Court Opinion

ID: 4690618
Source: CourtListenerOpinion
Date Created: 2021-05-27 15:02:29.62615+00
Date Added: 2024-06-11T08:05:01.416620
License: Public Domain

20-1929-cv
Hollis Care Group Inc. et al. v. U.S. SBA et al.

                                    UNITED STATES COURT OF APPEALS
                                       FOR THE SECOND CIRCUIT

                                            SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 27th day of May, two thousand twenty-one.

PRESENT:            JOHN M. WALKER, JR.,
                    JOSÉ A. CABRANES,
                    RICHARD C. WESLEY,
                                 Circuit Judges.

HOLLIS CARE GROUP INC., MEDI-SYSTEM RENAL
CARE MANAGEMENT LLC, GARAUDY ANTOINE,
M.D., M.B.A., JACQUES ANTOINE M.D.,

                               Plaintiffs-Appellants,                  20-1929-cv

                               v.

UNITED STATES SMALL BUSINESS ADMINISTRATION,
UNITED STATES OF AMERICA, ISABEL GUZMAN,
solely as Administrator of the Small Business
Administration,

                               Defendants-Appellees. *

FOR PLAINTIFFS-APPELLANTS:                                   REGINA FELTON, Felton & Associates,
                                                             Brooklyn, NY.

     *
         The Clerk of Court is directed to amend the case caption as shown above.

                                                         1
FOR DEFENDANTS-APPELEES:                                      ALEXANDER J. HOGAN, Assistant United
                                                              States Attorney, Christopher Connolly,
                                                              Assistant United States Attorney (on the
                                                              brief) for Audrey Strauss, United States
                                                              Attorney for the Southern District of New
                                                              York, New York, NY.

        Appeal from a May 19, 2020 judgment of the United States District Court for the Southern
District of New York (Jesse M. Furman, Judge).

     UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the District Court is AFFIRMED.

         Plaintiffs-Appellants Hollis Care Group Inc., Medi-System Renal Care Management LLC,
Garaudy Antoine, and Jacques Antoine (“Plaintiffs”) appeal a judgment of the District Court that
dismissed their Amended Complaint (“Complaint”) against Defendants-Appellants the United
States, the United States Small Business Administration (“SBA”) and the SBA Administrator 1
(together, “Defendants”) pursuant to Federal Rule of Civil Procedure 12(b) for lack of subject
matter jurisdiction and failure to state a claim upon which relief can be granted. As interpreted by
the District Court, the Complaint asserted claims for fraud, negligent supervision, and negligent
failure to investigate and uncover fraud, all arising from the SBA’s guaranteeing of a loan from
nonparty Community National Bank. 2 On appeal, Plaintiffs also advance Due Process and Equal
Protection claims under the United States Constitution. We assume the parties’ familiarity with the
underlying facts, the procedural history of the case, and the issues on appeal.

         The District Court dismissed Plaintiffs’ claims for fraud and negligent supervision on two
alternative grounds. First, to the extent Plaintiffs pled the necessary elements of fraud and negligent
supervision under New York law, those claims were cognizable under the Federal Tort Claims Act
(“FTCA”), 28 U.S.C. § 1346(b), 3 and therefore subject to a non-waivable, jurisdictional

    1
     Plaintiffs sued the Administrator solely in her individual capacity. Since Plaintiffs filed suit,
Isabel Guzman has replaced Linda McMahon as Administrator.

    Hollis Care Grp., Inc. v. Small Bus. Admin., No. 19-CV-5695 (JMF), 2020 WL 2521321 (S.D.N.Y.
    2

May 18, 2020).
    3
      This provision establishes exclusive federal jurisdiction over “civil actions on claims against the
United States, for money damages . . . for injury or loss of property . . . caused by the negligent or
wrongful act or omission of any employee of the Government while acting within the scope of his
office or employment, under circumstances where the United States, if a private person, would be
liable to the claimant in accordance with the law of the place where the act or omission occurred.”
28 U.S.C. § 1346(b).

                                                     2
administrative exhaustion requirement. 4 Since the Complaint did not allege exhaustion of remedies
(and the record confirmed Plaintiffs’ failure to exhaust), the District Court concluded that the fraud
and negligent supervision claims should be dismissed for lack of subject-matter jurisdiction. Second,
to the extent Plaintiffs failed to state claims for fraud and negligent supervision, those claims were
necessarily subject to dismissal under Rule 12(b)(6) for failure to state a claim. 5

         The District Court dismissed Plaintiffs’ claim for negligent failure to investigate and uncover
fraud on the grounds that (1) no such tort existed under state law, (2) federal law did not create such
a cause of action against Defendants, and (3) Plaintiffs in any event failed plausibly to allege any
failure to investigate and indeed expressly alleged the contrary. 6

         We agree with the District Court’s cogent analysis and therefore affirm the dismissal of
Plaintiffs’ claims for fraud, negligent supervision, and negligent failure to investigate and uncover
fraud. We deem Plaintiffs’ constitutional claims waived and decline to consider them. 7

    4
      See 28 U.S.C. § 2679(a) (“The authority of any federal agency to sue and be sued in its own
name shall not be construed to authorize suits against 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.”); see also 28 U.S.C. § 2675 (“An action shall not be instituted upon a claim against
the United States for money damages for injury or loss of property or personal injury or death
caused by the negligent or wrongful act or omission of any employee of the Government while
acting within the scope of his office or employment, unless the claimant shall have first presented
the claim to the appropriate Federal agency and his claim shall have been finally denied by the
agency in writing and sent by certified or registered mail.”)
    5
      Hollis Care Grp., 2020 WL 2521321, at *3 (“[I]t is not entirely clear whether [Plaintiffs’]
allegations, taken as true, satisfy the necessary elements [of fraud or negligent supervision] under
New York law. . . . If they do . . . they are cognizable under Section 1346(b) . . . . [I]f they do not,
then by definition Plaintiffs fail to state a claim for fraud or negligent supervision.”) (internal
quotation marks and alterations omitted).
    6
      Id. (“[T]he fact that [a claim for negligent failure to investigate and uncover fraud] does not
exist under New York law . . . means that Plaintiffs fail to state a claim under state law. Nor do they
have a claim under federal law, which provides that the Administrator of the SBA ‘may . . . make
such investigations as [s]he deems necessary,’ not that she must do so, 15 U.S.C. § 634(b)(11) . . . . In
any event, to the extent either New York or federal law does provide a valid cause of action,
Plaintiffs would fail to state a claim because they do not plausibly allege that the SBA actually failed
to investigate any alleged fraud. To the contrary, Plaintiffs expressly allege that the SBA ‘investigated
over a two-year period.’ [Complaint] ¶ 39”).
    7
       See Millea v. Metro-North R.R. Co., 658 F.3d 154, 163 (2d Cir. 2011) (“Arguments raised for the
first time on appeal are deemed waived.”).

                                                     3
                                        CONCLUSION

       We have considered all Plaintiffs’ arguments on appeal and find them to be without merit.
For the foregoing reasons, we AFFIRM the May 19, 2020 judgment of the District Court.

                                                     FOR THE COURT:
                                                     Catherine O’Hagan Wolfe, Clerk

                                                4