General Ry. Signal Co. v. Corcoran

• Decision Date: 03 January 1991
• Docket Number: No. 90-1861,90-1861
• Citation: 921 F.2d 700
• Parties: GENERAL RAILWAY SIGNAL COMPANY, Plaintiff-Appellee, v. James P. CORCORAN, Superintendent of Insurance of the State of New York, as Liquidator for American Fidelity Fire Insurance Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 700

921 F.2d 700

GENERAL RAILWAY SIGNAL COMPANY, Plaintiff-Appellee, v. James P. CORCORAN, Superintendent of Insurance of the State

of New York, as Liquidator for American Fidelity

Fire Insurance Company, Defendant-Appellant.

No. 90-1861.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 24, 1990.

Decided Jan. 3, 1991.

Martin M. Ruken, Andrew M. Gardner, Allan E. Lapidus, Stuart D. Kenney, Vedder, Price, Kaufman & Kammholz, Chicago, Ill., for plaintiff-appellee.

Lori A. Goldstein, William I. Goldberg, Michael A. Berman, Martin H. Redish, Holleb & Coff, Chicago, Ill., for defendant-appellant.

Before CUMMINGS, WOOD, Jr. and RIPPLE, Circuit Judges.

CUMMINGS, Circuit Judge.

The plaintiff, General Railway Signal Company ("General Railway"), brought an interpleader action in district court asking the court to decide which of two claimants, James P. Corcoran, the Superintendent of Insurance of the State of New York ("Corcoran") and Liquidator for American Fidelity Fire Insurance Company ("AFFI"), or Susan S. Engeleiter, the Administrator of the United States Small Business Administration ("SBA"), is entitled to the interpled fund. The fund consists of $1,070,000 that an Illinois state court previously decided General Railway owed to the Superintendent. Plaintiff asserted subject matter jurisdiction under the federal interpleader statute, 28 U.S.C. Sec. 1335, and asked the court to adjudicate the claimants' rights to the fund. After an ex parte hearing, it obtained a temporary restraining order enjoining the Superintendent from attempting to collect the Illinois state judgment pending the outcome of the federal court action. 28 U.S.C. Sec. 2361 authorizes the issuance of an injunction when the requirements of Section 1335 are met.

The issue before this Court is whether jurisdiction was properly asserted under Section 1335 so as to support the entry of an injunction under Section 2361. The Superintendent appeals two orders denying his motions to vacate the temporary restraining order. Section 1335 requires complete diversity amongst at least two claimants in the interpleader action. In the Superintendent's view, no diversity exists between the two claimants in this case, the SBA and the Superintendent, because the SBA, as an agency of the United States, is a citizen of no state and therefore cannot be sued in diversity. We agree that this case cannot properly be brought under Section 1335. Because the plaintiff must meet the requirements of Section 1335 to obtain an injunction under Section 2361, we vacate the injunction entered by the district court.

I.

The underlying facts are easily stated and are not disputed by the parties for the purposes of this appeal. In 1981, AFFI filed suit against General Railway in Illinois state court, claiming that General Railway had breached a contract with Transit Systems Technology, Inc. ("Transtec"). This breach caused AFFI, as surety on two performance bonds given by Transtec and issued in favor of Transtec's clients, to pay $803,500 to Transtec's clients. AFFI sought in state court to recover from General Railway the amounts AFFI had paid to Transtec's clients.

The trial court, after a jury verdict in favor of AFFI, entered judgment for AFFI on February 17, 1987, in the amount of $827,047 plus post-judgment interest. The Appellate Court of Illinois affirmed the judgment on June 9, 1989. American Fidelity Fire Ins. Co. v. General Railway Signal Co., 184 Ill.App.3d 601, 132 Ill.Dec. 817, 540 N.E.2d 557 (1st Dist.), appeal denied, 127 Ill.2d 611, 136 Ill.Dec. 580, 545 N.E.2d 104 (1989).

The SBA had entered into Surety Bond Guarantee Agreements with AFFI in connection with the performance bonds issued by Transtec. In these contracts, the SBA agreed to reimburse AFFI for portions of payments made on the Transtec performance bonds. Under the Surety Bond Guarantee Agreements, the SBA paid $732,872 to AFFI to reimburse AFFI for its payments to Transtec's clients. The agreements also obligated AFFI to pursue all possible sources of recovery. They entitled the SBA to a pro rata share of the "net proceeds" of any recovery "within 90 days of actual receipt by the Surety."

Before the Superintendent could collect his judgment from General Railway, the SBA notified General Railway that it was claiming the proceeds of the Illinois state court judgment under its Surety Bond Agreements with AFFI. General Railway filed this interpleader action in federal court on December 19, 1989, asserting that it was subject to multiple liability on the same funds. The sole basis of subject matter jurisdiction identified in the complaint was 28 U.S.C. Sec. 1335. General Railway interpled the SBA and the Superintendent, who had been named liquidator of AFFI after it became insolvent in 1985. General Railway posted a bond of $1,070,000. On the same day it filed this claim, it invoked Section 2361 to obtain an order enjoining the Superintendent from trying to collect the Illinois state court judgment.

The Superintendent appeals from two orders of the district court, dated March 21, 1990, 735 F.Supp. 265, and April 2, 1990, refusing to dissolve the injunction. The SBA is not a party to this appeal.

II.

The district court entered its injunction against the Superintendent under Section 2361. That section provides:

In any civil action of interpleader or in the nature of interpleader under section 1335 of this title, a district court may issue its process for all claimants and enter its order restraining them from instituting or prosecuting any proceeding in any State or United States court affecting the property, instrument, or obligation involved in the interpleader action until further order of the court. 28 U.S.C. Sec. 2361.

Section 2361 enables a plaintiff meeting the requirements of Section 1335 to obtain a restraining order without following the procedures set forth in Fed.R.Civ.P. 65, which normally governs the issuance of injunctive relief. See Fed.R.Civ.P. 65(e) ("These rules do not modify * * * the provisions of Title 28, U.S.C., Sec. 2361."). Section 1335 confers subject matter jurisdiction over an interpleader action when the amount in controversy is $500 or more and the case involves "two or more adverse claimants of diverse citizenship as defined in section 1332 of this title...." 28 U.S.C. Sec. 1335.

The injunction entered by the district court must be vacated because the requirements of Section 1335 have not been met. Susan Engeleiter, who is named as the defendant in her official capacity as administrator of the SBA, is a citizen of no state for diversity purposes. ¹

The parties agree that the United States is not a citizen for diversity purposes, Lummis v. White, 629 F.2d 397, 402 (5th Cir.1980), reversed on other grounds, 457 U.S. 85, 102 S.Ct. 2325, 72 L.Ed.2d 694, and that agencies of the United States likewise cannot be sued in diversity. Texas v. Interstate Commerce Commission and Railroad Labor Board, 258 U.S. 158, 160, 42 S.Ct. 261, 262, 66 L.Ed. 531 (no diversity jurisdiction over ICC and Railroad Labor Board, since they "are not citizens of any State, but have the same relation to one State as to another."); Koppers Co. v. Garling & Langlois, 594 F.2d 1094 (6th Cir.1979) (no diversity jurisdiction over claim against U.S. Department of Housing and Urban Development); Weeks Construction, Inc. v. Oglala Sioux Housing Authority, 797 F.2d 668 (8th Cir.1986) (same); Hancock Financial Corporation v. Federal Savings and Loan Insurance Corporation, 492 F.2d 1325 (9th Cir.1974) (no diversity jurisdiction over claim against U.S. FSLIC). Federal jurisdiction over a suit against an agency of the United States is proper when, for example, federal questions exist or when the agency chooses to remove a case brought initially in state court against an agency official, see 28 U.S.C. Sec. 1442(a). U.S. agencies cannot be sued in diversity, however.

The question is whether this suit, which names agency administrator Susan Engeleiter as defendant rather than the SBA, is equivalent to a suit against the agency or the United States. General Railway cites Trans-Bay Engineers & Builders, Inc. v. Hills, 551 F.2d 370 (D.C.Cir.1976), for the proposition that an agent of the United States, when sued in her official capacity, is considered a citizen of the state in which her agency is located. In Trans-Bay, the court held that diversity jurisdiction existed over a claim between Trans-Bay and Carla Hills, then the Secretary of Housing and Urban Development. The court stated that for diversity purposes, Carla Hills resided in the District of Columbia.

Trans-Bay itself is devoid of any reasoning which might justify viewing a suit against an agency administrator in her official capacity differently than a suit against the agency itself for diversity purposes. Plaintiff propounds a theory for making such a distinction. 15 U.S.C. Sec. 634(b)(1) provides that "the Administrator may * * * sue and be sued in any court of record of a State having general jurisdiction, or in any United States district court." Plaintiff believes that the statute singles out the Administrator as the prospective litigant to emphasize the "unique independence" (Br. at 4) of the administrator of the SBA, as opposed to administrators of other agencies. Because the Administrator is independent even of her own agency, General Railway argues that she should be regarded as a citizen of the District of Columbia, even if her agency is not.

We decline to interpret Section 634(b)(1), which waives sovereign immunity and establishes federal question jurisdiction over contract suits brought by and against the Administrator, ² to contain any implicit commentary on the propriety of asserting diversity jurisdiction over the SBA. The naming of the SBA administrator rather than the SBA as the party amenable to suit in a statute drafted to waive sovereign immunity cannot be imbued with special significance because, for sovereign...