653 F.

2d 152

Glen Kermit TILL and Bettie F. Till, Plaintiffs-Appellants,

v.
UNIFIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION and Wortman &
Mann, Inc., Defendants-Appellees.
No. 80-3640.

United States Court of Appeals,

Fifth Circuit.
Unit A
Aug. 7, 1981.
Gary D. Thrash, Jackson, Miss., for plaintiffs-appellants.
Daniel J. Goldberg, Matthew G. Ash, Washington, D.C., for amicus U.S.
League of Sav. Associations.
Fred L. Banks, Jr., Jackson, Miss., for American Sav. and Loan League.
Brunini, Grantham, Grower & Hewes, George P. Hewes, III, Lawrence E.
Allison, Jr., R. Wilson Montjoy, II, Jackson, Miss., for defendantsappellees.
Appeal from the United States District Court for the Southern District of
Mississippi.
Before BROWN, GOLDBERG and AINSWORTH, Circuit Judges.
AINSWORTH, Circuit Judge:

Appellants Glen and Bettie Till appeal from an adverse summary judgment by
the district court dismissing their suit for damages against defendants Unifirst
Federal Savings and Loan Association (Unifirst) and Wortman & Mann, Inc.
(W&M), predicated on the alleged failure of defendants to comply with the
provisions of the National Flood Insurance Program, 42 U.S.C. 4012a(b)

and 4104a (and all amendments),1 and on state common law causes of action
for fraud and negligence. This appeal presents for the first time the novel
question whether a private right of action for damages against a federally
insured savings and loan association is implied for failure to comply with the
federal flood insurance laws. The district court held that no private right of
action existed under the federal statutes and that all other claims presented by
appellants failed since they were dependent upon implication of the private
right of action in federal law. We affirm the district court's holding that the
federal flood insurance statutes imply no private right of action cognizable in
federal law. However, we vacate dismissal of the state common law causes of
action and direct that they be remanded to the state court from which the suit
originated.
I. Facts
2

Glen and Bettie Till purchased a residence in Jackson, Mississippi, on June 20,
1975, for $170,000 which was paid in part by a $75,000 secured loan obtained
from Unifirst. In the spring of 1979, the Pearl River swelled over its banks and
flooded much of Jackson and the surrounding area including the Tills' home.

The Tills filed this complaint in Mississippi state court seeking to recover
$175,847.67 in special damages and $1,758,476.70 in punitive damages from
defendants as a result of their losses in the 1979 flood. In their complaint,
plaintiffs alleged that at the time the property was purchased, the area had been
designated by the Department of Housing and Urban Development (HUD) as a
flood hazard area. Accordingly, they claimed that under the federal flood
program instituted by the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, Unifirst had two duties: (1) to notify the Tills
at least ten days prior to closing their loan that the property was located in a
flood hazard area, and (2) to require the purchase of flood insurance before
executing the loan. Plaintiffs further alleged that Unifirst and its wholly owned
subsidiary, W&M, failed to fulfill these duties. As a result of defendants'
alleged failure to comply with federal law, the Tills asserted they were entitled
to recover damages under state common law causes of action for fraud and
negligence.

Defendants removed the case pursuant to 28 U.S.C. 1441 to the United States
District Court for the Southern District of Mississippi, claiming federal
jurisdiction under 28 U.S.C. 1331 and 1337.2 In federal court, plaintiffs
made it clear that they sought damages from defendants through a private right
of action implied from the federal flood statutes, as well as seeking relief
through their general state claims. Following a lengthy discovery period,

defendants filed a motion to dismiss under Fed.R.Civ.P. 12(b) (6). Both sides
filed memoranda and other materials on the issues presented by the motion and
a hearing on the motion was conducted by the district court. The district judge,
after noting that both parties had presented materials and the court had
considered matters that were outside the scope of the pleadings, ruled the Rule
12(b)(6) motion would be treated as a motion for summary judgment.
Accordingly, the district court granted summary judgment to defendants
dismissing the suit of plaintiffs, holding that no private right of action was
implied from the federal law and that all alleged common law actions were
dependent upon the existence of the federal action.
5

On appeal, appellants assert that the district court erred in holding that there is
no implied federal private cause of action under the federal flood laws. They
also contend that the common law actions in their original complaint are in no
way dependent on the federal law.3

II. Federal Flood Laws

6

From 1968 to 1977, Congress passed a number of enactments which compose

the National Flood Insurance Program (the "Program"). The first enactment, the
National Flood Insurance Act of 1968, created a nationwide program to make
flood insurance available to property owners in flood prone areas and to
encourage the adoption by local communities of sound land use policies
designed to diminish damage from flooding.4 In establishing this program,
Congress summarized the factors that made this action necessary as follows:

(a) The Congress finds that (1) from time to time flood disasters have created
personal hardships and economic distress which have required unforeseen
disaster relief measures and have placed an increasing burden on the Nation's
resources; (2) despite the installation of preventive and protective works and
the adoption of other public programs designed to reduce losses caused by
flood damage, these methods have not been sufficient to protect adequately
against growing exposure to future flood losses; (3) as a matter of national
policy, a reasonable method of sharing the risk of flood losses is through a
program of flood insurance which can complement and encourage preventive
and protective measures; and (4) if such a program is initiated and carried out
gradually, it can be expanded as knowledge is gained and experience is
appraised, thus eventually making flood insurance coverage available on
reasonable terms and conditions to persons who have need for such protection.
42 U.S.C. 4001(a).5

The procedures created by the 1968 Act were voluntary in nature. Congress
anticipated that the local communities would voluntarily adopt the land use
restrictions necessary for its citizens to participate in the flood insurance plan.
However, it became clear that local acceptance of the voluntary program was
inadequate.6 Accordingly, Congress enacted the Flood Disaster Protection Act
of 1973 which amended the Program to essentially make its adoption by the
local governing bodies mandatory.

The 1973 Act used severe sanctions against non-participating communities to

encourage enrollment in the Program. Any community not participating by July
1, 1975 would receive neither federal financial assistance for acquisition or
construction purposes7 nor federally related financing by private lending
institutions for use in HUD designated flood risk zones.8 Participation was
conditioned upon adoption by the local community of the HUD promulgated
guidelines for land use. Thus, a community not adopting the land use controls
and participating in the Program was virtually cut off from federal assistance.

10

In those areas such as Jackson that did adopt the requisite land use controls, the
1973 Act further directed the appropriate federal supervisory agencies9 to adopt
regulations requiring lenders not to make loans in flood zones unless the
property owners first purchased flood insurance. 42 U.S.C. 4012a(b).10 This
provision was followed with an enactment by Congress in 1974 that required
the same federal supervisory agencies to promulgate regulations directing
lenders to notify borrowers, a reasonable period in advance of closing, that the
property is located in a HUD identified flood risk zone. 42 U.S.C. 4104a.11 It
is upon these two provisions that appellants claim they are entitled to a private
right of action for damages from the 1979 Jackson flood.

III. Implied Private Right of Action

11

Once again we are asked to find from the language and history of a federal
statute, an implied cause of action not explicitly provided for by Congress. The
standards which such a cause of action must meet before it may be implied
have become increasingly more stringent. Touche Ross & Co. v. Redington,
442 U.S. 560, 578, 99 S.Ct. 2479, 2490, 61 L.Ed.2d 82 (1975). The factors to
be considered in this regard were delineated by the Supreme Court in Cort v.
Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). They are as follows:
(1) whether the plaintiff is one of a class for whose especial benefit the statute
was enacted; (2) whether there is an indication of legislative intent to create or
deny such remedy; (3) whether such a remedy would be inconsistent with the
underlying legislative purpose; and (4) whether the cause of action is one
traditionally relegated to state law. Cort v. Ash, supra, 422 U.S. at 78, 95 S.Ct.

at 2088.
12

The theory of implied private actions is, of course, basically a matter of

statutory construction. Transamerica Mortgage Advisors, Inc. v. Lewis, 444
U.S. 11, 15, 100 S.Ct. 242, 245, 62 L.Ed.2d 146 (1979) (hereinafter TAMA);
Belluso v. Turner Communications Corp., 633 F.2d 393, 395 (5th Cir. 1980). In
interpreting federal statutes, Cort and its progeny all focus upon the "ultimate
issue" of whether it was Congress' intent to create a private remedy. California
v. Sierra Club, --- U.S. ----, ----, 101 S.Ct. 1775, 1779, 68 L.Ed.2d 101 (1981);
Rogers v. Frito Lay, Inc., 611 F.2d 1074, 1078 (5th Cir. 1980), cert. denied, --U.S. ----, 101 S.Ct. 246, 66 L.Ed.2d 115 (1980). To that end, our search to
determine the congressional intent concerning sections 4012a(b) and 4104a12
must consider the policies and purposes of the overall legislative scheme of
which these two sections are a component.13

13

In deciding the first Cort factor whether appellants are the especial
beneficiaries of sections 4012a(b) and 4104a we must determine if Congress
intended to "create a federal right in favor of the plaintiff." Cort v. Ash, supra,
422 U.S. at 78, 95 S.Ct. at 2088. Accordingly, the proper focus is upon the
"right- or duty-creating language of the statute (which) has generally been the
most accurate indicator or the propriety of implication of a cause of action."
Cannon v. University of Chicago, 441 U.S. 677, 690 n.13, 99 S.Ct. 1946, 1954
n.13, 60 L.Ed.2d 560 (1979); United States v. Capeletti Bros., Inc., 621 F.2d
1309, 1313 (5th Cir. 1980); Rogers v. Frito Lay, Inc., supra, 611 F.2d at 1079.

14

Even cursory evaluation of the statutory language in sections 4012a(b) and

4104a reveals that no clearly defined right exists in favor of borrowers in either
statute. The statutes merely require lending institutions to notify borrowers of
flood plains and require appropriate flood insurance. However, this duty is
imposed only indirectly on lenders. It is upon the various financial regulatory
agencies in this case, the Federal Home Loan Bank Board that Congress
directly assessed the responsibility for carrying out its plan.

15

The language of both statutes is therefore much like the statutes we considered
in United States v. Capeletti Bros., Inc. and Rogers v. Frito Lay, Inc. In both
cases, the statutory duty was imposed directly on federal agencies. Thus, we
held that the benefits flowing to the plaintiffs were derived indirectly and not as
a result of any private right of action conferred upon their class. United States v.
Capeletti Bros., Inc., supra, 621 F.2d at 1314; Rogers v. Frito Lay, Inc., supra,
611 F.2d at 1079-80. See also Cannon v. University of Chicago, supra, 441
U.S. at 693 n.14, 99 S.Ct. at 1955 n.14. This conclusion is equally applicable to
the circumstances in the present case.

16

Appellants argue, regardless of the statutory language, that borrowers are the
primary beneficiaries of the flood insurance and notice requirements and, as
such, they pass the Cort especial benefit test. However, even if borrowers could
be considered primary beneficiaries of the flood laws, appellants would still not
be the "especial beneficiaries." As previously stated, the Cannon v. University
of Chicago test requires a showing that borrowers are granted federal rights
under the statute; here, only duties are placed on the various regulatory
authorities.

17

However, appellants fail at the outset even to establish that borrowers are the
primary beneficiaries of the flood statutes. It would be disingenuous to suggest
that when Congress passed the Program it did not intend to help those
borrowers who had been damaged by flooding. On the other hand, borrowers of
federal funds were not the only concern of Congress. Clearly, the principal
purpose in enacting the Program was to reduce, by implementation of adequate
land use controls and flood insurance, the massive burden on the federal fisc of
the ever-increasing federal flood disaster assistance.14 Indeed, in requiring
flood insurance the concern for the protection of lenders was just as great, if not
more so, than the concern for borrowers.15 Lenders are only directed to require
flood insurance for the amount and term of the outstanding loan balance. 42
U.S.C. 4012a(b). There is no requirement that the flood insurance cover the
equity of the borrower. Plainly, Congress was interested in protecting the
lending institutions whose deposits the federal regulatory agencies insured. As
for the notice requirement, the legislative history indicates that it too was
enacted in part to help stem the development of flood hazard areas and further
diminish the burden of federal disaster assistance.16

18

In short, appellants are not the especial beneficiaries of sections 4012a(b) and
4104a in view of the fact that the only duties imposed therein are upon the
various federal regulatory agencies and the clear indication of concern not
merely for borrowers but also for the federally insured lending institutions.

19

Under the second Cort factor, our quest is to search for "any indication of
legislative intent, explicit or implicit, either to create such a remedy or to deny
one." Cort v. Ash, supra, 422 U.S. at 78, 95 S.Ct. at 2088. The Supreme Court
forewarns that in cases where the statutes and legislative history are silent on
the question of a private remedy, "implying a private right of action on the basis
of congressional silence is a hazardous enterprise, at best." Touche Ross & Co.
v. Redington, supra, 442 U.S. at 571, 99 S.Ct. at 2486.

20

Our examination of the legislative history reveals no evidence of specific

congressional intent to vest appellants with any federal right to damages for a

violation of the federal flood laws under sections 4012a(b) and 4104a. Instead,
the only discernible evidence of intent suggests no such private remedy was
envisioned.
21

Congress, by directing the federal financial supervisory agencies to adopt

regulations to implement the flood insurance and flood hazard notice
requirements, has entrusted enforcement of these requirements to those
agencies. In this case, the Federal Home Loan Bank Board (FHLBB) has the
authority to issue cease and desist orders against appellees' officers,17 to
terminate unsafe or unsound practices,18 to impose administrative remedies,
including monetary penalties,19 and to require affirmative action to prevent or
correct violations.20 Existence of this administrative scheme of enforcement is
strong evidence that Congress intended the administrative remedy to be
exclusive. E. g., Belluso v. Turner Communications Corp., supra, 633 F.2d at
397; Smith v. Cotton Bros. Baking Co., Inc., 609 F.2d 738, 741 (5th Cir. 1980).
Indeed, it is clear under the maxim expressio unius est exclusio alterius that a
pervasive remedial scheme provided by Congress is an indication there was no
intent to provide an additional private remedy. See TAMA, supra, 444 U.S. at
19, 100 S.Ct. at 247; National Railroad Passenger Corp. v. National Ass'n of
Railroad Passengers, 414 U.S. 453, 458, 94 S.Ct. 690, 693, 38 L.Ed.2d 646
(1974); United States v. Capeletti Bros., Inc., supra, 621 F.2d at 1315.

22

Furthermore, it is noteworthy that Congress did provide for private rights of

action in certain other sections of the flood insurance laws. Under 42 U.S.C.
4053 and 4072, flood insurance policyholders may sue on their policies in
federal court. Likewise, owners and lessees of property, as well as communities
which feel a flood hazard designation is incorrect, can appeal from an
administrative review to federal court for redesignation pursuant to 42 U.S.C.
4104. The Supreme Court in Touche Ross refused to imply a private cause of
action partly because other sections of the same act expressly provided for
private remedies. The Court reasoned that "when Congress wished to provide a
private damages remedy, it knew how to do so and did so expressly." Touche
Ross & Co. v. Redington, supra, 442 U.S. at 572, 99 S.Ct. at 2487.

23

Also useful is the opinion of the FHLBB itself. The Supreme Court directs that
in matters of statutory interpretation, courts should be attentive "to the views of
the administrative entity appointed to apply and enforce a statute." Ford Motor
Credit Co. v. Milhollin, 444 U.S. 555, 565, 100 S.Ct. 790, 797, 63 L.Ed.2d 22
(1980). In this case, affidavits of three members of the FHLBB indicate their
understanding that the statutory provisions do not encompass a private right of
action.21

24

Finally, it is simply inconsistent and implausible to find from the federal flood
laws that Congress intended to reduce the burden of federal disaster assistance
by shifting it to federally supervised lenders, whose deposits are insured by
federal agencies. Such a result would subject lenders like appellees to a liability
not shared by other significant sources of funding, such as insurance companies,
mortgage bankers, and state-chartered savings and loan associations, upon
which the federal regulations do not apply.

25

No private remedy exists in a statute which does not provide private rights to an
identifiable class, does not prohibit conduct as unlawful and whose legislative
history is silent on the existence of a private cause of action. Touche Ross &
Co. v. Redington, supra, 442 U.S. at 576, 99 S.Ct. at 2489. The third and fourth
factors of the Cort test are relevant only if the first two indicate an intent to
create the private remedy. California v. Sierra Club, supra, --- U.S. at ----, 101
S.Ct. at 1774. The initial two factors indicate that no such intent can be
ascertained from the federal flood laws; therefore, appellants' quest for
damages pursuant to 42 U.S.C. 4012a(b) and 4104a fails.

IV. State Claims

26

The district court, by granting summary judgment against all claims, dismissed
appellants' state claims for fraud and negligence22 on their merits. The court
held that "(i)nasmuch as all of Plaintiffs' claims herein are dependent upon the
implication of a private cause of action, Plaintiffs' claims must be dismissed."
Appellees, attempting to support the court's decision, reason that state common
law does not provide all the elements of the asserted fraud or negligence. They
assert that both causes of action require a breach of duty and that the only duty
here arises from federal enactments. Therefore, they contend, there must exist a
private cause of action in the federal statutes themselves before appellants can
recover from the state based claims.

27

Whether this is true is a matter of state law. See, e. g., Moore v. Chesapeake &
Ohio Ry., 291 U.S. 205, 211-17, 54 S.Ct. 402, 404-06, 78 L.Ed. 755 (1934);
Crane v. Cedar Rapids & Iowa City Railway Co., 395 U.S. 164, 166-67, 89
S.Ct. 1706, 1708-09, 23 L.Ed.2d 176 (1969); Moody v. McDaniel, 190 F.Supp.
24, 25-29 (N.D.Miss.1960); W. Prosser, Handbook of the Law of Torts 36, at
200-02 (4th ed. 1971). 23 This can best be determined by remand of the case to
the Mississippi state court in which the suit was initially filed. 24

28

In removal cases the federal court may, in its sound discretion pursuant to 28
U.S.C. 1441(c), return the parties to the state court for the trial of pendent

state law claims. Ondis v. Barrows, 538 F.2d 904, 908 (1st Cir. 1976); Brough
v. United Steelworkers of America, AFL-CIO, 437 F.2d 748, 750 (1st Cir.
1971). Since this case was originally filed in state court, it would be
unreasonable to dismiss without prejudice and require appellants to file anew in
state court. Therefore, the district court erred in granting a summary judgment
on all claims, since its holding dismissed the Mississippi common law claims
with prejudice.
29

We therefore remand this case to the district court with direction to remand it to
the Mississippi state court in which it was originally filed.

30

AFFIRMED IN PART; VACATED AND REMANDED IN PART.

JOHN R. BROWN, Circuit Judge, concurring:

31

I concur fully in the opinion for the Court.

32

Although, on my approach, it might have been preferable that we simply

remand to the District Court for consideration of the state-based claim, it is still
open to the State Court on remand to apply, as relevant, perhaps controlling,
substantive federal law not going solely to jurisdiction or the implication of a
private right of action, the National Flood Insurance Program, 42 U.S.C.
4012a(a, b) (and all amendments).

33

This Court has fully approved this approach.

34

Lowe v. General Motors Corp., 624 F.2d 1373, 1379-81 (5 Cir. 1980).

42 U.S.C. 4012a(b) provides as follows:

(b) Each Federal instrumentality responsible for the supervision, approval,
regulation, or insuring of banks, savings and loan associations, or similar
institutions shall by regulation direct such institutions not to make, increase,
extend, or renew after the expiration of sixty days following December 31,
1973, any loan secured by improved real estate or a mobile home located or to
be located in an area that has been identified by the Secretary as an area having
special flood hazards and in which flood insurance has been made available
under this chapter, unless the building or mobile home and any personal
property securing such loan is covered for the term of the loan by flood

insurance in an amount at least equal to the outstanding principal balance of the

loan or to the maximum limit of coverage made available with respect to the
particular type of property under the chapter, whichever is less.
42 U.S.C. 4104a provides as follows:
Each Federal instrumentality responsible for the supervision, approval,
regulation, or insuring of banks, savings and loan associations, or similar
institutions shall by regulation require such institutions, as a condition of
making, increasing, extending, or renewing (after the expiration of thirty days
following August 22, 1974) any loan secured by improved real estate or a
mobile home located or to be located in an area that has been identified by the
Secretary under this chapter or Public Law 93-234 as an area having special
flood hazards, to notify the purchaser or lessee (or obtain satisfactory
assurances that the seller or lessor has notified the purchaser or lessee) of such
special flood hazards, in writing, a reasonable period in advance of the signing
of the purchase agreement, lease, or other documents involved in the
transaction.
2

Federal courts are vested with jurisdiction pursuant to both 28 U.S.C.

1331(a) and 1337 over those claims arising under the laws of the United States.
The Supreme Court in Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90
L.Ed. 939 (1946) interpreted the statute which is now section 1331(a) as
follows:
Jurisdiction ... is not defeated ... by the possibility that the averments might fail
to state a cause of action on which petitioners could actually recover. For it is
well settled that the failure to state a proper cause of action calls for a judgment
on the merits and not for a dismissal for want of jurisdiction. Whether the
complaint states a cause of action on which relief could be granted is a question
of law and just as issues of fact it must be decided after and not before the court
has assumed jurisdiction over the controversy.
Under this analysis of section 1331, it has long been recognized that where a
plaintiff asserts that a private right of action is implied from federal law, federal
courts do have the requisite subject matter jurisdiction to determine whether
such a federal remedy exists. See, e. g., Davis v. Passman, 442 U.S. 228, 236,
99 S.Ct. 2264, 2272, 60 L.Ed.2d 846 (1979); Cort v. Ash, 422 U.S. 66, 71, 95
S.Ct. 2080, 2084-85, 45 L.Ed.2d 26 (1975); National Railroad Passenger Corp.
v. National Association of Railroad Passengers, 414 U.S. 453, 456, 94 S.Ct.
690, 692, 38 L.Ed.2d 646 (1974); Rogers v. Frito Lay, Inc., 611 F.2d 1074,
1078 (5th Cir. 1980), cert. denied, --- U.S. ----, 101 S.Ct. 246, 66 L.Ed.2d 115
(1980); Clark v. Gulf Oil Corp., 570 F.2d 1138, 1142-44 (3d Cir. 1977), cert.

denied, 435 U.S. 970, 98 S.Ct. 1611, 56 L.Ed.2d 62 (1978); Girardier v.

Webster College, 563 F.2d 1267, 1270 (8th Cir. 1977). However, a claim does
not arise under the law of the United States pursuant to either sections 1331 or
1337 if the relief sought is based entirely upon a state cause of action in which
regulations established by a federal statute are used merely as further evidence
of the right to recover under state law. See Lowe v. General Motors Corp., 624
F.2d 1373, 1379-81 (5th Cir. 1980); Jacobson v. New York, N.H. & H.R. Co.,
206 F.2d 153, 156-58 (1st Cir. 1953); aff'd, 347 U.S. 909, 74 S.Ct. 474, 98
L.Ed. 1067 (1954); Moody v. McDaniel, 190 F.Supp. 24, 25-29
(N.D.Miss.1960).
In the present case, appellants do not merely assert that under state law they are
entitled to recover damages for appellees' alleged noncompliance with the flood
statute. Rather, they specifically claim that a remedy exists pursuant to the
federal flood law itself. Appellants contended before the district court, as they
have before this court, that the National Flood Insurance Program implies a
private right of action sufficient to provide a damage remedy without any
assistance from state law. Thus, the fraud and negligence actions are pendent
state law claims whose existence in federal court depends solely upon
appellants' theory of a private right of action. E. g., Touche Ross & Co. v.
Redington, 442 U.S. 560, 566 n.8 & 567 n.9, 99 S.Ct. 2479, 2484 n.8 & 2485
n.9, 61 L.Ed.2d 82 (1979); United States v. Capeletti Bros., Inc., 621 F.2d
1309, 1311 (5th Cir. 1980).
3

Appellants also assert on appeal that the district court should have dismissed
the case according to Fed.R.Civ.P. 12(b)(6) and not on summary judgment. In
view of our ruling here, it is unnecessary to decide this issue

The 1968 Act set out that the Program was to be administered by HUD.
Accordingly, the Secretary of HUD was directed to identify and make public all
flood plain areas across the country and to determine the boundaries of the high
flood risk zones within all such areas. National Flood Insurance Act of 1968
1360, 42 U.S.C. 4101(a)

Further congressional findings and purposes in enacting the National Flood

Insurance Program are listed in the remaining subsections of 42 U.S.C. 4001

Texas Landowners Rights Ass'n v. Harris, 453 F.Supp. 1025, 1027

(D.D.C.1978), aff'd, 598 F.2d 311 (D.C.Cir.1979), cert. denied, 444 U.S. 927,
100 S.Ct. 267, 62 L.Ed.2d 184 (1980)

Flood Disaster Protection Act of 1973 202(a), 42 U.S.C. 4106(a)

Flood Disaster Protection Act of 1973 202(b). However, this restriction was

removed by the Housing and Community Development Act of 1977 and

replaced with a notice requirement. Pub.L.No.95-128, 703, 91 Stat. 1144
(codified at 42 U.S.C. 4106(b), as amended). For a general discussion of the
sanctions see Texas Landowners, supra note 6, at 1027-28
9

Congress did not place the burden of implementing and enforcing the Program
directly upon the lending institutions. Rather, this responsibility was placed
upon federal agencies such as the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Comptroller of the
Currency, the Federal Home Loan Bank Board, the Federal Savings and Loan
Insurance Corporation, and the National Credit Union Association whose duties
include the regulation and supervision of lenders. See 42 U.S.C. 4003(a)(5)

10

The regulation issued by the Federal Home Loan Bank Board to implement this
requirement is found at 12 C.F.R. 523.29(b)

11

The regulation issued by the Federal Home Loan Bank Board to implement this
requirement is found at 12 C.F.R. 523.29(e). The regulation directed that
notice must be given ten days prior to closing

12

Appellees, as well as the savings and loan associations participating herein as

amicus curiae, argue forcefully that the notice requirement of section 4104a is
not even applicable to defendants in the present case. They point out that it is
redundant and unnecessary to require a lender to give notice of a flood hazard
area where, pursuant to section 4012a(b), the lender is already required to direct
the borrower to first obtain flood insurance before the loan can be executed.
Accordingly, it was the obvious intent of Congress to apply the notice
requirement only in those communities where the flood program had not been
adopted and flood insurance was neither required nor available in the flood
zones. Thus, the argument proceeds, since Jackson adopted the Program,
section 4014a was inapplicable and lenders only had to follow the insurance
requirement of section 4012a(b)
The notice requirement was an amendment enacted in 1974. Its legislative
history is short. Although appellees' argument is logical and plausible, there is
no distinction in the statute itself. We find it unnecessary and inadvisable to
pass on this issue of statutory construction since, regardless of its applicability,
we hold that Congress did not supply a private cause of action under section
4104a upon which appellants can recover. See Anderson v. United States, 417
U.S. 211, 218, 94 S.Ct. 2253, 2259, 41 L.Ed.2d 20 (1974).

13

It is axiomatic under the principles of statutory construction that courts must

consider the entire corpus of pertinent law to ensure that any interpretation
would be consistent with the purposes enunciated by Congress. See Kokoszka

v. Belford, 417 U.S. 642, 650, 94 S.Ct. 2431, 2436, 41 L.Ed.2d 374 (1974);
Weinberger v. Hynson, Westcott & Danning, Inc., 412 U.S. 609, 631-32, 93
S.Ct. 2469, 2484, 37 L.Ed.2d 207 (1973). In Belluso v. Turner
Communications Corp., 633 F.2d 393, 396 (5th Cir. 1980), we recognized this
principle of statutory interpretation applied to the implication doctrine
14

In 1968, House Report No. 1585 discussed the purposes and need for a flood
insurance program. It stated as follows:
Heavy losses over the years from hurricanes in the coastal areas and from
storms in inland areas of the Nation dramatize the lack of insurance protection
against flood damage. Insurance protection against the risk of destruction
caused by tornadoes and other natural catastrophes is generally available, but it
is not available against the risk of flood loss.
Communities along the seacoast or in a river basin become completely
immobilized following a major flood. Usually they must depend on the Federal
Government and voluntary relief agencies to provide various forms of
assistance. Some State and local governments have limited programs to assist a
flood-stricken area, but disaster relief from all of these sources is inadequate to
provide for the necessary restoration of heavily damaged areas. These facts
underline the need for a program which will make insurance against flood
damage available, encourage persons to become aware of the risk of occupying
the flood plains, and reduce the mounting Federal expenditures for disaster
relief assistance. (emphasis added)
H.R.Rep.No.1585, 90th Cong., 2d Sess., reprinted in (1968) U.S.Code Cong. &
Ad.News 2873, 2966-67.
For further evidence of the interest of Congress in reducing the burden on
federal funds through land use controls and insurance, see S.Rep.No.93-583,
93d Cong., 1st Sess., reprinted in (1973) U.S.Code Cong. & Ad.News 3217,
3218-20, 3223.

15

The National Flood Insurance Program grew out of a 1966 HUD study, the
conclusion of which became a part of a Senate report on the Federal Flood
Disaster Relief Act of 1973. The recommendation of that study states in
pertinent part as follows:
To encourage widespread purchase of flood insurance, the Congress should be
requested to declare that as a matter of national policy all lending institutions
entrusted with savings or deposits and under any form of Federal supervision of
insurance of savings or deposits shall require in high risk areas flood insurance
at unsubsidized rates on all new mortgages based on new residences, as they

now generally require fire insurance; and that such flood insurance be
considered in the interest of the borrowers, the lending institutions, and the
savers and depositors; and these institutions might well encourage flood
insurance by borrowers in low risk areas. (emphasis added)
S.Rep.No.93-583, 93d Cong., 1st Sess. reprinted in (1973) U.S.Code Cong. &
Ad.News 3217, 3220.
16

There is little legislative history on 42 U.S.C. 4104a. However, in the short

statement of purpose by the amendment's sponsor, it is clear that one reason for
the notice requirement was to discourage flood zone development in order to
prevent using federal funds through such agencies as the Federal Housing
Authority (FHA) and Small Business Administration (SBA) to finance the
development and then later again using federal funds to rebuild with disaster
relief. The amendment's sponsor stated in pertinent part as follows:
This (amendment) has to do with the development of commercial and private
housing developments in flood plain areas, and these developments often add to
the flood hazards in these areas. Many times it is a commercial development or
a private housing development that is financed through the Federal
Government, through FHA or SBA or some other program.
Then when the flood happens and damage results, the Federal Government is
called upon again to help those who were the victims.

120 Cong.Rec. 20308 (1974)

17

12 U.S.C. 1464(d)(2)(A)

18

12 U.S.C. 1464(d)(4)

19

12 U.S.C. 1464(d)(8)(B)

20

12 U.S.C. 1464(d)(2)(A)

21

In the brief remarks on the House floor, the sponsor of the notice requirement
compared the legislation to an extension of the truth-in-lending concept. 120
Cong.Rec. 20308 (1974). Appellants rely on this comparison as evidence of
intent to create a private right of action. Their reliance is misplaced. "(T)he
Truth in Lending Act provides 'detailed remedial machinery' to redress
violations of the Act." Gerasta v. Hibernia National Bank, 575 F.2d 580, 583
(5th Cir. 1978). Additionally, Congress placed stringent substantive and
procedural limits on liability under the Act. E. g., 15 U.S.C. 1640(a)(2) & (e).
Other than the disclosure requirement, the similarity between 42 U.S.C.

4104a and the Truth-in-Lending Act vanishes. If Congress had intended section
4104a to provide the same private remedy, it would have also provided for the
similar "machinery" as well as substantive and procedural safeguards upon
which liability to borrowers could be fairly determined
22

On appeal, appellants charge that in addition to fraud and negligence they are
also entitled to recover damages under the separate common law theories for
breach of contract and breach of duty undertaken to be performed. In view of
our ruling here, these additional issues may be presented to the Mississippi state
court for its consideration

23

For a general discussion of the effects of federal regulations on state common

law see Hazen, Implied Private Remedies Under Federal Statutes; Neither a
Death Knell Nor a Moratorium Civil Rights, Securities Regulation, and
Beyond, 33 Vand.L.Rev. 1333, 1335-47 (1980); Note, Implied Causes of
Action in the State Court, 30 Stan.L.Rev. 1243, 1243-53 (1978)

24

In Lowe v. General Motors Corp., 624 F.2d 1373 (5th Cir. 1980), this court was
compelled to determine the effect of a federal statute on state law due to
diversity jurisdiction. There, we held that under Alabama law a plaintiff could
recover in a wrongful death action for violations of the National Traffic and
Motor Vehicle Safety Act of 1966. Lowe v. General Motors Corp., supra, 624
F.2d at 1379-80
There is no diversity in the present case. The fraud and negligence claims in
federal court were only pendent state claims. See note 2 supra. Under the
principles of comity and fairness, the Supreme Court in United Mine Workers
v. Gibbs, 388 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966) held
that in cases where the federal claim is dismissed before trial, as in the instant
case, the pendent state claims should be left to state tribunals. See Touche Ross
& Co. v. Redington, supra, 442 U.S. at 566 n.8, 99 S.Ct. at 2484 n.8; Lowe v.
General Motors Corp., supra, 624 F.2d at 379; United States v. Capeletti Bros.,
Inc., 621 F.2d 1309, 1317-18 (5th Cir. 1980).