Court Opinion

ID: 2766623
Source: CourtListenerOpinion
Date Created: 2015-01-05 18:00:24.921097+00
Date Added: 2024-06-11T11:27:27.904867
License: Public Domain

NOT PRECEDENTIAL

           UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT
                    _______________

                         No. 12-2922
                       _______________

               PENN BUSINESS CREDIT, LLC

                               v.

  ALL STAFFING, INC.; BROCK EMPLOYEE SERVICES, INC.;
     STANLEY J. COSTELLO, JR.; ANGELA L. COSTELLO,
            also known as ANGELA L. VALUSEK;
ALFONSO J. SEBIA; PAMELA G. SEBIA; GARBER GROUP, LTD.;
   J.C. DATA ENTERPRISES, INC., also known as JET DATA;
      A & S ASSOCIATES; COSTELLO’S RESTAURANT;
               UNITED STATES OF AMERICA

                                 Alfonso J. Sebia;
                                 Pamela G. Sebia,
                                            Appellants
                       _______________

         On Appeal from the United States District Court
            for the Eastern District of Pennsylvania
                (D.C. Civil No. 2-11-cv-05366)
             District Judge: Hon. Legrome D. Davis
                         ____________

        Submitted Pursuant to Third Circuit LAR 34.1(a)
                      December 8. 2014

BEFORE: VANASKIE, GREENBERG, AND COWEN, Circuit Judges

                    (Filed: January 5, 2015)
                                     _______________

                                        OPINION*
                                     _______________

COWEN, Circuit Judge.

       The defendants-appellants, Alfonso and Pamela Sebia (“Appellants”), appeal an

order denying their motion to amend their answer to assert a cross-claim against the

United States under the Administrative Procedure Act (“APA”). We will affirm.

                                             I.

       Because we write solely for the parties, we will only set forth the facts necessary to

inform our analysis.

       The plaintiff, Penn Business Credit, LLC (“PBC”), loaned one million dollars to

All Staffing, Inc. (“ASI”), pursuant to which ASI signed a note and security agreement in

favor of PBC. Appellants, among others, guaranteed the note. The security agreement

provided that, in the event of a default, PBC had the authority to open any mail addressed

to, and endorse any checks payable to, ASI. ASI defaulted on the loan, and PBC obtained

two United States Treasury checks, which, in accordance with the provisions of its

security agreement with ASI, it endorsed and deposited into its bank account. ASI

objected to PBC’s actions and demanded the return of the funds. Ostensibly dissatisfied

with whatever response it received from PBC, ASI filed a Notice of Reclamation with the

______________
*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.

                                              2
United States Department of the Treasury (“Treasury Department”).

       Before the Treasury Department acted, PBC filed suit in state court against ASI

and the guarantors of the loan, seeking, in part, a declaratory judgment that it could retain

the disputed funds in satisfaction of ASI's outstanding loan balance. It later filed an

amended complaint in state court naming the United States as a defendant, who then

removed the case to the United States District Court for the Eastern District of

Pennsylvania.

       Following removal, the Treasury Department reclaimed the funds underlying the

checks. The United States then moved to dismiss PBC’s claims against it. Appellants

also moved to amend their answer to assert a cross-claim against the United States under

the APA. They claimed that, had the Treasury Department not reclaimed the funds that

PBC had deposited into its account, the loan to PBC would have been satisfied and their

obligations extinguished. Instead, as the allegedly direct result of the Treasury

Department’s decision to reclaim the funds, PBC initiated foreclosure proceedings against

them. In a single order, the District Court denied the Appellants’ request to amend,

concluding that any such amendment would be futile because they lacked standing to

assert a claim under the APA and remanded the remainder of the action to state court.

Appellants now seek review only of the portion of the District Court’s order denying their

motion to amend.1

1
  Despite initial disagreement, Appellants and the United States now concur that we have
jurisdiction to review the District Court’s order denying Appellants’ request to amend their
answer. See 28 U.S.C. § 1447(d); City of Waco v. United States Fidelity & Guar. Co., 293 U.S.
140 (1934); Powers v. Southland Corp., 4 F.3d 223, 226 (3d Cir. 1993); Carr v. Am. Red Cross,
                                              3
                                              II.

        We review the denial of a motion for leave to amend a pleading for abuse of

discretion. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997).

Pursuant to Federal Rule of Civil Procedure 15, “a party may amend its pleading only with

the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). The

District Court noted that amendment should be freely given in the absence of specific

reasons, “such as . . . futility of amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962).

“Amendment of the complaint is futile if the amendment will not cure the deficiency in

the original [pleading] or if the amended [pleading] cannot withstand a renewed motion to

dismiss.” Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 292 (3d Cir. 1988).

       Article III, section 1 of the Constitution confers judicial power upon the federal

courts, but limits the jurisdiction of these courts to “Cases” and “Controversies.” Art. III,

§ 1. The doctrine of standing was developed to help “identify those disputes which are

appropriately resolved through the judicial process.” Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992) (citing Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)). To

establish standing, a plaintiff must demonstrate (1) an injury in fact, (2), that the injury is

“fairly traceable” to the actions complained of, and (3) that the injury will likely be

redressed by a favorable decision. Id. (citation omitted). Appellants are unable to meet

the second prong.

17 F.3d 671, 677-78 (3d Cir. 1994).
                                               4
       The causation requirement of standing requires that the complained of injury be

“fairly traceable to the challenged action of the defendant, and not the result of the

independent action of some third party not before the court.” Duquesne Light Co. v.

EPA, 166 F.3d 609, 613 (3d Cir. 1999) (quoting Bennett v. Speak, 520 U.S. 154, 167

(1997)) (emphasis added). Appellants’ own recitation of the facts are instructive.

Although they allege that the Treasury Department’s determination caused PBC to return

those funds, they iterate that “[a]s a direct result of the Treasury Department’s

determination, PBC initiated foreclosure proceedings against [them], have obtained

judgment, and . . . at the least, have taken ownership and possession of [certain] property.”

(Appellants’ Br. at 26) (emphasis added.) As Appellants make clear, while PBC may

have been prompted to act by the Treasury Department’s action, in the absence of a

mandate from the Treasury Department, they cannot demonstrate that the harm they

suffered from PBC’s decision to foreclose against them was “fairly traceable” to the

Treasury Department’s decision to reclaim the funds. Accordingly, they have not

established standing to sue under Article III.

       Nor have Appellants established prudential standing. Section 702 of the APA

provides that only “[a] person suffering legal wrong because of an agency action, or

adversely affected or aggrieved by agency action within the meaning of a relevant statute,

is entitled to judicial review thereof.” 5 U.S.C. § 702. The Supreme Court has interpreted

this provision as imposing a “prudential standing” requirement in addition to the

requirements imposed by Article III of the Constitution. Nat’l Credit Union Admin. v.

                                                 5
First Nat’l Bank & Trust Co., 522 U.S. 479, 488 (1998). Prudential standing requires,

among other things, that “the interest sought to be protected by the complainant must be

arguably within the zone of interests to be protected or regulated by the statute in

question.” Id.

       The District Court determined that Appellants do not fall within the APA’s zone of

interests and Appellants do not seriously dispute this. Rather, they contend that PBC, as

an endorser of the Treasury checks, falls within this zone, a point that none of the parties

appear to dispute. Getting them only so far, Appellants, invoking the doctrine of

subrogation, next assert that as guarantors of the loan, they are entitled to step into PBC’s

shoes and assert claims that PBC could have asserted in its position as creditor.

       As the Supreme Court has explained, subrogation is a doctrine whereby “one who

has been compelled to pay a debt which ought to have been paid by another is entitled to

exercise all the remedies which the creditor possessed against that other.” Am. Surety Co.

of New York v. Bethlehem Nat’l Bank of Bethlehem, Pa, 314 U.S. 314, 317 (1941)

(emphasis added). In the current context, that would entitle Appellants to exercise

remedies that PBC possessed against ASI.

       Appellants, however, argue that because PBC would be within the zone of interests

to be protected or regulated by the APA, and would therefore be entitled to assert a claim

against the Treasury Department for reclamation of the funds at issue, that under the

doctrine of subrogation, they should likewise be permitted to pursue such a claim against

the United States. More to the point, they argue that because they were forced to pay a

                                              6
debt owed by ASI, they “subrogate to the rights and remedies of PBC, including PBC’s

right to seek judicial relief that may result in repayment of the funds improvidently

reclaimed by the Treasury Department.” (Appellants’ Br. at 37.)

       But Appellants point to no case law, and we are not aware of any, in which a court

has held that the doctrine of subrogation applies to situations such as this, where the one

who was compelled to pay a debt [Appellants] owed by another [ASI], would be entitled

to exercise the rights that a creditor possesses against an unrelated third party that took no

part in the loan agreement and is not in a creditor-debtor relationship with either party [the

United States]. We therefore reject Appellants’ attempt to expand the doctrine of

subrogation to contexts to which there is no indication it was ever intended to apply.

                                             III.

       In light of the foregoing, we conclude that the District Court did not abuse its

discretion by denying Appellants’ motion to amend. The order of the District Court

entered on May 9, 2012 will be affirmed.

                                              7