The opinion of the court was delivered by: Bua, District Judge.
The Seventh Amendment to the United States Constitution
provides that "In suits at common-law, where the value in
controversy shall exceed twenty dollars, the right to a trial
by jury shall be preserved." Fed.R.Civ.P. 38 allows a party to
demand a jury trial as to issues "triable of right by a jury."
It is well established that the Seventh Amendment right does
not apply in actions against the Federal Government.
Lehman v. Nakshian, 453 U.S. 156, 160, 101 S.Ct. 2698, 2701, 69
L.Ed.2d 548 (1981). A plaintiff in such an action has a right
to a trial by jury only where Congress has affirmatively and
unambiguously granted that right by statute. Id.
Thus the issue in the instant suit crystallizes to whether
this is an action against the United States, requiring a
statutory entitlement to a jury trial, or an action against a
private insurer where the Seventh Amendment would grant
plaintiff a right to a jury trial. In order to answer this
question, it is necessary to analyze the background of the
The National Flood Insurance Act established the National
Flood Insurance Program (the "NFIP") to provide low-cost flood
insurance to high-risk areas. Congress found that it was
uneconomical for the private insurance industry alone to make
flood insurance available to certain areas. It was also found
that a program with large-scale participation by the Federal
Government was feasible. This program was to be carried out to
the maximum extent practicable by the private insurance
industry. 42 U.S.C. § 4001(b). The Act outlined two alternative
methods of implementing the program.
First, Part A of the Act set up an industry program with
Federal financial assistance. Under Part A, the National Flood
Insurance Association (the "NFIA"), an unincorporated
association of 132 private insurance companies, shared the
financial risk of flood insurance losses with the United
States Department of Housing and Urban Development ("HUD").
NFIA issued policies in its own name and marketed and serviced
them through local insurance agents. NFIA v. Harris,
444 F. Supp. 969, 970 (D.D.C. 1977).
In 1976, NFIA and HUD began to disagree over the operation
of the program. Id. at 970-971. In November, 1977, after
prolonged negotiations with NFIA, HUD determined that the
program would be materially assisted by the Federal
Government's assumption of the operational responsibilities for
flood insurance under Part B of the Act. The Secretary of HUD
communicated her intention to switch to a Part B framework to
Congress as required by 42 U.S.C. § 4071(b). 42 Fed.Reg. 58569
Under Part B of the Act, HUD is authorized to use the
facilities of the Federal Government to provide flood
insurance coverage. 42 U.S.C. § 4071(a). HUD took over the
program on January 1, 1978. After that date, all policies were
to be considered policies issued by the Federal Insurance
Administration. 44 C.F.R. § 61.15 (1982). All of HUD's
responsibilities under the program were subsequently
transferred to the Director of the Federal Emergency Management
The extent of the Federal Government's present participation
in the NFIP has increased since the switch to Part B. Under
Part A of the Act, the NFIA was the entity which provided the
risk capital, sold the insurance, and paid any claims. HUD was
authorized to make payments to the pool to subsidize premium
rates and to arrange for reinsurance of the pool if necessary.
See Pennsylvania v. NAFI, 520 F.2d 11 (3rd Cir. 1975). Under
Part B, however, operational responsibility for the program was
transferred first to HUD and then to FEMA. The statute
authorizing the Part B framework,
42 U.S.C. § 4071, authorizes the use of insurance companies as
fiscal agents of the United States and the use of officers and
employees of HUD. Although HUD's report to Congress indicated
that private sector insurers were to be used to "the maximum
extent practicable" under the Part B framework, 42 Fed.Reg.
58573 (1977), the report also indicated that the private
insurers were to be used exclusively on the fiscal
agent-contractor basis rather than as the pool of insurers they
were previously. Id.
Thus under the Part A framework, the NFIA was essentially a
private insurance company, and a jury trial in a suit against
it was proper. A suit against NFIA was not a suit against the
Federal Government. In West v. Harris, 573 F.2d 873 (5th Cir.
1978), a case brought under the Part A framework, trial was
before a jury. In discussing the awarding of prejudgment
interest, the Court stated its belief that NFIA was not an arm
of the sovereign but an association of private insurers. The
Court also found that the fact that the government had a
financial stake in the program did not clothe NFIA with
sovereign immunity. This conclusion was reinforced by Part A's
jurisdictional provision which stated that "the claimant . . .
may institute an action . . . against such company or other
insurer . . ." 42 U.S.C. § 4053.
Under the present Part B framework, however, the Federal
Government's participation is greatly increased. While the
exact extent of the role played by private insurers under Part
B is unclear, it seems that the Federal Government has assumed
most of the responsibility for the operation of the program.
A suit against the director of FEMA is therefore a suit
against the Federal Government. In Possessky v. NFIA,
507 F. Supp. 913 (D.N.J. 1981), the Court, in interpreting Part B's
jurisdictional provision to permit exclusive federal
"The suit against the Director of the FEMA under
Section 4072 is subject to the limited waiver of
sovereign immunity. The plaintiffs are
challenging the federal agency's final action
denying their claim for benefits under an
exclusively federal program. If the plaintiffs
are successful, the judgment is paid from the
public funds of the United States, which is the
hallmark of the application of sovereign
Id. at 915. This language supports this Court's conclusion.
Further support is provided by the separate jurisdictional
provision for Part B which states, "the claimant . . . may
institute an action . . . against the Secretary . . .".
42 U.S.C. § 4072.
Thus, this Court holds that, because the case at bar is a
suit against the Federal Government, the Seventh Amendment
right to a trial by jury does not apply. Lehman v. Nakshian,
453 U.S. at 160, 101 S.Ct. at 2701. Inasmuch as Congress has
not granted an entitlement to a jury trial under 42 U.S.C. § 4072
or any other provision, the plaintiffs in this case ...