Court Opinion

ID: 4114249
Source: CourtListenerOpinion
Date Created: 2017-01-09 22:01:13.396838+00
Date Added: 2024-06-11T07:41:06.909479
License: Public Domain

UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA

 BETTY YEE, Controller, State of California,

                Plaintiff,

        v.
                                                           Civil Action No. 16-490 (RDM)
 SALLY JEWELL, Secretary, United States
 Department of the Interior,

                 Defendant.

              MEMORANDUM OPINION AND ORDER TO SHOW CAUSE

       The State of California brings this breach-of-contract suit against the United States

Department of the Interior. The complaint identifies two bases for this Court’s jurisdiction: the

Declaratory Judgment Act, 28 U.S.C. § 2201, and the Mandamus Act, 28 U.S.C. § 1361. See

Dkt. 1 at 1 (Compl. ¶ 2). The Department has moved to dismiss the complaint on the grounds

that neither statute confers subject-matter jurisdiction here. Dkt. 7. California has also cross-

moved for summary judgment. Dkt. 9.

       The Department is correct that the Declaratory Judgment Act is not jurisdiction-

conferring, and, although the Mandamus Act can supply subject-matter jurisdiction in

exceptional circumstances, the Court is not persuaded (at least on the present record) that this is

such an occasion. But, because California’s claim arises under federal law, the Court concludes

that it has subject-matter jurisdiction under 28 U.S.C. § 1331. The Court will, accordingly, deny

the Department’s motion to dismiss.

       The more pertinent question—and the question that neither party has raised—is whether

Congress has waived the sovereign immunity of the United States for present purposes.
“Sovereign immunity is jurisdictional in nature,” FDIC v. Meyer, 510 U.S. 471, 475 (1994), and

this Court “ha[s] an obligation to address jurisdictional questions sua sponte,” United States v.

Baucum, 80 F.3d 539, 541 (D.C. Cir. 1996). As explained below, there is a significant question

whether Congress has consented to government contract suits like this one in federal district

court and whether this case should be transferred to the United States Court of Federal Claims as

a result. The Court, accordingly, will deny California’s summary judgment motion without

prejudice as premature, and will order the parties to show cause why the case should not be

transferred to the Court of Federal Claims or dismissed on grounds of sovereign immunity.

                                      I.      BACKGROUND

A.      Regulatory Background

        The Department of the Interior may lease federal lands to private parties for the

production of oil and gas. 30 U.S.C. § 226. Lessees must then pay the Department royalties for

any oil or gas produced. Id. § 226(b)(1)(A). And, to “accurately determine” the amount of those

royalties, the Department must “establish a comprehensive inspection, collection, and fiscal and

production accounting and auditing system.” Id. § 1711(a).

        Under the Federal Oil and Gas Royalty Management Act (“FOGRMA”), the Department

may then delegate its royalty-auditing duties to the leased lands’ host state, id. § 1735(a), by

means of a “cooperative agreement,” id. § 1732(a). “Cooperative agreements” are legal

instruments defined by statute. See 31 U.S.C. § 6305. They memorialize “relationship[s]

between the United States Government and a State,” where “the principal purpose of the

relationship is to transfer a thing of value to the State . . . to carry out a public purpose,” and

“substantial involvement is expected” between governments. Id.

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       Under the Department’s FOGRMA regulations, such cooperative agreements may

obligate the Department to reimburse the state “for up to 100 percent of the [eligible] costs of

eligible activities,” 30 C.F.R. § 1228.105(a)(1), where “eligible activities” are those activities

agreed upon each year by the parties, id., and “eligible costs” are the costs “directly associated”

with those activities, id. § 1228.107. Eligible costs include payment of salaries and benefits,

travel and training costs, administrative expenses, and other costs “which can be shown to be in

direct support of the activities covered by the agreement.” Id. That reimbursement, however,

“may not exceed the reasonably anticipated expenditures that [the Department] would incur to

perform the same function,” id. § 1227.112(b), and must be “necessary for” and “directly related

to [the state’s] performance of a delegated function,” id. § 1227.112(c).

       If the cooperative agreement provides for reimbursement, it must “contain detailed

schedules identifying those activities and costs which qualify.” Id. § 1228.107. Each calendar

quarter, the state must submit to the Department a “voucher for reimbursement of eligible costs

incurred,” id. § 1228.105(c), which the Department then pays using “appropriations specifically

designated for th[at] purpose,” id. § 1228.105(b).

B.     Factual Background

       In September 2010, the Department and California entered into a FOGRMA cooperative

agreement (“the Agreement”). Dkt. 7-2 at 2. The Agreement delegated certain royalty-auditing

duties to California for the period from October 1, 2010, to June 30, 2016, Dkt. 7-2 at 2, and as

such the Agreement has now expired. The Agreement also provided that the Department would

“reimburse the State up to 100 percent of allowable costs . . . not to exceed the amount approved

for each fiscal year of this Agreement . . . and contingent upon appropriation of funds by

Congress.” Id. at 6.

                                                  3
       At issue here is Agreement Paragraph 6.5.C, which provided for reimbursement of the

costs of California’s employees’ fringe benefits. See Dkt. 1 at 2 (Compl. ¶ 7); Dkt. 7-2 at 16.

“Fringe benefits” are “allowances and services provided by employers to their employees as

compensation in addition to regular salaries and wages.” Cost Principles for State, Local, and

Indian Tribal Governments (OMB Circular A-87), 70 Fed. Reg. 51,910, 51,914–15 (Aug. 31,

2005). Paragraph 6.5.C of the Agreement stated that “[f]ringe benefits shall be allowed in

accordance with the State’s established accounting system.” Dkt. 7-2 at 16 (Agreement ¶ 6.5.C).

       In July 2015, the Department took issue with California’s method of calculating its

salaries, fringe benefits, and other indirect costs. Dkt. 1 at 2–3 (Compl. ¶ 8). It sent California a

draft “Attestation Report,” Dkt. 9-4, which took the view that, broadly speaking, California had

sought and obtained reimbursement based on its employees’ “theoretical or estimated working

hours,” rather than their “[a]ctual working hours,” id. at 4. 1 The Report concluded that, between

October 2010 and September 2014, California had overcharged the Department by $296,459.94.

Id. at 8. California objected, see Dkt. 9–5, but the Department issued a final report declining to

change its position, see Dkt. 7-4 at 11–12.

       In its final report, the Department stated that it would recover the missing $296,459.94 by

withholding monies from California’s future FOGRMA vouchers. Id. at 12. That is, for each of

the twelve monthly vouchers covering the period from July 2015 to June 2016, the Department

would subtract $24,705 from the amount California would otherwise have received, thereby

recuperating the missing amount. Id. In addition, the Department stated that it would “make a

one-time adjustment to recover overstated costs” for fiscal year 2015 by withholding an

1
  Although the exact details of the accounting dispute are not necessary to this opinion, they are
difficult to discern from the current record. The Attestation Report makes frequent reference to
attached spreadsheets, see Dkt. 9-4 at 4–5, which neither party has provided.

                                                  4
additional $1,845.71 from the July 2015 voucher. Id. at 12–13. Finally, the Department

requested that California adopt the Department’s preferred method for calculating costs for the

remaining months on the contract, id. at 10, although it is unclear whether California did so.

C.     The Present Proceeding

       After pursuing an unsuccessful administrative appeal, Dkt. 1 at 3 (Compl. ¶¶ 11–12); see

Dkt. 7-2 at 18 (Agreement ¶ 7.5); Dkts. 9-7 & 9-8, California filed suit in this Court. It alleges

that the Department breached Paragraph 6.5.C by “unilaterally substituting its own method of

calculating overhead in lieu of [California’s preferred method].” Dkt. 1 at 4 (Compl. ¶ 13). It

seeks (1) a declaratory judgment that the Department breached the Agreement; (2) an injunction

requiring the Department to “abandon its $296,459.94 claim against [California] and any future

such claims” under the Agreement; (3) an injunction requiring the Department to “repay any

money withheld because of [the Department’s] erroneous interpretation”; and (4) costs. Id. at 4.

Assuming that the Department followed through on its threat to withhold money, California’s

requested relief would require the United States to pay California more than $298,000.

                                       II.     ANALYSIS

       The Department has moved to dismiss for lack of subject-matter jurisdiction, Dkt. 7, and

California has cross-moved for summary judgment, Dkt. 9. For the reasons explained below, the

Court will deny both motions and order the parties to show cause why the case should not be

transferred to the U.S. Court of Federal Claims or dismissed on sovereign immunity grounds.

A.     Subject-Matter Jurisdiction

       In suits against the government, subject-matter jurisdiction turns on at least “two different

jurisdictional questions.” Trudeau v. FTC, 456 F.3d 178, 183 (D.C. Cir. 2006). First, has

Congress provided an affirmative grant of subject-matter jurisdiction? And, second, has

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Congress waived the United States’s immunity to suit? See id. at 185; Transohio Savings Bank

v. Dir., Office of Thrift Supervision, 967 F.2d 598, 606 (D.C. Cir. 1992). Only if Congress has

done both may this Court reach the merits.

       1. Affirmative Grant of Subject-Matter Jurisdiction

       The Department trains its arguments on only the first question, i.e., whether a statute

provides an affirmative grant of subject-matter jurisdiction. In particular, it challenges the

jurisdictional statement in California’s complaint, in which California asserts that jurisdiction is

proper under the Declaratory Judgment Act, 28 U.S.C. § 2201, and the Mandamus Act, 28

U.S.C. § 1361. See Dkt. 1 at 1 (Compl. ¶ 2). The Department’s motion argues that neither

statute creates jurisdiction in this case. See Dkt. 7.

       As an initial matter, the Department is clearly correct that the Declaratory Judgment Act

does not supply jurisdiction here; simply put, the Declaratory Judgment Act is not a jurisdiction-

conferring statute. Dkt. 7-1 at 7 n.3; see Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667,

671 (1950). Whether the Mandamus Act confers jurisdiction on these facts is less obvious, but

the answer is likely the same. A number of decisions cast doubt on the proposition that the

Mandamus Act creates jurisdiction for district courts to compel specific performance of

government contracts. E.g., Blaney v. United States, 34 F.3d 509, 514 (7th Cir. 1994); Bobula v.

U.S. Dep’t of Justice, 970 F.2d 854, 860 (Fed. Cir. 1992); White v. Adm’r of Gen. Servs. Admin.,

343 F.2d 444, 447 (9th Cir. 1965) (“To find in § 1361 such a revolutionary step on the part of

Congress as the overturning of what had been settled law since the foundation of the

Government, i.e., that the courts do not have jurisdiction to order the Government to specifically

perform its contracts, would be to make too much of a short and simple piece of legislation.”).

And it has long been settled that the Mandamus Act is a law of last resort, available “only if [the

                                                   6
plaintiff] has exhausted all other avenues of relief and only if the defendant owes him a clear

nondiscretionary duty.” Heckler v. Ringer, 466 U.S. 602, 616 (1984). It is thus doubtful that

California can meet the stringent standard for establishing mandamus jurisdiction.

       The Court need not resolve that question, however, because this case falls within the

general grant of jurisdiction over civil actions “arising under the Constitution, laws, or treaties of

the United States.” 28 U.S.C. § 1331. “[F]ederal common law of contracts applies to contracts

with the federal government, and federal common law is part of the ‘laws . . . of the United

States’ for the purpose of § 1331 jurisdiction.” N. Side Lumber Co. v. Block, 753 F.2d 1482,

1484 (9th Cir. 1985) (second alteration in original) (citation omitted) (citing Illinois v.

Milwaukee, 406 U.S. 91, 100 (1972)); accord, e.g., Wright v. Foreign Serv. Grievance Bd., 503

F. Supp. 2d 163, 180 (D.D.C. 2007). The fact that the contract at issue here purports to allow

fringe benefits “in accordance with the State’s established accounting system,” Dkt. 7-2 at 16,

moreover, does not change this conclusion; even where federal law borrows from state rules or

procedures, it remains federal law. Cf. United States v. Sharpnack, 355 U.S. 286, 294–95 (1958)

(holding that Congress does not impermissibly “delegat[e] . . . its legislative authority to the

States” when it incorporates state laws into federal law). As such, § 1331 contains the requisite

jurisdictional grant, and the Department’s arguments pose no bar to this suit. The Court,

accordingly, will deny the Department’s motion.

       2. Waiver of Sovereign Immunity

       The Court has an independent duty, however, to address the second jurisdictional

question, i.e., whether a statute has, in relevant respects, unambiguously waived the sovereign

immunity of the United States. See FDIC, 510 U.S. at 475. The parties have not addressed this

issue, although California has hinted that it intends to rely on the waiver of sovereign immunity

                                                  7
found in the Administrative Procedure Act (“APA”), 5 U.S.C. § 702. See Dkt. 8 at 3. That

section provides in relevant part:

       An action in a court of the United States seeking relief other than money damages
       and stating a claim that an agency or an officer or employee thereof acted or failed
       to act in an official capacity or under color of legal authority shall not be dismissed
       nor relief therein be denied on the ground that it is against the United States or that
       the United States is an indispensable party. Provided, That . . . [n]othing herein . . .
       confers authority to grant relief if any other statute that grants consent to suit
       expressly or impliedly forbids the relief which is sought.

5 U.S.C. § 702. Importantly, this waiver applies to any suit that meets its conditions, “whether

under the APA or not.” Trudeau, 456 F.3d at 186. As such, the waiver of sovereign immunity

contained in § 702 might apply to California’s claim for breach of contract under the federal

common law of contract, but only if (1) California is “seeking relief other than money damages”

and (2) no other statute “impliedly forbids the relief which is sought.”

       Starting with the question whether the complaint seeks “relief other than money

damages,” one might at first blush think that the plain language of the complaint provides a

ready answer: among other things, the complaint seeks an order compelling the Department to

“repay any money withheld” from the contractually-required payments “because of [the

Department’s] erroneous interpretation of the Agreement.” Dkt. 1 at 4. But, as the Supreme

Court has explained, “[t]he fact that a judicial remedy may require one party to pay money to

another is not a sufficient reason to characterize the relief” at issue “as ‘money damages.’”

Bowen v. Massachusetts, 487 U.S. 879, 893 (1988). Rather, “money damages” are distinct from

“specific relief,” even when the award of “specific relief” includes an order directing the

payment of money. Id. at 900. “Damages are given to the plaintiff to substitute for a suffered

loss,” while specific relief “attempt[s] to give the plaintiff the very thing to which he was

entitled.” Id. at 895 (internal quotation mark omitted) (quoting D. Dobbs, Handbook on the Law

of Remedies 135 (1973)). For this reason, it is not uncommon for courts to award “monetary
                                                  8
relief under a contract” in “equitable actions.” Id.; see also Transohio Savings Bank, 967 F.2d at

608. Here, California endeavors to cast its complaint as one for “declaratory and injunction

relief,” Dkt. 1 at 1 (“Complaint for Declaratory and Injunctive Relief”), as opposed to a

complaint for damages resulting from a breach of contract. But, because the Department has not

addressed this question, the Court will refrain from deciding whether the complaint is one for

“money damages” within the meaning of § 702.

       As to the “impliedly forbids” prong of § 702, California’s chief obstacle is the Tucker

Act, 28 U.S.C. §§ 1346, 1491. The Tucker Act waives sovereign immunity for actions “founded

upon . . . any express or implied contract with the United States,” 28 U.S.C. § 1491(a)(1); see

United States v. Mitchell, 463 U.S. 206, 212 (1983), but only for suits brought in the U.S. Court

of Federal Claims. The one exception is the provision commonly known as the “Little Tucker

Act,” 28 U.S.C. § 1346(a)(2), which allows such suits to proceed in district courts, instead,

provided the amount in controversy is no greater than $10,000. 2 Whether the Tucker Act

“impliedly forbids” the application of § 702 to California’s breach of contract claim is a

potentially complex question, as the doctrinal history reflects.

       Initially, the D.C. Circuit held that the Tucker Act provided the “exclusive” waiver of

sovereign immunity for “cases against the United States based on contracts.” Spectrum Leasing

Corp. v. United States, 764 F.2d 891, 893 & n.2 (D.C. Cir. 1985); accord Megapulse, Inc. v.

Lewis, 672 F.2d 959, 967 (D.C. Cir. 1982). On that line of reasoning, “[t]he waiver of sovereign

immunity in the Administrative Procedure Act does not run to actions seeking declaratory relief

or specific performance in contract cases, because that waiver is by its terms inapplicable if ‘any

2
  The Little Tucker Act appears inapplicable here because California seems to be seeking more
than $10,000.

                                                 9
other statute that grants consent to suit expressly or impliedly forbids the relief which is sought,’

and the Tucker Act and Little Tucker Act impliedly forbid such relief.” Sharp v. Weinberger,

798 F.2d 1521, 1523 (D.C. Cir. 1986) (Scalia, J.) (quoting 5 U.S.C. § 702). Thus, “[t]he sole

remedy for an alleged breach of contract by the federal government is a claim for money

damages, either in the United States Claims Court under the Tucker Act, 28 U.S.C. § 1491(a)(1),

or, if damages of no more than $10,000 are sought, in district court under the Little Tucker Act,

28 U.S.C. § 1346(a)(2).” Id. (emphasis added).

       Bowen v. Massachusetts arguably challenged this understanding. Bowen was not a

contract case, but concerned the Medicaid program—“a cooperative endeavor” between the

federal government and the states. 487 U.S. at 883. The State of Massachusetts claimed that the

Department of Health and Human Services owed it millions of dollars that had been erroneously

withheld under the program. Id at 887. The Supreme Court rejected the argument that the Court

of Federal Claims had “exclusive jurisdiction” over the action. See id. at 890, 910 n.48. Instead,

it held that jurisdiction was proper in the district court because (1) the claim was not seeking

“money damages” within the meaning of § 702, id. at 893, and (2) the Tucker Act did not

provide an “adequate remedy” within the meaning of 5 U.S.C. § 704, id. at 904. 3 The Court did

not address the preclusion language in § 702. It did, however, expressly reject the notion that the

jurisdiction of the Court of Federal Claims was exclusive:

       It is often assumed that the [Court of Federal Claims] has exclusive jurisdiction of
       Tucker Act claims for more than $10,000. . . . That assumption is not based on any
       language in the Tucker Act granting such exclusive jurisdiction to the [Court of
       Federal Claims]. Rather, that court’s jurisdiction is “exclusive” only to the extent

3
  § 704 provides: “Agency action made reviewable by statute and final agency action for which
there is no other adequate remedy in a court are subject to judicial review.” But § 704 is not part
of the APA’s waiver of sovereign immunity; it merely sets forth requirements for stating an APA
cause of action, Trudeau, 456 F.3d at 183–84 & n.5, which California’s complaint does not
purport to do.

                                                 10
       that Congress has not granted any other court authority to hear the claims that may
       be decided by the Claims Court. If however, § 702 of the APA is construed to
       authorize a district court to grant monetary relief—other than traditional “money
       damages”—as an incident to the complete relief that is appropriate in the review of
       agency action, the fact that the purely monetary aspects of the case could have been
       decided by the [Court of Federal Claim] is not sufficient reason to bar that aspect
       of the relief available in a district court.

Id. at 910 n.48.

       In the wake of Bowen, the D.C. Circuit revisited the question whether the Tucker Act

provides an exclusive remedy—and thus impliedly forbids the application of the waiver of

sovereign immunity contained in § 702—for breach of contract claims against the federal

government. In doing so, the Court of Appeals recognized the “strong case that, after Bowen, the

Tucker Act should not be read to ‘impliedly forbid’ under the APA the bringing in district court

of contract actions for specific relief.” Transohio Savings Bank, 967 F.2d at 612. But, because

“Bowen did not involve a contract and did not address the ‘impliedly forbids’ limitation on the

APA’s sovereign immunity,” the Court of Appeals “decline[d] to overrule [its] very specific

holdings that the APA does not waive sovereign immunity for contract claims seeking specific

relief.” Id. at 613. Thus, it held that “if the case before us is a ‘contract case,’ the APA does not

waive the sovereign’s immunity from suit.” Id. at 609.

       Since then, the D.C. Circuit has consistently held that an action must be brought under

the Tucker Act in the Court of Federal Claims if, “in whole or in part, it explicitly or ‘in essence’

seeks more than $10,000 in monetary relief from the federal government,” Kidwell v. Dep’t of

the Army, 56 F.3d 279, 284 (D.C. Cir. 1995), if it “is essentially a contract action,” Albrecht v.

Comm. on Employee Benefits, 357 F.3d 62, 68 (D.C. Cir. 2004), and if the Court of Federal

Claims would have jurisdiction over the matter, Tootle v. Sec’y of the Navy, 446 F.3d 167, 176–

77 (D.C. Cir. 2006). The first requirement is satisfied if the complaint seeks more than $10,000

                                                 11
in “monetary relief”—a concept distinct from “money damages” in the sense of Bowen. See

Schwalier v. Hagel, 734 F.3d 1218, 1220–21 (D.C. Cir. 2013); see also Bowen, 487 U.S. at 900

n.31. The second requirement is satisfied if the claim “turns entirely on the terms of a contract,”

Albrecht, 357 F.3d at 69, as opposed to being a “statutory or constitutional claim[],” Transohio,

967 F.2d at 610. And the third requirement stems from the D.C. Circuit’s decision in Tootle v.

Secretary of the Navy, 446 F.3d 167 (D.C. Cir. 2006), where it “categorically reject[ed] the

suggestion that a federal district court can be deprived of jurisdiction by the Tucker Act when no

jurisdiction lies in the Court of Federal Claims.”

        To afford the parties an opportunity to address these issues, the Court will order them to

show cause why this action should not be dismissed on grounds of sovereign immunity. The

parties, accordingly, shall submit additional briefs regarding whether a waiver of sovereign

immunity—including the APA, the Tucker Act, or any other such waiver—applies to this action,

and, in particular, whether (1) California is seeking “money damages” within the meaning of

§ 702 and (2) whether the Tucker Act “impliedly forbids” the use of § 702 in this case.

        3. Transfer or Dismissal

        In the event that subject-matter jurisdiction is lacking, the Court “shall, if it is in the

interest of justice, transfer [the] action . . . to any other such court in which [it] could have been

brought at the time it was filed.” 28 U.S.C. § 1631. As such, the Court may need to transfer this

action to the U.S. Court of Federal Claims. See 28 U.S.C. § 1491(a)(1). The propriety of doing

so, of course, depends not only on the subject-matter jurisdiction of this Court, but also on the

jurisdiction of the Court of Federal Claims. Jan’s Helicopter Serv., Inc. v. FAA, 525 F.3d 1299,

1304 (Fed. Cir. 2008). Because neither party has addressed the possibility of transfer or why this

                                                   12
case was not brought in the Court of Federal Claims in the first place, the Court will further order

that they show cause why transfer would not be proper.

B.     California’s Motion for Summary Judgment

       In addition to the Department’s motion to dismiss, California has filed a three-page

motion for summary judgment. See Dkt. 9. Before addressing that motion, however, the Court

must first determine that it has jurisdiction over this case. Scenic Am., Inc. v. United States Dep’t

of Transp., 836 F.3d 42, 48 n.2 (D.C. Cir. 2016) (“[T]he district court [must] assure itself of its

jurisdiction before assessing a summary judgment motion on the merits.”). The Court,

accordingly, will deny California’s motion without prejudice as premature until the jurisdictional

issue is resolved.

                                          CONCLUSION

       In light of the above discussion, it is hereby

       ORDERED that the Department’s Motion to Dismiss, Dkt. 7, be DENIED;

       FURTHER ORDERED that California’s Motion for Summary Judgment, Dkt. 9, be

DENIED without prejudice as premature; and

       FURTHER ORDERED that the parties SHOW CAUSE why this action should not be

dismissed on grounds of sovereign immunity or transferred to the U.S. Court of Federal Claims.

In particular, the parties shall address all of the following issues: (1) whether Congress has

waived the United States’s sovereign immunity to suit in this Court for the pending action,

including, if California intends to rely on 5 U.S.C. § 702, whether this suit satisfies the

requirements that the action seek “relief other than money damages” and not be impliedly

forbidden by the Tucker Act; (2) whether the action could properly have been brought in the U.S.

Court of Federal Claims; and (3) assuming that the U.S. Court of Federal Claims has exclusive

                                                 13
jurisdiction over this matter, whether the interest of justice favors transfer of this case to that

court. California shall file its response on or before February 8, 2017. The Department shall file

its response on or before March 10, 2017. California may then file a reply on or before March

27, 2017.

        SO ORDERED.

                                                        /s/ Randolph D. Moss
                                                        RANDOLPH D. MOSS
                                                        United States District Judge

Date: January 9, 2017

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