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STERLING NATL. BANK & TRUST CO. v. TELTRONICS SERV

May 7, 1979

STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK, Plaintiff,
v.
TELTRONICS SERVICES, INC. and the United States of America, Defendants



The opinion of the court was delivered by: CANNELLA

MEMORANDUM AND ORDER

Upon the motion of the Court, this complaint is dismissed for want of subject matter jurisdiction.

 By order to show cause, plaintiff commenced a proceeding seeking a preliminary injunction against the United States and the defendant Teltronics, Inc. ("Teltronics"). The Court conducted a hearing on this application on April 20, 1979. On its own motion, the Court raised the issue of subject matter jurisdiction, and agreed to allow the parties time to brief the issue. The Court now makes the following findings of fact and conclusions of law.

 FACTS

 On July 19, 1976, plaintiff Sterling National Bank and Trust Company ("Sterling"), a national banking association with its principal place of business in New York, established a line of credit for the defendant Teltronics, a New York corporation. As collateral for the repayment of all loans pursuant to that credit, Teltronics assigned to Sterling all of its then existing or thereafter acquired accounts receivable on sales of merchandise and services.

 In early March 1979, Sterling became concerned about Teltronics' ability to repay, and began to take steps to protect its interests. On March 8, Sterling made demand upon Teltronics for outstanding loans, and immediately set off the balances of accounts Teltronics had maintained at Sterling. After the setoff, the total amount owing was approximately $ 700,000. On March 9, Sterling advised Teltronics to forward to it all receipts on the assigned receivables.

 Upon a review of the schedule of assigned receivables, Sterling learned that one of the accounts, listed as "Floyd Bennett Field," represented contract number GS-02S-29880 with the General Services Administration ("GSA"), an agency of the United States. The amount owing on this account was listed as approximately $ 300,000. Sterling thereupon forwarded to GSA four "Notices of Assignment" and a photocopy of the instrument of assignment, in an attempt to comply with GSA regulations relating to assignments of claims under Government contracts. *fn1" On March 22, GSA informed Sterling that it would not approve the assignment, for three reasons: (1) the instrument of assignment did not refer to a specific contract number; (2) Teltronics corporate seal was not affixed to the instrument; and (3) the assignment antedated the contract, which was dated May 1, 1978.

 By letter dated April 3, 1979, Sterling responded, insisting upon the validity of the assignment and resubmitting the instrument and four copies of the notice. By letter dated April 4, GSA reiterated its position that Sterling had not complied with Government requirements. On April 6, Sterling forwarded additional documentation, the Government indicated that it would not change its position, and Sterling commenced the instant action against Teltronics and the United States seeking injunctive relief. Specifically, Sterling asks this Court to enjoin the Government from paying any monies to Teltronics under GSA contract number GS-02S-29880, and to enjoin Teltronics from demanding or receiving such payments. Furthermore, Sterling seeks an order directing Teltronics

 
to execute and to deliver to plaintiff immediately all documents necessary in order for plaintiff to obtain payment directly from the United States of America all sums due to Teltronics Services, Inc. on account of aforesaid contract.

 DISCUSSION

 Sterling attempts to base jurisdiction over the Government on the Assignment of Claims Act, *fn2" the Declaratory Judgments Act, *fn3" chapter 7 of the Administrative Procedure Act, *fn4" and 28 U.S.C. § 1331(a). *fn5" As to the defendant Teltronics, Sterling concedes that the only possible jurisdictional basis is the doctrine of pendent jurisdiction. *fn6"

 No independent basis of jurisdiction is provided by either the Declaratory Judgments Act, See Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S. Ct. 876, 94 L. Ed. 1194 (1950), or the Administrative Procedure Act ("APA"), See Califano v. Sanders, 430 U.S. 99, 107, 97 S. Ct. 980, 51 L. Ed. 2d 192 (1977). Nor does the Assignment of Claims Act contain a grant of jurisdiction, whether express or implied. Thus the only possible basis for jurisdiction is general federal question jurisdiction under 28 U.S.C. § 1331.

 The problem with attempting to base jurisdiction over the Government in this case on section 1331, however, is that the Government asserts the defense of sovereign immunity. Absent a waiver of immunity, a suit against the sovereign "is not maintainable because of the absence of subject matter jurisdiction." Estate of Watson v. Blumenthal, 586 F.2d 925, 929 (2d Cir. 1978) (citing Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 69 S. Ct. 1457, 93 L. Ed. 1628 (1949)). The plaintiff admits that section 1331 is not a waiver of immunity, but argues that since this suit essentially seeks review of agency action, *fn7" the waiver of sovereign immunity embodied in the 1976 amendments to the Administrative Procedure Act *fn8" applies. The Second Circuit, however, has very recently rejected precisely this argument.

 In Estate of Watson v. Blumenthal, supra, an estate and its executrices brought an action in federal district court "against the Secretary of the Treasury and the Commissioner of the Bureau of Public Debt seeking declaratory relief and an order directing the Government to redeem (certain Government bonds known as "Flower Bonds') at par and apply them with accrued interest in satisfaction of estate taxes due." 586 F.2d at 928. The Second Circuit held that the action, although for injunctive and declaratory relief, was one "essentially . . . "founded upon a contract' and hence a matter exclusively for the Court of Claims." Id. at 929 (quoting the Tucker Act). *fn9" The Court did not end ...


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