Court Opinion

ID: 3208948
Source: CourtListenerOpinion
Date Created: 2016-06-02 20:00:59.994129+00
Date Added: 2024-06-11T07:39:27.457574
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                             JUN 02 2016
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

JOHN VAN CUREN, as Trustee and Plan              No. 14-15855
Administrator of the Chapter 11 Estate of
Michael Hat, f/k/a Michael Hat Farming           D.C. No. 3:13-cv-04601-CRB
Company,

              Plaintiff - Appellant,             MEMORANDUM*

 v.

FEDERAL CROP INSURANCE
CORPORATION and RISK
MANAGEMENT AGENCY,

              Defendants - Appellees.

                    Appeal from the United States District Court
                      for the Northern District of California
                    Charles R. Breyer, District Judge, Presiding

                       Argued and Submitted April 11, 2016
                            San Francisco, California

Before: THOMAS, Chief Judge and REINHARDT and CHRISTEN, Circuit
Judges.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      John Van Curen, chapter 11 bankruptcy trustee (“trustee”) for Michael Hat

(“debtor”), appeals the district court’s order granting the Federal Crop Insurance

Corporation’s (“FCIC”) motion to dismiss or, in the alternative, motion for

summary judgment. The trustee sought to enforce a decision by the National

Appeals Division of the United States Department of Agriculture reversing prior

decisions of the United States Department of Agriculture’s Risk Management

Agency (“RMA”) and awarding the bankruptcy estate insurance proceeds from

claims made by the debtor on a crop insurance policy with American Growers

Insurance Company (“AGIC”), which was reinsured by FCIC. We reverse.

Because the parties are familiar with the complex history of this case, we need not

recount it here, except as necessary to explain our decision.

                                           I

      The district court erred in dismissing the action for lack of subject matter

jurisdiction. The court relied on the trustee’s decision not to seek arbitration

within the time limits provided in the relevant crop insurance policy prior to

seeking administrative review. It reasoned that the time limitations contained in

the crop insurance policy at issue, read in conjunction with 7 U.S.C.

§ 1508(j)(2)(B), imposed a non-waivable jurisdictional bar precluding a suit

against the government.

                                           2
      Statutes limit a court’s jurisdiction when they govern a court’s adjudicatory

capacity. Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 435 (2011). The

Supreme Court has instructed that “claim-processing rules” ordinarily do not create

jurisdictional bars. Id. As the Supreme Court explained, these “rules . . . seek to

promote the orderly progress of litigation by requiring that the parties take certain

procedural steps at certain specified times.” Id. It noted that “[f]iling deadlines . . .

are quintessential claim-processing rules.” Id.

      Congress is, of course, free to attach to such rules “the conditions that go

with the jurisdictional label.” Id. However, there must be a “‘clear’ indication that

Congress wanted the rule to be ‘jurisdictional.’” Id. at 436 (quoting Arbaugh v. Y

& H Corp., 546 U.S. 500, 515-16 (2006)). Congress need not “incant magic

words” to signal the jurisdictional effect of a limitations statute. United States v.

Kwai Fun Wong, 135 S. Ct. 1625, 1632 (2015). Courts instead may review a

statute’s text, context and interpretive history to determine “whether a statute ranks

a requirement as jurisdictional.” Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154,

166-68 (2010); see also Kwai Fun Wong, 135 S. Ct. at 1632 (approving use of

“traditional tools of statutory construction” in jurisdictional inquiry).

      The statute in question, 7 U.S.C. § 1508(j)(2)(B), is not a jurisdictional

limitations statute. First, the text does not define or limit a reviewing court’s

                                            3
“adjudicatory capacity.” Henderson, 562 U.S. at 435. The provision identifies

neither the “classes of cases” nor the “persons” subject to the district court’s

“adjudicatory authority.” Reed Elsevier, 559 U.S. at 160-61. Second, no long

history of Section 1508 jurisprudence compels the conclusion that the provision

has jurisdictional effect. Cf. John R. Sand & Gravel Co. v. United States, 552 U.S.
130, 134 (2008) (describing 100-year-old line of decisions holding that Court of

Federal Claims limitations statute had jurisdictional effect), Bowles v. Russell, 551
U.S. 205, 210 (2007) (describing “consisten[t] . . . holdings” on question whether

28 U.S.C. § 2107 had jurisdictional effect). Neither the Supreme Court nor our

court has ruled on the question whether 7 U.S.C. § 1508(j)(2)(B) has jurisdictional

effect.

          Rather, § 1508(j)(2)(B) is the “quintessential claim-processing rule[].”

Henderson, 562 U.S. at 435. The limitations statute appears within a paragraph

entitled, “[c]laims for losses,” and prefaced with the language, “[u]nder rules

prescribed by the Corporation, the Corporation may provide for adjustment and

payment of claims . . . .” See 7 U.S.C. § 1508(j)(1). The lack of jurisdictional

effect is especially evident in this context, where the alleged failure to file a claim

stems not from regulation or statute, but from a private contract of insurance.

                                             4
                                           II

      The district court also erred in its alternative holding that the trustee’s

indemnity claims were time-barred. The court concluded that the trustee’s failure

to seek arbitration within the 12-month period required by the crop insurance

policy precluded the trustee from recovering from the agency. However, the

arbitration required by the policy and the federal administrative agency actions

were two entirely separate processes. Therefore, the trustee’s decision not to seek

arbitration did not preclude an administrative award from the agency.

      In this case, the agency elected to participate, and adjust the crop insurance

claim, which was its right. That adjustment followed an agreement between RMA

and the Nebraska Department of Insurance, which assumed supervisory control

over AGIC. Under the agreement, RMA, acting on behalf of FCIC, would

guarantee AGIC’s insurance policies if it were liquidated. A Nebraska state court

entered an order authorizing the Nebraska Department of Insurance to liquidate

AGIC and enjoining any “actions at law or in equity or in arbitration” against

AGIC. The liquidator sent notice to policy holders informing them that RMA

would assume control over federally reinsured policies. The trustee and the

liquidator ultimately reached a stipulation whereby the estate’s insurance claims

would be deemed denied by the liquidator, with the trustee retaining the right to

                                           5
pursue the claims with RMA. The trustee pursued the claims with RMA, which

denied the claims and requested that the estate refund monies paid by AGIC. After

mediation, the case was reopened, and a second RMA decision was issued again

denying the trustee’s claims and seeking repayment. The trustee appealed the

second RMA decision to the National Appeals Division of the United States

Department of Agriculture. The National Appeals Division ultimately determined

that RMA had erroneously denied the claims, and that it owed the estate

approximately an additional $2.3 million.

      The agency’s authority over the trustee’s claims derives from the Standard

Reinsurance Agreement (“SRA”) between the agency and AGIC. That agreement

includes (1) a “cut-through” provision that “transferred to FCIC” all “eligible crop

insurance contracts affected” by the Nebraska court’s 2005 liquidation order, and

(2) a January 2003 amendment that “assign[ed] to FCIC all of [AGIC’s] rights of

action to recover any funds improperly paid under any eligible crop insurance

contract[.]”

      Those SRA provisions effected a guarantee contained in the policy’s

preamble: that the trustee’s claim would be “settled in accordance with the

provisions of this policy and paid by FCIC” if the insurer could not pay the

trustee’s loss. Cf. Olsen v. United States, 665 F. Supp. 2d 1225, 1230 (E.D. Wash.

                                            6
2009) (“Olsen II”) (“FCIC thereafter acquired the authority to administer the

policy in accordance with its terms.”). Multiple policy provisions structured

indemnity determinations. See, e.g., ¶ 3(d) (reserving right to revise indemnities

paid based on inaccurate production guarantees); ¶ 6(e) (reserving right to

determine indemnities based on submitted acreage reports); ¶ 14 (Our Duties)

(“We recognize and apply the loss adjustment procedures established or approved

by the [FCIC].”). Indeed, the agency’s April 2010 and May 2011 determinations

cited to some of these and to other policy provisions to adjust the trustee’s losses.

Those determinations, made by “employee[s] . . . of the Agency” denied “program

benefits” to the trustee. See 7 C.F.R. § 400.90 (2016). The determinations

therefore amounted to “adverse decision[s]” subject to exclusive and unconditional

administrative relief under applicable federal regulations. See 7 C.F.R. § 400.90

(2016) et seq.

                                           7
      The National Appeals Division confirmed the separate administrative and

arbitration procedures in its decision, noting that under 7 C.F.R. § 11.1, it was

“unable to adjudicate disputes between a participant and an insurance provider.”1

      The agency presents no authority for the agency’s contrary proposition: that

the administrative and judicial review provisions of 7 C.F.R. Parts 11 and 400 do

not attach to an adverse decision made by RMA following an assignment in

liquidation. Instead, salient authority points the other direction: multiple

regulatory and contractual provisions make plain that any principles of state

law—including those regarding assignment—do not apply to federal crop

insurance policies when inconsistent with the “purpose, intent, or authority of the

[Federal Crop Insurance Act].” 7 C.F.R. § 400.351 (2016). Accordingly, any

interpretation of state law that encumbers “actions authorized by [7 C.F.R.

Part 400]”—including the trustee’s rights to the administrative and judicial relief

contemplated by Subpart J— cannot stand. See 7 C.F.R. § 400.352 (2016).

      1
         The National Appeals Division rejected RMA’s argument that the claims
were time-barred as “convoluted,” noting that, on one hand, RMA was claiming
the right to require higher refunds on the claims from the trustee but, on the other
hand, the trustee was precluded from arguing for claim restoration. It further
concluded that there was “nothing in the regulations or handbooks preventing [the
trustee] from arguing that, not only is the RMA decision seeking $2.4 million from
[the trustee] erroneous, but RMA also owes [the trustee] additional indemnities
because RMA incorrectly adjusted the claims.”

                                           8
Indeed, that was the agency’s position during the Olsen litigation, in which it

successfully contended that the arbitration provisions in a similar contract had no

bearing on the administrative process, and that the arbitrator’s award could not be

enforced against the agency. See Olsen v. U.S. ex rel. U.S. Dep’t of Agric., 546 F.

Supp. 2d 1122, 1126 (E.D. Wash. 2008) (“Olsen I”).

      In the final analysis, this appeal is confined to agency action. The claims

against AGIC were settled with the state liquidator, which agreed that the claims

could proceed before the agency in accordance with the liquidator’s memorandum

of understanding with the agency. The RMA made two determinations.2 The

trustee administratively appealed to the National Appeals Division, which issued a

final opinion. The trustee was entitled to seek judicial review of that determination

within one year. See 7 C.F.R. § 11.13(b) (2016); 7 U.S.C. § 1508(j)(2)(B). In this

unusual circumstance, the trustee is not appealing the decision, but asking the court

to enforce it. Regardless, the trustee timely filed his complaint on October 4, 2013,

less than one year after either the December 2012 Director Review Determination

or the agency’s January 2013 implementation letter.

                                         III

      2
        We need not decide whether the RMA could have initially rejected Van
Curen's claim as untimely. Once it decided to adjust the claim and seek additional
funds from the estate, it waived any time bar.

                                          9
      In sum, we reverse the district court’s dismissal of the action based on lack

of jurisdiction and its alternative grant of summary judgment. Given our resolution

of the issues, we need not, and do not, reach any other issue urged by the parties.

      REVERSED.

                                         10