Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-02069/USCOURTS-ca8-03-02069-0/pdf.json

Parties Involved:
Audio Odyssey
Appellant
Ann M. Dincer
Appellant
Dogan A. Dincer
Appellant
Small Business Administration
Appellee
United States of America
Appellee

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2069

___________

Audio Odyssey, Ltd., an Iowa *

Corporation; Dogan A. Dincer; *

Ann M. Dincer, *

*

Appellants, * Appeal from the United States

* District Court for the

v. * Southern District of Iowa.

*

United States of America; Small *

Business Administration, *

*

Appellees. *

___________

Submitted: October 23, 2003

Filed: July 1, 2004

___________

Before LOKEN, Chief Judge, LAY, and BOWMAN, Circuit Judges.

___________

BOWMAN, Circuit Judge.

This case, which has been before us previously, see Audio Odyssey, Ltd. v.

United States, 255 F.3d 512 (8th Cir. 2001), revolves around a loan that was made by

Brenton First National Bank (the Bank) to Audio Odyssey, Ltd. (Odyssey), a retail

electronics store owned by Dogan A. Dincer and Ann M. Dincer. The loan, which

was secured by, among other things, Odyssey's inventory, was guaranteed by the

Small Business Administration (the SBA) pursuant to a Loan Guaranty entered into

by the SBA and the Bank in 1978. The Bank, believing Odyssey to be in default of

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The Honorable James E. Gritzner, United States District Judge for the

Southern District of Iowa.

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its obligation to make timely repayment of the loan, filed a writ of replevin and seized

Odyssey's inventory. Odyssey and the Dincers then brought this action against the

United States and the SBA. The District Court,1

 on motions for dismissal and

summary judgment, dismissed all of plaintiffs' claims. Plaintiffs appeal.

Specifically, the District Court ruled that the individual plaintiffs, Dogan and

Ann Dincer, as distinguished from Odyssey, lack standing to assert claims against the

SBA. Accordingly, the court granted defendants' motion to dismiss the claims of

Dogan and Ann Dincer for lack of jurisdiction. In addition, the court held that

Odyssey cannot recover damages as a third-party beneficiary of the 1978 Loan

Guaranty between the SBA and the Bank, inasmuch as the provision of the Loan

Guaranty alleged to have been breached did not impose a duty on the SBA to provide

written consent before the Bank could take action to enforce its rights as a lender to

Odyssey; the Bank had waived its right to require written consent; and Odyssey,

having been unaware of the written-consent provision, could not and did not claim

detrimental reliance. Consequently, the District Court ruled that Odyssey had not

stated a contract claim on which relief may be granted, and dismissed the claim.

Plaintiffs attack these rulings in a variety of ways. Having carefully considered

all of their arguments, we affirm the District Court's dismissal of the Dincers' claims

for lack of standing and the dismissal of Odyssey's contract claim for failure to state

a claim on which relief may be granted. We do so on the basis of the District Court's

thorough and well-reasoned opinion. See 8th Cir. R. 47B.

The District Court also determined that, with respect to Odyssey's negligence

claims against the SBA, the relief sought (damages) is unavailable as a matter of law

under the Iowa economic-loss doctrine. The court therefore dismissed the negligence

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We note that the present case is distinguishable from Manning v. International

Harvester Co., 381 N.W.2d 376, 378–79 (Iowa App. 1985), where the Iowa Court of

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claim for failure to state a claim upon which relief may be granted. Having reviewed

this question of state law de novo, we sustain the court's holding, with a brief

discussion.

Under the Federal Tort Claims Act, the government cedes its sovereign

immunity to the extent that it will allow itself to be sued "in the same manner and to

the same extent as a private individual under like circumstances." 28 U.S.C. § 2674

(2000). Thus, when a private party asserts a tort claim against the United States, the

United States, subject to certain exceptions not here in play, may be held liable to the

same extent as if it were an ordinary tortfeasor under state law. The District Court

ruled that Iowa law does not provide a remedy in tort for Odyssey. After de novo

review of this question of state law, we are persuaded that the District Court's ruling

is correct.

Iowa has adopted the economic-loss doctrine with respect to cases of alleged

negligence. The doctrine simply states that "purely economic or business losses" are

not recoverable under negligence theories. Nebraska Innkeepers, Inc. v. PittsburghDes Moines Corp., 345 N.W.2d 124, 126 (Iowa 1984). The Iowa Supreme Court has

defined a "purely economic loss" as a loss not related to physical harm. Id. at 128,

see also Nelson v. Todd's Ltd., 426 N.W.2d 120, 123–25 (Iowa 1988). Odyssey

contends that because its inventory was seized and never returned, the loss was in fact

based on physical harm and the economic-loss doctrine does not apply. The District

Court disagreed with that contention, and so do we. No physical harm has been

alleged other than Odyssey's having been deprived of its inventory. Odyssey has not

directed our attention to any decision based on Iowa law that stands for the

proposition that seizure of an inventory, with resulting economic loss, is a physical

harm, and we have found no such decision.2

 Though physical harm is not the sole

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Appeals treated actual damage to a crop resulting from the placement of the wrong

seed drum in a planter as property damage, not as pure economic loss that would not

be recoverable in a tort action. In contrast, Odyssey does not contend there was an

actual physical harm to its inventory, but merely contends that the seizure of the

inventory was ipso facto a physical harm.

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factor considered in determining whether the economic-loss doctrine bars recovery,

see Nelson, 426 N.W.2d at 123-25, it remains essential if there is to be a remedy

under Iowa law in negligence. Because Odyssey (and its property) suffered no

physical harm, the negligence claims in this case were properly dismissed.

We have considered all of the issues and arguments plaintiffs have raised.

Having done so, we conclude that none of them has merit.

The judgment of the District Court is affirmed.

______________________________

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