                        UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA
_______________________________________
                                        )
ACE AMERICAN INSURCANCE                 )
COMPANY et al.,                        )
                                       )
            Plaintiffs,                )
                                       )
            v.                         )       Case No. 14-1992 (RCL)
                                       )
FEDERAL CROP INSURANCE                 )
CORPORATION et al.,                    )
                                       )
            Defendant.                 )
                                       )
_______________________________________)



                                 MEMORANDUM OPINION

   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.

                                                1
          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


                                                   2
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

                                                 3
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 opposition to

a motion for summary judgment.” Shanahan v. City of Chicago, 82 F.3d 776, 781 (7th Cir. 1996).

       As plaintiffs disclaimed an APA challenge and were unsuccessful in arguing that 7 U.S.C.

§ 1506 allows for a de novo proceeding, defendant’s motion to dismiss will be granted with respect

to count one.

       b. Count Two: Promissory Estoppel

       Defendant argues that count two should be dismissed as promissory estoppel provides for

remedies in situations where there is no contract. Here, there is a contract. Mem. Supp. Mot. J.

Pleadings 5. Plaintiffs argue that the methodology for setting premiums was not part of the
                                                 4
standard agreement, and thus there is no written contract. Pl.s’ Opp’n Mot. J. Pleadings 9-10. In

support of this plaintiffs note that defendant and the Board argued that premium rates are not

“financial terms and conditions” contained in the standard agreement. Id.

        Plaintiffs’ reading of the Board and defendant’s argument is myopic. There was a proper

and binding contract in the form of the standard agreement, and courts generally do not allow for

promissory estoppel when a binding contract exists. Vila v. Inter-Am. Inv., Corp., 570 F.3d 274,

280 (D.C. Cir. 2009). While that does not preclude claims of promissory estopped for additional

promises between parties that have a separate contract, as a factual matter that does not appear to

be the case here. It is clear from the text of the standard agreement, the briefings from all parties,

and the Board’s order, that the premiums and rate-setting methodology for the premiums were

repeatedly discussed during negotiations as they closely relate to the standard agreement, though

they are not defined as “financial terms and conditions” within the standard agreement. That is,

the premiums and rate-setting methodology are not wholly distinct from the standard agreement,

they were considered in relation to the standard agreement and the parties entered into a contract

without specifying the premiums or premium rate-setting methodology in a contract term.

        Indeed, by statute and prior practice, plaintiffs were aware that premiums and premium

rate-setting methodologies were subject to change. See 7 U.S.C. § 1508(i) (“[T]he Corporation

shall periodically review the methodologies employed for rating plans of insurance under this

subchapter”). While the parties dispute precisely what representations were made by defendant to

plaintiffs, this is irrelevant to the Court’s analysis given the statutory text. 1 Fed. Crop Ins. Corp.

v. Merrill, 332 U.S. 380, 384 (1947). The natural reading of the standard agreement in conjunction


1
 Moreover, given that this is a motion to dismiss on the pleadings or, in the alternative, for summary judgment, the
Court views facts in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986).

                                                         5
with the statute is thus that the parties entered into a contract that included premiums by reference

with full awareness that those premiums and methodologies could change. As there was a written

express contract between the parties, the doctrine of promissory estoppel is inapplicable to this

case. Defendant’s motion will be granted with respect to count two.

       c. Count Three: Unjust Enrichment

       Like the doctrine of promissory estoppel, the doctrine of unjust enrichment does not apply

when there is a valid contract. Jordan Keys & Jessamy, LLP v. St. Paul Fire & Marine Ins. Co.,

870 A.2d 58, 64 (D.C. 2005) (“One who has entered into a valid contract cannot be heard to

complain that the contract is unjust, or that it unjustly enriches the party with whom he or she has

reached agreement.”). Thus for the reasons articulated above, there can be no remedy through a

claim of unjust enrichment in this case. Accordingly, defendant’s motion will be granted with

respect to count three.

       d. Count Four: Violation of 7 U.S.C. § 1508(k)(8)

       Plaintiffs contend that defendant violated § 1508(k)(8), which limits renegotiation of

“financial terms and conditions” of standard agreements to once per five year period. 7 U.S.C. §

1508(k)(8). Procedurally, this count is in the same posture as count one, with defendant arguing

both that it has already been addressed by the Board and that plaintiffs disclaimed an APA

challenge. Mem. Supp. Mot. J. Pleadings 8-9. Like count one, plaintiffs argue this is question of

law to be reviewed de novo. However, they also argue that the Board lacked jurisdiction over this

cause of action. Pl.s’ Opp’n Mot. J. Pleadings 24. It is not clear why plaintiffs believe the Board

lacked jurisdiction, they merely state it in a conclusory manner and proceed to discuss promissory

estoppel. Id.


                                                 6
        As an initial matter the Court notes that it is difficult to engage with plaintiffs’ reasoning

with respect to jurisdiction as no reasoning with respect to this count is present in the one paragraph

plaintiff devotes to this matter. Id. However, the Court notes that the Board has jurisdiction over

FCIC actions arguably “not in accordance with the provisions of the Standard Reinsurance

Agreement or any reinsurance agreement with FCIC, except compliance issues.” 7 C.F.R. §

400.169. Furthermore, the parties appear to agree that the standard agreement incorporates the

FCIA by reference. Mem. Supp. Mot. J. Pleadings 25 n. 5. Finally, the complaint as a whole

clearly describes actions the plaintiffs believe are not in accordance with the contract they

entered—the standard agreement. See Comp. 2

        Additionally, merely pleading that changing the rates was a statutory violation rather than

an action “not in accordance with” the standard agreement is problematic. Plaintiff’s raised a

functionally identical claim before the Board, with nearly verbatim language. Compare Comp.

26-27 with JA 00005138-39. Letting plaintiffs make the same argument in the cloak of a statutory

violation outside the jurisdiction of the Board would be to sidestep the administrative regime

created by Congress. Westberg v. F.D.I.C., 741 F.3d 1301, 1306 (D.C. Cir. 2014); Steadman v.

Governor, U.S. Soldiers’ & Airmen’s Home, 918 F.2d 963, 967 (D.C. Cir. 1990). Strategic drafting

of a complaint ought not lead to such a result. Id.

        This count is set apart from claim one primarily by the conclusory statement that the Board

lacked jurisdiction with regard to this issue. That appears not to be the case, as the Board has a

broad grant of authority with regard to the standard agreements. Moreover, to the extent plaintiffs


2
  Plaintiff’s opposition memorandum also make clear they understand the change in actuarial methodology as a breach
of the standard agreement and even have a section titled “Unilateral Change in Ratemaking Methodology Is A Material
Breach of the [Standard Agreement].” Pl.s’ Opp’n Mot. J. Pleadings 27. At a minimum, this count is inextricably
intertwined with the question of if FCIC’s actions were “in accordance with the provisions of the [Standard
Agreement].”

                                                        7
have drafted this count outside of the jurisdiction of the Board, it appears to be strategic drafting

designed to relitigate de novo an issue plaintiffs already lost. Circuit precedent militates against

allowing such a claim. Am. Nat. Ins. Co. v. F.D.I.C., 642 F.3d 1137, 1144 (D.C. Cir. 2011) (“the

court of appeals rightly noted that plaintiffs cannot circumvent [a] jurisdictional bar by drafting

their complaint strategically”). As in count one, plaintiffs could have, but elected not to, challenge

the Board’s holding under the APA. In light of the fact they did not do so and are not entitled to

a de novo proceeding, defendant’s motion will be granted with respect to count four.

       e. Count Five: Violation of 7 U.S.C. § 1508(k)(3)

       § 1508(k)(3) states:

       The reinsurance agreements of the Corporation with the reinsured companies shall
       require the reinsured companies to bear a sufficient share of any potential loss under
       the agreement so as to ensure that the reinsured company will sell and service
       policies of insurance in a sound and prudent manner, taking into consideration the
       financial condition of the reinsured companies and the availability of private
       reinsurance.

       Plaintiffs allege that in changing the actuarial methodology FCIC did not consider

plaintiff’s financial condition, thus violating the statutory requirement. Defendant contends as an

initial matter that the Court lacks jurisdiction over this particular count as plaintiffs did not avail

themselves of the administrative process, never mind exhaust it. Mem. Supp. Mot. J. Pleadings

13. Plaintiffs in turn argue that they were not required to administratively exhaust this count as it

is based on a statute rather than the text of the standard agreement. Pl.s’ Opp’n Mot. J. Pleadings

40.

       As an initial matter, there is a difference between administrative exhaustion and

jurisdictional exhaustion. Jurisdictional exhaustion—premised on Congress’ power to control the

jurisdiction of the federal courts—is a question of statutory interpretation, Avocados Plus Inc. v.

                                                  8
Veneman, 370 F.3d 1243, 1247 (D.C. Cir. 2004), and there must be “sweeping and direct” statutory

language depriving the courts of jurisdiction prior to exhaustion. Id. at 1248. Here, 7 U.S.C. §

6912(e) reads “a person shall exhaust all administrative appeal procedures established by the

Secretary or required by law before the person may bring an action in a court of competent

jurisdiction.” The Court finds this is sufficiently sweeping to require exhaustion.

       In the alternative, the requirement for administrative exhaustion also applies to this count.

With administrative exhaustion the Court makes this decision by “balancing the interest of the

individual in retaining prompt access to the federal judicial forum against the countervailing

institutional interests favoring exhaustion.” McCarthy v. Madigan, 503 U.S. 140, 147 (1992);

Avocados Plus Inc. v. Veneman, 370 F.3d 1243, 1251 (D.C. Cir. 2004). McCarthy lays out three

factors where individual interests weight heavily against requiring administrative exhaustion, (1)

the administrative remedy may lead to undue prejudice, for example from an excessive delay; (2)

there may be doubt that the agency is empowered to grant the requested relief; or (3) the

administrative remedy may be shown to be biased. McCarthy, 503 U.S. at 146-149.

       The Court notes that plaintiffs availed themselves of administrative remedies for other

claims and, though they were unsuccessful in those claims, there is no argument that the

administrative timeframe was “indefinite” or “unreasonable.” Id. at 148. While plaintiffs do doubt

the jurisdiction and power of the Board, by statute the Board is “authorized to grant any relief that

would be available to a litigant asserting a contract claim in the United States Court of Federal

Claims.” 41 U.S.C. § 438(c)(1); 41 U.S.C. § 607(d). Furthermore, as noted above, the statute in

question is incorporated by reference into the standard agreement. Finally, there is no evidence

that the Board’s action is predetermined or would be the product of bias.




                                                 9
         Weighting in favor of administrative exhaustion is the longstanding concept that agencies

“ought to have primary responsibility for the programs that Congress has charged them to

administer.” Id. at 145. The FCIC administers “a complex and highly technical regulatory

program,” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994), where even under this

specific clause a great deal is left to the discretion of the FCIA. For example, Congress did not

specify what a “sufficient share” is, what a “sound and prudent” selling and servicing of policies

entails, or the contours of what it means to “take into consideration” the financial condition of the

approved providers. In brief, “Congress has explicitly left a gap for the agency to fill.” Chevron,

U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984). While this language speaks

to the doctrine of deference, the expertise and discretionary actions of an agency underlying the

deference doctrine are also a reason to favor administrative exhaustion. See McKart v. U.S., 395

U.S. 185, 193-94 (1969). Moreover, administrative review allows for the creation of a record in

what may be a very complicated area: how FCIC takes into account the financial situation of

approved providers while ensuring they have a sufficient share of potential loss and service

policies prudently. 3

         In balancing the interests on both sides, the Court finds that the balancing favors

administrative exhaustion. This count is one that can reasonably be expected to hark back to issues

of administrative expertise. There is little, if any, reason not to require plaintiffs to avail

themselves of the administrative process that is closer to that expertise and would allow for the

creation of a curated record in the event the issue is ultimately returned to a district court.




3
 The Court notes that administrative review could allow for this, the Court takes no position on whether this particular
claim will indeed lead to the creation of such a record. Plaintiffs may elect not to pursue it, it may be subject to
summary dismissal, or any number of other possible dispositions.

                                                          10
Accordingly defendant’s motion to dismiss count five will be granted for failure to exhaust

administrative remedies.

       f. Count Six: Reformation and Rescission

       In this count plaintiffs allege there was a mutual understanding between the parties that the

actuarial methodology would not change. As it did in fact change, they argue for rescission or

reformation the contract. Comp. 27-28. Procedurally, this count is identical to count four, with

defendant arguing that this was already adjudicated by the Board and that plaintiffs failed to

challenge that decision under the APA. Mem. Supp. Mot. J. Pleadings 8-9. Plaintiffs argue that

the Board lacked jurisdiction to hear that claim. Pl.s’ Opp’n Mot. J. Pleadings 24.

       For the reasons articulated in the discussion of count four, defendant’s motion to dismiss

count six will be granted.

       g. Count seven: Declaratory Judgment

       The arguments with respect to declaratory judgment are hard to follow. It appears plaintiffs

misunderstood defendant’s argument regarding the requirement for administrative proceedings to

be challenged under the APA, see Pl.s’ Opp’n Mot. J. Pleadings 17; Reply Supp. Mot. J. Pleadings

13-14, ECF No. 41, and argue that they cannot be precluded from bringing a de novo action if the

Board’s decisions are preclusive. Pl.s’ Opp’n Mot. J. Pleadings 17. That is not defendant’s

argument. Reply Supp. Mot. J. Pleadings 13-14. In the alternative plaintiffs argue that this count

would be subject to de novo review under the APA. Pl.s’ Opp’n Mot. J. Pleadings 22. As

previously noted however, plaintiffs disclaimed an APA challenge. Mem. Supp. Mot. J. Pleadings

8-9.




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