United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 00-3147
                                   ___________

Audio Odyssey, Ltd., an Iowa           *
Corporation, Dogan A. Dincer, and      *
Ann M. Dincer,                         *
                                       *
             Appellants,               * Appeal from the United States
                                       * District Court for the Southern
      v.                               * District of Iowa.
                                       *
United States of America and the       *
United States Small Business           *
Administration,                        *
                                       *
             Appellees.                *
                                 _____________

                                Submitted: April 10, 2001
                                Filed: July 5, 2001
                                 _____________

Before BOWMAN and FAGG, Circuit Judges, and PIERSOL1, District Judge.
                          _____________

PIERSOL, District Judge.

      This appeal revolves around a loan that was made by Brenton First National
Bank (the Bank) to Audio Odyssey, Ltd., a retail electronics store owned by Dogan and


      1
        The Honorable Lawrence L. Piersol, Chief Judge, United States District Court
for the District of South Dakota, sitting by designation.
Ann Dincer (Audio Odyssey and the Dincers are referred to collectively as Audio
Odyssey). The loan was guaranteed by the Small Business Administration (SBA).
After the Bank filed a writ of replevin and seized Audio Odyssey’s inventory, Audio
Odyssey brought this action against the United States and the SBA, alleging negligence,
breach of contract, and tortious interference with contract. The district court granted
summary judgment to the government. We affirm in part, reverse in part, and remand
for further proceedings.

                                            I

      One of the policies underlying the Small Business Act states that the government
should “aid, counsel, assist, and protect, insofar as is possible, the interests of small-
business concerns.” 15 U.S.C. § 631(a). The SBA helps to accomplish this, in part,
through agreements to participate in loans made by private lending institutions. 15
U.S.C. § 636(a). In 1978, the SBA and the Bank signed a “Loan Guaranty Agreement”
which allowed the Bank to make loans to small businesses with the SBA as the
guarantor of those loans (1978 Guaranty Agreement).

       In 1991, pursuant to the 1978 Guaranty Agreement, the Bank made a loan to
Audio Odyssey that the SBA guaranteed. On October 3, 1991, in connection with this
loan, the Dincers executed an SBA Note which stated:
             This promissory note is given to secure a loan which SBA
             is making or in which it is participating and, pursuant to Part
             101 of the Rules and Regulations of SBA (13 C.F.R.
             101.1(d)), this instrument is to be construed and (when SBA
             is the Holder or a party in interest) enforced in accordance
             with applicable Federal law.
The next day the Dincers and the SBA also executed an “Authorization and Loan
Agreement.” The Authorization and Loan Agreement provides that it is subject to the
provisions of the 1978 Guaranty Agreement. In addition, the Authorization and Loan


                                           -2-
Agreement requires Audio Odyssey to perform its payment obligations and keep
current with all tax obligations. The loan was secured with, among other things, a
security interest in Audio Odyssey’s accounts receivable, contract rights, inventory,
furniture, fixtures, machinery, and equipment, and a guaranty by the Dincers secured
by mortgages on property they owned personally.

      On July 12, 1995, John Bradley, a loan officer at the Bank, called Roger
Hoffman at the SBA, who was responsible for managing the SBA’s guaranteed loan
program in the eastern 29 counties of Iowa. Bradley informed Hoffman that Audio
Odyssey had failed to pay the loan installments for June and July, that it had fallen
behind on paying its employee withholding taxes, and that it was overdrawn on its
checking account. Bradley also told Hoffman that Audio Odyssey was going to hold
a sale that weekend and Bradley feared that the profits would be applied to the
withholding tax Audio Odyssey owed rather than to the loan from the Bank. According
to Hoffman’s deposition testimony, Bradley explained that the Bank representatives
were going to meet with Mr. Dincer and that the Bank would give Audio Odyssey until
5:00 p.m. the next day – July 13, 1995 – to bring everything current. If that failed, the
Bank was going to take possession of the collateral. Hoffman agreed.

       Hoffman also received a call from Mr. Dincer on July 12, 1995. Hoffman
believes the call came after he had spoken to Bradley. Mr. Dincer asked Hoffman to
extend the 5:00 p.m. deadline for 30 days which would allow Audio Odyssey to
become current on the loan and would give Mr. Dincer time to negotiate a payment
plan with the IRS on his tax liability. Hoffman advised Mr. Dincer that he would have
to discuss this workout proposal with Bradley. Mr. Dincer claims he called Bradley
several times on July 13 but that his calls were not returned.

      According to Mr. Dincer, on July 13 he went to the Bank with a large sum that
would cover the missed June and July payments. Mr. Dincer instructed the teller to
apply the funds to those loan payments. It is not clear from the record if those funds

                                          -3-
were credited to the loan payments. On July 14, the Bank delivered a letter to Audio
Odyssey at 8:50 a.m. which stated that the Bank was accelerating the loan and that the
entire balance of approximately $126,000 was due in 10 minutes at 9:00 a.m. Later
that day the Bank filed for and was granted a writ of replevin. According to Mr.
Dincer, the Sheriff arrived with Bradley and closed down the store, taking possession
of the inventory. Hoffman claims that he was not aware of the events that took place
on July 13 and 14 until several days later.2

                                            II

      A district court’s grant of summary judgment is subject to de novo review on
appeal. Do v. Wal-Mart Stores, 

, 1012 (8th Cir. 1998); Thomas v. First
Nat’l Bank of Wynne, 

, 65 (8th Cir. 1997).

A.      NEGLIGENCE CLAIM
        1.     Discretionary Function Exception
        In its Complaint, Audio Odyssey claims the SBA, through Hoffman, was
negligent because it did not follow mandatory procedures outlined in its own
regulations before allowing the Bank to proceed with the liquidation. Specifically,
Audio Odyssey claims that the SBA was negligent in: (1) authorizing the Bank to sue
Audio Odyssey without written consent in violation of the 1978 Guaranty Agreement;
(2) failing to inform the Bank that it was to take no action, including making a demand
on the borrower, or file suit without written approval; (3) failing to arrange for a field
visit as required by the Standard Operating Procedure Manual (SOP); (4) failing to
submit the required Form 327 to obtain approval for not following the SOP; (5) failing
to obtain and review a written liquidation plan from the Bank in violation of the SOP


      2
         For an extended discussion of the facts of this case, many of which are not
pertinent to the issues presented here, see this Court’s opinion in a related case, Audio
Odyssey, Ltd. v. Brenton First Nat’l Bank, 

(8th Cir. 2001).

                                           -4-
and 13 C.F.R. § 120.512; (6) failing to ensure that all guarantors were notified of the
acceleration of the loan; (7) failing to follow federal regulations and the SOP in general;
and (8) failing to act as a “reasonable prudent lender.”

       Audio Odyssey’s claims of negligence are governed by the Federal Tort Claims
Act (FTCA). “The Federal Tort Claims Act is a limited waiver of sovereign immunity,
making the Federal Government liable to the same extent as a private party for certain
torts of federal employees acting within the scope of their employment.” United States
v. Orleans, 

, 813 (1976).3 Although the FTCA generally waives sovereign
immunity with respect to tort claims, its waiver does not extend to claims “based upon
the exercise or performance or the failure to exercise or perform a discretionary
function or duty on the part of a federal agency or an employee of the Government,
whether or not the discretion involved be abused.” 28 U.S.C. § 2680(a).

     To determine whether an action by a government official was discretionary, we
employ a two-part test defined by the Supreme Court in Berkovitz v. United States, 

, 536-37 (1988). First, we must determine if the “challenged governmental
action [is] the product of ‘judgment or choice.’” Dykstra v. United States Bureau of
Prisons, 

, 795 (8th Cir. 1998) (internal citations omitted). To do this, we
must determine whether the “statute, regulation, or policy mandates a specific course
of action.” 

is a mandate there is no discretion. Second, if the government
action is the product of judgment or choice, it must be “based on ‘considerations of
public policy.’” 

the Court to determine if the judgment is “grounded
in social, economic or political policy.” 

policy allows government agents
to exercise discretion, “‘it must be presumed that the agent’s acts are grounded in
policy when exercising that discretion.’” 

This presumption may be
rebutted. 

      3
        Neither party takes issue with the district court’s finding that Iowa law would
provide Audio Odyssey with a remedy against a private party in similar circumstances.

                                           -5-
       We agree with the district court that the decision to place a loan in liquidation
is discretionary. The SOP provides “automatic” and discretionary means for placing
an account in liquidation. See SOP 50 51 1 ¶ 4(a) (lists situations which will
automatically place an account in liquidation); SOP 50 51 1 ¶ 4(b) (entitled “Non
Automatic Situations (Judgmental),” it lists situations that will “ordinarily” trigger
liquidation). The liquidation decision here was evidently based on the perceived threat
to the collateral which is a “non-automatic” situation (that “ordinarily” triggers
liquidation) expressly provided for in SOP 50 51 1 ¶ 4(b). See SOP 50 51 1 ¶ 4(b)(3).
This does not end the inquiry, however, because once a loan is “in liquidation” the SOP
provides certain mandatory steps that must be taken during the liquidation process.

        According to SOP 50 51 1 ¶ 2(b)(1), the “mandatory parts of the SOP are
identified through the use of the words ‘shall,’ ‘will,’ and ‘must.’” Several of the steps
that Audio Odyssey claims the SBA failed to take are written in mandatory language.
For example, SOP 50 51 1 ¶ 44(a) states that when the guaranteed lender notifies the
SBA of a delinquency or situation that may lead to liquidation, “[d]uring the
conversation, the SBA spokesperson will arrange for the required field visit and advise
the lender that no action, including making demand on the borrower, is to be taken
without SBA’s written approval.” Audio Odyssey claims that Hoffman failed to inform
the Bank that it was to take no action, including making a demand on the borrower, or
file suit without written approval.

       Similarly, Audio Odyssey claims that the SBA was negligent in authorizing the
Bank to sue without written consent in violation of the 1978 Guaranty Agreement.
SOP 50 51 1 ¶ 1(c) states that, while the SOP “is applicable in its entirety to all SBA
participation loans,” the SOP is applied within the constraints of the terms of any “Loan
Guaranty Agreement” and any applicable “Rules and Regulations.” In 1995, 13 C.F.R.
§ 120.201-1 stated that “[t]he holder of the note shall not, without the prior written
consent of the other participant: . . . (d) Sue: Sue upon any loan instrument.” The 1978
Guaranty Agreement also states that the “[h]older of the note (Lender or SBA) shall

                                           -6-
not, without prior written consent of the other: . . . (c) accelerate the maturity of any
note; (d) sue upon any Loan Instrument.”

        Audio Odyssey claims that the SBA failed to obtain a written liquidation plan or
arrange for a field visit as mandated by the SOP. In Chapter Two entitled
“Correspondence, Report and Control Systems,” SOP 50 51 1 ¶ 19 states: “Upon the
classification of a loan as in liquidation, a liquidation plan must be developed by the
liquidation officer and approved by the line supervisor.” A liquidation plan “consists
of several parts, starting with a review of factual data to determine the present situation,
and leading to a realistic and effective action plan for timely resolution of the debt.”
SOP 50 51 1 ¶ 19(a). As discussed more fully below, the SBA argues that a liquidation
plan was not necessary because the Bank handled the liquidation, not the SBA. Even
if the lender handles the liquidation, SOP 50 51 1 ¶ 6(b) provides that the loan will be
“classified as accounts ‘in liquidation’ and the provisions of this SOP will apply,
including the requirements for a Liquidation Plan.” Similarly, after the SBA has notice
of a liquidation event, SOP 50 51 1 ¶ 44(c) provides: “The borrower’s premises will
be visited by lender and/or SBA representative within ten working days following
knowledge of any condition(s) which create(s) an ‘in liquidation’ situation.” The
language in these provisions, as defined by the SOP, is mandatory.

       In concluding that the provisions of the SOP are discretionary, the SBA and the
district court rely on language from SOP 50 51 1 ¶ 44 which states: “Few liquidations
are the same, and, for that reason, no ‘absolute’ procedure can be mandated. The
following steps, set forth in a ‘usual’ sequence, can vary as circumstances dictate.”
The “usual” steps include notice and a field visit. The SBA acknowledges that the
provisions regarding the liquidation plan and field visit do use mandatory language but
argues that the mandatory language must be read in light of the discretionary language
found in paragraph 44. We agree that these mandatory provisions must be read in
conjunction with the discretionary language in paragraph 44 but do not agree that the
language in paragraph 44 transforms mandatory provisions into discretionary ones. The

                                            -7-
introductory language in paragraph 44 suggests that the sequence in which these
mandatory steps are taken may be altered as circumstances dictate, and therefore, “no
‘absolute’ procedure can be mandated.” The introductory language in paragraph 44
does not mean, however, that any one of these steps need not be taken. Read in
conjunction with the mandatory language elsewhere in the SOP, this one line in
paragraph 44 does not negate the mandatory nature of all the other provisions in the
SOP that require a liquidation plan and a field visit.

      The SBA also argues that under SOP 50 51 1 ¶ 46, a liquidation plan was not
necessary. SOP 50 51 1 ¶ 46 states:
            When it appears that the lender may perform as the
            liquidating agent on the loan, the decision to proceed on that
            course may be made on an event-by-event basis, or it may
            be for the complete liquidation. Proceeding on an event-by-
            event basis is usually appropriate when using a lender for
            specific tasks or in complex cases when events may take
            any of several twists. When the lender is to handle the
            entire liquidation, an overall liquidation plan must be
            approved in advance.

The SBA claims that the Bank was only authorized to perform a liquidation event –
taking possession of the inventory. As a result, the SBA claims, an overall liquidation
plan was not necessary. SOP 50 51 1 ¶ 43 makes clear that the SBA’s decision to
involve the lender in the liquidation is discretionary but paragraph 43 also states that
all actions taken under that SOP “must be in conformance with applicable statutes,
SBA’s published Rules and Regulations, and this SOP.” Thus, even if the Bank was
only involved in the liquidation on an event-by-event basis, the SBA would still have
to comply with SOP 50 51 1 ¶ 19, which requires a liquidation plan. The language in
paragraph 46 does not negate the general requirement of a liquidation plan just because
the lender may be involved in executing parts of that plan. It merely makes express the
requirement that the liquidation plan be approved in advance when the lender handles
the entire liquidation.

                                          -8-
       Because the SOP does prescribe a mandatory course of action for proceeding
with loans in liquidation, we do not find Appley Brothers. v. United States, 

(8th Cir. 1999) to be inapposite as the district court did. In Appley Brothers, the
plaintiff claimed it was damaged as a result of the U.S.D.A.’s failure to conduct a
proper investigation at the grain warehouse where the plaintiff delivered its grain.
Appley 

. Appley Brothers claimed that the U.S.D.A.’s
regulations required its inspector to investigate previously reported out-of-condition
grain and that this investigation, which was not done, would have uncovered the
problem that led to Appley Brothers’s damages. 

held that the
discretionary function exception did not apply because, while the U.S.D.A. inspector
had discretion in how he would investigate the out-of-condition corn, he did not have
the discretion to forgo the investigation altogether. 

The same is true
here. As discussed below, the Bank and the SBA may have had some discretion in
how they executed the mandatory requirements of the SOP, but they did not have the
discretion to eliminate those steps in the liquidation process entirely. To the extent
Audio Odyssey is alleging that the SBA was negligent for a complete failure to
undertake certain mandatory procedures, the discretionary function exception does not
apply and the district court has jurisdiction to address those claims.

       The SBA is protected by the discretionary function exception, however, to the
extent Audio Odyssey alleges the SBA was negligent in the way it executed these
mandatory procedures. While we do not interpret SOP 50 51 1 ¶ 44 to negate the
mandatory nature of certain procedures, we do agree with the district court that the
language in SOP 50 51 1 ¶ 44 which states that “no ‘absolute’ procedure can be
mandated” indicates that there is some discretion in how those mandatory procedures
are executed, particularly with regard to the sequence in which they are done.
Similarly, SOP 50 51 1 ¶ 44(c) mandates that a field visit is conducted but the SBA has
the discretion to direct that the field visit be done by the lender, a representative of the
SBA or both. Further, while a liquidation plan is mandated, neither paragraph 19 nor
paragraph 46 of SOP 50 51 1, mandates that the liquidation plan be processed in any

                                            -9-
particular way. For example, neither states that the plan must be written. Indeed, in
its brief Audio Odyssey admits “[a]n action against the SBA that they reviewed a
liquidation plan negligently or underestimated prior security interests, might well be
barred as discretionary.”

        The discretionary function exception only applies to Audio Odyssey’s claims of
negligence in the execution of mandatory procedures if the discretion was grounded in
considerations of policy. 

. As noted above, when a
government regulation allows an employee to exercise discretion, “‘it must be
presumed that the agent’s acts are grounded in policy when exercising that discretion.’”

This presumption has not been rebutted by Audio Odyssey. As a result,
the discretionary function exception bars Audio Odyssey’s claims to the extent it
alleges that the SBA was negligent in the manner in which it carried out mandatory
procedures.

       2.    Independent Contractor Exception
       Under the FTCA, the United States may be sued for damages arising from the
negligent or wrongful acts or omissions of “any employee of the Government.” 28
U.S.C. § 1346(b)(1). Independent contractors are excluded from the definition of
employees of the government. Charlima, Inc. v. United States, 

, 1080
(8th Cir. 1989). The SBA argues that the Bank was an independent contractor and that,
therefore, under the FTCA, the SBA cannot be held liable for the Bank’s actions. This
argument was raised below but was not mentioned in the district court’s opinion.

       In all of the cases cited by the SBA, the plaintiffs sued the United States for the
actions of the independent contractor. See 

(plaintiff sued
government for alleged negligence of community action agency); Charlima, 

(plaintiff sued FAA for alleged negligence of independent, FAA approved
safety inspector); Hartje v. Federal Trade Comm’n, 

, 1407-08 (8th Cir.
1997) (plaintiff sued federal government and agencies for alleged negligence of court

                                          -10-
appointed receiver). In none of these cases did the plaintiffs allege that the
government’s actions were negligent. Rather, the plaintiffs asserted that the alleged
negligent parties were federal employees in order to bring the suits against the
government. Audio Odyssey’s Complaint, however, does not attempt to hold the SBA
liable for the acts of the Bank. Rather, the Complaint clearly alleges negligence on the
part of the SBA itself. As a result, Audio Odyssey’s negligence claims may not be
dismissed on this ground.

B.     CONTRACT CLAIM
       Audio Odyssey is also suing the SBA for breach of the 1978 Guaranty
Agreement. Audio Odyssey is not a party to the 1978 Guaranty Agreement but that
agreement is specifically referenced in the Authorization and Loan Agreement signed
by Audio Odyssey and the SBA. Under 28 U.S.C. § 1346(a)(2), federal district courts
have original jurisdiction over any civil action based “upon any express or implied
contract with the United States.”4 The government’s consent to be sued in contract
generally extends only to those “with whom it has privity of contract.” See First
Hartford Corp. Pension Plan & Trust v. United States, 

, 1289 (Fed. Cir.
1999) (internal citation omitted). The exception to this rule includes those parties that
are intended third-party beneficiaries of the government contract. 

court
found that Audio Odyssey was not a third party beneficiary of the 1978 Guaranty
Agreement and that, therefore, the court did not have jurisdiction over the claim.

       In making this determination, the district court relied on Iowa law. Federal
common law applies, however, when “a federal agency is a party to the action and . . .
the outcome of the [the] case will directly affect substantial financial obligations of the
United States.” Holbrook v. Pitt, 

, 1270 n. 16 (7th Cir. 1981) (citing
United States v. Standard Oil Co., 

(1947); Clearfield Trust Co. v. United


      4
         In addition,15 U.S.C. § 634(b)(1) allows the SBA to be sued without regard
to the amount in controversy.

                                           -11-
States, 

(1943)). Audio Odyssey is suing the United States directly on a
contract to which the government is a party. The government will be directly affected
by this suit as it will determine if the United States is liable under the 1978 Guaranty
Agreement. As a result, federal common law applies to the determination of Audio
Odyssey’s status as a third-party beneficiary.

       “The proper test for determining third-party beneficiary status is whether the
contract reflects the express or implied intention of the parties to benefit the third
party.” Schuerman v. United States, 

, 433 (Fed. Cl. 1994). “The
intended beneficiary need not be specifically or individually identified in the contract,
but must fall within a class clearly intended to be benefitted thereby.” Montana v.
United States, 

, 1273 (Fed. Cir. 1997). Intent may be found if the
beneficiary was “reasonable in relying on the promise as manifesting an intention to
confer a right on him.” 

third party was not intended to benefit from the
agreement, that third party will be considered an incidental beneficiary. 

. Incidental beneficiaries have no “legally cognizable rights under the
contract.” 

Circuit’s opinion in Holbrook is instructive. In that case, the
Department of Housing and Urban Development (HUD) was being sued by a class of
tenants in housing projects in Wisconsin. The tenants claimed they were third-party
beneficiaries to contracts made between HUD and the owners of housing projects that
were HUD-insured or subject to HUD mortgages. 

These contracts were
made pursuant to Section 8 of the Housing and Community Development Act and they
provided the terms under which HUD would disburse rent subsidies to the owners on
behalf of eligible tenants. 

Under these Section 8 contracts, the project
owners were responsible for certifying eligible tenants for HUD benefits. 

In Holbrook, several months passed after the execution of the contract upon which the
named plaintiff sued before the eligible tenants were certified. 

As a result,


                                          -12-
there is no indication that the tenants are expressly named in the contracts between
HUD and the housing project owners.

        To determine if the tenants were third-party beneficiaries, the Seventh Circuit
looked to the underlying purpose of the contracts. The plaintiff tenants argued that the
purpose of the Section 8 contracts was to provide rental assistance to low income
families, while HUD claimed the contracts were meant to help financially troubled
housing projects. 

The court rejected HUD’s argument, noting that the
purpose of Section 8 was to provide rent subsidies to needy families. 

Further, the criteria for entering into the contracts focused on the financial needs of the
tenants in a particular housing project and not the financial needs of the housing project
itself. Thus, the court found the contracts were made for the purpose of facilitating the
goals of Section 8. 

      Neither Audio Odyssey nor any other recipient of a guaranteed loan from the
Bank is expressly identified in the 1978 Guaranty Agreement. Audio Odyssey,
however, is clearly part of a class intended to be benefitted by this agreement. Like the
Section 8 contracts in Holbrook, the 1978 Guaranty Agreement is a vehicle for
achieving the purposes underlying the Small Business Act. The declared policy of the
Small Business Act states that the security and economic well-being of the nation
cannot be realized “unless the actual and potential capacity of small business is
encouraged and developed.” 15 U.S.C. § 631(a). Thus, the purpose of the Small
Business Act is to “aid, counsel, assist, and protect, insofar as possible, the interests
of small-business concerns.” 

of the 1978 Guaranty Agreement is to facilitate this goal. The 1978
Guaranty Agreement states that its purpose is to allow the Bank to “make and the SBA
to guarantee loans to small business concerns pursuant to the Small Business Act.” The
1978 Guaranty Agreement allows small businesses to get loans from the Bank that they
might not have gotten otherwise. Although the provisions of the 1978 Guaranty

                                           -13-
Agreement deal primarily with the terms of the relationship between the Bank and the
SBA, the overriding purpose of the contract was ultimately to benefit small businesses
in need of loans. Indeed, there would be no purpose for a loan guaranty agreement
were it not for the mission of the Small Business Act.

        In addition, there are specific provisions in the 1978 Guaranty Agreement that
provide protection to the small business borrowing from the Bank. For example, under
paragraph six of the 1978 Guaranty Agreement, neither of the holders of the note – the
SBA and the Bank – may accelerate the maturity of the note or sue upon the note
without the written approval of the other.5 The Authorization and Loan Agreement,
which was signed by Audio Odyssey and the SBA, specifically states that the
Authorization is subject to the provisions of the 1978 Guaranty Agreement. As a
result, we find that Audio Odyssey is a third-party beneficiary of the provisions of the
1978 Guaranty Agreement which require written approval prior to acceleration of the
note or the institution of any suit upon it.

C.      TORTIOUS INTERFERENCE WITH CONTRACT
        We affirm the finding of the district court that there is no jurisdiction for Audio
Odyssey’s claim of tortious interference with contract. It is true, as Audio Odyssey
claims, that under 15 U.S.C. § 634(b)(1), the SBA may “sue or be sued,” but this
waiver is limited by the FTCA with regard to tort claims. “In order to place torts of
‘suable’ agencies . . . upon precisely the same footing as torts of ‘nonsuable’ agencies,
. . . Congress, through the FTCA, limited the scope of sue-and-be-sued waivers . . .”
FDIC v. Meyer, 

, 476 (1994) (internal quotation marks omitted). Section
2679(a) of the FTCA states:
              The authority of any federal agency to sue and be sued in its
              own name shall not be construed to authorize suits against


      5
       These provisions are nearly identical to the SBA’s regulations. 13 C.F.R. §
120.201-1 (1995).

                                           -14-
             such federal agency on claims which are cognizable under
             section 1346(b) of this title, and the remedies provided by
             this title in such cases shall be exclusive.
Therefore, for tort claims that may be brought under section 1346(b) against
government agencies, the FTCA provides the exclusive remedy.

       Claims for tortious interference of contract are cognizable under section 1346(b)
because the SBA, if a private person, could be liable to Audio Odyssey under “the law
of the place where the act or omission occurred” – namely Iowa. 28 U.S.C. § 1346(b);
Hibbs v. K-Mart Corp., 

, 439-40 (8th Cir. 1989) (citing the elements for
intentional interference with contractual relations under Iowa law). Since this claim is
cognizable under section 1346(b), the FTCA provides the exclusive remedy for Audio
Odyssey against the SBA pursuant to section 2679. But claims for “interference with
contract rights” are not within the scope of the FTCA. 28 U.S.C. § 2680(h).
Therefore, Audio Odyssey has no claim for tortious interference against the SBA.

                                             III
      The judgment of the district court is reversed to the extent that it bars Audio
Odyssey’s claim that the SBA was negligent in failing to perform mandatory
procedures and to the extent that it bars Audio Odyssey’s claim for breach of contract.
The judgment of the district court is affirmed in all other respects. The case is
remanded to the district court for further proceedings not inconsistent with this opinion.



      A true copy.

             Attest:

             CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.



                                          -15-