[00:00:00] Speaker 04:
The United States Court of Appeals for the Federal Circuit is now open and in session.

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God save the United States and this honorable court.

[00:00:12] Speaker 06:
We will hear argument in number 20-1226, Columbus Regional Hospital versus United States.

[00:00:21] Speaker 06:
Mr. Molter, please begin when you're ready.

[00:00:25] Speaker 03:
Thank you, Your Honor.

[00:00:25] Speaker 03:
May it please the court.

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If the hospital has afforded its day in court to prove its claims, it believes it will prevail based on the evidence.

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But its claims here were prematurely dismissed before any discovery and before any opportunity to present evidence.

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So this appeal is not about who should ultimately win the case on the merits of the hospital's claims.

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Instead, this appeal addresses the much narrower threshold questions of one, whether the hospital pledged the minimal allegations required to state an illegal exacting claim, and two,

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was that the Court of Federal Claims merely has jurisdiction to hear the hospital's contract claims.

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Because the Court of Federal Claims erred by misapplying the standards for dismissing claims at the pleading stage, it's two orders dismissing all of the hospital's claims should be reversed.

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And I'll start with the lower court's first order dismissing the hospital's illegal exacting claim.

[00:01:19] Speaker 07:
Could I ask you a question?

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This is Judge Bryson.

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Assuming that we were to agree with you that this case should not have been dismissed any of the claims on 12b1 grounds for lack of jurisdiction, that would not foreclose our determination that it would have been permissible for the court to dismiss on 12b6 grounds if we found the standards of 12b6 to be satisfied.

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Isn't that right?

[00:01:51] Speaker 03:
I don't think that's right.

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The government below argued on the basis of 12b6, but they have not argued on that basis even as an alternative ground on appeal, at least as I understand their brief.

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And I would direct the court's attention for the answer to that question to the standard of review section of the United States brief, which only addressed review for 12b1 jurisdictional grounds.

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So I do think the appeal... As a general matter, though, we have on numerous occasions

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at the appellate stage said I think that even though the Court of Federal Claims may have dismissed on 12b1 grounds that it can be converted in effect into a 12b6 dismissal if the circumstances permit, right?

[00:02:37] Speaker 03:
I take your point and again acknowledge that 12b6 was raised below.

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Again, I was arguing that there's a waiver on appeal, but I take your point that as a general proposition,

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any basis raised below and presented on the record is fair game for this court.

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But also, of course, we don't believe that our claims fail under 12b3.

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I understand that.

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Yeah.

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Go ahead.

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This is Judge Toronto.

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Can I ask this question, I think, which is relevant as maybe background to the illegal exaction claim?

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What do we know, what do we have to assume about

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What as a concrete matter it means for you to say that FEMA recovered the money at issue?

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Did Columbus wire or transfer the money to FEMA or did FEMA do something with its access to the SmartLink account

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What exactly happened to the extent that either there's agreed on knowledge or to the extent that the record allows us?

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Yes, and I'll answer your question directly with the caveat at the front.

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You know, this just illustrates why we need more of a factual record.

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And I don't think that part of the claim has to be that we pay the money directly to the government.

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In fact, in Aralinas,

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Argentina versus United States, there was no payment to the government.

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But to answer your question directly, it gets a bit complicated.

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As I understand it, the hospital did cut a check for a substantial portion of the exacted money.

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Now, I believe that check was written out to the State Department of Homeland Security, and then the money went to the United States.

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And then for the remaining portion,

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You know, I get confused as well.

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And again, we don't have a record to fully answer that question.

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But, you know, as you alluded to, I think some of that money flowed back through the SmartLink account.

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But at least a substantial portion was paid with the hospital writing a check.

[00:04:53] Speaker 06:
Okay.

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Thank you.

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And again, since this is a, the analysis we're engaging in is a 12b6 analysis for the illegal exacting claim.

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You know, it is important to establish at the threshold what it is that we had to plead.

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And this court gave that guidance again in the Aerolinius Argentinians versus United States case where this court said, quote, Tucker Act claims must be made for recovery, may be made for recovery of money.

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that the government has required to be paid contrary to law," end quote.

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So all the hospital had to plead is non-frivolous allegations that one, it paid money at the government's direction.

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Not that it paid money directly to the government, but that it paid money at the government's direction.

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And number two, that the government's direction to pay that money was in violation of a statute.

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And as far as I can tell, it is undisputed that the hospital pled both of those allegations

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And so it should have been permitted to proceed with its claims beyond the pleading stage.

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More specifically, as to the payment elements, the hospital alleged in paragraph three of its complaint that, quote, on April 10, 2014, FEMA unlawfully recovered $9.6 million of these funds to dispute a cost from Columbus, end quote.

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And we made the same allegation in paragraph 72, 73, 75, and 157.

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And then for the statutory violation, the hospital alleged in paragraphs 154 through 159 that the government required the hospital to pay the money in violation of Section 705C of the Stafford Act because the hospital's expenditures were authorized and reasonable and the purpose of the grant was achieved.

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The government, of course, disagrees on the merits of whether it violated Section 705C, but that's not an issue that goes to the pleadings.

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So the bottom line is because we pled each of the elements in the legal ex-action claim, it was improper to dismiss

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this claim at the pleading stage based on Rule 12b6.

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Critically, the Court of Federal Claims did not say that any of our allegations were frivolous.

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Instead, it had two other bases for dismissing our claim, but neither is supported by the law.

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Mr. Russell, before you leave the illegal exactions issue, let me ask you this question.

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I'm struggling with this question as to

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when money is in the possession and control of a party such that the money being taken out of that possession is an exaction.

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Suppose, for example, I get a tax refund from the IRS for $1,000 and a week later the IRS sends me a letter saying, this was a mistake on our part, we sent it to the wrong person, please send the check back.

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And I contest that.

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Would that be an illegal exaction by the IRS?

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Only if the government's recovery of the money was in violation of the statutes.

[00:07:53] Speaker 07:
I'm contending that it's in violation.

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I make an argument that they didn't make a mistake.

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That I was entitled to the money.

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But nonetheless, the money came from the government to me.

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And they're asking for it back.

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Is the request to get it back an exaction?

[00:08:15] Speaker 03:
I believe it is.

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And this court in the Norman case even mentioned that tax cases, tax refund cases, are the quintessential example of an illegal exaction claim.

[00:08:25] Speaker 07:
But I also acknowledge... Tax refund cases are different from my hypothetical, of course, because there what you're saying is that

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I was not required to pay all this tax.

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My hypothetical is that this was money that you received and then they requested that you send it back.

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That's not the situation in a request for a refund request in the typical COFC case.

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So I do not know the answer to whether somebody has a property interest and money

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that the government mistakenly, you know, inadvertently paid to them.

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But that does highlight an important distinction in this case.

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This was a penalty.

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That's what we plead and that's what the evidence will confirm.

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And so we certainly have an evidence that we certainly have a property interest in the money that we had to pay to the government as a penalty.

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Take the flood mitigation wall as an example.

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The government worked with the hospital to approve the project worksheets.

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It was the government, I think the evidence will show, that actually requested the flood mitigation wall, not the hospital.

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The government approved the estimated amount for the mitigation wall.

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It was built.

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It came in substantially under budget.

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And the government still deobligated the entirety of the amount because of the whole $5 million of the contract because the government

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decided to penalize the hospital because it disagreed with some of its practices and how it bid the contract.

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So that's a penalty.

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That's not the government inadvertently sending money to someone.

[00:10:02] Speaker 03:
So agreed.

[00:10:04] Speaker 03:
Your case sets up a difficult hypothetical, but it's certainly distinct from this one.

[00:10:08] Speaker 03:
Ours is a much easier case.

[00:10:13] Speaker 03:
Okay.

[00:10:13] Speaker 06:
Go ahead.

[00:10:15] Speaker 06:
No, can you turn to some of the contract issues?

[00:10:18] Speaker 06:
And let me just ask about

[00:10:20] Speaker 06:
one of them that at least is on my mind, the third-party beneficiary claim.

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I assume it's true and true enough for 12b purposes that persons like Columbus were intended to be benefited by FEMA's distribution of money to the state.

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Doesn't

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Astra make clear that that isn't enough for third party beneficiary status?

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And I'm thinking in particular, I guess, of two things.

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One, the explanation that what the parties have to intend is that the third party be legally entitled to a benefit, not just that the third party benefit.

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And then second, if, but let's just start with that.

[00:11:13] Speaker 03:
Yes, so two critical distinctions from Astra.

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One, here the hospital was legally entitled to benefit.

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Once the project worksheets were approved as a matter of federal regulation, FEMA was obligated to transfer that money for the hospital's benefit.

[00:11:29] Speaker 03:
The second critical distinction with Astra, and I think this is true of Sue Honey as well, the problem in those cases was that, I have to go into my rebuttal time for a moment.

[00:11:40] Speaker 06:
Please continue, I'll add some extra time.

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The problem in those cases for the plaintiffs were they were trying to supplant the federal government's exclusive regulatory role and go after some other third party.

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because they were a beneficiary under a statute.

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That's not this type of case.

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This is a case where we had a contract with the government, we had contractual obligations, they did too.

[00:12:03] Speaker 06:
Right, but I think you just switched away from the third party beneficiary analysis when you say we had a contract with the government.

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Let's assume you didn't.

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And so just for third party beneficiary purposes,

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And let's even posit that you gave a persuasive answer on the legal entitlement to the benefit.

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The as-applied portion of Astra says when the contract claim is in full a claim of violation of a statute, and that statute does not provide for a private right of action,

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We don't think there can be a third party beneficiary claim because that would essentially nullify the choice not to have a private right of action.

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Why is that not this?

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Because in that context, the issue is all about going after some other third party outside the government and the plaintiff to claim third party beneficiary.

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That's just not the context we have here.

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This is a third party beneficiary suing the government for the government's own breach of a contract.

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Again, not trying to supplant the government enforcing regulatory obligations against some other outsider in the world.

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I believe my time is up and I'll reserve the remainder for a bottle unless the court has further questions.

[00:13:26] Speaker 06:
Okay.

[00:13:27] Speaker 06:
Thank you.

[00:13:28] Speaker 06:
And we will hear arguments from

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Ms.

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Acevedo.

[00:13:36] Speaker 00:
Thank you, Your Honor.

[00:13:36] Speaker 00:
May it please the court.

[00:13:38] Speaker 00:
This court should affirm the trial court's dismissal of the complaint for lack of jurisdiction because even assuming that the FEMA Indiana agreement is a contract, which is obviously a position with which we disagree, the hospital cannot establish a contractual relationship with FEMA.

[00:13:52] Speaker 00:
Alternatively, the court can affirm the judgment on the grounds the case involves a federal question that belongs in district court, namely, whether FEMA erred in interpreting the Stafford Act to allow for the de-obligation to fund a question that belongs in district court under the APA where similar de-obligation claims are routinely and exclusively adjudicated and where the hospital has twice sued in connection... This is Judge Sorrento.

[00:14:19] Speaker 06:
Can I ask you about that point?

[00:14:20] Speaker 06:
Certainly.

[00:14:21] Speaker 06:
I'm having trouble understanding how, let's just call it, the Bowen ouster of Tucker Act jurisdiction could be supported here without our first deciding that there's no contract claim or illegal ex-action claim.

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And what I'm, I guess, particularly focused on is this.

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Bowen said that there was district court jurisdiction in that case when

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two requirements of the APA were satisfied.

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And although Bowen used the language of jurisdiction, I think it probably doesn't matter that those APA provisions are really about reviewability and jurisdiction vested under 1331.

[00:15:09] Speaker 06:
But the two provisions were 702, which the claim seeks relief other than money damages.

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And then the second one, 704,

[00:15:18] Speaker 06:
the Supreme Court said in Bowen, was not satisfied because the final agency action for which there is no other adequate remedy was not satisfied because given the nature of the claim, the remedy in the Tucker Act in the claims court would not have been adequate.

[00:15:37] Speaker 06:
If we assume that the illegal ex-action and contract claims can go forward on the merits, then why isn't that a perfectly adequate remedy in which case we can stop talking about Bowen?

[00:15:51] Speaker 00:
Because here what they're seeking is irrespective of how they characterize their claim.

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What they're seeking is a declaratory judgment that FEMA erred in interpreting the Act under 705.

[00:16:05] Speaker 06:
Aren't they seeking money?

[00:16:08] Speaker 00:
The fact that they're seeking money is not dispositive.

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Bowen stands for the proposition that irrespective of whether a claim

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involves the payment of money, what you look at is whether the claim involves money damages.

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What does that mean?

[00:16:22] Speaker 06:
That's for 702.

[00:16:25] Speaker 06:
Bowen also required that 704 has been satisfied, and what I'm trying to, I guess, focus on, and you don't discuss 704 at all in your brief, and I should

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say neither did the Seventh Circuit in the 2013 Columbus Hospital case.

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But why is 704 satisfied by this claim on the assumption that there is an illegal exacting and contract claim litigable on the merits in the claims court?

[00:17:03] Speaker 00:
Because the Stafford Act is a complex statutory scheme for the provision of a regulatory scheme for the provision of disaster relief.

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And it sets forth an enforcement mechanism, and it sets forth the procedures that you have to abide by in seeking that relief.

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And there is an appeals process.

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There are two administrative levels of appeal.

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And I would state that 704 would be satisfied by the administrative appeals.

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There is no basis for the court to conclude that the Safford Act supports an illegal exacting claim for the very reason that that assumes a property right in what are gifts or gratuities and moreover that it assumes a violation of the law.

[00:17:49] Speaker 06:
Right, but now you're talking about why you think that on the merits the illegal exacting claim fails.

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Now, I don't think we're talking about a Bowen point.

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And if we have to decide that there's no sustainable contract claim or illegal exemption claim, then there's no reason to talk about Bowen at all.

[00:18:12] Speaker 00:
Well, I think that, you know, as the seventh judge used to proclaim in the Seventh Circuit's opinion, we think that Bowen controls the circumstances here.

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Because under 702, where, as here, the hospital is challenging an action of the agency, an adverse action of the agency, and they're seeking specific relief or an entitlement to specific funds, the very thing to which they're entitled, that mandates that the claim be reviewed in district court under the APA, as have all other de-obligation claims to date.

[00:18:48] Speaker 00:
In terms of 704, we don't discuss it neither does the court in Columbus.

[00:18:54] Speaker 06:
But I would think that that provision... I mean, in Columbus, nobody had to discuss it because it's not a jurisdictional provision.

[00:19:06] Speaker 06:
It's a reviewability provision.

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And the court was raising sua sponte.

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a question to satisfy itself of its jurisdiction, which didn't require it to address matters that don't go to subject matter jurisdiction.

[00:19:19] Speaker 06:
704 is one of those, I think.

[00:19:24] Speaker 00:
Well, I suppose if you

[00:19:29] Speaker 00:
would find there would be jurisdiction under 704, we would have to assume that they would have stated a claim for a breach of contract or an illegal transaction, which we strongly disagree with.

[00:19:39] Speaker 00:
We do not think that they stated those claims for all the reasons we stated in our brief.

[00:19:46] Speaker 00:
But my understanding is that the administrative appeals process would have addressed the concerns that were raised in 704.

[00:19:59] Speaker 07:
Well, but 704 deals with whether there's an adequate remedy in a court, not an adequate remedy in the administrative agency, right?

[00:20:12] Speaker 07:
I mean, you can't satisfy the basic purpose of the APA and the idea of default jurisdiction in a district court is to say that with very, very few exceptions,

[00:20:27] Speaker 07:
any agency action, final agency action, will be reviewable in some court, and the default is it's a district court, right?

[00:20:37] Speaker 00:
Right.

[00:20:39] Speaker 07:
So you can't say that, well, the adequate remedy is satisfied by the agency's own internal procedures, can you?

[00:20:53] Speaker 00:
Well, I think

[00:20:56] Speaker 00:
The way that I understand ATA, I don't practice in the district court, but the way that I understand ATA review is they look at whether the agency had discretion to ask or whether Congress had still provided, and if so, whether the agency's action was reasonable.

[00:21:14] Speaker 00:
So, you know, I would, if you, I suppose, if you believed that they had a illegal action or a contract claim, you know,

[00:21:26] Speaker 00:
You still have to show that they were seeking money damages.

[00:21:30] Speaker 00:
You have to get over that hurdle.

[00:21:32] Speaker 00:
Because what they're seeking here is not substitute relief or compensatory relief for suffering or loss.

[00:21:38] Speaker 00:
They are seeking the very specific entitlement, the $9.6 million that's the obligated fund.

[00:21:46] Speaker 06:
This is Judge Toronto.

[00:21:48] Speaker 06:
Am I remembering right?

[00:21:51] Speaker 06:
Hasn't the Supreme Court explained, and now I'm not remembering, whether it's a footnote in Bowen or whether it's in Great West Life, the Tucker Act isn't actually limited to, quote unquote, money damages.

[00:22:03] Speaker 06:
It's monetary relief.

[00:22:05] Speaker 06:
Didn't the Supreme Court make that point at one point?

[00:22:10] Speaker 00:
I don't recall if the Supreme Court made that point.

[00:22:12] Speaker 00:
I think I simply don't recall.

[00:22:15] Speaker 00:
What I understand is

[00:22:20] Speaker 00:
that the court has jurisdiction to give incidental, equitable relief, right?

[00:22:24] Speaker 00:
But that they are limited to money damages or substitute damages for compensatory or suffered loss.

[00:22:30] Speaker 06:
Right, so you mentioned the declaratory aspect of this.

[00:22:35] Speaker 06:
Does that have a forward-looking, programmatic character in the way that

[00:22:45] Speaker 06:
This report emphasized rather heavily in Bowen and even more heavily in Maine Community Hospital recently, I don't know, in its discussion of the limits of what Bowen stood for.

[00:22:59] Speaker 06:
Is there something about the relief being sought here, the declaratory part of it that is, would on a forward-looking basis alter the,

[00:23:14] Speaker 06:
FEMA's way of doing a calculation that it's going to have to do on a regular basis into the future?

[00:23:23] Speaker 00:
No, not forward-looking in that sense.

[00:23:25] Speaker 00:
And I should say that we think the court should adopt Judge Easterbrook's reasoning in a Columbus case, that the court, the Bowen Court, did not say that only a dispute about one-year component on a multi-year program would be raised under 702.

[00:23:38] Speaker 00:
Instead, it's distinguished between money as compensating for an injury and money as an entitlement under a grant program.

[00:23:45] Speaker 00:
Here, what Columbus is seeking is forward-looking in the sense, in any event, that they're seeking to turn the ticket back off, right?

[00:23:52] Speaker 00:
FEMA shut the water off, and they want to reopen the channel and continue to receive those appropriated funds.

[00:23:59] Speaker 06:
But is that for, I mean, to cover expenses that the hospital has already incurred in doing the construction?

[00:24:08] Speaker 06:
that is the subject of this?

[00:24:11] Speaker 00:
Yes, there's no question the hospital did the construction and they're seeking reimbursement of those costs.

[00:24:16] Speaker 07:
Well, this is just a one-time lump sum request for money, right?

[00:24:21] Speaker 07:
We don't have any further ongoing dealings between the hospital and FEMA, as I understand it.

[00:24:28] Speaker 00:
No, which is exactly why it's specific.

[00:24:30] Speaker 07:
No more $5 million, period, end of discussion, no more

[00:24:35] Speaker 07:
strings that have no more interaction.

[00:24:39] Speaker 00:
That's correct.

[00:24:40] Speaker 00:
They want the exact $9.6 million of the obligated funds, or the very thing to which they believe they're entitled.

[00:24:46] Speaker 07:
And the question is, why isn't that monetary relief as plain and simple?

[00:24:52] Speaker 00:
Because it's not substitute relief.

[00:24:55] Speaker 00:
Money damages are free and clear damages that you can spend in any way you so wish.

[00:24:59] Speaker 00:
And Stafford Act grant funds are conditional grant funds that are given for the relief.

[00:25:05] Speaker 00:
And I think looking at the statute here would be instructive.

[00:25:09] Speaker 00:
Section 5121 of the Stafford Act provides that it is the intent of Congress to provide orderly and continuing needs of assistance by the federal government

[00:25:18] Speaker 00:
to the state to carry out the responsibilities to alleviate the suffering and damage which result from such disasters.

[00:25:26] Speaker 00:
This money is grant money given following a catastrophe.

[00:25:30] Speaker 00:
Think food, shelter, utilities, communications, right, getting electricity back up and running, that kind of thing.

[00:25:39] Speaker 00:
This is money that is given conditional for those purposes for such disasters.

[00:25:43] Speaker 00:
That is not what money damages are.

[00:25:45] Speaker 00:
Money damages are substitute damages that they can spend on upgrading their, you know, staff break rooms or gym facilities, right?

[00:25:56] Speaker 00:
That is not what they're seeking here.

[00:25:57] Speaker 00:
They are seeking $9.6 million in de-obligated funds that were given for such disasters.

[00:26:07] Speaker 07:
May I ask a question about a point made in your opposing counsel's brief where they assert that the appropriation, that there would be no possibility of recovery in this case if it went to the district court because the appropriation has expired.

[00:26:30] Speaker 07:
Can you address that point?

[00:26:33] Speaker 00:
That is certainly premature.

[00:26:35] Speaker 07:
It assumes that the money is still not... You say it's premature, but the problem is what we don't want to have happen is if we should say, okay, this case belongs in the district court under the APA, and then have the government come into the district court and say, oh, no, the money is not available because the appropriation has expired.

[00:26:59] Speaker 07:
So I'm looking to you for an answer as to the question

[00:27:03] Speaker 07:
whether or not that argument would be something that the government would be free to raise or would raise in a district court if we sent this to a district court.

[00:27:15] Speaker 00:
I can't say what argument federal programs would raise or the Assistant U.S.

[00:27:19] Speaker 00:
Attorney working with them would raise, but I can say that in the Southwater

[00:27:25] Speaker 00:
South Florida water management case, for example, the agency was found to have erred in its interpretation of the separate act as allowing for de-obligation.

[00:27:34] Speaker 00:
And there, the court simply ordered the re-appropriation of the funds.

[00:27:38] Speaker 00:
And it may be in any event that the state, and I don't know this to be true, still has the money in its SmartLake account.

[00:27:45] Speaker 00:
What happens is the government gives the money to the state via a SmartLake account.

[00:27:49] Speaker 00:
So certain states that are always in a state of catastrophe like

[00:27:53] Speaker 00:
You know, the Gulf Coast states where they get a lot of storms, California, places where they have a lot of earthquakes, fires, storms, constantly have money in reserve in their accounts.

[00:28:06] Speaker 00:
They're smart with their accounts.

[00:28:08] Speaker 00:
So it could very well be that the state still has it.

[00:28:10] Speaker 00:
If they don't, the district court could, as they did in the South Florida

[00:28:14] Speaker 00:
water management case if we reorder the appropriation of the funds.

[00:28:19] Speaker 07:
Is it clear to you that this money would not be, if there were a judgment in the district court for the $9 million, that it would not come out of the judgment fund?

[00:28:38] Speaker 00:
I can't speak to that.

[00:28:39] Speaker 00:
I'm not certain if it would come out of the judgment fund or not.

[00:28:42] Speaker 00:
I suppose that would be an alternative

[00:28:45] Speaker 00:
I suppose that could be an alternative possibility, but my understanding is that the court would simply order the funds to be re-appropriated and they would work it out that way if they have done previously.

[00:29:07] Speaker 06:
As long as the question is of me.

[00:29:08] Speaker 06:
I know.

[00:29:12] Speaker 02:
I mean, I might have questions for you later, but.

[00:29:17] Speaker 02:
But so I just want to move you to the jurisdictional point.

[00:29:22] Speaker 02:
And I find admittedly, I will personally admit that I find our precedent on when did this Smiths for lack of jurisdiction or failure to state a claim for lack of privacy confusing and

[00:29:36] Speaker 02:
What do you think the line is for when it's proper jurisdictional dismissal for lack of privacy and when it's just a failure of state of claim?

[00:29:44] Speaker 02:
And, you know, there's a bunch of cases going both ways.

[00:29:48] Speaker 02:
And I just, I'm not sure which way, which side of the line this falls on.

[00:29:54] Speaker 02:
And in your view, does it ultimately matter?

[00:29:56] Speaker 02:
Because if we find that it was incorrect on jurisdiction, couldn't we just convert it to a failure of state of claim?

[00:30:04] Speaker 00:
Certainly.

[00:30:05] Speaker 00:
Ultimately, I don't know that it matters, because I think you can convert it.

[00:30:08] Speaker 00:
But I think the line is whether or not you find that there was a contract, an express or implied contract.

[00:30:13] Speaker 00:
Because irrespective of whether or not, you only get privity if there's a contract, right?

[00:30:17] Speaker 00:
You have to first find a contract.

[00:30:19] Speaker 00:
And then you have to also establish privity.

[00:30:22] Speaker 00:
Nearly pleading, as the plaintiff suggests, a non-frivolous claim on the contract is not enough.

[00:30:27] Speaker 00:
They have to show a contractual relationship.

[00:30:29] Speaker 00:
And the cases in this court have routinely held that where

[00:30:33] Speaker 00:
As here, the agency is simply exercising a regulatory or sovereign function, even where it has intimate control or substantial regulatory involvement.

[00:30:41] Speaker 02:
I get that part of your argument.

[00:30:43] Speaker 02:
Can I move you on from that, though?

[00:30:44] Speaker 02:
Let's assume that we think the agreement between the United States and Indiana is a contract.

[00:30:53] Speaker 02:
I know you don't think that's true, but I should have put that in my hypothetical.

[00:30:57] Speaker 02:
Let's assume there is a contract here.

[00:31:00] Speaker 02:
there's still your argument is that there's a lack of privity with the hospital.

[00:31:05] Speaker 02:
I'm still confused.

[00:31:06] Speaker 00:
Then I think that would be a 12B6.

[00:31:08] Speaker 00:
I think once you decide that there's a contract, it's failure to state a claim based on the elements of the contract.

[00:31:16] Speaker 00:
But we here don't think that they stated a contract, so we've done it with jurisdiction.

[00:31:20] Speaker 07:
Now when you say that you believe they haven't pointed to a contract, you mean that

[00:31:29] Speaker 07:
the contract or the arrangement between FEMA and the state, you say, is not even a contract.

[00:31:38] Speaker 07:
Never mind the relationship between FEMA and the hospital, right?

[00:31:44] Speaker 00:
That's correct.

[00:31:44] Speaker 00:
It's our position that the FEMA... I'm sorry, go ahead.

[00:31:49] Speaker 07:
Well, I was just going to say, so if I understand your position, you're saying if the relationship between FEMA and the state is a contract, then

[00:32:00] Speaker 07:
the dismissal should be, if any, on 12b6 as opposed to 12b1.

[00:32:07] Speaker 07:
Is that the position I had thought I understood you to set out in your response to Judge Hughes?

[00:32:15] Speaker 07:
Is that right?

[00:32:15] Speaker 00:
Oh, okay, so I was thinking a contract with the hospital.

[00:32:19] Speaker 00:
They would have to find a contract with the hospital.

[00:32:21] Speaker 07:
That's what I was afraid.

[00:32:22] Speaker 07:
Yeah, so to be clear, assume that there's a contract with

[00:32:27] Speaker 07:
between FEMA and Indiana.

[00:32:31] Speaker 07:
Does that result, does any further argument about the contract-based rights of the hospital, then is that subject, in your view, to 12-B-1 dismissal on jurisdictional grounds?

[00:32:49] Speaker 07:
And if so, for example, why would that be true of the third-party beneficiary claim, for example?

[00:32:57] Speaker 07:
Why doesn't that involve an inquiry that goes beyond simply saying that there's no jurisdiction for the court to even consider that claim, even though the claim is asserted as a claim within the jurisdiction of the Court of Federal Claims?

[00:33:20] Speaker 00:
So I, the way I understand the Tucker Act, under 1491A1, right, they need, the hospital has to assert that it has a contract with express or implied with the United States.

[00:33:34] Speaker 07:
And because they- Well, it can assert that it is a third-party beneficiary.

[00:33:37] Speaker 07:
We have lots of cases in which we've said the Tucker Act allows you to make a third-party beneficiary claim, even though you weren't the principal contracting party, right?

[00:33:51] Speaker 00:
Certainly, but I think that you would have to establish they had third-party beneficiaries.

[00:33:55] Speaker 00:
In addition to a contract, you must also have privileges.

[00:33:59] Speaker 07:
You would have to plead, which they have done.

[00:34:03] Speaker 07:
And then it would have to be a pleading that would be non-frivolous or not simply devised for purposes of establishing your right to proceed in that forum.

[00:34:17] Speaker 07:
But the question is, given the fact-based

[00:34:21] Speaker 07:
nature of a third-party beneficiary claim, isn't that inquiry something that's hard to do as a jurisdictional matter?

[00:34:33] Speaker 00:
Generally, it is something that's resolved on the merits, but I think they have to plead one, and they haven't pled one here.

[00:34:39] Speaker 00:
I think that is a jurisdictional issue.

[00:34:40] Speaker 07:
If you find that there is a contractual... They haven't pled a third-party beneficiary.

[00:34:45] Speaker 07:
I think that's one of their claims.

[00:34:47] Speaker 00:
It is one of their claims, but we don't believe that they'd adequately put it here because they have to show that the FEMA Indiana agreement was for its intended direct benefit.

[00:34:56] Speaker 00:
What does that mean?

[00:34:57] Speaker 00:
As Your Honors were discussing earlier with my colleague, Mr. Moulter, that means that the hospital would have to at the time

[00:35:04] Speaker 00:
of the FEMA Indiana Agreement have understood that and reasonably relied upon the entry of that agreement as intending to benefit them.

[00:35:13] Speaker 00:
And the agreement merely says that it benefits 29 counties and additional areas to be determined.

[00:35:20] Speaker 00:
And then that the money would be limited funds appropriated, we'd be prioritized.

[00:35:26] Speaker 00:
There's no indication whatsoever.

[00:35:28] Speaker 00:
And frankly, it would cripple the agency's ability to provide disaster relief.

[00:35:33] Speaker 00:
Disaster relief by its very nature is

[00:35:37] Speaker 00:
something that they need to be able to kid without identifying the benefits.

[00:35:40] Speaker 00:
They cannot know.

[00:35:41] Speaker 00:
They don't even know the hospital exists on the day that they enter into the Indiana agreement.

[00:35:46] Speaker 00:
And how can they possibly enter into these disaster grant agreements going forward?

[00:35:53] Speaker 06:
This is just Toronto.

[00:35:55] Speaker 06:
Can I just ask you this?

[00:35:57] Speaker 06:
Yes.

[00:35:58] Speaker 06:
Does third-party beneficiary law either in

[00:36:03] Speaker 06:
the government context or the restatement context more generally, allow the relevant intent to run to a class of beneficiaries rather than one already individually identified?

[00:36:22] Speaker 06:
Why isn't this at least plausibly, maybe even obviously, that?

[00:36:31] Speaker 00:
that is... Because the class... I'm sorry.

[00:36:35] Speaker 06:
No, no, no.

[00:36:37] Speaker 06:
The hospital was at least allegedly and maybe even clearly among the group of those in need to perform services that it is FEMA's function to fund.

[00:36:56] Speaker 00:
Because the near fact that somebody stands to benefit from an agreement

[00:37:00] Speaker 00:
doesn't mean that they are a third-party beneficiary of it.

[00:37:04] Speaker 00:
The class in this case would be the 29 counties that were enumerated in the appendix at page 1020.

[00:37:11] Speaker 00:
Any innumerable municipalities and entities that are unknown and unknowable at the time of entry into the agreement.

[00:37:22] Speaker 00:
That's who the class is.

[00:37:23] Speaker 00:
It's way too broad to assume that the hospital was an intended beneficiary.

[00:37:28] Speaker 00:
The test is what was the agreement directly intended to benefit them, and we cannot say that.

[00:37:34] Speaker 00:
The agency and the state, in turn, have finite resources to address catastrophic damage and alleviate suffering from these disasters.

[00:37:45] Speaker 00:
And that funding has to be divvied up according to need and prioritized.

[00:37:51] Speaker 00:
It's not to make anybody whole.

[00:37:54] Speaker 00:
This is to alleviate suffering.

[00:37:57] Speaker 06:
But am I right in understanding that no money actually gets approved for payment without FEMA signing off on the project worksheets?

[00:38:17] Speaker 06:
I'm just entering into the agreement.

[00:38:20] Speaker 06:
kind of an open checkbook for later climates?

[00:38:25] Speaker 00:
So the way that the statutory framework works, the state enters into an agreement, and they become the sole grantee for all of the funds.

[00:38:35] Speaker 00:
FEMA does have a role in overseeing the project work.

[00:38:38] Speaker 00:
She say, approve the expenditure of the funds.

[00:38:40] Speaker 00:
That is correct.

[00:38:41] Speaker 00:
But it is the state that's ultimately responsible for the disbursement of those funds and the retrieval of them if they're improperly

[00:38:49] Speaker 00:
sent.

[00:38:50] Speaker 00:
And this court has routinely held such routine regulatory oversight, acting in their, you know, seeing that has an interest in disability and ensuring that the having, you know, knowledge of how these funds are spent and making sure that they're spent

[00:39:05] Speaker 00:
in accordance with the provisions of the Stafford Act, so as not to avoid waste, fraud, abuse, those sorts of things.

[00:39:11] Speaker 00:
They have a duty to taxpayers to ensure the money is spent appropriately and in accordance with the conditions of the Act.

[00:39:17] Speaker 00:
And that will alone is not enough to impute liability here to the agency.

[00:39:27] Speaker 06:
If you have nothing else, and if my colleagues have no further questions, we should probably turn back for rebuttal.

[00:39:35] Speaker 06:
Thank you.

[00:39:36] Speaker 00:
Thank you, Your Honor.

[00:39:37] Speaker 06:
Thank you.

[00:39:38] Speaker 06:
Patrick, how much time did we go over?

[00:39:42] Speaker 04:
For Ms.

[00:39:43] Speaker 04:
Salcivedo?

[00:39:44] Speaker 06:
Yes.

[00:39:45] Speaker 04:
Yes.

[00:39:45] Speaker 04:
About eight to nine minutes.

[00:39:49] Speaker 06:
OK.

[00:39:49] Speaker 06:
How about rebuttal for 10 minutes then, please?

[00:39:52] Speaker 04:
10?

[00:39:52] Speaker 04:
OK.

[00:39:53] Speaker 06:
Yes, Your Honor.

[00:39:53] Speaker 06:
If you need it.

[00:39:56] Speaker 03:
Thanks, Your Honor.

[00:39:57] Speaker 03:
A few points to pick up where the United States left off.

[00:40:01] Speaker 03:
I don't think the government can both say that beneficiaries can all seek redress in the district court and then say somehow it would cripple FEMA if they pursued third-party beneficiary claims in the court of federal claims.

[00:40:15] Speaker 03:
Secondly, the United States has identified multiple areas in which there's a need for evidentiary development, which is fundamentally inconsistent

[00:40:23] Speaker 03:
with a 12b6 dismissal.

[00:40:25] Speaker 03:
So, for example, the United States says one of the questions for a third-party beneficiary is whether the hospital reasonably relied on the contract.

[00:40:32] Speaker 03:
You know, reasonable reliance is the quintessential example of something that's a fact-based question that has to have evidentiary development.

[00:40:41] Speaker 03:
We've also pointed out before that

[00:40:43] Speaker 03:
the hospital is the only critical care facility in the area.

[00:40:47] Speaker 03:
And so obviously the parties would have intended that it would be within the class of beneficiaries, especially when the contract repeatedly refers to local hospitals.

[00:40:54] Speaker 03:
And the government responds in their briefing that, well, the record doesn't currently support or doesn't prove that the hospital is the only critical care facility in the region.

[00:41:03] Speaker 03:
Again, simply illustrating that there needs to be factual development before this claim can be decided on the merits.

[00:41:11] Speaker 03:
But the, and before I leave the third-party beneficiary, you know, this is a problem of the government's own making to the extent the government sees this as a problem.

[00:41:21] Speaker 03:
I would direct the court to a case that actually rejected a third-party beneficiary claim, the Dua Cucu versus Martinez case from the federal circuit.

[00:41:30] Speaker 03:
That was another Native American housing case with HUD.

[00:41:35] Speaker 03:
And this court in its initial analysis said, you know, this clearly seems to be a plaintiff within the class that was supposed to be benefited under the contract, but that the fact was that the contract expressly disclaimed any third-party beneficiaries.

[00:41:48] Speaker 03:
And you have nothing like that here.

[00:41:50] Speaker 03:
If the government, if it was critical to the government not only that there be no third-party beneficiaries, but that they be able to prevail in that argument at the pleading stage, then certainly they should put that language in these contracts like the United States does in so many other contexts.

[00:42:06] Speaker 03:
The government focuses also quite a bit on the previous Columbus litigation and the Seventh Circuit.

[00:42:12] Speaker 03:
And I just want to emphasize, again, those are fundamentally different types of claims.

[00:42:17] Speaker 03:
The Seventh Circuit litigation was about money that was not awarded to the hospital.

[00:42:22] Speaker 03:
The hospital got an award, and they thought they should have been awarded more.

[00:42:25] Speaker 03:
And they lost that case.

[00:42:27] Speaker 03:
This is the other end of the spectrum where the money was already awarded, the money came to the hospital, but there was an exaction, a breach of contract, the hospital had to pay money over to the government.

[00:42:44] Speaker 03:
In that sense, that's also inconsistent with the government characterizing in the previous argument that this is the nature of our claim is

[00:42:51] Speaker 03:
were complaining that FEMA shut the spicket off.

[00:42:54] Speaker 03:
Again, not true.

[00:42:55] Speaker 03:
The spicket was already shut off.

[00:42:57] Speaker 03:
They asked us to write a check.

[00:43:00] Speaker 03:
And again, the flood wall is a perfect illustration of this.

[00:43:03] Speaker 03:
The flood wall was something, as I understand it, that FEMA wanted.

[00:43:07] Speaker 03:
So after working directly with the hospital between FEMA, the wall was built.

[00:43:12] Speaker 03:
It primarily benefits FEMA, I would say.

[00:43:14] Speaker 03:
And then FEMA exacted the money after the fact.

[00:43:17] Speaker 03:
So again, this is not the hospital trying to turn the spicket

[00:43:21] Speaker 07:
Mr. Moulter, this is Jess Bryson.

[00:43:26] Speaker 07:
Returning to the Seventh Circuit case, was there any basis in that case attributable to a contract itself, or was the ground on which Columbus sought relief entirely non-contractual?

[00:43:47] Speaker 03:
entirely non-contractual there was no breach of contract claim and there was no illegal exaction claim and that's an important distinction to what the other cases the united states points to it when they say that uh... the obligation court claims are routinely decided uh... in the district court it's just not true that there any deobligation claims based on breaches of contract or or legal exaction in fact their lead case the rebuild northwest uh... florida case with the case for the plaintiff expressly disclaimed

[00:44:14] Speaker 03:
any contract theory, and the district court expressly stated if there had been a contract, or if there had been a contract claim, there would be no jurisdiction in the district court.

[00:44:25] Speaker 03:
So I'm aware, and the government has not cited, I'm aware of no case alleging a breach of contract or a legal exaction for deobligation that's been decided in the district court.

[00:44:38] Speaker 07:
Now if we were to decide that the court of federal claims

[00:44:44] Speaker 07:
The relief sought before the Court of Federal Claims, at least setting aside the illegal exactions for the moment, but just the other contract-based claims, was in the nature of an equitable, call it restitution-like form of recovery, and therefore,

[00:45:13] Speaker 07:
Court of Federal Claims did not have Tucker Act jurisdiction, would that not then tell us that there was no adequate remedy at law in the Tucker Act for purposes of Section 704?

[00:45:34] Speaker 03:
I think that's correct, although as you noted before, we haven't briefed 704, and so I'm not as familiar.

[00:45:41] Speaker 03:
I haven't given as much thought to that analysis.

[00:45:44] Speaker 03:
But I agree.

[00:45:45] Speaker 03:
In the Court of Federal Crimes, we need to be seeking monetary damages, which I think we are.

[00:45:50] Speaker 03:
And I think that also flags that it's inconsistent for the government.

[00:45:55] Speaker 07:
If you're wrong on that for purposes of the Tucker Act, then wouldn't that

[00:46:01] Speaker 07:
mean that both section 702 and section 704 would be satisfied?

[00:46:07] Speaker 07:
Because the fact that it wasn't money damages, and let's assume for the moment there's no difference between monetary relief and money damages, although that's another question.

[00:46:17] Speaker 07:
But would that not lead us to conclude that both section 702 and section 704 were satisfied?

[00:46:30] Speaker 03:
I think so.

[00:46:31] Speaker 03:
I'm not sure.

[00:46:32] Speaker 03:
If the point is that there would be a forum for redress, I think I'm following you, then yes.

[00:46:38] Speaker 07:
Okay.

[00:46:39] Speaker 07:
Okay.

[00:46:39] Speaker 03:
Thank you.

[00:46:41] Speaker 03:
Circling back, it is inconsistent for the government to say that the relief we are seeking is for the original strings attached funding and then to say, but if we're in the district court,

[00:46:54] Speaker 03:
maybe monetary relief could be awarded because maybe Indiana's got some other money from some other disaster still sitting around that might be able to make us whole.

[00:47:04] Speaker 03:
I think, again, those things are just two fundamentally inconsistent propositions.

[00:47:10] Speaker 03:
It's especially important here because, as Judge Solomson recently stated in the Slidewell case, as this court emphasized in the Lummi Tribe, the United States does have a pattern

[00:47:23] Speaker 03:
of this sort of traditional ping-pong and taking inconsistent positions in the district court and the court of federal claims.

[00:47:30] Speaker 03:
Certainly not saying that my opposing counsel here has, but that has been a problem with the United States, and it sounds like it's set up the same way here.

[00:47:37] Speaker 03:
The United States is not willing to say or make a judicial admission or something that was subjected to some sort of judicial estoppel that that money would be available if we were kicked over to the district court.

[00:47:47] Speaker 07:
Why wouldn't that money come out of the judgment fund if the judgment were entered in the district court action?

[00:47:54] Speaker 03:
But my understanding from the cases that the government had cited, that it can't in the district court APA cases, that part of the appropriations clause of the Constitution precludes that from happening.

[00:48:10] Speaker 07:
Is that because the APA court does not have jurisdiction to issue money damages award?

[00:48:20] Speaker 03:
I think that, yes, I think that's part of it.

[00:48:22] Speaker 03:
And then also I think the district court doesn't have constitutional authority to order money that you've characterized as part of an appropriation when the appropriations expire.

[00:48:37] Speaker 03:
So it is getting into semantics, I acknowledge.

[00:48:42] Speaker ?:
Okay, thank you.

[00:48:44] Speaker 06:
Do you have anything else, Mr.

[00:48:46] Speaker 03:
You know, I would just wrap up with what I think are three critical concessions from the United States, that they've agreed that Tuckrack jurisdiction, quote, requires no more than a non-furloughed allegation of a contract with the government, end quote, and that's at the appellee's brief on pages 35 through 36, and I think we've established here today that the hospital has made a non-furloughed allegation of a contract.

[00:49:09] Speaker 03:
And the government doesn't disagree with this court's statements in cases like engaged learning, trauma services, total medical management,

[00:49:16] Speaker 03:
that as with the dispute over the scope of the contract, the determination of whether or not a contract, in fact, exists is not jurisdictional.

[00:49:24] Speaker 03:
And finally, the government agrees that it is not dispute, excuse me, that a grant agreement may be a contract where it meets the elements of one.

[00:49:33] Speaker 03:
That's at page 41 of their brief.

[00:49:35] Speaker 03:
And here, we pretend we've pledged the elements of one.

[00:49:38] Speaker 03:
So for all those reasons, we request that this court reverse the Court of Federal Plaint

[00:49:44] Speaker 03:
On both of its orders, this became all the hospital's claims that were mandated for further proceedings.

[00:49:49] Speaker 03:
Thank you.

[00:49:49] Speaker 06:
Thank you.

[00:49:52] Speaker 06:
So thanks to both counsels.

[00:49:54] Speaker 06:
The case is submitted, and that concludes the argument session for this morning.

[00:50:00] Speaker 04:
Thank you.

[00:50:01] Speaker 04:
The Honorable Court is adjourned until tomorrow morning at 10 a.m.