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Northridge Bank v. Community Eye Care Center Inc.

decided: August 6, 1981.

NORTHRIDGE BANK, PLAINTIFF,
v.
COMMUNITY EYE CARE CENTER, INC., DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, V . RICHARD E. GALECKI, JONATHAN N. WEBER, JOHN G. GONIS, ARTHUR M. GREVE, SPENCER THOMAS, AND SMALL BUSINESS ADMINISTRATION, THIRD-PARTY DEFENDANTS-APPELLEES .



Appeal from the United States District Court For the Eastern District of Wisconsin No. 78-C-266 -- Terence T. Evans, Judge .

Before Cummings, Chief Judge, and Wood, Circuit Judge, and Jameson, Senior District Judge.*fn*

Author: Jameson

Community Eye Care Center, Inc. (Community) has appealed the dismissal of the federal defendants (the Small Business Administration (SBA) and two of its officers) from Community's conspiracy counterclaim and third-party complaint against appellees, which was filed in an action commenced by Northridge Bank (Bank). The case had been removed from state court. With the dismissal of the federal defendants the case was remanded to the state court for further proceedings. We affirm.

Factual and Procedural Background

Northridge Bank leased equipment to Community. The Bank filed a complaint in a Wisconsin state court alleging default on the lease agreement and seeking recovery of possession of the equipment. Community denied being in default, and alleged in turn that it had tendered rental payments due under the lease but the Bank refused to accept payment. Community also asserted a counterclaim and third-party complaint against the Bank, two of the Bank's officers, a dentist, the SBA, and two of its employees, alleging that the third-party defendants conspired to destroy its business enterprise.*fn1

The SBA removed the case to federal court. The Bank later voluntarily dismissed its complaint without prejudice. The district court retained jurisdiction over Community's conspiracy counterclaim. Several motions were filed, including motions for dismissal of third-party defendants SBA and its two employees. Community did not respond to the briefs in support of the motions to dismiss except to note that "we do not concede any of the conclusions advanced therein."

The district court concluded that the third-party complaint "falls within the scope of the Federal Tort Claims Act" (FTCA), 28 U.S.C. § 2671 et seq. Since Community had not complied with the requirement of 28 U.S.C. § 2401(b) that any tort claim against the United States must be presented to the administrative agency within two years, the action against the SBA was dismissed. The court also dismissed the two SBA employees because they were acting within the scope of their employment and there was no consent to sue and be sued that applied to them. With the dismissal of all of the federal defendants there was no basis for federal jurisdiction, and the case was remanded to the state court.

Contentions on Appeal

Appellant contends that (1) 15 U.S.C. § 634(b)(1), rather than the Federal Tort Claims Act, is controlling and provides subject matter jurisdiction over the third-party claim; (2) in the alternative, if the court construes the FTCA to encompass all tort claims, the third-party claim exception applies and presentation of the claim to the SBA, pursuant to the "exhaustion" requirement of 28 U.S.C. § 2675, was unnecessary; and, (3) there is "consent to be sued" against the SBA officials, and there is no exhaustion requirement as to them.

Effect of 15 U.S.C. § 634(b)(1)

Congress waived sovereign immunity for suits against the SBA in 15 U.S.C. § 634(b)(1):

(b) In the performance of, and with respect to, the functions, powers, and duties vested in him by this chapter the Administrator may

(1) sue and be sued in any court of record of a State having general jurisdiction, or in any United States district court, and jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; ...

Community contends that because this waiver is more specific and came later than the FTCA, it is controlling with respect to jurisdiction. Community therefore argues that it does not have to meet the requirements of the FTCA to ...


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