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ALNOR CHECK CASHING v. KATZ

March 10, 1993

ALNOR CHECK CASHING
v.
JEFF KATZ AND SOLAR RESEARCH CORPORATION, et al.



The opinion of the court was delivered by: BY THE COURT; HERBERT J. HUTTON

 HUTTON, J.

 March 10, 1993

 Presently before the Court is third-party defendant United States of America's Motion to Dismiss under Fed. R. Civ. P. 12(b)(6) and plaintiff Alnor Check Cashing Company's ("Alnor") response.

 I. FACTS AND PROCEDURAL DEVELOPMENTS

 A. The Underlying Financial Transactions The material facts are not in dispute. On November 29, 1991, the United States Treasury issued Treasurer's Check Number 3007-7994192 in the amount of $ 9,390.90. The check identified the payee as: Pay to the Order of SOLAR RESEARCH CORP ATTN JEFF KATZ 230 SOUTH BROAD STREET PHILADELPHIA, PA 19102

 (Alnor Exhibit C, photocopy of check and Government's Exhibit A). On December 19, 1991, Jeff Katz ("Katz") presented the check to Alnor for negotiation of the check to cash. Alnor is a check cashing company. Katz represented to Alnor that he was a corporate officer of Solar Research Corporation ("Solar Research") and that he had the authority to cash the check.

 Alnor cashed the check and gave Katz the cash value of the check less Alnor's customary service fee. Alnor subsequently endorsed the check over to its bank, the Philadelphia Savings Fund Society ("PSFS"). On September 23, 1992, PSFS issued a notice to Alnor that it was debiting Alnor's account in the amount of $ 9,390.90 and that PSFS was issuing a check no. 2372912, for the same amount, to the United States Federal Reserve Bank. (Alnor Exhibit G). PSFS explained that the transfer from Alnor's account to the Federal Reserve was because of a "forged endorsement." Id.

 Although Solar Research does not indicate the actual date, there is no dispute that prior to September 23, 1992, the Treasury was notified that Jeff Katz no longer had the authority to negotiate treasury notes for Solar. (Alnor Exhibit C, Solar's undated request for new Treasury Check based on Katz's cashing Treasury Check No. 3007-7994192).

 B. Litigation in State Court and the Government's Subsequent Removal to Federal Court

 On November 4, 1992, Alnor filed suit against Solar Research and Katz in the Court of Common Pleas of Philadelphia County. Alnor's complaint alleges that Solar Research and Katz violated Pennsylvania's version of the Uniform Commercial Code ("U.C.C.") on negotiable instruments. 13 Pa. Con. Stat. §§ 3302-05 (U.C.C. §§ 3-302 to 3-305) (Holders in Due Course).

 On December 8, 1992, Solar Research filed its answer including a counterclaim against Alnor for negligently failing to confirm Katz's status as an authorized Solar Research officer. (Alnor Exhibit I, New Matter Cross-Claim and Counter-Claim). Subsequently, on December 16, 1992, Alnor filed a two count "Complaint in Joinder" (Third-Party Complaint) against the United States. Count one seeks indemnification from the United States in the event Solar Research prevails on its counter claim against Alnor. Count two seeks direct reimbursement from the United States on the theory that the United States wrongfully dishonored a government check of which Alnor was the Holder in Due Course of a properly endorsed "pay to the order" commercial instrument.

 The United States received service of Alnor's Third-Party Complaint on December 29, 1992, and on January 27, 1993, removed the case to federal court. 28 U.S.C. § 1441 (removal provision); 28 U.S.C. § 1346 (federal question jurisdiction where United States is a defendant). On February 2, 1993, the United States filed the present Motion to Dismiss and Solar Research responded on February 17, 1993.

 II. DISCUSSION

 The United States has moved to dismiss both counts of Alnor's complaint under Fed. R. Civ. P. 12(b)(6). In support of its motion the government argues that the United States has not waived sovereign immunity to be sued over a commercial instrument. If this Court does have jurisdiction, the United States argues in the alternative that Alnor's endorsement of the treasury check constitutes a guarantee that any previous endorsements are valid under existing treasury regulations. 31 C.F.R. § 240 (Endorsement and Payment of Checks Drawn on the United States Treasury).

 A. Whether the United States has Waived Sovereign Immunity

 The government's first argument is that this Court lacks subject matter jurisdiction because the United States has not waived sovereign immunity to be sued. Fed. R. Civ. P. 12(b)(1). It is axiomatic that "the United States, as sovereign, is immune from suit" unless it consents to be sued. United States v. Sherwood, 312 U.S. 584, 586, 85 L. Ed. 1058, 61 S. Ct. 767 (1941); Balmaceda v. United States, 1992 WL 395696, *2 (E.D. Pa. Dec. 29, 1992). Further, Congress can only waive the defense of sovereign immunity if it does so expressly by statute. United States v. Mitchell, 445 U.S. 535, 538, 63 L. Ed. 2d 607, 100 S. Ct. 1349 (1980).

  Any party attempting to sue the United States bears the burden of proving that Congress has waived sovereign immunity. Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983) (per curiam). In the present case it is Alnor that bears the burden of proof. The United States alleges that Alnor has failed in its burden by failing to state any statute or legal theory in their Third Party Complaint that waives sovereign immunity. (Government's Brief at 4; see also Alnor's Third-Party Complaint at PP 5-20, citing only 13 Pa. Con. Stat. §§ 3302-05; U.C.C. §§ 3-302 to 3-305, state law provisions as basis for relief).

 In response to the government's motion, however, Alnor argues that Congress has waived sovereign immunity under the Tucker Act (sometimes "Little Tucker Act"), 28 U.S.C. § 1346(a), which provides in relevant part:

 
(a) The district courts shall have original jurisdiction, concurrent with the United States Claims Court, of:
 
(2) Any other civil action or claim against the United States, not exceeding $ 10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort . . . .

 § 1346(a)(2). Case law interpreting this provision has held that § 1346(a) both provides subject matter jurisdiction and is ...


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