Memorandum Opinion and Order — Chef Time 1520 LLC v. Small Business Administration (District of Columbia)
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Memorandum Opinion and Order of the United States District Court for the District of Columbia in Chef Time 1520 LLC, et al. v. Small Business Administration, et al., Civil Action No. 22-3587 (RDM), filed 12/20/22. Two Dallas restaurants majority-owned by Brandon Luke, The Woolworth and Smithy, challenge the agency's failure to pay Restaurant Revitalization Fund awards; Smithy's application was fully approved on May 26, 2021, but on June 12, 2021, the agency said court rulings barred disbursement. After about $83 million was returned and allocated to 169 applicants, Applicants 135 and 151 remained unpaid. The opinion grants in part and denies in part the motion for a temporary restraining order, finding the balance of equities tips in Smithy's favor; it is signed /s/ Randolph D. Moss.
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Case 1:22-cv-03587-RDM Document 16 Filed 12/20/22 Page 1 of 22
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CHEF TIME 1520 LLC, et al.,
Plaintiffs,
Civil Action No. 22-3587 (RDM)
v.
SMALL BUSINESS ADMINISTRATION,
et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
This matter arises from Plaintiffs’ efforts to seek financial assistance from the Restaurant
Revitalization Fund (“RRF”), created by Congress in the American Rescue Plan Act of 2021
(“ARPA”), Pub. L. No. 117-2, 135 Stat. 4, to help restaurants and other eligible businesses pay
“expenses incurred as a direct result of, or during, the COVID-19 pandemic,” 15 U.S.C.
§ 9009c(c)(5). Plaintiffs, two restaurants in Dallas, Texas, bring claims against the Small
Business Administration (“SBA”) and its Administrator, alleging that the SBA’s failure to award
the restaurants’ RRF funding was arbitrary, capricious, contrary to law, and unsupported by
substantial evidence, in contravention of 5 U.S.C. § 706(2)(A) and (E). Before the Court is
Plaintiff’s motion for a temporary restraining order (“TRO”), Dkt. 5, which is opposed, Dkt. 14.
For the reasons that follow, the Court will GRANT in part and DENY in part that motion.
I. BACKGROUND
A. Statutory Background
As part of the American Rescue Plan Act of 2021, Congress allocated close to $29 billion
for RRF grants, 15 U.S.C. § 9009c(b)(2)(A), to help restaurant owners meet payroll and other
Case 1:22-cv-03587-RDM Document 16 Filed 12/20/22 Page 2 of 22
“expenses incurred as a direct result of, or during, the COVID-19 pandemic,” id. § 9009c(c)(5).
The fund was designed to assist “restaurant[s], food stand[s], food truck[s], food cart[s],
caterer[s], . . . bar[s], lounge[s], brewpub[s]” and other like businesses “in which the public or
patrons assemble for the primary purpose of being served food or drink,” id. § 9009c(a)(4)(A),
but it excludes those businesses that, “together with any affiliated business,” operated “more than
20 locations,” id. § 9009c(a)(4)(C). “[T]he amount of a grant made to an eligible entity” is based
on the entity’s “pandemic-related revenue loss.” Id. § 9009c(c)(4)(B)(i). An entity’s “pandemic-
related revenue loss” is calculated by subtracting the entity’s 2020 “gross receipts, as established
using such verification documentation as the Administrator may require,” from its 2019 gross
receipts, id. § 9009c(a)(7); that figure is also “reduced by any amounts” the business previously
“received from a [Paycheck Protection Program] loan,” id.; see also id. § 636(a)(36).
The statute provides that the Administrator of the SBA “shall,” as a general matter,
“award grants to eligible entities in the order in which applications [were] received by the
Administrator.” Id. § 9009c(c)(1). But it also requires that, “[d]uring the initial 21-day period in
which the Administrator awards grants under the subsection, the Administrator shall prioritize
awarding grants” to small businesses “owned and controlled by women” and “by veterans” as
well as to “socially and economically disadvantaged small business concerns,” as those terms are
defined in the statute, id. § 9009c(c)(3)(A).
B. Factual Background
1. The RRF Program
The SBA began accepting RRF applications through an online portal on May 3, 2021,
Dkt. 14-1 at 2 (Piccioni Decl. ¶ 5)—although a select group of applicants was invited to submit
applications a few days prior as part of a “pilot phase,” see Dkt. 5-2 at 6 (Luke Decl. Ex. 1).
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Once an application was submitted, the agency began processing it with the intention of
confirming the applicant’s eligibility and ensuring that the requested amount of RRF funding
was accurate. Dkt. 14-1 at 2 (Piccioni Decl. ¶ 9). For the first 21 days after the portal opened on
May 3, the SBA processed applications only from those businesses owned and controlled by
women and veterans and from “socially and economically disadvantaged” small business
concerns. Id. at 3 (Piccioni Decl. ¶¶ 10–12). Among those priority applicants, the SBA initiated
processing based “on the date the application was electronically signed and submitted.” Id.
(Piccioni Decl. ¶ 8). But not all applications took the same amount of time to process: As the
SBA explains, “some applications were more complicated than others and took longer to review”
and others “had omissions or errors” that needed to be corrected by the applicants. Id.
The first step in processing an RRF application was to transmit the applicant’s revenue
information to the IRS for verification. Id. at 2 (Piccioni Decl. ¶ 9). If there was a discrepancy
between the tax information the SBA received from the IRS and the gross receipts reported on
the application, the SBA “worked with the applicant to resolve the discrepancy or to correct the
error.” Id. If an error in the award amount was what the SBA deemed “de minimis,” the agency
allowed the applicant to correct its application without requiring it to refile. Id. But, if the
discrepancy in their application exceeded the lesser of 5% of the award or $25,000, “the
applicant was required to re-sign [its] application.” Id. at 2–3 (Piccioni Decl. ¶ 9). The new
signature would, then, give the application a new submission date, effectively moving the
application “to the back of the queue.” Id. at 3 (Piccioni Decl. ¶ 9).
Once the agency fully confirmed an applicant’s eligibility, the “processing status” of the
application changed to “Fully Approved;” the applicant was notified of that change; and the
application was processed in SBA’s payment system before the money was ultimately disbursed
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to the applicant. Id. According to the SBA, during the initial phase of processing applications,
the agency paid applicants in the order in which their applications were fully approved. Tr. at
24–25 (Dec. 14, 2022 Hearing) (“[The SBA] was paying applications as soon as they were fully
approved.”).
The statutorily mandated priority application period concluded on May 24, 2021, and the
SBA began processing applications from non-priority applicants the next day. Dkt. 14-1 at 3
(Piccioni Decl. ¶¶ 12–13). On May 27, 2021, the SBA paused processing priority applications
altogether—including “those undergoing final processing in SBA’s payment system.” Dkt. 14-1
at 3 (Piccioni Decl. ¶ 14). According to the SBA, it “planned to resume processing priority
applications once it completed processing the [earlier] filed non-priority applications,” but,
before it could do so, “the fund was [exhausted] and all processing ceased.” Id. The SBA
announced the closure of the RRF program on July 2, 2021. Id. at 4 (Piccioni Decl. ¶ 15).
Sometime after the fund’s depletion, about $83 million of the previously obligated funds
were returned to the SBA. Id. (Piccioni Decl. ¶ 16–17). In assessing how to distribute those
remaining funds, the SBA took a different approach from the one it adopted in May and June
2021: this time around, it considered neither priority status nor the date on which the application
was “fully approved.” Id. (Piccioni Decl. ¶ 17). Rather, the agency allocated the funds to the
pool of fully approved applications in the order in which the applications were submitted, as
reflected by “when applicants signed their applications using DocuSign.” Id. (Piccioni Decl.
¶ 17). According to this methodology, the $83 million was allocated to 169 eligible applicants,
the last of which submitted their applications at 1:19 PM on May 3, 2021. Id. (Piccioni Decl.
¶ 18). The SBA began distributing the $83 million to those 169 applicants on November 23,
2022. Id. (Piccioni Decl. ¶ 19).
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As of November 29, 2022, the SBA had paid 167 of those applicants but had not yet paid
the remaining two applicants, identified as Applicants 135 and 151. Id. at 5 (Piccioni Decl. ¶¶
20–22). If fully funded, those two applicants would receive a total amount of about $2 million.
Id. In addition, roughly $5.4 million in attempted disbursements failed due to “problems with
the bank information provided by the applicant,” “an issue with the account number,” or the
closure of “the corresponding account.” Id. at 5–6 (Piccioni Decl. ¶ 24). The SBA planned on
contacting “the respective applicant to ascertain if the problem could be resolved,” but “out of
deference to the Court’s administrative stay”—which applied only with respect to the payments
to Applicants 135 and 151—the SBA delayed taking action “with respect to the nine failed
disbursements.” Id. at 6 (Piccioni Decl. ¶ 25). Subsequently, the Court clarified that its
administrative stay required only that the SBA refrain from disbursing an amount sufficient to
cover Plaintiffs’ claims pending briefing, oral argument, and a decision on their motion for a
TRO. Tr. at 48 (Dec. 14, 2022 Hearing).
2. The Woolworth and Smithy
Brandon Luke is a veteran of the United States Army and a majority owner of two
restaurants in Dallas, Texas: The Woolworth and Smithy. Dkt. 5-2 at 2 (Luke Decl. ¶¶ 1–5, 7–
8). On April 22, 2021, Luke received an email from the SBA, informing him that he had been
“randomly selected for an opportunity to participate in the pilot phase for” the RRF, which
would allow participants to “complete the RRF application before the portal open[ed] to the
greater public.” Dkt. 5-2 at 6 (Luke Decl. Ex. 1). Luke agreed to participate; he applied for
funding on behalf of both of his restaurants on April 27, 2021, requesting $1,344,299 on behalf
of The Woolworth and $509,881 on behalf of Smithy. Dkt. 5-2 at 3 (Luke Decl. ¶¶ 7–9); Dkt.
14-1 at 6 (Piccioni Decl. ¶ 27). That evening, Luke received two emails notifying him that he
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had “successfully completed the electronic signature process associated” with his application and
alerting him that the SBA would “review th[e] application, verify the supporting documentation,
and process [his] award if applicable.” Dkt. 14-2 at 1–2. The applications received two
confirmation numbers: 882a00074896 was associated with The Woolworth and 2c090074905
was associated with Smithy. Dkt. 14-1 at 6 (Piccioni Decl. ¶¶ 27–28).
With respect to The Woolworth’s application, Luke represents that he was advised in
mid-May 2021 that “updates to The Woolworth’s application were required.” Dkt. 5-2 at 3
(Luke Decl. ¶ 10). But Luke avers that he “could not open the application” to make the
requested updates and that he was eventually instructed by the SBA to resubmit his application.
Id. (Luke Decl. ¶¶ 10–11). According to the agency, Luke withdrew The Woolworth’s
application on the afternoon of May 10, 2021—“[f]or reasons unknown to SBA”—at which time
the original application was “reduced to basic technical data” and therefore not available in any
decipherable format for this Court to review. Dkt. 14-1 at 6 (Piccioni Decl. ¶ 27); see also Tr. at
26 (Dec. 14, 2022 Hearing). Luke resubmitted his application on behalf of The Woolworth on
May 14, 2021, and the resubmitted application received a new confirmation number:
36e600394091. Id. at 7 (Piccioni Decl. ¶ 30). That application did not make it beyond the early
stages of review when the SBA paused processing veteran-owned applications on May 27, 2021.
Id. (Piccioni Decl. ¶ 30).
Smithy’s application took a different path. According to the agency, the SBA sent
Smithy’s tax forms to the IRS for verification on April 28, 2021—the day after the application
was submitted. Id. (Piccioni Decl. ¶ 28). The IRS returned the forms to the SBA on May 6,
2021, at which point the agency noticed discrepancies between the tax forms and Smithy’s
application. Id. On May 7, 2021, the SBA informed Luke of those discrepancies and explained
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that, based on the SBA’s calculation, Smithy would be entitled to an award of only $451,829
(rather than the $509,881 he requested). Dkt. 14-4 at 1. The agency also clarified, at that time,
that “[t]he [award] calculation requires gross sales to be used,” id., rather than the point-of-sale
figures that Luke used in his application, see Tr. at 9 (Dec. 14, 2022 Hearing). From the records
submitted by the agency, it appears to have taken the agency several days to unlock the
application to allow Luke to make the necessary revisions. Dkt. 14-5 at 1. He was finally able to
do so on May 14, 2021, Dkt. 14-7 at 1; but, because the discrepancy between the SBA’s
calculated award ($451,829) and the entitlement claimed on Smithy’s initial application
($509,881) exceeded the de minimis threshold of $25,000, Luke was required to re-sign Smithy’s
application, and the agency treated May 14, 2021—the date of the renewed signature—as the
new date of submission. Dkt. 14-1 at 6 (Piccioni Decl. ¶ 28).
After Luke re-signed Smithy’s application, the SBA reviewed the application anew and
deemed it “Fully Approved” on May 26, 2021, two days after the expiration of the 21-day
priority processing window. Id. at 6 (Piccioni Decl. ¶ 29). That day, the agency sent Smithy’s
application (along with 2,964 other priority applications, id. at 6–7 (Picconi Decl. ¶ 29)) to
SBA’s payment system for final processing, and Smithy was notified on May 28, 2021 that its
RRF application “ha[d] been approved” and that “[t]he SBA w[ould] now process the funding of
this award directly to [Smithy’s] Bank account within 3-7 business day from th[e] notification.”
Dkt. 5-2 at 8 (Luke Decl. Ex. 2).
Smithy never received the award; rather, on June 12, 2021, the SBA notified Smithy that
“due to recent court rulings, the [SBA] will not be able to disburse your Restaurant
Revitalization Fund award.” Dkt. 5-2 at 10 (Luke Decl. Ex. 3). The SBA explained that,
because of recent litigation arising out of the Northern District of Texas and the Eastern District
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of Tennessee, “[t]he SBA is not able to pay 2,965 priority applicants—including yourself—who
were previously approved and notified of their approval.” Id. In the relevant rulings, the courts
held that the government may not “allocate limited coronavirus relief funds based on the race
[or] sex of the applicants.” Vitolo v. Guzman, 999 F.3d 353, 357 (6th Cir. 2021). The courts did
not, however, cast doubt on the SBA’s authority to “continue to give veteran-owned restaurants
priority in accordance with the law.” Id. at 366; see also Blessed Cajuns LLC et al. v. Guzman,
No. 21-cv-677 (N.D. Tex. May 28, 2021), see Dkt. 5-1 at 10.
C. Procedural Background
Plaintiffs filed suit under the Administrative Procedure Act (“APA”) on November 28,
2022, Dkt. 1 (Compl.), asserting that the SBA’s “fail[ure] to retain The Woolworth’s place in
queue after it directed the restaurant to resubmit the application because of technological
problems on the SBA’s end” was “arbitrary and capricious” and “contrary to law,” Dkt. 5 at 15;
Dkt. 1 at 6 (Compl. ¶ 28), and that the SBA’s mistaken reliance on the court rulings referenced in
its June 12, 2021 letter resulted in an arbitrary and unlawful decision to decline disbursing
Smithy’s funds, Dkt. 1 at 8 (Compl. ¶¶ 36, 39) (quoting 5 U.S.C. § 706(2)(A), (E)). The next
day, Plaintiffs moved for a temporary restraining order and asked this Court to direct that the
SBA preserve funds sufficient to fully fund Smithy’s and The Woolworth’s RRF applications.
Dkt. 5 at 1.
After the SBA informed the Court that it had paid 167 of the 169 eligible applicants
selected to receive portions of the $83 million in remaining funds and that the agency retained
approximately $2 million in RRF funding that had been allocated to the final two applicants,
Dkt. 7-1 at 4–5 (Piccioni Decl. ¶¶ 20–21), the agency requested an opportunity to investigate
Plaintiffs’ claims. The Court agreed, but entered an administrative stay ordering the agency to
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preserve the remaining $2 million in RRF funding while the agency did so. Dkt. 8 at 3. The
parties appeared for a hearing on the motion for temporary restraining order on December 14,
2022, see Min. Entry (Dec. 14, 2022), and the motion is now ripe for resolution.
II. LEGAL STANDARD
“A TRO is ‘an extraordinary form of relief.’” Costa v. Bazron, 456 F. Supp. 3d 126, 133
(D.D.C. 2020) (quoting Banks v. Booth, 459 F. Supp. 3d 143, 149 (D.D.C. 2020)). The decision
of whether to award a TRO is “analyzed using the same ‘factors applicable to preliminary
injunctive relief,’” and a TRO “may only be awarded upon a clear showing that the plaintiff is
entitled to such relief.” Id. (quoting Banks, 459 F. Supp. 3d at 149). To obtain a TRO, a movant
“must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer
irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his
favor, and [4] that an injunction is in the public interest.” Aamer v. Obama, 742 F.3d 1023, 1038
(D.C. Cir. 2014) (quoting Sherley v. Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011)). When
seeking such relief, “the movant has the burden to show that all four factors, taken together,
weigh in favor of the injunction.” Abdullah v. Obama, 753 F.3d 193, 197 (D.C. Cir. 2014)
(quoting Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1292 (D.C. Cir. 2009)); see also
Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (“[A] preliminary injunction is an
extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear
showing, carries the burden of persuasion.” (internal citation and quotation marks omitted)
(emphasis in original)).
Before the Supreme Court’s decision in Winter v. NRDC, 555 U.S. 7 (2008), courts in
this circuit applied a “sliding-scale” approach under which “a strong showing on one factor could
make up for a weaker showing on another.” Sherley, 644 F.3d at 392. Since Winter, the D.C.
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Circuit has hinted on several occasions that “a likelihood of success is an independent, free-
standing requirement,” id. at 393 (internal citation and quotation marks omitted), but it “has not
yet needed to decide th[e] issue,” League of Women Voters of U.S. v. Newby, 838 F.3d 1, 7 (D.C.
Cir. 2016); see also Changji Esquel Textile Co. v. Raimondo, 40 F.4th 716, 726 (D.C. Cir. 2022).
III. ANALYSIS
A. Likelihood of Success on the Merits
A court may “hold unlawful and set aside” agency action if—as relevant here—it is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C.
§ 706(2)(A), or if it is “unsupported by substantial evidence,” id. § 706(2)(E). Although this
standard of review is a “deferential” one, Am. Radio Relay League, Inc. v. FCC, 524 F.3d 227,
233 (D.C. Cir. 2008), agency action must nevertheless be the product of “reasoned
decisionmaking,” Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 52 (1983). Accordingly, courts will typically find an agency action to be “arbitrary and
capricious” only if the agency “relied on factors which Congress has not intended it to consider,
entirely failed to consider an important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or is so implausible that it could not
be ascribed to a difference in view or the product of agency expertise.” Id. at 43. Agency fact-
finding warrants considerable deference, moreover, so long as it is supported by “substantial
evidence.” 5 U.S.C. § 706(2)(E).
1. Administrative Record
The Court begins its analysis with a threshold note about the scope of the administrative
record before it. At this very early stage, the SBA has yet to compile or to certify an
administrative record, and the parties have submitted only a handful of communications between
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the SBA and Luke between April and June of 2021. Accordingly, at this juncture, the Court
lacks a complete record regarding the agency’s internal policies for distributing RRF funding or
its interpretation of 15 U.S.C. § 9009c. To fill this gap, the SBA has filed a declaration from
Vanessa Piccioni, the Director of the SBA’s National Guaranty Purchase Center, who attests that
she “assisted in reviewing certain RRF applications and [is] knowledgeable about the RRF
program.” Dkt. 14-1 at 1 (Piccioni Decl. ¶ 1).
In considering a motion for a preliminary injunction, a district court must base its review
“on the full administrative record that was before the [agency] at the time [it] made its decision,”
Am. Bioscience, Inc. v. Thompson, 243 F.3d 579, 583 (D.C. Cir. 2001) (second alteration in
original) (quoting Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 (1971)), and
may not rely on “the parties’ written or oral representations” or on “sworn affidavits filed during
the litigation” to discern the basis of agency actions, id. That rule, however, cannot sensibly
extend to a motion for temporary retraining order, which seeks to maintain the status quo for the
brief time necessary for the parties litigate whether a preliminary injunction should issue. To be
sure, the Court may not deny a motion for a TRO merely because the agency has not had time to
prepare the administrative record. But, at the same time, the Court may not issue a TRO without
holding the movant to its burden of demonstrating a likelihood of success on the merits. Here,
the parties have provided the Court with a handful of agency communications with the applicants
and the Piccioni declaration, which explains how the agency processed the RRF applications.
The Court may consider extra-record material, such as a declaration offered by a
knowledgeable agency official, under “unusual circumstances justifying a departure from [the]
general rule.” City of Dania Beach v. FAA, 628 F.3d 581, 590 (D.C. Cir. 2010) (quoting Tex.
Rural Legal Aid v. Legal Servs. Corp., 940 F.2d 685, 698 (D.C. Cir. 1991)). The D.C. Circuit
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has identified at least three such circumstances, including, as relevant here, when “the agency
failed to explain administrative action so as to frustrate judicial review.” Animal Legal Def.
Fund v. Perdue, 872 F.3d 602, 611 (D.C. Cir. 2017) (quoting Am. Wildlands v. Kempthorne, 530
F.3d 991, 1002 (D.C. Cir. 2008)); see also Dania Beach, 628 F.3d at 590 (listing the same three
exceptions); James Madison Ltd. by Hecht v. Ludwig, 82 F.3d 1085, 1095 (D.C. Cir. 1996)
(same). That exception applies here. The circumstances are “unusual” due to the time pressure
posed by a motion for a TRO, and, even more significantly, the RRF program itself required the
agency to act expeditiously without providing sufficient time for detailed agency opinions at
each critical stage in the process. Consideration of the Piccioni declaration does not represent
“an end run around the agency’s substantive . . . judgments,” CTS Corp. v. EPA, 759 F.3d 52, 65
(D.C. Cir. 2014), but, rather, represents the Court’s only available glimpse into the process the
SBA employed. Finally, the Court is aided by the fact that the parties—at least for present
purposes—do not dispute the central elements of that process, including the manner in which
applications were prioritized at various stages in the process.
The Court will, accordingly, base its decision on the administrative materials that the
parties have produced to date and on the Piccioni declaration, which sets forth the process that
the agency employed in prioritizing and approving applications. To the extent that additional
record materials exist, the SBA will be required to assemble and to certify an administrative
record in time for the Court to evaluate a motion for a preliminary injunction, should Plaintiffs
file one.
2. The Woolworth
Plaintiffs argue, first, that the SBA’s “fail[ure] to retain The Woolworth’s place in queue
after it directed the restaurant to resubmit the application” was both “arbitrary and capricious,”
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Dkt. 5 at 15, and contrary to § 9009c, which directs the SBA Administrator to “award grants to
eligible entities in the order in which applications are received by the Administrator,” 15 U.S.C.
§ 9009c(c)(1); see Dkt. 15 at 6. At oral argument, counsel for Plaintiffs clarified—and
Defendants did not contest—that Luke was asked to make edits to The Woolworth’s application
for the same reason that he had to adjust Smithy’s application: as to both restaurants, Luke
apparently used point-of-sale records rather than gross-receipts records in submitting his
application, requiring amendments to the applications. Hearing Tr. at 9 (Dec. 14, 2022). The
only distinction, then, between the application processes for Luke’s two restaurants seems to be
that Luke had to re-submit The Woolworth’s application (apparently due to technical difficulties
that prevented him from editing the application), while he could edit and re-sign Smithy’s
application without generating a new application number. Id. But the result was effectively the
same: the parties agree for present purposes that both applications, one re-signed and one-
resubmitted, were treated by the agency as newly submitted on May 14, 2022.
Plaintiffs also do not dispute the existence of an SBA policy requiring resubmission or re-
signature of certain erroneous applications; nor do they dispute that, when the SBA required such
resubmission, the agency treated the application as complete on the date of resubmission, rather
than on the date the applicant originally applied for RRF funding. Plaintiffs themselves
represent that Luke had to resubmit The Woolworth’s application because of discrepancies
between the financial records in the application and the information on the restaurant’s tax
returns. And Luke nowhere contends that those discrepancies were de minimis under the SBA’s
processing procedures, such that, absent the technological difficulties in editing his application,
Luke would have been able to edit The Woolworth’s application without (at a minimum) re-
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signing it and triggering a new effective date. 1 Rather, Plaintiffs argue, without more, that
requiring Luke to submit a “new” application in order to correct the errors in The Woolworth’s
first application was arbitrary and capricious. The Court is, at this juncture, unpersuaded.
The relevant statute, which requires only that the SBA Administrator “award grants to
eligible entities in the order in which the applications are received,” 15 U.S.C. § 9009c(c)(1),
does not speak to the question of whether the agency must allow an applicant to make material
post-submission corrections to his application. In other words, the text does not require the
agency to award grants according to when an applicant’s first application was received, rather
than, say, when the applicant’s first substantially complete application was received. Nor has
Plaintiff offered any authority for the proposition that it was arbitrary and capricious for the SBA
to require Luke to resubmit The Woolworth’s application with the correct information.
Plaintiffs’ counsel asserted at oral argument that it was “arbitrary” and “fundamentally
unfair” for the SBA to “cost the applicant his place in line,” Tr. at 11 (Dec. 14, 2022 Hearing),
where the SBA “didn’t tell [Luke] clearly that [he] had to submit the numbers from [his] tax
return as opposed to [his] point of sale records,” id. at 10. But that question of notice was not
raised in Plaintiffs’ motion for temporary restraining order or in their reply. Defendants,
moreover, contest the idea that applicants were deprived of such notice: counsel explained at the
hearing that “there were different worksheets” that applicants could use “depending on what type
of business [they] had and what [their] revenue was;” that there were “different formulas that
applied;” and that all of that information “was . . . communicated to the general public.” Tr. at
29–30 (Dec. 14, 2022 Hearing). And, even more importantly, the statute itself clearly requires
1
Whether the SBA’s technological failures were at fault for the required resubmission may, then,
be less material here than the nature and extent of the discrepancies between The Woolworth’s
initial application and the tax information obtained from the IRS.
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the use of “gross receipts, as established using such verification documentation as the
Administrator may require” in order to calculate the “pandemic-related revenue loss,” 15 U.S.C.
§ 9009c(a)(7) (emphasis added), rather than the “point of sales reports” that the Woolworth
apparently used. In any event, without briefing on this question or evidence to support either
parties’ position on the notice question, the Court declines to reach that argument at this stage of
the proceeding.
At most, Plaintiffs point to U.S. AirWaves, Inc. v. FCC, 232 F.3d 227 (D.C. Cir. 2000)
for the proposition that “unfair agency action can be arbitrary and capricious.” Dkt. 15 at 7. But
the D.C. Circuit in U.S. Airwaves also acknowledged that “an agency must be allowed to adjust
its policies to changing circumstances” and that, even if such a change is “unfair” or
“inequit[able],” it is not necessarily arbitrary and capricious where the agency “reasonably
exercised its discretion to balance fairness to losing bidders with the needs of the market and
with the public interest.” U.S. Airwaves, Inc., 232 F.3d at 235–36. At the present juncture,
Plaintiffs, who carry the burden of establishing that they are likely to succeed on the merits,
Mazurek, 520 U.S. at 972, have not established that it was likely arbitrary and capricious for the
SBA to treat The Woolworth’s application as submitted on May 14, 2021—that is, the date on
which it was substantially complete.
3. Smithy
A separate question remains as to Smithy’s application, which (unlike that of The
Woolworth) achieved “Fully Approved” status and was, according to the records presently
before the Court, slated for payment as of May 26, 2021. Dkt. 5-2 at 8 (Luke Decl. Ex. 2); Dkt.
14-1 at 6 (Piccioni Decl. ¶ 29). On June 12, 2021, however, the agency communicated to Luke
that it would not fund Smithy’s application—although the agency now indicates that the relevant
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decision to pause funding all “fully approved” priority applications was reached internally on
May 27, 2021. See Dkt. 14-1 at 7 (Piccioni Decl. ¶ 29). Plaintiffs argue that the SBA’s decision
not to fund Smithy’s application was both arbitrary and capricious and contrary to § 9009c(c)(3),
which requires the Administrator to prioritize awarding grants to veteran-owned business during
the 21-day statutory priority period. Dkt. 5 at 16. In particular, Plaintiffs contend that the SBA
misunderstood the court rulings it referenced in its June 12, 2021 letter to Luke, which, in their
view, did not alter the requirement that the SBA prioritize funding restaurants owned by
veterans. Id. at 15–16.
To the extent that the SBA decided to pause funding Smithy’s application on May 27,
2021 (or, in any event, sometime after Smithy’s application reached “fully approved” status on
May 26, 2021), that decision does not appear to conflict with § 9009c. The statute requires only
that “the Administrator . . . prioritize awarding grants to eligible entities” for the “initial 21-day
period in which the Administrator awards grants under” the RRF, 15 U.S.C. § 9009c(c)(3)(A)—a
period that expired on May 24, 2021, Dkt. 14-1 at 3 (Piccioni Decl. ¶ 12). By all accounts, the
SBA did “prioritize awarding grants” to veteran-owned businesses during the 21-day window
after May 3, 2021: the SBA processed only those applications submitted by priority applicants
during that window, id. at 3 (Piccioni Decl. ¶ 11), and it took the necessary steps to process
Smithy’s application, including by ensuring the application was complete and correct and,
ultimately, by deeming the application “Fully Approved” on May 26, 2021, id. at 6 (Piccioni
Decl. ¶ 29). That the SBA ultimately stopped prioritizing priority applicants like Smithy after
the expiration of the priority period, however, does not conflict with the agency’s statutory
obligations.
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But that conclusion does not end the inquiry. Even if the agency’s decision to pause
priority processing was not foreclosed by the statute, the agency was nevertheless required to
engage in “reasoned decisionmaking;” the APA directs that “agency actions be ‘set aside’ of they
are ‘arbitrary’ or ‘capricious,’” Dep’t of Homeland Sec’y v. Regents of the Univ. of Calif., 140 S.
Ct. 1891, 1905 (2020) (first quoting Michigan v. EPA, 576 U.S. 743, 750 (2015), and then
quoting 5 U.S.C. § 706(2)(A)), including where, among other things, the agency “offer[s] an
explanation for its decision that runs counter to the evidence before [it],” State Farm Mut. Auto.
Ins. Co., 463 U.S. at 43. “Under this narrow standard of review, . . . a court is not to substitute
its judgment for that of the agency, but instead to assess only whether the decision was based on
a consideration of the relevant factors and whether there has been a clear error of judgment.”
Regents of the Univ. of Calif., 140 S. Ct. at 1905 (internal quotation marks and citation omitted).
In evaluating whether the agency’s decision was arbitrary and capricious, the Court
looks, as it must, to “the grounds that the agency invoked when it took the action” to pause
priority processing. Michigan, 576 U.S. at 758. The agency set forth is rationale in its June 12,
2021 letter to Luke: “The SBA is not able to pay 2,965 priority applicants—including yourself—
who were previously approved and notified of their approval. SBA will not pay these claims
because the legal conclusions in these court rulings would preclude payment.” Dkt. 5-2 at 10
(Luke Decl. Ex. 3). But contrary to that reasoning, the “legal conclusions” in those court rulings
did not “preclude payment” of Smithy’s award. Rather, as the SBA now acknowledges, the
decisions in Vitolo v. Guzman, 999 F.3d 353 (6th Cir. 2021) and in Blessed Cajuns LLC et al. v.
Guzman, No. 21-cv-677 (N.D. Tex. May 28, 2021), see Dkt. 5-1 at 2, “did not question . . . the
constitutionality of the priority afforded to veterans,” Dkt. 14 at 12. The SBA is correct that
“those courts did not require [the] SBA to continue offering such a priority after the expiration of
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the statutory priority either.” Id. (emphasis added). But even if the decision to pause priority
processing was a discretionary one, the agency was required to justify its decision on a legally
coherent ground. Cf. Regents of the Univ. of Calif., 140 S. Ct. at 1912 (finding the rescission of
DACA forbearance arbitrary and capricious where the agency incorrectly “treated the Attorney
General’s conclusion regarding the illegality of [DACA-related] benefits as sufficient to rescind
both benefits and forbearance, without [further] explanation” (emphases added)). It did not do
so.
Seeking to avoid the obvious implication of its June 12, 2021 letter, the agency now
asserts that the SBA’s decision to pause processing priority applications on May 27, 2021 was
“in large part because there was nothing in the statute requiring this processing out of order to
continue,” and because “there[] [are] good reasons in the statute to bring the applications back
onto a level playing field.” Tr. at 35 (Dec. 14, 2022 Hearing). The agency indicates, in this vein,
that the June 12 letter was not directed to Luke or to veterans: it was, rather, a blast email to
“2,965 applicants, many of which were owned by women or socially-and-economically-
disadvantaged individuals directly affected by” the referenced court rulings. Dkt. 14 at 12. But
the agency may not now supply a rationale for its decision that is nowhere to be found in its June
12, 2021 letter or even—assuming the Court may consider such evidence at this preliminary
stage, see supra at 10–12—in the declarations submitted by the agency. The Piccioni declaration
posits only that the “SBA planned to resume processing priority applications once it completed
processing the previously filed non-priority applications.” Dkt. 14-1 at 3 (Piccioni Decl. ¶ 14).
But nowhere does it suggest that the agency decided to pause processing applications from
veteran-owned businesses for any reason other than the court rulings in Vitolo and Blessed
Cajuns; nor does it indicate that the agency appreciated “the full scope of [its] discretion” in
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reaching its decision. Regents of the Univ. of Calif., 140 S. Ct. at 1911. The record presently
before the Court strongly suggests, then, that the decision not to fund Smithy’s award was based
on a “clear error of judgment” and was, therefore, arbitrary and capricious. Id. at 1905 (quoting
Citizens to Pres. Overton Park, Inc., 401 U.S. at 416).
The agency marshals one further argument at this stage that bears mentioning, although it
speaks more to the question of remedy than to the merits. The SBA contends that, whatever
problems existed during the initial distribution of funds in June 2021, at this stage, it is,
“impossible to [un]scramble the egg and start with a blank slate,” Tr. 47 (Dec. 14, 2022
Hearing), particularly because the agency is now distributing its remaining funds according to
the date on which applications were submitted (rather than, as it was doing in 2021, the date
upon which the application became “fully approved”), Dkt. 14-1 at 4 (Piccioni Decl. ¶ 17).
Under this reasoning, if the agency can properly conclude that both of Luke’s applications were
submitted on May 14, 2021 (and not on April 27, 2021), then the agency might decide, even on a
hypothetical remand, not to fund Smithy’s application.
It is premature, however, for the Court to assess the merit of that argument. As a general
matter, if the grounds invoked by the agency in taking an action are inadequate, “a court may
remand for the agency to offer a fuller explanation of the agency’s reasoning at the time of the
agency action” or to allow the agency “to deal with the problem afresh by taking new agency
action.” Regents of the Univ. of Calif., 140 S. Ct. at 1908 (emphases in original) (internal
quotation marks and citation omitted). But, in any event, “[t]he norm is to vacate agency action
that is held to be arbitrary and capricious and remand for further proceedings consistent with the
judicial decision, without retaining oversight over the remand proceedings.” Baystate Med. Ctr.
v. Leavitt, 587 F. Supp. 2d 37, 41 (2008); see also N. Air Cargo v. Postal Serv., 674 F.3d 852,
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861 (D.C. Cir. 2012). The Court should not, at least at this stage of the proceedings, fashion its
relief around how the SBA might decide, in its discretion, to act if the matter is remanded to the
agency. For present purposes, and in light of the strong presumption in favor of remand, the
Court simply concludes that Smithy has established a likelihood of success on the merits—and
therefore a likelihood of success in obtaining a remand—that warrants preserving the status quo
for the time being.
B. Irreparable Harm
The Court turns, next, to the question of irreparable harm. Because The Woolworth has
failed to show that it is likely to prevail on the merits, the Court will consider only whether
Smithy will suffer an irreparable injury in the absence of emergency relief. See Greater New
Orleans Fair Hous. Action Ctr. v. Dep’t of Hous. & Urb. Dev., 639 F.3d 1078, 1088 (D.C. Cir.
2011) (“[W]hen a plaintiff has not shown a likelihood of success on the merits, there is no need
to consider the remaining [preliminary injunction] factors.”); Sherley, 644 F.3d at 393 (“[W]e
read Winter at least to suggest if not to hold ‘that a likelihood of success is an independent, free-
standing requirement for a preliminary injunction.’” (quoting Davis v. Pension Benefit Guar.
Corp., 571 F.3d 1288, 1292 (D.C. Cir. 2009) (Kavanaugh, J., concurring)); Ark. Dairy Co-op
Ass’n v. U.S. Dep’t of Agric., 573 F.3d 815, 817 (D.C. Cir. 2009) (suggesting that a failure to
show likelihood of success on the merits alone justifies the denial of temporary injunctive
relief). 2
2
Moreover, even if the sliding-scale approach has survived Winter, see supra at 9–10, the Court
would conclude that the remaining factors are insufficiently weighty to overcome Plaintiff’s
weak showing with respect to the likelihood of success on the merits with respect to the The
Woolworth.
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Smithy contends—and Defendants do not contest—that, absent a TRO, it will suffer
irreparable harm because “it is likely that [the remaining RRF funds] will be exhausted before a
decision on the merits of Plaintiffs’ claims.” Dkt. 15 at 12. Because the SBA is in the process of
distributing (or attempting to distribute) the last of the remaining RRF funds—and because
Smithy will not be able to seek damages under the APA for any possibly unlawful agency action
once the fund has fully expired, see, e.g., 5 U.S.C. § 702 (providing for “[a]n action in a court of
the United States seeking relief other than money damages”)—the Court concludes that Smithy
is likely to suffer irreparable economic harm absent a temporary restraining order. See, e.g.,
Whitman-Walker Clinic, Inc. v. U.S. Dep’t of Health & Human Servs., 485 F. Supp. 3d 1, 59
(D.D.C. 2020) (explaining that “injuries are unrecoverable because the present suit arises under
the APA, which does not allow for money damages”); Nat’l Mining Ass’n v. Jackson, 768 F.
Supp. 2d 34, 52 (D.D.C. 2011) (“[I]f a movant seeking a preliminary injunction ‘will be unable
to sue to recover any monetary damages against’ a government agency in the future because of,
among other things, sovereign immunity, financial loss can constitute irreparable injury.”
(quoting Brendsel v. Off. of Fed. Hous. Enter. Oversight, 339 F. Supp. 2d 52, 66–67 (D.D.C.
2004)).
C. Balance of Equities and Public Interest
Finally, the Court turns to the last two factors—the balance of the equities and the public
interest. The balance of the equities weighs the harm to Plaintiffs absent a TRO against the harm
to the agency if the Court grants the motion. Pursuing America’s Greatness v. FEC, 831 F.3d
500, 511 (D.C. Cir. 2016). And here, the harm to the SBA and the public-interest factor are “one
and the same” because the government is the non-movant and because “the government’s
interest is the public interest.” Pursuing America’s Greatness v. FEC, 831 F.3d 500, 511 (D.C.
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Cir. 2016). Although the SBA correctly points out that two eligible RRF applicants may be
deprived of some of their RRF funding if Smithy ultimately succeeds in obtaining relief, it is not
true that, at this early stage, the Court must “decid[e] between paying the two plaintiff businesses
or paying Eligible Applicants 135 and 151.” Dkt. 14 at 13. The emergency relief requested by
Plaintiffs simply would preserve the possibility that Smithy could get relief, while
simultaneously leaving the door open for Applicants 135 and 151 to receive their full RRF
funding after the Court has decided whether to issue a preliminary injunction and, if appropriate,
after the Court has adjudicated the ultimate merits of the present dispute. Even then, moreover,
if the Court merely remands the dispute to the SBA, the agency will need to decide (at least in
the first instance) whether Smithy is entitled to relief and, if so, the amount it is entitled to
receive. Because Defendants have not made a significant showing that the public—or anyone
beyond Applicants 135 and 151—may be harmed by the entry of a temporary restraining order,
the Court finds that the balance of equities tips in Smithy’s favor and that a temporary restraining
order is in the public interest.
CONCLUSION
For the foregoing reasons, the Court will GRANT in part and DENY in part Plaintiffs’
motion for temporary restraining order, Dkt. 5.
A separate order will issue.
/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge
Date: December 20, 2022
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