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Hooven-Dayton Corp. v. Center City Mesbic, Inc.
Citations: 918 F. Supp. 193; 1996 U.S. Dist. LEXIS 2900; 1996 WL 112390Docket: No. C-3-94-177
Court: District Court, S.D. Ohio; February 6, 1996; Federal District Court
Defendant Small Business Administration's (SBA) Motion to Dismiss (Doc. 43) is granted, while Defendant Center City Mesbic, Inc.'s (CCM) Motion for Entry of Final Judgment and Certification (Doc. 41) is denied. Plaintiff Hooven-Dayton Corp. (HDC) and shareholder McKenna Jordan, Jr. allege that HDC, a minority-owned business, received financing from CCM in 1985 under terms involving securities and future share purchases. Plaintiffs seek declaratory relief against the SBA for its alleged inaction regarding CCM's failure to address its impairment status and Citywide Development Corp.'s unauthorized control over CCM, which allegedly violated specific regulations. The SBA argues that neither the Small Business Investment Act (SBI Act) nor the Small Business Act (SB Act) grants a private right of action for the Plaintiffs, a position not opposed by them. The court reviews Plaintiffs’ allegations under Rule 12(b)(6) of the Federal Rules of Civil Procedure, determining if they can prove any facts that would entitle them to relief. The SBA's motion is upheld due to the absence of a federal cause of action for the claims asserted by the Plaintiffs. The court will separately assess the pending motions, noting the legislative differences between the SB Act, which facilitates direct assistance to small businesses, and the SBI Act. The Small Business Investment (SBI) Act of 1958 enables the licensing of small business investment companies (SBICs) that finance small businesses. Plaintiff HDC received financing from Defendant CCM, a specialized small business investment company (SSBIC) under the SBI Act. The claims against Defendant SBA arise from alleged violations of regulations under the SBI Act. The court determined that Plaintiffs failed to state a claim under the SBI Act, focusing on whether it provides a private right of action. Citing *Goodall v. Columbia Ventures, Inc.*, the court noted that the SBI Act does not expressly create a private right of action and that Congress intended enforcement to be solely by the SBA. The court found this reasoning compelling, concluding no private right of action exists under the SBI Act. Consequently, Plaintiffs lack a federal cause of action against the SBA, leading to the dismissal of all claims against it. Defendant CCM sought final judgment and certification for appeal regarding a counterclaim, but filed the motion over ten days after the relevant decision. The court ruled that the time limit for an interlocutory appeal had lapsed, overruling Defendant CCM’s motion. As a result, the court sustained Defendant SBA’s motion to dismiss and dismissed it from the action, while also overruling Defendant CCM’s motion for entry of final judgment and certification. Additionally, relevant regulations under the SBI Act authorize the SBA to prescribe rules governing SBIC operations and manage conflicts of interest detrimental to small businesses.