Martin v. U.S. Small Business Administration, C.D. Cal. No. 2:26-cv-03714, Doc. 63, SBA motion to dismiss (July 13, 2026)

Summary

A Notice of Motion and Motion to Dismiss Claims Against Defendant United States Small Business Administration, with a Memorandum of Points and Authorities, filed July 13, 2026 as Document 63 in Travis Edward Martin v. United States Small Business Administration, et al., No. 2:26-cv-03714-WLH-DFM, in the U.S. District Court for the Central District of California. The SBA moves to dismiss the action with prejudice under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), 12(b)(4) and 12(b)(5), with a hearing date of September 4, 2026. It argues that the First Amended Complaint identifies no waiver of sovereign immunity, that declaratory relief is not a standalone cause of action, that 28 U.S.C. § 1346(a)(2) bars the implied covenant claim, that no claim is stated, and that service was not shown. The signature block names Assistant U.S. Attorney Paul B. La Scala.

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     Case 2:26-cv-03714-WLH-DFM    Document 63     Filed 07/13/26   Page 1 of 9 Page ID
                                        #:911



1    TODD BLANCHE
     Acting Attorney General
2    BILAL A. ESSAYLI
     First Assistant United States Attorney
3    DANIEL A. BECK
     Assistant United States Attorney
4    Acting Chief, Civil Division
     ALARICE M. MEDRANO
5    Assistant United States Attorney
     Acting Chief, Complex and Defensive Litigation Section
6    PAUL B. LA SCALA (Cal. Bar No. 186939)
     Assistant United States Attorney
7           Federal Building, Suite 7516
            300 North Los Angeles Street
8           Los Angeles, California 90012
            Telephone: (213) 894-2467
9           E-mail: Paul.LaScala@usdoj.gov
10   Attorneys for Defendant U.S. Small Business Administration
11
                              UNITED STATES DISTRICT COURT
12
                      FOR THE CENTRAL DISTRICT OF CALIFORNIA
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14
     TRAVIS EDWARD MARTIN,                       No. 2:26-cv-03714-WLH-DFM
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                Plaintiff,                       NOTION OF MOTION AND MOTION
16                                               TO DISMISS CLAIMS AGAINST
                       v.                        DEFENDANT UNITED STATES
17                                               SMALL BUSINESS
     UNITED STATES SMALL                         ADMINSTRATION; MEMORANDUM
18   BUSINESS ADMINISTRATION; et                 OF POINTS AND AUTHORITIES IN
     al.,                                        SUPPORT
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                Defendants.                      Hearing Date:      September 4, 2026
20                                               Hearing Time:      1:30 p.m.
                                                 Ctrm:              9B
21
                                                 Honorable Wesley L. Hsu
22                                               United States District Judge
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     Case 2:26-cv-03714-WLH-DFM       Document 63      Filed 07/13/26   Page 2 of 9 Page ID
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1                    NOTICE OF MOTION AND MOTION TO DISMISS
2          PLEASE TAKE NOTICE that, on September 4, 2026 at 1:30 p.m., or as soon
3    thereafter as it may be heard, defendant United States Small Business Administration
4    (“SBA”) will, and hereby does, move this Court for an order to dismiss the action with
5    prejudice against the SBA under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6),
6    12(b)(4) and 12(b)(5). This motion will be made in the Felicitas and Gonzalo Mendez
7    United States Courthouse before the Honorable Wesley L. Hsu, United States District
8    Judge, located at 350 W. 1st Street, Los Angeles, CA 90012.
9          Dismissal of the SBA from the action with prejudice is warranted because:
10          The First Amended Complaint does not identify a waiver of sovereign
11            immunity for Plaintiff’s claims against the SBA. See, e.g., Hutchinson v.
12            United States, 677 F.2d 1322, 1327 (9th Cir. 1982).
13          Plaintiff brings a declaratory relief “cause of action” against the SBA that is
14            not a standalone cause of action and does not establish jurisdiction.
15          The Court does not have jurisdiction over Plaintiff’s cause of action based on
16            an alleged breach of an implied covenant of good faith and fair dealing
17            sounding in contract. See 28 U.S.C.A. § 1346(a)(2).
18          Even if there were jurisdiction, Plaintiff fails to state a claim against the SBA.
19            See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal,
20            556 U.S. 662 (2009).
21          Plaintiff failed to effect service of process on the SBA.
22         This motion is made upon this Notice, the attached Memorandum of Points and
23   Authorities, and all pleadings, records, and other documents on file with the Court in this
24   action, and upon such oral argument as may be presented at the hearing of this motion.
25         This motion is exempt from Local Rules 7-3 and 16-12 because Plaintiff is
26   appearing pro se, is in custody, and is not an attorney. See Dkt. 50.
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1     Dated: July 13, 2026            Respectfully submitted,
2                                     TODD BLANCHE
                                      Acting Attorney General
3                                     BILAL A. ESSAYLI
                                      First Assistant United States Attorney
4                                     DANIEL A. BECK
                                      Assistant United States Attorney
5                                     Acting Chief, Civil Division
                                      ALARICE M. MEDRANO
6                                     Assistant United States Attorney
                                      Acting Chief, Complex and Defensive Litigation
7                                     Section
8
                                         /s/ Paul B. La Scala
9                                     PAUL B. LA SCALA
                                      Assistant United States Attorney
10
                                      Attorneys for Attorneys for Defendant United
11                                    States Small Business Administration
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     Case 2:26-cv-03714-WLH-DFM       Document 63     Filed 07/13/26   Page 4 of 9 Page ID
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1                    MEMORANDUM OF POINTS AND AUTHORITIES
2    I.    INTRODUCTION
3          This case involves a commercial dispute brought by plaintiff Travis Edward
4    Martin against his former business partner and employees relating to SBA loans to two
5    companies owned by Plaintiff. In his First Amended Complaint (“FAC;” Dkt. 33),
6    Plaintiffs asserts two causes of action against SBA, for declaratory relief and breach of
7    the implied covenant of good faith and fair dealing. Plaintiff alleges that his former
8    business partner and employees diminished the assets securing SBA loans to Plaintiff’s
9    companies and that, assuming this is true, the SBA should have somehow prevented
10   Plaintiff’s former business partner and employees from doing so.
11         The Court should dismiss Plaintiff’s two claims against the SBA on several
12   independent grounds. First, the Court lacks subject matter jurisdiction over Plaintiff’s
13   “cause of action” against the SBA for declaratory relief because the FAC does not
14   identify a waiver of sovereign immunity applicable to this claim and because it is not a
15   cognizable cause of action in federal court against the SBA and is not a basis to assert
16   jurisdiction over the SBA. Second, the Court does not have jurisdiction over Plaintiff’s
17   cause of action based on an alleged breach of an implied covenant of good faith and fair
18   dealing because it is a contract-based claim precluded by 28 U.S.C. § 1346(a)(2). Third,
19   even if the Court had jurisdiction, Plaintiff fails to state a claim against the SBA under
20   Federal Rule of Civil Procedure 12(b)(6). Lastly, Plaintiff failed to effect service of
21   process on the SBA.
22         For these reasons, the Court should dismiss the SBA from the action with
23   prejudice and without leave to amend.
24   II.   FACTUAL AND PROCEDURAL BACKGROUND
25         Plaintiff filed his FAC, the operative pleading, on May 24, 2026. See generally
26   FAC. He asserts two causes of action against SBA: (1) declaratory relief and (2) breach
27   of the implied covenant of good faith and fair dealing. FAC at 34-37. Plaintiff also
28   asserts several causes of action against other defendants, namely Plaintiff’s business
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1    partner, employees, and other co-conspirators, for allegedly leaving him “personally
2    exposed on federal SBA debt secured by the collateral they took or impaired.” FAC ¶ 1.
3           Plaintiff alleges that he was a personal guarantor on a SBA loan to Entertainment
4    Technology LLC and that he is the owner of Airlink Internet, Inc., which obtained a loan
5    from SBA. FAC ¶¶ 5-6, 20-2243-44, 51. He further alleges that, between 2019 and 2021,
6    co-defendants James Wald, Natalie Wald, and Jayson Cohen coerced money and
7    property from him, and in 2021 and 2022, they impaired or liquidated the assets securing
8    his SBA loans. FAC ¶¶ 7-9, 23-27, 34-42, 59-126. Plaintiff also alleges that he sent
9    written notice SBA on June 28, 2023 and asked SBA “to secure and pursue the identified
10   collateral” because he was incarcerated. FAC ¶¶ 10, 131. He does not allege what
11   remained of that collateral as of June 2023 or what legal duties or obligations required
12   SBA to pursue the alleged co-conspirators.
13   III.   STANDARD OF REVIEW
14          A.    Dismissal Under Federal Rule of Civil Procedure 12(b)(1).
15          Dismissal under Federal Rule of Civil Procedure (“FRCP”) 12(b)(1) is proper if
16   the Court lacks subject matter jurisdiction to adjudicate a party’s claims. Fed. R. Civ. P.
17   12(b)(1); Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039-40 (9th Cir. 2003).
18   Importantly, the burden of proof on a FRCP 12(b)(1) motion is on the party invoking the
19   Court’s jurisdiction. Sopcak v. No. Mountain Helicopter Serv., 52 F.3d 817, 818 (9th Cir.
20   1995). “Federal courts are courts of limited jurisdiction. . . . It is to be presumed that a
21   cause lies outside this limited jurisdiction, and the burden of establishing the contrary
22   rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am.,
23   511 U.S. 375, 377 (1994) (citations omitted). Thus, in this case, Plaintiff bears the
24   burden of establishing that the Court has jurisdiction over his claims.
25          B.    Dismissal Under Federal Rule of Civil Procedure 12(b)(6).
26          A motion under FRCP 12(b)(6) tests the legal sufficiency of a complaint. “While a
27   complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
28   allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’
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1    requires more than labels and conclusions, and a formulaic recitation of the elements of a
2    cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
3    (citations omitted). Rather, the allegations of the complaint “must be enough to raise a
4    right to relief above the speculative level.” Id. To survive a motion to dismiss, a plaintiff
5    must allege “enough facts to state a claim to relief that is plausible on its face.” Id. at
6    570; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin
7    to a ‘probability requirement,’ but it asks for more than a sheer possibility that a
8    defendant has acted unlawfully. Where a complaint pleads facts that are ‘merely
9    consistent with’ a defendant’s liability, it stops short of the line between possibility and
10   plausibility of ‘entitlement to relief.’” Iqbal, 556 U.S. at 678 (quoting Twombly at 556).
11   IV.   ARGUMENT
12         A.     Plaintiff Has Not Identified Any Applicable Waiver Of Sovereign
13                Immunity.
14         The United States is immune from suit unless it consents to be sued. United States
15   v. Mitchell, 445 U.S. 535, 538 (1980). The SBA, a non-incorporated federal agency, is
16   an integral part of the United States government and has the full sovereign immunity of
17   the United States unless such immunity has been waived by congressional action.
18   vonLusch v. Hoffmaster, 253 F. Supp. 633, 634 (D. Md. 1966); see also United States v.
19   Mel’s Lockers, Inc., 346 F.2d 168, 169 (10th Cir. 1965) (same). As such, a party cannot
20   bring any claim against the SBA unless Congress has “unequivocally” waived sovereign
21   immunity by statute. Jachetta v. United States, 653 F.3d 898, 903 (9th Cir. 2011); see
22   also U.S. Postal Serv. v. Flamingo Indus. (USA) Ltd., 540 U.S. 736, 743 (2004). The
23   burden is on the party asserting jurisdiction to show such a waiver. Holloman v. Watt,
24   708 F.2d 1399, 1401 (9th Cir. 1983). Unless the plaintiff can point to such a waiver, a
25   district court lacks jurisdiction to hear a case. Hutchinson v. United States, 677 F.2d
26   1322, 1327 (9th Cir. 1982).
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1           Here, because Plaintiff fails to identify any “unequivocal waiver of immunity”
2    allowing his lawsuit against the SBA, this action should be dismissed for lack of subject
3    matter jurisdiction.
4           B.       The Court Lacks Jurisdiction Over Plaintiff’s Claim for Declaratory
5                    Relief.
6           The FAC asserts a claim against the SBA for “declaratory relief” under 28 U.S.C.
7    §§ 2201-2201, the Declaratory Judgment Act. See FAC at 34:11. Declaratory relief is not
8    a cause of action in and of itself, but instead a type of relief. Stock W., Inc. v.
9    Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989).
10   Therefore, before declaratory relief can be granted, federal jurisdiction requirements
11   must be satisfied. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950).
12          As the Supreme Court has held, “[t]he operation of the Declaratory Judgment Act
13   is procedural only”; specifically, it “enlarged the range of remedies available in the
14   federal courts but did not extend their jurisdiction.” Id. (citing Aetna Life Ins. Co. v.
15   Haworth, 300 U.S. 227, 240 (1937)). Thus, the Declaratory Judgment Act “does not
16   confer jurisdiction where none otherwise exists.” Benson v. State Bd. Of Parole and
17   Probation, 384 F.2d 238, 239 (9th Cir. 1967); Fiedler v. Clark, 714 F.2d 77, 79 (9th Cir.
18   1983) (“The Declaratory Judgment Act does not provide an independent jurisdictional
19   basis for suits in federal court. . . . It only permits the district court to adopt a specific
20   remedy when jurisdiction exists.”).
21          Therefore, Plaintiff’s request for declaratory relief against the SBA must be
22   dismissed because it is not a standalone cause of action and does not establish
23   jurisdiction.
24          C.       The Court Lacks Jurisdiction Over Plaintiff’s Breach of Implied
25                   Covenant Cause Of Action Against SBA.
26          In his second cause of action against SBA for breach of the implied covenant of
27   good faith and fair dealing, Plaintiff alleges that this claim “arises from” his contractual
28   relationship with SBA and that this claim “sounds in contract, not tort.” FAC ¶ 186. But
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1    28 U.S.C. § 1346(a)(2) states that “the district courts shall not have jurisdiction of any
2    civil action or claim against the United States founded upon any express or implied
3    contract with the United States or for liquidated or unliquidated damages in cases not
4    sounding in tort ...”. Thus, the Court does not have jurisdiction over this contract-based
5    claim.1
6          D.     Plaintiff Fails To State A Claim Against The SBA.
7          Even if the Court had jurisdiction, which it does not, the FAC fails to allege facts
8    to state a claim for relief against the SBA. The crux of Plaintiff’s claims against the SBA
9    is that the SBA failed to preserve the assets securing Plaintiff’s SBA loans. See FAC
10   ¶¶ 1-2, 176-191. Plaintiff alleges that Plaintiff’s former business partner and employees
11   impaired or liquidated these assets in 2021 and 2022. See FAC ¶¶ 3-9. But by Plaintiff’s
12   own account, SBA did not have notice of the alleged impairment or liquidation of these
13   assets until June 28, 2023. See FAC ¶ 10. He does not allege what remained of that
14   collateral as of June 2023 or what legal duties or obligations required SBA to pursue the
15   alleged co-conspirators. Therefore, there is no plausible right to relief against the SBA
16   under FRCP 12(b)(6). See Twombly, 550 U.S. at 555 (2007); Iqbal, 556 U.S. at 678.
17         E.     Dismissal Is Warranted Because Plaintiff Has Not Shown That He
18                Effected Service Of Process On The SBA.
19         Federal courts cannot exercise personal jurisdiction over a defendant without
20   proper service of process. See, e.g., Omni Capital Int’l, Ltd. V. Wolff & Co., 484 U.S. 97,
21   104 (1987). There is no evidence that Plaintiff served the SBA or the United States
22   Attorney General in compliance with FRCP 4(i). See FRCP 4(i) (requiring service of
23   process on the agency and the Attorney General of the United States); id. 4(l) (requiring
24   proof of service to be filed with the court); see also Brockmeyer v. May, 383 F.3d 798,
25   801 (9th Cir. 2004) (“Once service is challenged, plaintiffs bear the burden of
26
     1
       Even if Plaintiff had alleged that this claim is tort-based, the Court would lack
27   jurisdiction because the Federal Tort Claims Act requires the exhaustion of
     administrative remedies prior to commencement of any tort suit. See 28 U.S.C.
28   § 2675(a).
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1    establishing that service was valid under Rule 4.”). Accordingly, dismissal is also
2    warranted under FRCP 12(b)(4) and (5).2
3    V.       CONCLUSION
4             For these reasons, the SBA’s motion should be granted without leave to amend.
5
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7        Dated: July 13, 2026          Respectfully submitted,
8                                      TODD BLANCHE
                                       Acting Attorney General
9                                      BILAL A. ESSAYLI
                                       First Assistant United States Attorney
10                                     DANIEL A. BECK
                                       Assistant United States Attorney
11                                     Acting Chief, Civil Division
                                       ALARICE M. MEDRANO
12                                     Assistant United States Attorney
                                       Acting Chief, Complex and Defensive Litigation
13                                     Section
14
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16                                        /s/ Paul B. La Scala*
                                       PAUL B. LA SCALA
17                                     Assistant United States Attorney
18                                     Attorneys for Defendant United States Small Business
                                       Administration
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22   * The undersigned, counsel of record for defendant United States Small Business
     Administration, certifies that this submission does not use generative artificial
23   intelligence and certifies that this brief contains 1,835 words, which complies with the
     word limit of L.R. 11-6.1
24
25
26   2
      A defendant may move under FRCP 12(b)(4) and (5) to challenge the form and method
     of a plaintiff’s service, respectively. See 5B Charles Alan Wright, Arthur R. Miller, et
27   al., Federal Practice and Procedure § 1353 (3d ed. 2014). The distinction between the
     two Rules is often blurred, and it is appropriate to present and analyze service issues
28   under both. Id.
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