Brief in “SolarCity” Cash Grant Litigation Provides Insight into Strategy

by Akin Gump Strauss Hauer & Feld LLP
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Covington & Burling’s reply brief to the government’s brief in support of its motion to dismiss provides insight into SolarCity’s strategy.  The complaint appears to be as much about providing SolarCity with leverage in negotiations with the Treasury regarding its pending 1603 Cash Grant applications as it is about recovering the $8 million Cash Grant shortfall referenced in the complaint. 

Covington’s brief is available here.  Here are links to posts about the original complaint and the Government’s motion to dismiss.

The underlying complaint filed in the Court of Federal Claims was on behalf of two special purpose entities affiliated with SolarCity.  Nonetheless, the complaint somewhat oddly included references to issues with the 1603 Cash Grant program that did not directly involve the named plaintiffs.

One of the government’s grounds for dismissal was that the complaint sought relief for parties other than those named in the complaint.  To this, Covington explained why the complaint had referenced these arguably extraneous issues:

  • In order to provide the Court and the Government a complete recitation of relevant facts, the Complaint refers to SolarCity Corporation and its involvement with the Plaintiffs and the Section 1603 Program.  But the Complaint explicitly identifies SolarCity as a ‘non-party,’ and all three components of the Prayer for Relief explicitly seek relief only for the ‘Plaintiffs,’ defined as Sequoia Pacific and Eiger.  (p. 16)
  • The reference to Plaintiffs’ pending grant applications were included only to provide a thorough recitation of the facts, and to ensure that neither the Government nor the Court will be taken by surprise if and when Plaintiffs seek leave to file an amended complaint based upon additional, deficient cash grant awards.  (p. 17)

The government’s other primary ground for dismissal is that the complaint’s discussion of various procedural shortcomings with respect to the Treasury’s implementation of the Cash Grant program suggested that the complaint sought relief for violations of the Administrative Procedure Act (APA).  The fundamental requirement of that act is public notice and comment prior to the creation of administrative rules, and Treasury appears potentially to have not complied with certain of those principles in the issuance of some of the Cash Grant guidance.

The Court of Federal Claims would not have jurisdiction over such an action under the APA, so if the complaint sought such relief at least the pertinent portion of the complaint should be dismissed on jurisdictional grounds.  Covington explained that its clients were not bringing an action under the APA:

  • The Government’s motion seeks to isolate a few paragraphs of the Complaint that describe how Treasury misapplied Section 1603 criteria for determining cash grants, arguing that the Complaint actually seeks an APA review of Treasury’s administration of  the program. (p. 12)
  • It would be surprising for any plaintiff to file a claim in this Court for money damages based upon a money-mandating statute without providing at least some description of the manner in which the Government erred in its application of that statute and thereby paid too little.  (p. 12)

Here are other pertinent excerpts from the brief:

  • Yet despite these concessions, the Government never so much as cites this Court’s express holding that Section 1063 is money-mandating, nor does it ever address the Complaint’s express allegations that Treasury failed to pay the Plaintiffs specific dollar amounts to which they were entitled under the federal statute.  (p. 2)
  • The Government’s argument is premised upon a tortured interpretation of the Complaint that all but ignores the key paragraphs contained therein and entirely misconstrues others.  While the Complaint does describe Treasury’s failure properly to carry out Section 1603 provisions regarding the calculation of cash grants, it does so only to provide context and background for Plaintiffs’ demand for the amounts to which they were rightfully entitled under Section 1063, pursuant to the cash grant applications they made under the federal law.  (pgs. 3-4)
  • The Government’s contention that Plaintiffs’ requested relief “exceeds this Court’s jurisdiction” simply ignores the actual words in the Prayer for Relief.  Paragraph A of the Prayer requests monetary relief measured by the difference between the amounts Plaintiffs received pursuant to their Section 1603 applications and the amounts that they should have received.  Paragraph B requests “such additional monetary relief as is available under applicable law.”  The third and final clause, Paragraph C, requests that the Court “[a]ward Plaintiffs such other and further relief as this Court may deem necessary and proper.”  It is impossible to divine how any of these claims for relief exceed the jurisdiction conferred on this Court by the Tucker Act with respect to money damages claims.  (p. 7)
  • The Complaint does of course explain that Treasury’s calculation of cash grants under Section 1603 was inconsistent with that statute and Congressional intent because these facts establish that Treasury’s calculations were wrong.  Such allegations are entirely appropriate to lay the predicate for claims for monetary relief that are necessarily measured by the difference between what Treasury actually paid and what it should have paid under the correct application of the law.  Thus, the Complaint clearly explains the relevance of this information:  that “[a]s a result of [Treasury’s] . . . misapplications of the Section 1603 Program, Plaintiff have not been paid the cash grant amounts to which they are entitled.”  (p. 12)

It appears that Court of Federal Claims is likely to not grant the government’s motion to dismiss.  Rather, it will require the Plaintiffs and their counsel to narrowly focus the litigation on the $8 million shortfall in Cash Grant proceeds the Plaintiffs seek to recover and to not reference generalized problems with the administration of the Cash Grant program or losses incurred by other industry participants.

If SolarCity suffers other Cash Grant shortfalls, it (or other affiliates) will join the litigation.  SolarCity is likely positioning itself to join this case, rather than filing another case, so that this litigation may be advancing while Treasury evaluates pending Cash Grant applications.  Thus, if and when SolarCity (or other affiliates) join the complaint (assuming the Court permits it to), the case procedurally will be months ahead of where a newly filed case would be.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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