Citations
- 711 F. Supp. 2d 697
Full opinion text
MEMORANDUM AND ORDER
KEITH P. ELLISON, District Judge.
Pending before the Court are the parties’ Cross Motions for Summary Judgment. After considering the relevant law and the arguments presented in briefing and at a hearing on the pending motions, the Court finds that Plaintiffs’ Motion for Partial Summary Judgment, Docket No. 88, should be GRANTED IN PART because Defendants’ determination that certain bonds were breached was arbitrary and capricious. These bond breach determinations are therefore REMANDED to the Agency to take action not inconsistent with this Order. Plaintiffs’ Motion is also GRANTED IN PART as to certain bonds that were settled; Defendants cannot, therefore, prevail on their counterclaim with regard to these bonds.
Defendants’ Motion, Docket No. 86, is GRANTED IN PART because Defendants’ determination that certain bonds were breached was not arbitrary and capricious. Payment is therefore due on these bonds in accordance with the terms of the Alternative Dispute Resolution Agreed Framework, Docket No. 27.
The Court further finds that certain bonds that were cancelled are now MOOT.
I. BACKGROUND
A. Procedural Posture
This lawsuit involves a bitter dispute between Safety National Casualty Corporation (Safety National), a surety company authorized by the Department of Treasury to issue immigration delivery bonds, AAA Bonding Agency, Inc. (AAA), Safety National’s authorized agent, and the Department of Homeland Security (DHS), regarding more than 1400 immigration bond breach determinations. An alien may use an immigration delivery bond to procure his release from the custody of DHS’s Bureau of Immigration and Customs Enforcement (ICE) pending the outcome of deportation proceedings against him. As discussed below, an immigration delivery bond is a contract, akin to a bail bond, between Safety National — acting through its agent AAA — and DHS.
Plaintiffs contend that DHS has failed to follow the terms of the bond contract and the relevant regulations and statutes when determining that the immigration bonds at issue were breached. Specifically, Plaintiffs claim that DHS has demanded payment of bonds that were not actually breached or to which they have asserted valid defenses, and that DHS has refused to comply with valid requests for information made pursuant to the Freedom of Information Act (FOIA). Plaintiffs’ Complaint sought declaratory and injunctive relief, including offsets and credits, for amounts due under the breached immigration bonds. Plaintiffs also pled a claim under the Freedom of Information Act, 5 U.S.C. § 552, demanding documents they had requested from DHS regarding the bonds at issue. Defendants counterclaimed against Plaintiffs for $9,255,750 in penal amounts plus interest, penalties and handling charges for outstanding breached bonds. Defendants also filed a motion to dismiss all counts except for those claims brought under the Administrative Procedures Act, 5 U.S.C. § 701 et seq. (APA).
Shortly after this lawsuit was filed, DHS informed Plaintiffs of its decision to unilaterally prohibit Safety National from writing any further immigration bonds. The Court subsequently enjoined DHS from refusing to accept bonds issued by Safety National, finding, inter alia, that Safety National had established a substantial likelihood of prevailing on the merits of its claim that DHS lacked inherent authority to refuse all bonds issued by a particular surety and on its due process claims. (Docket No. 35.)
The parties subsequently entered into an Agreed Framework for Alternative Dispute Resolution (ADR Agreement) that was approved by the Court on September 14, 2005. (Docket No. 27.) Pursuant to the ADR Agreement, which was prepared by Defendants, parties agreed to jointly review 50 bond breach determinations — 25 selected by Plaintiffs, and 25 selected by Defendants. Defendants agreed to produce a copy of the full Alien file (“A-file”) to Plaintiffs for each of these 50 bonds “exclusive of any privileged or otherwise protected documents.” The parties also agreed to “review the 50 files produced and identify any and all potential defenses to payment found in the selected files” and to “compile a list of all such potential defenses found in those files.” The parties were then to agree to a “general description or brief statement of facts that illustrates the purported defense,” and mutually confer and decide whether any of the 50 bond determinations should be rescinded and/or the bond cancelled or whether the breach determination should stand. Plaintiffs agreed to immediately pay the outstanding debt owing from a determination that a selected breach should stand. The ADR Agreement concluded:
Any selected breach determinations as to which the parties cannot agree whether there exists a valid defense to payment will be presented to the Court for resolution, with a copy of the corresponding file produced to Plaintiffs and the general description or statement of facts for the purported defense, as cross motions for summary judgment or using another mutually agreed-upon method. The Court’s ruling on any such determinations shall be binding only with regard to the rescission or payment of the selected determinations.
The Court also agreed to the Parties’ joint request that it refrain from deciding Defendants’ pending Motion to Dismiss until the conclusion of the ADR proceedings. The Motion to Dismiss was denied without prejudice to refiling “at the conclusion of those proceedings.” (Doc. No. 37.)
Any hope that the ADR Agreement might substantially assist the parties in resolving them differences was dampened when parties later became engaged in a protracted battle over Defendants’ refusal to release more than 2,000 pages of documents related to the 50 bonds based on claims of privilege. The Court compelled the production of those documents over the protest of Defendants. Defendants sought mandamus as to that decision, and the Fifth Circuit ordered the Court to review the documents in camera to determine whether any were protected by the law enforcement privilege. The parties, however, never asked the Court to do so. A year after the Court approved the ADR Agreement, parties entered into an Agreed Protective Order and Defendants finally produced the remaining redacted documents to Plaintiffs. The parties then agreed to a stipulated Joint Statement of Facts (JSOF) for each of the 50 bond breach determinations and compiled a Joint Appendix of the documents referenced in the JSOF. Plaintiffs also identified thirteen defenses they claim are applicable to one or more of the 50 bonds and provided a list of those defenses to Defendants.
The ADR process had some limited success. Defendants agreed to cancel six of the bond breach determinations, and Plaintiffs now concede that one of the bonds was properly declared breached. Of the remaining 43 bonds, DHS conceded that two invoices were not enforceable, and remanded those breach determinations to the agency for further proceedings, leaving 41 bond breach determinations for the Court to consider.
As agreed, Parties have provided the JSOF and the Joint Appendix to the Court, subject to the parties’ “right to object to the relevance or admissibility of any document included herein.” (Doc. No. 83.) The Court is therefore prepared to rule on the remaining 41 bond breach determinations.
B. Relevant Statutory and Regulatory Background
The Bureau of Immigration and Customs Enforcement (ICE) is responsible for the apprehension and detention of inadmissible and deportable aliens. 8 U.S.C. § 1103(a); 8 C.F.R. Part 236. An alien detained by ICE may be released from custody during removal proceedings under certain circumstances. 8 C.F.R. § 236.1(e). The Secretary of Homeland Security is authorized to “prescribe such forms of bond” as he deems necessary to carry out his authority. 8 U.S.C. § 1103(a)(3).
An alien may post a cash or surety bond for his release from custody on form 1-352 (the Bond Contract). 8 C.F.R. § 103.6. Given the exceptionally poor draftsmanship reflected in this document, it is perhaps unsurprising that its requirements and conditions are subject to dispute. The delivery bond is issued to guarantee the appearance of an alien for deportation and at hearings in exclusion proceedings. According to the Bond Contract, “[a] delivery bond is breached when in response to a timely demand, the obligor either [sic] fails to produce the alien at the location specified in that demand.” 1-352, General Terms and Conditions. The Bond Contract further specifies that the bond obligation is terminated if the obligor produces or causes the alien to be produced as specified in the appearance notice “upon each and every written request until exclusion/deportation/removal proceedings” are terminated, if the alien is accepted by ICE for detention or deportation/removal, or if the bond is “otherwise cancelled.” I-352(G)(1). The General Terms and Conditions section of the 1-352 lists a number of specific events that lead to automatic cancellation of a bond if they occur prior to the date of the breach. “[0]ther circumstances as provided by statute or regulation” are also listed as a reason for cancellation of a bond. Id. If the obligor “fails to surrender the alien in response to a timely demand while the bond remains in effect, the full amount of the bond ... becomes due and payable.” I-352(G)(1).
The relevant regulations clarify that a bond is breached “when there has been a substantial violation of the stipulated conditions.” 8 C.F.R. § 103.6(e). “Substantial performance of all conditions imposed by the terms of a bond shall release the obligor from liability.” 8 C.F.R. § 103.6(c)(3).
Notice of a demand to surrender an alien is sent to the bonding company on an 1-340 “Notice to Deliver Alien” form, which sets forth the date, time and place the alien needs to appear. (See, e.g., Jt. Appx. 0003.) If the alien fails to appear, and the ICE Field Office Director finds a substantial violation of the terms of the bond has occurred, the bond is deemed breached. DHS must send notice of the breach and the reasons for the breach to the surety, which is usually done on a Form 1-323. 8 C.F.R. § 103.6(e) (“The district director having custody of the file ... shall determine whether the bond shall be declared breached or cancelled and shall notify the obligor on Form 1-323 or Form 1-391 of the decision, and, if declared breached, of the reasons therefor, and of the right to appeal ....”); 1-352, General Terms and Conditions.
The surety has 30 days to file an administrative appeal or motion for reconsideration of the breach. 1-352, General Terms and Conditions; 8 C.F.R. § 103.5, 8 C.F.R. § 103.3(a)(2)®. The parties agree that the surety is not required by statute or regulation to exhaust either of these remedies. (See Defs.’ Mot. Summ. J. 6.) The surety may also file a motion to reopen. 8 C.F.R. § 103.5.
“A final determination that a bond has been breached creates a claim in favor of the United States .... ” 8 C.F.R. § 103.6(e). “If payment is not made within 30 days of demand for payment, “interest, penalty, and handling charges” accrue from the date of the first demand, and will be payable as damages.... ” 1-352, General Terms and Conditions.
II. JURISDICTION
Before it can consider the parties’ arguments about the contested bond breaches, the Court must clarify the basis for its jurisdiction and the applicable standard of review. As explained above, the Court is currently reviewing Defendants’ decision to breach 41 bonds that were identified as part of the ADR Agreement in this case. The Court agrees with Defendants that it has jurisdiction to consider Plaintiffs’ request for a declaratory judgment regarding Defendants’ decision to breach these bonds under 28 U.S.C. § 1331 and pursuant to the Administrative Procedures Act, 5 U.S.C. § 704(APA) (“Agency action made reviewable by statute and final agency action for which there is no adequate remedy in a court are subject to judicial review.”). Section 702 of the APA provides a clear waiver of sovereign immunity. 5 U.S.C. § 702; see also Stockman v. Federal Election Com’n, 138 F.3d 144. 151 n. 3 (5th Cir.1998).
The Court also has jurisdiction to consider Defendants’ counterclaim under 28 U.S.C. § 1345. By bringing this counterclaim, Defendants have waived sovereign immunity as to certain claims by Plaintiffs, see Frederick v. United States, 386 F.2d 481, 488 (5th Cir.1967) (noting that when the sovereign sues, it waives immunity as to certain claims, but not to “claims of a different form or nature than that sought by it as plaintiff’), and Plaintiffs must be allowed to present defenses to the counterclaim. The Court believes that Defendant’s counterclaim confers jurisdiction on the Court to entertain Plaintiffs’ argument that certain bonds were settled. See discussion infra Part VI(G). The Court is otherwise convinced, however, that the proper defense to Defendants’ claim to enforce the Agency’s breach decision is that the Agency’s breach decision is unenforceable because it was arbitrary and capricious. This is precisely the defense that Plaintiffs asserted in their Answer. (Doc. No. 28.)
III. SUMMARY JUDGMENT STANDARD
A motion for summary judgment under Federal Rule of Civil Procedure 56 requires the Court to determine whether the moving party is entitled to judgment as a matter of law based on the evidence thus far presented. Fed. R. Civ. P. 56(c). Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Kee v. City of Rowlett, 247 F.3d 206, 210 (5th Cir.2001) (quotations omitted). A genuine issue of material fact exists if a reasonable jury could enter a verdict for the non-moving party. Crawford v. Formosa Plastics Corp., 234 F.3d 899, 902 (5th Cir.2000). The Court views all evidence in the light most favorable to the non-moving party and draws all reasonable inferences in that party’s favor. Id. Conclusory allegations, unsubstantiated assertions, and unsupported speculation are not competent summary judgment evidence. See, e.g., Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir.1996); see also Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (noting that a non-movant’s burden is “not satisfied with ‘some metaphysical doubt as to the material facts.’ ” (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986))). Cross motions for summary judgment do not alter the basic Rule 56 standard; instead the Court must determine whether either of the parties deserves judgment.
IV. STANDARD AND SCOPE OF REVIEW
The Court will review the disputed bond breach determinations under the arbitrary and capricious standard set forth in Section 706 of the APA. 5 U.S.C. § 706(2)(A). The Court will limit its review to the administrative record, but finds that Plaintiffs did not waive arguments they did not raise during their administrative appeals.
A. Defendants did not stipulate to de novo review.
Plaintiffs maintain that the parties stipulated in the ADR Agreement that the Court would review the contested bond breach determinations de novo. Plaintiffs point out that, pursuant to the ADR Agreement, Defendants produced to the Court a copy of the full A-file and a joint statement of facts for each purported defense, not just the record before the Agency at the time of the bond breach determination. Defendants, on the other hand, argue that they did not intend to stipulate to de novo review in the ADR Agreement. Defendants further contend that any such stipulation would be a nullity because parties may not stipulate to a legal standard.
It is not clear whether an agency can stipulate to de novo review of its own decisions in an APA case. Defendants are correct that parties generally may not stipulate to the legal effect of admitted facts, see, e.g., Humble Oil & Refining Co. v. Sun Oil Co., 191 F.2d 705, 714 (5th Cir. 1951) (citing Swift & Co. v. Hocking Valley Ry. Co., 243 U.S. 281, 37 S.Ct. 287, 61 L.Ed. 722 (1917)). Courts have reached different conclusions, however, as to whether an agency may allow a court to review its own action de novo. See Asarco, Inc. v. EPA, 616 F.2d 1153, 1156 (9th Cir.1980) (“Courts have apparently split over the issue whether an agency can waive the requirement that a district court must not conduct a de novo review of agency adjudicatory action.”) (comparing Cooperative Services, Inc. v. HUD, 562 F.2d 1292, 1295 (D.C.Cir.1977) with Independent Meat Packers Ass’n v. Butz, 526 F.2d 228 (8th Cir.1975)).
Even if an agency could stipulate to a less deferential standard of review, however, it is not clear that Defendants intended to do so in this case. The ADR Agreement does not explicitly state that the parties stipulated to de novo review. Defendants did agree to provide full copies of the A-files related to each of the 50 breach determinations to the Court, and those files admittedly contain information that was not part of the administrative record. Defendants maintained at a hearing on the pending motions that they agreed to do so at Plaintiffs’ insistence and in the hopes of resolving Plaintiffs’ claims through the ADR process, not because they thought that the Court could properly consider the records when reviewing any contested bond breaches. Furthermore, when the parties provided the Joint Appendix to the Court, they specifically reserved the right to object to the relevance or admissibility of any of the documents. Finally, Plaintiffs themselves acknowledge that it is sometimes possible for a Court to review documents outside of the administrative record even under arbitrary and capricious review. Thus, the fact that parties submitted documents outside of the record to the Court does not compel the conclusion that Defendants agreed to de novo review of the bond breach determinations.
Transcripts of hearings leading up to the ADR Agreement do not provide further clarity. Defendants initially told the Court that they had proposed the ADR framework to “save both the plaintiff and the government enormous amounts of time and money” and to avoid “full blown discovery” in 1400 separate cases. (Sept. 6, 2005 Tr. at 22). Defendants also explained:
We have offered in our ADR proposal to give them a copy of the record of proceedings, which is the full copy of the record that was before the Administrative Appeals Office when they considered the bond breached determinations on appeal, as well as any additional information that may not have been a part of the record of proceedings that ... would be available under a FOIA request had one been presented. But to do so not on 1400 bonds at once, which would be extremely unmanageable for the government, but to do so on a more discrete basis [inaudible] and some subset of the 1400 bonds that we can separate by issue to review and to try and reach resolution on to the extent we can ourselves and to the extent we cannot with the Court’s assistance.
(Id. at 29-30.) Defendant also stated that most “if not all” of the information “that relates to whether or not the breach was proper ... are all a part of the record of proceedings.” (Id. at 34.) After the ADR Agreement was signed, Defendants (through different counsel) repeatedly emphasized that the Court would be reviewing only the administrative record when deciding the bonds that the parties could not agree on under the ADR framework. (Tr. Mar. 9, 2006 at 14 (“[The administrative record is] the basis for the administrative action. That’s what the Court would be reviewing.”).) Plaintiffs disagreed with Defendants’ assessment at times, (see, e.g., Tr., May 1, 2006, at 16 (“I thought we had an admission from the government that wasn’t all that was before the court from the past.”)), but have not pointed the Court to any specific admission from Defendants in the transcripts.
The Court recognized at the hearing on the pending motions that it thought the purpose of the ADR Agreement was to give a full ventilation to all issues and all relevant documents. However, based on the record before it, the Court cannot find that Defendant clearly agreed to allow de novo review of the bond breach determinations.
B. De novo review is not warranted due to inadequate factfinding procedures.
Plaintiffs maintain that the Court should consider the bond breach determinations de novo because Defendants’ fact-finding procedures were inadequate. In Citizens to Preserve Overton Park, Inc. v. Volpe, the Supreme Court held that de novo review “is authorized when the action is adjudicatory in nature and the agency factfinding procedures are inadequate.” 401 U.S. 402, 415, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); see also Camp v. Pitts, 411 U.S. 138, 141-42, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973) (noting that “de novo review is appropriate only where there are inadequate factfinding procedures in an adjudicatory proceeding, or where judicial proceedings are brought to enforce certain administrative actions.”). After Overton Park, “de novo review of agency adjudications has virtually ceased to exist. In its stead, the arbitrary and capricious’ standard of review of 5 U.S.C. § 706(2)(A) is now applied to review of agency determinations in the adjudicatory setting.” Sierra Club v. Peterson, 185 F.3d 349, 368 n. 29 (5th Cir.1999). De novo review is only available “in special circumstances where [an] agency does not possess adequate factfinding procedure, not just that it failed to employ adequate procedures.” 33 Charles Alan Wright and Charles H. Koch, Jr, Federal Practice and Procedure § 8332. Furthermore, “[w]here a court finds that the agency factfinding is inadequate but that the agency has the procedural authority to correct the inadequacy then the court’s proper function is to return the matter to the agency with instructions as to how to correct the inadequacy.” Id. § 8372.
The Fifth Circuit has applied de novo review in at least one case based on inadequate factfinding procedures. See Porter v. Califano, 592 F.2d 770, 782 (5th Cir. 1979) (“[W]e find the process inadequate in the instant case because the biased or otherwise inadequate initial fact-finding process was not cured by a subsequent impartial and full review in the agency.”). In Porter, two officials accused of corruption were themselves involved in the fact-finding process. 592 F.2d at 782 (“The chief inadequacy in the agency fact-finding procedures used in this case was the pervasive role played by ... the officials Porter explicitly accused of corruption.”). In addition, the investigation surrounding Porter’s appeal “did not entail an adequate inquiry into the central issues in the case,” and “to the extent questions about these matters were asked, they were asked, without benefit of cross-examination, only of persons accused of wrong-doing by Porter.” Id. In addition, Porter was “denied an opportunity to confront her accusers even in the most rudimentary sense.” Id.
Plaintiffs argue that DHS’ factfinding procedures are similarly inadequate. Plaintiffs claim that DHS wrongfully withheld relevant documents that Plaintiffs sought through FOIA, thus depriving Plaintiffs of any meaningful opportunity to submit comments, provide information to the record, or present oral argument. Plaintiffs also note that Defendants have conceded that they wrongly declared nine of the 50 bonds breached, and argue that this provides further evidence of the agency’s inadequate procedures. Defendants counter that no relevant documents were actually omitted from the agency’s proceedings and convincingly argue that Plaintiffs could have obtained much of the evidence they needed from sources other than FOIA. Plaintiffs were not restricted from providing this evidence to the agency on appeal. See Conax Florida Corp. v. United States, 824 F.2d 1124, 1129 (D.C.Cir.1987) (refusing to apply de novo review “because the fact finding procedures employed by the agency were by no means inadequate. Indeed, there were absolutely no restrictions on the amount or type of evidence that Conax was permitted to submit to the contracting officer.”). Defendants’ alleged failure to comply with FOIA is troublesome, and the cancellation or rescission of several bond breach determinations raises some concerns about the agency’s current bond breach determination process. The facts of the case at hand are not nearly as exceptional as those present in Porter, however. At best, Plaintiffs have shown that the Agency failed to employ adequate procedures, not that the Agency does not possess such procedures. The Court will not, therefore, take the extraordinary step of applying de novo review.
C. The Court will apply arbitrary and capricious review and will generally limit review to the administrative record.
The Court will apply arbitrary and capricious review to the agency’s bond breach determinations. 5 U.S.C. § 706(2)(A) (a court “shall hold unlawful and set aside agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”) “Although Overton Park truncated the use of de novo review, it vastly expanded the range of arbitrary and capricious review under § 706(2)(A).” Sierra Club v. Peterson, 185 F.3d 349, 368 (5th Cir.1999). “[W]hile the arbitrary and capricious standard of review is highly deferential, it is by no means a rubber stamp.” Pension Benefit Guar. Corp. v. Wilson N. Jones Mem’l Hosp., 374 F.3d 362, 366 (5th Cir.2004). Agency action is entitled to a presumption of regularity, but “that presumption is not to shield [its] action from a thorough, probing, in-depth review.” Overton Park, 401 U.S. at 402, 91 S.Ct. 814. The Supreme Court further explained in Overton Park:
[T]he court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency.
401 U.S. at 416, 91 S.Ct. 814. The Court must therefore uphold the agency’s decision if it “examine[d] the relevant data and artieulate[d] a satisfactory explanation for its actions including a ‘rational connection between the facts found and the choice made’ ” Motor Vehicle Mfrs. Ass’n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)). The Court should not, however, “weigh the evidence in the record pro and con.” Harris v. United States, 19 F.3d 1090, 1096 (5th Cir.1994).
Arbitrary and capricious review is usually limited to review of the record that was before the agency at the time its decision was made. See Overton Park, 401 U.S. at 420, 91 S.Ct. 814; Camp, 411 U.S. at 142, 93 S.Ct. 1241 (“The focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.”); State of La., ex rel. Guste v. Verity, 853 F.2d 322, 327 n. 8 (5th Cir. 1988) (“Nor are the courts permitted to consider evidence outside the administrative record .... Agency action is to be upheld, if at all, on the basis of the record before the agency at the time it made its decision”). Under certain circumstances, however, a court may look to evidence outside of that record when applying arbitrary and capricious review. See, e.g., Overton Park, 401 U.S. at 420, 91 S.Ct. 814 (“[S]ince the bare record may not disclose the factors that were considered or the Secretary’s construction of the evidence it may be necessary for the District Court to require some explanation in order to determine if the Secretary acted within the scope of his authority and if the Secretary’s action was justifiable under the applicable standard”); Citizen Advocates For Responsible Expansion, Inc. (I-Care) v. Dole, 770 F.2d 423, 438 n. 18 (5th Cir.1985) (allowing supplementation of an inadequate administrative record because, inter alia, “a plaintiff who demonstrates that the agency developed an inadequate record should be afforded an opportunity, in essence, to develop that record.”); Esch v. Yeutter, 876 F.2d 976, 991 (D.C.Cir.1989) (allowing parties to supplement the administrative record when an agency failed to comply with its own procedural requirements, raising “serious questions as to whether the adjudicative officials at any given point considered all relevant factors in reaching their determinations,” and failed to gather the underlying facts in a coherent record); see also Ware v. U.S. Federal Highway Admin., No. Civ.A. H-04-2295, 2006 WL 696551, at *4 (S.D.Tex. Mar. 15, 2006) (“A narrow exception permits a court to examine evidence beyond the administrative record if that evidence: ... (2) shows an agency failed to consider relevant evidence; or (3) shows an agency, in bad faith, failed to include information it considered in the record.”).
Although Plaintiffs have raised legitimate concerns about some of DHS’ practices, this is not a case involving an entirely absent record or a record that is so incomplete that it is not susceptible to judicial review. The Court will generally limit its review to the administrative record. If, in the case of any particular bond breach determination, the Court finds that the agency developed an inadequate record or that there are serious questions as to whether the agency considered all relevant factors in reaching their determinations, the Court will remand those bond breach determinations to the Agency for further review.
D. Plaintiffs have not waived defenses not raised on appeal, but Plaintiffs have waived defenses not raised on reconsideration.
Defendants argue that the Court should not consider any defenses that Plaintiffs did not raise before the agency on appeal. Issue exhaustion may be required either “where parties are expected to develop the issues in an adversarial administrative proceeding” or where an agency’s regulations “require issue exhaustion in administrative appeals.” Sims v. Apfel, 530 U.S. 103, 108, 110, 120 S.Ct. 2080, 147 L.Ed.2d 80 (2000).
The bond breach appeal process does not appear to be the kind of adversarial proceeding contemplated in Sims. It is not a formal adjudication between two parties. In fact, though the proceedings are far from identical, there are some similarities between the bond breach appeals process and the Social Security appeals process. As the Fifth Circuit recognized in Delta Foundation, Inc. v. United States, in the Social Security context, no representative for the Agency goes before the ALJ to oppose the claim, parties are “permitted, but are not required, to file briefs with the Appeals Council,” and the Appeals Council may review material evidence outside the record promulgated by the parties. 303 F.3d 551, 560-61 (5th Cir.2002) (discussing Sims, 530 U.S. at 111-12, 120 S.Ct. 2080). In the bond breach context, the Agency itself compiles a record consisting of certain documents, (see Adjudicator’s Field Manual, § 10.8(a)(3), Gov. Appx. 058), counsel for USCIS is not required to prepare a brief, (id. § 10.8(a)(1), Gov. Appx. 057), and the appellant is permitted, but not required, to file a brief of his own, 8 C.F.R. § 103.3(a)(2)(vi). This record confirms that Agency sometimes reviews evidence not provided by the parties and has sustained appeals based on grounds not set forth by the parties in the notice of appeal. (See Jt. Appx. 2626-2628.) Thus, the Court does not believe that the bond breach appeal process is the kind of adversarial process that provides strong reasons for a court to require issue exhaustion. See Sims, 530 U.S. at 109, 120 S.Ct. 2080 (“Where the parties are expected to develop the issues in an adversarial administrative proceeding ... the rationale for requiring issue exhaustion is at its greatest. Where, by contrast, an administrative proceeding is not adversarial, ... the reasons for a court to require issue exhaustion are much weaker.”).
Issue exhaustion may also be required by regulation. In Sims, the Court noted that issue exhaustion was required by a regulation that obliged a party to “lis[t] the specific issues to be considered on appeal.” 530 U.S. at 108, 120 S.Ct. 2080 (citing 20 CFR § 802.211(a) (1999)). By contrast, the regulation governing bond appeals simply states that an appeal may be summarily dismissed if the party states no reason for the appeal. 8 C.F.R. § 103.3(a)(l)(v). (“An officer ... shall summarily dismiss any appeal when the party concerned fails to identify specifically any erroneous conclusion of law or statement of fact for the appeal.” (emphasis added)). The regulations governing motions to reopen and motions to reconsider are more specific, however. See 8 C.F.R. § 103.5(a)(2) (“A motion to reopen must state the new facts to be provided in the reopened proceeding and be supported by affidavits or other documentary evidence.”); 8 C.F.R. § 103.5(a)(3) (“A motion to reconsider must state the reasons for reconsideration and be supported by any pertinent precedent decisions to establish that the decision was based on an incorrect application of law or Service policy.”).
To the extent that Plaintiffs are appealing the Agency’s decision on a Motion for Reconsideration or a Motion to Reopen, issue exhaustion does appear to be required by regulation. However, it may have been futile for Plaintiffs to raise many of the defenses asserted in this lawsuit. See McCarthy v. Madigan, 503 U.S. 140, 147, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992); Hormel v. Helvering, 312 U.S. 552, 557, 61 S.Ct. 719, 85 L.Ed. 1037 (1941). The Court will address the futility question on a case by case basis, infra. Issue exhaustion does not appear to be required by regulation on appeal, however. The Court is not required defer to the Agency’s interpretation of 8 C.F.R. § 103.3(a)(l)(v), which appears to be set forth for the first time in this litigation, because it appears to be “plainly erroneous or inconsistent with the regulation.” Belt v. EmCare, Inc., 444 F.3d 403, 417 (5th Cir.2006) (citing Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997)). The Court therefore concludes that the regulations governing motions to reopen or reconsider do mandate issue exhaustion, but the regulations governing appeals do not mandate issue exhaustion. To the extent that exhaustion was required on a motion to reopen or reconsider, the Court will determine on a defense by defense basis whether it would have been futile for Plaintiffs to raise such an argument.
V. AMWEST SETTLEMENTS AND AMWEST MEMORANDUM
Before the Court can examine the merits of each purported defense, it must first consider the relevance of a 1995 and 1997 Settlement Agreement in the case Amwest Storety Insurance Co., et al. v. Reno, et al., C.D. Cal., No. 93-3256 JSL(SHx) and an agency memorandum explaining the application of the settlement provisions to other sureties.
On June 22, 1995, INS entered into a Settlement Agreement with Amwest Surety Insurance Company, Far West Surety Insurance Company, and Gonzales and Gonzales Bonds and Insurance Agency (Amwest I Settlement). (Jt. Appx. 672.) In the underlying lawsuit, Amwest Surety Insurance Co., et al. v. Reno, et al., No. 93-3256 JSL(SHx) (C.D.Cal.), Plaintiffs sought a declaration that INS’s “interpretation of its Bond Contract (Form 1-352) was contrary to case law, statute, and INS policy.” (Jt. Appx. 673.) While continuing to deny those claims, the Agency agreed in the settlement agreement to distribute several policy statements “to all regional and district offices ... with instructions that the policies stated shall be implemented immediately.’ ” (Jt. Appx. 674-75 para. 2.) Although the nine policy statements attached to the settlement appear to generally clarify the agency’s position on certain statutory and regulatory provisions and agency policies governing immigration bonds, the agreement, by its terms, only applied to the actual parties to the settlement. (Jt. Appx. 675 (“The attached policy statements are binding on the parties in their contractual relationship formed through the execution of any immigration bond contract .... ”).) The Agency also agreed to certain practices and policies in the text of the Settlement Agreement itself.
On September 10, 1997, the parties to the Amwest I Settlement entered into a second settlement agreement (Amwest II Settlement). (Gov. Appx. 65.) In the Am-west II Settlement, the Government agreed “to immediately send” an “INS Field Memorandum ... in a format substantially similar ... to the document attached hereto as Exhibit ‘A’ to all District Directors and District Deportation Directors throughout the United States and to the AAU.” (Gov. Appx. 66.) The attached draft Field Memorandum provided guidance regarding the implementation of the Amwest I Settlement policy statements and clarified: “As a matter of policy and fairness ... INS has decided to apply [the Amwest I Settlement] terms to such contracts with all other companies who underwrite immigration bonds.” (Gov. Appx. 70-82.) The Government also agreed to train deportation officers on the policies in the field memo by January 31, 1998. (Gov. Appx. 66.)
At some point thereafter, a substantially similar draft memorandum (“Amwest Memorandum”) was authored by the Agency. (Jt. Appx. 657.) Most of the text of the Amwest Memorandum is identical to that of the Field Memorandum attached as Exhibit A the Amwest II Settlement. (Jt. Appx. 657-671.) The Memorandum includes a line stating that it is “from” Paul W. Virtue, General Counsel, and Vtichael A. Pearson, Executive Associate Commissioner of Field Operations. (Id.) The copy before the Court retains the word “draft” on the top of the first page. Like the Field Memorandum, the Amwest Memorandum — addressed to “All Regional Directors, All District Directors, Administrative Appeals Offices,” and others — states an intention to “provide comprehensive guidance for the implementation” of the Amwest I Settlement. The Amwest Memorandum explains that the guidance contained therein is to replace that provided in a November 14, 1995 Office of Programs memorandum entitled Instructions re: new bond policies and procedures and March 1996 training materials entitled New Bond Policies and Procedures. (Jt. Appx. 658.)
Like the Field Memorandum, the Am-west Memorandum explains that in the Amwest I Settlement, the Agency had “agreed to implement specified modifications to its immigration bond program” and again states: “By its terms the Settlement Agreement applies only to immigration bonds underwritten by Amwest and Far West.... As a matter of policy and fairness, however, INS has decided to apply its terms to such contracts with all other companies who underwrite immigration bonds.” (Jt. Appx. 658.) The Memorandum further notes:
[AJrguably, an INS failure to comply with any provision in [the policy statements attached to the Amwest I Settlement] would provide the obligor with a defense against an INS attempt to enforce a breach. No court has ruled on this issue, and INS has not conceded the point, but all offices should attempt to minimize the instances in which it might arise. (Jt. Appx. 658.) The Memorandum goes on to discuss in great detail the provisions of the settlement and attached policy statements.
There is great dispute over what became of the Amwest Memorandum. This case appears to be unique in that the Agency maintains that it never actually adopted the policies or interpretations in the Am-west Memorandum in the first place, not just that it should not be bound by those policies or interpretations. According to DHS, the Amwest Memorandum was never “officially circulated within DHS or its field offices,” but “various versions” of the memorandum “inappropriately found their way to some field offices.” (Wells Declaration, Gov. Appx. at 185.) In briefing and oral argument before the Court, Defendants have repeatedly insisted that the Amwest Memorandum was “never implemented as the formal policy of DHS,” (Defs.’ Mot. Summ. J. 31, n 19), that the document did not “purport[ ] to represent the ‘official’ position of DHS on any matters contained therein,” (Defs.’ Resp. to Pis.’ Mot. Summ. J. 6), and that “it’s not on this record that there are any DHS employees who actually believed Amwest was generally enforceable as policy,” (Tr. Oct. 4, 2007). After this lawsuit was filed, DHS circulated another memorandum (“Cerda Memorandum”) to Field Office Directors regarding the Amwest Settlements. The Cerda Memorandum recognizes that “[s]inee 1995, there has been some uncertainty among Field Offices concerning what authorities should guide a determination to issue a Declaration of Breach on an immigration delivery bond.” (Id.) The Cerda Memorandum also states that as of March 11, 2005, field offices are not to refer to the Amwest Settlements or any version of the Amwest Memorandum when making bond breach determinations unless the bond was posted by a party to the Amwest Settlements. (Gov. Appx. 186-88.)
Plaintiffs claim that the Amwest Memorandum was “widely circulated in the bond industry.” (Mendoza Aff. ¶ 5.) Plaintiffs have not clarified who circulated the memo, and Defendants claim that it was circulated by members of the bond industry itself. Plaintiffs do not argue that the Agency consistently applied the policies set forth in the Amwest I Settlement or Amwest Memorandum, and instead complain that the Agency has regularly failed to do so. Plaintiffs do, however, provide evidence indicating that at least some DHS employees, including, but not limited to Field Office personnel, acted on the belief that the provisions of the Amwest Settlement had been extended to all sureties and/or that some parts of the Amwest Settlement were enforceable as policy. The Court will briefly summarize that evidence.
First, the Agency recognized that the “requirements” of the Amwest Settlement were extended to all sureties in at least two other settlement agreements. (See INS v. Allegheny Casualty Company Settlement Agreement, Nov. 3, 1998, Pls.’s Resp. to Defs.’ Mot. Summ. J., Ex. B. (“The Parties determined that a significant number of these breaches arguably contained evidence of actions that were not in accord with the requirements of a June 1995 Settlement in the case of AMWEST v. Reno, No 93-2356(JSL)(SHx) (C.D.Ca.), which INS subsequently extended to all sureties for immigration bonds.”); INS v. Nobel Insurance Company Settlement Agreement, Aug. 17, 1999, Pls.’s Resp. to Defs.’ Mot. Summ. J., Ex. C. (same)). In the Nobel settlement, the Agency went on to say, however, that “INS does not agree, however, that these actions necessarily require cancellation of a breach.” (Pls.’s Resp. to Defs.’ Mot. Summ J., Ex. C.)
Secondly, when responding to Plaintiffs’ FOIA requests, the agency has on some occasions stated that the request “will be processed pursuant to the settlement in Amwest v. Reno ... rather than the Freedom of Information Act.” (See, e.g., Pis.’ Mot. Partial Summ. J. Ex. C.)
Third, the Administrative Appeals Office has frequently cited one provision of the Settlement Agreement. See, e.g. In re Obligor, 2005 WL 2271462 (INS May 3, 2005) (“The present record contains evidence that a properly completed question-name ... was forwarded to the obligor ... pursuant to the Amwest/Reno Settlement Agreement.”); see also Jt. Appx. 0355; Jt. Appx. 0580; Jt. Appx. 0609. The Administrative Appeals Office is not, of course, a Field Office that may have “inappropriately” received a copy of the Amwest Memorandum.
Fourth, the 1-352 Bond Contract itself seems to recognize that the Agency considered itself bound to take certain actions pursuant to the Amwest Settlement. I-352, General Terms and Conditions (“Paragraph seven of the settlement in AMWEST SURETY v. RENO ... requires that INS send a copy of any new or amended Notice to Appear or amended order to Show Cause to the obligor.”). Interestingly, most of the provisions set forth in the text of the Amwest I Settlement also appear to be reflected in the language of the current 1-352 Bond Contract, even though these provisions do not reference the settlement explicitly. For example, the 1-352 includes: a provision that INS not mail notice of a demand for deportation until three days after the demand is sent to the obligor; the relevant provisions set forth in the Amwest I Settlement regarding mitigation; and a statement that a breach will be stale and unenforceable if a 1-323 notice of breach is sent to the obligor more than 180 days following the date of breach. {Compare 1-352 Bond Contract with Amwest I Settlement, Jt. Appx. 675-78.)
Finally, in a notice of proposed rulemaking published in the Federal Register, the Agency stated on May 9, 2002 that “While the [Amwest I] settlement agreement applied only to bonds underwritten by the plaintiffs, the Service as a matter of policy and fairness decided to apply the terms of the settlement agreement to all other companies underwriting immigration bonds.” Requiring Aliens Removed from the United States to Surrender to the Immigration and Naturalization Service for Removal, 67 Fed.Reg. 31157, 31160 (May 9, 2002); see also 44 U.S.C. § 1507. The Agency went on to state in the Notice that it had considered the effects of that policy with respect to the proposed rule and had determined that it “should be modified for all bonds posted after the effective date of this rule.” Id.
Plaintiffs have provided some evidence that the Agency did, in fact, have a policy of extending provisions of the Amwest I Settlement to other sureties. Based on the evidence in the summary judgment record, however, the Court cannot conclude that the Agency actually adopted the specific draft Amwest Memorandum included in the summary judgment record as a general agency policy or interpretation. Plaintiffs have not provided evidence that directly contradicts the Agency’s sworn statement that this exact document was never formally circulated to Field Offices or the implication that the Agency never intended the document to be distributed. As such, the Court cannot conclude that this draft, undated memorandum constituted an agency statement of policy or interpretive rule. See also Wilderness Society v. Norton, 434 F.3d 584, 596 (D.C.Cir.2006) (noting that the APA requires general statements of policy to be published).
Even if the Agency in some other manner adopted an informal policy to apply the provisions of the Amwest Settlement to all sureties, the Bond Contract itself specifically states that “[t)he express language of the bond contract shall take precedence over any inconsistent policies or statements.” 1-352, General Terms and Conditions. As explained below, the Court finds that the language of the Bond Contract does address many of Plaintiffs’ alleged defenses and concludes that it need not look to any other Agency policy or statement with regard to these provisions.
In the case of two defenses, however— Alien Granted Voluntary Departure and Failure to Provide a Questionnaire — the Bond Contract is silent. As to these defenses, the Court will consider whether a prior Agency policy or interpretation existed and, if so, whether the Agency was entitled to reverse that prior policy. The Court will engage in that analysis in its discussion of these two defenses, infra.
VI. DEFENSES AVAILABLE TO SURETIES
The heart of the dispute before the Court revolves around Defendants’ unwillingness to acknowledge certain defenses that Plaintiffs claim should either cancel a bond or excuse a bond breach. The Court will examine the parties’ arguments about each purported defense.
A. Defense No. 1: No Notice
1. 1-340 No Notice Defense
The General Terms and Conditions of the 1-352 Bond Contract state that “INS shall notify the obligor of a demand to produce the alien, the breach or cancellation of a bond, and any demand for payment of a bond.” (1-352.) INS provides notice of a demand to produce the alien by sending an 1-340 “Notice to Deliver Alien” form setting forth the time, date, and place to deliver the alien. The relevant regulations do not explicitly mention the Bond Contract provisions requiring notice of a demand to produce the alien, stating only that “A bond is breached when there has been a substantial violation of the stipulated conditions.” See 8 C.F.R. 103.6(e). Surely, however, the Agency may not ignore the relevant provisions of the Bond Contract when determining whether a bond has been breached. The Bond Contract clearly states that “[a] delivery bond is breached when in response to a timely demand, the obligor either [sic] fails to produce the alien at the location specified in that demand.” 1-352, General Terms and Conditions. The 1-352 reiterates in section G(l) that the bond becomes due and payable “if the obligor fails to surrender the alien in response to a timely demand while the bond remains in effect.” (Id.) The 1-352 form also allows both the obligor and agent or co-obligor to provide an address and includes and to check one of the following boxes: “Address to use for notice purposes: [] Obligor [] Agent [] Both.”
The express language of the Bond Contract makes clear that a bond is breached only if Defendants make a timely demand to produce the alien. A timely demand to produce the alien is, therefore, a condition precedent to Plaintiffs’ performance. Defendants argue that they can fulfill this requirement by sending notice to the obligor alone, even if the agent (in this case, AAA) provides an address and checks the box indicating that the address for both the obligor and the agent are to be used for notice purposes.
The 1-352 is a contract, and the instructions on the form have been “incorporated into the section of the regulations requiring its submission.” 8 C.F.R. § 103.2(a); 8 C.F.R. § 299.1; see also I-352, General Terms and Conditions (“Federal law shall apply to the interpretation of the contract, and its terms shall be strictly construed.”). The Court interprets contracts to give effective meaning to all terms, and assumes that no part of the agreement is superfluous. See Medlin Const. Group, Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed.Cir.2006) (“The general rules of contract interpretation apply to contracts to which the government is a party. A reasonable interpretation must ‘assure that no contract provision is made inconsistent, superfluous, or redundant.’ ” (internal citations omitted)); Rest. (Second) of Contracts § 203(a), cmt. (b). Furthermore, “in choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds.” Rest. (Second) of Contracts § 206; see also Grumman Data Systems Corp. v. Widnall, 15 F.3d 1044, 1048 n. 4 (Fed.Cir. 1994) (noting that the doctrine of contra proferentum “has been repeatedly applied in the field of government contracts.”).
The terms of the 1-352 Bond Contract are somewhat contradictory. Although the Terms and Conditions state that INS must send notice of a breach to “the obligor,” the form also includes a box that, if checked, directs the agency to use the address of both the obligor and the agent “for notice purposes.” If the court were to read the contract, drafted by the agency, to require notice only to the obligor, it would render the “address to be used for notice purposes” language entirely superfluous.
Based on general principles of contract interpretation, the Court finds that the Bond Contract requires the Agency to provide notice of a demand for delivery to both the obligor and the agent if an address is provided for both on the bond form and if the 1-352 form indicates that both addresses should be used for notice purposes by a checked box. Notice of a demand to deliver the alien is a condition precedent to performance, and proper notice, as defined by the terms of the Bond Contract, entails sending the 1-340 notice to both addresses.
Defendants seem to argue that even where notice is a condition precedent to performance, Plaintiffs may not claim lack of notice as a defense unless they show prejudice or damage. The cases cited by defendant do not involve contracts with notice as a condition precedent, however. See, e.g., Conesco Industries, Ltd. v. Conforti and Eisele, Inc., D.C., 627 F.2d 312, 317, n. 6 (D.C.Cir.1980) (noting, however, that a “surety should not be able to use the failure to give notice as a defense against recovery under the bond when it has shown no prejudice or damage suffered as a result of the failure to give “adequate” notice,” but recognizing that this is the “minority stance”); New Amsterdam Cas. Co. v. United States Shipping Board Emergency Fleet Corp., 16 F.2d 847, 851-52 (4th Cir.1927) (recognizing notice was not “among the conditions of the bond” and stating “even where there is a requirement of notice, if this requirement is not made a condition of the bond, the surety company cannot complain of the failure to give notice where no damage had resulted therefrom.”). At best, the law in this area appears unsettled. See 23 Williston on Contracts § 61:39 (4th ed.2007) (“Notice may be made an express condition of the surety’s contract. If so, the condition must, on principle, be fulfilled. The contracts of compensated sureties frequently contain such a condition, but some courts are reluctant to give the condition its ordinary meaning, and hold that the surety is discharged only to the extent of the loss suffered.”); Southern Sur. Co. v. MacMillan Co., 58 F.2d 541 (10th Cir. 1932) (noting a “sharp divergence in the authorities as to the effect of failure to give notice of the default of a principal” but following the law of the Eighth Circuit and holding “that if the parties have made the giving of notice a condition upon the obligation of the surety company, failure to give such notice relieves the surety company of liability” (citing Nat’l Sur. Co. v. Long, 125 F. 887 (8th Cir.1903))); see also Nat’l City Bank v. Nat’l Sec. Co., 58 F.2d 7, 8 (6th Cir.1932) (“It is plain ... that, where one of the conditions of an indemnity bond is the giving of notice of the loss within an agreed time, if notice is not given within such time, there is no liability on the bond.”). Furthermore, the cases cited by Defendants address notice of default. In the immigration bond context, failure to provide notice of a demand to produce the alien results in obvious prejudice, since it is impossible to substantially comply with the terms of the bond by producing the alien if they have not been notified that such a demand has been made. The fact that AAA is the party that actually monitors and delivers the alien provides even more reason to believe that lack of notice to the co-obligor, where requested, would also result in prejudice.
The Agency argues that even if the Bond Contract requires notice to both parties, a bond breach cannot be excused unless Plaintiffs demonstrate that the failure to notify both parties prevented them from substantially complying with the terms of the bond. Specifically, Defendants maintain that the bond breaches should stand unless Plaintiffs can show that, but for the Agency’s failure to notify both parties, Plaintiffs would have produced the alien. This argument is unavailing given the Court’s finding that notice to both parties is a condition precedent to Plaintiffs’ performance. Defendants reliance on International Fidelity Ins. Co. v. Crosland, 516 F.Supp. 1249 (S.D.N.Y.1981), is misplaced because the court in Crosland was considering the Agency’s interpretation of a regulation that did not require advance notice to the surety.
Parties also quarrel over who had the burden to prove that notice was mailed. The briefing on this issue does not appear to fully take into account the nature of the Agency’s process for breaching a bond and the Court’s standard of review. The Court will further discuss this matter when considering the so-called “No Notice” bonds. See discussion, infra, Part VII(B)(1).
In sum, Defendants are required to send notice of a demand to deliver the alien to both the obligor and the co-obligor if the 1-352 Bond Contract indicates that notice should be addressed to both.
2. 1-323 Notice of Breach
Plaintiffs also contend that DHS’ failure to provide notice of an alleged breach within 180 days renders the bond breach ineffective. The Agency is required to “send notice of a breach of the bond to the obligor on Form 1-323, Notice-Immigration Bond Breached, at the address of record.” 1-352 General Terms and Conditions; see also 8 C.F.R. § 103.6 (a district director “shall notify the obligor on Form 1-323” of a declaration of a bond breach). Any notice of a breach “sent more than 180 days after the date of the breach shall be unenforceable.” The bond contract clarifies, however, that failure to send the 1-323 form within 180 days:
shall have not [sic] effect on the status of the bond; i.e., the bond shall remain in full force until and unless properly canceled. In the case of a delivery bond, INS may, unless otherwise precluded by law, send a new timely demand to produce the alien and then breach the bond again if the obligor fails to produce the alien.
(1-352, General Terms and Conditions.)
Defendants do not contest that notice sent more than 180 days after the date of the breach is unenforceable, but they do argue that the bond contract does not require them to send such notice to both Safety National and AAA. Defendants’ arguments that Plaintiffs cannot use failure to give notice as a defense against recovery without showing prejudice or damage are somewhat more persuasive in the context of notice of a bond breach, which is more similar to a notice of default, than in the context of notice of a demand to deliver the alien. See, e.g., Conesco Industries, Ltd., 627 F.2d 312, 317, n. 6; New Amsterdam Cas. Co., 16 F.2d at 851-52. Nonetheless, the language of the Bond Contract clearly provides that notice of a breach sent more than 180 days after the breach is unenforceable and requires that notice to be sent to the “address of record.” Where a surety has indicated that notice is to be sent to “both” the obligor and the coobligor, the checked box clarifies the meaning of notice and the term “address of record.” Thus, the Agency can only comply with its clearly expressed obligation to provide notice within 180 days by sending that notice to both the obligor and the co-obligor if the “both” box is checked.
B. Defense No. 2: “Untimely Removal”
Plaintiffs allege that failure to deliver an alien is excused where DHS did not demand delivery of the alien within 90 days of a final removal order pursuant to 8 U.S.C. § 1231. According to Plaintiffs, because this statute and related regulations are implied into the terms of the bond contract, and because the 1-352 General Terms and Conditions contemplate that the bond will be canceled based on “other circumstances as provided by statute and regulation,” if the Agency does not comply with § 1231, the bond is cancelled. Defendants argue that § 1231, at most, only limits the Agency’s detention authority and contend that the statute and relevant regulations contemplate supervision of an alien by bond beyond the 90-day period.
Section 1231 allows DHS to detain an alien for up to 90 days pending deportation after an order of removal becomes administratively final. 8 U.S.C. § 1231(a)(1)(A) (“Except as otherwise provided in this