 103.3(a)(2). The district director then reviews the brief and additional evidence. If he continues to believe that the bond was breached, he forwards the administrative record along with the brief and any supporting evidence to the AAO, which then reviews the appeal. Id. § 103.3(a)(2)(iii). The AAO also has authority to grant oral argument on appeal. Id. § 103.3(b).
In the Ninth Circuit, adequate fact-finding procedures are generally found where an aggrieved party is permitted an opportunity to present arguments and evidence challenging the agency's decision. See Pacific Architects & Engineers, Inc. v. Dep't of State, 906 F.2d 1345 (9th Cir.1990). There, a government contractor objected to the State Department's decision, in response to a FOIA request, to disclose certain information about the contractor's work. Id. at 1345-46. The State Department provided the contractor with notice of the FOIA request, and an opportunity to present objections and evidence. Id. at 1348. The Department considered the contractor's objections, reached a decision, issued a statement of its reasons for this decision, and provided the contractor a second opportunity to object. The court found that these fact-finding procedures were adequate. Id.; see also Conax Fla. Corp. v. United States, 824 F.2d 1124, 1129 (D.C.Cir.1987) ("[T]he fact-finding procedures employed by the agency were by no means inadequate. Indeed, there were absolutely
In Proietti v. Levi, 530 F.2d 836 (9th Cir.1976), the court gave a similarly broad interpretation of what constitutes adequate fact-finding procedures. There, the Attorney General's office investigated a car accident on a military base by employing relatively meager fact-finding procedures: "The factual information in the report prepared for the Attorney General was gathered by soliciting a statement from [the driver] and an affidavit from his supervisor. Accident reports and answers to interrogatories in the state court action [in which the driver sought representation] were also considered." Id. at 838. The court found these fact-finding procedures to be adequate: "While the investigation may not have been painstakingly thorough, the same procedures, especially solicitation of affidavits, could have been used to obtain any necessary additional information. Any defects in the investigation were not the result of the agency's `fact-finding procedures'." Id. The agency held no evidentiary hearing, nor did it specifically afford the driver an opportunity to introduce evidence or object to the agency's determination. Id. at 837-38. Thus, even if the exclusion of the A-file from the administrative record renders the DHS' investigation far from being "painstakingly thorough," the existence of procedures to obtain further information renders the fact-finding adequate. Since the party appealing the bond-breach determination can submit any evidence it wishes, the information which the agency can obtain through its fact-finding procedures is limitless. The fact that no additional evidence was gathered in this particular case, because defendants chose not to appeal, is immaterial. See Conax, 824 F.2d at 1129 (finding that where fact-finding procedures were adequate, party's decision not to submit additional evidence "is an imprudence for which there is no judicial remedy"); Healy Tibbitts, 713 F.2d at 1475 (indicating that fact-finding procedures are not inadequate merely because a party fails to offer evidence in support of its contention).
By contrast, the Fifth Circuit confronted a case of inadequate fact-finding procedures in Porter v. Califano, 592 F.2d 770 (5th Cir.1979). There, a federal employee was suspended without pay after accusing two of her superiors of corruption. Id. at 771. The two officials accused of corruption were themselves involved in the fact-finding process which led to the employee's suspension. Id. at 782 ("The chief inadequacy in the agency fact-finding procedures used in this case was the pervasive role played by . . . the officials [who were] explicitly accused of corruption.").
Review of an alien's A-file on every bond-breach appeal may improve the accuracy of bond-breach determinations; but simply because more accurate fact-finding measures exist does not mean that the agency's current fact-finding procedures are inadequate. Courts have yet to find an agency's fact-finding procedures inadequate under similar circumstances, even though the procedures being reviewed could have been improved. See Proietti v. Levi, 530 F.2d at 838; see also Safety Nat'l Cas. Corp. v. Dep't of Homeland Sec., 711 F.Supp.2d 697, 707-08 (S.D.Tex. 2008) (finding DHS fact-finding procedures for bond-breach determinations to be adequate). Thus, because obligors may submit any pertinent evidence and arguments challenging the bond-breach determination, the fact-finding procedures employed by DHS when making breach determinations are adequate. This does not mean, however, that every instance of bond-breach determination made by the government is proper. The court now turns to whether immigration bonds are akin to commercial contracts, and if so, whether their contractual nature requires de novo review of the government's bond-breach determination.
In order to obtain de novo review, defendants claim that immigration bonds are indistinguishable from commercial contracts entered into by private parties. This appears to be an issue of first impression in this Circuit. Bail bonds, but not immigration bonds, have consistently been held to be contracts between the government, and the criminal defendant and his surety. United States v. Toro, 981 F.2d 1045, 1047 (9th Cir.1992) ("courts apply general principles of contract construction when interpreting bail bonds."); see United States v. Figuerola, 58 F.3d 502, 503 (9th Cir.1995) (applying contract principle of unilateral mistake to bail-bond breach analysis). However, bail bonds are distinguishable from immigration bonds since bail-bond breach determinations are made by the district court, not an agency. Moreover, with respect to immigration bonds, the Code of Federal Regulations sets forth both a regulatory scheme and an appeals process regarding breach.
According to basic principles of contract law, a contract is an agreement to do or not to do a certain thing. Cal. Civ.Code § 1549. And when a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. Id. § 1639. The face of the immigration bond document itself demonstrates that the parties intended to form a contract. Specifically, the first general term and condition of the
Contract principles, such as consideration and liquidated damages, are also referenced throughout the bond. Each type of immigration bond states either: "In consideration of the granting of the application of the above alien for release from custody under a warrant of arrest issued by the Attorney General charging that he/ she is unlawfully in the United States, provided that . . .," or "In consideration of the granting of the application of the above alien for permission to enter the United States, providing there . . .," or "In consideration of the granting by the Attorney General of an application or the above alien to depart voluntarily from the United States, provided there . . . ." Bond Form at 4 (emphases added). The section of the bond where the bond amount is entered states: "In consideration of the facts recited in . . . the obligor above named, by subscribing hereto, hereby declares that he/she is firmly bound unto the United States in the sum of [dollar amount] as liquidated damages and not as a penalty, which sum is to be paid to the United States immediately upon failure to comply with the terms set forth in . . . ." Id. at 3 (emphases added). The bond cites to 28 U.S.C. section 2415 when stating that "[t]he statute of limitations that applies to actions for monetary damages from a breached bond is six years from the date of the breach event. (28 U.S.C. 2415)[.]" Id. at 2. Section 2415 sets forth the statute of limitations in contract actions brought by the United States.
In practice, the government has treated immigration bonds as contracts. The Amwest agreements specifically and repeatedly refer to immigration bonds as contracts. Docket No. 11 (Motion for Summary Judgment), Exh. A (Amwest I agreement) ¶ 2 ("The attached policy statements are binding on the parties in their contractual relationship formed through the execution of any immigration bond contract, whether in the past or in the future, using the bond agreement (INS Form 1-352) attached to this Agreement as Exhibit K."); see also Safety Nat'l, 711 F.Supp.2d at 714 n. 19 (the draft field memorandum and Amwest memorandum associated with the Amwest I agreement explained that "[w]hen an obligor . . . attaches a copy of its bond contract to its [FOIA] request, the office processing that request should not withhold any records under either of the FOIA personal privacy exemptions . . . except for highly personal ones . . . which have no reasonable connection to the bond.").
Other courts are in accord. This identical issue was recently decided by a sister court that also found immigration bonds to be contracts. Safety Nat'l, 711 F.Supp.2d at 716-17. In Matter of Allied Fidelity Ins. Co., 19 I. & N. Dec. 124 (1984), a commissioner at the United States Board of Immigration Appeals decided an appeal from the district director's decision that the conditions of a bond were violated when the alien was not surrendered as demanded. The commissioner found that immigration delivery bonds "are formal instruments governed by the general provisions of 8 C.F.R. 103.6(a), (b), and (e). These instruments create a contract between the Service [INS], the bonding agent and attorney-in-fact, and the surety company." Id. at 125; see also United
The express language of the bond instrument, coupled with what appears to be the parties' intention, leads to the inevitable conclusion that the immigration bonds at issue are contracts. The cases cited by the government in support are inapposite because they do not discuss the contract issue; instead, they discuss whether the surety can sue the government based on a subrogation theory. See Balboa Ins. Co. v. United States, 775 F.2d 1158, 1163 (Fed. Cir.1985) ("we hold that both the Claims Court and this court have jurisdiction to hear the claim of a Miller Act surety against the United States for funds allegedly improperly disbursed to a contractor."); Ins. Co. of the West v. United States, 243 F.3d 1367, 1375 (Fed.Cir.2001) ("No act here limits the right of subrogees to bring suit against the government, and thus sovereign immunity presents no barrier to such an action."). Here, the surety is suing in its own stead; consequently, Balboa does not aid the government, and as that court stated: "a surety, as bondholder, is as much a party to the Government contract as the contractor." 775 F.2d at 1160.
Defendants have not provided, and the court has not been able to find, any authority that employs de novo review under similar circumstances. To the extent courts have found immigration bonds to be contracts, they have nonetheless found de novo review inappropriate. Specifically, in light of the regulatory scheme described above, every court to address immigration bonds has employed the arbitrary and capricious standard of review. A sister court addressing this identical issue also found immigration bonds to be contracts, but nonetheless applied the arbitrary and capricious review to the agency's bond-breach determinations. Safety Nat'l, 711 F.Supp.2d at 716-17. All other courts that discuss the standard of review have also employed the arbitrary and capricious standard. Bahramizadeh v. INS, 717 F.2d 1170, 1173 (7th Cir.1983) (reviewing bond-breach determinations under the APA framework); see Castaneda v. Dep't of Justice, 828 F.2d 501, 502 (8th Cir.1987)
This is not the first time that APA review has applied to a contract with the government. Both the Federal Circuit and the Court of Federal Claims have recognized that a claimant's cause of action can arise by virtue of final agency action even though the claimant is also party to an underlying contract with the government. See Doty v. United States, 24 Cl.Ct. 615, 626 n. 14 (1991) ("contract claims like the one in this case constitute appeals from final agency action subject to judicial review. Thus, we turn to the APA 5 U.S.C. § 706, for standards to guide review of the agency action in question."); Foote Mineral Co. v. United States, 228 Ct.Cl. 230, 654 F.2d 81 (1981) (lessee's challenge to final agency, determination regarding government lease reviewed under the APA). United States v. Morrison, 370 F.Supp. 193 (D.C.Va.1974), does not help defendants. There, defendant had entered into a contract with the government for the storage of household goods. The contract required the contracting officer to adjudicate disputes of fact, but not law, regarding a fire. Consequently, the court based its holding on a de novo analysis of the legal conclusion only. Although the court excoriated the contracting officer for making "no more than a pro forma conclusion of liability in favor of the Government by signing a printed form . . .," id. at 197, it did not allow supplementation of the factual record other than by stipulation amongst the parties, id. at 197-98.
Other cases cited by defendants are all unpersuasive. Allied Fidelity, 19 I. & N. Dec. 124, does not speak to the standard of review courts should use when reviewing bond-breach decisions. Moreover, it explicitly holds that bond-breach determinations are governed by the regulations specified in 8 C.F.R. section 103.6(e). In Marathon Oil Co. v. Babbitt, 938 F.Supp. 575, 581 (D.Alaska 1996), the court reviewed only the statute of limitations issue de novo because the limitation period did not apply exclusively to the government. Defendants point to no generally applicable laws that somehow bar the government's claim. Moreover, Marathon Oil specifically found that administrative exhaustion was required. Id. n. 12. In County of Suffolk v. United States, 19 Cl.Ct. 295, 299 (1990), the contracts were at one time subject to a regulation that limited the court's scope of review. Due to the repeal of that regulation, the court found de novo review appropriate. Id. Here, however, a regulatory scheme is currently in place. Other cases cited by defendants do not specify the standard of review they are employing. See Suburban Mortgage Assoc., Inc. v. Dep't of Housing & Urban Dev., 480 F.3d 1116 (Fed.Cir. 2007) (no discussion of standard of review); Int'l Engineering Co., Div. of A-T-O, Inc. v. Richardson, 512 F.2d 573 (D.C.Cir.1975) (same); Olson, 47 F.2d 1070 (pre-dating regulatory scheme); Minnesota Trust, 59 F.3d 87 (does not discuss scope of review to be used by
This conclusion is further strengthened by the true nature of the action—a challenge to a final agency decision. Doe v. United States, 372 F.3d 1308, 1315 (Fed. Cir.2004) (courts must look "to the true nature of the action instead of merely relying on the plaintiff's characterization of the case." (internal citations omitted)); Suburban Mortgage, 480 F.3d at 1124 (discussing true nature of the claim to determine Little Tucker Act jurisdiction). Here, defendants claim that the United States itself breached its bond obligations when declaring the bond breached. In other words, defendants argue they are excused from paying the bond amount because the United States failed to substantially comply with the terms of the bond. Therefore, they claim that the agency's action, in declaring the bond breached, was improper. Authorities that use the arbitrary and capricious standard with respect to immigration bond-breach claims made by non-governmental plaintiffs are therefore persuasive. The fact that the United States brought suit to collect, subsequent to its declaration of bond breach, does not change the analysis.
Under this standard, the obligations set forth in statutes, regulations, case law and the terms specified in the bonds themselves must all be considered when the agency declares a bond breach. The same holds true regarding the Amwest agreements. Indeed, many of the Amwest provisions have been incorporated into the bonds themselves. For instance, according to the terms of the bond instrument, the agency must determine whether cancellation of the bond has occurred, or whether any mitigation is necessary. See generally Bond Form. And the government concedes as much. DOJ Reply at 12 (if a DHS "bond breach determination fails to take into account a material provision of the Amwest Agreements, then the final agency action could be considered arbitrary or capricious. . . ."); see also Safety Nat'l, 711 F.Supp.2d 697 (finding breach
Having decided the appropriate standard of review, the court now determines which specific bond-breach determinations are properly before the court.
The government invoked this court's jurisdiction pursuant to 28 U.S.C. section 1331, federal question jurisdiction, and 28 U.S.C. section 1345, jurisdiction when the United States is plaintiff, to enforce four immigration bond-breach determinations and to collect the associated debt. There is no dispute that this court has jurisdiction over the claims in the complaint. Defendants filed a permissive counterclaim, challenging as unlawful seventeen determinations of bond breach and seeking the return of associated payments. The government claims the court does not have jurisdiction over defendants' counterclaim.
Defendants' counterclaim is premised on two jurisdictional hooks: a claim under the Little Tucker Act, or alternatively, a claim under the APA. These claims are mutually exclusive. See Richardson, 512 F.2d at 580 (government contracts within the ambit of the Tucker Act fall outside the contemplation of the APA). Each is discussed in turn.
The Little Tucker Act ("LTA") provides that this court shall have concurrent jurisdiction with the Court of Federal Claims for a civil claim against the United States, not exceeding $10,000, which is founded upon any "any express or implied contract with the United States . . . ." 28 U.S.C. § 1346(a)(2). The jurisdictional limit "is not violated when plaintiffs combine a number of claims that are individually less than $10,000 but cumulatively exceed that amount." Baker v. United States, 722 F.2d 517, 518 (9th Cir.1983). Since defendants seek monetary damages based on immigration bond contracts, Little Tucker Act jurisdiction is proper.
The government makes three arguments regarding the impropriety of defendants' LTA claim: 1) immigration bonds are not contracts; 2) it was not the government's breach that caused defendants' damages, but defendants' failure to deliver the bonded aliens; and 3) defendants' voluntary payment of the principal amount of the breached bonds gives rise to a specific, equitable remedy, not the compensatory or substitute remedy of money damages. The first argument is disposed of above. The second argument is premature, as the government's failure to fulfill its own obligations under the bond contracts may have rendered arbitrary and capricious the district director's declaration of bond breach. The third argument is discussed below.
The government contends that no cause of action can be had because defendants voluntarily paid the face amount of the bonds. Prior to filing their counterclaim, defendants paid the government the principal amount of all seventeen bonds, but refused to pay the interest, penalties and handling charges that had accrued. The government's argument is premature because the court cannot determine, at the pleading stage, whether the payments were made voluntarily. See Richfield Oil Corp. v. United States, 248 F.2d 217, 224 (9th Cir.1957) ("If the court, after hearing evidence, were to find that the alleged telephone conversation took place and that the actual agreement between the United States on the one hand and Richfield, on the other, was that Richfield might pay the demanded sum under protest and then proceed by suit to recover it back in order to litigate the question of its liability for any further sum, then it would be improper
The government also argues that the Little Tucker Act claim should be dismissed because the damages sought by defendants are not compensatory damages. The government claims that defendants simply seek return of monies, not further compensation from the government. In other words, the government argues that defendants' counterclaim is for specific relief that happens to be money. See Suburban Mortgage, 480 F.3d at 1124 (lamenting the "cottage industry among lawyers attempting to craft suits, ultimately seeking money from the Government, as suits for declaratory or injunctive relief without mentioning the money. If successful, a plaintiff could have the case heard under the APA in one or another district court, with appeal to a regional circuit, rather than in the Court of Federal Claims, where money claims against the Government are routinely heard and decided, with appeal in the Federal Circuit."). Here, defendants specifically mention and seek the return of monies. In other words, they seek money as compensation for a loss suffered. Cf. Katz v. Cisneros, 16 F.3d 1204, 1208 (Fed.Cir.1994). Indeed, the counterclaim is, at base, a claim for the return of money from the government based on contract, and does not seek payments on any other grounds. See Bowen v. Massachusetts, 487 U.S. 879, 900-01, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988) (suits seeking to enforce statutory mandates "for the payment of money must not be confused with the question whether such payment, in these circumstances, is a payment of money as damages or as specific relief."). The government's argument proves too much. At its logical conclusion, all contractual damages, including liquidated damages, could be characterized as specific relief that happen to be money. This could eviscerate Little Tucker Act jurisdiction.
The Federal Circuit has already found the government's argument unavailing. Specifically, when these same defendants failed to pay amounts due under other bonds and their LTA claim was appealed to the Federal Circuit, the court held: "there is a substantive difference between a plaintiff seeking the return of money it already paid the government and a plaintiff never having to pay the government in the first place. Simply stated, if the plaintiff in the second scenario prevails, he would not be receiving monetary damages from the public fisc of the United States." Gonzales & Gonzales Bonds & Ins. Agency, 490 F.3d at 945 (internal quotations and citation omitted). The Federal Circuit declined to find jurisdiction specifically because defendants had not paid money to the government. The obvious implication of the Federal Circuit's opinion is that seeking return of monies already paid pursuant to contract creates Little Tucker Act jurisdiction. Here, defendants would receive money from the public fisc if they prevail; consequently, Little Tucker Act jurisdiction is proper.
The government acknowledges that defendants "can invoke the APA's sovereign immunity waiver and be afforded full relief
Expanding the record is "typically unnecessary to judicial review of agency decisionmaking." Florida Power & Light Co. v. Lorion, 470 U.S. 729, 744, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985). "If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation." Id.
Defendants claim that the government's administrative record was prepared in an arbitrary fashion because it failed to identify all documents upon which the agency relied when it declared the bond breached. In order to expand the record, defendants must demonstrate that "the agency has relied on documents not included in the record. This has been acknowledged as a qualification to or explication of the rule that judicial review is based upon the full administrative record in existence at the time of the agency decision. Some courts have thus permitted discovery when those challenging agency action have contended the record was incomplete, in order to provide a record of all documents and materials directly or indirectly considered by the agency decisionmakers." Public Power Council v. Johnson, 674 F.2d 791, 794 (9th Cir.1982) (citations omitted); see also Animal Defense Council v. Hodel, 840 F.2d 1432, 1436 (9th Cir.1988) ("The district court may also inquire outside of the administrative record when it appears the agency has relied on documents or materials not included in the record." (internal quotations and citation omitted)). Indeed, the whole administrative record "is not necessarily those documents that the agency has compiled and submitted as `the' administrative record. The `whole' administrative record, therefore, consists of all documents and materials directly or indirectly considered by agency decision-makers and includes evidence contrary to the agency's position." Thompson v. Dep't of Labor, 885 F.2d 551, 555 (9th Cir.1989) (quotations and citation omitted). According to the DHS, "[u]pon receipt of an appeal in a case over which the AAO [sic], the district or center must review the complete case to determine [the appeal]." Adjudicator's Field Manual Excerpt at 1 (emphasis added). The DHS manual allows the district or center to "forward either the complete A-file or a complete Record of Proceeding to the AAO." Id. Thus, the agency appears to consider the alien's entire A-file upon
Defendants also claim that they need the alien's A-file from the government in order to determine whether the agency ignored pertinent information—information that would tend to establish that the government's declaration of breach was in violation of the bond itself, the Amwest agreements, case law, regulations and other authority. "[D]istrict courts are permitted to admit extra-record evidence: (1) if admission is necessary to determine whether the agency has considered all relevant factors and has explained its decision, (2) if the agency has relied on documents not in the record, (3) when supplementing the record is necessary to explain technical terms or complex subject matter, or (4) when plaintiffs make a showing of agency bad faith." Lands Council v. Forester of Region One of the United States Forest Serv., 395 F.3d 1019, 1030 (9th Cir.2005) (internal quotations omitted). The record of proceeding created by the government, which it states is also the administrative record, comprises a select subset of documents from the alien's A-file. Rhew Dec. ¶¶ 3-15; id., Exh. A (Adjudicator's Field Manual Excerpt) at 1-2.
Since the agency appears to have reviewed the A-file during its compilation of the record of proceedings, and because the A-file may reveal documents whose admission may be necessary to determine whether the agency has considered all relevant factors and has explained its decision, the government is ordered to produce
For the foregoing reasons, the court finds that: 1) immigration bond-breach determinations are reviewed under APA standards; 2) defendants' counterclaim stands; and 3) defendants may discover A-files.
