DV Diamond Club of Flint, LLC v. Small Bus. Admin.

• Decision Date: 15 May 2020
• Docket Number: No. 20-1437,20-1437
• Citation: 960 F.3d 743
• Parties: DV DIAMOND CLUB OF FLINT, LLC, et al., Plaintiffs-Appellees, 689 Eatery, Corp.; 725 Eatery, Corp.; GJJM Enterprises, LLC, Intervenors-Appellees, v. SMALL BUSINESS ADMINISTRATION, an agency of the United States, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

960 F.3d 743

DV DIAMOND CLUB OF FLINT, LLC, et al., Plaintiffs-Appellees,689 Eatery, Corp.; 725 Eatery, Corp.; GJJM Enterprises, LLC, Intervenors-Appellees,

v.SMALL BUSINESS ADMINISTRATION, an agency of the United States, et al., Defendants-Appellants.

No. 20-1437

United States Court of Appeals, Sixth Circuit.

FILED May 15, 2020

ORDER

Defendants, the Small Business Administration and others (collectively the "SBA"), appeal the district court’s opinion and order granting plaintiffs’ motion for a preliminary injunction. A district court’s order granting or denying a preliminary injunction is immediately appealable pursuant to 28 U.S.C. § 1292(a)(1). The SBA moves to stay the preliminary injunction pending a decision on the merits of its appeal. See Fed. R. App. P. 8(a)(2). The district court denied a similar motion but granted the SBA’s alternative request to extend the date by which it must comply with the injunction. Plaintiffs and intervenors jointly respond, and the SBA replies.

At issue is the proper interpretation of recent legislation enacted by the United States Congress to alleviate the incredible economic hardship caused by the COVID-19 pandemic. See Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), Pub. L. No. 116-136, 134 Stat. 281 (2020). Under a CARES Act provision entitled "Keeping American Workers Paid and Employed Act," Congress created the Paycheck Protection Program ("PPP"), authorizing the SBA to guarantee up to $349 billion in PPP loans. In April 2020, Congress increased the amount to $659 billion. The PPP is intended to "[i]ncrease[ ] eligibility for certain small businesses and organizations." 15 U.S.C. § 636(a)(36)(D). During the covered time-period,

in addition to small business concerns, any business concern, nonprofit organization, veterans organization, or Tribal business concern described in section 657a(b)(2)(C) of this title shall be eligible to receive a covered loan if the business concern, nonprofit organization, veterans organization, or Tribal business concern employs not more than the greater of-- (I) 500 employees; or (II) if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern, nonprofit organization, veterans organization, or Tribal business concern operates.

15 USC § 636(a)(36)(D)(i) (emphasis added). Despite this language, the SBA has adopted a "PPP Ineligibility Rule" that renders sexually oriented businesses and certain other businesses ineligible to receive PPP loan guarantees. Plaintiffs are sexually oriented businesses that own and operate (1) venues that present clothed, semi-nude, and/or nude performance entertainment, (2) adult novelty stores, and (3) businesses that service those establishments. They represent that their businesses are not unlawful and operate in conformity with various licenses and permits. The SBA does not argue otherwise. Nevertheless, lenders are denying plaintiffs’ applications for PPP loans based on the SBA’s PPP Ineligibility Rule. The district court concluded that the SBA exceeded its statutory authority when it adopted this rule and granted plaintiffs’ motion for preliminary injunctive relief.

We evaluate four factors when deciding whether to grant a stay under Federal Rule of Appellate Procedure 8(a) : "(1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the court grants the stay; and (4) the public interest in granting the stay." Coal. to Defend Affirmative Action v. Granholm , 473 F.3d 237, 244 (6th Cir. 2006) (quoting Mich. Coal. of Radioactive Material Users, Inc. v. Griepentrog , 945 F.2d 150, 153 (6th Cir. 1991) ). "These factors are not prerequisites that must be met, but are interrelated considerations that must be balanced together." Mich. Coal. , 945 F.2d at 153. As the moving party, the SBA has the burden of showing it is entitled to a stay. Overstreet v. Lexington–Fayette Urban Cty. Gov’t , 305 F.3d 566, 573 (6th Cir. 2002).

"We begin by considering ‘the likelihood that the district court’s preliminary injunction order will be upheld on appeal.’ " Serv. Emp. Int’l Union Local 1 v. Husted , 698 F.3d 341, 343–44 (6th Cir. 2012) (quoting Coal. to Defend , 473 F.3d at 244 ). "[T]he district court’s ultimate determination as to whether the four preliminary injunction factors weigh in favor of granting or denying preliminary injunctive relief is reviewed for abuse of discretion. This standard of review is ‘highly deferential’ to the district court’s decision." Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp. , 511 F.3d 535, 541 (6th Cir. 2007) (citation omitted) (quoting Leary v. Daeschner , 228 F.3d 729, 739 (6th Cir. 2000) ). "Thus, we reverse a decision granting a preliminary injunction ‘only if the district court "relied upon clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous legal standard." ’ " Southern Glazer’s Distrib. of Ohio, LLC v. Great Lakes Brewing Co. , 860 F.3d 844, 849 (6th Cir. 2017) (quoting Six Clinics Holding Corp., II v. Cafcomp Sys., Inc. , 119 F.3d 393, 399 (6th Cir. 1997) ).

An agency’s interpretation of a statute is reviewed using the two-step framework outlined in Chevron, U.S.A., Inc. v. Natural Res. Defense Council, Inc ., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). "First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron , 467 U.S. at 842–43, 104 S.Ct. 2778 ; see Arangure v. Whitaker , 911 F.3d 333, 336 (6th Cir. 2018) ("[A]ll too often, courts abdicate this duty by rushing to find statutes ambiguous, rather than performing a full interpretive analysis.") In applying Chevron to the first factor—likelihood of success on the merits—the district court determined that the CARES Act unambiguously foreclosed the SBA from precluding sexually-oriented businesses from receiving PPP loan guarantees during the pandemic. It relied on language in the Act specifying that eligibility would be conferred to "any business concern." 15 U.S.C. § 636(a)(36)(D)(i). The term "any" carries an expansive meaning. See SAS Inst., Inc. v. Iancu , ––– U.S. ––––, 138 S. Ct. 1348, 1354, 200 L.Ed.2d 695 (2018). It "refer[s] to a member of a particular group or class without distinction or limitation" and, in this way, "impl[ies] every member of the class or group." Id. (quoting Oxford English Dictionary (3d ed., Mar. 2016)). Thus, the Act’s specification that "any business concern" is eligible, so long as it meets the size criteria, is a reasonable interpretation. That broad interpretation also comports with Congress’s intent to provide support to as many displaced American workers as possible and, in doing so, does not lead to an "absurd result" as the SBA claims. Finally, by specifying "any business concern," Congress made clear that the SBA’s longstanding ineligibility rules are inapplicable given the current circumstances. Neither may the SBA continue to apply these rules pursuant to § 636(a)(36)(B), which states: "Except as otherwise provided in this paragraph, the [SBA] may guarantee covered loans under the same terms, conditions, and processes as a loan made under this subsection." 15 U.S.C. § 636(a)(36)(B). This provision likely constitutes a catch-all governing procedures otherwise unaffected by the mandate of the...