Rheams v. Bankston, Wright & Greenhill

• Decision Date: 21 February 1991
• Docket Number: Civ. A. No. SA-88-CA-971.
• Citation: 756 F. Supp. 1004
• Court: U.S. District Court — Western District of Texas
• Parties: Felix Charles RHEAMS, Plaintiff, v. BANKSTON, WRIGHT & GREENHILL, et al., Defendants.

756 F. Supp. 1004

Felix Charles RHEAMS, Plaintiff, v. BANKSTON, WRIGHT & GREENHILL, et al., Defendants.

Civ. A. No. SA-88-CA-971.

United States District Court, W.D. Texas, San Antonio Division.

February 21, 1991.

Earle E. Cobb, Jr., San Antonio, Tex., for plaintiff.

George H. Spencer, Jr., Clemens & Spencer, San Antonio, Tex., David W. Dixon, Federal Reserve Bank of Dallas, Legal Dept., Dallas, Tex., and James M. Hill, Jr., Small, Craig & Werkenthin, San Antonio, Tex., for defendants.

ORDER

PRADO, District Judge.

On this date the Court considered the Motion to Reconsider, filed on February 5, 1991, by Timothy Heup, Scott Gesell, Glenn Seeley, Jim Smith, and Robert Torres (the "Defendants").¹ In this Motion Defendants request that the Court vacate its Order of January 31, 1991 (the "Order"), in which the Court determined that it lacked subject matter jurisdiction in this case and remanded the case to state court for further proceedings. For the reasons set forth below, the Court finds that the Defendants' Motion is without merit and should therefore be denied.

Background

The Plaintiff originally filed this case in state court asserting various state-law tort claims including misrepresentation, tortious interference with contract, defamation, negligence, bad faith and wrongful discharge. The Defendants filed a Petition for Removal, asserting three separate grounds for federal jurisdiction. At a hearing on January 31, 1991, the Court ruled orally that the Plaintiff had failed to state a claim on which relief could be granted with respect to the allegations contained in the Plaintiff's First Amended Original Petition, paragraph VII, entitled "Conspiracy to Violate Civil Rights."² The Court also ruled that it lacked subject matter jurisdiction over the remaining claims and therefore was required to remand the case to state court.

In their Motion to Reconsider, the Defendants do not object to the Court's ruling dismissing the Plaintiff's civil rights claims, nor do they contest the Court's finding that jurisdiction was not established under 28 U.S.C. § 1442(a)(1). Therefore, these portions of the Court's Order are not at issue.

The Defendants oppose remanding the case, however, and urge two arguments in support of their position. First, they argue that the Court erred in finding that the Defendants' employer, the Federal Home Loan Bank of Dallas, is not a "federal agency" as defined in 28 U.S.C. § 2671, for purposes of jurisdiction under 28 U.S.C. § 1346(b). Second, they argue that federal question jurisdiction exists in this case because "the majority, if not all of Plaintiff's claims, are premised on the Bank's actions of terminating the Plaintiff's employment ... and ... the case will be resolved, to a large measure, by construing a federal statute, specifically, 12 U.S.C. § 1432(a)."³ Motion to Reconsider and Supporting Brief, filed February 5, 1991, at 6.

Federal Agency Issue

The Defendants argue that this Court erred in finding that the Defendants' employer, the Federal Home Loan Bank of Dallas, is not a "federal agency" as defined in 28 U.S.C. § 2671, and that its employees are not employees of the government for purposes of jurisdiction under 28 U.S.C. § 1346(b).

The Court notes that when a lawsuit is brought against an employee of the government pursuant to 28 U.S.C. § 1346(b), the Attorney General of the United States is required to defend the lawsuit. In fact, there is a specific procedure, set forth in 28 U.S.C. § 2679, that must be followed in "any civil action or proceeding brought in any court against any employee of the Government" under 28 U.S.C. § 1346(b). (Emphasis added). Pursuant to this procedure, when an employee of the government is sued, he is required to deliver the suit papers served on him to his immediate supervisor. The supervisor must then furnish copies of these papers to three people: 1) the United States attorney for the district where the proceeding is brought; 2) the Attorney General of the United States; and 3) the head of the defendant's employing federal agency. 28 U.S.C. § 2679(c). The Attorney General is then required to determine whether defendant-employee was acting within the scope of his office or employment at the time the incident complained of arose. If so, the action proceeds against the United States as the defendant. 28 U.S.C. § 2679(d)(1-2).

Defendants assert that the Federal Home Loan Bank of Dallas is a federal agency, that they are employees of the government, and that the Court has jurisdiction over this case pursuant to 28 U.S.C. § 1346(b). As government employees, the Defendants also argue that they are immune from liability in this suit under the doctrine of sovereign immunity. Memorandum Brief in Support of Defendants' Motion to Dismiss or in the Alternative for Summary Judgment, filed March 6, 1989, at 4-12.

The record in this case, however, clearly shows that the explicit and mandatory procedure set forth in 28 U.S.C. § 2679 was never followed, that no United States attorney has ever appeared on behalf of these Defendants, that the United States is not a defendant in this matter, and that the Attorney General has never certified that this is, in fact, a suit against an employee of the government acting within the scope of his employment. It does not even appear that the United States would be liable in this case, if the Court rendered a verdict in favor of the Plaintiff. The Defendants' argument that they are somehow entitled to sovereign immunity in a case in which the sovereign is not involved is perilously close to being frivolous; the record simply does not support the Defendants' argument that they are employees of the government for purposes of jurisdiction under 28 U.S.C. § 1346(b).

At the January 31, 1991 hearing, this Court indicated that it found the case of Lewis v. United States, 680 F.2d 1239 (9th Cir.1982), to be persuasive authority with respect to the federal agency issue. In their Motion to Reconsider, however, the Defendants argue that the Lewis case is inapposite because it involved a federal reserve bank and not a federal home loan bank. Although the Defendants acknowledge that the two banking systems are similar, they insist that the federal home loan banks "are subject to a higher degree of control by the federal government." Motion to Reconsider and Supporting Brief, filed February 5, 1991, at 3.

In support of this argument, the Defendants refer to the difference between 12 U.S.C. § 341 (enumerating the powers of federal reserve banks) and 12 U.S.C. § 1432 (incorporation and powers of federal home loan banks.) The Defendants attribute great importance to the provisions of section 1432 which state that federal home loan banks have the power to select and employ officers and other employees "subject to the approval of" the Federal Home Loan Bank Board, and provide further that the powers granted to the federal home loan banks "may be exercised and enjoyed subject to the approval of" the Federal Home Loan Bank Board. Because they do not find similar language in section 341, the Defendants argue that "analogies drawn from the holding in Lewis ... are inapplicable due to the express approval rights contained in 12 U.S.C. § 1432(a)." Motion to Reconsider and Supporting Brief, filed February 5, 1991, at 3-4.

Despite what appears to be careful research, the Defendants apparently failed to review other portions of the statute governing the federal reserve system. For example, 12 U.S.C. § 248, which enumerates the powers of the Board of Governors of the Federal Reserve System, provides that the Board has the power to suspend or remove any officer or director of a federal reserve bank. It further provides that the Board has the power to suspend the operations of the federal reserve banks and the power to exercise general supervision over all of the federal reserve banks. 12 U.S.C. § 248.

Having reviewed other portions of the statutes, the Court finds that the degree of control exercised by the government over the federal reserve banks is similar to that exercised over the federal home loan banks. In addition, other courts have acknowledged the similarity between the two banking systems. See e.g. Inglis v. Feinerman, 701 F.2d 97, 98 (9th Cir.1983), cert. denied, 464 U.S. 1040, 104 S.Ct. 703, 79 L.Ed.2d 168 (1984)⁴; Association of Data Processing Serv. Org., Inc. v. Federal Home Loan Bank Bd., 568 F.2d 478, 488 (6th Cir.1977) ("In establishing the federal home loan bank system, it is apparent that the Congress had in mind a structure similar to the federal reserve system.") In conclusion, the Defendants' argument, that the difference between 12 U.S.C. § 341 and 12 U.S.C. § 1432 precludes a meaningful comparison between the two banking systems on the issue of "federal agency," is without merit.

The Defendants cite the case of Fahey v. O'Melveny, 200 F.2d 420 (9th Cir.), cert. denied, 345 U.S. 952, 73 S.Ct. 863, 97 L.Ed. 1374 (1952), in support of their argument that the Federal Home Loan Bank of Dallas is a federal agency. However, the Fahey case dealt primarily with the rights of member banks and stockholders to contest the action of the Federal Home Loan Bank Board in dissolving a regional home loan bank and transferring the assets of the dissolved bank to another regional bank. See id. It did not involve the question of whether an entity is a federal agency for purposes of the Federal Tort Claims Act, and the Defendants' reliance on dicta from Fahey is misplaced and unpersuasive in this case.

A subsequent Ninth Circuit decision also casts doubt on the validity of the Defendants' interpretation of Fahey. See Fidelity Fin. Corp. v. Federal Home Loan Bank of San Francisco, 792 F.2d 1432, 1435-36 (9th Cir.1986), cert. denied, 479 U.S. 1064, 107 S.Ct. 949, 93 L.Ed.2d 998 (1987). In Fidelity, the court made the following observations about the structure and functions of the Federal Home Loan Bank of San Francisco:

The

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