Free Response to Objection to Appeal of Magistrate Judge Decision - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 03-cv-02435-PSF-PAC (Consolidated with 04-cv-00639-PSF-PAC) LILLIAN F. SANDLE, Plaintiff, v. ANTHONY J. PRINCIPI, Secretary, Department of Veterans Affairs, Defendant.

Civil Action No. 04-cv-00639-PSF-PAC (Consolidated with 03-cv-02435-PSF-PAC) LILLIAN F. SANDLE, Plaintiff, v. ANTHONY J. PRINCIPI, et al., Defendants.

DEFENDANT'S RESPONSE TO OBJECTION TO DECISION BY MAGISTRATE JUDGE RE: DEFENDANT'S MOTION TO AMEND ANSWER

Defendant Anthony J. Principi, Secretary, Department of Veterans Affairs, by and through undersigned counsel, hereby responds in opposition to plaintiff Lillian F.

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Sandle's Objection to Decision by Magistrate Judge Regarding Defendant's Motion to Amend Answer. Plaintiff argues that defendant's motion to amend to bring a counterclaim for unjust enrichment should be denied under Fed. R. Civ. P. 15(a) on two grounds: futility of amendment and undue delay. Neither argument has merit. The amendment is not futile because it would not be subject to dismissal. Defendant's counterclaim for unjust enrichment is permitted by 28 U.S.C. § 2415(a), and defendant brought its counterclaim well within the six-year statutory period permitted by Section 2415(a). Because defendant's counterclaim has been brought within the limitations period, defendant did not "unduly delay" bringing its counterclaim. Defendant's timely filing of its counterclaim cannot constitute undue delay as a matter of law. Plaintiff's Objection should be denied and the U.S. Magistrate Judge's Order filed December 19, 2005, see Docket No. 188, should be affirmed. I. STATEMENT OF FACTS

Prior to and following her separation from employment with the Department of Veterans Affairs ("VA") in 1991, plaintiff filed formal administrative complaints with the VA containing allegations of discrimination based on race, color, sex, age, national origin, disability, and reprisal. On April 2, 1997, plaintiff and the Agency entered into a signed settlement agreement regarding the claims she raised in six formal administrative complaints. Pursuant to the settlement agreement, defendant paid plaintiff $50,000 in

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damages, plus $16,600 in attorneys' fees, in consideration for plaintiff's releasing defendant from the claims of discrimination and reprisal contained in her administrative complaints. Thereafter, plaintiff challenged the validity of the settlement agreement. On August 2, 2000, the Equal Employment Opportunity Commission ("EEOC") Office of Federal Operations entered an order in plaintiff's favor, declaring that the April 2, 1997 settlement agreement was invalid. The EEOC remanded the cases to the EEOC's Denver District Office instructing that the matters be reinstated. An administrative law judge then conducted a hearing on plaintiff's formal administrative complaints, and at the conclusion of the hearing ruled against plaintiff on all of her claims. Because the EEOC invalidated the April 2, 1997 settlement agreement, plaintiff is now pursuing in this lawsuit the claims that she previously released by way of the agreement. These claims are contained in her original Complaint, filed December 2, 2003 ­ see Docket No. 4 at First and Third Claims for Relief ­ and in her Second Amended Complaint, filed November 9, 2005 ­ see Docket No. 169 at ¶¶ 7-94.1 But plaintiff has never repaid to defendant the monies that defendant paid her in consideration of the

Defendant submits that plaintiff also appears to be pursuing in her Second Amended Complaint a number of claims that were not contained in the six formal administrative complaints at issue in the April 2, 1997 settlement agreement which plaintiff signed. Discover is continuing on these particular claims. 3

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release. Instead, she has retained the $50,000 settlement amount plus the $16,600 in attorneys fees. Following plaintiff's filing of her original Complaint, defendant filed ­ in lieu of filing an answer ­ a motion to dismiss. See Docket No. 29. Defendant's motion to dismiss was ultimately denied by this Court in an Order filed March 30, 2005. See Docket No. 79. Defendant then filed its Answer to the original Complaint on April 25, 2005. See Docket No. 90. In defendant's answer defendant asserted several defenses, including the following three defenses which relate specifically to plaintiff's retention of funds obtained as a consequence of the April 2, 1997 settlement agreement: 2. Plaintiff's claims are barred by the doctrine of estopped. Plaintiff entered into and received from defendant at the administrative level a monetary settlement to resolve the matters alleged in her Complaint. 11. Plaintiff's claims are barred by the doctrine of accord and satisfaction. 12. Plaintiff's claims are barred by the prior settlement agreement entered into with the VA. See Docket No. 90 at 7-8. Pursuant to the Court's Order filed October 18, 2005 permitting plaintiff to file an amended complaint, plaintiff filed on November 2, 2005 her Amended Complaint, see Docket No. 163, and then on November 9, 2005 filed her Second Amended Complaint. See Docket No. 169. On November 25, 2005, defendant filed its Answer to the Second Amended Complaint. See Docket No. 179.

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In defendant's November 25, 2005 Answer, defendant again asserted several defenses relating specifically to plaintiff's retention of funds obtained as a consequence of the April 2, 1997 settlement agreement: 3. Plaintiff's claims are barred by the doctrine of estoppel. Plaintiff entered into and signed a written administrative settlement agreement on April 2, 1997, resolving all issues in plaintiff's Second Amended Complaint. Pursuant to the written administrative settlement agreement, plaintiff received the amount of $50,000 and her attorney at the time received attorney's fees in the amount of $16,600. 4. Plaintiff's claims are barred by the doctrine of accord and satisfaction, due to the written administrative settlement agreement she entered into and signed on April 2, 1997, which resulted in payment to her of the amount of $50,000 and payment to her attorney at the time of the amount of $16,600. 5. Plaintiff's recovery in this matter, if any, should be set off to the extent she received $50,000, and her attorney at the time received attorney's fees in the amount of $16,600, pursuant to a written settlement agreement which plaintiff signed on April 2, 1997. See Docket No. 179 at 24-25. Now, in defendant's amended answer to plaintiff's Second Amended Complaint, filed as an exhibit on December 9, 2005 to defendant's motion to amend answer (see Docket No. 185 at attachment 1), defendant asserts a counterclaim for unjust enrichment against plaintiff. Id. at 26-27. Defendant contends in its counterclaim that "[i]f plaintiff is allowed to retain the monies she received in consideration of the release which has

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been invalidated, she will be unjustly enriched at the expense of the defendant." Id. at 27.2 II. A. ARGUMENT

Defendant's Counterclaim is Proper and Timely Under 28 U.S.C. § 2415(a) Plaintiff contends that defendant's amendment to add a counterclaim for unjust

enrichment is futile. Objection at 3-5. According to plaintiff, defendant's unjust enrichment claim is subject to the State of Colorado's three-year statute of limitations, and the three-year statute has expired. Id. Plaintiff's argument is without merit because the State of Colorado's statute of limitations is not applicable here. Rather, defendant's actions are governed by 28 U.S.C. § 2415(a), and under this federal statute, defendant's counterclaim is timely. 1. Pursuant to 28 U.S.C. § 2415(a), the Government May Seek to Recover Money Damages

Congress in 1966 enacted 28 U.S.C. § 2415, entitled "Time for Commencing Actions Brought by the United States." In particular, 28 U.S.C. § 2415(a) provides, in pertinent part:

Defendant notes that the Court filed an Amended Scheduling Order in this case on January 10, 2006. See Docket No. 199. In that Amended Scheduling Order, plaintiff agreed that defendant Anthony J. Principi is now the only defendant in either of the two consolidated cases presently before the Court. Id. at 11. Plaintiff's Second Amended Complaint reflects that defendant is being sued only in his official capacity as Secretary of the U.S. Department of Veterans Affairs. See Docket No. 169 at ¶ 3. Nothing in the Second Amended Complaint or in the parties' Amended Scheduling Order suggests that defendant is being sued here in his individual capacity. 6

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(a) Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues. . . . 28 U.S.C. § 2415(a). 2. Defendant's Counterclaim for Unjust Enrichment is Properly Brought Under 28 U.S.C. § 2415(a) a. Defendant's Counterclaim Constitutes an "Action"

Defendant's counterclaim here constitutes an "action" for purposes of 28 U.S.C. § 2415(a). As the Tenth Circuit noted in Oxy USA, Inc. v. Babbitt, 268 F.3d 1001, 1005 (10 th Cir. 2001), the phrase "every action" in Section 2415(a) is "patently broad, and is expressly limited in scope only by reference to the possibility of a specific exception `otherwise provided by Congress.'" Id. (citing 28 U.S.C. § 2415(a)). In Oxy USA the Tenth Circuit reasoned that "Congress' subsequent reference to the filing of a `complaint' within six years cannot fairly be read to limit this broad language to formalized judicial proceedings in light of (1) the statute's obvious purpose to level the playing field between the government and private litigants by forcing the government to promptly assert its claims; and (2) a reading of the entire text of § 2415, including subsections (f) and (i), which evidence Congress' desire to deal with extra-judicial agency actions as well as judicial actions." 268 F.3d at 1005. Thus, because defendant's counterclaim is an "action for money damages," it is properly brought under Section 2415(a). 7

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b.

The Action is Founded Upon a Contract Implied in Law

Defendant's unjust enrichment counterclaim "is founded upon [a] contract express or implied in law or fact." See 28 U.S.C. § 2415(a). In particular, an action for unjust enrichment is based on a quasi-contract, which is synonymous with a "contract implied in law." United States v. State of Michigan, 851 F.2d 803, 810 (6 th Cir. 1988) (citing United States v. Limbs, 524 F.2d 799, 801-02 (9 th Cir. 1975)). See also DCB Const. Co., Inc. v. Central City Development Co., 940 P.2d 958, 962 (Colo.App. 1996) (citing Valley Realty & Investment Co. v. McMillan, 160 Colo. 109, 112, 414 P.2d 486, 488 (1966)) (a claim for unjust enrichment is based upon a contract implied in law); Ninth Dist. Prod. Credit Ass'n v. Ed Duggan, Inc., 821 P.2d 788, 794-95 (Colo. 1991) (characterizing an unjust enrichment claim as a contract implied in law). The Ninth Circuit in Limbs recognized that the legislative history of section 2415(a) clearly shows the statute was intended to govern such nonconsensual, quasi-contractual obligations as where someone receives money from the federal government to which he is not entitled. Limbs, 524 F.2d at 802, n. 3. See also United States v. DeKalb County, 729 F.2d 738 (11 th Cir. 1984). Therefore, section 2415(a) is applicable to defendant's counterclaim for unjust enrichment, as the counterclaim is founded upon a contract implied in law. State of Michigan, 851 F.2d at 810.

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3.

Defendant's Counterclaim is Not Subject to the State of Colorado's Statute of Limitations

Under the doctrine of sovereign immunity, the United States, absent its own consent, it not subject to state statutes of limitations. United States v. John Hancock Mutual Insurance Co., 364 U.S. 301, 308 (1960). If federal and state laws are in conflict, the Supremacy Clause of the United States Constitution requires that the federal limitation prevail. King v. United States, 301 F.3d 1270, 1277 (10 th Cir. 2002) (citing United States Constitution, Art. VI, Cl. 2). Here, the federal government has not consented to the State of Colorado's state statute of limitations. Moreover, because Congress has enacted a federal statute of limitations, 28 U.S.C. § 2415(a), which is applicable under the circumstances of this case, that federal statute prevails over the State of Colorado's statute of limitations. King, 301 F.3d at 1277. 4. Defendant's Counterclaim Is Timely under 28 U.S.C. § 2415(a)

Plaintiff contends that defendant's claim for unjust enrichment arose on August 2, 2000, when the EEOC invalidated the settlement agreement. See Objection at 4. She cites no case, statute or regulation, however, to support her contention. Notably, plaintiff does not contend that the claim for unjust enrichment arose at any time prior to August 2, 2000. Assuming arguendo that defendant's claim for unjust enrichment arose on August 2, 2000, defendant's counterclaim is timely under 28 U.S.C. § 2415(a). The counterclaim 9

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was filed within the six-year period permitted by that statute. The period of time between August 2, 2000 ­ when the claim allegedly arose ­ and December 9, 2005 ­ when defendant submitted its proposed Amended Answer to Second Amended Complaint ­ is five years and four months. Therefore, defendant submitted its counterclaim prior to the expiration of the sixyear statute of limitations period, even under plaintiff's assertion that the cause of action for unjust enrichment arose on August 2, 2000. The counterclaim is timely under Section 2415(a), and amendment of defendant's answer to bring this counterclaim would not be futile. B. Defendant Did Not Unduly Delay the Filing of its Counterclaim Plaintiff also contends that defendant's amended answer has been unduly delayed. Objection at 5-6. She argues that leave to amend should be denied for this reason as well. Plaintiff's contention that defendant has engaged in undue delay is the same as asserting that defendant is guilty of laches. See, e.g., Mahn v. Harwood, 112 U.S. 354, 366 (1884) (the question of laches is one of undue delay); In re Bogese, 303 F.3d 1362, 1364 (Fed. Cir. 2002) ("The doctrine of laches [means] undue delay in claiming one's rights"). But the United States is not "subject to the defense of laches in enforcing its rights." United States v. Summerlin, 310 U.S. 414, 416 (1940). See F.D.I.C. v. Hulsey, 22 F.3d 1472, 1490 (10 th Cir. 1994) (citing Summerlin).

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In any event, the defense of laches is simply inapplicable here. Laches is an affirmative defense requiring a showing of (1) lack of diligence by the opponent and (2) prejudice to the movant. See Costello v. United States, 365 U.S. 265, 282 (1961); Roberts v. Morton, 549 F.2d 158, 163 (10 th Cir. 1977). Plaintiff should not be able to defeat defendant's motion to amend on the grounds that defendant has failed to act with diligence given that Congress by statute has authorized a six-year period to assert claims for unjust enrichment. And plaintiff does not argue in her motion that she will be prejudiced if defendant's Amended Answer containing defendant's counterclaim is allowed. C. The U.S. Magistrate Judge Properly Exercised Her Discretion In Granting Defendant's Motion to Amend Rule 15 of the Federal Rules of Civil Procedure provides that a party's request to amend his pleading "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). The matter is committed to the Court's sound discretion. Federal Ins. Co. v. Gates Learjet Corp., 823 F.2d 383, 387 (10 th Cir. 1987). Defendant submits that justice would be served by permitting defendant's counterclaim for unjust enrichment. The counterclaim is timely under Section 2415(a); the counterclaim bears a logical relationship to plaintiff's other claims in this case, insofar as no claims could have proceeded here unless plaintiff had been permitted to withdraw from the April 2, 1997 settlement agreement; and plaintiff does not argue that she would be prejudiced if the

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counterclaim is permitted. This Court in its discretion should permit defendant to amend its answer to bring a counterclaim for unjust enrichment. WHEREFORE, defendant respectfully requests that its Amended Answer be filed with the Court, and that plaintiff's Objection be denied. Dated this 25th day of January, 2006. Respectfully submitted, WILLIAM J. LEONE United States Attorney

s/ Michael C. Johnson MICHAEL C. JOHNSON Assistant United States Attorney 1225 Seventeenth Street, Suite 700 Denver, Colorado 80202 Telephone: (303) 454-0134 FAX: (303) 454-0408 E-mail: [email protected] Counsel for Defendant

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CERTIFICATE OF SERVICE I hereby certify that on this 25 th day of January, 2006, I electronically filed the foregoing document with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: Counsel for Plaintiff: Elizabeth Kapukihilani Pietsch Email: [email protected] Dugan William Edward Bliss Email: [email protected] Sean Robert Gallagher Email: [email protected]

I hereby certify that on this 25 th day of January, 2006, I served the foregoing document via electronic mail on the following non-CM/ECF participant: Agency Counsel: Thomas Kennedy [email protected]

s/ Michael C. Johnson MICHAEL C. JOHNSON Attorney for Defendant United States Attorney's Office 1225 Seventeenth Street, Suite 700 Denver, Colorado 80202 Telephone: (303) 454-0134 FAX: (303) 454-0408 E-mail: [email protected]

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