Associated Mortgage Bankers, Inc. v. Castro
Civil Action No. 2017-0075
| D.D.C. | Sep 20, 2017Background
- AMB (mortgage originator) entered a 2012 Indemnification Agreement with HUD promising to indemnify HUD for losses on a specific FHA-insured loan if it defaulted.
- HUD sold the loan note in 2013 via its Single Family Loan Sale (SFLS) program, recovering substantially less than the loan collateral’s appraised value; HUD acknowledged the loan was erroneously included in the bulk sale.
- HUD later sought $160,448.62 from AMB via administrative offset as indemnified losses; an Administrative Judge (AJ) concluded the insurance claim was valid and authorized collection by offset.
- AMB appealed to the District Court under the APA, seeking to set aside the AJ’s decision as arbitrary and capricious, a declaration of HUD breach of the Indemnification Agreement, injunctive relief against offsets, class certification, and fees. It pleaded: (1) APA § 706(2)(A) and (2) breach of the covenant of good faith and fair dealing.
- Defendants moved to dismiss: they argued sovereign immunity/Tucker Act precluded the district court from deciding what were essentially contract claims and that Count II (good-faith claim) fails on its face because it is a contract dispute or derives from a third-party PSA HUD entered into.
- The Court dismissed Count II with prejudice for lack of jurisdiction (Tucker Act/Claims Court exclusive jurisdiction for contract claims seeking money or relief tied to money), but denied dismissal of Count I to the extent it challenges the AJ’s decision under the APA as arbitrary and capricious; limited review to the administrative record and barred contract-style relief, discovery, or class certification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether District Court has jurisdiction over APA challenge to AJ offset decision | AMB: APA waives sovereign immunity; AJ decision reviewable in district court under APA § 702/§ 704 | HUD: Claim is essentially a contract action; Tucker Act/sovereign immunity bars district-court review | Held: District court has jurisdiction over APA challenge to AJ decision (APA waiver applies) |
| Whether dispute is a disguised contract claim requiring exclusive Claims Court jurisdiction | AMB: Challenges administrative action/statutory offset process, not a contract suit | HUD: Merely disputes contract interpretation and seeks relief tied to money, so Tucker Act applies | Held: Court finds Count I is not a disguised contract action insofar as it challenges AJ’s administrative decision; Tucker Act does not bar APA review here |
| Whether Count II (breach of covenant of good faith and fair dealing) is cognizable in district court | AMB: Alleges HUD breached the Indemnification Agreement and covenant | HUD: Claim is contractual and belongs in Court of Federal Claims; PSA issues also preclude AMB’s claim | Held: Count II dismissed with prejudice for lack of subject-matter jurisdiction (Tucker Act exclusivity) |
| Whether APA challenge is facially plausible and reviewable (adequate alternative remedies) | AMB: APA review necessary because administrative offset and sanctions (including mortgagee sanctions) are not remedied adequately by later breach-of-contract suit | HUD: A breach-of-contract action would provide an adequate remedy; APA relief inappropriate | Held: Court finds APA claim facially plausible and that an APA challenge to the AJ’s offset decision is an adequate and proper vehicle for review; breach suit would not adequately remedy immediate offset or sanctions risk |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard; facial plausibility)
- Khadr v. United States, 529 F.3d 1112 (jurisdictional principles re: sovereign immunity)
- Albrecht v. Comm. on Emp. Benefits, 357 F.3d 62 (distinguishing contract actions from APA suits)
- Kidwell v. Dep’t of Army, Bd. for Corr. of Military Records, 56 F.3d 279 (Tucker Act jurisdiction where relief is monetary in essence)
- Perry Capital LLC v. Mnuchin, 864 F.3d 591 (APA waiver and limits where claims are essentially contractual)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (arbitrary-and-capricious standard)
- B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (preclusive effect of administrative decisions)