Elk Associates Funding Corporation v. United States Small Business Administration
858 F. Supp. 2d 1
D.D.C.2012Background
- ELK has been an SBIC licensed by the SBA since 1980 with over $21 million in SBA-held debentures.
- In 2010 ELK defaulted due to capital impairment; SBA gave cure notice with 15 days to cure.
- ELK pursued various private-capital plans; none cured the impairment; condition deteriorated over time.
- February 22, 2012: SBA transferred ELK to the Office of SBIC Liquidation; ELK challenged via PTA and Due Process.
- March 6, 2012: SBA issued a Second Cure Letter; March 13, 2012 letter purportedly conditioned cure considerations.
- Court denied ELK’s motion for preliminary relief, finding no likelihood of success and equities against injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of transfer to Liquidation | ELK argues procedural/substantive defects in transfer decision | SBA acted within regulatory framework and economic judgment supported by record | Transfer upheld; not arbitrarily or capriciously decided |
| Second Cure Letter/TechNote 13 conditions | Second Cure Letter imposed impermissible, onerous conditions to cure | Letter provided guidance, not final decision; cure period ample and not arbitrary | Second Cure Letter/Course not final agency action; not arbitrary |
| Likelihood of success on APA/due process claims | SBA violated APA and due process by improper procedures | SBA exercised expert business judgment within regulatory framework | ELK failed to show likelihood of success on merits |
| Irreparable harm and public interest | Injury is irreparable and public interest favors delaying liquidation | Liquidation safeguards public funds; public interest weighs against injunction | Equities and public-interest factors weighed against relief |
Key Cases Cited
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (S. Ct. 2008) (four-factor test for injunction; sliding-scale consideration)
- Ulstein Marine, Ltd. v. United States, 833 F.2d 1052 (1st Cir. 1987) (anti-injunction issues in government loan programs)
- Fed. Deposit Ins. Corp. v. Meyer, 510 U.S. 471 (U.S. 1994) (liberal construction of sue-and-be-sued waivers for agencies)
- Oklahoma Aerotronics, Inc. v. United States, 661 F.2d 976 (D.C. Cir. 1981) (sovereign-immunity and arbitrary-agency-review discussion)
- National Association of Home Builders v. Norton, 415 F.3d 8 (D.C. Cir. 2005) (note on final agency action and reviewability)