StarEvents, Inc. v. Small Business Administration — Opposition to Motion to Dismiss (D.D.C., Dkt. 16)
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Plaintiff's Memorandum in Opposition to Defendants' Motion to Dismiss or, in the Alternative, for Summary Judgment in StarEvents, Inc. v. Small Business Administration, et al., Civ. A. No. 22-00380 (JDB), in the U.S. District Court for the District of Columbia, filed July 7, 2022 as Document 16. StarEvents argues that the court has subject matter jurisdiction and that the Amended Complaint states claims for unreasonable delay and for declaratory relief after SBA rescinded its denial of the company's Shuttered Venue Operators Grant application. The opposition reviews the TRAC factors and cites a June 8, 2022 minute order in Champion Matters LLC v. Small Business Administration. It argues summary judgment is premature because SBA has not filed the administrative record under LCvR 7(n)(1). It is signed by Jeffrey E. McFadden, Counsel for Plaintiff.
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“StarEvents, Inc. v. Small Business Administration — Opposition to Motion to Dismiss (D.D.C., Dkt. 16).”
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Case 1:22-cv-00380-JDB Document 16 Filed 07/07/22 Page 1 of 10
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
STAREVENTS, INC.,
Plaintiff, Civ. A. No. 22-00380 (JDB)
v.
SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
PLAINTIFF’S MEMORANDUM IN OPPOSITION
TO DEFENDANTS’ MOTION TO DISMISS
OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT
Defendants’ dispositive motions (ECF No. 15) filed in response to Plaintiff’s Amended
Complaint (ECF No. 14) – and which have been filed without Defendants certifying or
producing the administrative record or affording Plaintiff any opportunity for discovery – are
substantively and procedurally flawed. This Court’s subject matter jurisdiction is not seriously
questioned. Plaintiff has pleaded claims sufficiently to move forward to a merits hearing based
on a full, factual record, which has yet to be compiled or disclosed. Further, at least one other
judge in this District has recognized the plausibility and legal sufficiency of a claim of
“unreasonable delay” by the SBA under circumstances similar to those presented here. See
Minute Order, June 8, 2022, Champion Matters LLC v. Small Business Administration, No. 22-
cv-00616-RDM (attached hereto as Exhibit 1). Thus, neither Rule 12 nor Rule 56 provides a
basis for dismissal at this juncture. Defendant’s motions should be denied.
INTRODUCTION
In December 2020 Congress established the SVOG Program and appropriated $15 billion
for grants of emergency financial assistance to eligible businesses impacted by the global
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COVID-19 pandemic. Pub. L. No. 116-260 § 324. The American Rescue Plan, enacted March
11, 2021, provided an additional $1,249,500,000 for SVOG awards. Pub. L. No. 117-2 §
5005(a). Eligible businesses that suffered a minimum 25% reduction in revenue in 2020 and
losses in 2021 of 70% as compared to 2019 were eligible for both initial and supplemental
SVOG awards. 15 U.S.C. § 9009a(a)(A)(i)(II), (b)(3). Initial and supplemental awards can be
used for specified business expenses including rent, maintenance, and administrative costs. Id. §
9009a(d). The Economic Aid Act specifies that SVOG award funds may be used for costs
incurred between March 1, 2020 and December 31, 2021. Id. § 9009a(d)(1)(A)(i). For businesses
eligible for both an initial and supplemental award, the deadline to incur allowable costs is
extended to June 30, 2022. Id. § 9009a(d)(1)(A)(ii). For recipients of only initial awards, any
funds that are not expended on eligible costs within one year of disbursement of the award must
be returned to the SBA. Id. § 9009a(d)(1)(B)(i). Recipients of both initial and supplemental
awards must return any expended funds not used within 18 months of disbursement. Id. §
9009a(d)(1)(B)(ii).
Plaintiff StarEvents, Inc. (“StarEvents” or the “Company”), a live performing arts
organization operator based in Chicago, IL that, for the past 25 years, has produced large
festivals with live entertainment for thousands of attendees, applied for emergency assistance
through the Shuttered Venue Operators Grant (“SVOG”) Program in April 2021. Over a year
after first applying, and nearly three months after StarEvents filed this lawsuit, the SBA
rescinded its denial of StarEvents’s application without substantive explanation, essentially
going back to the starting line on its review of StarEvents’s eligibility for an SVOG grant. With
no final decision for StarEvents to accept or challenge, the SBA’s latest action in rescinding its
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prior decision merely seeks to insulate its original, “final” action from judicial review, while
forcing StarEvents back to simply waiting for a new, “final” decision from the SBA.
The SBA cannot be allowed to evade judicial review, potentially indefinitely, by using
this technique of rescinding prior decisions as soon as they are about to have consequences
because of litigation deadlines. The SBA has offered no reasonable or rational basis for why
StarEvents is being treated differently than the tens of thousands of other SVOG applicants who
received final decisions on their awards in the fall of 2020, and many of which have received
supplemental awards, even though the statutory scheme clearly contemplated that initial awards
for timely applicants would be decided before the awarding of supplemental awards. StarEvents
has pleaded valid claims for unreasonable delay and for as-applied constitutional challenges (on
equal protection due process grounds) to the statutory deadlines that the SBA is ignoring.
Defendants’ motions should be denied.
Further, the SBA cannot obtain Rule 56 relief at this time through a one-sided motion
procedure in which it refuses to produce its administrative record to Plaintiff, in violation of local
rules, yet submits a self-serving affidavit that Plaintiff has had no opportunity to test or challenge
through discovery and by examination against the administrative record. Defendant has not
properly moved for Rule 56 relief, and thus the Court should either deny the motion outright, or,
defer any ruling on it until after Plaintiff has had an opportunity to receive and review the
administrative record and conduct discovery.
ARGUMENT
I. This Court has subject matter jurisdiction.
Defendants first argue that Plaintiff’s complaint is subject to dismissal under Rule
12(b)(1) for lack of subject matter jurisdiction. This argument fails for two reasons: (1) as
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Defendants concede, there is statutory jurisdiction and a waiver of sovereign immunity for
Plaintiffs’ first claim of “unreasonably delay” by the SBA in reaching a final determination of
Plaintiff’s application for an SVOG grant (ECF No. 15, at pp. 10-11) 1; and (2) Defendants do not
even challenge the Court’s subject matter jurisdiction over Plaintiff’s Count II, seeking
declaratory relief, and there is clear subject matter jurisdiction for that claim as alleged in the
Amended Complaint under 28 U.S.C. § 2201. Thus, Rule 12(b)(1) provides no basis to dismiss
Plaintiff’s Amended Complaint.
Defendants’ merits-based arguments under the “TRAC factors” articulated in
Telecommunications Research and Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984) are
premature and do not go to subject-matter jurisdiction. No sovereign-immunity-based
jurisdictional issue was raised in TRAC; the only jurisdictional issue raised in TRAC is not
present here (whether the Court of Appeals had exclusive subject matter jurisdiction over the
mandamus action). Further, the Court in TRAC expressly held that it had jurisdiction and would
retain jurisdiction over the claim of unreasonable delay alleged in that case. Thus, neither the
TRAC case, itself, nor any other case cited by Defendants supports the relief Defendants seek
here – for the Court to perform a merits-based application of the TRAC factors to an incomplete
factual record to reach a conclusion that it has no subject matter jurisdiction. Clearly, there is no
issue here of the Court’s subject matter jurisdiction under Rule 12(b)(1).
Thus, while consideration of the TRAC factors is a merits inquiry that should await the
full administrative record and any limited discovery that is appropriate here on the SBA’s
1
Defendants recognize that, when the Small Business Administration (“SBA”) Administrator
acts outside of her authority through unreasonable delay, the no-injunction provision of the Small
Business Act’s sue-and-be-sued clause, 15 U.S.C. § 634(b)(1), does not bar injunctive relief.
Defs.’ Opp. at 11, ECF No. 15 (citing U.S. Women’s Chamber of Com. v. U.S. Small Bus.
Admin., No. 1:04-CV-01889, 2005 WL 3244182, at *15 (D.D.C. Nov. 30, 2005)).
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unreasonable delay, to the extent the Court examines those factors at this juncture, the only lens
through which they should be considered at this point is whether, under Rule 12(b)(6), Plaintiff’s
Amended Complaint sufficiently states a claim for relief for “unreasonable delay” by the SBA,
viewing all allegations in the light most favorable to Plaintiff.
II. Plaintiff’s Amended Complaint sufficiently states claims for relief.
As Defendants concede, ECF No. 15, at p. 9, to survive a motion to dismiss under Rule
12(b)(6), Plaintiff’s Amended Complaint “must contain sufficient factual matter, accepted as
true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 570 (2007)). The pleadings are to be
construed broadly, accepting as true all facts pleaded therein, and all inferences are viewed in a
light favorable to plaintiff. Id.
Defendants’ limited Rule 12(b)(6) argument fails to apply the proper Rule 12(b)(6)
framework. Under a Rule 12(b)(6) review, the Court “may consider only the facts alleged in the
complaint, any documents either attached to or incorporated in the complaint[,] and matters of
which [the Court] may take judicial notice.” Kursar v. Transportation Sec. Admin., 751 F. Supp.
2d 154, 164 (D.D.C. 2010), aff'd, 442 F. App'x 565 (D.C. Cir. 2011) (quoting Equal Emp't
Opportunity Comm'n v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997)).
Rather than undertaking such an argument based upon the alleged insufficiency of the
allegations in the Amended Complaint, however, Defendants’ argument under Rule 12(b)(6)
only adopts or incorporates its fact-based arguments that cite and rely extensively (citing more
than a dozen paragraphs over multiple pages) on the Declaration of Matthew T. Stevens, Director
of the SVOG Program. Defendants do not suggest that the Court should take judicial notice of
the more than 34 paragraphs of testimony offered by Mr. Stevens. Yet, Defendants offer no
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argument for dismissal that is not based, in part, on that declaration, which the Court must ignore
for purposes of Rule 12(b)(6). The Court may deny Defendants’ motion under Rule 12(b)(6) just
based on the fact that the Defendants, themselves, have offered no arguments to the Court for
dismissal under a proper Rule 12(b)(6) framework, despite acknowledging that framework in
their brief.
Under a proper Rule 12(b)(6) analysis of the Amended Complaint, Plaintiffs’ claims are
sufficiently pled. Both Counts I and II offer facts beyond mere legal conclusions to make
plausible the claims alleged and that support the relief sought. In support of Count I for
unreasonable delay, Plaintiff alleges, for example, that StarEvents applied for an SVOG grant on
April 26, 2021 (ECF Doc. 14 ⁋ 22), that the SBA originally denied the grant on or before August
17, 2021 (Id. ⁋ 24), but that after StarEvents filed this action seeking judicial review of that
denial, the SBA rescinded its earlier final decision, effectively returning StarEvents to a status of
having applied for the grant more than a year ago but still lacking a final decision by the SBA.
(Id. ⁋⁋ 28-30, 37.) Such a delay in even reaching a final decision that Plaintiff could challenge,
if adverse, is particularly unreasonable given the facts, as alleged by Plaintiff, that Congress had
included a timetable for decisions by the SBA that expected the SBA to decide these applications
before December 31, 2021, which was a deadline included in the statutory program at issue for
grantees to use the grant funds (id. ⁋ 36); that the SBA has awarded competitors of Plaintiff
grants under this program, putting Plaintiff at a disadvantage to such competitors (id. ⁋ 38); and
that Plaintiff has a compelling need for these emergency funds to restore its business (id. ⁋ 40),
which is exactly what this grant program was intended to do for applicants like Plaintiff who
have suffered from the adverse effects of the Covid pandemic. All of these allegations
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sufficiently plead a claim for “unreasonable delay” by the SBA. Thus, Defendants’ motion to
dismiss should be denied.
The legal sufficiency of Plaintiffs’ unreasonable delay claim is further supported by the
legal determination and reasoning of Judge Moss in conveying that Court’s preliminary
inclination to grant the plaintiff’s motion for preliminary injunction on its unreasonable delay
claim, based on similar facts and circumstances, in Champion Matters LLC v. Small Business
Administration, No. 22-cv-00616-RDM.
Reference to the TRAC factors only supports the conclusion that Defendants’ present
motions should be denied. Factor 1, that the timing with which agencies act must be governed
by a rule of reason, suggests that this inquiry should be done carefully with reference to a full
factual and administrative record, which is not yet present here. Factor 2 supports Plaintiffs’
allegation because Congress did provide a timetable for decision as alleged in the Amended
Complaint, and Defendants have failed to meet that timetable (decisions before December 31,
2021) with respect to Plaintiff. Factor 3 supports Plaintiff in that the statutory program at issue is
not one in the realm of mere “economic regulation,” but arises from the catastrophic economic
consequences of a global pandemic that disrupted jobs, livelihoods, and “human health and
welfare,” and the statutory program at issue was intended to address these effects in an
expeditious manner that has been frustrated by the SBA’s delays. Factor 4 supports Plaintiff
because Defendants have not identified a higher or competing priority for their resources than
completing this program. Factor 5 supports Plaintiff because the nature of the interests
prejudiced by delay are the very interests (expedited and emergency economic relief to
businesses directly impacted by the pandemic) for which the statutory program in question was
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enacted to address – emergency economic relief. Finally, Factor 6 (bad faith) is neither alleged
nor necessary for delays to be found unreasonable.
In support of Count II, for declaratory relief, Plaintiff alleges the statutory and
constitutional grounds for the declaratory relief it seeks, and, identifies the constitutional
standard (rational basis) applicable to its challenge, as well as the facts supporting why that
standard is not present in Plaintiff being treated differently from nearly all other applicants in the
timing with which the SBA has considered its application for SVOG relief. (Id. ⁋⁋ 42-46.)
These allegations clearly are sufficient to state a claim for relief under Rule 12(b)(6). Defendant
does not argue otherwise. To the extent Defendants seek dismissal of the Amended Complaint
under Rule 12(b)(6), despite not arguing for such relief under the proper framework, such motion
should be denied.
III. It is premature for Defendants to seek a ruling under Rule 56.
Similarly, Defendants’ alternative request asking the Court to enter summary judgment in
its favor is premature and must be denied. Local rules are clear that, in cases involving the
judicial review of administrative agency action, and unless otherwise ordered by the Court
(which has not happened here), “the agency must file a certified list of the contents of the
administrative record with the Court . . . simultaneously with the filing of a dispositive motion.”
LCvR 7(n)(1). Defendants have not done so here. Instead, Defendants argue in a footnote that
production of the administrative record is “unnecessary” because, among other things, “the
Agency seeks to dismiss this case not based on administrative record, but instead based on the
facts alleged in the complaint and the present status of the SVOG application.” ECF No. 15, at
p. 19, n.4.
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Such a concession by Defendants essentially asks the Court not to decide the case under
Rule 56, but rather under Rule 12(b)(6), which, for reasons argued above, is also inappropriate.
Clearly, it is inappropriate and unfair for Defendants to seek summary judgment on the claims
alleged in the Amended Complaint, and to submit an untested Declaration purporting to support
the merits of its position, and yet to provide no access to Plaintiff to the administrative record of
its actions in connection with Plaintiffs’ application, nor, before Plaintiff has had any opportunity
to conduct any limited discovery on its allegations.
As contemplated by the local rules, Count I of Plaintiff’s Amended Complaint, seeking
review of and relief from the SBA’s “unreasonable delay” in deciding Plaintiff’s SVOG
application, cannot be decided on summary judgment prior to production of the administrative
record. Among other things, the administrative record will inform any merits inquiry into the
reasonableness of the SBA’s actions with respect to Plaintiff. Further, to the extent the SBA
seeks to rely upon testimony from its Director, Matthew Stevens, or others, the Plaintiffs are
entitled to depose Mr. Stevens to cross-examine his testimony and complete that factual record
before the Court should make a merits-based determination or weigh any testimony offered by
the SBA through Mr. Stevens. Plaintiffs may also seek limited discovery regarding the facts
concerning why it has been treated differently than thousands of other SVOG applications whose
decisions were rendered in a timely fashion by the SBA, and whether there is any rational basis
for such differential treatment of Plaintiff, and whether due process has been denied to Plaintiff
or Congressional intent thwarted by the SBA’s delay in reaching a final decision on Plaintiff’s
application.
All of those issues require and warrant the completion of a factual record before the
Court makes a final, merit-based decision under Rule 56 or otherwise. Defendant has not
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complied with local rules or otherwise afforded Plaintiff with a fair opportunity to complete such
a factual record. Thus, its request for a ruling under Rule 56 is premature and must be denied.
CONCLUSION
For the foregoing reasons, this Court should deny Defendants’ Motion to Dismiss.
Likewise, this Court should deny Defendants’ Motion for Summary Judgment.
Dated: July 7, 2022 Respectfully submitted,
/s/_Jeffrey E. McFadden________
Jeffrey E. McFadden
(DC. Bar No. 434234)
LAW OFFICES OF JEFFREY E. MCFADDEN, LLC
312 Prospect Bay Drive East
Grasonville, MD 21638
(410) 490-1163
jmcfadden@jmcfaddenlaw
Counsel for Plaintiff
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