UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

OVANOVA, INC., et al.,

Plaintiffs, v. Civil Action No. 24-2769 (JEB)

UNITED STATES DEPARTMENT OF AGRICULTURE, et al.,

Defendants.

MEMORANDUM OPINION

Plaintiffs Ovanova, Inc. and its associated entities help rural businesses and agricultural

producers submit grant applications to the Rural Energy for America Program (REAP) run by the

U.S. Department of Agriculture. Unhappy with a spate of denials, they brought this suit against

USDA and its officials, the National Renewable Energy Laboratory (NREL), its Director Martin

Keller, and others, claiming that the manner in which USDA administers REAP violates the

Administrative Procedure Act. The Court recently dismissed NREL and Keller. See ECF No.

32 (Order). Hoping to follow in their wake, USDA and its officials now similarly move to

dismiss the suit against them, contending that Plaintiffs lack Article III and prudential standing

and that their claims fail on the merits in any case. Agreeing, the Court will grant the Motion.

I. Background

REAP is designed to “increase American energy independence by promoting the use of

renewable energy resources and improving the energy efficiency of small businesses and

agricultural producers in rural areas.” ECF No. 1 (Compl.), ¶ 54. It does so by providing

1 significant grants for projects that create renewable-energy systems or improve energy

efficiency. Id. To apply for a REAP grant, applicants must submit detailed proposals that

include the environmental impacts, technical specifications, and financial projections for their

project. Id., ¶ 55. USDA must follow regulatory guidelines in its assessment of REAP

applications, and it collaborates with NREL to evaluate their technical components. Id., ¶¶ 55–

56.

Plaintiffs are renewable-energy developers who provide energy solutions to rural

businesses and agricultural producers by building projects and helping clients secure funding for

such projects. Id., ¶¶ 1, 57. To date, Plaintiffs have helped their clients submit applications

requesting over $100 million from REAP. Id., ¶¶ 2, 57. Their clients’ success in the application

process seems to be waning, however, as USDA has recently denied many of their applications.

Id., ¶ 60. The denials, Plaintiffs allege, have hindered their ability to complete energy projects

that would have benefited rural communities and their company. Id., ¶¶ 63, 68.

The Ovanova entities brought this suit last September, claiming that USDA, in its review

of over 60 applications that they had helped clients submit, had violated the APA by using

arbitrary and capricious standards, implementing new technical-merit criteria without proper

notice or opportunity for public comment, and failing to fulfill its statutory obligation to support

the adoption of renewable-energy systems in rural areas. See Compl., ¶¶ 6, 60, 62, 129–46.

They alleged that USDA’s technical review of the applications largely rubber-stamps NREL’s

recommendation from its own review process, which Plaintiffs believe relies on unannounced,

unauthorized standards. Id., ¶¶ 64–65. Plaintiffs seek declaratory, injunctive, administrative,

monetary, equitable, and procedural relief. Id. at 39–43. The remaining Defendants now move

to dismiss. See ECF No. 27 (Mot.).

2 II. Legal Standard

When a defendant files a Rule 12(b)(1) motion to dismiss for lack of subject-matter

jurisdiction, the plaintiff generally “bears the burden of establishing jurisdiction by a

preponderance of the evidence.” Bagherian v. Pompeo,

, 91–92 (D.D.C.

2020) (quoting Didban v. Pompeo,

, 172–73 (D.D.C. 2020)); see Lujan v.

Defs. of Wildlife,

(1992). The Court “assume[s] the truth of all material

factual allegations in the complaint and ‘construe[s] the complaint liberally, granting plaintiff the

benefit of all inferences that can be derived from the facts alleged.’” Am. Nat’l Ins. Co. v. FDIC,

(D.C. Cir. 2011) (quoting Thomas v. Principi,

(D.C. Cir.

2005)).

To survive a motion to dismiss under Rule 12(b)(6), conversely, a complaint must “state

a claim upon which relief can be granted.” Bell Atl. Corp. v. Twombly,

(2007). Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6)

motion,

, “a complaint must contain sufficient factual matter, [if] accepted as true, to

‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

(2009)

(quoting Twombly,

). While a plaintiff may survive a Rule 12(b)(6) motion even

if “recovery is very remote and unlikely,” Twombly,

(quoting Scheuer v.

Rhodes,

(1974)), the facts alleged in the complaint “must be enough to raise a

right to relief above the speculative level.” Id. at 555.

III. Analysis

The Court begins, as it must, with the question of whether the Ovanova entities have

Article III standing before briefly discussing the merits.

3 A. Standing

Article III of the Constitution limits the jurisdiction of the federal courts to resolving

“Cases” or “Controversies.” U.S. Const. art. III, § 2, cl. 1. A party’s standing “is an essential

and unchanging part of the case-or-controversy requirement of Article III.” Lujan v. Defs. of

Wildlife,

(1992). To have standing, a party must, at a constitutional

minimum, meet the following criteria. First, the plaintiff “must have suffered an ‘injury in fact’

— an invasion of a legally protected interest which is (a) concrete and particularized . . . and (b)

‘actual or imminent, not ‘conjectural’ or ‘hypothetical.’”

(quotation marks and citations

omitted). Second, “there must be a causal connection between the injury and the conduct

complained of — the injury has to be ‘fairly . . . trace[able] to the challenged action of the

defendant, and not . . . th[e] result [of] the independent action of some third party not before the

court.’”

(citations omitted). Third, “it must be ‘likely,’ as opposed to merely ‘speculative,’

that the injury will be ‘redressed by a favorable decision.’”

(citation omitted). A

“deficiency on any one of the three prongs suffices to defeat standing.” U.S. Ecology, Inc. v.

U.S. Dep’t of Interior,

(D.C. Cir. 2000).

Plaintiffs’ explanation of their purported injury is largely set forth in one scant paragraph

in their Complaint. That paragraph states in full:

Plaintiffs have standing to bring this action, as they meet the requirements of injury-in-fact, causation, and redressability. Plaintiffs have suffered concrete and particularized injuries, including direct financial losses of approximately $100 million due to the denial and rescission of REAP grants, operational costs and disruptions amounting to $2 million resulting from the USDA’s actions, loss of business opportunities and partnerships estimated at $500 million, and reputational damage affecting future business prospects. These injuries are directly traceable to the USDA’s actions in denying and rescinding REAP grants, as well as the agency’s inconsistent and arbitrary application of evaluation criteria. The relief sought in this lawsuit, including the setting aside

4 of the USDA’s decisions, declaratory judgment, and mandamus, would directly redress the plaintiffs’ injuries by allowing for a fair re-evaluation of their REAP grant applications and restoring their grant funding.

Compl., ¶ 52. It is undoubtedly true that financial and reputational injuries can confer Article III

standing. See Twin Rivers Paper Co. LLC v. SEC,

(D.C. Cir. 2019) (financial

injuries); McBryde v. Comm. to Rev. Cir. Council Conduct & Disability Ords. of Jud. Conf. of

U.S.,

(D.C. Cir. 2001) (reputational injuries). The problem is that the Complaint

is insufficiently specific about the nature of the harms, how those harms are caused by USDA’s

alleged actions, and whether success in this lawsuit can provide relief.

Consider first the nature of the harms. Plaintiffs assert that USDA’s practices inflict

economic injuries but never describe those alleged injuries in any detail. The Ovanova entities

state, vaguely, “The denials of Plaintiffs’ REAP grant applications, and the [rescission] of [a

particular] grant award, have had a substantial impact on the company’s projects and the rural

communities they aimed to serve.” Compl., ¶ 63. Attempting to elaborate on that bare

statement, the Complaint also declares that Defendants’ decisions “jeopardize substantial tax

benefits and the economic viability of the renewable energy projects Plaintiffs had proposed.”

Id., ¶ 63; see, e.g., id., ¶¶ 68, 105, 108–117.

It is critical to bear in mind that Plaintiffs themselves are not the applicants. They never

explain, moreover, precisely what financial injuries they suffer when USDA denies other

entities’ grant applications. And, of course, they have no standing on behalf of “rural

communities.” Their own claims of economic harms are purely conclusory, lacking any

supporting statements describing their asserted “direct financial losses,” “operational costs and

disruptions,” or lost “business opportunities and partnerships.” Id., ¶ 52. To put a finer point on

it, the Ovanova entities do not make clear what they (as opposed to their clients, the actual

5 applicants) have lost out on as a result of Defendants’ alleged conduct. Plaintiffs do not discuss

which aspects of their own businesses are jeopardized or even how they earn an income from

assisting clients with REAP grant applications. They do not, for instance, provide examples of

the operational costs they have had to incur or name a single business opportunity they have lost

after USDA allegedly changed its approach to evaluating granting applications. Without such

allegations or other clarifying statements in the Complaint or other attached materials, the Court

cannot determine what injuries the Ovanova entities are purportedly suffering. It therefore

concludes that Plaintiffs have not sufficiently substantiated their claims of economic injuries.

That leads the Court to Plaintiffs’ related suggestion that USDA’s practices harm their

reputations. Reputational harm can give rise to a cognizable injury under certain circumstances,

including if the harm causes a “loss of clients or other business” — i.e., economic injury. See

Morgan Drexen, Inc. v. CFPB,

, 692–93 (D.C. Cir. 2015). In support of their claim

of reputational injury, Plaintiffs declare that “the reputational damage resulting from project

cancellations or delays could severely impact the plaintiffs’ ability to secure future partnerships

and business opportunities, with potential losses estimated in the hundreds of millions of

dollars.” Compl., ¶ 114. Elsewhere, they complain that they have “suffered severe reputational

damage, including destruction of reputation due to presentation of failure letters, resulting in an

estimated $2 billion in losses over nine years of 100% customer satisfaction being

compromised.” Id., ¶ 122.

As with injury in fact, however, the Ovanova entities do not substantiate those figures,

explain how their stature among their industry will suffer, or explain why any reputational

damage would lead to economic loss. Nor do they provide specific allegations that they have

fallen from grace in the eyes of particular prospective clients. The Complaint hints at some

6 answers to these mysteries, but it falls well short of the detail and clarity that courts require.

Plaintiffs’ “[v]ague [and] conclusory” assertions of reputational harm are thus insufficient to

establish injury in fact. See Morgan Drexen,

.

Plaintiffs’ only fleshed-out claims of injury relate to the grant applicants themselves. The

Ovanova entities, for instance, describe specific grant denials and rescissions to certain

applicants, and they provide numerous details about how those applicants have been negatively

affected by USDA’s evaluation criteria. See, e.g., Compl., ¶¶ 66, 71, 76, 85. But regardless of

how particularized and concrete those injuries might be, they concern only Plaintiffs’ clients,

who are not involved in this lawsuit. Plaintiffs do not connect how applicants’ alleged injuries

have any bearing on whether they have standing to bring this case.

That conclusion is true notwithstanding the Ovanova entities’ fallback argument that they

should be able to assert third-party standing on behalf of the grant applicants. See ECF No. 29

(Opp.) at 8–9. To assert the rights of a third party, a plaintiff “must have a close relation to the

third party,” and “there must exist some hindrance to the third party’s ability to protect his or her

own interests.” Powers v. Ohio,

(1991). Plaintiffs assert, again in conclusory

fashion, that their relationships with REAP applicants “go beyond ordinary commercial

interactions” and are “analogous to . . . attorney-client relationships.” Opp. at 9. Nothing in

their Complaint, however, describes the nature of the Ovanova entities’ commercial

relationships, much less supports their questionable suggestions that their contractual

arrangements are more than standard vendor-vendee relationships or that the grant applicants

cannot assert their own rights. Cf. Powers, 499 U.S. at 413–15 (describing requirements for

third-party standing to be appropriate). The Court accordingly rejects Plaintiffs’ contention that

they have standing to sue on behalf of their clients.

7 While Plaintiffs’ standing problems begin with injury in fact, they do not end there. The

Complaint is also deficient in establishing that their injuries are fairly traceable to USDA’s

alleged reliance on arbitrary and capricious criteria. The Court instead is left to speculate about

the nature of the Ovanova entities’ business relationships with their clients and how USDA’s

alleged conduct might affect those relationships. Do Plaintiffs, for example, receive payment

only if the client’s grant application is approved? Alternatively, do they earn their keep by

receiving contracts to build the renewable-energy projects once their clients’ applications are

approved? Do they fear that they will lose business if word gets around that their applications

are now being rejected more frequently than applications submitted by others? If Plaintiffs have

information that would establish how USDA’s actions inflict harm on themselves — not merely

on their clients — they must provide those particulars in the Complaint.

By the same token, Plaintiffs have not demonstrated that any of their alleged injuries

would be redressed by a favorable outcome in this litigation. Based on the Complaint, there

appears to be an abundance of intermediate steps — controlled by a slew of independent third

parties — standing between USDA’s decision on a grant application and the Ovanova entities’

business operations. It is far from clear that, even were Plaintiffs to receive the relief they

request in this suit, they would be spared the economic and reputational consequences they

claim.

One could hypothesize about what Plaintiffs’ injury might be, the means by which it may

be caused by USDA’s alleged actions, and how a favorable ruling could redress that injury.

Indeed, Plaintiffs offer some suggestions in their Opposition to USDA’s Motion. The Court,

however, is “not bound to . . . accept inferences drawn by plaintiffs if such inferences are

8 unsupported by the facts set out in the complaint,” Trudeau v. FTC,

(D.C. Cir.

2006) (citations and quotations omitted), or in sworn materials attached to their Opposition.

While we must presume that general allegations embrace those specific facts which are necessary to support the claim, we are not required to fill in critical lacunae in [Plaintiffs’] allegations. This is particularly true where, as here, those facts are uniquely within [Plaintiffs’] knowledge, and therefore failure to allege them with sufficient specificity to provide notice of the precise basis for standing to maintain this suit cannot be overlooked.

Nat’l Wrestling Coaches Ass’n v. U.S. Dep’t of Educ.,

(D.D.C. 2003)

(citations and quotation marks omitted). Plaintiffs’ Complaint leaves much unanswered, and it is

not the Court’s role to fill in the blanks.

Plaintiffs, in short, must reap what they have sown. Because the Ovanova entities have

not “affirmatively” demonstrated standing in the Complaint, the Court must dismiss it for lack of

jurisdiction. FW/PBS Inc. v. City of Dallas,

(1990) (holding plaintiff carries

burden to “affirmatively” and “clearly” plead standing). Because of this conclusion, the Court

need not address Defendants’ alternative argument that Plaintiffs do not fall within the REAP

statute’s zone of interests.

B. Exhaustion and Mandamus

Even if Plaintiffs had adequately pled standing, their claims would face other obstacles.

First, as Defendants point out, Plaintiffs have not fulfilled REAP’s mandatory exhaustion

requirement. Litigants seeking to challenge grant decisions made under REAP must comply

with

(e), which provides that “a person shall exhaust all administrative appeal

procedures established by the Secretary or required by law before the person may bring an action

in a court of competent jurisdiction against” the USDA. In other words, the Ovanova entities

were obligated to pursue a set of internal USDA appeals before bringing this lawsuit in court.

9 See

(setting out appeal procedures);

pt. 11 (same). That requirement,

though “nonjurisdictional,” is undoubtedly “mandatory.” Munsell v. Dep’t of Agric.,

(D.C. Cir. 2007).

Plaintiffs do not dispute that they never satisfied the statute’s exhaustion requirement.

See Opp. at 10–12. They instead maintain that heeding that requirement would have been

“meaningless.” Id. at 10. Plaintiffs are correct that litigants can sometimes justify

noncompliance with an exhaustion provision if adherence would have been futile. But “[i]n this

Circuit, the exceptions for futility and inadequacy are narrowly construed, as the exhaustion

requirement ‘may be waived only in the most exceptional circumstances’” — which a plaintiff

bears the burden of demonstrating. Douglass v. Dist. of Columbia,

(D.D.C. 2010) (quoting Commc’ns Workers of Am. v. AT&T,

(D.C. Cir.

1994)). Such exceptional circumstances exist only when there is “certainty of an adverse

decision” and “resort to administrative remedies is clearly useless.” Commc’ns Workers of Am.,

(quotation marks omitted).

Plaintiffs allege that USDA instructed them to “bypass the appeals process” and that, in

any case, the evaluations’ outcomes were “predetermined” given the “inconsistent application of

criteria.” Compl., ¶ 41. Neither assertion is sufficient to establish futility. First, the Ovanova

entities claim that USDA instructed them to “refrain from pursuing the standard appeals process”

because “such an approach would have resulted in a significantly protracted timeline compared

to the alternative of resubmission.” Id., ¶ 36. Any such statement from USDA, however, cannot

reasonably be construed as a command to “circumvent the established appeals process,” id., ¶ 38,

by filing litigation. Nor could it be interpreted as a statement that exhaustion would certainly be

useless; instead, it simply encourages resubmission. Second, Defendants’ alleged “inconsistent

10 application of criteria,” id., ¶ 41, necessarily means that the outcome of any grant application or

appeal would be the opposite of predetermined. Indeed, elsewhere in Plaintiffs’ Complaint, they

emphasize the “uncertainty” that has been injected into the REAP application-review process.

Id., ¶¶ 73, 106, 113, 152, 159. The Ovanova entities cannot now argue that an administrative

appeal undoubtedly would have ended in failure.

Plaintiffs’ new justification raised in their Opposition — that REAP projects face such

tight deadlines that any administrative delay would sound the death knell for their viability, see

Opp. at 11–12 — also does not meet the high bar for forgiving noncompliance with an

exhaustion requirement. Even accepting arguendo Plaintiffs’ dubious premise that litigation in

the federal courts is quicker than an agency appeal, our Circuit has made clear that excusing

noncompliance is appropriate only when the outcome of an administrative appeal will certainly

be adverse — not when the appeal may well be lengthy. Plaintiffs’ APA claims thus would

topple on the merits for failure to exhaust.

As for Plaintiffs’ mandamus claim, Defendants again correctly note that the Ovanova

entities have not satisfied the stringent conditions for demonstrating entitlement to that relief. In

particular, a plaintiff can receive mandamus relief only if, among other requirements, it “has no

adequate alternate remedy.” Illinois v. Ferriero,

(D.C. Cir. 2023). As noted,

Plaintiffs are entitled to pursue administrative appeals within USDA. If they are unsuccessful,

they can bring an APA claim in court. Both are eminently adequate remedies that would provide

identical relief to what Plaintiffs seek through mandamus review. To the extent their claims are

so time sensitive that an ordinary agency appeal or APA suit would be insufficient, see Opp. at

14, Plaintiffs are free to seek emergency relief, as they have already done once, see ECF No. 5

(TRO Mot.); Minute Order of Nov. 13, 2024, and have sought again. See ECF No. 31 (PI Mot.).

11 IV. Conclusion

For the foregoing reasons, the Court will grant Defendants’ Motion to Dismiss. A

separate Order so stating will issue this day.

/s/ James E. Boasberg JAMES E. BOASBERG Chief Judge Date: January 30, 2025

12