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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
KAOS PRODUCTIONS, INC.,
d/b/a Spin Nightclub,
Plaintiff,
v.
SMALL BUSINESS ADMINISTRATION, and
ISABELLA CASILLAS GUZMAN,
Administrator, Small Business Administration,
Defendants.
Civil Action No. 21-cv-2324-TNM
Judge Trevor N. McFadden
PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION
Pursuant to Federal Rule of Civil Procedure 65, Plaintiff Kaos Productions, Inc., d/b/a
Spin Nightclub (“Spin”), hereby moves for a preliminary injunction directing Defendants to
preserve, pending resolution of this action, Shuttered Venue Operators Grant Program funds in
the amount of that which Spin requested, is eligible to receive, and Defendants have unlawfully
withheld. In support of this Motion, Spin submits the accompanying Memorandum of Points and
Authorities, Declaration of Daniel Maris, Owner and President of Spin, and Exhibits to Mr.
Maris’s Declaration. Spin is concurrently moving to file Exhibits 1 through 21, 24, and 26 to the
Declaration under seal.
In accordance with Local Civil Rule 7(m), undersigned counsel conferred with Dedra S.
Curteman, Assistant United States Attorney at the United States Attorney’s Office for the District
of Columbia, regarding this Motion. The government opposes the Motion. A proposed order is
attached.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 1 of 26
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Dated: September 15, 2021
Respectfully submitted,
/s/ Caroline L. Wolverton
Angela B. Styles
D.C. Bar No. 448397
Caroline L. Wolverton
D.C. Bar No. 496433
AKIN GUMP STRAUSS HAUER & FELD LLP
2001 K Street, N.W.
Washington, DC 20006
(202) 887-4000
Counsel for Plaintiff Kaos Productions, Inc.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 2 of 26
CERTIFICATE OF SERVICE
I hereby certify that, on the 15th day of September 2021, true and genuine copies of the
foregoing Plaintiff’s Motion for Preliminary Injunction, Memorandum of Points and Authorities
in Support, Declaration of Daniel Maris, and Proposed Order were sent to counsel for
Defendants via electronic mail as follows:
Dedra S. Curteman, dedra.curteman@usdoj.gov
/s/ Caroline L. Wolverton
Caroline L. Wolverton
D.C. Bar No. 496433
AKIN GUMP STRAUSS HAUER & FELD LLP
2001 K Street, N.W.
Washington, DC 20006
(202) 887-4000
Counsel for Plaintiff Kaos Productions, Inc.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 3 of 26
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
KAOS PRODUCTIONS, INC.,
d/b/a Spin Nightclub,
Plaintiff,
v.
SMALL BUSINESS ADMINISTRATION, and
ISABELLA CASILLAS GUZMAN,
Administrator, Small Business Administration,
Defendants.
Civil Action No. 21-cv-2324-TNM
Judge Trevor N. McFadden
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
ITS MOTION FOR PRELIMINARY INJUNCTION
Angela B. Styles
D.C. Bar No. 448397
Caroline L. Wolverton
D.C. Bar No. 496433
AKIN GUMP STRAUSS HAUER & FELD LLP
2001 K Street, N.W.
Washington, DC 20006
(202) 887-4000
Dated: September 15, 2021
Counsel for Plaintiff Kaos Productions, Inc.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 4 of 26
TABLE OF CONTENTS
INTRODUCTION ...........................................................................................................................1
BACKGROUND .............................................................................................................................2
A.
Shuttered Venue Operators Grant Program ..................................................2
B.
Spin’s SVOG Application and the SBA’s Denial ........................................4
ARGUMENT ...................................................................................................................................7
I.
Legal Standard .....................................................................................................................7
II.
Spin Is Likely to Succeed on the Merits ..............................................................................7
A.
The SBA’s Denial of Spin’s Requested SVOG Award is Arbitrary and
Capricious ................................................................................................................7
1.
The SBA Failed to Give Any Reason for the Denial ...................................8
2.
The SBA’s Decision Conflicts with the Evidence Before the
Agency .........................................................................................................9
3.
The SBA Treated Spin Disparately from Its Similarly Situated
Competitors ................................................................................................ 11
B.
The SBA’s Denial is Contrary to Law ...................................................................13
C.
The SBA’s Denial is Unsupported by Substantial Evidence .................................13
III.
Spin’s Harms From Denial of a SVOG Award Will Likely Be Irreparable Absent
Injunctive Relief.................................................................................................................14
IV.
The Balance of Equities and Public Interest Support a Preliminary Injunction ................17
V.
The Court Should Exercise Its Discretion to Waive Rule 65’s Security
Requirement .......................................................................................................................17
CONCLUSION ..............................................................................................................................18
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TABLE OF AUTHORITIES
Page(s)
Cases
Ala. Ass’n of Realtors v. U.S. Dep’t of Health & Hum. Servs.,
No. 20-CV-3377 (DLF), 2021 WL 1946376 (D.D.C. May 14, 2021) .......................................7
Amerijet Int’l, Inc. v. Pistole,
753 F.3d 1343 (D.C. Cir. 2014) .................................................................................................8
ANR Storage Co. v. Fed. Energy Regulatory Comm’n,
904 F.3d 1020 (D.C. Cir. 2018) .........................................................................................11, 13
Archdiocese of Wash. v. Wash. Metro. Area Transit Auth.,
897 F.3d 314 (D.C. Cir. 2018) ...................................................................................................7
Banks v. Booth,
459 F. Supp. 3d 143 (D.D.C. 2020) ...........................................................................................7
Camelot Banquet Rooms, Inc. v. SBA,
458 F. Supp. 3d 1044 (E.D. Wis. 2020) ...................................................................................16
Cigar Ass’n of Am. v. FDA,
317 F. Supp. 3d 555 (D.D.C. 2018) ...........................................................................................7
Defy Ventures, Inc. v. SBA,
469 F. Supp. 3d 459 (D. Md. 2020) .........................................................................................16
Dickinson v. Zurko,
527 U.S. 150 (1999) .................................................................................................................13
DSE, Inc. v. United States,
169 F.3d 21 (D.C. Cir. 1999) .............................................................................................16, 17
DV Diamond Club of Flint, LLC v. SBA,
960 F.3d 743 (6th Cir. 2020) .............................................................................................15, 16
DV Diamond Club of Flint, LLC v. SBA,
459 F. Supp. 3d 943 (E.D. Mich. 2020) ...................................................................................16
Encino Motorcars, LLC v. Navarro,
136 S. Ct. 2117 (2016) ...............................................................................................................8
Int’l Franchise Ass’n, Inc. v. City of Seattle,
803 F.3d 389 (9th Cir. 2015) ...................................................................................................15
*
*
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iii
Kreis v. Sec’y of Air Force,
406 F.3d 684 (D.C. Cir. 2005) .................................................................................................11
League of Women Votes of the U.S. v. Newby,
838 F.3d 1 (D.C. Cir. 2016) .......................................................................................................9
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29 (1983) .....................................................................................................................9
NAACP v. Trump,
321 F. Supp. 3d 143 (D.D.C. 2018) ...........................................................................................7
Nken v. Holder,
556 U.S. 418 (2009) .................................................................................................................17
Pursuing Am.’s Greatness v. FEC,
831 F.3d 500 (D.C. Cir. 2016) .................................................................................................17
Sherley v. Sebelius,
644 F.3d 388 (D.C. Cir. 2011) ...................................................................................................7
Simms v. District of Columbia,
872 F. Supp. 2d 90 (D.D.C. 2012) ...........................................................................................17
Tourus Records, Inc. v. Drug Enf’t Admin.,,
259 F.3d 731 (D.C. Cir. 2001) ...................................................................................................7
Winter v. Nat. Res. Def. Council, Inc.,
555 U.S. 7 (2008) .......................................................................................................................7
Xiaomi Corp. v. Dep’t of Def.,
No. CV 21-280 (RC), 2021 WL 950144 (D.D.C. Mar. 12, 2021) .....................................13, 17
Statutes and Rules
5 U.S.C.
§ 555(e) ......................................................................................................................................8
15 U.S.C.
§ 9009a .....................................................................................................................................13
§ 9009a(a)(1)(A) ........................................................................................................................3
§ 9009a(a)(1)(A)(iii) ..................................................................................................................4
§ 9009a(a)(3)(A)(i) ....................................................................................................................3
*
*
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§ 9009a(b)(3)(A) ........................................................................................................................3
§ 9009a(c) ..................................................................................................................................2
§ 9009a(d)(1)(A)(i) ................................................................................................................2, 3
Fed. R. Civ. P. 65(c) ......................................................................................................................17
Other Authorities
Press Release (No. 21-75), SBA, SBA Opens Supplemental Grant Applications
for Shuttered Venue Operators Grant Awardees (Aug. 27, 2021) .............................................3
Pub. L. No. 116-260 § 324 ...............................................................................................................2
Pub. L. No. 117-2 § 5005(a) ............................................................................................................2
SBA, SBA Opens Supplemental Grant Applications for Shuttered Venue
Operators Grant Awardees (Aug. 27, 2021), ............................................................................3
SBA, Shuttered Operators Grant Appeal Information Session (Aug. 4, 2021) .............................12
SBA, Shuttered Venue Operators Grantees .............................................................................11, 12
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INTRODUCTION
Kaos Productions, Inc., d/b/a Spin Nightclub (“Spin” or the “Company”), is a small music
venue that hosts live performances by DJs, bands, and individual artists on stage. Spin applied for
a Shuttered Venue Operator Grant (“SVOG”) award to help the Company recover from the
devastating setbacks it suffered as a result of the COVID-19 pandemic. Spin desperately needs
SVOG funds to rebuild its business, which is precisely the purpose of the SVOG Program. Spin
satisfies all of the eligibility criteria for an award, but the Small Business Administration (“SBA”)
inexplicably denied Spin’s application and appeal.
Spin’s likelihood of success in this challenge to the SBA’s denial of a SVOG award is
abundantly clear. To this day, Spin does not know why the SBA denied its application and appeal.
The SBA provided no explanation in the notice of either denial, contrary to fundamental
requirements of administrative procedure. The SBA’s denial of Spin’s award request is invalid as
arbitrary and capricious for that reason alone. The SBA’s denial is also unsupported by substantial
evidence and, because Spin demonstrated eligibility for an award, contrary to the statutory
provision governing SVOG awards for qualifying applicants in the Economic Aid to Hard-Hit
Small Businesses, Nonprofits, and Venues Act (the “Act”).
Not only has the SBA unlawfully denied Spin much needed SVOG funds, the agency has
compounded Spin’s injury by making SVOG awards to four of Spin’s direct competitors in the
San Diego live music venue industry. In so doing, the SBA has afforded these businesses an unfair
competitive advantage over Spin in an already competitive industry, further inhibiting Spin’s
recovery. Because these competitors are similarly situated to Spin, the SBA’s disparate treatment
of Spin is yet another reason the denial of Spin’s SVOG award request is invalid.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 9 of 26
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While Spin will succeed on the merits of this action, the congressional appropriation for
SVOG awards is limited, thereby creating a significant risk that, by the time the SBA’s erroneous
denial of Spin’s request is remedied, all of the appropriated funds will be exhausted. If Spin
ultimately cannot receive the SVOG funds to which it is entitled, the severe harms it is now
suffering will likely become permanent and irreparable. Spin therefore seeks a preliminary
injunction from this Court that will preserve SVOG funds in the amount of Spin’s award request
as well as the amount of the supplemental SVOG award to which Spin is entitled under the Act.
For these reasons, and because a preliminary injunction would not harm the SBA but rather
further Congress’s intent for the SVOG Program, preliminary relief is warranted. The Court
should grant Spin’s motion and issue a preliminary injunction directing the SBA to preserve SVOG
funds in the amount of Spin’s request ($644,547.11) and in the amount of the supplemental award
to which Spin is entitled under the Act ($322,273.56).
BACKGROUND
A.
Shuttered Venue Operators Grant Program
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, signed into
law December 27, 2020, appropriated $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
appropriating an additional $1,249,500,000 for SVOG awards. Pub. L. No. 117-2 § 5005(a).
SVOG awards may be used for specified business expenses, including payroll, rent and utility
payments incurred between March 1, 2020, and December 31, 2021. 15 U.S.C.
§ 9009a(d)(1)(A)(i). 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).
Businesses with 2021 first quarter revenues of no more than 30 percent of their 2019 first
quarter revenues are also eligible for supplemental grants of 50 percent of the original award
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amount. 15 U.S.C. § 9009a(b)(3)(A); Press Release (No. 21-75), 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).
Eligible entities under the Act include live venue operators and promoters, as well as
theatrical producers, live performing arts organization operators, museum operators, motion
picture theatre operators, and talent representatives. Id. § 9009a(a)(1)(A). 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 the same quarter in 2019, and has reopened or intends to reopen. Id.
The Act defines live venue 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). The Act specifies that for a live venue operator (as
well as a live venue promoter, theatrical producer, or live performing arts organization operator)
to be eligible, it must have additional characteristics. The applicant must: (1) put on events with
defined performance and audience spaces; (2) use mixing equipment, a public address system and
a lighting rig; (3) engage one or more individuals to carry out at least two of the following roles—
sound engineer, booker, promoter, stage manager, security personnel, box office manager; (4) sell
tickets or impose a cover charge for most performances; (5) fairly pay artists; and (6) market its
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events including through print or electronic publications, websites, mass email or social media.
Id. § 9009a(a)(1)(A)(iii).
B.
Spin’s SVOG Application and the SBA’s Denial
On April 26, 2021, Spin applied for a SVOG award of $644,547.11. Decl. of Spin Owner
& President D. Maris (“Maris Decl.”) ¶ 12 (Ex. A hereto). In its application, Spin demonstrated
that it satisfied the criteria for eligibility as a live venue operator. Id. ¶ 17. Spin demonstrated that
its losses in 2020 exceeded the 25 percent statutory threshold by submitting its tax returns for 2019
and 2020. Id. ¶ 13. Spin also submitted, among other things, its venue floorplans and equipment
photographs, venue rent checks, sample contracts with performance artists and promoters
providing for fair payment by market rate, receipts for marketing campaigns, screenshots of and
web links to online marketing materials, and records reflecting that admission was by paid tickets
and cover charges. Id. ¶ 13. Spin additionally provided the certifications of eligibility required by
the SBA’s guidance on SVOG applications. Id. ¶ 13.
On June 22, 2021, Spin learned from the SBA’s SVOG portal that its application was
denied. Id. ¶ 14. The portal’s denial notice gave no explanation of why the SBA found Spin
ineligible. Id. The portal simply said: “Based on the information provided, your organization does
not meet the definition of an eligible entity under the statute. Please visit www.sba.gov to find
other programs that may be able to assist you.” Id. ¶ 14 & Ex. 26 to Maris Decl.
On August 12, 2021, Spin submitted an administrative appeal of the denial to the SBA.
Maris Decl. ¶ 15. Because the denial included no explanation, Spin’s appeal elaborated on why
the Company satisfies all of the criteria for eligibility as a live venue operator. Id. Spin organized
the appeal according to the SVOG Eligibility Matrix the SBA had published in July 2021, and
explained in detail and with supporting documentation how Spin meets each of the general
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eligibility requirements for a SVOG award and each of the specific eligibility requirements for live
venue operators. Id. ¶ 17 & Ex. 1 to Maris Decl. Spin’s documentation in support of the appeal
included: quarterly income statements for 2019, 2020, and the first half of 2021; 2019 and 2020
tax returns; advertising receipts; contracts with live performing artists; box office records reflecting
cover charges and ticket sales; employee records and contractor agreements reflecting engagement
of a sound engineer, stage manager, box office manager, and security personnel, bookers and
promoters; photographs, floorplans, and purchase orders demonstrating its defined performance
space, defined audience space, sound mixing equipment, public address system, and lighting rig;
payroll and other records reflecting its periods of operation; copies of contracts with promoters
that provide for fair payment of performing artists; web links to marketing materials; and other
documentation. Maris Decl. ¶ 18 & Exs. 2–21 to Maris Decl. Spin also submitted a letter from
its attorney explaining how these documents satisfy SVOG Program requirements for live venue
operators, as well as a letter from the San Diego Police Department regarding Spin’s special permit
to operate solely as a live music venue, and a letter from the Southern California Advocate for the
National Independent Venues Association and General Manager of one of Spin’s direct local
competitors, The Music Box, endorsing Spin’s eligibility for a SVOG award as a live venue
operator. Maris Decl. ¶ 19 & Ex. 22 to Maris Decl.
On August 22, 2021, the SBA notified Spin that the administrative appeal was denied.
Maris Decl. ¶ 22 & Ex. 25 to Maris Decl. As with the denial of Spin’s application, the SBA gave
no reason for denying the administrative appeal. Maris Decl. ¶ 23 & Ex. 25 to Maris Decl. The
SBA’s appeal denial notification stated in its entirety: “Your appeal of your SVOG application
decision is denied based on the additional and/or updated information you provided.” Maris Decl.
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¶ 23 & Ex. 25 to Maris Decl. The SBA’s denial of Spin’s appeal is the agency’s final decision on
Spin’s SVOG award request.
On September 1, 2021, Spin filed this action for judicial review of the denial of its request
for a SVOG award. As explained below and in the attached Declaration of Spin’s owner and
president, Daniel Maris, absent a preliminary injunction, Spin will likely suffer irreparable harm
in the form of the permanently impaired ability to recover from the severe setbacks the Company
has suffered due to the COVID-19 pandemic, as well as the continuation of its unfair competitive
disadvantage resulting from the SBA’s SVOG awards to Spin’s competitors.
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ARGUMENT
I.
Legal Standard
Courts analyze a motion for preliminary injunction using four well-established factors:
whether (1) the plaintiff is “likely to succeed on the merits,” (2) the plaintiff is “likely to suffer
irreparable harm in the absence of preliminary relief,” (3) “the balance of equities tips in [the
plaintiff’s] favor,” and (4) award of interim relief “is in the public interest.” Winter v. Nat. Res.
Def. Council, Inc., 555 U.S. 7, 20 (2008); accord, e.g., Sherley v. Sebelius, 644 F.3d 388, 392 (D.C.
Cir. 2011).1 Preliminary relief in the form of a preliminary injunction is “an extraordinary remedy
that may only be awarded upon a clear showing that the plaintiff is entitled to such relief,” Banks
v. Booth, 459 F. Supp. 3d 143, 149 (D.D.C. 2020) (quoting Sebelius, 644 F.3d at 392), and Spin
makes such a showing here.
II.
Spin Is Likely to Succeed on the Merits
The Complaint asserts three claims against Defendants, and Spin is likely to prevail on all
three.
A.
The SBA’s Denial of Spin’s Requested SVOG Award is Arbitrary and
Capricious
1 Courts in the D.C. Circuit have “considered these factors on a sliding scale, whereby a
strong showing on one factor could make up for a weaker showing on another.” NAACP v. Trump,
321 F. Supp. 3d 143, 146 (D.D.C. 2018) (internal quotation marks omitted) (quoting Cigar Ass’n
of Am. v. FDA, 317 F. Supp. 3d 555, 560 (D.D.C. 2018)); Ala. Ass’n of Realtors v. U.S. Dep’t of
Health & Hum. Servs., No. 20-CV-3377 (DLF), 2021 WL 1946376, at *1 (D.D.C. May 14, 2021)
(under sliding scale approach, the plaintiff must show at least “a serious legal question on the
merits”) (quoting NAACP, 321 F. Supp. 3d at 146); see also Archdiocese of Wash. v. Wash. Metro.
Area Transit Auth., 897 F.3d 314, 334 (D.C. Cir. 2018) (reserving question of “whether the ‘sliding
scale’ approach remains valid after Winter”) (quoting League of Women Votes of the U.S. v. Newby,
838 F.3d 1, 7 (D.C. Cir. 2016)). Because all four factors weigh in Spin’s favor of a preliminary
injunction, it is unnecessary for this Court to apply a sliding scale.
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The SBA’s decision to deny Spin’s request for a SVOG award is arbitrary and capricious
for three separate reasons, each of which independently demonstrates Spin’s likelihood of success
on the merits.
1.
The SBA Failed to Give Any Reason for the Denial
A “fundamental requirement” and “basic principle” of administrative law is that “an agency
set forth its reasons for decision.” Amerijet Int’l, Inc. v. Pistole, 753 F.3d 1343, 1350 (D.C. Cir.
2014) (quoting Tourus Records, Inc. v. Drug Enf’t Admin., 259 F.3d 731, 737 (D.C. Cir. 2001));
see also Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016) (“One of the basic
procedural requirements of administrative rulemaking is that an agency must give adequate
reasons for its decisions.”). The APA mandates this, requiring that an agency decision to deny an
application or other request “shall be accompanied by a brief statement of the grounds for denial.”
5 U.S.C. § 555(e) (“Prompt notice shall be given of the denial in whole or in part of a written
application, petition, or other request of an interested person made in connection with any agency
proceeding. Except in affirming a prior denial or when the denial is self-explanatory, the notice
shall be accompanied by a brief statement of the grounds for denial.”); Amerijet, 753 F.3d at 1350.
An agency’s failure to provide a clear explanation of a decision renders the decision arbitrary and
capricious. E.g., Amerijet, 753 F.3d at 1350.
Blatantly ignoring this fundamental tenet of law, the SBA did not provide a single reason
for denying Spin’s request for a SVOG award. Indeed, neither the SBA’s denial of Spin’s
application nor the denial of Spin’s appeal included any explanation at all. With respect to Spin’s
initial application, the SBA portal merely stated: “Based on the information provided, your
organization does not meet the definition of an eligible entity under the statute.” Maris Decl. ¶ 14
& Ex. 26 to Maris Decl. Likewise, the SBA’s email notification denying Spin’s administrative
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appeal provided only the bald statement “Your appeal of your SVOG application decision is denied
based on the additional and/or updated information you provided.” Maris Decl. ¶ 23 & Ex. 25 to
Maris Decl. Neither of these denials shed a ray of light on SBA’s rationale.
The SBA’s decision is plainly arbitrary and capricious for failure to include any
explanation. For that reason alone, Spin has demonstrated a likelihood of success on the merits.
2.
The SBA’s Decision Conflicts with the Evidence Before the Agency
An agency decision is arbitrary and capricious when it “runs counter to the evidence before
the agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983).
Spin’s submissions to the SBA in support of its request for a SVOG award demonstrated
that Spin satisfies all of the criteria for eligibility. Consistent with the SBA’s instructions, Spin
organized its appeal statement and evidence according to the SVOG Eligibility Matrix and
addressed each criterion separately, explaining how Spin satisfied each criteria and identifying the
specific evidence supplied to support the criteria. See Exs. 2–21 to Maris Decl. Because the SBA’s
denial of Spin’s application gave no explanation of why the agency deemed Spin ineligible, Spin’s
appeal statement covered all of the general eligibility criteria and all of the specific criteria for
eligibility as a live venue promoter. Maris Decl. ¶ 15.
Spin also submitted a letter from its counsel that elaborated on the areas where the SBA
may have misconstrued Spin’s application. Id. ¶ 21. Of course, Spin could only speculate as to
SBA’s reasoning for the denial, as the agency failed to provide any justification. The letter from
legal counsel explained, with reference to supporting documentation, that Spin meets the Act’s
definition of live venue operator because Spin: (1) resumed its operations on July 2, 2021; (2)
operates exclusively as a live music venue operator by hosting live concerts and performances by
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performing artists; (3) meets the Act’s requirements of admission by cover charge or ticket with at
least 70 percent of its revenue deriving from the sale of event beverages at its live music events;
and (4) pays performing artists. Id. & Ex. 24 to Maris Decl. In addition, the letter from legal
counsel explained how Spin meets the several additional eligibility requirements for live venue
operators, including, inter alia, that Spin: (1) currently employs a sound engineer, a booking
manager and promoter, a stage and lighting manager/sound engineer, security personnel (including
a security manager), and a box office manager; (2) has a defined performance and audience space;
and (3) has sound mixing equipment, a public address system and lighting rig. Ex. 24 to Maris
Decl. Moreover, Spin works with live venue promoters for several of its events, many of which
received SVOG grants, and many of which would have been ineligible for SVOG awards had Spin
not provided its qualifying venue for the promoters to organize live music events. Maris Decl.
¶ 14.
Spin submitted a letter from the San Diego Police Department stating that, as a live
entertainment venue, Spin is required to maintain a “Police Regulated Live-Entertainment
Permit[,]” which “allows [Spin] to specifically provide a performance space for live
entertainment.” Maris Decl. ¶ 20 & Ex. 23 to Maris Decl. The letter also clarified that Spin “solely
operates on Fridays and Saturdays and provides Live-Entertainment during those days of
operation.” Maris Decl. ¶ 20 & Ex. 23 to Maris Decl.
Finally, Spin submitted a letter from the Southern California Advocate for the National
Independent Venues Association and General Manager of one of Spin’s direct local competitors,
The Music Box, endorsing Spin’s eligibility for a SVOG award as a live venue operator. Maris
Decl. ¶ 19 & Ex. 22 to Maris Decl.
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The evidence Spin submitted to the SBA plainly demonstrated that Spin meets all of the
eligibility criteria that the Act specifies for award of SVOG funds. The SBA’s denial conflicts
with the evidence before the agency and, for this additional reason, is arbitrary and capricious.
3.
The SBA Treated Spin Disparately from Its Similarly Situated
Competitors
“It is axiomatic that an agency must treat similar cases in a similar manner unless it can
provide a legitimate reason for failing to do so.” Kreis v. Sec’y of Air Force, 406 F.3d 684, 687
(D.C. Cir. 2005). Disparate treatment of similarly situated entities without justification is arbitrary
and capricious. Id. Such disparate treatment is particularly egregious where the similar entities
are competitors of the disparately treated entity. See ANR Storage Co. v. Fed. Energy Regulatory
Comm’n, 904 F.3d 1020, 1026 (D.C. Cir. 2018).
The SBA awarded SVOG funds to at least four live venues in San Diego that are Spin’s
direct competitors in the live music venue industry. Maris Decl. ¶ 27. The SBA’s online list of
SVOG award recipients includes (1) Bar Dynamite, Inc., d/b/a The Office, (2) Lynn A Paul, d/b/a
Soma Productions, (3) Music Box San Diego, LLC, and (4) Quartyard, LLC, all of which are live
music
venues
in
San
Diego.
SBA,
Shuttered
Venue
Operators
Grantees,
https://data.sba.gov/dataset/svog (last updated Sept. 13, 2021, 3:44 PM). These businesses host
live performances by DJs and musicians, just like Spin. See, e.g., About, The Office Bar,
https://www.theofficebarsd.com/about (last visited Sept. 2, 2021) (“Nightly entertainment starts at
9pm
with
D[J]s
and
live
music.”);
Upcoming
Events,
Soma
San
Diego,
https://www.somasandiego.com/ (last visited Sept. 2, 2021) (advertising upcoming live
performances by bands and individual artists); About, Music Box, https://musicboxsd.com/about/
(last visited Sept. 2, 2021) (video showing performances by bands and advertisements for
upcoming performances by DJs); Quartyard, LLC Promotion Photographs (Justin Campbell
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 19 of 26
12
Presents: Cloud 10 w/ Dink! & Kid Wonder, QUARTYARD, https://quartyardsd.com/event/justin-
campbell-presents-cloud-10-w-dnk-kid-wonde/ (June 26, 2021)) (photographs of performance by
DJ). The SBA’s denial notification gave no reason to justify the disparity.2
In addition, at least seven live venue promoters that use Spin’s venue have received SVOG
awards: (1) CRSSD MUSIC LLC; (2) Happy Dark Productions, Inc.; (3) Night Access LLC; (4)
West Coast Weekender LLC; (5) City Hearts LLC; (6) Desert Hearts LLC; and (7) DO LAB, INC.
SBA, Shuttered Venue Operators Grantees, https://data.sba.gov/dataset/svog (last updated Sept.
13, 2021, 3:44 PM). In fact, CRSSD MUSIC LLC uses Spin as its main venue. Maris Decl. ¶ 28.
That the federal government would use its vast resources and power for pandemic recovery
to favor certain entities in San Diego, but deny other eligible entities, is beyond explanation. SBA
2 Remarkably, the SBA actively discouraged denied SVOG applicants from even
referencing in appeals that similarly situated businesses had received awards. During a webinar
on SVOG appeals, the SBA told applicants “it will not be helpful in this [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.” SBA, Shuttered Operators Grant Appeal Information Session,
at 19:55–20:10 (Aug. 4, 2021). The recorded webinar is available on Microsoft Teams at
https://urldefense.proofpoint.com/v2/url?u=https-
3A__gcc02.safelinks.protection.outlook.com_ap_t-2D59584e83_-3Furl-3Dhttps-253A-252F-
252Fteams.microsoft.com-252Fl-252Fmeetup-2Djoin-252F19-25253ameeting-
5FYWJiYmU3OTItMTRlZC00NzRhLWExNDAtZTU4OTcxMDI3ZGVm-252540thread.v2-
252F0-253Fcontext-253D-25257b-252522Tid-252522-25253a-2525223c89fd8a-2D7f68-
2D4667-2Daa15-2D41ebf2208961-252522-25252c-252522Oid-252522-25253a-
252522fb2d2af5-2D02f5-2D4dbb-2Db8ba-2D7d22d256b8f6-252522-25252c-
252522IsBroadcastMeeting-252522-25253atrue-25257d-2526btype-253Da-2526role-253Da-
26data-3D04-257C01-257CStephanie.King-2540sba.gov-
257C0c9e494913fa405b03c108d955c189a0-257C3c89fd8a7f684667aa1541ebf2208961-257C1-
257C0-257C637635111983717294-257CUnknown-
257CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJX
VCI6Mn0-253D-257C1000-26sdata-3DmXbGma9yXyb6raybeOVgs7iJF2AKkohN9Rwop-
252BfTCYA-253D-26reserved-3D0&d=DwMFAg&c=YOHA32qHoO0MIaoXxJhqDw&r=W-
twT8t6E966iXdH08aZVWA5fvWZkXBTVWaO1_kzXMI&m=pBVgMi7i0A5hTYrgve3LduuU
NFoCbbFGzWU7h5ATD8I&s=jjGNeEIdjAoo0ZYq7fESDabPWAUhe5DyXR1jEyAyduY&e=.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 20 of 26
13
miserably failed its duty under the APA “to provide some reasonable justification for any adverse
treatment relative to similarly situated competitors.” ANR Storage Co., 904 F.3d at 1025. Further,
SBA’s blatant attempt to discourage applicants from raising legitimate legal arguments regarding
disparate treatment is starkly manipulative for a trusted agency charged with pandemic relief. The
SBA’s denial of Spin’s SVOG award request amounts to a particularly egregious instance of
arbitrary and capricious agency action, further elevating Spin’s likelihood of success.
B.
The SBA’s Denial is Contrary to Law
The Act provides for SVOG awards to be made to applicants that meet the statutory
definition of live venue operator and satisfy the Act’s general eligibility criteria. 15 U.S.C.
§ 9009a. As set forth in Spin’s application and appeal, and as summarized above, Spin is a live
venue operator as defined by the Act and satisfies each of the statute’s general eligibility criteria.
Consequently, the SBA’s denial of Spin’s request for a SVOG award violates the Act and is
contrary to law.
C.
The SBA’s Denial is Unsupported by Substantial Evidence
The APA requires a factual conclusion such as eligibility for a SVOG award to be supported
by substantial evidence. Dickinson v. Zurko, 527 U.S. 150, 164 (1999) (recognizing that courts
review an agency’s record-based factual conclusion “to determine whether it is supported by
‘substantial evidence’”); Xiaomi Corp. v. Dep’t of Def., No. CV 21-280 (RC), 2021 WL 950144,
at *7 (D.D.C. Mar. 12, 2021) (same).
The SBA’s decisions denying Spin’s application and appeal identify zero evidence
supporting a conclusion that Spin possesses any of the characteristics that render a business
ineligible for a SVOG award or any other basis for concluding that Spin is ineligible. See Ex. 25
to Maris Decl. And, as described above, Spin demonstrated its eligibility to the SBA. Accordingly,
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 21 of 26
14
the SBA’s denial of Spin’s SVOG award request is not supported by substantial evidence and is
invalid under the APA for that reason as well.
III.
Spin’s Harms From Denial of a SVOG Award Will Likely Be Irreparable Absent
Injunctive Relief
Spin is already suffering severe financial harm because the SBA has denied the SVOG
funds that it desperately needs and to which Spin is plainly entitled. Once the SBA expends the
funds appropriated for SVOG awards through awards made to other applicants, no funds will be
available for Spin if an award is ultimately granted—as it should be—unless funds in the amount
to which Spin is entitled are preserved. If the funds are not preserved and are exhausted before
Spin’s claims are resolved, the harms Spin is now experiencing—described in Mr. Maris’s
Declaration and below—will be permanent and irreparable.
Impeded Recovery from the COVID-19 Pandemic. The COVID-19 pandemic has had
a devastating impact on Spin. Maris Decl. ¶ 8. Spin had its best year in 2019 ever since it first
opened in 2006. Id. ¶ 7. Capitalizing on that success, Spin booked live events for every weekend
in 2020 before the year even began. Id. However, when the pandemic hit in March 2020, Spin
was forced to close down entirely, lay off all of its employees, and lost over 80 percent of its
revenue in 2020 as compared to 2019. Id. ¶ 9. The only revenue generated in 2020 occurred
between January and March, prior to the pandemic; Spin’s revenue from April to December 2020
was down 100 percent from that same period in 2019. Id. Spin did not resume operations until
July 2, 2021. Id. ¶ 11. During the first two quarters of 2021, Spin suffered a 100 percent loss in
revenue as compared to the first half of 2019. Id. ¶ 9.
Spin incurred significant debt—at least $500,000—during the pandemic as well. For
example, Spin owes more than $200,000 to its landlord for the rental of its premises alone. Id. ¶
25. Spin’s owner also loaned the Company approximately $100,000 to cover continuing expenses
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 22 of 26
15
such as insurance and utilities, as well as payments to vendors and for supplies and operational
and logistical needs to reopen the venue. Id.
Spin needs a SVOG award to recover from the major setbacks the Company has
experienced from the pandemic, which is precisely the need that Congress created the SVOG
Program to address. Without an award, Spin will not be able to (1) rehire all of the laid off
employees, (2) host as many performances as before the pandemic, (3) host performances on the
same scale as before the pandemic, or (4) market shows as effectively as before the pandemic, at
least for the foreseeable future. Id. ¶ 29.
Competitive Disadvantage. By making awards to Spin’s competitors—the four similarly
situated live music venues in San Diego—the SBA has placed Spin at a competitive disadvantage
relative to businesses with which Spin competes, and thereby exacerbated Spin’s injury. See Int’l
Franchise Ass’n, Inc. v. City of Seattle, 803 F.3d 389, 411 (9th Cir. 2015) (“A rule putting plaintiffs
at a competitive disadvantage constitutes irreparable harm.”). While The Office, Soma
Productions, Music Box, and Quartyard are able to use SVOG funds to compete with Spin, Maris
Decl. ¶ 27, the SBA has denied Spin access to those funds and thus placed it on an uneven playing
field vis-à-vis these competitors.
* * *
The Sixth Circuit recently recognized the propriety of preliminary relief to preserve
pandemic-related recovery funds under circumstances similar to those here. In DV Diamond Club
of Flint, LLC v. SBA, a challenge to an SBA rule restricting eligibility for Paycheck Protection
Program (“PPP”) loans, the lower court awarded a preliminary injunction to guard against the risk
that the limited appropriations would be exhausted before the plaintiffs’ challenge was resolved,
and the Sixth Circuit denied the SBA’s motion to stay the injunction. 960 F.3d 743, 747 (6th Cir.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 23 of 26
16
2020). See also Defy Ventures, Inc. v. SBA, 469 F. Supp. 3d 459, 479 (D. Md. 2020) (granting
preliminary injunction to extend PPP application deadline for plaintiffs “at risk of losing a benefit
for which they are eligible because of arbitrary and capricious agency action”); Camelot Banquet
Rooms, Inc. v. SBA, 458 F. Supp. 3d 1044, 1049 (E.D. Wis. 2020) (noting that the court had granted
a temporary restraining order requiring the SBA to set aside enough reserve authority to guarantee
PPP loans). As the lower court recognized in DV Diamond Club of Flint, sovereign immunity
likely precludes a claim for monetary damages against the SBA. DV Diamond Club of Flint, LLC
v. SBA, 459 F. Supp. 3d 943, 962–63 (E.D. Mich. 2020), stay denied, 960 F.3d 743 (6th Cir. 2020).
Similarly, here, absent preliminary relief, the limited appropriation of SVOG funds may be
exhausted by the time Spin’s claims are resolved. While the SBA’s website indicates that a large
number of funds are still available, there is no basis for believing that they will be available at the
end of this litigation. SBA, Shuttered Venue Operators Grant Public Report (Sept. 7, 2021),
https://www.sba.gov/sites/default/files/2021-09/SVOG%20Public%20Report%20-
%20Midday%20Sept%207%202021-508.pdf. Should the funds be exhausted before resolution of
Spin’s claims, Spin would be left unable to obtain the relief funds to which it is entitled, and with
a permanently impaired ability to build back its business and an entrenched competitive
disadvantage relative to its competitors that received SVOG awards.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 24 of 26
17
IV.
The Balance of Equities and Public Interest Support a Preliminary Injunction
When preliminary relief is sought against a federal agency, harm to the opposing party and
the public interest merge into a single inquiry. Nken v. Holder, 556 U.S. 418, 435 (2009); accord,
e.g., Xiaomi, 2021 WL 950144, at *12. “[T]he [government’s] harm and the public interest are one
and the same, because the government’s interest is the public interest.” Pursuing Am.’s Greatness
v. FEC, 831 F.3d 500, 511 (D.C. Cir. 2016) (citing Nken, 556 U.S. at 435). Thus, the Court balances
the harm to the movant absent preliminary relief against the impact of injunctive relief on the
government and the public interest. Id.
Here, Spin is suffering severe economic and competitive harms. By contrast, preserving
SVOG funds so that they will be available in the (likely) event that Spin ultimately prevails will
not harm the government. Instead, an interim order preserving the funds will further the SVOG
Program’s purpose of helping small businesses like Spin get back on their feet.
V.
The Court Should Exercise Its Discretion to Waive Rule 65’s Security Requirement
Finally, the Court should waive the security requirement of Rule 65. The rule provides for
security “in an amount that that the court considers proper to pay the costs and damages sustained
by any party found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c).
However, the Court has discretion to waive that requirement. E.g., Simms v. District of Columbia,
872 F. Supp. 2d 90, 107 (D.D.C. 2012) (“Courts in this Circuit have found the Rule ‘vest[s] broad
discretion in the district court to determine the appropriate amount of an injunction bond,’
including the discretion to require no bond at all.”) (quoting DSE, Inc. v. United States, 169 F.3d
21, 33 (D.C. Cir. 1999)).
An order that Defendants preserve sufficient funds for a SVOG award and supplemental
award, as Spin requests, will not require Defendants to incur any costs or suffer any damages. In
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 25 of 26
18
the unlikely event that Spin does not prevail, Defendants can simply return the amounts to the
general SVOG fund. Accordingly, Rule 65’s purpose would not be served by imposition of a bond
or other security requirement, and it would be appropriate for the Court to exercise its discretion
to waive the requirement.
CONCLUSION
Spin respectfully urges this Court to grant this motion and to issue as soon as possible a
preliminary injunction directing Defendants to preserve SVOG funds in the award amount that
Spin requested—$644,547.11—and supplemental award amount of $322,273.56.
Dated: September 15, 2021
Respectfully submitted,
/s/ Caroline L. Wolverton
Angela B. Styles
D.C. Bar No. 448397
Caroline L. Wolverton
D.C. Bar No. 496433
AKIN GUMP STRAUSS HAUER & FELD LLP
2001 K Street, N.W.
Washington, DC 20006
(202) 887-4000
Counsel for Plaintiff Kaos Productions, Inc.
Case 1:21-cv-02324-TNM Document 5 Filed 09/15/21 Page 26 of 26