646 F.Supp.3d 101
D.D.C.2022Background
- Congress created the Restaurant Revitalization Fund (RRF) under ARPA to award grants based on pandemic-related revenue loss; statute required SBA to award grants in order received and to prioritize, during the initial 21-day window, businesses owned/controlled by women, veterans, and socially/economically disadvantaged owners.
- The SBA opened the RRF portal May 3, 2021 (with a small pilot beforehand); it processed priority applications during the first 21 days and sometimes required applicants to correct discrepancies between application figures and IRS-verified gross receipts.
- Brandon Luke (a veteran) applied in the pilot for two Dallas restaurants: The Woolworth and Smithy (applications submitted April 27, 2021). Both required corrections; each was effectively treated as submitted/resubmitted on May 14, 2021.
- Smithy was later marked “Fully Approved” (May 26, 2021) and queued for payment, but SBA paused payment of many priority, fully-approved awards after May 27 and informed applicants on June 12, 2021 that recent court rulings prevented disbursement. Those rulings invalidated race/sex-based priorities but did not attack veteran priority.
- After the RRF was exhausted, roughly $83 million returned to SBA was reallocated in Nov. 2022 by original submission date; two applicants (including the plaintiffs’ claims aggregate) remained unpaid and plaintiffs sued under the APA and moved for a TRO to preserve funds sufficient to cover their awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether treating The Woolworth’s resubmission as a new submission (losing original queue place) was arbitrary/capricious or contrary to 15 U.S.C. § 9009c(c)(1) | SBA’s requirement to resubmit for agency-required corrections (and thereby lose earlier place) was arbitrary and unfair | SBA had a policy treating materially corrected/resubmitted applications as newly submitted; statute does not require preserving an earlier incomplete filing date | Denied as to The Woolworth — court found plaintiffs unlikely to succeed; agency treatment plausible and not shown arbitrary at TRO stage |
| Whether SBA’s refusal/pause to disburse Smithy’s fully approved award was arbitrary/capricious and contrary to statutory veteran-priority § 9009c(c)(3) | Smithy was fully approved and entitled to payment; the cited court rulings did not preclude veteran priority, so withholding payment was arbitrary and unlawful | SBA asserted it paused payments in response to court rulings and later defended pause as permissible after priority period; argued practical difficulty and later redistribution justify actions | Granted in part for Smithy — court concluded SBA’s June 12 rationale was legally inadequate and likely arbitrary and capricious, so Smithy showed likelihood of success and the need to preserve funds |
| Whether plaintiffs would suffer irreparable harm absent emergency relief | Irreparable harm because remaining RRF funds could be exhausted and APA does not provide money damages; plaintiffs would lose ability to obtain relief | SBA noted administrative burdens and competing eligible applicants | Court found Smithy (but not The Woolworth) would suffer irreparable harm absent TRO; preserved funds sufficient to cover plaintiffs’ claims |
| Balance of equities and public interest in granting TRO | Preserving funds temporarily protects plaintiffs’ potential entitlement while allowing later adjudication; harms to others minimal and remand norm favors preservation | SBA argued interim redistribution and other applicants would be prejudiced | Court found balance and public interest favored preserving the status quo for Smithy and issued TRO in part |
Key Cases Cited
- Vitolo v. Guzman, 999 F.3d 353 (6th Cir. 2021) (rejected race/sex-based allocation of relief but did not overturn veteran priority)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency action must be the product of reasoned decisionmaking; arbitrary and capricious standard)
- Dep't of Homeland Sec'y v. Regents of the Univ. of Calif., 140 S. Ct. 1891 (2020) (agency must give coherent, adequate reasons; failure can render action arbitrary and capricious)
- Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) (preliminary injunction/TRO standards require likelihood of success and irreparable harm)
- U.S. AirWaves, Inc. v. FCC, 232 F.3d 227 (D.C. Cir. 2000) (agency policy changes that produce inequity are not necessarily arbitrary if the agency reasonably exercises its discretion)