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Les Anciens D Une Eglise En Les Chambres Compagnie v. United States Department of Agriculture

United States District Court, E.D. North Carolina, Northern Division

March 12, 2018

LES ANCIENS D UNE EGLISE EN LES CHAMBRES COMPAGNIE, Plaintiff,
v.
UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant.

          ORDER

          JAMES C. DEVER III Chief United States District Judge

         On June 25, 2015, Les Anciens D Une Eglise En Les Chambres Compagnie ("Les Anciens" or "plaintiff') and its President, S. G. Abdallah, proceeding pro se, filed a complaint against the United States Department of Agriculture ("USDA" or "defendant") alleging claims for "Conversion and Trespass to Chattel; Fraud/Deceit/Fraud on Authorities, " "Transaction with parties not authorized; excess of authority, " "Breach of Contract, " and "Violation of Due Process" [D.E. 1]. On November 2, 2015, Les Anciens filed a petition for "leave to settle" [D.E. 7]. On November 9, 2015, the USDA moved to dismiss the complaint and filed a memorandum in support [D.E. 10-11]. On February 26, 2016, counsel filed a notice of appearance for Les Anciens [D.E. 21]. On February 29, 2016, Les Anciens responded in opposition to the motion to dismiss and moved to amend the complaint [D.E. 22]. On April 4, 2016, the court denied the motion for settlement [D.E. 7] and the motion to dismiss [D.E. 10] and granted plaintiffs motion to amend the complaint [D.E. 23]. On April 21, 2016, Les Anciens filed an amended complaint alleging a single count of abuse of discretion [D.E. 26]. On June 29, 2017, the USDA moved to dismiss the amended complaint, and for judgment on the pleadings, and filed a memorandum in support [D .E. 3 9-40]. On July 31, 2017, Les Anciens responded in opposition [D.E. 44]. On August 8, 2017, the USDA replied [D.E. 45]. As explained below, the court grants the USDA's motion to dismiss and for judgment on the pleadings.

         I.

         Les Anciens is a Minnesota non-profit corporation which was formed to foster economic growth among "persons who are disadvantaged" and unable to access traditional forms of capital "including loans for small business development." Am. Compl. [D.E. 26] ¶¶ 15-16. In June 2008, "Rural Development, a division of the [USDA], granted [Les Anciens]'s request for a RBEG grant in the amount of $75, 000.00 to establish a revolving loan fund." Id. ¶ 17; see Am. Answer [D.E. 27] ¶ 17. After receiving the grant, all but one member of Les Anciens's board resigned, effectively dissolving the corporation. In January 2009, the USDA received a letter from "Reverend David H. Rouson, Chairman [of Les Anciens]... stating that the Board was dissolved." Am. Answer ¶ 19. The USDA then "acted on a request from Reverend Rouson to cancel (i.e. to de-obligate) the award funding" because "[w]ithout a functioning Board, the organization was unable to fulfill the purposes and objectives of the grant." Id. ¶ 20.

         On January 20, 2009, the USDA informed Les Anciens of its intent to cancel the $75, 000 grant. See [D.E. 31-2] 5-7. The USDA explained that the dissolution of Les Anciens's board meant that Les Anciens could not "carry out the responsibilities of administering a revolving loan fund" and therefore could not "fulfill the objectives of the grant in accordance to the organization's Scope of Work and the Letter of Conditions issued by [USDA]." Id. at 5. The USDA informed Les Anciens of its right to appeal the decision to a hearing officer with the National Appeals Division ("NAD"). See Id. at 6-7.

         Program participants can appeal adverse agency action to the NAD. See 7 C.F.R. §§ 11.1 et. seq. Under governing regulations, participants (or their authorized representatives) may request a hearing "on any adverse decision." See Id. §§ 11.1, 11.8(c). Appellants who dispute the conclusions of the NAD hearing officer may ask the Director to review the determination and issue a final determination. See Id. § 11.9. An appellant may request reconsideration of the Director's final determination if the Director made "a material error of fact" or made a determination "contrary to statute or regulation." Id. § 11.11. The director's final determination is a necessary prerequisite to judicial review in the district court. See 7 U.S.C. § 6999; 7 C.F.R. § 11.13.

         On January 21, 2009, Benita Gathers ("Gathers, " or "claimant"), Secretary of Les Anciens, "requested an appeal with the National Appeals Division ("NAD") on behalf of [Les Anciens] (Appellant)." [D.E. 31-2] 97. Gathers "challenge[d] a Rural Development (RD) decision, dated January 20, 2009, cancelling a Rural Business Enterprise Grant (RBE Grant) with Appellant." Id. During this appeal, the NAD hearing officer focused on whether Gathers, as claimant, was "authorized to bring an appeal on behalf of [Les Anciens]." Id. Gathers "assert[ed] she represented] [Les Anciens] and requested th[e] appeal as secretary of the corporation, " she also asserted that she was "the sole remaining member of the board of directors." Id. The USDA responded that "there [was] no one authorized to represent [Les Anciens] because [its] board of directors were removed or resigned without replacement board members being elected or appointed in conformity with the requirements of [Les Anciens's] Articles of Incorporation." Id.

         During the NAD process, the NAD hearing officer communicated extensively with Les Anciens to clarify the procedural requirements of the appeals process and to obtain the relevant evidence for inclusion in the record. See [D.E. 32-1] 2-6. The record includes the hearing officer's notes from fifteen phone calls between the hearing officer and Les Anciens between January 27, 2009, and March 2, 2009. See Id. On February 24, 2009, the NAD hearing officer conducted a pre- hearing conference focusing on the issue of Gather's authority to conduct an appeal. See [D.E. 31-2] 97. After the pre-hearing conference, the hearing officer requested additional information from the parties concerning Gathers's authority to conduct an appeal and jurisdiction. See Id. The hearing officer gave the parties "until March 13, 2009, to submit additional documents in support of their positions" and "until March 19, 2009 to submit written rebuttals to any additional documents submitted by the other party." Id.

         Les Anciens "timely submitted additional documents, " which the hearing officer included in the record. On March 23, 2009, Les Anciens also submitted an untimely sur-rebuttal concerning jurisdiction, which the hearing officer included in the case record but did not consider because it was submitted after the deadline. See id.

         The hearing officer reviewed Les Anciens's articles of incorporation and by-laws, Minnesota and North Carolina law, federal regulations, and the record. On March 27, 2009, the hearing officer concluded that Gathers was not authorized to represent Les Anciens on appeal. See Id. at 99-100. "[O]nly an 'appellant' or 'authorized representative' may request an appeal with NAD[, ]" because "NAD's rules allow Claimant to request an appeal on behalf of Appellant only if Claimant is duly authorized by the Appellant to represent it." Id. at 99. Thus, the hearing officer concluded that NAD did "not have jurisdiction to conduct a hearing for the requested appeal." Id. at 98. In reaching this conclusion, the hearing officer interpreted the regulations in Title 7 of the Code of Federal Regulations which govern requests for appeals. See id.; 7 C.F.R. § 11.1. The hearing officer interpreted "appellant" to mean "any participant who appeals an adverse decision... includ[ing] an authorized representative." [D.E. 31-2] 98. The hearing officer interpreted "authorized representative" to mean "any person, who is authorized in writing by a participant... to act for the participant man administrative appeal." Id. The hearing officer concluded that Gathers did not meet these requirements because she was not "authorized to represent [Les Anciens] in th[e] appeal or for any purpose." Id. at 100.

         On April 7, 2009, Gathers requested a Director review of the NAD's determination. See id, at 153. On June 26, 2009, the Director upheld the NAD's determination, and concluded that Gathers was not authorized to appeal the adverse decision cancelling the $75, 000 grant to Les Anciens on behalf of Les Anciens. See Id. at 153-159. In reaching this conclusion, the Director reviewed the record and the relevant legal standards, including the definitions of "participant" and "authorized representative" in 7 C.F.R. §11.1. See Id. at 156. On July 22, 2009, the Director denied Les Anciens's request for reconsideration. See Id. at 172.

         On June 25, 2015, Les Anciens filed this lawsuit. Les Anciens challenges the USDA's decision to cancel the $75, 000 grant to Les Anciens, and the determination that Gathers was not authorized to represent Les Anciens on appeal. See Am. Compl. ¶¶ 35-38. Les Anciens contends that this court has jurisdiction under 7 U.S.C. § 6999 and 5 U.S.C. § 702. See id. ¶ 3. Under 7 U.S.C. § 6999, a district court has jurisdiction to review any "final determination of the Division." Under 5 U.S.C. § 702, any person who is "suffering a legal wrong" or who is "adversely affected or aggrieved [because of an] agency action" may seek judicial review in a United States District Court.

         II.

         The USDA moves to dismiss this action for lack of subject-matter jurisdiction because Les Anciens did not exhaust its administrative remedies before seeking judicial review concerning the USDA's decision to cancel the $75, 000 grant to Les Anciens. See [D.E. 40] 6-7, 9-12; Fed.R.Civ.P. 12(b)(1). In support, the USDA cites 7 U.S.C. ยง 6912(e), which provides that a person "shall exhaust all administrative appeal ...


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