NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2009-5101
PETER KALOS and VERON KALOS,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
.
Peter Kalos and Vernon Kalos, of Broad Run, Virginia, pro se.
Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, for defendant-appellee. With
her on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson,
Director, and Donald E. Kinner, Assistant Director.
Appealed from: United States Court of Federal Claims
Judge Margaret M. Sweeney
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2009-5101
PETER KALOS and VERON KALOS,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
Appeal from the United States Court of Federal Claims in 08-CV-631, Judge Margaret
M. Sweeney.
__________________________
DECIDED: March 4, 2010
__________________________
Before NEWMAN, BRYSON, and PROST, Circuit Judges.
Opinion for the court filed by Circuit Judge PROST. Dissenting opinion filed by Circuit
Judge NEWMAN.
PROST, Circuit Judge.
Peter and Veron Kalos (collectively, “Kalos”) appeal the dismissal of their
amended complaint for lack of subject matter jurisdiction and failure to state a claim
upon which relief can be granted. We affirm.
The following facts are taken from Kalos’s complaint. Because we are reviewing
the dismissal of the complaint under Rule 12(b)(1) and Rule 12(b)(6), we assume that
the complaint’s well-pleaded allegations of fact are true. Bradley v. Chiron Corp., 136
F.3d 1317, 1321 (Fed. Cir. 1998). Our decision does not rely on any of the judicially
noticed facts. 1
Prior to filing this action, a company owned by Kalos, Brickwood Contractors
(“Brickwood”), entered into a contract with the Federal Bureau of Prisons. On behalf of
Brickwood, Kalos obtained a payment and performance bond from a corporation called
Greenwich. The bond named Brickwood as the principal, Greenwich as the surety, and
the United States as the obligee. After the Bureau of Prisons terminated its contract
with Brickwood for default, it sought to collect from Greenwich on the bond. Collection
on the bond was resolved by a settlement agreement between the Bureau of Prisons
and Greenwich, whereby Greenwich agreed to pay the full amount of the bond in full
satisfaction of its obligations. Kalos was not a party to the settlement agreement, which
expressly provided that “[n]othing contained in this Agreement shall be deemed to
affect, impact or modify any or all rights, claims, demands, lawsuits or other actions that
Brickwood [Kalos] or the Government may have against each other.” The agreement
released Greenwich and the Bureau of Prisons from any liability, actions, debts, claims
or demands against each other. It further stated that the agreement did not create “any
third-party beneficiaries.”
After this settlement agreement was executed, Greenwich sought to recover from
Brickwood by foreclosing on the liens burdening Kalos’s property, which secured the
bonds. Kalos subsequently lost title to their real property in Great Falls, Virginia and
Manassas, Virginia. Both before and after losing title to their property, Kalos asked the
1
Accordingly, we need not decide if the trial court erred by relying on these
facts and thus resolving allegedly “disputed facts” against Kalos. See Dissent at 2-3.
2009-5101 2
U.S. Attorney’s Office to confirm that the bonds issued by Greenwich were forgeries and
to initiate criminal proceedings. The U.S. Attorney’s Office confirmed that the bonds
were forgeries, but declined to open a criminal investigation.
Kalos then filed this action in the U.S. Court of Federal Claims. The amended
complaint states two different claims. First, Kalos alleges a taking in violation of the
Fifth Amendment. According to the complaint, “[a]s a direct result of the actions of the
Government, the Plaintiffs [Kalos] lost title to both of their real properties in Great Falls,
Virginia and in Manassas, Virginia.” Specifically, Kalos points to the settlement
agreement between Greenwich and the Bureau of Prisons as preventing them from
obtaining compensation for their lost properties. Second, Kalos alleges that the Bureau
of Prisons illegally exacted $769,998, the amount Greenwich paid to the Bureau of
Prisons pursuant to the settlement agreement. According to Kalos, this settlement
agreement “imposed . . . financial liability on [them] without statutory or regulatory
authority to do so.” Kalos appears to argue that the Bureau of Prisons could not take
any action regarding the bonds because the bonds were counterfeit, and thus entering
into a settlement agreement regarding the bonds violated 18 U.S.C. § 494 and 31
C.F.R. § 223.13(d).
The Court of Federal Claims dismissed Kalos’s takings claim under Rule 12(b)(6)
for failure to state a claim upon which relief could be granted. It found that Kalos had
not—and could not—establish a “government action” that amounted to a compensable
taking of their property interest. The trial court explained that the Bureau of Prison’s
settlement agreement with Greenwich was not a physical invasion or regulatory action
(such as a zoning ordinance) that might qualify as “government action.”
2009-5101 3
The Court of Federal Claims also dismissed Kalos’s illegal exaction claim under
Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter
jurisdiction. It found that Kalos failed to cite any statute or regulation that could provide
a basis for their illegal exaction claim, explaining that it lacked jurisdiction over criminal
matters that might be brought under 18 U.S.C. § 494, and that 31 C.F.R. § 223.10 limits
the surety’s power to underwrite bonds, not the Bureau of Prison’s power to enter into
settlement agreements.
On appeal, Kalos argues that the Court of Federal Claims erred in multiple ways.
We address each of these arguments below.
First, Kalos argues that the trial court’s decision was based on an erroneous
reading of the facts and improperly relied on public records. Even giving the complaint
the liberal construction Kalos is entitled as a pro se litigant, dismissal was still proper.
Despite the dissent’s suggestion to the contrary, this is not a suit on a surety contract,
because the surety bond is not the basis for Kalos’s takings or illegal exaction claims.
Cf. Dissent at 3. Instead, the claims are based, respectively, on Greenwich’s
foreclosure of its (private) lien on Kalos’s properties and on the settlement agreement
between Greenwich and the government. As explained below, however, Kalos has no
standing to sue the government based on either Greenwich’s foreclosure or the
settlement agreement. When a complaint fails to state a cognizable claim, we cannot
adjudicate the case further—we lack authority to remand the case for additional fact
finding or clarification. See Kontrick v. Ryan, 540 U.S. 443, 454-55 (2004); Larson v.
Correct Craft, Inc., 569 F.3d 1319, 1325 (Fed. Cir. 2009).
2009-5101 4
To allege a cognizable taking under the Fifth Amendment, a person suing for the
loss of his property must show that the loss, or “taking,” was the result of government
action. Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206, 1213 (Fed. Cir.
2005). Kalos’s takings claim was properly dismissed because Kalos has not identified a
“government action” entitling them to compensation under the Fifth Amendment.
Huntleigh USA Corp. v. United States, 525 F.3d 1370, 1381-82 (Fed. Cir. 2008); see
also Air Pegasus, 424 F.3d at 1215-16. Kalos’s two properties in Virginia were both
sold to satisfy liens placed on the property by Greenwich, a private corporation, and
purchased by private third parties, not the government. Accordingly, these sales did not
involve a “physical invasion or appropriation” by the government, or a “government
regulation[]” burdening the Kalos’s property. See Palmyra Pac. Seafoods, L.L.C. v.
United States, 561 F.3d 1361, 1366-67 (Fed. Cir. 2009); Belk v. United States, 858 F.2d
706, 709 (Fed. Cir. 1988). Since a showing of “government action” is required, whether
or not Kalos has a claim against Greenwich has no bearing on whether dismissal was
proper.
Similarly, the Court of Federal Claims properly dismissed Kalos’s illegal exaction
claim. As an initial matter, the trial court did not err in dismissing the claim,
notwithstanding Kalos’s attempts to “delete” it by filing a second amended complaint.
Because Kalos had already amended their complaint once, any subsequent
amendment could only be made with the trial court’s permission. Fed. R. Civ. P.
15(a)(2). It was not an abuse of discretion to deny Kalos’s request to amend their
complaint a second time, since the request would have resulted in delay, the
government had already filed its motion to dismiss, and the proposed amendment would
2009-5101 5
not have cured the jurisdictional flaws in the previously-filed complaints. Cultor Corp. v.
A.E. Staley Mfg. Co., 224 F.3d 1328, 1333 (Fed. Cir. 2000) (“Futility of the proposed
amendment is an adequate reason to deny leave to amend.”) Accordingly, the trial
court properly considered the illegal exaction claim in deciding whether to dismiss the
first amended complaint.
As to the substance of the illegal exaction claim, dismissal was proper because
Kalos failed to identify a “statutory power” pursuant to which the $769,998 was exacted.
Norman v. United States, 429 F.3d 1081, 1095-96 (Fed. Cir. 2005). To survive the
government’s motion to dismiss, it was not enough for Kalos to cite 18 U.S.C. § 494 and
31 C.F.R. § 223.13(d), because there is no evidence that the government relied on
either to obtain the $769,998. Id. Even if Kalos were able to identify a permissible
statutory authority, Kalos has still not satisfied the other requirements for making out an
illegal exaction claim: to be entitled to relief, Kalos was required to show that the
$769,998 was “exacted” from them, either “directly or in effect.” Aerolineas Argentinas
v. United States, 77 F.3d 1564, 1573 (Fed. Cir. 1996); see also Norman, 429 F.3d at
1096. Kalos cannot satisfy this requirement because the $769,998 was paid by
Greenwich, not Kalos, pursuant to Greenwich’s settlement with the government. Thus,
this payment cannot be attributed to Kalos, who was not a party to the settlement
agreement or a third-party beneficiary of it.
Finally, Kalos is not entitled to relief based on the other asserted “errors.” Kalos
argues the Court of Federal Claims erred by 1) treating the government’s motion to
dismiss the “complaint” as applying to the “amended complaint”; 2) failing to enter
2009-5101 6
default against the government pursuant to Rule 55(a); and/or 3) denying as moot
Kalos’s request to file a second response to the government’s motion to dismiss.
First, the trial court did not abuse its discretion by construing the government’s
motion to dismiss as applying to the amended complaint, given that the amended
complaint contained the same claims and substantially the same factual allegations as
the original. See Fed. R. Civ. P. 12(a)(4); cf. Easter v. United States, 575 F.3d 1332,
1336 (Fed. Cir. 2009) (examining whether a party had a “reasonable opportunity” to
oppose the motion to dismiss). Similarly, it was not error for the trial court to refuse to
enter default under Rule 55(a), because the government “defend[ed]” by filing a motion
to dismiss. See Fed. R. Civ. P. 55(a), 12(b). Finally, the trial court did not abuse its
discretion by refusing to let Kalos respond a second time to the government’s motion to
dismiss, since Kalos had already responded in December 2008. Cf. Easter, 575 F.3d at
1336-37.
2009-5101 7
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2009-5101
PETER KALOS and VERON KALOS,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
Appeal from the United States Court of Federal Claims in Case No. 08-CV-631, Judge
Margaret M. Sweeney.
NEWMAN, Circuit Judge, dissenting.
This case reaches us with an odd and confused record. Mr. Kalos, proceeding pro
se in the Court of Federal Claims and in this court, alleged by complaint that the United
States, acting through the Bureau of Prisons, received full payment on the performance
bond from the surety, Greenwich Insurance Co. The government appears to agree, for it
states that it has no claim against Kalos or his company, Brickwood Contractors Inc. Yet
Kalos states in his complaint that there was an improper foreclosure on the real property in
Manassas and Great Falls, Virginia that he personally owned, which he had personally
pledged to assure performance of the contract between his company and the Bureau of
Prisons. He states that the property has been taken and that its value of over $4 million is
several times the government’s claim for non-performance. He thus asserted claims for a
Fifth Amendment taking, illegal exaction, and breach of contract. The Court of Federal
Claims dismissed the complaint on the pleadings, going outside of the pleadings and into
an undeveloped record to reach disputed facts, upon which my colleagues hold that Kalos
cannot obtain judicial attention sufficient to explore the irrational consequences of his failed
contract.
The Court of Federal Claims, in its dismissal, took judicial notice of information
outside of the record, such as statements in briefs filed in a bankruptcy proceeding, to
contradict the allegations in Kalos’s complaint. For example, Kalos stated in his complaint
that he authorized a lien of $154,000 on his Virginia property, but the Court of Federal
Claims found, by footnote, that liens of $400,000 and $700,000 were placed against these
properties. Kalos v. United States, 87 Fed. Cl. 230, 232 n.3. Greenwich provided two
bonds, a performance bond and a payment bond. After Brickwood defaulted, Greenwich
paid the full amount of the contract ($769,998), and the settlement agreement between the
Bureau of Prisons and Greenwich stated that the payment is “in full satisfaction of
[Greenwich’s] obligations pursuant to the performance bond.” The settlement agreement,
however, left the payment bond in “full force and effect.” See Amended Compl. ¶¶51-55.
Nothing in the records clarifies whether any claim has been made under the
payment bond. Nonetheless, there was a foreclosure on Kalos’s property that secured
both bonds, which is alleged to be worth more than $4 million and is encumbered by
Greenwich’s liens for $1.1 million. With liens for more than the full amount of the
2009-5101 2
government contract, and property value exceeding the liens, the total loss of the property,
if accurately reported, warrants at least minimal judicial attention.
Kalos alleges there has been a double recovery. Certainly if Greenwich only paid
under the performance bond for $769,998, it should not have recovered the total amount of
the liens or the total value of the property. The government remains silent. While the trial
court criticized Kalos for “fail[ing] to supply supporting affidavits or correspondence” with the
complaint, on a motion for dismissal on the pleadings, the facts as pleaded are accepted,
and summary dismissal, leaving no recourse when injury is apparent, is not the favored
process.
The government contends that it has “suffered no loss on the bond” and attempts to
remove itself from this dispute. The government, however, required these bonds to secure
the government contract. Moreover, surety undertakings for bonds on government
contracts are three-way contracts that include the government. Of course, it is possible
that the factual assertions in the complaint are inaccurate. However, the Court of Federal
Claims left no opportunity for Kalos—the entity who states that he suffered adverse
consequences—to sort out these events.
A claim against the United States arising from a government contract and its
consequences is properly brought in the Court of Federal Claims, whether viewed as
arising under the Contract Disputes Act or the Fifth Amendment. Kalos is entitled to judicial
attention sufficient to resolve the facts that are material to his claim.
2009-5101 3