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Pennbank v. United States

ELR Citation: 16 ELR 20353
Nos. No. 85-3066, 779 F.2d 175/23 ERC 1905/(3d Cir., 12/20/1985)

The court rules that actions of the Environmental Protection Agency (EPA) and the Department of Agriculture concerning sewage treatment construction grants fall under the discretionary function exception to the Federal Tort Claims Act (FTCA). The banks had provided interim financing to the municipal sewer authority pending agency funding, but found themselves short-changed after the Farmers Home Administration refused to close the loan and EPA declined to make its final payment due to construction deficiencies resulting in violations of the facility's water pollution control permit. The court first concludes that the discretionary function exception to the FTCA, rather than the misrepresentation exception relied on by the district court, governs the case. It reviews the facts and the relevant caselaw on the discretionary function exception, and concludes that the applicability of the exception turns not on whether the agencies acted negligently infailing to discover the project's defects, but on whether the actions challenged are of the nature and quality that Congress intended to shield from tort liability. The FTCA's legislative history indicates that Congress did not intend for agencies to be subject to damage suits for discretionary actions such as the expenditure of federal funds. The court holds that the agencies' conduct, the oversight of the expenditure of federal funds, is a discretionary function going to the heart of governmental activity. The court affirms the judgment of the district court.

[Related cases appear at 11 ELR 20498, 20790.]

Counsel for Appellants
Lawrence A. Demase, Richard DiSalle
Rose, Schmidt, Chapman, Duff & Hasley
900 Oliver Bldg., Pittsburgh PA 15222
(412) 434-8600

John V. Anderson
Kirkpatrick & Lockhart
1500 Oliver Bldg., Pittsburgh PA 15222
(412) 355-6500

Counsel for Appellee
Roger B. Clegg, Anthony J. Steinmeyer
Civil Division
Department of Justice, Washington DC 20530
(202) 633-4195

Before Weis and Re*, JJ.