Court Opinion

ID: 764
Source: CourtListenerOpinion
Date Created: 2010-03-30 04:09:27+00
Date Added: 2024-06-11T14:54:59.853374
License: Public Domain

NOTE: This disposition is nonprecedential.

    United States Court of Appeals for the Federal Circuit
                                         2009-5101

                            PETER KALOS and VERON KALOS,

                                                        Plaintiffs-Appellants,

                                             v.

                                     UNITED STATES,

                                                        Defendant-Appellee.

.
          Peter Kalos and Vernon Kalos, of Broad Run, Virginia, pro se.

           Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division,
    United States Department of Justice, of Washington, DC, for defendant-appellee. With
    her on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson,
    Director, and Donald E. Kinner, Assistant Director.

    Appealed from: United States Court of Federal Claims

    Judge Margaret M. Sweeney
                      NOTE: This disposition is nonprecedential.

 United States Court of Appeals for the Federal Circuit
                                       2009-5101

                         PETER KALOS and VERON KALOS,

                                                Plaintiffs-Appellants,

                                           v.

                                   UNITED STATES,

                                                Defendant-Appellee.

Appeal from the United States Court of Federal Claims in 08-CV-631, Judge Margaret
M. Sweeney.

                           __________________________

                            DECIDED: March 4, 2010
                           __________________________

Before NEWMAN, BRYSON, and PROST, Circuit Judges.

Opinion for the court filed by Circuit Judge PROST. Dissenting opinion filed by Circuit
Judge NEWMAN.

PROST, Circuit Judge.

      Peter and Veron Kalos (collectively, “Kalos”) appeal the dismissal of their

amended complaint for lack of subject matter jurisdiction and failure to state a claim

upon which relief can be granted. We affirm.

      The following facts are taken from Kalos’s complaint. Because we are reviewing

the dismissal of the complaint under Rule 12(b)(1) and Rule 12(b)(6), we assume that

the complaint’s well-pleaded allegations of fact are true. Bradley v. Chiron Corp., 136
F.3d 1317, 1321 (Fed. Cir. 1998). Our decision does not rely on any of the judicially

noticed facts. 1

       Prior to filing this action, a company owned by Kalos, Brickwood Contractors

(“Brickwood”), entered into a contract with the Federal Bureau of Prisons. On behalf of

Brickwood, Kalos obtained a payment and performance bond from a corporation called

Greenwich. The bond named Brickwood as the principal, Greenwich as the surety, and

the United States as the obligee. After the Bureau of Prisons terminated its contract

with Brickwood for default, it sought to collect from Greenwich on the bond. Collection

on the bond was resolved by a settlement agreement between the Bureau of Prisons

and Greenwich, whereby Greenwich agreed to pay the full amount of the bond in full

satisfaction of its obligations. Kalos was not a party to the settlement agreement, which

expressly provided that “[n]othing contained in this Agreement shall be deemed to

affect, impact or modify any or all rights, claims, demands, lawsuits or other actions that

Brickwood [Kalos] or the Government may have against each other.” The agreement

released Greenwich and the Bureau of Prisons from any liability, actions, debts, claims

or demands against each other. It further stated that the agreement did not create “any

third-party beneficiaries.”

       After this settlement agreement was executed, Greenwich sought to recover from

Brickwood by foreclosing on the liens burdening Kalos’s property, which secured the

bonds. Kalos subsequently lost title to their real property in Great Falls, Virginia and

Manassas, Virginia. Both before and after losing title to their property, Kalos asked the

       1
              Accordingly, we need not decide if the trial court erred by relying on these
facts and thus resolving allegedly “disputed facts” against Kalos. See Dissent at 2-3.

2009-5101                                   2
U.S. Attorney’s Office to confirm that the bonds issued by Greenwich were forgeries and

to initiate criminal proceedings. The U.S. Attorney’s Office confirmed that the bonds

were forgeries, but declined to open a criminal investigation.

       Kalos then filed this action in the U.S. Court of Federal Claims. The amended

complaint states two different claims. First, Kalos alleges a taking in violation of the

Fifth Amendment. According to the complaint, “[a]s a direct result of the actions of the

Government, the Plaintiffs [Kalos] lost title to both of their real properties in Great Falls,

Virginia and in Manassas, Virginia.”        Specifically, Kalos points to the settlement

agreement between Greenwich and the Bureau of Prisons as preventing them from

obtaining compensation for their lost properties. Second, Kalos alleges that the Bureau

of Prisons illegally exacted $769,998, the amount Greenwich paid to the Bureau of

Prisons pursuant to the settlement agreement.         According to Kalos, this settlement

agreement “imposed . . . financial liability on [them] without statutory or regulatory

authority to do so.” Kalos appears to argue that the Bureau of Prisons could not take

any action regarding the bonds because the bonds were counterfeit, and thus entering

into a settlement agreement regarding the bonds violated 18 U.S.C. § 494 and 31

C.F.R. § 223.13(d).

       The Court of Federal Claims dismissed Kalos’s takings claim under Rule 12(b)(6)

for failure to state a claim upon which relief could be granted. It found that Kalos had

not—and could not—establish a “government action” that amounted to a compensable

taking of their property interest. The trial court explained that the Bureau of Prison’s

settlement agreement with Greenwich was not a physical invasion or regulatory action

(such as a zoning ordinance) that might qualify as “government action.”

2009-5101                                     3
       The Court of Federal Claims also dismissed Kalos’s illegal exaction claim under

Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter

jurisdiction. It found that Kalos failed to cite any statute or regulation that could provide

a basis for their illegal exaction claim, explaining that it lacked jurisdiction over criminal

matters that might be brought under 18 U.S.C. § 494, and that 31 C.F.R. § 223.10 limits

the surety’s power to underwrite bonds, not the Bureau of Prison’s power to enter into

settlement agreements.

       On appeal, Kalos argues that the Court of Federal Claims erred in multiple ways.

We address each of these arguments below.

       First, Kalos argues that the trial court’s decision was based on an erroneous

reading of the facts and improperly relied on public records. Even giving the complaint

the liberal construction Kalos is entitled as a pro se litigant, dismissal was still proper.

Despite the dissent’s suggestion to the contrary, this is not a suit on a surety contract,

because the surety bond is not the basis for Kalos’s takings or illegal exaction claims.

Cf. Dissent at 3.      Instead, the claims are based, respectively, on Greenwich’s

foreclosure of its (private) lien on Kalos’s properties and on the settlement agreement

between Greenwich and the government. As explained below, however, Kalos has no

standing to sue the government based on either Greenwich’s foreclosure or the

settlement agreement. When a complaint fails to state a cognizable claim, we cannot

adjudicate the case further—we lack authority to remand the case for additional fact

finding or clarification. See Kontrick v. Ryan, 540 U.S. 443, 454-55 (2004); Larson v.

Correct Craft, Inc., 569 F.3d 1319, 1325 (Fed. Cir. 2009).

2009-5101                                     4
         To allege a cognizable taking under the Fifth Amendment, a person suing for the

loss of his property must show that the loss, or “taking,” was the result of government

action. Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206, 1213 (Fed. Cir.

2005). Kalos’s takings claim was properly dismissed because Kalos has not identified a

“government action” entitling them to compensation under the Fifth Amendment.

Huntleigh USA Corp. v. United States, 525 F.3d 1370, 1381-82 (Fed. Cir. 2008); see

also Air Pegasus, 424 F.3d at 1215-16. Kalos’s two properties in Virginia were both

sold to satisfy liens placed on the property by Greenwich, a private corporation, and

purchased by private third parties, not the government. Accordingly, these sales did not

involve a “physical invasion or appropriation” by the government, or a “government

regulation[]” burdening the Kalos’s property. See Palmyra Pac. Seafoods, L.L.C. v.

United States, 561 F.3d 1361, 1366-67 (Fed. Cir. 2009); Belk v. United States, 858 F.2d
706, 709 (Fed. Cir. 1988). Since a showing of “government action” is required, whether

or not Kalos has a claim against Greenwich has no bearing on whether dismissal was

proper.

         Similarly, the Court of Federal Claims properly dismissed Kalos’s illegal exaction

claim.     As an initial matter, the trial court did not err in dismissing the claim,

notwithstanding Kalos’s attempts to “delete” it by filing a second amended complaint.

Because Kalos had already amended their complaint once, any subsequent

amendment could only be made with the trial court’s permission.           Fed. R. Civ. P.

15(a)(2). It was not an abuse of discretion to deny Kalos’s request to amend their

complaint a second time, since the request would have resulted in delay, the

government had already filed its motion to dismiss, and the proposed amendment would

2009-5101                                    5
not have cured the jurisdictional flaws in the previously-filed complaints. Cultor Corp. v.

A.E. Staley Mfg. Co., 224 F.3d 1328, 1333 (Fed. Cir. 2000) (“Futility of the proposed

amendment is an adequate reason to deny leave to amend.”) Accordingly, the trial

court properly considered the illegal exaction claim in deciding whether to dismiss the

first amended complaint.

        As to the substance of the illegal exaction claim, dismissal was proper because

Kalos failed to identify a “statutory power” pursuant to which the $769,998 was exacted.

Norman v. United States, 429 F.3d 1081, 1095-96 (Fed. Cir. 2005). To survive the

government’s motion to dismiss, it was not enough for Kalos to cite 18 U.S.C. § 494 and

31 C.F.R. § 223.13(d), because there is no evidence that the government relied on

either to obtain the $769,998. Id. Even if Kalos were able to identify a permissible

statutory authority, Kalos has still not satisfied the other requirements for making out an

illegal exaction claim:   to be entitled to relief, Kalos was required to show that the

$769,998 was “exacted” from them, either “directly or in effect.” Aerolineas Argentinas

v. United States, 77 F.3d 1564, 1573 (Fed. Cir. 1996); see also Norman, 429 F.3d at

1096.    Kalos cannot satisfy this requirement because the $769,998 was paid by

Greenwich, not Kalos, pursuant to Greenwich’s settlement with the government. Thus,

this payment cannot be attributed to Kalos, who was not a party to the settlement

agreement or a third-party beneficiary of it.

        Finally, Kalos is not entitled to relief based on the other asserted “errors.” Kalos

argues the Court of Federal Claims erred by 1) treating the government’s motion to

dismiss the “complaint” as applying to the “amended complaint”; 2) failing to enter

2009-5101                                       6
default against the government pursuant to Rule 55(a); and/or 3) denying as moot

Kalos’s request to file a second response to the government’s motion to dismiss.

       First, the trial court did not abuse its discretion by construing the government’s

motion to dismiss as applying to the amended complaint, given that the amended

complaint contained the same claims and substantially the same factual allegations as

the original. See Fed. R. Civ. P. 12(a)(4); cf. Easter v. United States, 575 F.3d 1332,

1336 (Fed. Cir. 2009) (examining whether a party had a “reasonable opportunity” to

oppose the motion to dismiss). Similarly, it was not error for the trial court to refuse to

enter default under Rule 55(a), because the government “defend[ed]” by filing a motion

to dismiss. See Fed. R. Civ. P. 55(a), 12(b). Finally, the trial court did not abuse its

discretion by refusing to let Kalos respond a second time to the government’s motion to

dismiss, since Kalos had already responded in December 2008. Cf. Easter, 575 F.3d at

1336-37.

2009-5101                                   7
                       NOTE: This disposition is nonprecedential.

 United States Court of Appeals for the Federal Circuit

                                        2009-5101

                          PETER KALOS and VERON KALOS,

                                                        Plaintiffs-Appellants,

                                             v.

                                    UNITED STATES,

                                                        Defendant-Appellee.

Appeal from the United States Court of Federal Claims in Case No. 08-CV-631, Judge
Margaret M. Sweeney.

NEWMAN, Circuit Judge, dissenting.

       This case reaches us with an odd and confused record. Mr. Kalos, proceeding pro

se in the Court of Federal Claims and in this court, alleged by complaint that the United

States, acting through the Bureau of Prisons, received full payment on the performance

bond from the surety, Greenwich Insurance Co. The government appears to agree, for it

states that it has no claim against Kalos or his company, Brickwood Contractors Inc. Yet

Kalos states in his complaint that there was an improper foreclosure on the real property in

Manassas and Great Falls, Virginia that he personally owned, which he had personally

pledged to assure performance of the contract between his company and the Bureau of
Prisons. He states that the property has been taken and that its value of over $4 million is

several times the government’s claim for non-performance. He thus asserted claims for a

Fifth Amendment taking, illegal exaction, and breach of contract. The Court of Federal

Claims dismissed the complaint on the pleadings, going outside of the pleadings and into

an undeveloped record to reach disputed facts, upon which my colleagues hold that Kalos

cannot obtain judicial attention sufficient to explore the irrational consequences of his failed

contract.

       The Court of Federal Claims, in its dismissal, took judicial notice of information

outside of the record, such as statements in briefs filed in a bankruptcy proceeding, to

contradict the allegations in Kalos’s complaint. For example, Kalos stated in his complaint

that he authorized a lien of $154,000 on his Virginia property, but the Court of Federal

Claims found, by footnote, that liens of $400,000 and $700,000 were placed against these

properties. Kalos v. United States, 87 Fed. Cl. 230, 232 n.3. Greenwich provided two

bonds, a performance bond and a payment bond. After Brickwood defaulted, Greenwich

paid the full amount of the contract ($769,998), and the settlement agreement between the

Bureau of Prisons and Greenwich stated that the payment is “in full satisfaction of

[Greenwich’s] obligations pursuant to the performance bond.” The settlement agreement,

however, left the payment bond in “full force and effect.” See Amended Compl. ¶¶51-55.

       Nothing in the records clarifies whether any claim has been made under the

payment bond. Nonetheless, there was a foreclosure on Kalos’s property that secured

both bonds, which is alleged to be worth more than $4 million and is encumbered by

Greenwich’s liens for $1.1 million.      With liens for more than the full amount of the

2009-5101                                      2
government contract, and property value exceeding the liens, the total loss of the property,

if accurately reported, warrants at least minimal judicial attention.

       Kalos alleges there has been a double recovery. Certainly if Greenwich only paid

under the performance bond for $769,998, it should not have recovered the total amount of

the liens or the total value of the property. The government remains silent. While the trial

court criticized Kalos for “fail[ing] to supply supporting affidavits or correspondence” with the

complaint, on a motion for dismissal on the pleadings, the facts as pleaded are accepted,

and summary dismissal, leaving no recourse when injury is apparent, is not the favored

process.

       The government contends that it has “suffered no loss on the bond” and attempts to

remove itself from this dispute. The government, however, required these bonds to secure

the government contract.       Moreover, surety undertakings for bonds on government

contracts are three-way contracts that include the government. Of course, it is possible

that the factual assertions in the complaint are inaccurate. However, the Court of Federal

Claims left no opportunity for Kalos—the entity who states that he suffered adverse

consequences—to sort out these events.

       A claim against the United States arising from a government contract and its

consequences is properly brought in the Court of Federal Claims, whether viewed as

arising under the Contract Disputes Act or the Fifth Amendment. Kalos is entitled to judicial

attention sufficient to resolve the facts that are material to his claim.

2009-5101                                      3