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HUGHES v. UNITED STATES

United States District Court, Northern District of Illinois, E.D


February 23, 1982

HAROLD B. HUGHES AND NANCY J. HUGHES, PLAINTIFFS,
v.
UNITED STATES OF AMERICA AND JOSEPH MELTZER AND THE DES PLAINES NATIONAL BANK, DEFENDANTS.

The opinion of the court was delivered by: Moran, District Judge.

MEMORANDUM AND ORDER

In their amended complaint plaintiffs Harold and Nancy Hughes ("the Hugheses") seek recovery against the United States under the Federal Tort Claims Act, 28 U.S.C. § 2671 et seq., claiming that as a result of the United States involvement with Joseph Meltzer, also a defendant in this action, they suffered significant loss of income and harm to their reputations. The government has moved to dismiss or in the alternative for summary judgment, maintaining, among other things,*fn1 that the amended complaint, filed after the statute-of-limitations period ran, does not "relate back" to the date the original complaint was filed, and hence is untimely. For the reasons stated below, we reluctantly agree, and the United States is stricken from the complaint.

The underlying controversy concerns an alleged "sting" operation — nicknamed "Son of Abscam" by the press — run by Joseph Meltzer and aided in various ways by the Federal Bureau of Investigation ("FBI"). Neither party disputes that Meltzer was employed by the FBI as an informer, although the exact nature of his duties is, to say the least, unclear. At some point in this relationship, plaintiffs maintain, Meltzer learned that the FBI had created a fictitious investment firm named Abdul Enterprises, and a fictitious sheik named Kambler Abdul Rahman, to assist them in a congressional bribery probe, popularly known as Abscam.

On the basis of such information gleaned from the FBI, Meltzer devised a scheme whereby he presented himself to the plaintiffs as the president of a company, Foreign Investment Groups, Ltd., which he claimed was owned or controlled by a Saudi Arabian sheik. Induced by Meltzer's representations, the Hugheses entered into a financing plan with Foreign Investment Group, Ltd. to manufacture and sell equipment for the cable television industry. As a precondition to such an arrangement, however, Meltzer demanded $5,000 earnest money, and he encouraged the plaintiffs to call the FBI to verify the legitimacy of his company before paying the fee. The FBI, plaintiffs allege, vouched for Meltzer and the Foreign Investment Group;*fn2 satisfied by the FBI's assurances, the Hugheses eventually paid out $10,000 before the "sting" came to light. In addition to the lost money, plaintiffs allege that they have lost future income and profits, were forced to file for bankruptcy, and suffered embarrassment, humiliation and loss of esteem in their community and business relations.

As required under the Federal Tort Claims Act, plaintiffs submitted a claim for $32,754.73 in damages to the FBI, who referred it to the Department of Justice. On November 14, 1980, the agency denied the claim but informed the Hugheses that if they so desired they could file suit in an appropriate United States District Court no later than six months from the date of the letter. Accordingly, the Hugheses filed pro se their initial complaint on May 13, 1981, in which they sued only the United States Department of Justice and the FBI. Service of process on these agencies occurred thirteen days later, on May 26, 1981. Subsequently, plaintiffs retained counsel, and on August 21, 1981 an amended complaint naming the United States, Joseph Meltzer and the Des Plaines National Bank was filed.*fn3

The applicable statute of limitations for commencement of an action against the United States under the Federal Tort Claims Act, 28 U.S.C. § 2401(b), provides:

    A tort claim against the United States shall be
  forever barred unless it is presented in writing
  to the appropriate Federal agency within two years
  after

  such claim accrues or unless action is begun
  within six months after the date of mailing, by
  certified or registered mail, of notice of final
  denial of the claim by the agency to which it was
  presented.

In their motion to dismiss, the government contends that plaintiffs failed to bring suit in a timely manner for two reasons. First, although the complaint was filed within the statute-of-limitations period, it was served almost two weeks after the period ran and therefore was not timely. Second, the original complaint did not name the United States as a party, and later amendments cannot relate back to cure this defect when no notice was received within the statutory time limit. The former argument can be summarily rejected; the latter merits more detailed discussion.

Without citing any case law or statutory language to support their position, defendants baldly assert that "filing a complaint does not suffice to initiate an action within six months under 28 U.S.C. § 2401(b). Actual service within the six-month period is imperative to toll the statute." Contrary to defendant's insistence, an action is begun, at least for purposes of § 2401(b), by the filing of a verified complaint. See Bates Manufacturing Co. v. United States, 303 U.S. 567, 572, 58 S.Ct. 694, 696, 82 L.Ed. 1020 (1938). Cf. McGowan v. Williams, 623 F.2d 1239 (7th Cir. 1980); Steele v. United States, 599 F.2d 823 (7th Cir. 1979). Since no one questions that the original complaint was filed within the statute-of-limitations period, no jurisdictional problems are presented solely by the fact that service occurred outside the period.

Resolving the government's second argument, that the amendment naming the United States as a defendant does not relate back to the time of filing, and thus the court lacks jurisdiction over the government, poses greater difficulties. Under the Federal Tort Claims Act a federal agency cannot be sued in its own name and the action must be brought against the United States despite the authority of an agency to sue or be sued. See Stewart v. United States, et al., 503 F. Supp. 59 (N.D.Ill. 1980), aff'd 659 F.2d 1084 (7th Cir. 1981). Since plaintiffs failed to name the United States as a party until many months after the limitation period had passed, the action against the United States can be maintained only if the amended complaint is held to "relate back" to the date of the original complaint. Federal Rule of Civil Procedure 15(c) provides the standards for determining when an amendment relates back:

  Whenever the claim or defense asserted in the
  amended pleading arose out of the conduct,
  transaction or occurrence set forth or attempted
  to be set forth in the original pleading, the
  amendment relates back to the date of the original
  pleading. An amendment changing the party against
  whom a claim is asserted relates back if the
  foregoing provision is satisfied and, within the
  period provided by law for commencing an action
  against him, the party to be brought in by
  amendment (1) has received such notice of the
  institution of the action that he will not be
  prejudiced in maintaining his defense on the
  merits, and (2) knew or should have known that, but
  for a mistake concerning the identity of the proper
  party, the action would have been brought against
  him. (Emphasis added.)

Defendants, noting the maxim that a waiver of sovereign immunity under the Federal Tort Claims Act is to be strictly construed, contend that the amendment cannot relate back to the time the complaint was filed because the first time the United States received notice concerning the institution of a lawsuit occurred on May 26, 1981 (when the complaint was served on the agencies) — beyond the six-month statute-of-limitations period.

If we were writing on a "blank slate," we would reject such an approach, finding instead that "under Rule 15(c), the period within which the `party to be brought in' must receive notice of the action includes the reasonable time allowed under the Federal Rules for service of process. We think this interpretation is permissible and desirable and carries out the beneficent purpose of the 1966 amendments." Ingram v. Kumar, 585 F.2d 566, 571 (2d Cir. 1978), cert. denied, 440 U.S. 940, 99 S.Ct. 1289, 59 L.Ed.2d 499 (1979). As the Second Circuit recently explained:

    Although on its face the phrase "within the
  period provided by law for commencing the action
  against him," seems to mean the applicable statute
  of limitations period, such a literal
  interpretation is unjustified in jurisdictions
  where timely service of process can be effected
  after the statute of limitations has run. In those
  jurisdictions, even an accurately named defendant
  may not receive actual notice of the action
  against him prior to the running of the statute of
  limitations. Yet there is no doubt that the action
  against him is timely. There is no reason why a
  misnamed defendant is entitled to earlier notice
  than he would have received had the complaint
  named him correctly.

Ingram v. Kumar, supra, at 571.

The anomaly of dismissing an action which "against the original defendant . . . would be considered timely brought despite the delayed service," Kaplan, "Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (1)," 81 Harv.L.Rev. 356, 410 n. 204 (1967) is all the greater when, for all practical and legal purposes, the original party and the party to be brought in are identical. In the case at bar, whether the United States or the Department of Justice is named as the defendant, the same person is served, the same party appears in court, and the same entity bears the risk of loss.*fn4

Although the court in Ingram dealt with a mistake in the name of a private party, no greater burden is imposed under 15(c) because the error concerns the federal government. While prior to the 1966 Amendments some courts had been more reluctant to relate back amendments in actions against the United States than in suits between private parties because of the principle that any waiver of sovereign immunity be strictly construed, the amendments remove this inhibition, "guaranteeing to a plaintiff at least the same liberal treatment when he sues the federal government that he would receive if the defendant were a private party." 3 J. Moore, Federal Practice ¶ 15.15 at 15-234 n. 25.

  But, unfortunately, this court is constrained by the dictates
of the Seventh Circuit on this issue, spelled out in
Stewart v. United States, 655 F.2d 741 (7th Cir. 1981). In that
case, which is factually indistinguishable from the one at
bar,*fn5 the Court declared that:

   . . Relation back under 15(c) requires, however,
  that actual notice be received by the Government
  within the period provided by law for commencing
  the action. That notice must comply with Rules
  4(d)(4) and (5). No notice, formal or informal,
  occurred during the limitations period here.
  Having elected to file suit on the last day of the
  limitations period, plaintiff requests us to add
  to that period a "reasonable time" for service of
  process. We cannot expand the fully adequate six
  month period established by Congress. At 742
  (citations omitted).

Accordingly, the motion to dismiss the government is, most reluctantly, granted.


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