Sokol World Entertainment, Inc. v. Small Business Administration
Civil Action No. 2021-2385
D.D.C.Mar 20, 2025Background
- Sokol World Entertainment, Inc. ("Sokol") owns Club Cobra, a Los Angeles live entertainment venue featuring LGBTQ+-oriented performances.
- Sokol applied to the Small Business Administration (SBA) for COVID-19 emergency relief under the Shuttered Venue Operator Grant (SVOG) program.
- The SBA denied the application, finding that Club Cobra presented live performances of a "prurient sexual nature," making it ineligible under the relevant statute.
- Sokol challenged the SBA denial as arbitrary and capricious under the Administrative Procedure Act (APA) and asserted disparate treatment, as some competitors allegedly received grants despite similar shows.
- The District Court previously remanded the decision to the SBA for further explanation regarding treatment of similarly situated entities; after another denial and further litigation, the court reviewed cross-motions for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the SBA's denial "arbitrary and capricious"? | SBA failed to consider all evidence and gave insufficient reasoning | SBA evaluated relevant evidence, explained its rationale | Not arbitrary or capricious |
| Did the SBA treat Sokol differently from competitors? | Competitors had similar entertainment but received grants | Review of competitors showed material differences or timing issues | No disparate treatment; reasonable justification provided |
| Did the SBA misinterpret "prurient" under the SVOG statute? | "Prurient" should be defined using the strict obscenity standard | Statute adopts a broader, common meaning of "prurient" | SBA's interpretation and application upheld |
| Was the denial supported by substantial evidence? | No substantial evidence showing Club Cobra was ineligible | Social media, reviews, and marketing showed sexualized content | Substantial evidence supported denial |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard under Federal Rule 56)
- Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (requirement of reasoned decisionmaking for agency action)
- Roth v. United States, 354 U.S. 476 (definition of "prurient" in obscenity context)
- Miller v. California, 413 U.S. 15 (test for obscenity; discussed in interpretation of "prurient")
- Encino Motorcars, LLC v. Navarro, 579 U.S. 211 (requirement that courts be able to discern agency reasoning)