Opinion ID: 785675
Heading Depth: 3
Heading Rank: 2

Heading: The sources of the rights upon which Plaintiffs base their claims

Text: 34 Plaintiffs assert three causes of action, the first of which encompasses multiple claims. 35 1. Plaintiffs' numerous claims for declaratory and injunctive relief for violation of the mail transporters' Fifth Amendment rights 36 Plaintiffs' first cause of action is an amalgam of numerous Fifth Amendment claims for deprivation of liberty and property interests without due process of law. (J.A. at 17-18) (Plaintiffs' Second Amended Complaint, paragraphs 6.1, 6.2, and 6.3). There are three types of claims here. Plaintiffs claim a violation of the property right to control use of Plaintiffs' fuel tanks. Plaintiffs also claim the freedom to contract with fuel suppliers of their own choosing. In addition, Plaintiffs assert various liberty rights to control the manner of the operation of Plaintiffs' business. Each of the three categories is examined here. 37
38 In one claim, Plaintiffs assert a deprivation of property interests. Plaintiffs assert that the USPS violated Plaintiffs' freedom to use their bulk fuel tanks for fuel products of their choosing, to limit and exclude products not of their choosing, and to control the use of their tanks and the surrounding property. 7 The Exxon contracts grant Exxon-Mobil and BP Amoco the right to enter certain properties to supply fuel. 39 Plaintiffs' asserted right to protect their property from being entered and used is not a contractual right. Plaintiffs were not parties to any contract with Exxon-Mobil or BP Amoco. The rights upon which this claim is ultimately based 8 arise from these Plaintiffs' title over the property upon which they have installed their own fuel tanks. Plaintiffs' Complaint describes this claim as deprivation ... of Plaintiffs' liberty and property interests, including ... Plaintiffs' freedom to use their bulk fuel tanks for the fuel products of their choosing, to limit and exclude products not of their choosing, and to control the use of their tanks and the surrounding property. The title to the property is not a contractual right. 40 The only contract issues relating to the fuel tanks are Defendant's rebuttal points, which are not the source of the rights upon which the plaintiff bases its claim. RMI Titanium, 78 F.3d at 1136. Perhaps the Fifth Amendment property right claim of Plaintiffs who own fuel tanks has no merit because, by signing Amendment 3, Plaintiffs bargained away their Fifth Amendment rights but this argument speaks to the merits of the claim, not to the jurisdictional issue of the source of the rights upon which the claim is based. 41 It is well-established that the existence of contractual rebuttal points does not render a claim essentially contractual, in CDA analysis. The D.C. Circuit — the very circuit that devised the CDA test adopted by this Court has ruled that a claim is not rendered essentially contractual merely because a contract issue may prove dispositive to the claim. In Commercial Drapery Contractors, Inc. v. United States, 133 F.3d 1 (D.C.Cir.1998), a business, Commercial Drapery Contractors (Commercial), had contracts with the federal government's General Services Administration (GSA). Id. at 3. After a grand jury returned a fraud indictment against Commercial and its president, the GSA terminated its contract with Commercial and suspended future contracting with Milford Acquisition Corporation (Milford), a company that was owned by Commercial's president and his wife. Id. Commercial and Milford brought suit, claiming that GSA's cancellation and suspension decisions violated multiple government procurement statutes and regulations, and constituted `de facto debarment' or `blacklisting,' thereby depriving them of due process. Id. 42 The D.C. Circuit ruled that the CDA did not bar jurisdiction: 43 Among other things, Commercial and Milford complain about the termination clause in their contracts. That sounds like a claim founded on a contract. But classification of a particular action as one which is or is not `at its essence' a contract action depends both on the source of the rights upon which the plaintiff bases its claim, and upon the type of relief sought (or appropriate). Megapulse, Inc. v. Lewis, 672 F.2d 959, 968 (D.C.Cir.1982). The basis of Commercial's and Milford's claim is that GSA's repeated attempts to extricate the government from financial dealings with them constituted unlawful blacklisting. The dispute over the termination clause in their contracts is embedded within this broader claim, and is not an independent cause of action.... The claim and the type of relief requested thus reveal that this is not at its essence a contract action. Accordingly, we have jurisdiction. 44 Id. at 4. This ruling made clear that the mere existence of a contract issue within a broader claim does not make the claim essentially contractual, where the source of the rights claimed and the relief are not contractual. 45 The ruling in Commercial Drapery Contractors cited Megapulse, the very case that defined the applicable legal standard. In Megapulse, the plaintiff, Megapulse, had contracts with the Coast Guard, pursuant to which Megapulse had developed proprietary data. 672 F.2d at 961-62. When, based on the Coast Guard's determination that the data had not been developed solely at Megapulse's expense, the Coast Guard decided to release the data to other parties, Megapulse brought suit for an injunction to prevent the release of data. Id. at 962. The D.C. Circuit made clear that the existence of relevant contractual issues did not render all claims essentially contractual: 46 Contract issues may arise in various types of cases where the action itself is not founded on a contract. A license, for example, may be raised as a defense in an action for trespass, or a purchase contract may be raised to counter an action for conversion. But the mere fact that a court may have to rule on a contract issue does not, by triggering some mystical metamorphosis, automatically transform an action based on trespass or conversion into one on the contract and deprive the court of jurisdiction it might otherwise have. 47 Id. at 968. Applying this general principle, the court determined that the CDA did not bar jurisdiction, because, Appellant's position is ultimately based, not on breach of contract, but on an alleged governmental infringement of property rights and violation of the Trade Secrets Act. It is actually the Government, and not Megapulse, which is relying on the contract.... Id. at 969. As in Megapulse, so too in the present case, it is the government — and not any of the plaintiffs — that is attempting to assert contractual rights (those purportedly in Amendment 3). 48 The rule that a rebuttal issue cannot alter the nature of the claims is analogous to the well-pleaded complaint rule that governs federal question jurisdiction under 28 U.S.C. § 1331. Under the well-pleaded complaint rule, `[W]hether a case is one arising under [federal law], in the sense of the jurisdictional statute, ... must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.' Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 58 L.Ed. 1218 (1914); Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). Okla. Tax Comm'n v. Graham, 489 U.S. 838, 840-41, 109 S.Ct. 1519, 103 L.Ed.2d 924 (1989) (emphasis added). The RMI Titanium/ Megapulse test is similar to the well-pleaded complaint rule in that both tests evaluate jurisdiction by the underlying rights upon which a plaintiff bases its claims, without reference to any rebuttal points. This similarity is logical. Both tests concern the issue of jurisdiction. Jurisdiction is generally established by a plaintiff, through the complaint. E.g., Nichols v. Muskingum Coll., 318 F.3d 674, 677 (6th Cir.2003) (the plaintiff bears the burden of establishing jurisdiction with the court taking the allegations in the complaint as true). 49 In the present case, a well-pleaded complaint would not necessarily even mention the very term of the contract that Defendant considers dispositive, i.e., Amendment 3. A well-pleaded complaint would not refer to the contracts between Plaintiffs and Defendant. Rather, the complaint would only refer to the Exxon contracts — which were made without Plaintiffs' consent, and which Plaintiffs seek to nullify. 9 A complaint would allege that the Exxon contracts had violated Plaintiffs' property rights, by granting Exxon-Mobil and BP Amoco the right to enter Plaintiffs' land. The Exxon contracts are a key part of the factual basis for the complaint. But source of the rights upon which Plaintiffs base their claim is not the Exxon contracts or any other contract. It is undisputed that Plaintiffs were not privy to the Exxon contracts. 10 The property rights claim attempts to void the Exxon contracts due to violation of Plaintiffs' constitutional rights. The contractual relationship between Plaintiffs and Defendant is not the source of the rights upon which Plaintiffs base their property rights claim — this is similar to Commercial Drapery Contractors and Megapulse, in which the rights claimed did not stem from the contractual relationship between the parties. 50 Plaintiffs actual complaint is consistent with this analysis of a well-pleaded complaint. 11 The actual complaint focuses almost entirely on the Exxon contracts, as violating Plaintiffs' property rights, without Plaintiffs' consent. Nowhere in Plaintiffs' actual complaint is there any mention of Plaintiffs' contracts with Defendant 12 — even though Amendment 3 to these contracts might rebut Plaintiffs' claims, on the merits. A well-pleaded complaint does not refute itself. Defendant's rebuttal does not bear on the source of rights upon which Plaintiffs base their property rights claim. 51 Absent the contractual rebuttal points, there are no contractual issues relating to the claim for deprivation of property — the source of the rights asserted in this claim is not found in any contract. The source of the rights asserted is the title to Plaintiffs' land. 52
53 Moving on to other claims in the first cause of action, Plaintiffs also claim a liberty interest in the freedom to contract with fuel suppliers of their own choosing. 13 On rebuttal, it is possible that Defendant would establish that Plaintiffs chose to forfeit this freedom, in order to maintain their USPS contracts. If Plaintiffs had chosen not to sign Amendment 3 to their USPS contracts, the USPS would not have interfered with their fuel dealings; instead the USPS merely would have declined to renew its contracts with Plaintiffs. But, as stated directly above, contract issues that would arise only in rebuttal do not render contractual an otherwise non-contractual claim. Commercial Drapery Contractors, 133 F.3d at 4; Megapulse, 672 F.2d at 968. 54
55 Additionally, Plaintiffs attempt to assert multiple liberty interests, in asserting a deprivation of freedom from interference to operate their business, perform their HCR contracts, and to make business decisions concerning the terms and conditions of the purchase of supplies such as fuel. 14 Plaintiffs freedom from interference... and to make business decisions is not rooted in contract. It is possible that Plaintiffs bargained away the freedoms being claimed, but again that is merely a rebuttal point. Commercial Drapery Contractors, 133 F.3d at 4; Megapulse, 672 F.2d at 968. 56 The only rights asserted in this cause of action that are based upon contractual sources are Plaintiffs' rights to perform their HCR contracts. The HCR contracts are the original contracts between Plaintiffs and Defendant as they existed prior to Amendment 3 — here, Plaintiffs assert that subsequent acts by the USPS breached that contract. Clearly, a claim to enforce the original contracts is grounded in rights whose source is contractual — this claim is identical to the attempt to enforce the original contract (by requesting specific performance) in Ingersoll-Rand, where the plaintiff sought declaratory and injunctive relief to prevent the Air Force from soliciting new bids in a process that would replace the plaintiff's contract. 780 F.2d at 79-80. That this claim is based on a contract is clear from the fact that the very rights at stake can only be identified with reference to the HCR contracts. As in Ingersoll-Rand, the relief requested here is specific performance of the original contract. The claim of a right to perform HCR contracts is essentially contractual. This claim provides a striking contrast to all of the other claims in this case, which are not based on rights found in a contract and which do not seek contractual relief, in the form of specific performance (or money damages). 57 The contractual claim for performance of HCR contracts does not pollute the non-contractual assertions of Fifth Amendment rights. It would be absurd to characterize Plaintiffs' entire first cause of action as one claim. The first cause of action contains three sub-parts. Hence, it is likely that there are at least three claims under this cause of action, and in fact there are probably even more, since one of the sub-parts (asserting, inter alia, the HCR contract argument) asserts numerous legal rights. The definition of a claim, within the CDA context, comes from the RMI Titanium/ Megapulse test a claim is distinct if it is founded upon distinct legal rights. In stating that the characterization of a claim as essentially contractual depends on the source of the rights upon which the plaintiff bases its claim, 15 RMI Titanium indicated that claims are defined by their underlying rights; thus, by definition, in CDA analysis, an assertion of non-contractual legal rights would be a distinct claim from an assertion of contractual legal rights. See also Black's Law Dictionary 240 (7th ed.1999) (one definition of a claim is the assertion of an existing right). (If, arguendo, the entire first cause of action were somehow viewed as a single claim, then it is doubtful that there would be a valid basis for dismissing the entire claim, on the basis of the small part of the claim that is based upon the rights in the HCR contracts. This question, though, need not be considered.) 58 The rights upon which Plaintiffs base their claims are not contractual with respect to any Fifth Amendment claim other than the claim of liberty to perform HCR contracts. 59 2. Plaintiffs' claim for declaratory and injunctive relief for violation of postal regulations 60 Plaintiffs' second cause of action is the claim that Defendant has violated its own regulations. Plaintiffs state that regulations forbid the USPS from limiting Plaintiffs' freedom to purchase fuel from any source that Plaintiffs wish. Plaintiffs cite a regulation that [t]he postal service is not permitted to tell a contractor how or when to purchase supplies.... (J.A. at 209) (quoting USPS Management Instruction PO-530-97-1). Plaintiffs also cite a regulation that [p]urchases of fuel may be made from any source at the option of the contractor. (J.A. at 216) (quoting USPS Management Instruction PO-530-97-1). 61 On the merits, a question arises as to whether these regulations vest private rights of action to enforce the regulations. The question is whether mail transporters (Plaintiffs) and/or fuel suppliers (e.g., those other than Exxon-Mobil and BP Amoco) have the right to sue to force the USPS to comply with the regulations. 16 But this question is not relevant to a ruling on jurisdiction. The essentially contractual test of RMI Titanium, from Megapulse, examines the source of the rights upon which the plaintiff bases its claim, without requiring that those claimed rights even exist. If the rights do not exist, then the court will grant a motion to dismiss for failure to state a claim but the court will not deny its jurisdiction over the claim. 62 The district court and Defendant attempt to deem this claim contractual, by likening it to Ingersoll-Rand. In Ingersoll-Rand, the named plaintiff alleg[ed] that the government's decision to terminate I-R's contract to supply air compressors and to resolicit bids for the contract was ... contrary to several federal acquisition regulations. 780 F.2d at 74. Yet Ingersoll-Rand does not govern the present case. In Ingersoll-Rand, the court, in addition to classifying the relief sought as contractual, offered three reasons for ruling that the source of the rights in the claim for violation of regulations was contractual. The court stated: 63 First, it is possible to conceive of this dispute as entirely contained within the terms of the contract. The contract included a termination-for-convenience clause.... 64 Second, the issues raised by plaintiff's complaint are within the unique expertise of the Court of Claims. The substance of I-R's complaint is that the Air Force had no good reason to terminate the contract and begin resolicitation. This complaint, unlike a complaint based, for example, on a violation of the civil rights of the contractor, calls for knowledge of the government contracting process.... 65 Finally, despite I-R's characterization, see Br. for Appellant at 34, we find that I-R is not a frustrated bidder. I-R asserts that its action is no different from a bid protest action. See Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App. D.C. 371, 424 F.2d 859 (D.C.Cir.1970). 66 Id. at 78. None of these three reasons prove controlling in the present case. 67 Setting aside the first reason momentarily, it is clear that the other two reasons do not apply to the present dispute. The second reason from Ingersoll-Rand is not applicable to the present dispute, because Plaintiffs claim in the present case does not relate to the contracting process. Ingersoll-Rand was a case involving the rules and process of competitive bidding for the awarding of government contracts. Id. at 75. The present case does not involve the awarding of contracts among competitors; thus, the third reason in Ingersoll-Rand clearly does not apply to the present case, which does not involve a frustrated bidder. 68 The first reason given in Ingersoll-Rand might apply to the present case: by signing Amendment 3, Plaintiffs might have contractually waived any rights that vested under the regulations. Nonetheless, the present dispute is not governed by Ingersoll-Rand. It appears that the D.C. Circuit's first reason for ruling that the source of the rights was contractual never was good law within that circuit. In ruling that the source of the rights in the claim was contractual because it is possible to conceive of this dispute as entirely contained within the terms of the contract, the D.C. Circuit classified the claim on the basis of a rebuttal point embedded within a larger claim — the D.C. Circuit thus ran afoul of the principle that the mere existence of a contract issue within a broader claim does not make the claim essentially contractual, where the source of the rights claimed and the remedies are not contractual. Commercial Drapery Contractors, 133 F.3d at 4; Megapulse, 672 F.2d at 968. Since the within the terms of the contract point in Ingersoll-Rand, a 1985 opinion, is contrary to the same circuit's 1982 ruling in Megapulse (and the same circuit's 1998 ruling in Commercial Drapery Contractors ), it appears that this point from Ingersoll-Rand never was good law in the D.C. Circuit. 17 69 Moreover, even if the within the terms of the contract point were good law, this one similarity is not enough to make the present dispute similar to Ingersoll-Rand. As discussed above, the D.C. Circuit's second and third reasons given for determining the source of the Ingersoll-Rand claim to be contractual are not applicable to the present dispute. Also, as discussed above, the Ingersoll-Rand court ruled that the relief sought was specific performance, a contractual remedy — the relief issue alone is sufficient to distinguish Ingersoll-Rand from the present case. Finally, the many differences between the present case and Ingersoll-Rand are quite important — Ingersoll-Rand itself stressed the case-specific nature of the CDA inquiry. 780 F.2d at 76-77 (As to whether the relief sought was essentially contractual, the [ Megapulse ] court recognized that the question `may be resolved only against the facts of each case.' [ Megapulse, 672 F.2d] at 970.). 70 The claim for violation of postal regulations is not a claim relating to a contract, under the CDA, but rather is a claim based upon rights established in government regulations. The claim is analogous to that in Commercial Drapery Contractors, where the CDA did not bar jurisdiction over the plaintiffs' claims that GSA's cancellation and suspension decisions violated multiple government procurement statutes and regulations. 133 F.3d at 3. 71 This claim should be decided on the merits. If the regulations do not vest any rights in mail transporters, then the district court should grant a motion to dismiss this claim. But if a regulation does vest a right of action in the mail transporters, then the source of this right is the regulation, notwithstanding that a contract issue arises in rebuttal. Ingersoll-Rand is not controlling, and there is no other valid argument for classifying the rights found in the regulation as contractual. 72 3. Plaintiffs' claim for declaratory and injunctive relief for arbitrary agency action without statutory authority 73 Plaintiffs' third cause of action is the claim that the Exxon contracts created third-party obligations, obligating Plaintiffs to certain fuel supply provisions, and that because the USPS lacks statutory authority to obligate third parties, such obligations were arbitrary and capricious. Plaintiffs assert that arbitrary and capricious action violates due process. Tolchin v. Supreme Court, 111 F.3d 1099, 1115 (3rd Cir.1997) (Due process may also be violated if the government acts arbitrarily or capriciously. Grayned, 408 U.S. at 109, 92 S.Ct. 2294.). Plaintiffs assert irreparable harm. 74 Nothing in this claim relates to the contractual relationship between Plaintiffs. The claim itself is structured and argued such that it would be the same if, hypothetically, Plaintiffs had no contractual relationship with the USPS: i.e., if, hypothetically, the USPS attempted to obligate all gas stations to give discounts to mail transporters, and gas stations had no contractual relationship with the USPS, then the gas stations could assert the exact same legal rights. 75 The source of the rights in this claim is not distinguishable from the source of rights in claims over which the CDA did not bar jurisdiction in Commercial Drapery Contractors. 133 F.3d at 3 (holding that the CDA did not bar jurisdiction over the plaintiffs' claims that GSA's cancellation and suspension decisions ... constituted `de facto debarment' or `blacklisting,' thereby depriving them of due process.). 76 On the merits, contract issues certainly may be relevant: Plaintiffs' contracts with the USPS may be considered in determining disputed factual issues concerning whether Plaintiffs agreed to abide by the Exxon contracts. But the contract issues would arise only in rebuttal, not in setting forth the source of rights upon which Plaintiffs base their claims. Again, the existence of contract issues as rebuttal points does not change the nature of the source of the rights claimed. Commercial Drapery Contractors, 133 F.3d at 4; Megapulse, 672 F.2d at 968.