Lewis v. United States, 680 F.2d 1239 (9th
Cir.
1982)
JOHN L. LEWIS,
Plaintiff/Appellant,
vs.
UNITED STATES OF AMERICA,
Defendant/Appellee.
April 19, 1982, Decided
As Amended June 24, 1982.
COUNSEL: Lafayette L. Blair, Compton, Cal.,
for
plaintiff/appellant.
James R. Sullivan, Asst. U. S. Atty., Los
Angeles,
Cal., argued, for defendant/appellee; Andrea Sheridan Ordin, U. S.
Atty., Los
Angeles, Cal., on brief.
JUDGES: Before POOLE and BOOCHEVER, Circuit
Judges,
and SOLOMON, District Judge.
On July 27, 1979, appellant John Lewis was
injured
by a vehicle owned and operated by the Los Angeles branch of the
Federal
Reserve Bank of San Francisco. Lewis brought this action in district
court
alleging jurisdiction under the Federal Tort Claims Act (the Act), 28
U.S.C. §
1346(b). The United States moved to dismiss for lack of subject matter
jurisdiction. The district court dismissed, holding that the Federal
Reserve
Bank is not a federal agency within the meaning of the Act and that the
court
therefore lacked subject matter jurisdiction. We affirm.
In enacting the Federal Tort Claims Act,
Congress
provided a limited waiver of the sovereign immunity of the United
States for
certain torts of federal employees. United States v. Orleans, 425 U.S.
807,
813, 96 S. Ct. 1971, 1975, 48 L. Ed. 2d 390 (1976). Specifically, the
Act
creates liability for injuries "caused by the negligent or wrongful act
or
omission" of an employee of any federal agency acting within the scope
of
his office or employment. 28 U.S.C. §§ 1346(b), 2671. "Federal
agency" is defined as:
the executive departments, the military
departments,
independent establishments of the United States, and corporations
acting
primarily as instrumentalities of the United States, but does not
include any
contractors with the United States.
28 U.S.C. § 2671. The liability of the United
States
for the negligence of a Federal Reserve Bank employee depends,
therefore, on
whether the Bank is a federal agency under § 2671.
There are no sharp criteria for determining
whether
an entity is a federal agency within the meaning of the Act, but the
critical
factor is the existence of federal government control over the
"detailed
physical performance" and "day to day operation" of that entity.
United States v. Orleans, 425 U.S. 807, 814, 96 S. Ct. 1971, 1975, 48
L. Ed. 2d
390 (1976), Logue v. United States, 412 U.S. 521, 528, 93 S. Ct. 2215,
2219, 37
L. Ed. 2d 121 (1973). Other factors courts have considered include
whether the
entity is an independent corporation, Pearl v. United States, 230 F.2d
243
(10th Cir. 1956), Freeling v. Federal Deposit Insurance Corporation,
221 F.
Supp. 955 (W.D.Okla.1962), aff'd per curiam, 326 F.2d 971 (10th Cir.
1963),
whether the government is involved in the entity's finances. Goddard v.
District of Columbia Redevelopment Land Agency, 109 U.S. App. D.C. 304,
287
F.2d 343, 345 (D.C.Cir.1961), cert. denied, 366 U.S. 910, 81 S. Ct.
1085, 6 L.
Ed. 2d 235 (1961), Freeling v. Federal Deposit Insurance Corporation,
221 F.
Supp. 955, and whether the mission of the entity furthers the policy of
the
United States, Goddard v. District of Columbia Redevelopment Land
Agency, 287
F.2d at 345. Examining the organization and function of the Federal
Reserve
Banks, and applying the relevant factors, we conclude that the Reserve
Banks
are not federal instrumentalities for purposes of the FTCA, but are
independent,
privately owned and locally controlled corporations.
Each Federal Reserve Bank is a separate
corporation
owned by commercial banks in its region. The stockholding commercial
banks
elect two thirds of each Bank's nine member board of directors. The
remaining
three directors are appointed by the Federal Reserve Board. The Federal
Reserve
Board regulates the Reserve Banks, but direct supervision and control
of each
Bank is exercised by its board of directors. 12 U.S.C. § 301. The
directors
enact by-laws regulating the manner of conducting general Bank
business, 12
U.S.C. § 341, and appoint officers to implement and supervise daily
Bank
activities. These activities include collecting and clearing checks,
making
advances to private and commercial entities, holding reserves for
member banks,
discounting the notes of member banks, and buying and selling
securities on the
open market. See 12 U.S.C. §§ 341-361.
Each Bank is statutorily empowered to conduct
these
activities without day to day direction from the federal government.
Thus, for
example, the interest rates on advances to member banks, individuals,
partnerships, and corporations are set by each Reserve Bank and their
decisions
regarding the purchase and sale of securities are likewise
independently made.
It is evident from the legislative history of
the
Federal Reserve Act that Congress did not intend to give the federal
government
direction over the daily operation of the Reserve Banks:
It is proposed that the Government shall
retain
sufficient power over the reserve banks to enable it to exercise a
direct authority
when necessary to do so, but that it shall in no way attempt to carry
on
through its own mechanism the routine operations and banking which
require
detailed knowledge of local and individual credit and which determine
the funds
of the community in any given instance. In other words, the
reserve-bank plan
retains to the Government power over the exercise of the broader
banking
functions, while it leaves to individuals and privately owned
institutions the
actual direction of routine.
H.R. Report No. 69, 63 Cong. 1st Sess. 18-19
(1913).
The fact that the Federal Reserve Board
regulates
the Reserve Banks does not make them federal agencies under the Act. In
United
States v. Orleans, 425 U.S. 807, 96 S. Ct. 1971, 48 L. Ed. 2d 390
(1976), the
Supreme Court held that a community action agency was not a federal
agency or
instrumentality for purposes of the Act, even though the agency was
organized
under federal regulations and heavily funded by the federal government.
Because
the agency's day to day operation was not supervised by the federal
government,
but by local officials, the Court refused to extend federal tort
liability for
the negligence of the agency's employees. Similarly, the Federal
Reserve Banks,
though heavily regulated, are locally controlled by their member banks.
Unlike
typical federal agencies, each bank is empowered to hire and fire
employees at
will. Bank employees do not participate in the Civil Service Retirement
System.
They are covered by worker's compensation insurance, purchased by the
Bank,
rather than the Federal Employees Compensation Act. Employees traveling
on Bank
business are not subject to federal travel regulations and do not
receive
government employee discounts on lodging and services.
The Banks are listed neither as "wholly
owned" government corporations under 31 U.S.C. § 846 nor as "mixed
ownership" corporations under 31 U.S.C. § 856, a factor considered in
Pearl v. United States, 230 F.2d 243 (10th Cir. 1956), which held that
the
Civil Air Patrol is not a federal agency under the Act. Closely
resembling the
status of the Federal Reserve Bank, the Civil Air Patrol is a
non-profit,
federally chartered corporation organized to serve the public welfare.
But
because Congress' control over the Civil Air Patrol is limited and the
corporation is not designated as a wholly owned or mixed ownership
government
corporation under 31 U.S.C. §§ 846 and 856, the court concluded that
the
corporation is a non-governmental, independent entity, not covered
under the
Act.
Additionally, Reserve Banks, as privately
owned
entities, receive no appropriated funds from Congress. Cf. Goddard v.
District
of Columbia Redevelopment Land Agency, 109 U.S. App. D.C. 304, 287 F.2d
343,
345 (D.C.Cir.1961), cert. denied, 366 U.S. 910, 81 S. Ct. 1085, 6 L.
Ed. 2d 235
(1961) (court held land redevelopment
agency was federal agency for purposes of the Act in large part because
agency
received direct appropriated funds from Congress.)
Finally, the Banks are empowered to sue and
be sued
in their own name. 12 U.S.C. § 341. They carry their own liability
insurance
and typically process and handle their own claims. In the past, the
Banks have
defended against tort claims directly, through private counsel, not
government
attorneys, e.g., Banco De Espana v. Federal Reserve Bank of New York,
114 F.2d
438 (2d Cir. 1940); Huntington Towers v. Franklin National Bank, 559
F.2d 863
(2d Cir. 1977); Bollow v. Federal Reserve Bank of San Francisco, 650
F.2d 1093
(9th Cir. 1981), and they have never been required to settle tort
claims under
the administrative procedure of 28 U.S.C. § 2672. The waiver of
sovereign
immunity contained in the Act would therefore appear to be inapposite
to the
Banks who have not historically claimed or received general immunity
from
judicial process.
The Reserve Banks have properly been held to
be
federal instrumentalities for some purposes. In United States v.
Hollingshead,
672 F.2d 751 (9th Cir. 1982), this court held that a Federal Reserve
Bank
employee who was responsible for recommending expenditure of federal
funds was
a "public official" under the Federal Bribery Statute. That statute
broadly defines public official to include any person acting "for or on
behalf of the Government." S. Rep. No. 2213, 87th Cong., 2nd Sess.
(1962),
reprinted in (1962) U.S. Code Cong. & Ad. News 3852, 3856. See 18
U.S.C. §
201(a). The test for determining status as a public official turns on
whether
there is "substantial federal involvement" in the defendant's
activities. United States v. Hollingshead, 672 F.2d at 754. In
contrast, under
the FTCA, federal liability is narrowly based on traditional agency
principles
and does not necessarily lie when the tortfeasor simply works for an
entity,
like the Reserve Banks, which perform important activities for the
government.
The Reserve Banks are deemed to be federal
instrumentalities for purposes of immunity from state taxation. Federal
Reserve
Bank of Boston v. Commissioner of Corporations & Taxation, 499 F.2d
60 (1st
Cir. 1974), after remand, 520 F.2d 221 (1st Cir. 1975); Federal Reserve
Bank of
Minneapolis v. Register of Deeds, 288 Mich. 120, 284 N.W. 667 (1939).
The test
for determining whether an entity is a federal instrumentality for
purposes of
protection from state or local action or taxation, however, is very
broad:
whether the entity performs an important governmental function. Federal
Land
Bank v. Bismarck Lumber Co., 314 U.S. 95, 102, 62 S. Ct. 1, 5, 86 L.
Ed. 65
(1941); Rust v. Johnson, 597 F.2d 174, 178 (9th Cir. 1979), cert.
denied, 444
U.S. 964, 100 S. Ct. 450, 62 L. Ed. 2d 376 (1979). The Reserve Banks,
which
further the nation's fiscal policy, clearly perform an important
governmental
function.
Performance of an important governmental
function,
however, is but a single factor and not determinative in tort claims
actions.
Federal Reserve Bank of St. Louis v. Metrocentre Improvement District,
657 F.2d
183, 185 n.2 (8th Cir. 1981), Cf. Pearl v. United States, 230 F.2d 243
(10th
Cir. 1956). State taxation has traditionally been viewed as a greater
obstacle to
an entity's ability to perform federal functions than exposure to
judicial
process; therefore tax immunity is liberally applied. Federal Land Bank
v.
Priddy, 295 U.S. 229, 235, 55 S. Ct. 705, 708, 79 L. Ed. 1408 (1955).
Federal
tort liability, however, is based on traditional agency principles and
thus
depends upon the principal's ability to control the actions of his
agent, and
not simply upon whether the entity performs an important governmental
function.
See United States v. Orleans, 425 U.S. 807, 815, 96 S. Ct. 1971, 1976,
48 L.
Ed. 2d 390 (1976), United States v. Logue, 412 U.S. 521, 527-28, 93 S.
Ct.
2215, 2219, 37 L. Ed. 2d 121 (1973).
Brink's Inc. v. Board of Governors of the
Federal
Reserve System, 466 F. Supp. 116 (D.D.C.1979), held that a Federal
Reserve Bank
is a federal instrumentality for purposes of the Service Contract Act,
41
U.S.C. § 351. Citing Federal Reserve Bank of Boston and Federal Reserve
Bank of
Minneapolis, the court applied the "important governmental function"
test and concluded that the term "Federal Government" in the Service
Contract Act must be "liberally construed to effectuate the Act's
humanitarian purposes of providing minimum wage and fringe benefit
protection
to individuals performing contracts with the federal government." Id.
288
Mich. at 120, 284 N.W.2d 667.
Such a liberal construction of the term
"federal agency" for purposes of the Act is unwarranted. Unlike in
Brinks, plaintiffs are not without a forum in which to seek a remedy,
for they
may bring an appropriate state tort claim directly against the Bank;
and if
successful, their prospects of recovery are bright since the
institutions are
both highly solvent and amply insured.
For these reasons we hold that the Reserve
Banks are
not federal agencies for purposes of the Federal Tort Claims Act and we
affirm
the judgment of the district court.
AFFIRMED.