[00:00:25] Speaker 01: The next argued case is number 16, 1042, Western States Federal against the Department of Veterans Affairs. [00:00:33] Speaker 01: Mr. Barron. [00:00:35] Speaker 02: Thank you very much, Your Honor. [00:00:38] Speaker 02: Good morning. [00:00:39] Speaker 02: If it please the court, I want to address one issue right off the bat, and that's the standard of review. [00:00:46] Speaker 02: It's strictly an issue of law. [00:00:49] Speaker 02: It's about jurisdiction. [00:00:51] Speaker 02: It should be looked at de novo. [00:00:53] Speaker 03: We're looking at the scope of our prior order, right? [00:00:57] Speaker 02: Scope, yes. [00:00:58] Speaker 03: So we get to determine what the scope of our prior order means. [00:01:01] Speaker 02: Yes. [00:01:04] Speaker 02: But now the review of the CBCA's order of dismissal, the second order of dismissal is reviewed de novo. [00:01:10] Speaker 02: And the only plan I'm trying to make is that the VA has cited cases where it's talking about contract provisions and reimbursement of costs. [00:01:19] Speaker 02: We're not involved with that here. [00:01:20] Speaker 02: It's strictly an issue of law. [00:01:21] Speaker 02: Let me ask you this. [00:01:23] Speaker 03: Our order says what it says, and your view is that because we just vacated and sent it back, you could cure the defect back before the board. [00:01:33] Speaker 03: Could we have written in a way, if we had wanted to, that wouldn't have permitted you to cure the defect? [00:01:41] Speaker 02: As far as retroactive effect, yes, you could have. [00:01:44] Speaker 03: So if hypothetically we had said the last time around, [00:01:48] Speaker 03: You know, we see these issues. [00:01:50] Speaker 03: We agree with the board that you don't have standing because you're not in good standing and can't pursue it as an LLC. [00:01:58] Speaker 03: And so we affirm that part. [00:02:00] Speaker 03: But we think there may be an issue of whether you can have standing as an incorporated association. [00:02:06] Speaker 03: So we remand for the limited purpose of doing that. [00:02:11] Speaker 02: And you're talking about under 17B3A. [00:02:13] Speaker 02: Under Rule 17. [00:02:15] Speaker 03: So we send it back and tell the board, you're affirmed on no standing as an LLC, but look at this alternative legal ground. [00:02:23] Speaker 03: If we did it that explicitly in that way, the board would be correct in saying, we're not going to look at whether you've cured yourself as an LLC, because the only issue before us is whether you were properly an incorporated association. [00:02:40] Speaker 03: I'm not trying to trap you here. [00:02:42] Speaker 03: I'm just worried that if we agree with you, we're limiting our powers on remands and effectively opening up cases to everything when we send them back. [00:02:53] Speaker 03: It may be that we didn't write our order here properly, or it may be that we intended to let you cure on remand. [00:02:59] Speaker 03: But I just want to make sure that the gist of your argument isn't going to limit our authority to do a very limited remand, if we had written that. [00:03:07] Speaker 02: You know, I still think there's an issue of retroactive effect. [00:03:10] Speaker 02: Once the prior order dismissal was vacated, there was no final order. [00:03:15] Speaker 03: OK, but let me ask you this. [00:03:16] Speaker 03: And I know this isn't order, but hypothetically, we said we affirm the conclusion that whatever your company's name lacks standing to pursue this as an LLC. [00:03:28] Speaker 03: That's affirmed. [00:03:29] Speaker 03: That's a final judgment. [00:03:30] Speaker 03: But we vacate and remand for the express and limited purpose of determining whether it has standing [00:03:37] Speaker 03: as an unincorporated association. [00:03:40] Speaker 03: When it goes back, can't we limit the view to that unincorporated association issue? [00:03:46] Speaker 03: And even if you do rescue yourself as an LLC, that issue is a final judgment. [00:03:51] Speaker 03: It's affirmed. [00:03:52] Speaker 03: It's no longer before the court. [00:03:54] Speaker 02: I think there's a way to craft the mandate that comes from this court back to the CBC. [00:03:59] Speaker 03: And it just wasn't, in your view, done here in this case. [00:04:02] Speaker 02: I think in this case, because the order was vacated, there is no final order. [00:04:06] Speaker 02: And that was the primary point made by the VA that the cases that we cited, Chance Enterprises and System Integration, where it talks about retroactive effect, once you've cured the defect, the payment of taxes, you're in good standing. [00:04:21] Speaker 02: And Delaware law is very clear that it's retroactive back. [00:04:25] Speaker 02: It just cures any prior defect. [00:04:27] Speaker 02: So in this particular case, because the mandate was to vacate the prior order, there was no pending final order. [00:04:36] Speaker 02: So the cases of chance and system integration, I think, are right on point. [00:04:43] Speaker 02: But to go to this specific issue that you're addressing, 17B3A, Federal Rules of Civil Procedure, we believe that the exception applies because if the court holds, there is no retroactive effect. [00:04:58] Speaker 03: But we don't have to get there if we determine that we make it everything and you are allowed [00:05:07] Speaker 03: essentially cured your defect because you have it's undisputed you cured your defect in Europe or at least at the time of the this ladder board proceeding was a corporation in good standing. [00:05:18] Speaker 02: That's correct. [00:05:18] Speaker 02: So it's really an alternative approach. [00:05:22] Speaker 02: If you find that there's retroactive effect of good standing, then yes, Western states federal contract we can go forward because under Delaware law it's allowed to maintain its suit. [00:05:35] Speaker 02: If you determine that there's not retroactive effect, so going under that issue, then the exception applies because Western states does not have capacity under Delaware state law. [00:05:50] Speaker 02: And that's exactly what 17B3A says. [00:05:54] Speaker 02: We've cited a number of cases. [00:05:55] Speaker 02: I'm going to run through just a couple of them because in the VA's brief, they try to distinguish these cases, but there's a multitude of cases. [00:06:04] Speaker 02: that hold that one, an LLC is an unincorporated association, and two, that if it's pursuing a substantive right under US law, that it's permitted to go forward and prosecute that action, even if state law would not permit it. [00:06:20] Speaker 02: So Malibu media, Ohio law, wouldn't permit it to go forward. [00:06:25] Speaker 02: The LLC, because it wasn't registered as a foreign LLC, and the court held it's pursuing a substantive right, it can go forward. [00:06:34] Speaker 02: The Malibu media case distinguished alpha waste systems, and there they held it was an LLC, was an unincorporated association. [00:06:43] Speaker 02: But because all the claims were state law claims, it was still dismissed. [00:06:48] Speaker 02: But that does not negate at least the holding that the LLC was an unincorporated association. [00:06:56] Speaker 02: There's Zufa V. Thomas, that's a district of Maryland, 2012. [00:07:01] Speaker 02: Maryland law said you had to register to do business in the state. [00:07:05] Speaker 02: There they were suing the anti-piracy and copyright claim. [00:07:09] Speaker 02: It was a federal claim. [00:07:11] Speaker 02: And the court said, as planned as an LLC, the court need not address whether it has capacity to pursue under Maryland law. [00:07:18] Speaker 02: It must only consider whether it has sued to enforce the substantive right existing under federal law. [00:07:25] Speaker 01: Well, let's assume for the few minutes of this oral argument that all of these rulings are resolved in the direction most favorable to your client in order to proceed. [00:07:38] Speaker 01: The government nonetheless argues that in that case you have other problems, and particularly they point out all of the various issues of failure to prosecute and so on. [00:07:52] Speaker 01: helpful, at least to me, if you would comment on whether you think those issues are before us and what the response might be. [00:08:01] Speaker 02: The answer is no. [00:08:04] Speaker 02: The basis for the initial dismissal was the failure to pay the taxes of being good standing. [00:08:10] Speaker 02: There were certainly a number of directives and orders from the CBCA. [00:08:15] Speaker 02: Before the first dismissal order, pay your taxes. [00:08:18] Speaker 02: The taxes were not paid. [00:08:20] Speaker 02: There was a dismissal. [00:08:21] Speaker 02: But that dismissal has been vacated. [00:08:25] Speaker 02: Again, we filed a motion to reconsider. [00:08:28] Speaker 02: And the court denied it because it held, even though the taxes were paid, that wasn't a basis for reconsideration of the rules 26A and 27A. [00:08:37] Speaker 02: But again, because the initial dismissal order was vacated, those prior orders are not in effect. [00:08:44] Speaker 02: And the motion for reconsideration is irrelevant. [00:08:47] Speaker 02: Because now we're back to a fresh slate with a vacated order. [00:08:51] Speaker 02: And the question now is, does this LLC, with no capacity to sue under Delaware law, again, if you determine that there is no retroactive effect, then it should be permitted to pursue the substantive claim under federal law, which is the Contract Disputes Act, its claims against the Veterans Administration. [00:09:11] Speaker 01: And what happens to these defenses? [00:09:14] Speaker 01: You think that they're just off the table? [00:09:17] Speaker 02: You mean as far as the court's prior directives to pay the taxes? [00:09:21] Speaker 01: No. [00:09:21] Speaker 01: The only argument on the merits, which has been raised, as I recall, by the government, is that there was a failure to prosecute. [00:09:32] Speaker 02: No. [00:09:33] Speaker 02: It wasn't a failure to prosecute. [00:09:35] Speaker 02: It was a failure to pay the taxes that was the basis for the initial dismissal. [00:09:40] Speaker 01: And they also point to various missed deadlines in the course of the proposal [00:09:47] Speaker 01: to cure these defects? [00:09:52] Speaker 02: One point is that case initially was filed by my client alone, Western States Federal Contracting, without an attorney. [00:09:59] Speaker 02: We'd actually filed a separate case in the court of claims that didn't know he filed the suit. [00:10:05] Speaker 02: But irrespective of that, the basis for the initial dismissal order has been vacated. [00:10:12] Speaker 02: So all of those rulings and what we've said in our motion to reconsider [00:10:18] Speaker 02: that now that there's counsel that's available, we will respond to inquiries and all the interrogatories, requests for production, whatever was propounded. [00:10:28] Speaker 02: But that's, again, not the issue we're looking at, because the prior dismissal order was vacated. [00:10:35] Speaker 02: It's a nullity. [00:10:38] Speaker 03: What's the difference to that Court of Federal Claims case? [00:10:41] Speaker 03: The Court of Federal Claims case... We ended dismissing it because it's either or. [00:10:45] Speaker 02: You filed in the board first. [00:10:47] Speaker 02: The board was filed first. [00:10:48] Speaker 02: That's correct. [00:10:49] Speaker 02: And unbeknownst to the attorneys, it was, I can say, not a smart thing to do. [00:10:54] Speaker 02: But we pursued it in that fashion. [00:10:58] Speaker 02: I want to go through one more point. [00:10:59] Speaker 02: I do want to save time for rebuttal. [00:11:01] Speaker 02: The Lundquist case. [00:11:05] Speaker 02: There, the School of Medicine did have the power to sue and be sued, but only by the Board of Regents. [00:11:13] Speaker 02: So with the Lundquist case held, [00:11:16] Speaker 02: is there's a more basic reason the exception in 17B3A doesn't apply. [00:11:20] Speaker 02: And that is because the School of Medicine did have capacity to sue or be sued, but it had to be by the Board of Regents. [00:11:28] Speaker 02: The plaintiff had just sued the wrong party. [00:11:30] Speaker 02: So the board mistakenly, I believe, said the exception applies only when it, being the LLC, has absolutely no right under the law of the state where the court is located. [00:11:44] Speaker 02: And that's not what the cases hold. [00:11:47] Speaker 02: It's not that there's absolutely no right to sue. [00:11:51] Speaker 02: It's that this particular LLC did not have capacity to sue under a particular state's law. [00:11:58] Speaker 02: So we believe that the board got this improperly. [00:12:01] Speaker 02: The Lundquist case was read improperly. [00:12:04] Speaker 02: And even the Lundquist case said why the exception didn't apply, because the plaintiff sued the wrong party. [00:12:12] Speaker 02: I'd like to save my time, Your Honors. [00:12:13] Speaker 01: OK, we'll see if we have time for some respect. [00:12:30] Speaker 00: Your Honor, may it please the Court? [00:12:31] Speaker 00: The Court should affirm the Board's decision because the Board applied or answered the narrow question that the Court asked it to answer in its remand and appropriately concluded based upon the text of Federal Rule 17B3A that Western states would not have possessed standing at the time that its appeal was initially dismissed because it had [00:12:53] Speaker 00: It was not an unincorporated association, as that is understood commonly under federal case law. [00:13:00] Speaker 00: And two, even if it could be considered an unincorporated association, in accordance with the plain language of the rule, it did not have no such, which requires that it have no such capacity under that state's law. [00:13:13] Speaker 00: That was not the case. [00:13:14] Speaker 01: But, General, were laws explicit that this could be cured retroactively? [00:13:21] Speaker 00: Your Honor. [00:13:23] Speaker 00: In terms of the question of retroactivity, we understood the purpose, the reason we initially asked for the remand was because when the case was initially before the board, the VA requested dismissal citing the law of corporations. [00:13:38] Speaker 00: And the board never considered whether the fact that it was a limited liability company would make a difference in terms of capacity. [00:13:46] Speaker 00: And so the appeal that was, that it had never considered the law applicable to limited liability companies. [00:13:52] Speaker 00: As it came up on appeal, it looked to us like that 17B3A might make a difference. [00:13:58] Speaker 03: At that time, we knew... So you asked for a limited remand. [00:14:02] Speaker 00: Yes, Your Honor. [00:14:03] Speaker 03: But you didn't get a limited remand. [00:14:05] Speaker 00: Your Honor, we understood the court's remand at page 68 to say... 68 at a joint appendix. [00:14:15] Speaker 00: We explained to the court the situation. [00:14:17] Speaker 00: that the board had not considered this particular provision of law? [00:14:22] Speaker 03: Sure, I get that. [00:14:22] Speaker 03: I mean, maybe the problem is you weren't specific enough in what you asked for, or maybe we just didn't give it to you. [00:14:28] Speaker 03: But I mean, the portion of the order that's relevant is the CBCA's decision is vacated, and it's remanded for additional proceedings consistent. [00:14:39] Speaker 03: It doesn't say the CBCA's decision is affirmed with respect to the no standing, [00:14:46] Speaker 03: remanded for the limited purposes of determining standing under this alternative theory? [00:14:53] Speaker 00: Well, Your Honor, the case law says that the court interpreting, which is de novo, in interpreting the scope of the remand, that it looks to the spirit of the remand and also the opinion. [00:15:04] Speaker 00: And the opinion says the CBCA did not consider whether Western had standing under federal rule, civil procedure 17B3A, as an unincorporated association. [00:15:15] Speaker 00: And that was consistent for what we had asked for in the order, which our initial proposed order was at the Joint Appendix 260, which was that the court addressed the issue raised by Western states, whether Federal Rule of Civil Procedure 17b3a permitted Western states to file an appeal before the CBCA to enforce a substantive right existing under the United States Constitution or laws, regardless of a lack of capacity. [00:15:42] Speaker 00: Certainly, at that time, there would have been no purpose to asking for the remit. [00:15:47] Speaker 00: Sure. [00:15:47] Speaker 03: I mean, the problem is we didn't assign your proposed order. [00:15:51] Speaker 03: Your proposed order seems to do exactly what you're saying we should do, and to be limited. [00:15:59] Speaker 03: But I don't see our order as being that narrow. [00:16:07] Speaker 00: Well, Your Honor, then there seems to be no purpose for why the court would have said whether Western State had standing under federal rule of civil procedure 17B3A. [00:16:16] Speaker 00: It seems like the court understood what we were asking it to do and did, looking at least at the opinion, did ask that. [00:16:25] Speaker 00: And that's certainly how the board understood it as well. [00:16:31] Speaker 00: In terms of the nature, the- Let me ask you this. [00:16:35] Speaker 03: I mean, this may be just unfortunate when we wrote the order. [00:16:38] Speaker 03: We may have actually intended to be prouder. [00:16:40] Speaker 03: I mean, I think we have to read it on its face. [00:16:42] Speaker 03: But if we determine that it doesn't foreclose this correction on remand or the reestablishment of good standing on remand, [00:16:54] Speaker 03: Then we don't have to reach the association issue, do we? [00:16:57] Speaker 00: No. [00:16:57] Speaker 00: I mean, unless they've fallen out of good standing. [00:17:00] Speaker 03: Because you agree that they reestablish good standing. [00:17:03] Speaker 00: As far as we know, as of April 17, 2015, they at least said in the remand proceeding that they had established good standing. [00:17:12] Speaker 00: And so I don't know what's happened after that. [00:17:14] Speaker 00: But it would appear they had reestablished their good standing. [00:17:21] Speaker 00: Your Honor, in terms of the actual issue, the court did appropriately read the text of federal rule 17B3A. [00:17:31] Speaker 00: The requirements, they applied the definition of an unincorporated association as established under a federal case law, looking at what an unincorporated association is, and then also said even if they could be considered an unincorporated association, it would have to be with no such capacity under that state's law. [00:17:49] Speaker 00: And applying the plain language of the rule, the court held that Western states did not meet those requirements at that time. [00:17:59] Speaker 00: Again, this was not a company that didn't have a shot. [00:18:02] Speaker 00: This was intended to address a narrow question. [00:18:04] Speaker 00: As the court has recognized, they had over 10 months [00:18:07] Speaker 00: when this matter was initially proceeding before the board to have cured this. [00:18:12] Speaker 00: This was, just given the context, intended to give them the benefit of the doubt on this narrow question because the VA had cited the incorrect law before the civilian board. [00:18:24] Speaker 00: If the court has no further questions, you respectfully request that the court affirm the board's decision. [00:18:31] Speaker 01: Thank you, Ms. [00:18:31] Speaker 01: Speck. [00:18:32] Speaker 01: Thank you, Your Honor. [00:18:34] Speaker 02: A couple of points. [00:18:36] Speaker 02: One, the definition of LLC that was applied. [00:18:39] Speaker 03: Let me ask you this. [00:18:41] Speaker 03: I mean, I think our order is not altogether clear, but I think it's pretty easy to read it more broadly and not as limited as the government would like. [00:18:51] Speaker 03: But doesn't that, I mean, that helps you in your case, but doesn't that provide kind of a disincentive to the government in the future to agree to revance to resolve issues that weren't resolved? [00:19:03] Speaker 03: Because if we say, look, this order opens up everything, even though the government only agreed to limit it for this, to remand for this limited purpose, the government's just going to stop agreeing to joint remands altogether. [00:19:18] Speaker 03: And they're going to make you and the court go through the process of considering the case on the merits and then remanding. [00:19:24] Speaker 03: And if that had happened here, we might have affirmed the decision as to lack of standing as an LLC. [00:19:30] Speaker 03: but vacated and remanded for only that limited purpose. [00:19:34] Speaker 03: And so it would have gotten a clearer order. [00:19:36] Speaker 03: And so I understand your arguments here. [00:19:38] Speaker 03: And maybe this is something to deal with in future cases, or maybe we just need to write better orders. [00:19:44] Speaker 03: But it does seem to me that if we agree with you that this order, in response to the government's motion, which was intended to be very limited, opens up the whole case, then the government's never going to file these motions ever again. [00:19:57] Speaker 02: I think a couple of points. [00:20:00] Speaker 02: The CBCA's initial dismissal order was just wrong. [00:20:05] Speaker 02: It was decided on 17B2 for corporations. [00:20:09] Speaker 03: Well, that's not answering my question. [00:20:11] Speaker 03: I mean, they filed an unopposed, I think you, was it a joint motion, or was it an unopposed motion to read it? [00:20:17] Speaker 02: It was with specific consent with Ms. [00:20:18] Speaker 02: Speck. [00:20:19] Speaker 02: We talked about it. [00:20:19] Speaker 02: We agreed to. [00:20:20] Speaker 03: So you all agreed what the purpose of the motion was. [00:20:23] Speaker 03: And now, because we had, and if we had written it, if we had signed the order that they proposed, I think you'd be out. [00:20:31] Speaker 03: But because we wrote a different order than the one you agreed to, [00:20:35] Speaker 03: you have a chance to come back. [00:20:37] Speaker 03: And I understand. [00:20:38] Speaker 03: I mean, you're arguing for your client's stay in court, and perhaps they should get it. [00:20:42] Speaker 03: But the board also has its right to insist on following its rules. [00:20:47] Speaker 03: And if you don't, after several requests established that you're in good standing, I think they would be entitled to dismiss it. [00:20:53] Speaker 03: So it troubles me that we're going possibly to let you have another shot after multiple attempts [00:21:02] Speaker 03: and failures to reestablish good standing just because we wrote the order badly. [00:21:07] Speaker 02: And to address it in the future, I think the orders can be more carefully drafted. [00:21:12] Speaker 02: So it would take care of future issues and the concerns I think you're raising. [00:21:15] Speaker 02: But the other issue is, again, that would only address the retroactivity issue. [00:21:23] Speaker 02: You would still have the 17B3A issue, even if it was a straight appeal on a remand. [00:21:30] Speaker 02: So again, there are alternative issues. [00:21:32] Speaker 02: I think the concern you're raising can be addressed. [00:21:36] Speaker 02: But in this particular case, there was a vacating of the order to start things new. [00:21:41] Speaker 02: And as far as equity goes, there was no attorney. [00:21:45] Speaker 02: And I was surprised as hell when I found out that there was a dismissal of another case I didn't know about and I wasn't told about by the VA, even though they knew we were pursuing another case. [00:21:55] Speaker 02: So that was strange for me. [00:21:59] Speaker 02: As far as the definition that the CBCA used for defining LLCs, they got a quote out of a couple of Ninth Circuit cases that required LLCs to not have a charter, to have to be two or more people as part of an association. [00:22:14] Speaker 02: There is absolutely no case I've found that has held an LLC is not an unincorporated association because it had a charter. [00:22:25] Speaker 02: And we've decided a multitude of cases that an LLC is an unincorporated association. [00:22:31] Speaker 02: And again, if you hold that there's no retroactivity, then Western states have no capacity to sue under Delaware law, which makes the exception applicable, because they're pursuing the substantive claim under the contract disputes act. [00:22:49] Speaker 02: Does the court have any questions? [00:22:52] Speaker 01: Any more questions? [00:22:54] Speaker 01: Thank you very much.