Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-86-01061/USCOURTS-ca10-86-01061-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

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IN THE UNITED STATES CO~T OF APPEALS 

FOR THE TENTH CIRCUIT OCT .. 5 1989 

THE ASCOT DINNER THEATRE, LTD. 

a Colorado limited partnership, 

v. 

Plaintiff-Appellee/ 

Cross-Appellant, 

} 

) 

) 

) 

) 

) 

) 

) 

THE SMALL BUSINESS ADMINISTRATION, ) 

an agency of the United States ) 

Government; CHARLES HEATHERLY, ) 

Administrator, ) 

Defendants-Appellants/ 

Cross-Appellees. 

) 

) 

) 

ROBERT L. HOECKER 

Clerk 

Nos. 86-1061 

86-1117 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 83-C-1982) 

Brian Magoon, Loser, Fitzgerald, Magoon & Davies, P.Co, Englewood, 

Colorado, for Plaintiff-Appellee/Cross-Appellant 

Peter R. Maier, Appellate Staff Civil Division, Department of 

Justice, Washington, D.C. (Richard K. Willard, Assistant Attorney General, John F. Cordes and Linda J. Silberman, Attorneys, 

Appellate Staff Civil Division, Department of Justice, Washington, 

D.C., Robert N. Miller, United States Attorney, Denver, Colorado, 

were also on the brief) for Defendants-Appellants/Cross-Appellees 

Before HOLLOWAY, Chief Judge, ANDERSON, Circuit Judge, and 

SAFFELS, District Judge* 

HOLLOWAY, Chief Judge 

*The Honorable Dale E. Saffels, United States District Judge 

for the District of Kansas, sitting by designation. 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 1 
The Small Business Administration (SBA) and its Administrate. 

appeal a judgment awarding damages to the Ascot Dinner Theatre 

(Ascot), 1 an applicant denied a loan guaranty by the SBA. The 

district court held unconstitutional as applied here the SBA's 

"opinion molder rule," a regulation which disqualified certain 

businesses engaged in the formation, expression and distribution 

of ideas from receiving SBA loan guarantees. The court awarded 

$59,086.25 as damages arising from the unconstitutional denial of 

the Ascot application. Mission Trace Investments, Ltd. v. Small 

Business Administration, 622 F. Supp. 687 (D. Colo. 1985). 

Concluding that Ascot has on these facts no valid 

jurisdictional basis for a contract, tort or constitutional claim 

for damages against the SBA and its Administator, when sued in his 

official capacity as he was, we reverse the award of damages. No 

claim of error is asserted by the defendants with respect to the 

district judge's adjudication that the rule as applied is invalid 

under First Amendment principles. 

considered or disturbed. 

II 

Hence that ruling is not 

The facts were detailed by the district court. See 622 F. 

Supp. 688-89. We recite the facts pertinent to our disposition 

and critical evidentiary support for them in our record. There is 

1 

This case was originally filed under the name of Mission 

Trace Investments, Ltd. On March 3, 1988 Mission Trace filed a 

Certificate of Limited Partnership with the Colorado Secretary of 

State, changing its name to the Ascot Dinner Theatre, Ltd. 

Originally the suit named Administrator Sanders as a defendant. 

Administrator Heatherly was substituted later, consistently with 

Ascot's maintenance of the suit against the Administrator in his 

official capacity. 

2 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 2 
challenge to the subsidiary historical facts found by the 

district judge. 

Ascot was formed in 1982 to establish a dinner theatre in the 

Mission Trace Shopping Center in Lakewood, Colorado. In October 

1982 Ascot signed a lease for the Center property with Pride, a 

Colorado partnership. Pursuant 

deposited $49,000 with Pride and 

to the 

agreed 

lease agreement, Ascot 

to pay an additional 

amount of not less that $1,100,000 for tenant improvements on or 

before January 15, 1983. Ascot thereafter paid $50,000 and 

obtained extensions of the due date to May 15, 1983. 

In April 1983 Ascot's representative, Margaret S. McCool, met 

with Warner Knabe, president of the Columbine Valley Bank and 

Trust (Columbine), to obtain a loan for Ascot. Upon determining 

that Ascot was not eligible for a direct loan from Columbine, 

Knobe suggested an SBA guaranteed loan as an alternative. 

Columbine had a loan guaranty agreement with the SBA under which 

Columbine was the lender and the SBA the guarantor of loans, 

subject to the SBA's approval and its rules and regulations. 

Knabe provided McCool with the SBA loan guaranty application form. 

On May 25, 1983 Pride again extended Ascot's payment due date 

to June 7, 1983. McCool then met with Pride on June 7 to discuss 

another extension. McCool completed the SBA application in late 

May or early June and 

delivered it to the SBA. 

returned it to Knabe who thereafter 

On June 9 or 10 Knabe discussed Ascot's 

eligibility with an SBA official. Knabe then talked with Ascot's 

attorney regarding the discussion Knabe had with the SBA official. 

On June 10 Ascot's attorney telephoned McCool and Ascot then paid 

an additional $50,000 for another lease extension. 

3 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 3 
The SBA District Director approved Ascot's creditworthines~ 

on July 22, 1983, but final approval remained subject to a 

complete eligibility determination. Pride sent Ascot a default 

letter on July 28, 1983. On August 12, 1983 the SBA determined 

that Ascot was not eligible for a loan guarantee. The SBA has 

stipulated that 13 C.F.R. § 120 . 2(d)(4), et seq. (1983), the 

"opinion molder rule'' in effect at the time of Ascot's 

application, was the sole basis for denying Ascot's application 

and that absent the regulation, Ascot would have qualified for an 

SBA loan guaranty. I R. 3, Stipulations, at ~ 39. 

It is undisputed that all personal contact and communications 

with SBA personnel were made by and through Knabe for the 

Columbine bank. No contact occurred between McCool or any other 

representative of Ascot and any personnel or officials of the SBA . 

After the loan guaranty was denied, Knabe requested an agency 

review to reconsider the denial based upon the opinion molder 

rule. This review affirmed the denial of the guaranty. II R., 

Knabe's testimony, 35-40. 

Ascot's complaint followed. 

and also damages against the SBA 

It sought declaratory relief, 

and its Administrator in his 

official capacity for wrongful denial of the loan guarantee. 

Ascot asserted that promissory estoppel precluded the SBA from 

denying the loan application and that 13 C.F.R. § l20.2(d)(4) 

(1983), the opinion molder rule involved here, was 

unconstitutional as applied. 

After a bench trial in April 1985 the district court rejected 

the promissory estoppel claim because Ascot failed to demonstrate 

reliance on SBA representations. The court held, however, that 

4 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 4 
.e SBA 

Amendment 

applicants 

protected 

regulation "unnecessarily" inhibited Ascot's First 

rights and that the SBA could not deny benefits to 

solely because they engage in constitutionally 

expression. 622 F. Supp. at 702. The court awarded 

damages based on losses incurred after Ascot "relied on at 

the possibility of obtaining SBA financial assistance." 

703 .• 

least 

Id. at 

The SBA timely appealed. It argues that sovereign immunity 

precludes the award of damages against the SBA and the 

Administrator for losses of a loan applicant denied loan 

assistance on the basis of an agency regulation subsequently held 

unconstitutional. Opening Brief for Federal Defendants at 7. The 

SBA also says that its denial of the Ascot loan application did 

not proximately cause the injuries alleged by Ascot. On crossappeal, Ascot seeks the $149,060 in damages denied by the trial 

court and argues that this loss in lease payments is also a 

consequence of the SBA denial and would not have occurred but for 

the denial of the guaranty. 

III 

Sovereign Immunity 

In this case of first impression, Ascot says that the 

unconstitutional application of the opinion molder rule entitles 

it to recover damages on its claim whose "substance is that of a 

breach of contract rather than tort." Cross-Appellant's Reply 

Brief at 10. Ascot argues against the application of the Federal 

Tort Claims Act {FTCA), 28 u.s.c. §§ 1346(b), 2671 et seq. (1976), 

which operates as an exclusive remedy, see § 2679, and precludes 

claims arising from regulations on stated conditions. See § 2680. 

5 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 5 
Ascot contends that the SBA's refusal to grant guaranty assistance 

to an eligible applicant is in substance a breach of contract 

claim and only incidentally and conceptually also a tort claim. 

Cross-Appellant's Reply Brief at 9-10. The SBA asserts that Ascot 

asserts a tort claim, precluded by the FTCA, and that sovereign 

immunity also precludes any nontort basis of liabi lity to Ascot. 

We are persuaded that the controlling issue is that of 

sovereign immunity.2 Absent the waiver of sovereign immunity, 

Ascot's claim cannot survive. It is established principle that 

the United States, as sovereign, "is immune from suit save as it 

consents to be sued .•• and the terms of its consent to be sued 

in any court define the court's jurisdi ction to entertain the 

suit." United States v. Testan, 424 u.s. 392, 399 (1975) (quoting 

United States v. Sherwood, 312 u.s. 584, 586 (1941)): United 

States v. Mel's Lockers, 346 F.2d 168, 169-70 (lOth Cir 1965}. 

Waiver of sovereign immunity cannot be implied, but must be 

unequivocally expressed. Testan, 424 U.S. at 399. 

Ascot argues that an unrestricted waiver of i mmunity arises 

in 15 u.s.c. § 634(b}(l), which provides: 

2 

Powers of Administrator 

(b) In the performance of, and with respect 

to, the functions, powers, a nd duties vested in him 

by this chapter the Admi nistrator may 

record 

in any 

{1} sue and be sued in any court of 

of a State having general jurisdiction, or 

united States district court, and 

Because we hold that Ascot fails to prevail on the 

controlling issue of sovereign immunity, we need not address the 

merits of Ascot's cross appeal to increase the amount of damages 

awarded by the district court. The cross-appeal is also barred by 

sovereign immunity. 

6 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 6 
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: 

We must disagree with Ascot's position on the waiver of 

immunity based on§ 634(b)(l) for reasons that follow. 

Tort Exclusion 

We are persuaded that the consent ·to sue and be sued in 

§ 634(b)(l) does not establish a waiver of immunity so as to 

permit entertainment of Ascot's damages claim. Congress has 

integrated the "sue and be sued'' statutes, such as§ 634(b)(l), 

within the overall scheme for allowing claims against the United 

States. In this scheme the Tucker Act, 28 u.s.c. §§ 1346(a)(2), 

and 1491 (1973), provides the waiver of immunity and the 

jurisdictional grant for the district courts and Court of Claims 

to entertain nontort actions arising from the Constitution, 

statutes, regulations, and express or implied contract obligations 

of the Government. 

However, Ascot's claim should be viewed as an alleged 

constititonal tort, a claim of unconstitutional application of the 

regulation known as the opinion molder rule, see Cross-Appellant's 

Reply Brief at 5, since as noted below there is no viable 

contractual basis for Ascot's case. 3 This leads us to the FTCA. 

3 

As a constitutional violation, Ascot's claim is more 

appropriately treated as a tort. In actions invoking 28 U.S.C. 

§ 1983, the Supreme Court has held that violations of 

constitutional rights "[create] a species of tort liability'' in 

(Footnote continued on next page) 

7 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 7 
It provides liability for the Government for certain tort claims 

"in the same manner and to the same extent as a private individual 

under like circumstances." 28 u.s.c. § 2674; also§ 1346(b). 4 

The "sue and be sued" statutes such as § 634(b) are subject 

to the exclusive tort provisions of the FTCA. In 28 U.S.C. § 2679 

Congress provided: 

(a) The authority of any federal agency to sue and 

be sued in its own name shall not be construed to 

authorize suits against such federal agency on 

claims which are cognizable under section 1346(b) 

of this title, and the remedies provided by this 

title shall be exclusive. 

{Footnote continued): 

favor of persons deprived of the rights, privileges, or immunities 

secured to them by the Constitution. Carey v. Piphus, 435 u.s. 

247, 253 (1978); see also Wilson v. Garcia, 471 u.s. 261, 277 

(1985) (actions arising from constitutional violations which 

invoke § 1983 are "more analogous to tort claims for personal 

injury, than for example, claims for damages to property or breach 

of contract"); Bent v. Commissioner of Internal Revenue, 835 F.2d 

67, 69 (3rd Cir. 1987) (unlawful abridgement of First Amendment 

right to express views is "tort type right"); but cf. DiPasalgne 

v. Elby's Family Restaurants, Inc., 640 F. Supp. 1312, 1314-1315 

(S.D. Ohio 1986) (§ 1981 claims treated as contract for statute of 

limitations determination); Harrigan v. Sebastian's on the 

Waterfront, Inc., 629 F. Supp. 102u 105 {D. Virgin Islands 1985) 

(same). 

4 

For discussion of the congressional effort to systemitize the 

federal statutes concerning waiver of immunity, see United States 

v. Mitchell, 463 U.S. 206, 212-217 (1983) (history of Tucker Act); 

also Taylor v. Administrator of Small Business Administrationu 722 

F.2d 105, 109-110 (5th Cir. 1983) (FTCA and "sue and be sued" 

statutes created claim exceptions for which recovery is proscribed 

or permissible only by other acts); Peak v. Small Business 

Administration, 660 F.2d 375, 377-378 (8th Cir. 1981); (FTCA 

passed to end "piecemeal" approach to tort actions against 

Government) Northridge Bank v. Community Eye Care, Inc., 655 F.2d 

832, 834-835 (7th Cir. 1981) (the 15 U.S.C. § 634(b} enactment 

after the FTCA does not alter the waiver of immunity from tort 

liability defined by the FTCA); Federal Deposit Insurance Corp. v. 

Citizens Bank & Trust Co., 592 F.2d 364, 368-371 (7th Cir.), cert. 

den1ed, 444 u.s. 829 (1979) (discussion of circuit decisions 

holding FTCA exclusively governs remedies respecting suable 

agencies). 

8 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 8 
.us the express authority of any federal agency "to sue and be 

sued" does not alter the FTCA as the exclusive remedy for actions 

sounding in tort. Taylor v. Administrator· of Small Business 

Administration, 722 F.2d 105, 109 (5th Cir. 1983); Peak v. Small 

Business Administration, 660 F.2d 375, 377 (8th Cir. 1981); 

Northridge Bank v. Community Eye Care Center, 655 F.2d 832, 835 

(7th Cir. 1981}; Freeling v. FDIC, 221 F. Supp. 955, 956-957 (W.O. 

Okla. 1962), aff'd on basis of district court's OEinion, 326 F.2d 

971 (lOth Cir. 1963). 

Here 28 U.S.C. § 2680 bars Ascot•s damages claim as a 

challenge to the opinion molder regulation premised on a tort 

theory: 

The prov1s1ons of this chapter and section 

1346(b) of this title shall not apply to 

(a) Any claim based upon an act or 

omission of an employee of the Government, 

exerc1s1ng due care, in the execution of a 

statute or regulation, whether or not such 

statute or regulation be valid, or based upon 

the exercise or performance or the failure to 

exercise or perform a discretionary function 

or duty on the part of a federal agency or an 

employee of the Government, whether or not the 

discretion involved be abused. 

Section 634(b) of Title 15 u.s.c. must be construed in Eari 

materia with §§ 2679 and 2680 of the FTCA. Under the explicit 

terms of these FTCA sections, Ascot cannot maintain a tort claim 

against the SBA and its Administrator on these facts. 

At the time Ascot applied for a guaranty, 13 C.F.R. § 120.2 

(d)(4), (1983) barred a guaranty 

(4) If the applicant is engaged in the 

creation, origination, expression, dissemination, 

propagation, or distribution of ideas, values, 

thoughts, op1n1ons or similar intellectual 

property, regardless of medium, form, or content. 

Financial assistance to such applicants is barred 

9 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 9 
in order to avoid Government interference, or the 

appearance thereof, with the constititionally 

protected freedoms of speech and press; ••• 

Enterprises providing "theatrical productions" were expressly 

listed as ineligible. The regulation then listed applicants who 

were not precluded from financial assistance if "otherwise 

eligible" and who were engaged in providing printing, publishing, 

advertising and technical material, sound and visual reproduction, 

broadcasting and cable TV, nonacademic schools, and general 

merchandising and nonspecialty bookstores. 

through (vii). 

Id. at (d)(4)(i) 

Even if the regulation facially discriminated against Ascot, 

§ 2680 explicitly precludes Government liability for damages under 

such a tort theory here. Ascot charges that the SBA 

discriminatorily applied the regulation to provide loan guarantees 

to entertainment centers, while denying this to Ascot's dinner 

theatre. The contention does not overcome the § 2680 

prohibitions. Then § 2679, making the FTCA the exclusive remedy, 

completely forecloses such a tort recovery. 

The FTCA provisions establish that "it was plainly the 

purpose of Congress to use the 'sue or be sued' clause in a narrow 

sense." F.H.A. v. Burr, 309 o.s. 242, 245 (1940). In sum, Ascot 

is barred from recovery on a tort theory on these facts. 

IV 

Contract Relief 

Ascot resists analysis of its claim as a constititional tort. 

It argues that the PTCA does not provide the exclusive remedy for 

its claim; that 15 o.s.c. § 634(b}(l) provides the necessary 

waiver of sovereign immunity either because non tortious 

10 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 10 
Jristitutional claims do not come within the FTCA, or because 

Ascot•s claim "sounds in contract, rather than tort." CrossAppellant's Reply Brief at 12. It says its claim is "akin to an 

action for breach of a loan guaranty commitment, and, therefore, 

its substance is that of a breach of contract, rather than tort." 

Id. at 10. 

Ascot relies on Mar v. Kleppe, 520 F.2d 867 (lOth Cir. 1975), 

as a jurisdictional basis for its contract theory. We did hold 

there that there was a jurisdictional grant by § 634(b) which 

permitted the consideration of the claim against the Administrator 

in his official capacity. The jurisdiction conferred was limited 

and the statute proscribed an injunction. However, we construed 

the statute to not preclude an action for damages or a declaratory 

judgment. Id. at 869. Mar is premised basically on the oral 

agreement there alleged with the SBA for a release of the 

plaintiffs as to their personal endorsement of the lease. Id. at 

868. Thus the claim was bottomed on a specific contractual 

agreement that was averred. We do not view Mar as establishing a 

broad waiver of sovereign immunity under § 634(b) for the 

assertion of a claim like Ascot 1 S against the government or the 

SBA.5 

5 

Insofar as this opinion establishes a limitation or 

modification of Mar v. Kleppe, we are authorized by all the active 

judges of the court to state that the full court approves the 

interpretation of Mar herein, limiting that opinion to a 

jurisdictional grant where a contractual agreement is asserted; 

Mar is not interpreted to confer jurisdiction for the 

entertainment of claims against the SBA or its Administrator sued 

in his official capacity on a theory such as Ascot•s which has no 

contractual basis. 

11 

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In assessing Ascot's theory we note that there is no right o~ 

entitlement to a loan guaranty ~ ~; nothing in the SBA 

legislation supports such an interpretation. See 15 u.s.c. § 634 

(b}(6)(SBA administrator may "make such rules and regulations as 

he deems necessary to carry out the authority vested in him by or 

pursuant to this chapter"); Romeo v. United States, 462 F.2d 1036 

(5th Cir. 1972), cert. denied, 410 u.s. 9 28 (1973) (SBA may deny 

loan which was initially approved upon discovery of applicant's 

disqualifying illegal activity); Copake Lake Development 

Corporation v. United States Government, 490 F. Supp. 386 {E.D. 

N.Y. 1980) (where SBA withdrew loan authorization there is no 

entitlement of the applicant or court jurisdiction to compel the 

SBA to grant a loan); Raitport v. Chase Manhattan Capital 

Corporation, 388 F. Supp. 1095 (S.D. N. Y. 1975) (the SBA statute 

does not create a private right of action nor does frustrated 

applicant have a right to financial backi ng). Moreover, while 

Ascot invokes the First Amendment, in conjunction with contractual 

theory, in Testan the Supreme Court stated that "we regard as 

unsound the argument that all substantive rights of 

necessity create a waiver of sovereign immunity such that money 

damages are available to redress their violation." Testan, 424 at 

401. 

We reject Ascot's argument that there is waiver of sovereign 

immunity and a right to recover on a contractual theory. The 

record is devoid of a ny contract that was signed or orally agreed 

to by the SBA or its personne1 . 6 Ascot does not demonstrate that 

6 

The district court properly denied the promissory estoppel 

(Footnote continued on next page) 

12 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 12 
.1e finding of no promissory estoppel was clearly erroneous, but 

it continues to rely on the promissory estoppel theory. It points 

to the trial judge's further finding that Ascot 11 relied on at 

least the possibility of obtaining SBA financial assistance. 

Moreover [Ascot] reasonably expected that the program would be 

administered in accordance with the Constitution... 622 F. Supp. 

at 703-04. 

We cannot agree that such references to reliance or 

reasonable expectations bring Ascot's case within the waiver of 

immunity we found in Mar under 15 u.s.c. § 634(b)(l). We allowed 

the recovery of damages in Mar; however, that decision like others 

was based on the existence of an oral or written contract. Id. at 

868, 870; accord, Taylor, 722 F.2d 105, (where SBA twice approved 

application and obtained commitment fee from plaintiff, then 

breach of contract claim was allowed under§ 634{b)(l); Duncan v. 

Peninger, 624 F.2d 486 (4th Cir. 1980}; cert. denied, 449 u.s. 

1078 (1981), (in absence of contract, plaintiffs lack standing to 

challenge SBA sale}; Gilford v. United States, 573 F. Supp. 96, 98 

(D. Colo. 1983) (summary judgment improperly granted as promissory 

(Footnote continued): 

claim in the absence of any evidence of the SBA making a promise 

to either McCool or Knabe as the bank's representative and 

intermediary for McCool. 622 F. Supp. at 688; II R. 46-48. The 

same evidentiary problem undermines Ascot's contract claim on 

appeal. While Knobe disagreed with the SBA's decision to deny the 

guaranty, he did not testify that there was any oral or written 

communication which could be construed as a contractual promise or 

be represented as such to McCool. Even if such communication or 

representation had occurred, the SBA would not be bound by such a 

lender's representation to the loan applicant. Benson v. u.s. 

Small Business Administration, 644 F.2d 1366, 1367-68 {9th Cir. 

1981) (SBA not bound by lender's representation in absence of 

facts showing SBA consented to such representation). 

13 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 13 
estoppel claim will lie against SBA based on its representatiol. 

that loan was authorized and would be granted). 

Ascot's arguments do not overcome the absence of a 

contractual foundation for its claim. There was no contract "but 

merely an ordinary declaration by the agency that it would 

consider such an application under the l aw, as it had to do." 

Eastport Steamship Corporation v. United States, 372 F.2d 1002, 

1012 (Ct. Cl. 1967}; accord Simpkins v. Davidson, 302 F. Supp. 

456, 457-458 (S.D. N~Y. 1969) (loan applicant entitled to 

consideration of application as required by law but court cannot 

order SBA to grant loan}. In Eastport, the plaintiff claimed that 

the Maritime Commission's failure to approve a potential sale had 

caused the loss of the sale and resulted in subsequent losses in 

obtaining another sale. The court concluded that "liability for 

damages occasioned by wrongful regulatory action smacks more of 

tort than of non-tortious obligation." Eastport, 372 F.2d at 

1010. No matter how described or characterized, in the absence of 

a contract, the plaintiff-seller's claim "must be tortious." Id. 

at 1010-1013; accord Jackson v. United States, 573 F.2d 1189, 1199 

(Ct. Cl. 1978)(in absence of contract or authorized oral promises 

by government agent, the complaint sounds in tort, subject to the 

limitations of the FTCA); Federal Deposit Insurance Corp. v. 

Citizens Bank & Trust Co., 592 F.2d 364, 368-369 (7th Cir.), cert. 

denied, 444 u.s. 829 (1979) (in absence of contract plaintiff's 

claim is tort).7 

7 

Ascot's reliance upon Claxton v. Small Business 

Administration, 525 F. Supp. 777 (S.D. Ga . 1981), is misplaced as 

the reasonlng argues against Ascot's claim being "in substance a 

(Footnote continued on next page) 

14 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 14 
We conclude that Ascot lacks a cognizable contract basis as 

the underlying substantive theory for invoking the jurisdictional 

grant and limited waiver of immunity of 15 u.s.c. § 634(b)(l} and 

Mar v. Kleppe. 

The First Amendment 

We have noted Ascot's assertion of its theory that it may 

maintain its suit against the SBA and its Administrator because it 

asserts a "non-tortious contract claim," emphasizing also that its 

"claim for damages, however, can be based on the First Amendment 

and should not be automatically categorized as a tort." CrossAppellant's Reply Brief at 6, 12. We consider lastly whether 

Ascot's incorporation of its First Amendment constitutional claim 

within its theory removes the bar of sovereign immunity. 

We are not convinced that the assertion of the constitutional 

claim saves Ascot's case. In fact, Ascot concedes that the 

constitutional amendments themselves "do not constitute a waiver 

of sovereign immunity." Cross-Appellant's Reply Brief at 11. 

{Footnote continued): 

breach of contract claim and only incidentally and conceptually 

also a tort claim." Id. at 782 (emphasis in original). The 

complete text of this statement adopted by the Fifth and Ninth 

Circuits demonstrate that Ascot fails to meet the threshhold 

element, the existence of a contract: 

Many breaches of contract can also be treated as 

torts. But ••• where the 'tort' complained of is 

based entirely upon breach by the government of a 

promise made by it in a contract, so that the claim 

is in substance a breach of contract claim, and 

only incidentally and conceptually also a tort 

claim, we do not think that the common law or local 

state law right to 'waive the breach and sue in 

tort' brings the case within the Federal Tort 

Claims Act. Id. {emphasis in original) (citations 

omitted). 

15 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 15 
However desirable a direct remedy agai nst the government might be 

as a substitute for individual official li~bility, " • • • the 

sovereign still remains immune to sui t. " Martinez v. Winder, 771 

F . 2d 4 24, 442 {lOth Cir. 1985} {quoting Bivens v. Six Unk nown 

Unnamed Agents, 403 U.S o 388, 410 (1971) Harlan, J., concurri ng). 

Despite the const i tutional claim in j ected, the damages claim 

against the SBA and its Administrator in his official capacity as 

asse r ted by Ascot is barred by sovereign immunity. See Clark v. 

Library of Congress, 750 F.2d 89, 103 (D.C. Cir. 1984), and cases 

cited therein; Laswell v. Brown, 683 F.2d 261, 268 (8th Cir. 

1982), cert. denied, 459 u.s. 1210 {1983); Garcia v. United 

States, 666 F . 2d 960, 966 (5th Cir.), ·cert. denied, 459 U.So 832 

(1982); Jaffee v. United States, 592 U.S. 712, 717-18 (3rd Cir.), 

cert . denied, 441 u.s. 961 (1979); ~also Mine Safety Co. V o 

Forrestal , 326 u.s. 371, 374-75 (1945}. 

Accord i ngly, the award of damages in the judgment of the 

district court is 

R E V E R S E D. 

16 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 16 
OFFICE OF THE CLERK 

United States Court of Appeals for the Tenth Circuit 

C-404 United States Courthouse 

1929 Stout Street 

Denver Colorado 80294 

November 17, 1989 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: 86-1061 & 86-1117, Ascot Dinner Theatre v. The SBA 

Attached is corrected page 7 to the op1n1on authored by 

Chief Judge Holloway filed on October 5, 1989. Footnote three on 

page seven has been modified to reflect citation to Title 42 

rather than Title 28. 

Enclosure 

Very truly yours, 

Patrick Fisher 

Chief Deputy Clerk 

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 17 
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; 

We must disagree with Ascot's position on the waiver of 

immunity based on§ 634(b)(l) for reasons that fol low. 

Tort Exclusion 

We are persuaded that the consent to sue and be sued in 

§ 634(b)(l) does not establish a waiver of immunity so as to 

permit entertainment of Ascot's damages claim. Congress has 

integrated the "sue and be sued11 statutes, such as § 634(b)(l), 

within the overall scheme for allowing claims against the United 

States. In this scheme the Tucker Act, 28 u.s.c . §§ 1346(a)(2), 

and 1491 ( 1973), provides the waiver of immunity and · the 

jurisdictional grant for the district courts and Court of Claims 

to entertain nonto r t actions arising from the Constitut ion, 

statutes, regulations, and express or implied contract obligations 

of the Government. 

However, Ascot's claim should be viewed as an alleged 

constititonal tort, a claim of unconstitutional application of the 

regulation known as the opinion molder rule , see Cross-Appell ant's 

Reply Brief at 5, since as noted below there is no viable 

contractual basis for Ascot's case. 3 This leads us to the FTCA. 

3 

As a constitutional violation, Ascot's claim is more 

appropriately treated as a tort. In actions invoking 42 U.S.C. 

§ 1983, the Supreme Court has held that vi olations of 

constitutional rights " [create J ·a species of tort liability" in 

favor of persons deprived of the rights, privileges, or immunities 

secured to them by the Constitution. Carey v. Piphus, 435 U.S. 

- 7-

Appellate Case: 86-1061 Document: 01019401561 Date Filed: 10/05/1989 Page: 18