Palmer v. Weaver, Civ. A. No. 79-4564.

• Decision Date: 16 April 1981
• Docket Number: Civ. A. No. 79-4564.
• Citation: 512 F. Supp. 281
• Parties: Harold H. PALMER v. Honorable A. Vernon WEAVER, In His Capacity as Administrator, U.S. Small Business Administration et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

512 F. Supp. 281

Harold H. PALMER v. Honorable A. Vernon WEAVER, In His Capacity as Administrator, U.S. Small Business Administration et al.

Civ. A. No. 79-4564.

United States District Court, E. D. Pennsylvania.

April 16, 1981.

Harold Palmer pro se.

Antoinette R. Stone, Asst. U. S. Atty., Eastern District of Pa., Philadelphia, Pa., for defendant.

MEMORANDUM

SHAPIRO, District Judge.

Plaintiff, Harold H. Palmer, brings this action against A. Vernon Weaver in his capacity as Administrator of the Small Business Administration ("SBA") and against various SBA officials¹ in their official capacities and alleges that the SBA's denial of his requests for a small business loan was unlawful. Plaintiff invokes the court's jurisdiction pursuant to Section 25(b)(1) of the Small Business Act, 15 U.S.C. § 634(b)(1) (1976) and seeks injunctive and declaratory relief, money damages, costs and attorney's fees.

Defendants, moving for dismissal or, in the alternative, for summary judgment, assert that the standard of review by district courts of SBA decisions is circumscribed and that judicial intervention is inappropriate here. Because affidavits and counter-affidavits as well as the motion papers have been submitted to and reviewed by the court, defendants' motion will be considered a motion for summary judgment under Fed. R.Civ.P. 56. See, Fed.R.Civ.P. 12. Defendants' motion is granted.

Plaintiff, a thirty-six year old black male, filed three loan applications with SBA between April, 1978 and November, 1979 to secure capital to open and operate a card and gift shop. All three applications were refused.

Palmer requested a SBA loan in the amount of $36,500 on April 14, 1978. The parties differ as to what next occurred. Defendants assert that Palmer's original application² contained several deficiencies which, unless corrected, would preclude the offer of a SBA loan, that he was so informed by letter of May 11, 1978,³ and that the deficiencies were not cured by Palmer's May 14th letter in response which was received May 16; Palmer avers that he never received that or any other "deficiency notice."⁴ Palmer asserts that his loan application was denied by letter dated May 6, 1978⁵ and that the defendants could not have given his request the consideration required by law in the time between the application of April 14 and the denial on May 6. Defendants aver that the letter of denial was actually sent on June 6, 1978 and that the May 6 date was a typographical error.⁶ Regardless of the actual date, the reasons for refusal given were:

a. Lack of reasonable assurance that the business can be operated at a rate of profit sufficient to repay the loan and other obligations from earnings.

b. Disproportion of loan requested and of debts to tangible net worth before and after the loan.

c. Gross disproportion between owner's actual investment and loan requested.⁷

Palmer applied for reconsideration of the initial loan request in June, 1978. Upon reconsideration, his loan request was again declined.⁸ Thereafter, upon Palmer's oral request the SBA entertained his letter of July 14, 1978 as an appeal to the District Director. Again, the situation was reviewed but SBA continued to find management deficiencies in his proposal. Robert B. Silikovitz, Assistant District Director for the Finance and Investment Division of SBA in Philadelphia, states by affidavit that he and the District Director, William T. Gennetti, met with Mr. Palmer on September 25, 1979 to explain the reasons for the loan denial and to suggest that Mr. Palmer obtain help in preparing his application from a business development organization. Mr. Silikovitz avers that he called such an organization on Mr. Palmer's behalf, that assistance was available but that Palmer did not utilize this service.

Countering, Palmer attests that, "at no time did any person from Small Business Administration attempt to assist me in the establishment of this business venture or otherwise. When I went to the Service Core of Retired Executives (SCORE), as suggested by SBA, I received no help from anyone."⁹

Mr. Palmer filed a second loan request, in July, 1979. This application, requesting a $22,500 loan, was reviewed by Daniel M. Sossaman who noted several deficiencies.¹⁰ Minority Small Business Representative Henry P. Murphy also reviewed this application and agreed with the decision to decline.¹¹ This request was declined on August 6, 1979 by Carole A. Scheck, Chief of the Financing Division; her reasons were supplied by affidavit submitted to the court.¹²

In October, 1979, Mr. Palmer filed a third loan application which requested $26,500. Again this request was reviewed by Scheck and Murphy who determined that there were the same credit deficiencies as in previous applications;¹³ this request was denied by letter of November 20, 1979.¹⁴

Plaintiff brings this action under § 25(b) of the Small Business Act, 15 U.S.C. § 634(b)(1) which, in relevant part, provides:

(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 United States District Court, and jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Administrator or his property.

This provision waives sovereign immunity by allowing the Administrator to be sued and confers jurisdiction on this court to hear such suits. See, Expedient Services, Inc. v. Weaver, 614 F.2d 56 (5th Cir. 1980). Section 634, however, by its own terms, denies district courts the authority to enjoin the SBA Administrator. ("no ... injunction ... shall be issued against the Administrator or his property.") Federal courts have consistently held that this provision precludes the issuance of an injunction against the Administrator because the court has no subject matter jurisdiction and therefore no power to order such relief. E. g., Expedient Services, Inc., supra; Mar v. Kleppe, 520 F.2d 867 (10th Cir. 1975); Little v. United States, 489 F.Supp. 1012 (C.D.Ill. 1980); Copake Lake Development Corp. v. United States, 490 F.Supp. 386 (E.D.N.Y. 1980); Murray v. Kleppe, 424 F.Supp. 108 (M.D.Pa.1977).¹⁵

Plaintiff seeks, in part, injunctive relief to remedy the alleged unlawful denials of his loan applications. The complaint prays that the court "enter a final judgment ordering the defendant to process a new loan application request to be submitted by plaintiff and to give said application the consideration required by law...." Plaintiff is clearly asking for a mandatory injunction by the terms of his request for relief. Because the statute upon which plaintiff bases jurisdiction expressly precludes such relief, as do the cases construing that statutory provision, plaintiff's complaint insofar as it seeks injunctive relief must be dismissed.

But plaintiff also requests relief declaring that defendants failed to give plaintiff's loan application request the consideration required by law in violation of the Small Business Act and awarding money damages of $50,000¹⁶ together with fees and costs of the action.

Where an action framed by plaintiff as one for declaratory relief under § 634(b)(1) is equivalent to the injunctive relief barred by the statute, it has been dismissed. See, Expedient Services, Inc. v. Weaver, 614 F.2d 56 (5th Cir. 1980) (plaintiff's request to have the agency decision set aside was essentially a request for an injunction preventing the agency from continuing to enforce its decision); Copake Lake Development Corp. v. United States, 490 F.Supp. 386, 390 (E.D.N.Y.1980) (where "heart of the action" was plaintiff's claim for a loan in an increased amount, there was no subject matter jurisdiction).

However, the instant case is not a demand for an injunction disguised as a prayer for declaratory relief but is a true request for declaratory relief and damages. Section 636(b), consenting to suits against the Small Business Administrator, neither excepts declaratory relief nor actions for money damages. Several cases have upheld plaintiffs' right to bring suit against the Administrator for declaratory relief. E. g., Mar v. Kleppe, 520 F.2d 867 (10th Cir. 1975); Little v. United States, 489 F.Supp. 1012 (C.D.Ill.1980); S.C.L.C. v. Connolly, 331 F.Supp. 940 (E.D.Mich.1971); Pottharst v. SBA, 329 F.Supp. 1142 (E.D.La.1971); American Electric v. United States, 270 F.Supp. 689 (D.Haw.1967); but see, Murray v. Kleppe, 424 F.Supp. 108 (M.D.Pa.1977) (Court finds no jurisdiction under § 634(b)(1) to provide injunctive or "other similar relief;" plaintiff's action for declaratory relief dismissed).

The right to bring an action for money damages against the Administrator has been repeatedly upheld. E. g., Mar v. Kleppe, supra (money damages claimed for alleged SBA breach of an oral agreement with lease guarantors); Romeo v. United States, 462 F.2d 1036 (5th Cir. 1972) (money damages claimed where SBA rescinded plaintiff's disaster loan); Little v. United States, supra (money damages sought where SBA allegedly improperly denied plaintiff's applications for certification in minority business program); Raitport v. Small Business Administration, 380 F.Supp. 1059 (E.D.Pa.1974) (money damages sought where SBA denied plaintiff's loan application in allegedly arbitrary and discriminatory fashion); Simpkins v. Davidson, 302 F.Supp. 456 (S.D.N.Y.1969) (money damages sought where SBA refused to make loan to plaintiff, a small businessman).

Therefore, this court has jurisdiction to consider plaintiff's claims for declaratory relief and money damages. But the applicable standard of review of a loan denial by SBA, clearly and consistently applied by the courts, is whether the agency action was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with...