The opinion of the court was delivered by: Lawrence J. O'Neill United States District Judge
ORDER DENYING DEFENDANT'S SECOND MOTION TO DISMISS FIRST AMENDED COMPLAINT AND GRANTING REQUEST TO STRIKE DAMAGES PRAYER (DOC. 53)
Plaintiff Pinnacle Armor, Inc. ("Pinnacle") produces armor designed to protect buildings, vehicles, and the human body. Among Pinnacle's primary customers are local law enforcement agencies that often utilize a federal subsidy to purchase body armor. Availability of the subsidy is conditioned upon certification that the body armor was manufactured in compliance with standards set by the National Institute of Justice ("NIJ"), an arm of the U.S. Department of Justice ("DOJ"). In its Verified First Amended Complaint ("FAC"), Pinnacle alleged that NIJ's decision to revoke certification for one of Pinnacle's products: (1) violated Pinnacle's procedural due process rights under the Fifth Amendment; and (2) was "arbitrary and capricious" in violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A). Doc. 6.*fn1
On March 11, 2008, the district court dismissed both claims, holding that Pinnacle's interest in NIJ certification is not a protected property right under the due process clause, and that NIJ's certification decision is exempt from review under the APA because the certification process is "committed to agency discretion by law," 5 U.S.C. § 701(a)(2). Doc. 22. Pinnacle appealed. Doc. 24.
The Ninth Circuit affirmed on the Fifth Amendment claim, but reversed and remanded on the APA claim, directing the district court to conduct further proceedings. Doc. 35, filed May 26, 2011, Pinnacle Armor, Inc. v. United States, 648 F.3d 708 (2011). After several continuances and a change of counsel by Pinnacle, Docs. 38, 39, 41, 42-45, 48-51, Defendant, the United States of America, now moves to dismiss the remaining APA claim for lack of jurisdiction pursuant to Fed R. Civ. P. 12(b)(1), Doc. 53. Plaintiff opposes dismissal. Doc. 57. Defendant replied. Doc. 59. The matter was originally set for hearing on July 5, 2012, but the hearing was vacated and the submitted for decision on the papers pursuant to Local Rule 230(g). Doc. 58.
The pre-remand factual history is summarized succinctly in the Ninth Circuit's decision:
As part of the Department of Justice, the NIJ is authorized to "improv[e] Federal, State, and local criminal justice systems and related aspects of the civil justice system [by] identifying programs of proven effectiveness ... or programs which offer a high probability of improving the functioning of the criminal justice system." 42 U.S.C. § 3721. The NIJ, through its Office of Science and Technology ("OST"), establishes and maintains performance standards for bulletproof vests and other law enforcement technologies. 6 U.S.C. § 162(b)(3), (b)(6). The OST is charged with "establish[ing] and maintain [ing] a program to certify, validate, ... or otherwise recognize law enforcement technology products that conform to standards established and maintained by the Office...." Id. § 162(b)(4).
One of the programs the NIJ manages is the Body Armor Compliance Testing Program. Under this program, a manufacturer may submit its body armor to the NIJ for a determination of whether the armor complies with the NIJ's performance standards. If the product satisfies the standards, the NIJ includes it on a list of compliant body armor models. A product reaps a substantial benefit if it is found compliant: When state and local law enforcement agencies purchase body armor listed as "compliant" by the NIJ, the federal government subsidizes up to fifty percent of the purchase. See 42 U.S.C. §§ 3796ll, 3796ll--2.
The NIJ issued compliance standards in 2001. See Nat'l Institute of Justice, U.S. Dept. of Justice, Ballistic Resistance of Personal Body Armor, NIJ Standard-0101.04, Revision A (June 2001) [hereinafter "NIJ Standard-0101.04 "]. After it learned that certain body armor models could wear out prematurely and that its 2001 compliance requirements did not adequately address this concern, the NIJ issued supplemental performance standards for body armor in 2005. See Nat'l Institute of Justice, U.S. Dept. of Justice, NIJ 2005 Interim Requirements for Bullet--Resistant Body Armor (Sept. 26, 2005) [hereinafter "2005 Interim Requirements"], [internet citation omitted]. In order to maintain compliance, the 2005 Interim Requirements require the manufacturers of body armor to submit either "evidence ... that demonstrates to the satisfaction of the NIJ that the model will maintain ballistic performance (consistent with its originally declared threat level) over its declared warranty period," or a "written certification" by a manufacturer's officer stating that the officer believes the model will maintain ballistic performance; that the manufacturer has objective evidence to support that belief; and that the officer agrees to provide the NIJ with the evidence "promptly on demand" by the NIJ. The requirements provide that the NIJ will revoke a model's compliance status "at any time" if the evidence submitted by the manufacturer was "insufficient to demonstrate to the satisfaction of NIJ that the model w[ould] maintain its ballistic performance" over the model's declared warranty period.
Pinnacle manufactures body armor used by state and local government law enforcement agencies. One of its models, patented as "dragon skin," consists of overlapping ceramic discs, which allow the vest to be more flexible than other bulletproof vests. The parties do not dispute that dragon skin met the NIJ's 2001 requirements. See NIJ Standard- 0101.04. The issue here is dragon skin's compliance with the 2005 Interim Requirements. To comply with the 2005 Interim Requirements, Pinnacle's officer issued a written certification declaring that he believed the vests would maintain their ballistic performance over the warranty period, that he had objective evidence to support this belief, and that he would submit the evidence to the NIJ on demand. In December 2006, the NIJ issued a Notice of Compliance to Pinnacle certifying that dragon skin, which had a six-year warranty period, was compliant with the NIJ's 2005 standards. Relying on this notice, Pinnacle spent hundreds of thousands of dollars producing vests for law enforcement agencies.
Subsequently, the NIJ received information from the Department of Defense that questioned the dragon skin model's durability under environmental stressors. The NIJ was particularly concerned about the effects of "temperature extremes and cycling" on the dragon skin model over time. Consistent with the 2005 Interim Requirements, the NIJ asked Pinnacle in June 2007, to provide documentation of the "data or other objective evidence that supports Pinnacle Armor's belief that [the dragon skin] model ... will maintain its ballistic performance (consistent with its originally declared threat level) over its declared warranty period of six years." In response, Pinnacle submitted testimonials of those who wore the dragon skin vest for over one year, photographs of armor panels, and a test report on a vest that had been turned in after four years of service. The NIJ found that this evidence was "insufficient to demonstrate to the satisfaction of NIJ that the model ... will maintain its ballistic performance ... over its declared warranty period." The NIJ stated that as of August 3, 2007, the dragon skin model would no longer be deemed compliant with the NIJ requirements and published statements to that effect. 648 F.3d at 711-14.
Also on August 3, 2007, the NIJ, through DOJ's Office of Justice Programs, issued a press release stating that plaintiff had not provided evidence sufficient to demonstrate to the satisfaction of the NIJ that the Dragon Skin armor would maintain its ballistic performance over its declared 6-year warranty period. FAC ¶ 35; Doc. 2, Ex. T. Pinnacle submitted additional information on several more occasions. Doc. 2 at Ex. N, O & P. After reviewing the additional evidence, NIJ nevertheless concluded that Pinnacle still had not sufficiently demonstrated that the dragon skin model would perform at the same level for six years. FAC ¶¶ 29-30. The NIJ identified several reasons why Pinnacle's evidence was insufficient and invited Pinnacle to provide additional evidence. Doc. 2 at Ex. R; see also Pinnacle Armor, 648 F.3d at 713. Pinnacle declined to submit any further evidence, choosing instead to file this lawsuit in November 2007.
As discussed above, Pinnacle alleged that NIJ's decision to revoke certification for the Pinnacle' product in question: (1) violated its procedural due process rights under the Fifth Amendment; and (2) was "arbitrary and capricious" in violation of the APA, 5 U.S.C. § 706(2)(A). Doc. 6. The district court dismissed both claims. Doc. 22. The Ninth Circuit affirmed on the Fifth Amendment claim, finding that the Due Process Clause does not require that NIJ grant a formal hearing before revoking a finding of compliance with its standards. 648 F.3d at 717. All that is required is "notice and an opportunity for hearing appropriate to the nature of the case." Id (emphasis in original). The Ninth Circuit found NIJ's procedures provided Pinnacle a "full and fair opportunity to be heard on its claims." Id.
On the APA claim, the Ninth Circuit described the district court's reasoning as follows:
The district court's dismissal of the APA claims rested on two alternative grounds. First, the district court held that APA § 701(a)(2) precludes review of the NIJ's decision to issue a Notice of Compliance. That section provides that agency actions are unreviewable when "agency action is committed to agency discretion by law." 5 U.S.C. § 701(a)(2). The district court held § 701(a)(2) precluded review because "the 2005 [I]nterim
[R]equirements vest[ ] NIJ with discretion to remove a bulletproof vest model from NIJ's compliance list without statutory restraint." In the alternative, the district court held that even if § 701(a)(2) did not preclude review, Pinnacle's APA claim cannot succeed on the merits because Pinnacle "ma[de] no attempt to demonstrate that NIJ acted arbitrarily or capriciously," in violation of APA § 706(2)(A).
Id. at 718. As to the finding that judicial review is precluded by § 701(a)(2) (barring judicial review where "agency action is committed to agency discretion by law"), the Ninth Circuit reasoned:
We turn to the statute at issue to determine whether the NIJ was bound by a "meaningful standard against which [we can] judge the agency's exercise of discretion." Heckler [v. Chaney,] 470 U.S [821,] 830 [(1985)]. In this case, the statute tells us that OST, as a part of the NIJ, "shall have the ... dut [y] ... [t]o establish and maintain performance standards ... and test and evaluate law enforcement technologies," as well as "[t]o establish and maintain a program to certify, validate, and mark ... law enforcement technology products that conform to standards established and maintained by [OST]." 6 U.S.C. § 162(b)(3)-(4). Congress left it to the NIJ and OST to establish those standards. Id. § 162(b)(3) .
We may also look to "regulations, established agency policies, or judicial decisions" for a meaningful standard to review. Mendez--Gutierrez v. Ashcroft, 340 F.3d 865, 868 (9th Cir. 2003). In this case, we believe that, together, the 2005 Interim Requirements and the statute supply the standard against which we can judge the agency's decision-making.
[T]he Requirements provide that body armor must conform to the detailed ballistic resistance criteria set out in NIJ Standard--0101.04 over its declared warranty period. Furthermore, the Requirements specify that the NIJ "shall" revoke certification when it determines that the evidence and statements the manufacturer submitted are insufficient. 2005 Interim Requirements at 4. And it is also clear that the overriding purpose of the NIJ's certification program is to protect law enforcement officers. 6 U.S.C. § 162 (describing the mission of OST as to "carry out programs that, through the provision of equipment, training, and technical assistance, improve the safety and effectiveness of law enforcement technology and improve access to such technology by Federal, State, and local law enforcement agencies"). The NIJ recognizes this purpose in the 2005 Interim Requirements' introductory statement, which explains that the purpose of the NIJ's certification program is "to ensure the safety of public safety officers."
Although the Requirements provide that the NIJ determines the "sufficiency" of a manufacturer's evidence and statements, the Requirements do not give the NIJ unbridled discretion. Just because a statute calls on the agency to exercise its "judgment" in making its determination does not necessarily make an agency's action unreviewable. [Citation omitted] Indeed, although 5 U.S.C. § 701(a)(2) insulates from judicial review agency discretion where there is no law to apply, the APA itself commits final agency action to our review for "abuse of discretion." 5 U.S.C. § 706(2)(A); see Heckler, 470 U.S. at 829. Those standards are adequate to allow a court to determine whether the NIJ is doing what it is supposed to be doing: setting out standards and determining whether law enforcement products should be certified under those standards, whatever they may be. See Newman v. Apfel, 223 F.3d 937, 943 (9th Cir. 2000) ("The fact that an agency has broad discretion in choosing whether to act does not establish that the agency may justify its choice on specious grounds. To concede otherwise would be to disregard entirely the value of political accountability, which itself is the very premise of administrative discretion in all its forms.").
Id. at 719-20. The Appeals Court concluded that § 701(a)(2) did not bar judicial review of Plaintiff's APA claim. Id. at 721.
As to the alternative ground for dismissal pursuant to Rule 12(b)(6) because "Pinnacle ma[de] no attempt to demonstrate that the NIJ acted arbitrarily and capriciously," the Ninth Circuit reasoned that Pinnacle was "not required to 'demonstrate' anything in order to survive a Rule 12(b)(6) motion to dismiss." Id. Rather, "it only needs to allege 'sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662 (2009)). Finding that the FAC sufficiently set forth an APA claim because it "alleges that the methods the NIJ uses to test body armor bear no relation to the standard set out in the Requirements-namely, that the armor will maintain its ballistic integrity over the life of the warranty" and further "alleges that the NIJ violated the APA by failing to provide the data upon which revocation of the Notice of Compliance was based," the Ninth Circuit concluded Pinnacle "is entitled to proceed past the motion to dismiss." Id.
C.The "06 Standard" and Mootness on Appeal.
In 2008, during the pendency of the appeal, NIJ published a new set of requirements for the Body Armor Compliance Testing Program ("BACTP"). Id. at 714. The United States argued before the Ninth Circuit that the entire appeal was moot because the 2008 requirements, set forth in NIJ Standard -0101.06 (the "06 ...