Complaint — StarEvents, Inc. v. Small Business Administration

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U.S. District Court for the District of Columbia · No. 1:22-cv-00380-JDB · Doc. 1 · 2022-02-12 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF COLUMBIA 
 
STAREVENTS, INC. 
1609 W. Belmont Ave. 2nd Floor 
Chicago, IL 60657, 
Plaintiff, 
v. 
SMALL BUSINESS ADMINISTRATION, 
409 3rd Street, SW 
Washington, DC 20416, 
ISABELLA CASILLAS GUZMAN, 
Administrator, Small Business Administration, 
409 3rd Street, SW 
Washington, DC 20416, 
Defendants. 
      Civil Action No.   
 
 
COMPLAINT 
Plaintiff Star Events, Inc. (“StarEvents”), by and through counsel, alleges and states as 
follows: 
INTRODUCTION 
1. 
This is an action under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706, and 
the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202, seeking emergency federal financial 
assistance unlawfully withheld by Defendants Small Business Administration (“SBA”) and its 
Administrator, Isabella Casillas Guzman. 
2. 
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, as 
amended, 15 U.S.C. § 9009a, established the Shuttered Venue Operators Grant (“SVOG”) Program 
to provide emergency financial assistance to eligible live entertainment businesses impacted by 
the global COVID-19 pandemic. The SVOG Program is administered by the SBA and 
Administrator Casillas Guzman. 
 
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3. 
Plaintiff StarEvents demonstrated its eligibility for a SVOG award in its application 
to the SBA and, following an initial denial, its appeal to the SBA. The SBA denied StarEvents’s 
application and its appeal.  The sole reason StarEvents was given for the denial was that “did not 
meet the principal business activity standard for the entity type under which it applied.”  This 
explanation is completely conclusory and sheds no light on the true reason for the denial. 
4. 
For the past 25 years Plaintiff StarEvents has produced large festivals with live 
entertainment in Chicago, IL for thousands of attendees and has raised more than $15,000,000 for 
local non-profit organizations and businesses over the years.  The COVID-19 pandemic has had a 
devastating impact on StarEvents, forcing it to lose over 90% of its revenue in 2020 as compared 
to 2019 and forcing StarEvents to cancel numerous vendor and performance contracts.              
5. 
StarEvents needs a SVOG award for precisely the reason Congress created the SVOG 
Program: to help eligible businesses like StarEvents recover from the major setbacks they have 
experienced because of the pandemic. 
6. 
SVOG funds are limited, and once the SBA has depleted the appropriated amount 
through awards, eligible businesses may not be able to receive the emergency assistance. Thus, 
even though StarEvents demonstrated that it is an eligible live performing arts organization 
operator, it may receive no assistance if SVOG funds are depleted before the SBA corrects the 
erroneous denial of StarEvents’s application. 
JURISDICTION AND VENUE 
 
7. 
This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 because it 
presents federal questions under the APA. 
8. 
Venue lies in this district under 28 U.S.C. § 1391(e)(1). 
 
9. 
This Court has authority to issue declaratory and injunctive relief under 5 U.S.C. 
 
§ 706 and 28 U.S.C. §§ 2201 and 2202. 
 
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PARTIES 
 
10. Plaintiff StarEvents is an event production company in Chicago, IL that, as its 
principal business activity, produces large outdoor festivals with live entertainment.  StarEvents 
has been in operation for over 25 years.  StarEvents handles all aspects of the event and festival 
production, including procuring stages, audio visual equipment, permits, licenses, insurance, as 
well as booking all the talent (over 250 acts per year). 
11. Defendant Small Business Administration is an independent agency of the federal 
government. The SBA’s mission is to help Americans start, build and grow businesses. 
12. Defendant Isabella Casillas Guzman is the Administrator of the SBA and oversees its 
operations. Administrator Casillas Guzman is sued in her official capacity. 
BACKGROUND 
A. Shuttered Venue Operators Grant Program 
13. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the 
“Act”), signed into law December 27, 2020, included $15 billion for grants to operators of 
shuttered venues. Pub. L. No. 116-260 § 324. The American Rescue Plan, enacted March 11, 2021, 
amended the Act by providing an additional $1,249,500,000 for SVOG awards. Pub. L. No. 117-2 
§ 5005(a). 
14. SVOG awards may be used for specified business expenses, including payroll, rent and 
utility payments, that are incurred between March 1, 2020, and December 31, 2021. 15 U.S.C. 
§ 9009a(d)(1)(A)(i). 
15. An eligible entity may receive a SVOG award in an amount equal to 45 percent of its 
gross earned revenue in 2019. 15 U.S.C. § 9009a(c). 
16. Eligible businesses with 2021 first quarter revenues of no more than 30 percent of 
their 2019 first quarter revenues are eligible for supplemental grants in the amount of 50 percent 
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of the original award amount, up to a maximum combined initial and supplemental SVOG award 
amount of $10 million.  15 U.S.C. § 9009a(b)(3)(A); SBA, SBA Opens Supplemental Grant 
Applications   for   Shuttered   Venue  Operators Grant Awardees (Aug. 27, 2021),  
https://www.sba.gov/article/2021/aug/27/sba-opens-supplemental-grant-applications-shuttered- 
venue-operators-grant-awardees. Supplemental awards can be used for costs incurred through 
June 30, 2022.  15 U.S.C. § 9009a(d)(1)(A)(i). 
17. Eligible entities under the Act include live performing arts organization operators 
and live venue operators, as well as promoters, theatrical producers, museum operators, motion 
picture theatre operators, and talent representatives.  15 U.S.C. § 9009a(a)(1)(A). 
18. In addition to falling within an eligible business category, to qualify for a SVOG award 
a business must meet general eligibility criteria including, inter alia, that the business was fully 
operational on February 29, 2020, suffered at least a 25 percent reduction of gross earned revenue 
during at least one quarter of 2020 as compared to 2019, and has reopened or intends to reopen. 
15 U.S.C. § 9009a(a)(1)(A). The Act lists a number of characteristics that would render an entity 
ineligible, including, inter alia, issuance of securities on a national securities exchange, employing 
more than 500 employees, and presenting live performances of a prurient sexual nature.   Id. § 
9009a(a)(1)(A)(vi), 9009a(a)(1)(B). 
19. The Act defines live performing arts organization operator to include an entity that as 
a principal business activity organizes, promotes, produces or hosts live concerts or “events by 
performing artists” for   which there is a ticketed cover charge, performers are paid in an amount set 
by sales or agreement, and not less than 70 percent of revenue is generated through ticket sales or 
event beverages, food or merchandise. 15 U.S.C. § 9009a(a)(3)(A)(i).  
20. The Act specifies that for a live performing arts organization operator (as well as a live 
venue operator or promotor, or theatrical producer) to be eligible, it must have additional 
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characteristics.  It must put on events with defined performance and audience spaces; use mixing 
equipment, a public address system and a lighting rig; engage one or more individuals   to carry out 
at least two of the following roles—sound engineer, booker, promoter, stage manager,  security 
personnel, or box office manager; sell tickets or impose a cover charge for most  performances; 
fairly pay artists; and market its events including through print or electronic publications, websites, 
mass email, or social media. 15 U.S.C. § 9009a(a)(1)(A)(iii). 
B. StarEvents’s SVOG Application and the SBA’s Denial 
 
21. StarEvents applied for a SVOG award of $602,365.50. 
22. In its application, StarEvents demonstrated that it satisfied the criteria for eligibility 
as “a live venue operator or promoter, theatrical producer, or live performing arts organization 
operator.”  See 15 U.S.C. § 9009a(a)(3)(A) (defining the term “live venue operator or promotor, 
theatrical producer, or live performing arts organization operator”).  StarEvents demonstrated that 
its losses in 2020 exceeded the 25 percent statutory threshold by submitting its financial statements 
and tax returns for 2019 and 2020. StarEvents also submitted, among other things: (i) documents 
demonstrating the performance space and defined audience space (floor plan), lighting rig 
(receipts), and audio equipment (receipts).  StarEvents further provided the certifications of 
eligibility required by the SBA’s guidance on SVOG applications. 
23. StarEvents learned from the SBA’s portal that its application was denied.  No reason 
was given to StarEvents for its denial.  
24. StarEvents submitted an administrative appeal of the denial to the SBA. Because the 
denial included no explanation, StarEvents’s appeal elaborated on why it satisfies all  of the criteria 
for eligibility as a live performing arts organization operator.  
25. StarEvents explained in detail and with supporting documentation how it meets each 
of the general eligibility requirements for a SVOG award and each of the specific eligibility 
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requirements for live performing arts organization operators. StarEvents’s supporting 
documentation included: its quarterly income statements for 2019 and 2020; 2019 and 2020 tax 
returns; advertising receipts; box office records reflecting cover charges and ticket sales; payroll 
records; profit and loss statements reflecting expenses for promotional efforts and expenses for 
talent acts; floorplans demonstrating defined performance spaces and audience spaces; receipts 
for sound equipment, and  lighting equipment; marketing materials; and other documentation. 
26. On November 8, 2021, the SBA notified StarEvents that its appeal was denied. The 
portal’s denial notice gave only a conclusory explanation that StarEvents “did not meet the 
principal business activity standard” for the reason why the SBA found StarEvents ineligible. 
27. The SBA’s denial of StarEvents’s appeal is the agency’s final decision. 
CLAIMS FOR RELIEF 
28. The courts recognize a strong presumption favoring judicial review of administrative 
action. 
29. The APA provides that “[a] person suffering legal wrong because of agency action, or 
adversely affected or aggrieved by agency action within the meaning of a relevant statute, is 
entitled to judicial review thereof.” 5 U.S.C. § 702. 
30. The APA provides that “final agency action for which there is no other adequate 
remedy in a court” is “subject to judicial review.” 5 U.S.C. § 704. 
31. The APA provides that courts will “hold unlawful and set aside” agency action that is 
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or 
“unsupported by substantial evidence.” 5 U.S.C. § 706(2)(A) and (E), respectively. 
32. The SBA is an “agency” whose final actions are reviewable under the APA. 
 
 
 
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COUNT I - ARBITRARY AND CAPRICIOUS AGENCY ACTION 
33. StarEvents realleges and incorporates by reference each of the preceding paragraphs 
and allegations. 
34. A basic requirement of administrative law is that an agency provide the reasons for its 
decisions. However, the SBA gave no reason for denying StarEvents’s application, nor did it 
provide  any substantive reason when it denied StarEvents’s appeal.  The SBA’s sole explanation 
was that StarEvents “did not meet the principal business activity standard”.  This explanation is 
conclusory and inadequate under the APA. 
35. Indeed, the SBA’s decision on StarEvents’s application conflicts with the evidence of 
StarEvents’s eligibility that it presented to SBA in its application and in its appeal. 
36. The SBA further erred by treating StarEvents disparately from similarly situated 
businesses that were granted SVOG awards. Specifically, the SBA approved the SVOG 
application of StarEvents’s competitors: 
• Riot Fest Corporation 
• NCMF LLC 
37. The SBAs funding of the aforementioned entities has further exacerbated StarEvents’s 
Covid related damages.  After receiving funding from the SBA, these competitors have been able 
to work with vendors and contractors that were previously a part of StarEvents’s network.  The 
SVOG funding has served as a significant competitive advantage to StarEvents’s competitors.      
38. For each of these reasons, the SBA’s denial of StarEvents’s SVOG award request is 
arbitrary and capricious. 
COUNT II - AGENCY ACTION CONTRARY TO LAW 
39. StarEvents realleges and incorporates by reference each of the preceding paragraphs 
and    allegations.   
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40. StarEvents meets the Act’s definition of a live performing arts organization operator 
and satisfies the Act’s   general eligibility criteria for a SVOG award. 
41. The SBA’s denial of StarEvents’s SVOG award request therefore violated the Act and 
is   contrary to law. 
COUNT III - AGENCY DECISION UNSUPPORTED BY SUBSTANTIAL EVIDENCE 
42. StarEvents realleges and incorporates by reference each of the preceding paragraphs 
and  allegations.  
43. The SBA’s denial of StarEvents’s SVOG award request is supported by no evidence 
in the record, let alone substantial evidence. StarEvents’s application and appeal presented 
evidence that demonstrates StarEvents is eligible for a SVOG award. 
44. The SBA’s denial of StarEvents’s SVOG award request is thus unsupported by 
substantial   evidence. 
PRAYER FOR RELIEF 
For the foregoing reasons, StarEvents respectfully requests that this Court: 
1. 
Declare unlawful and set aside Defendants’ denial of StarEvents’s SVOG award 
request. 
2. 
Preliminarily and permanently order Defendants to consider StarEvents’s application 
for  a SVOG award consistent with applicable law and the evidence before the SBA. 
3. 
Preliminarily and permanently order Defendants to award StarEvents $548,720.50 
in    SVOG funds. 
4. 
Preliminarily and permanently order Defendants to grant StarEvents a supplemental 
SVOG award of $301,182.75. 
5. 
Preliminarily and permanently order Defendants to retain appropriations from the 
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Pub. L. No. 116-260 
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§ 324) and/or the American Rescue Plan (Pub. L. No. 117-2 § 5005(b)) in an amount sufficient to
fund StarEvents’s SVOG initial and supplemental grant awards. 
6.
Award Plaintiffs their costs and reasonable attorney fees; and
7.
Grant such other and further relief as the Court deems just and proper.
Dated: February 12, 2022 
Respectfully submitted, 
/s/  Tyler W. Hudson 
Tyler W. Hudson 
D.C. Bar No. 485971
Eric D. Barton
Missouri Bar No. 64112
(pro hac vice motion to be filed)
WAGSTAFF & CARTMELL LLP
4740 Grand Ave., Suite 300
Kansas City, MO 64112
816-701-1100
thudson@wcllp.com
Matthew S. Mokwa 
Fla. Bar No.47761 
(pro hac vice motion to be filed) 
THE MAHER LAW FIRM, PA 
271 West Canton Ave, Suite 1 
Winter Park, FL 32789 
407-839-0866
mmokwa@maherlawfirm.com
Jeffrey E. McFadden 
D.C. Bar No. 434234
LAW OFFICES OF JEFFEREY E. MCFADDEN
312 Prospect Bay Drive E.
Gransonville, MD 21638-1181
410-490-1163
jmcfadden@jmcfaddenlaw.com
Counsel for StarEvents, Inc. 
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