Opinion ID: 577150
Heading Depth: 2
Heading Rank: 1

Heading: Applicability of the Federal Tort Claims Act

Text: 8 The first issue we must resolve is whether the Federal Tort Claims Act applies to the FHLMC. The district court assumed that it does. 2 It found, however, that Count II falls within the exception for intentional torts from the FTCA's general waiver of sovereign immunity, 28 U.S.C. § 2680(h), and it therefore dismissed Count II for lack of subject matter jurisdiction. 3 If, however, the FTCA does not apply in the first place, then the FHLMC is prima facie suable under its enabling statute, and Count II should not have been dismissed for lack of subject matter jurisdiction. 9 The Federal Tort Claims Act, 28 U.S.C. §§ 1346(b) & 2671-2680, provides a limited waiver of the sovereign immunity of the United States for certain torts of federal agency employees. A federal agency under the Act includes the executive departments, the judicial and legislative branches, the military departments, independent establishments of the United States, and corporations primarily acting as instrumentalities or agencies of the United States, but does not include any contractor with the United States. 28 U.S.C. § 2671. The FHLMC is a corporation of the United States, created and chartered by Congress to pursue its statutory mission of maintaining secondary mortgage markets. See S.Rep. No. 19, 101st Cong., 1st Sess. 38 (1989). As a hybrid entity--federally chartered but acting largely as a private corporation--the FHLMC does not fit neatly into any of the categories laid out by Congress in the Federal Tort Claims Act. Does the FHLMC fall within the set of corporations primarily acting as instrumentalities or agencies of the United States? On the one hand, the FHLMC is a corporation of the United States, it is designed to meet specific policy goals articulated by Congress and it is deemed a federal agency for certain purposes. On the other hand, the statute does not say all federally chartered corporations, but rather, corporations primarily acting as instrumentalities or agencies of the United States; this language suggests that Congress contemplated a functional approach to determining which federal corporations are federal agencies under the FTCA. In the end, however, this definition does not take us very far, because it amounts to the nearly circular: Federal agencies include corporations that primarily act as federal agencies. 4 This circuit has held that the Federal Deposit Insurance Corporation--like the FHLMC a Janus-faced federal-private entity--qualifies as a federal agency under this provision of the FTCA. Federal Deposit Ins. Corp. v. Citizens Bank & Trust Co., 592 F.2d 364, 369 n. 5 (7th Cir.), cert. denied, 444 U.S. 829, 100 S.Ct. 56, 62 L.Ed.2d 37 (1979). A Federal Reserve Bank, however, another hybrid corporation, is not a federal agency under the Act, according to the Ninth Circuit. Lewis v. United States, 680 F.2d 1239 (9th Cir.1982). 10 Since the basic question is whether Congress provided that the FHLMC primarily act[ ] as [an] instrumentalit[y] or agenc[y] of the United States, we turn first to the FHLMC's governing statute. The following provision initially appears promising: 11 Notwithstanding section 1349 of Title 28 or any other provision of law, (1) the Corporation shall be deemed to be an agency included in sections 1345 and 1442 of such Title 28; (2) all civil actions to which the Corporation is a party shall be deemed to arise under the laws of the United States.... 12 12 U.S.C. § 1452(f). Section 1345 of Title 28 provides for original jurisdiction in the federal district courts where an agency of the United States brings a civil suit; section 1442 allows officers of federal agencies to remove to federal court any suits filed against them in state courts. One might conclude that since Congress specifically provided for the FHLMC to be an agency for purposes of bringing suit and removal, but did not so provide for purposes of being a defendant (section 1346) or for purposes of the FTCA itself (section 2671), it therefore intended the FHLMC not to be a federal agency for the latter purposes. As we have observed, however, [n]ot every silence is pregnant; expressio unius est exclusio alterius is therefore an uncertain guide to interpreting statutes. Illinois Dep't of Public Aid v. Schweiker, 707 F.2d 273, 277 (7th Cir.1983). One might conclude, alternatively, that section 1452(f) makes the FHLMC a federal agency for all (or most) purposes. Indeed, why would Congress make the FHLMC an agency for purposes of filing and removal, but not for purposes of being a defendant or being a federal agency under the FTCA? The first answer to this question must be that, irrespective of any reason on the part of Congress, it appears that Congress has in fact made such a distinction: the provision refers only to sections 1345 and 1442 in deeming the FHLMC an agency. In addition, the legislative history of 12 U.S.C. § 1452(f) (though scant) suggests that this part of the provision is indeed concerned only with suing in and removing to federal court. 5 Finally, sections 1345 and 1442 simply provide for jurisdiction in federal court, and jurisdictional provisions may easily be viewed as significantly different from the FTCA's substantive provisions governing what counts as a federal agency. 6 Congress's obvious determination that suits involving the FHLMC should be in federal court is not surprising, given that such suits will always (at least tangentially) implicate a federal statute (the FHLMC's organic statute), and particularly given the defined federal mission for which Congress created the FHLMC. See infra section II.B. But it does not follow that the FHLMC is the United States under the Federal Tort Claims Act; the latter simply involves a different question--and one that is not such a clear-cut matter of classification. 13 Section 1452(f) ultimately does not tell us whether the FHLMC is a federal agency under the FTCA. No other provision of the FHLMC's statute can be construed as direct evidence of Congress's intent as to the issue. We therefore consider the FHLMC in light of the principles established by courts in deciding whether other entities are federal agencies for purposes of the FTCA. A review of the cases reveals that courts consider the following factors in making this determination: (1) the federal government's ownership interest in the entity; (2) federal government control over the entity's activities; (3) the entity's structure; (4) government involvement in the entity's finances; and (5) the entity's function or mission. 14 We begin with the courts' treatment of two entities that seem most akin to the FHLMC: the Federal Deposit Insurance Corporation and the Federal Reserve Bank. Our circuit has held that the FDIC is unquestionably a 'federal agency' within the meaning of § 2679(a) of the FTCA. Federal Deposit Ins. Corp. v. Citizens Bank & Trust Co., 592 F.2d 364, 369 n. 5 (7th Cir.), cert. denied, 444 U.S. 829, 100 S.Ct. 56, 62 L.Ed.2d 37 (1979). In that case the court did not explain its conclusion, but merely cited the Ninth Circuit's decision in Safeway Portland Employees' Federal Credit Union v. Federal Deposit Ins. Corp., 506 F.2d 1213, 1215 (9th Cir.1974), which in turn simply cited two district court cases for the proposition that the FDIC is a federal agency within the coverage of the FTCA. One of those cases, Freeling v. Federal Deposit Ins. Corp., 221 F.Supp. 955, 956 (W.D.Okla.1962), aff'd per curiam, 326 F.2d 971 (10th Cir.1963), explains: 15 The statute [creating the FDIC, 12 U.S.C. §§ 1811 et seq.,] provides in part: that the President will appoint two of the three members of the Board of Directors; certain investments of the corporation must first have the approval of the Secretary of the Treasury; and the corporation is required to report annually to Congress as to its financial condition. 16 Freeling, 221 F.Supp. at 956. The district court also relied on the FDIC's status as a  'mixed-ownership government corporation' whose financial transactions are required to be audited annually by the General Accounting Office. Id. (quoting Pearl v. United States, 230 F.2d 243, 245 (10th Cir.1956)). 17 On the other hand, in Lewis v. United States, 680 F.2d 1239 (9th Cir.1982), the Ninth Circuit held that a Federal Reserve Bank is not a federal agency under the FTCA, emphasizing the federal government control factor. The court noted that although each Federal Reserve Bank is a corporation created by Congress and is heavily regulated, it is completely privately owned by commercial banks in its region. In addition, the stockholding commercial banks elect six of the Bank's nine directors, who supervise and control the Bank's daily operations. Id. at 1241. 18 The court in Lewis may have overstated the matter when it wrote that the critical factor is the existence of federal government control over the 'detailed physical performance' and 'day to day operation' of [the] entity, citing United States v. Orleans, 425 U.S. 807, 814, 96 S.Ct. 1971, 1976, 48 L.Ed.2d 390 (1976), and Logue v. United States, 412 U.S. 521, 528, 529, 93 S.Ct. 2215, 2220, 37 L.Ed.2d 121 (1973). Lewis, 680 F.2d at 1240. In Logue the Supreme Court held that a county jail holding a federal prisoner was not a federal agency under the FTCA, relying on the lack of federal government control over the jail's daily operation. However, there the Court was specifically construing the exclusionary clause of section 2671: an agency does not include any contractor with the United States. Lack of control over daily operations was considered dispositive in Logue for the specific reason that it is the common-law definition of an independent contractor. 412 U.S. at 527, 93 S.Ct. at 2219. The contractor exception of section 2671 is not involved in the present case, nor was it involved in Lewis. 19 While the government control factor may not be dispositive where the contractor exception is not at issue, we nonetheless think that it may be an important factor in determining whether an entity is a federal agency under section 2671. It is worth noting that even before Logue, federal government control over an entity's activities was a factor expressly relied on when courts considered hybrid corporations like the FHLMC under section 2671. See, e.g., Pearl v. United States, 230 F.2d 243, 245 (10th Cir.1956) (The control of Congress over this corporation [the Civil Air Patrol] is only such as is common to virtually all private corporations granted federal charters....); Freeling, 221 F.Supp. at 956 (The control of Congress and the President over the corporation ... lead me to the conclusion that the [FDIC] is a federal agency as defined and referred to in the Federal Tort Claims Act.). Moreover, cases after Logue have also found the federal government control factor helpful under the FTCA, even in non-contractor situations. Indeed, in Orleans, the Supreme Court itself arguably generalized the usefulness of the government control factor in the process of holding that a community action agency created pursuant to the Economic Opportunity Act, 42 U.S.C. §§ 2781 et seq., was not a federal agency for purposes of the FTCA. The Court traced the government control factor to Logue and Maryland ex rel. Levin v. United States, 381 U.S. 41, 85 S.Ct. 1293, 14 L.Ed.2d 205, vacated and remanded on other grounds, 382 U.S. 159, 86 S.Ct. 305, 15 L.Ed.2d 227 (1965). But in Maryland ex rel. Levin, and apparently in Orleans (though the opinion is not clear in this regard), the Court did not actually find the contractor exception applicable; rather, the Court relied on the lack of federal control to find the entities to be local and state entities, respectively, and thus not federal agencies. In any event, other cases after Logue (and in addition to Lewis ) have relied on the government control factor in construing the FTCA, even where no contractor is involved. See, e.g., Vincent v. United States, 513 F.2d 1296, 1297 (8th Cir.1975), cert. denied, 426 U.S. 919, 96 S.Ct. 2623, 49 L.Ed.2d 372 (1976); Wright v. United States, 428 F.Supp. 782, 787-88 (D.Mont.1977), aff'd, 599 F.2d 304 (9th Cir.1979). 20 We think that under the principles established in the cases the FHLMC is not a federal agency for purposes of the FTCA, and that the FHLMC is distinguishable from the FDIC. First, the federal government has no ownership interest in the FHLMC, unlike the FDIC. This factor was found relevant in Lewis, 680 F.2d at 1241, Pearl, 230 F.2d at 245, and Freeling, 221 F.Supp. at 956. In addition, the general statutory definitions applicable to Title 28 suggest that this factor is important: agency is defined as including any corporation in which the United States has a proprietary interest, unless the context shows that such term was intended to be used in a more limited sense. 28 U.S.C. § 451. 21 The second and third factors--federal government control and the structure of the entity--also support this conclusion. Like the Federal Reserve Bank considered in Lewis--and unlike the FDIC 7 --the FHLMC's Board of Directors is controlled by private shareholders: thirteen of its eighteen members are elected by the voting common shareholders and only five are appointed by the President. 12 U.S.C. § 1452(a)(2)(A). The Board has the authority [w]ithin the limitation of law and regulation ... [to] determine the general policies that govern the operations of the Corporation. 12 U.S.C. § 1452(a)(1). The Board is also given general power to prescribe investments for the Corporation and to supervise the exercise of the Corporation's extensive powers. 8 While the FHLMC is subject to regulation by the Secretary of Housing and Urban Development, it is regulated significantly less than the FDIC, and the regulation imposed on it generally does not extend to its daily operations. 9 Moreover, extensive federal regulation does not convert an entity into a federal agency under the FTCA. Orleans, 425 U.S. at 817-18, 96 S.Ct. at 1977-78; Lewis, 680 F.2d at 1241. 22 Fourth, the FHLMC receives no appropriations from Congress. See Lewis, 680 F.2d at 1242; cf. Goddard v. District of Columbia Redevelopment Land Agency, 287 F.2d 343, 345 (D.C.Cir.) (relying in part on congressional appropriations in holding land redevelopment agency a federal agency under FTCA), cert. denied, 366 U.S. 910, 81 S.Ct. 1085, 6 L.Ed.2d 235 (1961). Evidence that the FTCA does not contemplate coverage of an entity like the FHLMC can be found in the Act's provision that an award of $2,500 or less shall be paid by the head of the Federal agency concerned out of appropriations available to that agency. 28 U.S.C. § 2672. 23 The fifth factor is the entity's mission or function. See Lewis, 680 F.2d at 1241; Goddard, 287 F.2d at 345. As we discuss below, see infra section II.B, the FHLMC certainly furthers an important federal mission, and does act as a federal agency or instrumentality in this sense. This factor, however, is not dispositive when weighed against the other four factors. All federally chartered corporations further some congressional mission, but the fact that an entity is federally chartered does not necessarily make it a federal agency under the Act. See Lewis, 680 F.2d at 1241-42; Pearl, 230 F.2d at 245. 24 Because the FHLMC is privately owned, is structured to function independently of the federal government to a great extent, and receives no appropriations from Congress, we conclude that it is not a federal agency for purposes of the Federal Tort Claims Act.