American Small Business League v. Johnson et al, No. 3:2010cv00986 - Document 49 (N.D. Cal. 2010)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND GRANTING PLAINTIFF'S MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT by Judge Alsup granting 44 Motion to Amend/Correct ; (whalc2, COURT STAFF) (Filed on 9/3/2010)
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American Small Business League v. Johnson et al Doc. 49 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 9 12 No. C 10-00986 WHA Plaintiff, 11 For the Northern District of California United States District Court 10 AMERICAN SMALL BUSINESS LEAGUE, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S SECOND AMENDED COMPLAINT; AND GRANTING PLAINTIFF’S MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT v. 14 MARTHA N. JOHNSON, in her capacity as Administrator of the General Services Administration, and THE GENERAL SERVICES ADMINISTRATION, 15 Defendants. 13 16 17 / INTRODUCTION 18 In this action on the public accessability of information provided by the Federal 19 Procurement Data System-Next Generation, the federal defendants move to dismiss the 20 second amended complaint for lack of subject-matter jurisdiction; plaintiff moves for 21 leave to file a third amended complaint. For the reasons stated below, defendants’ motion 22 to dismiss is GRANTED IN PART AND DENIED IN PART, and plaintiff’s motion for leave to 23 amend is GRANTED. The hearing set for September 9, 2010 is VACATED. 24 25 STATEMENT Plaintiff American Small Business League is a national small business advocacy 26 organization established to promote the interest of small businesses. The ASBL monitors 27 federal contracts to determine whether the correct number of contracts required by law 28 have been set aside for small businesses. The ASBL checks information provided by the Dockets.Justia.com 1 Federal Procurement Data System-Next Generation — a database of federal contracting 2 data administered by the GSA. 3 This action followed a change to the database search fields. On March 12, 2010, 4 the GSA implemented “Version 1.4,” which removed the search field previously used to 5 identify small businesses, “isSmallBusiness,” and the field that identified recipients of 6 federal contracts, “ContractorName.” Plaintiff alleges that these changes were made in 7 violation of the Federal Funding Accountability and Transparency Act, the Federal 8 Procurement Policy Act, and the Federal Records Act. 9 Plaintiff sought a temporary restraining order to halt the then-proposed deletions and to avoid what it described as permanent and irreparable harm. That motion was 11 For the Northern District of California United States District Court 10 denied on March 9 in order to give defendants an opportunity to be heard before enacting 12 sweeping injunctive relief. Plaintiff then sought a preliminary injunction. That 13 extraordinary remedy was denied on June 8 because (1) defendants specifically stated that 14 no historical data had been destroyed; and (2) changes to the search fields did not 15 completely hide federal contract data. 16 Defendants moved to dismiss for lack of standing. That motion was denied on 17 June 8 because, although the federal contract data were still available to the public via the 18 Freedom of Information Act, the changes to the search field represented a barrier to public 19 access sufficient to aggrieve the plaintiff. 20 At issue now is plaintiff’s proposed third amended complaint. Defendants have 21 not consented to allow plaintiff to add a reference to 5 U.S.C. 702, part of the 22 Administrative Procedure Act, into its jurisdictional statement. The APA enables judicial 23 review and waives the sovereign immunity of the United States as a defendant. The 24 original complaint and the first amended complaint included an erroneous citation to 15, 25 not 5, U.S.C. 702. Ordered to show cause, plaintiff has stated that the mistake originated 26 in the haste to obtain the TRO, then clung to the first amended complaint. Instead of 27 correcting the typographical error, plaintiff deleted all mention of Section 702 from its 28 second amended complaint. 2 1 Though unconvinced that an explicit mention of Section 702 is necessary, plaintiff 2 contends that a single-sentence addition will suffice to establish subject-matter 3 jurisdiction, and leave to amend should freely be given. Defendants oppose granting leave 4 to amend because plaintiff has already squandered two opportunities to correct its mistake. 5 Defendants also contend that the proposed amendment is too spare to correct the 6 jurisdictional defect, both because it omits reference to 5 U.S.C. 704 (dealing with final 7 agency action), and because it does not effectively rehabilitate the destruction-of-records 8 claim in light of a declaration submitted in opposition to the preliminary injunction. 9 ANALYSIS 10 lack of subject-matter jurisdiction, and plaintiff’s motion for leave to amend the For the Northern District of California United States District Court This order resolves two concurrent motions: defendants’ motion to dismiss for 11 12 complaint. 13 1. MOTION TO DISMISS. 14 The party seeking to invoke federal jurisdiction has the burden of establishing 15 subject-matter jurisdiction. A jurisdictional challenge under Federal Rule of Civil 16 Procedure 12(b)(1) may be made either on the face of the pleadings or by presenting 17 extrinsic evidence. Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 18 2003). “In a facial attack, the challenger asserts that the allegations contained in a 19 complaint are insufficient on their face to invoke federal jurisdiction. By contrast, in a 20 factual attack, the challenger disputes the truth of the allegations that, by themselves, 21 would otherwise invoke federal jurisdiction.” Wolfe v. Strankman, 392 F.3d 358, 362 (9th 22 Cir. 2004). Defendants bring both types of challenges. 23 A. Facial Challenges. 24 If a Rule 12(b)(1) motion is a facial attack, a district court must accept all 25 allegations in the complaint as true and draw all reasonable inferences in favor of the 26 plaintiff. Defendants allege that subject-matter jurisdiction is lacking because plaintiff has 27 failed to cite the APA and failed to adequately identify any final agency action. 28 3 1 2 3 (1) Citing the APA. Defendants contend that the omission of a citation to 5 U.S.C. 702 in the second amended complaint is fatal. 4 A complaint must include a “short and plain statement of the grounds for the 5 court’s jurisdiction.” Fed. R. Civ. P. 8(a)(1). “Each complaint . . . must include a separate 6 paragraph entitled ‘Jurisdiction.’ The paragraph will identify the statutory or other basis 7 for federal jurisdiction and the facts supporting such jurisdiction.” Civil Local Rule 3-5. 8 The reason for these rules is that federal courts are courts of limited jurisdiction. “A 9 plaintiff suing in a federal court must show in his pleading, affirmatively and distinctly, the existence of whatever is essential to federal jurisdiction, and, if he does not do so, the 11 For the Northern District of California United States District Court 10 court, on having the defect called to its attention or on discovering the same, must dismiss 12 the case, unless the defect be corrected by amendment.” Fifty Assocs. v. Prudential Ins. 13 Co. of Am., 446 F.2d 1187, 1189 (9th Cir. 1970) (quoting Smith v. McCullough, 270 U.S. 14 456, 459 (1926)). 15 Plaintiff contends that defendants have violated several federal statutes, but 16 plaintiff has not identified the source of its private right of action or how it will overcome 17 the sovereign immunity of the United States as a defendant. Plaintiff relies on Skora v. 18 Brenner, 379 F.2d 134 (D.C. Cir. 1967), and Platsky v. Central Intelligence Agency, 953 19 F.2d 26 (2d Cir. 1991), for the proposition that a specific citation to the APA is not a 20 jurisdictional pleading requirement. These decisions from other circuits are unpersuasive 21 because they involved a relaxed standard for pro se complaints. Pleadings must be 22 construed so as to do justice. The APA may both give access to federal court and waive 23 sovereign immunity. But plaintiff must explicitly point to the APA in its complaint. 24 Defendants would require a citation to Section 704 as well. Section 702 waives 25 sovereign immunity and permits citizen suits, subject to limits in Section 704. See Tucson 26 Airport Auth. v. Gen. Dynamics Corp., 136 F.3d 641, 645 (9th Cir. 1998). To be safe, 27 plaintiff should plead both sections. But pleading Section 702, as plaintiff has proposed, 28 is sufficient. See Parola v. Weinberger, 848 F.2d 956, 958–59 (9th Cir. 1988). 4 1 Defendants’ motion to dismiss for lack of subject-matter jurisdiction with respect 2 to failure to plead the APA is GRANTED. The motion with respect to failure to plead 3 Section 704 in particular is DENIED. (2) 4 5 Final Agency Action. Defendants contend that plaintiff has failed to adequately identify any final agency 6 action, putting the case outside the scope of the APA and therefore beyond federal 7 jurisdiction. “[F]inal agency action” is necessary to invoke review under the APA. 5 8 U.S.C. 704. “Agency action is final if at least two conditions are satisfied: First, the 9 action must mark the consummation of the agency’s decisionmaking process . . . — it must not be of a merely tentative or interlocutory nature. And second, the action must be 11 For the Northern District of California United States District Court 10 one by which rights or obligations have been determined, or from which legal 12 consequences will flow.” W. Radio Servs. Co., Inc. v. Glickman, 123 F.3d 1189, 1196 13 (9th Cir. 1997) (internal quotations omitted). 14 Plaintiff alleges that defendants have already changed their search interface, 15 hindering the public’s right to access information. This allegation, on its face, identifies 16 agency action of sufficient finality to survive a subject-matter jurisdiction challenge. 17 Rattlesnake Coalition v. E.P.A., 509 F.3d 1095 (9th Cir. 2007), is inapposite despite its 18 emphasis on the importance of Section 704. The assertion of jurisdiction there faltered 19 because the actor was Congress, not an agency; and the action was appropriation of funds, 20 not actual disbursement. 21 Defendants also protest the inexact identification of final agency action because of 22 the uncertainty regarding discovery, disclosure, and the scope of review. These concerns 23 are discrete from the question of whether subject-matter jurisdiction exists in this case. 24 25 26 Defendants’ motion to dismiss on these grounds is DENIED. B. Factual Challenge. Defendants also bring a factual challenge because they dispute that records have 27 been destroyed. “If the moving party converts ‘the motion to dismiss into a factual motion 28 by presenting affidavits or other evidence properly brought before the court, the party 5 1 opposing the motion must furnish affidavits or other evidence necessary to satisfy its 2 burden of establishing subject matter jurisdiction.’” Wolfe, 392 F.3d at 361. 3 Plaintiff contends that certain records have been destroyed, and thus the GSA has furnished the declaration of Christopher F. Fornecker, the Chief of the Acquisition 6 Systems Division for GSA. Defendants reference this declaration in their brief. 7 Fornecker, who oversees the Federal Procurement Data System-Next Generation database, 8 declared that the removal of the search fields did not destroy the records that formerly 9 provided data for those fields (Fornecker Decl. ¶ 21). Defendants aver that, presumably 10 even combined with the APA and 28 U.S.C. 1331, subject-matter jurisdiction is wanting 11 For the Northern District of California violated the Federal Records Act. In opposing a preliminary injunction, defendants 5 United States District Court 4 because no claim arises under federal law — no records have been destroyed. 12 Defendants’ challenge fails for two reasons. 13 First, it is only “[w]here the jurisdictional issue is separable from the merits of the 14 case” that a judge may consider extrinsic evidence. Thornhill Pub. Co., Inc. v. Gen. Tel. 15 & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979). But “if the attack on jurisdiction 16 requires the court to consider the merits of the case, the court has jurisdiction to proceed to 17 a decision on the merits.” Id. at 734. For example, in Berardinelli v. Castle & Cooke Inc., 18 587 F.2d 37, 38–39 (9th Cir. 1978), a Sherman Act case, defendants challenged the nexus 19 with interstate commerce of certain land-sale services. Defendants prevailed only because 20 the plaintiff conceded that this issue was separable from the substantive issue of whether 21 the defendants’ conduct as brokers was anti-competitive. In the present case, the 22 jurisdictional issue of whether records have genuinely been destroyed, in violation of the 23 Federal Records Act, is inseparable from the merits of ASBL’s substantive claim. 24 Destruction of records is intermeshed with access to records, the essence of plaintiff’s 25 case. 26 Second, defendants extrapolate that the early denial of the preliminary injunction 27 in this case demonstrates a thorough rejection of the destruction of records claim. But “[a] 28 preliminary injunction is a drastic and extraordinary remedy that is not to be routinely 6 1 granted.” Nat’l Steel Car, Ltd. v. Canadian P. Ry., Ltd., 357 F.3d 1319, 1324 (Fed. Cir. 2 2004). A different standard now applies. 3 Defendants’ motion to dismiss on this ground is DENIED. 4 2. 5 Federal Rule of Civil Procedure 15(a) establishes the rule that after a response to MOTION FOR LEAVE TO AMEND. 6 the complaint has been filed, “a party may amend its pleading only with the opposing 7 party’s written consent or the court’s leave. The court should freely give leave when 8 justice so requires.” Rule 15(a) applies until the expiration of the deadline for filing 9 motions for leave to amend. The deadline to file such motions was July 30, 2010 (see Dkt. No. 33), and plaintiff’s motion was timely filed. The Rule 15(a) standard is applied 11 For the Northern District of California United States District Court 10 liberally, but leave to amend is not granted automatically. A district court may “deny 12 leave to amend due to undue delay, bad faith or dilatory motive on the part of the movant, 13 repeated failure to cure deficiencies by amendments previously allowed, undue prejudice 14 to the opposing party by virtue of allowance of the amendment, [and] futility of 15 amendment.” Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 16 2009) (internal quotations and citations omitted). In assessing these factors, all inferences 17 should be made in favor of granting the motion. Griggs v. Pace Am. Group, Inc., 170 18 F.3d 877, 880 (9th Cir. 1999). 19 20 A. Undue Delay. The first factor in determining the propriety of granting leave to amend is whether 21 plaintiff unduly delayed in filing its motion. The motion is timely under the case 22 management deadline for amendments and thus this factor favors the amendment. 23 24 B. Bad Faith. The second factor in determining the propriety of granting leave to amend is 25 whether leave is sought in bad faith. Defendants point to plaintiff’s missed deadlines, 26 hasty drafting, and incomplete work as dilatory conduct, but bad faith has not been shown. 27 C. Repeated Failure to Cure Deficiencies by Amendments Previously Allowed. 28 The third factor in determining the propriety of granting leave to amend is whether 7 1 “the plaintiff has previously been granted leave to amend and has subsequently failed to 2 add the requisite particularity to its claims.” Zucco Partners, 552 F.3d at 1007. Such a 3 failure may indicate that a plaintiff had no more facts to plead, and had made its “best case 4 and had been found wanting.” Ibid. 5 This is not the case here. “Defective allegations of jurisdiction may be amended, 6 upon terms, in the trial or appellate courts.” 28 U.S.C. 1653. “[A]n action should not be 7 dismissed for lack of jurisdiction without giving the plaintiff an opportunity to be heard 8 unless it is clear the deficiency cannot be overcome by amendment.” May Dept. Store v. 9 Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir. 1980). This factor favors the 11 For the Northern District of California United States District Court 10 amendment. D. Prejudice to Defendants. 12 The fourth factor in determining the propriety of granting leave to amend is 13 whether granting leave to amend would prejudice the defendants. In general, “[t]he party 14 opposing amendment bears the burden of showing prejudice.” DCD Programs, Ltd. v. 15 Leighton, 833 F.2d 183, 187 (9th Cir. 1987). Defendants claim that granting leave to 16 amend would prejudice them by compelling them to continue to draft responses. 17 Defendants cite Davis v. Astrue, 250 F.R.D. 476, 482 (N.D. Cal. 2008), which found that 18 leave to amend would be prejudicial to defendants because repeated amendments required 19 time-consuming and resource-draining responses. That is not the situation presented here. 20 In Davis, the proposed amendment would have added a variety of new claims. Also, 21 Davis’s proposed third amended complaint followed eight months after his second 22 amended complaint. In the present case, plaintiff’s proposed amendment is more timely 23 and adds no claims. Leave to amend will cause little prejudice to defendants. 24 25 E. Futility of Amendment. The final factor is whether the proposed amendment would be futile. An 26 “amendment should not be barred as futile if the underlying facts may be a proper subject 27 of relief.” Breier v. N. California Bowling Proprietors’ Ass’n, 316 F.2d 787, 790 (9th Cir. 28 1963) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). The amendment must, 8 1 however, be able to survive a motion to dismiss. Saul v. United States, 928 F.2d 829, 843 2 (9th Cir. 1963). Plaintiff proposes adding a single reference to Section 702 to the 3 complaint’s jurisdictional statement. Defendants contend that the proposed third amended 4 complaint does not cure the defects in the second amended complaint because it does not 5 reference Section 704, contains incorrect citations to statutes, and continues to claim 6 destruction of records despite a factual dispute about whether records have been 7 destroyed. None of these contentions suggests futility; none weighs against granting leave 8 to amend. However, as a concession to the shortness of life, this order directs plaintiff to 9 add Section 704 as well as 702 in the amendment. 11 For the Northern District of California United States District Court 10 Based on an evaluation of these five factors, plaintiff’s motion for leave to amend is GRANTED. CONCLUSION 12 13 For the above reasons, defendants’ motion to dismiss plaintiff’s second amended 14 complaint is GRANTED IN PART AND DENIED IN PART. Plaintiff’s motion for leave to 15 file a third amended complaint is GRANTED, subject to adding a reference to Section 704 16 as well. The amended pleading must be filed within seven calendar days. Defendants 17 then have sixty calendar days to file an answer. The hearing scheduled for September 9, 18 2010, is VACATED. 19 20 21 22 23 IT IS SO ORDERED. 24 25 Dated: September 3, 2010. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 26 27 28 9
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