Prosser v. Sessions ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
JEFFREY J. PROSSER, et al.,
Plaintiffs,
v. Case No. 1:17-cv-01662 (TNM)
JEFFERSON B. SESSIONS, III, et al.,
Defendants.
MEMORANDUM OPINION
Pro se Plaintiff Jeffrey Prosser is the debtor in a Chapter 7 bankruptcy and the beneficial
owner of three companies in Chapter 11 bankruptcy. Compl. 3 n.5, 5, ¶ 3. Pro se Plaintiff John
Raynor is a former director and outside counsel to one of Mr. Prosser’s companies, has pursued
legal claims against the National Rural Utilities Cooperative Finance Corporation, or CFC, and
has been the defendant in what he characterizes as an extortionary adversary proceeding. Id. ¶ 4.
Plaintiffs allege that CFC has engaged in an extensive scheme of accounting fraud and public
corruption in violation of the Racketeer Influenced and Corrupt Organizations Act, or RICO.
Through this lawsuit, they seek to compel Attorney General Jeff Sessions to intervene in Mr.
Prosser’s bankruptcy proceedings. They also seek to compel Treasury Secretary Steven
Mnuchin to cease and desist funding CFC from the United States Treasury. Because Plaintiffs
have failed to state a claim that entitles them to the requested intervention and have not shown
standing to challenge CFC’s funding, the Defendants’ Motion to Dismiss will be granted.
I. BACKGROUND
Plaintiffs’ Complaint and other filings focus mainly on allegations about CFC’s
misconduct. Although CFC is not a party to this case, Plaintiffs’ allegations against CFC
provide the basis for their request that the Attorney General intervene in Mr. Prosser’s
bankruptcy proceedings and that the Secretary of the Treasury discontinue funding of CFC. 1
CFC is a tax-exempt, member-owned financing cooperative that supplements federal loan
programs to support the generation and distribution of electricity in rural America. Id. ¶¶ 10-11.
Plaintiffs allege that CFC engaged in extensive accounting fraud, including embezzling nearly
$263 million in five years from the Rural Telephone Finance Cooperative, or RTFC, which CFC
controls. Id. ¶¶ 30-56. Plaintiffs also allege that CFC corrupted public officials in the Virgin
Islands, including several federal prosecutors and former Governor John Percy de Jongh, Jr.,
who was arrested for financial crimes. Id. ¶¶ 16, 21, 23. According to Plaintiffs, “Fraud and
criminality is a systemic part of CFC’s operations and without it, CFC cannot financially
survive.” Id. ¶ 62.
Plaintiffs allege that CFC has victimized them for their efforts to address its misconduct.
Mr. Prosser alleges that he discovered CFC’s accounting fraud when his three companies
borrowed money from RTFC, which CFC controlled, and CFC embezzled funds from those
companies. Id. at 3. Mr. Prosser says that, because he “raised the issue of Embezzlement,”
RTFC illegally foreclosed on loans that it made to his companies and forced Mr. Prosser and his
companies into bankruptcy. Id. at 5.
Mr. Raynor, a former director and outside counsel to at least one of Mr. Prosser’s
companies, alleges that he filed a civil False Claims Act complaint against CFC. Id. at 10. He
also alleges that he provided information to the Department of Justice to encourage an
1
The Complaint seeks an order directing both the Attorney General and the Secretary of the
Treasury to cease and desist funding CFC from the United States Treasury but does not allege
that the Attorney General has provided CFC funds from the United States Treasury. See id. ¶ 37.
In any event, my analysis of Plaintiffs’ standing does not depend on whether the cease and desist
order would issue against one or both the Defendants.
2
investigation of potential RICO violations, potential criminal False Claims Act violations, and
potential bank fraud, and that the Department of Justice responded by conducting an extensive
criminal investigation. Id. at 10 & n.14, 14. Mr. Raynor says that he was forced to defend
himself in an extortionary adversary proceeding. Id. at 10.
Plaintiffs also allege that, in what they call the “ICC Bribery,” CFC paid about $20
million in bribes to public officials “to facilitate the involuntary bankruptcy of New ICC [one of
Mr. Prosser’s companies] and to enlist the support of those public officials . . . in pursuing CFC’s
retaliatory agenda.” Pls.’ Statement of Facts in Opp. to Mot. Dismiss 4-5. CFC arranged these
bribes through a consultant and several court-appointed bankruptcy professionals in Mr.
Prosser’s bankruptcy proceedings. Id. at 4. According to Plaintiffs, CFC bribed two federal
prosecutors, at least one witness in the bankruptcy proceedings, and a former Territorial Senator,
Alvin Williams, who was arrested on six counts of bribery in 2012. Compl. 6-7. Plaintiffs also
allege the Department of Justice forced the judge presiding over the bankruptcy proceedings to
retire from the bench after a pattern of unsupportable decisions that suggested bribery. Id. at 7. 2
The District Court for the U.S. Virgin Islands sealed at least some records in the criminal
proceeding against former Territorial Senator Williams to protect the Department of Justice’s
ongoing criminal investigation. Id. at 8. Plaintiffs have tried to have these records unsealed, but
without success. Id. at 8-9. Plaintiffs allege the sealed records would show that
(i) the foreclosure which resulted in the Prosser Bankruptcies was unlawful; (ii) the
Bankruptcy proceedings in the Prosser Bankruptcies were completely and
thoroughly corrupted and lacked any integrity whatsoever; (iii) the Bankruptcy
proceedings in the Prosser Bankruptcies were not impartially adjudicated; and
(iv) with the implied consent of the DOJ, the U.S. Treasury has funded CFC’s
pattern of racketeering activities in violation of the False Claims Act.
2
But Plaintiffs also allege that the Department of Justice had no direct evidence of bribery and
no publicly disclosed connection to the judge’s retirement. Id. at 7 & n.10.
3
Id. at 9. This allegation is based at least in part on statements made to Mr. Prosser by a
co-indictee of Mr. Williams. Id. at 8.
Mr. Prosser and Mr. Raynor brought this case against the Attorney General and the
Secretary of the Treasury in their official capacities, seeking an order from the Court compelling
the Attorney General to intervene in Mr. Prosser’s bankruptcy proceedings and directing the
Secretary to cease and desist funding CFC. Id. at 37-38. Plaintiffs also filed a Motion for
Miscellaneous Relief, seeking an order from the Court directing the Department of Justice to file
under seal in this case: (1) the sealed documents from Mr. Williams’ criminal case; and (2) any
documents involving admissions by the bankruptcy judge that he did not impartially adjudicate
Mr. Prosser’s bankruptcy proceedings. Defendants moved to dismiss the case for failure to state
a claim to the requested relief and for lack of standing. 3
II. LEGAL STANDARD
To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6), a complaint must contain sufficient factual allegations that, if true, “state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). Plausibility requires that a complaint raise “more than a sheer possibility that a
defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Pleading facts
3
Plaintiffs’ Opposition to the Motion to Dismiss argues that the sealing of records in Mr.
Williams’ criminal case violated Plaintiffs’ constitutional rights but does not ask to unseal the
records. Defendants’ Reply notes that any challenge to the Virgin Islands District Court’s
sealing order should be filed in that court or raised on appeal. Plaintiffs moved to strike this
argument because Plaintiff’s original Motion to Dismiss did not raise it. The law generally
disfavors motions to strike. Capitol Sprinkler Inspection, Inc. v. Guest Servs., Inc., 630 F.3d
217, 226 (D.C. Cir. 2011). Because Plaintiffs first challenge the constitutionality of the sealing
order in their Opposition and because, in any event, this issue is not material to my analysis, I
will not strike the Reply or grant leave to file a Sur-Reply. See Baloch v. Norton, 517 F. Supp.
2d 345, 348 n.2 (D.D.C. 2007) (denying motion to strike new argument in reply because it
responded to new argument in opposition).
4
that are “merely consistent with” a defendant’s liability “stops short of the line between
possibility and plausibility.” Twombly, 550 U.S. at 545-46. Thus, a court evaluating a motion to
dismiss for failure to state a claim does not accept the truth of legal conclusions or “[t]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal,
556 U.S. at 678. That said, it construes the complaint in the light most favorable to the plaintiff
and accepts as true all reasonable inferences drawn from well-pled factual allegations. See In re
United Mine Workers of Am. Emp. Benefit Plans Litig., 854 F. Supp. 914, 915 (D.D.C. 1994).
Consideration is limited to “the facts alleged in the complaint, any documents either attached to
or incorporated in the complaint and matters of which [the court] may take judicial notice.”
Hurd v. D.C. Gov’t, 864 F.3d 671, 678 (D.C. Cir. 2017).
On a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure
12(b)(1), the plaintiff bears the burden of establishing jurisdiction. Georgiades v. Martin-
Trigona, 729 F.2d 831, 833 n.4 (D.C. Cir. 1984). “Article III of the Constitution limits federal
courts’ jurisdiction to certain ‘Cases’ and ‘Controversies.’” Clapper v. Amnesty Int’l USA, 568
U.S. 398, 408 (2013) (quoting U.S. Const. art. III, § 2). “No principle is more fundamental to
the judiciary’s proper role in our system of government,” and “[t]he concept of standing is part
of this limitation.” Simon v. E. Kentucky Welfare Rights Org., 426 U.S. 26, 37 (1976). Article
III standing requires an injury that is “concrete, particularized, and actual or imminent; fairly
traceable to the challenged action; and redressable by a favorable ruling.” Monsanto Co. v.
Geertson Seed Farms, 561 U.S. 139, 149 (2010). “While the district court may consider
materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of
jurisdiction . . . the court must still accept all of the factual allegations in [the] complaint as true.”
Jerome Stevens Pharm., Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253 (D.C. Cir. 2005).
5
The Court construes pro se filings liberally, holding them “to less stringent standards than formal
pleadings drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94 (2007).
III. ANALYSIS
A. The Plaintiffs Have Not Stated a Claim That Entitles Them to the Requested
Intervention
The parties agree that the order Plaintiffs seek directing the Attorney General to intervene
in Mr. Prosser’s bankruptcy proceedings constitutes mandamus relief. See Defs.’ Memo. ISO
Mot. Dismiss 4; Pls.’ Opp. to Mot. Dismiss 11; see also 28 U.S.C. § 1361 (authorizing
mandamus actions “to compel an officer or employee of the United States or any agency thereof
to perform a duty owed to the plaintiff”). “The mandamus remedy is an extraordinary one, and it
is to be utilized only under exceptional circumstances . . . .” Haneke v. Sec. of Health, Ed. &
Welfare, 535 F.2d 1291, 1296 (D.C. Cir. 1976). Even under exceptional circumstances,
mandamus issues only at the discretion of the court. Nat’l Wildlife Fed’n v. United States, 626
F.2d 917, 923 (D.C. Cir. 1980). Mandamus generally requires “a clear right in the plaintiff to the
relief sought, a plainly defined and nondiscretionary duty on the part of the defendant to honor
that right, and no other adequate remedy, either judicial or administrative, available.” Ganem v.
Heckler, 746 F.2d 844, 852 (D.C. Cir. 1984).
Plaintiffs have a particularly steep hill to climb in suggesting that a court could—let alone
should—order a coordinate branch to intervene in their case. The Constitution vests the
executive power in the President, not in the Judiciary. U.S. Const. art. II, § 3. Decisions such as
whether to bring or drop criminal charges or to institute or join a civil proceeding are squarely
within the core executive function. The traditional rule is that “an agency’s decision not to take
enforcement action should be presumed immune from judicial review.” Heckler v. Chaney, 470
U.S. 821, 832 (1985) (holding that the Administrative Procedure Act did not alter this traditional
6
rule). The Executive Branch generally enjoys “absolute discretion” in determining whether the
United States should take legal action. Swift v. United States, 318 F.3d 250, 253 (D.C. Cir.
2003). To show that they are entitled to mandamus relief against the Attorney General, Plaintiffs
must show that their case presents an exception to these well-established rules.
Plaintiffs have failed to state a claim that entitles them to mandamus relief because they
have not established a plainly defined and nondiscretionary duty of the Attorney General that
would require him to intervene in Mr. Prosser’s bankruptcy proceedings. Plaintiffs state at the
outset of their Complaint that their claim to “the requested relief is premised upon the affirmative
duty . . . of the Department of Justice . . . and/or the United States Department of Treasury . . .
which mandates affirmative action to: (i) protect the integrity of Bankruptcy proceedings; (ii)
protect the Treasury of the United States from False Claims; and (iii) by implication, to cease
and desist Federal funding a person [including a corporation] engaged in a pattern of
racketeering activity within the meaning of [RICO].” Compl. 1-2. The alleged duties to protect
the Treasury from false claims and to cease and desist funding a person engaged in RICO
violations underlie Plaintiffs’ challenge to CFC’s receipt of federal funds, but do not entitle them
to an order requiring the Attorney General to intervene in Mr. Prosser’s bankruptcy proceedings.
Thus, Plaintiffs’ request for a writ of mandamus depends solely on the Department of Justice’s
alleged duty to take affirmative action to protect the integrity of bankruptcy proceedings. And
Plaintiffs have not shown that this duty exists.
Plaintiffs cite a plethora of sources to prove “[t]here can be no dispute that the U.S. Code
reflects Federal Public Policy intended to promote the efficiency, and to protect and preserve the
integrity, of the bankruptcy system.” Id. ¶ 73. According to Plaintiffs, “It is antithetical to the
Federal Public Policy and U.S. Code” to allow unjust decisions to stand, particularly after
7
forcing a bankruptcy judge to retire because of those decisions. Id. ¶ 74. But Plaintiffs have not
shown that the law imposes on the Attorney General “a plainly defined and nondiscretionary
duty” requiring him to intervene in Mr. Prosser’s bankruptcy proceedings. See Ganem, 746 F.2d
at 852.
Plaintiffs cite two provisions of the United States Code to establish the Attorney
General’s affirmative duty. 4 First, they cite 28 U.S.C. § 586(c), which states, “Each United
States trustee shall be under the general supervision of the Attorney General, who shall provide
general coordination and assistance to the United States trustees.” Id. ¶ 70. Second, they cite 18
U.S.C. § 3057:
(a) Any judge, receiver, or trustee having reasonable grounds for believing
that any violation under chapter 9 of this title or other laws of the United States
relating to insolvent debtors, receiverships or reorganization plans has been
committed, or that an investigation should be had in connection therewith, shall
report to the appropriate United States attorney all the facts and circumstances of
the case, the names of the witnesses and the offense or offenses believed to have
been committed. Where one of such officers has made such report, the others need
not do so.
(b) The United States attorney thereupon shall inquire into the facts and
report thereon to the judge, and if it appears probable that any such offense has been
committed, shall without delay, present the matter to the grand jury, unless upon
inquiry and examination he decides that the ends of public justice do not require
investigation or prosecution, in which case he shall report the facts to the Attorney
General for his direction.
4
Plaintiffs also cite 18 U.S.C. § 242, which establishes criminal penalties for deprivation of civil
rights under color of law. Compl. 35 n.51. But this statute creates no affirmative duties nor
suggests that intervention in a bankruptcy proceeding would be appropriate relief. And, as a
criminal statute, it does it provide Plaintiffs a private right of action. See Rockefeller v. United
States Court of Appeals Office, 248 F. Supp. 2d 17, 23 (D.C. Cir. 2003) (dismissing private
claims based on 18 U.S.C. § 242 because it is a criminal statute).
8
Id. ¶ 71. These statutes impose only one requirement on the Attorney General: That he “provide
general coordination and assistance to the United States trustees.” 28 U.S.C. § 586(c). That duty
does not plainly require him to intervene in Mr. Prosser’s bankruptcy proceedings. 5
Plaintiffs also cite three Department of Justice Publications. First, they cite a Department
of Justice handbook on bankruptcy for the proposition that “[t]he United States Trustee Program
acts in the public interest to promote the efficiency, and to protect and preserve the integrity, of
the bankruptcy system.” Compl. ¶ 69. Second, they cite the United States Attorneys’ Manual,
stating, “Courts have recognized that the [United States Trustee Program] serve[s] as the
vanguard, especially on those issues that impact upon the integrity of the [bankruptcy] process.”
Compl. ¶ 69. Third, they cite the United States Trustee Program Policy and Practices Manual,
which states that the United States Trustee Program “is responsible for overseeing the nation’s
bankruptcy system,” that its “mission is to promote the integrity and efficiency of the bankruptcy
system,” and that it pursues its mission by enforcing bankruptcy laws and by ensuring that those
involved in the bankruptcy process fulfil their legal obligations. Defs.’ Opp. to Mot. Dismiss 16-
17. But these high-level descriptions of the United States Trustee Program and its aspirations
establish no affirmative duty that would require intervention in Mr. Prosser’s bankruptcy
proceedings.
Plaintiffs’ remaining citations similarly fail to establish an affirmative duty that would
entitle them to mandamus relief. Plaintiffs cite Collier on Bankruptcy for the proposition that
“the statutes establishing the federal bankruptcy crimes seek to prevent and redress abuses of the
5
The statutes also mention duties to work under the Attorney General’s supervision, to report
suspected unlawful activity, to investigate suspected unlawful activity, and to present such
matters to a grand jury unless the ends of public justice do not so require. But the statutes do not
impose these duties on the Attorney General and do not address intervention in bankruptcy
proceedings.
9
bankruptcy system” and that “they set basic rules for participation in the civil bankruptcy
process.” Compl. ¶ 68. But this has nothing to do with whether the Attorney General has an
affirmative duty to intervene in bankruptcy proceedings that have gone wrong.
Plaintiffs also cite three out-of-circuit opinions for the proposition that “[c]ourts
recognize the DOJ’s enforcement duty, watchdog and advocate.” Defs.’ Opp. to Mot. Dismiss
18 & n.8. Similarly, they note that the Attorney General takes an oath to execute the laws of the
United States faithfully and quote a District of Columbia Circuit opinion stating that “[t]he
Constitution entrusts the Executive with [the] duty to take Care that the Laws be faithfully
executed.” Compl. ¶ 63 (quoting Swift, 318 F.3d at 253). 6 But the general duty to enforce the
law does not plainly require the Attorney General to intervene in any particular bankruptcy
proceeding.
As explained above, the Executive Branch enjoys wide discretion in enforcing the law.
Plaintiffs have not pointed to any authority that cabins the Attorney General’s discretion for
bankruptcy proceedings. They have not pointed to any authority plainly defining a
nondiscretionary duty that requires the Attorney General to intervene in Mr. Prosser’s
bankruptcy proceedings. Thus, they have failed to state a claim on which the extraordinary
remedy of mandamus relief may be granted.
B. Plaintiffs Have Not Established Standing to Challenge CFC’s Federal Funding
The Supreme Court has “consistently held that a plaintiff raising only a generally
available grievance about government—claiming only harm to his and every citizen’s interest in
proper application of the Constitution and laws, and seeking relief that no more directly and
tangibly benefits him than it does the public at large—does not state an Article III case or
6
Swift uses this as a reason the Executive enjoys “absolute discretion” in determining whether to
bring an action, not as grounds for a nondiscretionary duty to act. Id.10
controversy.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 573-74 (1992). To have Article III
standing, a Plaintiff must suffer an injury that is “concrete, particularized, and actual or
imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.”
Monsanto, 561 U.S. at 149.
Although Plaintiffs allege significant injuries, they do not trace any of their injuries to
federal funding of CFC or show how a favorable ruling on their request for a cease and desist
order would redress their injuries. They expressly disclaim taxpayer standing, standing under the
False Claims Act, and standing under the All Writs Act. Pls.’ Opp. to Mot. Dismiss 12. 7
Plaintiffs claim standing based on the Administrative Procedure Act, or APA, the mandamus
statute, and the United States Constitution. Id. at 12-16. But their standing arguments focus
exclusively on injuries caused by the Department of Justice’s alleged failure to perform its law
enforcement duties. See id. Plaintiffs have not shown that the APA, the mandamus statute, or
the Constitution makes federal funding of an enterprise engaged in a pattern of RICO violations
a cognizable injury for purposes of Article III standing.
Under the APA, as Plaintiffs note, “A person suffering legal wrong because of agency
action, or adversely affected or aggrieved by agency action within the meaning of a relevant
statute, is entitled to judicial review thereof.” 5 U.S.C. § 702; see also Pls.’ Opp. to Mot.
Dismiss 12-13. The mandamus statute provides, “The district courts shall have original
jurisdiction of any action in the nature of mandamus to compel an officer or employee of the
United States or any agency thereof to perform a duty owed to the plaintiff.” 28 U.S.C. § 1361.
Neither statute creates substantive rights violated by federal funding of the CFC. Nor is it
7
They also disclaim standing as victims to compel the Department of Justice “to execute on the
sealed indictments with respect to the related criminal investigations.” Id.11