Chen v. U.S.

Citation854 F.2d 622
Decision Date11 August 1988
Docket NumberD,No. 953,953
Parties35 Cont.Cas.Fed. (CCH) 75,544 Andrew CHEN and Chen Printing and Supply Co., Inc., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. ocket 88-6013.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Hamilton P. Fox, III, Washington, D.C. (Scott P. Perlman, Dewey, Ballantine, Bushby, Palmer & Wood, Washington, D.C., of counsel), for plaintiffs-appellants.

David R. Lewis, Asst. U.S. Atty. (Rudolph W. Giuliani, U.S. Atty., S.D.N.Y., Richard W. Mark, Asst. U.S. Atty., New York City, of counsel), for defendant-appellee.

Before OAKES and MINER, Circuit Judges, POLLACK, * District Judge.

MINER, Circuit Judge:

Plaintiffs-appellants Andrew Chen and Chen Printing and Supply Co. ("Chen Printing") commenced an action in the United States District Court for the Southern District of New York (Motley, J.) against defendant-appellee United States of America ("the government") under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. Secs. 1346, 2671-80 (1982 & Supp. IV 1986). Chen's complaint alleged claims of negligence per se, intentional tort and prima facie tort against the General Services Administration ("GSA"), based on GSA's alleged violations of federal procurement regulations during (1) the investigation of Chen Printing's operations and (2) the proceedings to suspend and debar Chen Printing as a government contractor. Chen sought $2.5 million damages for loss of investment in, income to, and salary from Chen Printing allegedly caused by GSA's actions.

Upon the government's motion, the district court granted summary judgment in its favor, holding that Chen's claims for GSA's alleged violations of federal procurement regulations were not actionable under state law and that all of his claims arose out of intentional torts barred by the intentional tort exception to the FTCA, 28 U.S.C. Sec. 2680(h). See Chen v. United States, 674 F.Supp. 1078, 1089 (S.D.N.Y.1987). Plaintiffs appeal from this judgment. Because we find that Chen has failed to set forth any claim cognizable against a private party under applicable state law, we affirm without reaching the issue of whether any exceptions to the FTCA apply to bar Chen's claims.

BACKGROUND

Chen Printing, established in 1976 by its president and sole shareholder, Andrew Chen, was a paper supplier accepted into the Section 8(a) Program of the Small Business Act, 15 U.S.C. Sec. 637(a) (1982 & Supp. IV 1986), in February 1977. Under the Act, federal agencies such as the GSA set aside certain supply requirements for which the Small Business Administration ("SBA") contracts with minority-owned firms. During 1977-81, Chen Printing performed In 1979, the Office of the GSA Inspector General in Washington, D.C. opened an investigation into possible illegality relating to Chen Printing's participation in the Section 8(a) Program. An informal investigation led to a formal investigation of Chen Printing in October 1979. Chen maintains that despite his full cooperation with the government, the Inspector General refused to explain the reasons prompting the investigation. While the investigation continued, Chen Printing submitted a bid in January 1981 to GSA's New York office for a Section 8(a) contract involving $1.8 million of business. A "Recommendation for Award" was prepared by the New York office on April 28 and approved by procurement officers on May 6. The final award of the subcontract required approval by other GSA officials. Then, by letter dated May 27, GSA's Commissioner for Federal Supply Service, acting upon a May 15 recommendation from the GSA's Inspector General, notified Chen that Chen Printing was suspended from contracting or subcontracting with GSA as a result of the formal investigation. The investigators' report, which had been submitted on March 17, charged that Chen had made false claims and statements to the government and had falsified a federal tax return. Referral of the matter to the Justice Department for possible criminal prosecution was also recommended. The Commissioner's letter effectively barred the award of the $1.8 million subcontract to Chen Printing. Chen appealed to the Board of Contract Appeals. A hearing scheduled for August 11 before that body was never held, however, because GSA withdrew the suspension on August 10.

seven subcontracts and one competitive contract to supply computer forms to GSA. All the contracts were approved by GSA's New York office, and the company had no business other than that obtained under the Section 8(a) Program.

Subsequently, Chen's attorney wrote to the SBA in Philadelphia and the GSA in New York seeking to resume negotiations on the $1.8 million contract Chen had sought. The GSA Commissioner wrote to the Inspector General on August 25 that " 'the information furnished by your office does not sustain suspension action, and we plan no further action on this matter at this time,' " Jt.App. at 28 (Joint Pre-trial Order p 28). On September 1, GSA New York requested that SBA determine whether Chen Printing remained an eligible Section 8(a) subcontractor and notified Chen's counsel that GSA was in the process of determining whether Chen Printing satisfied the "responsible contractor" criteria under federal procurement regulations. In a September 4 memorandum to the Commissioner, the Inspector General wrote that there was " 'sufficient cause ... to reevaluate Chen's eligibility in the SBA's 8(a) program prior to the award of any contracts to the SBA on behalf of Chen Printing,' " id. at 29 (p 31). The Inspector General also recommended in a September 14 letter to the SBA Administrator that Chen's eligibility be reevaluated. SBA reaffirmed Chen's eligibility on December 11, but Chen lost his only printing plant that month for failure to pay rent.

The GSA Inspector General meanwhile had recommended in an October 26 memorandum that debarment proceedings be brought against Chen Printing. Not until June 11, 1982 was Chen notified that GSA proposed to debar him and his company from GSA contracting and that Chen Printing was suspended from consideration for contract awards pending the conclusion of the debarment proceeding. The Board of Contract Appeals held a hearing in August 1982 and denied the proposed debarment in an opinion issued December 10, 1982.

Chen filed this action in 1984. Judge Motley dismissed his original complaint with leave to replead. Chen's amended complaint contained three claims against the government: (1) negligence per se, (2) intentional tort and (3) prima facie tort. Chen based his negligence per se and intentional tort claims on allegations that GSA negligently and willfully violated federal procurement regulations by, inter alia: delaying the award of the $1.8 million contract while it considered suspending Chen Printing, constituting a "de facto debarment/suspension"; refusing to inform The government moved to dismiss Chen's amended complaint or, alternatively, for summary judgment. Following supplemental briefing requested by Judge Motley on how the disposition of the motion was affected by Guccione v. United States, 670 F.Supp. 527 (S.D.N.Y.1987) (Motley, J.), aff'd, 847 F.2d 1031 (2d Cir.1988), summary judgment was granted in favor of the government. Judge Motley held that Chen's complaint failed to state claims for negligence per se or intentional tort under state law. Because "the rights meant to be secured by the regulations GSA disobeys in cases of constructive debarment are due process rights" guaranteed by the federal constitution, "there could not be an analogous tortious violation of local law" as required under the FTCA, 674 F.Supp. at 1084 (footnote omitted); see id. at 1086. Nor would such violations support Chen's claim for prima facie tort, Judge Motley found, because "it would run up against the requirement that the acts constituting prima facie tort be otherwise lawful," id. at 1086 n. 17.

Chen of the purpose of its investigation; formally suspending Chen Printing, without prior notice or hearing, during the pendency of the $1.8 million contract award; and imposing a second "de facto debarment/suspension" by requiring, without prior notice or hearing, that the SBA reaffirm Chen's eligibility for the Section 8(a) Program before considering Chen Printing for future contracts or continuing business relations with it. For his prima facie tort claim, Chen alleged that (1) GSA imposed the "de facto debarments/suspensions" wrongfully, maliciously and in bad faith, with the sole motivation to injure him, and (2) GSA investigators, with malice and ill will, harassed his wife and children, made racist comments to him, and acted in a racist manner towards his Asian employees.

Alternatively, Judge Motley found that all of Chen's claims were barred by the intentional tort exception, 28 U.S.C. Sec. 2680(h), of the FTCA. Comparing Chen's claims with those she dismissed in Guccione, Judge Motley found that essential to each of Chen's claims was proof of intentional torts barred under Sec. 2680(h): His claims based on wrongful "de facto debarment/suspension" would require proof of interference with contract rights, and his allegations concerning harassment and GSA's bad faith in the process of awarding the $1.8 million contract would require proof of malicious prosecution as well as deceit and misrepresentation. See 674 F.Supp. at 1088-89.

On appeal, Chen challenges the district court's characterizations of the claims in his complaint and contends that he in fact has stated claims under New York law properly cognizable under the FTCA. We affirm the decision of the district court because the facts pleaded by Chen fail to make out any claim assertable against a private party under New York tort law, 1 and therefore we need not reach the issue of the applicability of exceptions to the FTCA.

DISCUSSION

Under the FTCA, the federal government's waiver of sovereign immunity

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