Memorandum Opinion Granting Summary Judgment for Plaintiff — Sokol v. SBA

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UNITED STATES DISTRICT COURT · No. 1:21-cv-02385-TSC · Doc. 47 · 2022-09-28 · Docket on CourtListener

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UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF COLUMBIA 
 
 
Civil Action No. 21-cv-2385 (TSC)  
SOKOL WORLD ENTERTAINMENT, 
INC., 
 
Plaintiff, 
 
v. 
 
 
SMALL BUSINESS ADMINISTRATION, 
et al., 
 
Defendants. 
 
 
ORDER 
Plaintiff Sokol World Entertainment, Inc. (“Sokol”) owns and operates Club Cobra, a live 
entertainment venue in Los Angeles.  During the COVID-19 pandemic it applied for a 
“Shuttered Venue Operator Grant” (“SVOG”) from Defendants United States Small Business 
Administrator and its Administrator, Isabella Casillas Guzman (“SBA”).  After being denied 
funding twice, Sokol sued the SBA in this court under the Administrative Procedure Act 
(“APA”), 5 U.S.C. § 701, et seq., arguing that the SBA acted arbitrarily and capriciously, in a 
manner contrary to law, and in a manner unsupported by substantial evidence in denying its 
SVOG applications.  Am. Compl. ¶¶ 41-56, ECF No. 17. 
Both parties have moved for summary judgment.  See Sokol Mot. for Summ. J. (“Sokol 
MSJ”), ECF No. 20; SBA Mot. for Summ. J. (“SBA MSJ”), ECF No. 24.  The SBA also seeks 
dismissal of Sokol’s complaint for lack of subject-matter jurisdiction.  SBA Mot. to Dismiss, 
ECF No. 20.  Both parties also ask the court to consider certain extra-record evidence, ECF Nos. 
19, 36.  Sokol has further moved for the SBA’s extra-record evidence to be stricken from the 
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record.  See ECF No. 30.  Both parties also seek leave to file their unredacted joint appendix on 
the record under seal.  ECF No. 34.   
For the reasons set forth below, Sokol’s motion for summary judgment will be 
GRANTED.  The SBA’s cross-motion for summary judgment and motion to dismiss will be 
DENIED without prejudice.  Sokol and the SBA’s motions for consideration of extra-record 
evidence will be GRANTED.  Sokol’s motion to strike will be DENIED.  The joint motion for 
leave to file the unredacted joint appendix under seal will be GRANTED.  This case will be 
REMANDED to the SBA for supplementation of the administrative record as necessary 
regarding Sokol’s competitors and further proceedings consistent with this Opinion. 
I. 
BACKGROUND 
As part of its ongoing legislative response to the COVID-19 pandemic, Congress set 
aside $15 billion to support shuttered venue operators—such as theatrical producers, live 
performing arts organizations, museums, movie theaters, and talent representatives—through 
SVOGs.  Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act, Pub. L. 116-260 
§§ 323(d)(1)(H), 324, 134 Stat. 1993, 2021, 2022 (2020) (codified at 15 U.S.C. § 9009a).  Venue 
operators whose gross revenues declined from 2019 to 2020  by over 25% could apply to the 
SBA for a grant of up to 45% of their 2019 gross revenue, provided they met other eligibility 
conditions.  15 U.S.C. §§ 9009a (a)(1)(A)(i)(II), (c)(1)(A)(i)(I).  The SVOG program excluded 
any venue operator that presents live performances of a prurient sexual nature; or derives, 
directly or indirectly, more than de minimis gross revenue through the sale of products or 
services, or the presentation of any depictions or displays, of a prurient sexual nature.  Id. § 
9009a (a)(1)(B). 
Sokol owns and operates Club Cobra, a “live-entertainment venue in Los Angeles for 
LGBTQ+ oriented shows by local singers, DJs, dancers, and performers.”  Sokol MSJ at 1.  In 
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April 2021, Sokol applied for a SVOG award of $486,761.85 for Club Cobra.  Id. at 3.  Sokol’s 
application stated that it neither presents live performances of a prurient sexual nature nor 
derives more than de minimis gross revenue from prurient sexual displays and depictions.  Sokol 
SVOG Application, Redacted J.A. (“J.A.”) at 220, ECF No. 40.  After its application was denied, 
Sokol submitted an administrative appeal on August 12, 2021 with more information as to its 
eligibility.  Sokol MSJ at 4.  That appeal was denied in August 2021.  Id. at 4-5.  Sokol then filed 
this action, seeking judicial review of SBA’s denial.  Id. at 5; Compl., ECF No. 1. 
Upon joint motion of the parties, the court remanded the matter to the SBA.  Oct. 5, 2021 
Min. Order.  Upon review, the SBA again denied Sokol’s application, finding that Club Cobra 
“[p]resented live performances of a prurient sexual nature.”  Nov. 3, 2021 Denial Email, J.A. at 
223.  The SBA explained that it denied Sokol’s application because 
social media pages for Club Cobra . . . contain numerous suggestive images 
depicting the Club Cobra male go-go dancers in seemingly sexualized poses . . . 
in some images the dancers are shown pulling down their underwear and in other 
images tip money is shown protruding from the dancers waistbands . . . .[;] 
Yelp.com reviews revealed patrons describing the “sexy” go-go dancers as 
“strippers” and “a bit raunchy, touching their penis while dancing” . . . .  
in 2020, while Club Cobra was closed due to the pandemic, [Club Cobra’s owner] 
started filming a dance show called “The Clubhouse” featuring erotic videos of 
the Club Cobra male go-go dancers.  The videos were made available for a 
monthly subscription on the website OnlyFans.com.  Club Cobra’s Twitter page 
advertised the erotic dance shows with images of the dancers in highly suggestive 
poses . . . . [i]n one video clip, a dancer is shown wearing jockey shorts in a 
shower while he splashes water over his body as the camera pans down over the 
dancer’s bare chest and genitalia. In another video, a dancer in only thong 
underwear is shown sitting on the edge of a bed while the camera pans up and 
down his body providing close ups of his seemingly aroused genitalia. 
Id.; see also SBA MSJ at 5-7. 
Sokol then amended its complaint to challenge the November 3, 2021 denial.  Nov. 8, 
2021 Joint Status Rep. ¶ 5, ECF No. 15; Am. Compl.   
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II. 
LEGAL STANDARD 
A. Motion to Dismiss 
Federal courts require a statutory basis to exercise their jurisdiction over a matter.  See 
Exxon Mobil Corp. v. Allapattah Servs. Inc., 545 U.S. 546, 552 (2005).  A plaintiff bears the 
burden of establishing jurisdiction by a preponderance of the evidence.  See Lujan v. Defenders 
of Wildlife, 504 U.S. 555, 561 (1992).  To determine if it has jurisdiction, the court may 
“consider the complaint supplemented by undisputed facts evidenced in the record . . . or the 
complaint supplemented by undisputed facts plus the court’s resolution of disputed facts.”  Coal. 
for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (citations omitted).  
When evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), the court 
must “assume the truth of all material factual allegations in the complaint and ‘construe the 
complaint liberally, granting plaintiff[s] the benefit of all inferences that can be derived from the 
facts alleged.’” Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (quoting 
Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)). 
B. Motion for Summary Judgment 
In an APA case. the court “sits as an appellate tribunal” for the agency when evaluating a 
motion for summary judgment under Federal Rule of Civil Procedure 56, rather than considering 
whether there are genuine disputes of material fact.  Am Bioscience Inc., v. Thompson, 269 F.3d 
1077, 1083 (D.C. Cir. 2001).  “The entire case on review is a question of law,” and the court 
should only consider “arguments about the legal conclusion to be drawn about the agency 
action.”  Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993).  
This review is, therefore, based on “the administrative record already in existence” at the time of 
the agency action.  Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam).  
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The court’s review is “narrow” and limited to an assessment of whether the agency 
“examine[]d the relevant data and articulate[d] a satisfactory explanation for its action including 
a ‘rational connection between the facts found and the choice made.’”  Vehicle Mfrs. Ass'n of 
United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington 
Truck Lines v. United States, 371 U.S. 156, 168 (1962)).  The court’s review is “highly 
deferential” and “presumes the agency’s action to be valid.”  Defs. of Wildlife & Ctr. for 
Biological Diversity v. Jewell, 815 F.3d 1, 9 (D.C. Cir. 2016) (quoting Am. Wildlands v. 
Kempthorne, 530 F.3d 991, 997–98 (D.C. Cir. 2008)).  The court should, therefore, take care not 
to “substitute its own judgment for that of the agency.”  State Farm, 463 U.S. at 43. 
III. 
ANALYSIS 
A. Jurisdiction 
The SBA argues that the court lacks subject-matter jurisdiction in this matter because 
Sokol seeks monetary damages.  SBA MSJ at 10-11.  The APA confers jurisdiction only for 
matters where a plaintiff seeks “relief other than money damages.”  Lamb v. ATF, 790 F. App’x 
222 (D.C. Cir. 2020) (citing 5 U.S.C. § 702).  The SBA contends that Sokol seeks money 
damages because the Amended Complaint asks the court to “order Defendants to award Sokol 
SVOG grants in the amount for which it is eligible [and] . . . a supplemental SVOG award in the 
amount for which it is ineligible.”.  SBA MSJ at 11 (citing Am. Compl. at 11). 
That argument is unavailing.  Equitable monetary relief is different from money damages.  
In Bowen v. Mass, 487 U.S. 879, 893 (1988), the Supreme Court explained that damages 
compensate a victim for their injury, while equitable relief provides specific relief to which a 
party was already entitled.  Id. at 893-94.  Therefore, a court order that a party should receive 
something that it was entitled to, even if that entitlement is a monetary award, is different from a 
money damages award.  See, e.g., Esch v. Yeutter, 876 F2.d 976, 981 (D.C. Cir. 1989) (a plaintiff 
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that “sought the very thing which it has been deprived of which happened to be the payment of 
money,” was not seeking “damages”); see also MomoCon, LLC v. SBA, No. 21-cv-2386, slip op. 
at 9 (D.D.C. Feb. 10, 2022) (dismissing SBA’s argument that the court lacks jurisdiction to 
review a plaintiff’s equitable demands for an SVOG award on the same grounds). 
Moreover, as Sokol’s reply observes, a monetary award is not the only relief it seeks.  It 
also asks this court to “declare unlawful and set aside Defendants’ denial of Sokol’s SVOG 
award request [and] order Defendants to consider Sokol’s application for a SVOG award 
consistent with applicable law and the evidence before the SBA.”  Am. Compl. at 11.  Sokol 
further notes that its motion for summary judgment only asks this court to set aside the SBA’s 
November 3 denial and order the SBA to reconsider its application.  Sokol Opp. to SBA MSJ at 
3, ECF No. 27. 
Sokol’s request—that the court set aside SBA’s November 3 denial and remand for 
reconsideration—is well within the court’s jurisdictional grant.  5 U.S.C. § 706(2) (“The 
reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions 
found to” violate the APA”); Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 654 (1990) 
(“remanding to the agency . . . is the preferred course” for agency action violative of the APA).   
Nothing in the APA or Sokol’s Amended Complaint precludes the court’s review of the 
November 3 denial.  The court will therefore deny the SBA’s motion to dismiss. 
B. The Applicable Record 
Sokol asks this court to consider the declaration of its President and Owner, Martin 
Sokol, and the August 26, 2021 email denying Sokol’s SVOG appeal as part of the record along 
with its motion for summary judgment.  See ECF No. 19.  The SBA does not oppose the court’s 
consideration of the email; it will therefore be considered along with the administrative record as 
filed.  SBA MSJ at 23. 
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Sokol’s Declaration describes five other companies that he believes were similarly 
situated to Club Cobra which nonetheless received SVOG grants.  Sokol Mot. for Consideration 
of Extra Record-Evidence (“Sokol Extra Record Mot.”), Ex. 1, Sokol Decl. ¶¶ 12-16, ECF No. 
19.  Sokol argues that it was affirmatively excluded from including this evidence in the record 
because the SBA instructed grant appellants not to include such information in their appeals 
during an August 4, 2021 webinar.  Id. at 2-3. 
The SBA’s Reply in support of its Motion for Summary Judgment, ECF No. 30, included 
a declaration from Eric S. Benderson, Associate General Counsel for Litigation at the SBA.  Ex. 
1, ECF No. 30-1.  Benderson’s Declaration first describes the SVOG application process, 
including its procedures for a “prurience review”  Id. ¶¶ 20-24.  A prurience review is a formal 
review of the applicant’s website, social media, and internet references to see if the business is 
ineligible for SVOG funding because it appeals to the prurient sexual interest, per 15 U.S.C. § 
9009a(1)(B).  Id. ¶ 18.  Benderson then states that “[a]n informal review of these five applicants 
fails to identify sufficient information” that any of the five businesses required such a prurience 
review.  Id. ¶¶ 20-21.  The SBA argues that should the court accept the Sokol Declaration, it 
should similarly accept the Benderson Declaration as necessary background information to 
explain the November 3 denial.  SBA Mot. for Consideration of Extra-Record Evid. at 4, ECF 
No. 36. 
The D.C. Circuit has narrowed the circumstances in which the court may consider extra-
record evidence.  See United Student Aid Funds v. Devos, 237 F. Supp. 3d 1, 4 (D.D.C. 2017) 
(charting the course of the D.C. Circuit’s jurisprudence on extra-record evidence).  The court 
may do so if the “‘procedural validity of the agency’s action remains in serious question’ . . . or 
the agency affirmatively excluded relevant evidence.”  CTS Corp. v. EPA, 759 F.3d 52, 64 (D.C. 
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Cir. 2014) (internal citations omitted).  The court may further consider extra-record evidence if it 
contains “background information . . . needed to determine whether the agency considered all the 
relevant factors.”  Daikin Applied Americas, Inc. v. EPA, 39 F.4th 701, 716-17 (D.C. Cir. 2022) 
(quoting City of Dania Beach v. FAA, 628 F.3d 581, 590 (D.C. Cir. 2010)).  A movant’s burden 
is high.  It must demonstrate that there has been a “‘strong showing of bad faith or improper 
behavior’ or that the record is so bare that it prevents effective judicial review.”  Comm. Drapery 
Contractors, Inc. v. United States, 133 F.3d 1, 7 (D.C. Cir. 1998) (quoting Citizens to Preserve 
Overton Park v. Volpe, 401 U.S. 402, 420 (1971)).   
  During an August 4 webinar, the SBA informed potential SVOG appellants that “it will 
not be helpful in th[e] [appeal justification] statement to refer to other SVOG applicants you feel 
are similar to your own business,” and that “if you feel that there are other SVOG applicants 
which are similar to your own business but which may have had a different outcome on their 
initial SVOG applications than you did, it will not be helpful to reference that.”  Sokol Extra 
Record Mot. at 2-3.  Based on this warning, Sokol did not include information about the five 
other similarly situated businesses in its appeal.  Id., Ex. 1, Sokol Decl. ¶ 11 (“I prepared Sokol’s 
appeal of the denial of its Shuttered Venue Operators Grant (“SVOG”) application and did not 
reference any of these companies because the SBA told applicants not to include in our SVOG 
appeals information about similar businesses that received awards.”). 
The SBA does not contest what was said in the webinar, but instead characterizes the 
information provided at the webinar as a mere suggestion that comparator information would not 
be helpful for the SBA’s evaluation.  SBA Mot. for Consideration of Extra-Record Evid. at 5 n. 
2.   
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There is scant caselaw regrading what constitutes an affirmative exclusion of evidence.  
But even in the absence of guiding principles or precedent, it seems apparent that an 
informational webinar from the agency in charge of adjudicating appeals specifically instructing 
appellants not to include such information in their applications would constitute such an 
affirmative exclusion.  The court will therefore grant Sokol’s motion to consider extra-record 
evidence, ECF No. 19, and consider the Sokol Declaration as part of the administrative record. 
As for the Benderson Declaration, the SBA’s point that its inclusion in the record is 
necessary as a response to the Sokol Declaration is well taken.  The declaration includes the 
SBA’s justification and response to Sokol’s argument that similarly situated competitors 
received SVOG awards when it did not.  Further, much of the Benderson Declaration is little 
more than permissible background information; an acceptable basis to consider extra-record 
evidence.  See Daikin Applied Americas, Inc., supra.  While Sokol is correct that the SBA should 
have sought the leave of court to file such extra-record evidence, that procedural error, cured by 
a subsequent filing, is not a sufficient reason for the court to disregard the Benderson 
Declaration. 
The court will therefore deny Sokol’s motion to strike the Benderson Declaration, ECF 
No. 31, and grant the SBA’s motion for consideration of extra-record evidence, ECF No. 36.   
C. Summary Judgment 
Sokol’s motion for summary judgment argues first that the SBA’s November 3 denial 
was arbitrary and capricious because it failed to consider Sokol’s competitor applications, 
described in the Sokol Declaration.  The SBA responds that regardless of those competitor 
applications, the record indicates that Club Cobra was a business that presented live 
performances of a prurient sexual nature or derived more than de minimis gross revenue from the 
presentation of the same.   
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It is a “fundamental norm of administrative procedure” than an agency must “treat like 
cases alike.”  Westar Energy, Inc. v. FERC, 473 F.3d 1239, 1241 (D.C. Cir. 2007).  An agency 
that treats similar cases differently must explain its inconsistent treatment at the time the decision 
is made.  See Baltimore Gas & Elec. Co. v. FERC, 954 F.3d 279, 285 (D.C. Cir. 2020) (“the duty 
to explain inconsistent treatment is incumbent on the agency”).  That duty extends to when an 
agency treats similarly situated competitors differently; it must provide a “reasonable 
justification” for any adverse treatment.  ANR Storage Co. v. FERC, 904 F.3d 1020, 1025 (D.C. 
Cir. 2018). 
The SBA provided no explanation for disparate treatment in its November 3 denial, likely 
because it had instructed applicants not to include comparator information.  And the SBA’s 
discussion of Sokol’s competitors in the Benderson Declaration is not a “reasoned analysis” that 
“point[s] to a relevant distinction” between Sokol and its competitors, but instead “glosses over . 
. . [those] prior precedents.”  Westar Energy, 473 F.3d at 1241.  The Benderson Declaration only 
discusses one of Sokol’s alleged competitors, Reload Entertainment.  Benderson Decl. ¶ 21.  
That discussion does consider the relevant distinctions between Reload and Sokol, identifying 
specific differences in both companies’ marketing materials that justify Reload’s SVOG award.  
Id.  But there is no similar review for the four other competitors Sokol proffers; the SBA only 
states that it conducted an “informal review” of all five companies.  Id.  That is not a reasoned 
analysis for why these apparently similarly situated competitors were treated differently.   
Certainly, the SBA is not required to distinguish every similarly situated SVOG awardee 
cited by Sokol.  See Bush-Quayle ’92 Primary Comm., Inc. v. FEC, 104 F.3d 448, 454 (D.C. Cir. 
1997) (“We may permit agency action to stand without elaborate explanation where distinctions 
between the case under review and the asserted precedent are so plain that no inconsistency 
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appears.”).  But when there is a “significant showing that analogous cases have been decided 
differently, the agency must do more than simply ignore that argument.”  Republic Airline Inc. v. 
Dep’t of Transp., 669 F.3d 296, 243 (D.C. Cir. 2012) (quoting LeMoyne-Owen Coll. v. NLRB, 
357 F.3d 55, 61 (D.C. Cir. 2004)); see also MomoCon, slip op. at 9 (remanding a SVOG denial 
to the SBA to either “supplement the administrative record and explain how MomoCon is 
meaningfully different than the other companies or explain why SBA has changed how it decides 
SVOG applications.”).  It would be arbitrary and capricious to do otherwise, especially if the 
agency took steps to affirmatively exclude such evidence from the record. 
The SBA attempts to forestall a remand by casting doubt as to whether the competitor 
awards were “properly made” in the first place.  SBA MSJ, Ex. 1, Stevens Decl. ¶¶ 3-4.  While 
such a determination would moot Sokol’s arguments that it was treated differently than its 
competitors, that possibility is a mere hypothetical not before this court.  See MomoCon at 9-10 
n.2 (similarly declining to review “mere uncertain plans” to revoke SVOG awards to a plaintiff’s 
competitors).   
“When an agency provides a statement of reasons insufficient to permit a court to discern 
its rationale, or states no reasons at all, the usual remedy is a ‘remand to the agency for additional 
investigation and explanation.’” Tourus Recs., Inc. v. Drug Enf’t Admin., 259 F.3d 731, 737 
(D.C. Cir. 2001) (quoting Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985)).  As it 
stands, the record indicates that five of Sokol’s alleged direct competitors received SVOG 
awards while Sokol did not.  And the record does not show that the SBA provided a reasonable 
justification for this disparate treatment.  The November 3 denial therefore was arbitrary and 
capricious.  The court will grant Sokol’s motion for summary judgment as to arbitrary and 
capriciousness, and remand for additional investigation and explanation, as necessary. 
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The court will also grant the parties joint motion for leave to file the unredacted Joint 
Appendix under seal.   
IV. 
CONCLUSION 
For the foregoing reasons, Sokol’s motion for summary judgment will be GRANTED.  
The SBA’s cross-motion for summary judgment and motion to dismiss will be DENIED 
without prejudice.  Sokol and the SBA’s motions for consideration of extra-record evidence 
will be GRANTED.  Sokol’s motion to strike will be DENIED.  The joint motion for leave to 
file the unredacted joint appendix under seal will be GRANTED.   
This case will be REMANDED to the SBA for supplementation of the administrative 
record as necessary regarding Sokol’s competitors and further proceedings consistent with this 
Opinion. 
 
Date: September 28, 2022 
Tanya S. Chutkan 
TANYA S. CHUTKAN 
United States District Judge 
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