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Great American Life Insurance Co. v. Secretary

United States District Court, S.D. Ohio, Western Division, Cincinnati

June 3, 2019

GREAT AMERICAN LIFE INSURANCE COMPANY, Plaintiff,
v.
SECRETARY, DEPARTMENT OF THE INTERIOR, ET AL., Defendants.

          ORDER

          MICHAEL R BARRETT, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Defendants' Motion to Dismiss (Doc. 10). Plaintiff, Great American Life Insurance Company (“Plaintiff” or “GALIC”), asserts nine claims against the Secretary of the Interior and multiple other Defendants on the basis that the United States government failed to honor a guaranty governed by the Indian Financing Act of 1974. Defendants (“Defendants” or “the government”) contend that almost all of Plaintiff's claims must be dismissed due to failure to state a claim, lack of jurisdiction, sovereign immunity, or some combination thereof.

         I. BACKGROUND

         The Indian Loan Guaranty, Insurance, and Interest Subsidy Program (Program) was established under the Indian Financing Act of 1974 (IFA), Pub. L. No. 93-262, as amended, 25 U.S.C. § 1451 et seq., and regulations at 25 C.F.R. pt. 103. Loan guaranties are governed by Title II of the IFA (codified at §§ 1481-1499), which authorizes the Secretary of the Interior to guarantee up to 90 percent of the unpaid principal and interest due on loans to Indian entities or individuals “[i]n order to provide access to private money sources which otherwise would not be available.” 25 U.S.C. § 1481.

         In order for a loan to be guaranteed under the Program, that loan must close and fund. 25 C.F.R. § 103.18. Under § 103.36(d)(1), a guaranty holder may submit a claim for loss to the Department of the Interior (“Interior” or “Agency”) if the loan borrower has defaulted. The Agency may deny a claim for loss if the loan is not guaranteed as indicated in § 103.18. 25 C.F.R. § 103.39(a).

         On June 24, 2010, the Agency issued Loan Guaranty No. G103D1A1501. (Compl. ¶ 14). Plaintiff purchased the guaranteed loan on April 2, 2012. (Id. at ¶ 27). Plaintiff claims it was “induced” to purchase the loan. (Id. at PageID 3). On June 19, 2013, asserting default on the loan, Plaintiff submitted a claim to the Agency for loss under the guaranty. (Id. at ¶ 32). On December 23, 2013, the Agency denied Plaintiff's $20, 043, 618 claim for loss under the guaranty, for the purported reason that Plaintiff failed to demonstrate that the loan had been funded, as required by regulation. (Id. at ¶¶ 33, 47).

         Plaintiff argues that, as a result, the Agency has “dump[ed] the burden of [a] failed tribal business on [Plaintiff].” (Doc. 15, PageID 126). According to Plaintiff, “the Government achieved this unjust result through a flawed administrative process triggered by GALIC's claim for payment under the Guaranty, ” in which the “[t]he Agency's final decision to renege on the Guaranty . . . was supported by . . . [the] alleged lack of ‘sufficient documentation' that the original loan . . . ever funded.” (Id.) Plaintiff asserts that, as a purchaser in due course in the secondary market, it had nothing to do with this original closing. (Id.) Regardless, Plaintiff alleges that the Agency's rationale for not honoring the guaranty is arbitrary and capricious because, inter alia, the Bureau of Indian Affairs monitored, almost hour by hour, the closing and funding of the original loan; reviewed and approved the loan structure; and accepted and cashed a premium check in the amount of $405, 354.00. (Compl. ¶¶ 50-52). This premium check is set by federal regulation at 2% of the original loan principal amount that the BIA guarantees. 25 C.F.R. § 103.8. Also by regulation, the premium must be paid to the BIA by the original lender at the time the original loan closes and funds. 25 C.F.R. § 103.19 (“The premium is due within 30 calendar days of the loan closing.”).

         Plaintiff now seeks relief in this Court. As Defendants, it names the Agency, its then-Secretary (Sally Jewel) in her official capacity, and two employees of the Agency (Lawrence Roberts and Jack Stevens) in their official capacities. Plaintiff asserts the following claims for relief: (1) breach of contract; (2) “Violations of Due Process”; (3) “de novo review”; (4) “Arbitrary and Capricious Action”: (5) fraudulent inducement; (6) intentional misrepresentation; (7) negligent misrepresentation; (8) declaratory judgment; and (9) “attorneys' fees.”

         II. ANALYSIS

         a. Standard

         The government argues for dismissal under Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure.

         i. Rule 12(b)(1)

         Rule 12(b)(1) allows a defendant to move for dismissal on the basis that the court lacks subject matter jurisdiction. When subject matter jurisdiction is challenged, the party asserting jurisdiction bears the burden of establishing that subject matter jurisdiction exists. Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990); Mich. S.R.R. v. Branch & St. Joseph Counties Rail Users Ass'n., 287 F.3d 568, 573 (6th Cir. 2002). A Rule 12(b)(1) facial challenge to subject matter jurisdiction questions the sufficiency of the pleadings. In such cases, courts apply the Rule 12(b)(6) standard and the court must accept the alleged facts to be true and determine if those facts are sufficient to state a claim for relief that is plausible on its face. Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990); Ashcroft v. Iqbal, 556 U.S. 662 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         “It is generally recognized . . . that Rule 12(b)(1) is the appropriate vehicle for a court's consideration of claims that are asserted to be . . . barred by sovereign immunity.” Living Care Alternatives of Utica, Inc. v. United States, 312 F.Supp.2d 929, 931 (S.D. Ohio 2004), aff'd, 411 F.3d 621 (6th Cir. 2005). “On a motion invoking sovereign immunity to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of proving by a preponderance of evidence that jurisdiction exists.” Chayoon v. Chao, 355 F.3d 141, 143 (2d Cir. 2004).

         i. ...


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