Appeal from the United States District Court for the Eastern District of California D.C. No.1:07-CV-01655-LJO-DLB Lawrence J. O'Neill, District Judge, Presiding
The opinion of the court was delivered by: Opinion by Judge Bybee
Argued and Submitted July 15, 2010-San Francisco, California
Before: Richard C. Tallman and Jay S. Bybee, Circuit Judges, and Timothy M. Burgess, District Judge.*fn1
Pinnacle Armor, Inc. ("Pinnacle") produces armor designed to protect buildings, vehicles, and the human body. Among the primary customers for its body armor are local law enforcement agencies, who depend in large part upon a federal subsidy to purchase the body armor. This federal subsidy is conditioned on certification that the manufacturer's body armor is compliant with standards set by the National Institute of Justice ("NIJ"), an agency of the Department of Justice.
Pinnacle alleges that the NIJ's decision to revoke certification of one of its products (1) violated its procedural due process rights under the Fifth Amendment, and (2) was "arbitrary and capricious" in violation of § 706(2)(A) of the Administrative Procedure Act ("APA"). The district court dismissed both claims, holding that Pinnacle's interest in NIJ certification is not a protected property right under the due process clause, and that the NIJ's decision is exempt from review under the APA because the certification decision is "committed to agency discretion by law." 5 U.S.C. § 701(a)(2).
We affirm in part and reverse in part. First, we affirm the dismissal of the due process claims because the NIJ afforded Pinnacle adequate process. Second, we hold that the NIJ's certification decision is not committed to agency discretion by law and is therefore reviewable under the APA. We remand to the district court for further proceedings on Pinnacle's APA claim.
As part of the Department of Justice, the NIJ is authorized to "improv[e] Federal, State, and local criminal justice systems and related aspects of the civil justice system [by] identifying programs of proven effectiveness . . . or programs which offer a high probability of improving the functioning of the criminal justice system." 42 U.S.C. § 3721. The NIJ, through its Office of Science and Technology ("OST"), establishes and maintains performance standards for bulletproof vests and other law enforcement technologies. 6 U.S.C. § 162(b)(3), (b)(6). The OST is charged with "establish[ing] and maintain[ing] a program to certify, validate, . . . or otherwise recognize law enforcement technology products that conform to standards established and maintained by the Office . . . ." Id. § 162(b)(4).
One of the programs the NIJ manages is the Body Armor Compliance Testing Program. Under this program, a manu- facturer may submit its body armor to the NIJ for a determination of whether the armor complies with the NIJ's performance standards. If the product satisfies the standards, the NIJ includes it on a list of compliant body armor models. A product reaps a substantial benefit if it is found compliant: When state and local law enforcement agencies purchase body armor listed as "compliant" by the NIJ, the federal government subsidizes up to fifty percent of the purchase. See 42 U.S.C. §§ 3796ll, 3796ll-2.
The NIJ issued compliance standards in 2001. See Nat'l Institute of Justice, U.S. Dept. of Justice, Ballistic Resistance of Personal Body Armor, NIJ Standard-0101.04, Revision A (June 2001) [hereinafter "NIJ Standard-0101.04"]. After it learned that certain body armor models could wear out prematurely and that its 2001 compliance requirements did not adequately address this concern, the NIJ issued supplemental performance standards for body armor in 2005. See Nat'l Institute of Justice, U.S. Dept. of Justice, NIJ 2005 Interim Requirements for Bullet-Resistant Body Armor (Sept. 26, 2005) [hereinafter "2005 Interim Requirements"], available at http://www.ojp.usdoj.gov/bvpbasi/docs/08_18_05Body Armor_int_reqts.doc.*fn2 In order to maintain compliance, the 2005 Interim Requirements require the manufacturers of body armor to submit either "evidence . . . that demonstrates to the satisfaction of the NIJ that the model will maintain ballistic performance (consistent with its originally declared threat level) over its declared warranty period," or a "written certification" by a manufacturer's officer stating that the officer believes the model will maintain ballistic performance; that the manufacturer has objective evidence to support that belief; and that the officer agrees to provide the NIJ with the evidence "promptly on demand" by the NIJ. The requirements provide that the NIJ will revoke a model's compliance status "at any time" if the evidence submitted by the manufacturer was "insufficient to demonstrate to the satisfaction of NIJ that the model w[ould] maintain its ballistic performance" over the model's declared warranty period.
Pinnacle manufactures body armor used by state and local government law enforcement agencies. One of its models, patented as "dragon skin," consists of overlapping ceramic discs, which allow the vest to be more flexible than other bulletproof vests. The parties do not dispute that dragon skin met the NIJ's 2001 requirements. See NIJ Standard-0101.04. The issue here is dragon skin's compliance with the 2005 Interim Requirements. To comply with the 2005 Interim Requirements, Pinnacle's officer issued a written certification declaring that he believed the vests would maintain their ballistic performance over the warranty period, that he had objective evidence to support this belief, and that he would submit the evidence to the NIJ on demand. In December 2006, the NIJ issued a Notice of Compliance to Pinnacle certifying that dragon skin, which had a six-year warranty period, was compliant with the NIJ's 2005 standards. Relying on this notice, Pinnacle spent hundreds of thousands of dollars producing vests for law enforcement agencies.
Subsequently, the NIJ received information from the Department of Defense that questioned the dragon skin model's durability under environmental stressors. The NIJ was particularly concerned about the effects of "temperature extremes and cycling" on the dragon skin model over time. Consistent with the 2005 Interim Requirements, the NIJ asked Pinnacle in June 2007, to provide documentation of the "data or other objective evidence that supports Pinnacle Armor's belief that [the dragon skin] model . . . will maintain its ballistic performance (consistent with its originally declared threat level) over its declared warranty period of six years." In response, Pinnacle submitted testimonials of those who wore the dragon skin vest for over one year, photographs of armor panels, and a test report on a vest that had been turned in after four years of service. The NIJ found that this evidence was "insufficient to demonstrate to the satisfaction of NIJ that the model . . . will maintain its ballistic performance . . . over its declared warranty period." The NIJ stated that as of August 3, 2007, the dragon skin model would no longer be deemed compliant with the NIJ requirements and published statements to that effect.
Pinnacle submitted additional information on three more occasions, including data describing the body armor's performance at high temperatures. After reviewing the additional evidence submitted by Pinnacle, the NIJ concluded that the evidence still did not sufficiently demonstrate that the dragon skin model would perform at the same level for six years. The NIJ gave several explanations for why Pinnacle's evidence was insufficient: a lack of information directly related to the dragon skin model as opposed to another model; a lack of an adequate explanation of the relevance of the test samples to the dragon skin model; insufficient test sample history (e.g., information concerning when the samples were constructed, how they were stored, whether they had been used); insuffi- cient ballistic testing regarding shot locations, angles, and directions; and insufficient evidence as to environmental exposure such as temperature extremes, thermal stress, mechanical stress or failure, or humidity exposure. The NIJ invited Pinnacle to provide additional evidence, but Pinnacle declined to submit any further evidence and filed this lawsuit in November 2007.
Pinnacle asserts in its complaint that the NIJ's decision to remove the dragon skin body armor model from the list of compliant vests (1) violates Pinnacle's due process rights because the NIJ revoked certification without granting Pinnacle an opportunity to be heard and (2) violates the APA because the NIJ's action was arbitrary and capricious. Pinnacle sought a declaration from the district court that the NIJ's revocation of its compliance was illegal and petitioned the court to direct the NIJ to declare the model compliant with the 2005 Interim Requirements, and to order the NIJ to retract public statements about dragon skin. The government moved for dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The district court granted the government's motion, holding that Pinnacle did not have a property ...