Opinion ID: 3014885
Heading Depth: 2
Heading Rank: 2

Heading: Claims Against the SBA

Text: The Barracks would like to assert two classes of claims against the SBA: first, against the SBA as a preferred limited 9 partner3 of Acorn for breach of fiduciary duties allegedly owed to the Barracks as co-limited partners; and second, against the SBA for breach of “its statutory and regulatory duties as regulator of Acorn, an SBIC.” Motion of Leonard & Lynne A. Barrack for Partial Lifting of Receivership Stay & Injunction, United States v. Acorn Tech. Fund, L.P., No. 03-cv-0070 (E.D. Pa. Nov. 24, 2003). The District Court concluded that the receivership stay should not be lifted to allow the assertion of these claims because they were without merit as a matter of law. Order Denying Motion to Modify Stay at , United States v. Acorn Tech. Fund, L.P., No. 03-cv0070 (E.D. Pa. Aug. 12, 2004) (“District Court Order”). We agree, and will affirm the District Court as to any claims against the SBA. The Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671 et seq., is the exclusive method for suing an administrative agency in tort for monetary damages. 28 U.S.C. § 2679. The so-called discretionary function exception bars: “Any claim based upon an act or omission of an employee of the Government, exercising 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.” 28 U.S.C. § 2680(a) (emphases added). 3 Pursuant to 15 U.S.C. § 683, the SBA purchased participating securities–in the form of a preferred limited partnership interest–from Acorn. 10 The Barracks’ claims against the SBA for breaching “statutory and regulatory duties” obviously fall within the discretionary function exception and cannot be maintained. The Barracks argue that their other claims against the SBA were not based on the SBA’s actions as regulator, but on the SBA’s actions as a preferred limited partner of and investor in Acorn. The SBA supposedly learned that the Torkelsens were looting and otherwise mismanaging Acorn, but failed to tell the other investors, thereby depriving them of this superior information and the opportunity to stop investing. The SBA also, according to the Barracks, erred by not imposing sanctions after these misdeeds were discovered. These actions allegedly breached a fiduciary duty owed by the SBA to co-limited partners.4 Therefore, the Barracks claim, the suit is not barred by the discretionary function exception. Unfortunately, the Barracks have shown no support for this distinction, nor can we find any. The SBA provides leverage to a limited partnership SBIC in part by buying participating securities and becoming a preferred limited partner. 15 U.S.C. § 683. The SBA does gain payment priority over other limited partners, as the Barracks stress. 15 U.S.C. § 683(g)(2). All SBICs are also required to supply information to the SBA, and the SBA must examine each SBIC every two years. 15 U.S.C. § 687b(b)-(c) The SBA inevitably, therefore, has superior information to the other investors in an SBIC. This informational advantage is solely the result of the SBA’s position as regulator, however, as is the SBA’s mere presence as a preferred limited partner. The Barracks acknowledge this fact, but still assert that suit against the SBA-as-investor should stand. Appellant Br. at -28. The Barracks produce no precedent or support for this position beyond bare assertions. Any suit based on this superior information is fundamentally based on the SBA-as-regulator–not as investor. Even if a preferred limited 4 Even if the Barracks’ claims were not barred by the FTCA, we note that they have produced no New Jersey law to support the argument that a limited partner has a fiduciary duty to other limited partners. However since we conclude that these claims are barred, we will not address the fiduciary duty issue. 11 partner owed a fiduciary duty to other limited partners, the Barracks’ suit against the SBA cannot be characterized as against another investor–the acts challenged here were taken by the SBA pursuant to its regulatory duties. We next address whether the SBA’s actions here involved discretion, or merely ministerial acts unprotected by the discretionary function exception. The District Court concluded that all of the SBA’s acts in question involved “decision[s] committed to the sound discretion of the agency.” District Court Order at . The Barracks fail even to raise the issue of whether the SBA’s actions were discretionary or ministerial, but claim simply that the SBA erred by failing to impose sanctions on Acorn, by negotiating with Acorn Partners to lower management fees, and by failing to inform the Barracks of Acorn’s mismanagement. Each of these acts was undeniably taken by the SBA in the exercise of its discretion, and involved “element[s] of judgment or choice.” United States v. Gaubert, 499 U.S. 315, 322 (1991) (quotation marks omitted). The SBA’s decisions regarding sanctions and management fees were “grounded in the social, economic, or political goals of the statute and regulations,” id. at 323, and were not contrary to those statutes or regulations. Cf. Berkovitz v. United States, 486 U.S. 531, 542-43 (1988). The FTCA bars suits based on discretionary decisions. The SBA’s decisions fall squarely within the discretionary function exception. We conclude that regardless of attempted characterization as regulator or investor, the Barracks are attempting to sue the SBA for its discretionary judgment decisions as regulator of Acorn, and run afoul of the FTCA’s discretionary function bar. We will therefore affirm the District Court’s refusal to lift the stay as to these claims, since if the claims are barred as a matter of law, they cannot be colorably meritorious under Wencke.