Sokol World Entm't v. Small Bus. Admin.

• Decision Date: 28 September 2022
• Docket Number: Civil Action 21-cv-2385 (TSC)
• Parties: SOKOL WORLD ENTERTAINMENT, INC., Plaintiff, v. SMALL BUSINESS ADMINISTRATION, et al., Defendants.
• Court: U.S. District Court — District of Columbia

SOKOL WORLD ENTERTAINMENT, INC., Plaintiff,
v.
SMALL BUSINESS ADMINISTRATION, et al., Defendants.

Civil Action No. 21-cv-2385 (TSC)

United States District Court, District of Columbia

September 28, 2022

ORDER

TANYA S. CHUTKAN UNITED STATES DISTRICT JUDGE

Plaintiff Sokol World Entertainment, Inc. (“Sokol”) owns and operates Club Cobra, a live entertainment venue in Los Angeles. During the COVID-19 pandemic it applied for a “Shuttered Venue Operator Grant” (“SVOG”) from Defendants United States Small Business Administrator and its Administrator, Isabella Casillas Guzman (“SBA”). After being denied funding twice, Sokol sued the SBA in this court under the Administrative Procedure Act (“APA”), 5 U.S.C. § 701, et seq., arguing that the SBA acted arbitrarily and capriciously, in a manner contrary to law, and in a manner unsupported by substantial evidence in denying its SVOG applications. Am. Compl. ¶¶ 41-56, ECF No. 17.

Both parties have moved for summary judgment. See Sokol Mot. for Summ. J. (“Sokol MSJ”), ECF No. 20; SBA Mot. for Summ. J. (“SBA MSJ”), ECF No. 24. The SBA also seeks dismissal of Sokol's complaint for lack of subject-matter jurisdiction. SBA Mot. to Dismiss, ECF No. 20. Both parties also ask the court to consider certain extra-record evidence, ECF Nos. 19, 36. Sokol has further moved for the SBA's extra-record evidence to be stricken from the

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record. See ECF No. 30. Both parties also seek leave to file their unredacted joint appendix on the record under seal. ECF No. 34.

For the reasons set forth below, Sokol's motion for summary judgment will be GRANTED. The SBA's cross-motion for summary judgment and motion to dismiss will be DENIED without prejudice. Sokol and the SBA's motions for consideration of extra-record evidence will be GRANTED. Sokol's motion to strike will be DENIED. The joint motion for leave to file the unredacted joint appendix under seal will be GRANTED. This case will be REMANDED to the SBA for supplementation of the administrative record as necessary regarding Sokol's competitors and further proceedings consistent with this Opinion.

I. BACKGROUND

As part of its ongoing legislative response to the COVID-19 pandemic, Congress set aside $15 billion to support shuttered venue operators-such as theatrical producers, live performing arts organizations, museums, movie theaters, and talent representatives-through SVOGs. Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act, Pub. L. 116-260 §§ 323(d)(1)(H), 324, 134 Stat. 1993, 2021, 2022 (2020) (codified at 15 U.S.C. § 9009a). Venue operators whose gross revenues declined from 2019 to 2020 by over 25% could apply to the SBA for a grant of up to 45% of their 2019 gross revenue, provided they met other eligibility conditions. 15 U.S.C. §§ 9009a (a)(1)(A)(i)(II), (c)(1)(A)(i)(I). The SVOG program excluded any venue operator that presents live performances of a prurient sexual nature; or derives, directly or indirectly, more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature. Id. § 9009a (a)(1)(B).

Sokol owns and operates Club Cobra, a “live-entertainment venue in Los Angeles for LGBTQ+ oriented shows by local singers, DJs, dancers, and performers.” Sokol MSJ at 1. In

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April 2021, Sokol applied for a SVOG award of $486,761.85 for Club Cobra. Id. at 3. Sokol's application stated that it neither presents live performances of a prurient sexual nature nor derives more than de minimis gross revenue from prurient sexual displays and depictions. Sokol SVOG Application, Redacted J.A. (“J.A.”) at 220, ECF No. 40. After its application was denied, Sokol submitted an administrative appeal on August 12, 2021 with more information as to its eligibility. Sokol MSJ at 4. That appeal was denied in August 2021. Id. at 4-5. Sokol then filed this action, seeking judicial review of SBA's denial. Id. at 5; Compl., ECF No. 1.

Upon joint motion of the parties, the court remanded the matter to the SBA. Oct. 5, 2021 Min. Order. Upon review, the SBA again denied Sokol's application, finding that Club Cobra “[p]resented live performances of a prurient sexual nature.” Nov. 3, 2021 Denial Email, J.A. At 223. The SBA explained that it denied Sokol's application because

social media pages for Club Cobra . . . contain numerous suggestive images depicting the Club Cobra male go-go dancers in seemingly sexualized poses . . . in some images the dancers are shown pulling down their underwear and in other images tip money is shown protruding from the dancers waistbands . . . .[;]

Yelp.com reviews revealed patrons describing the “sexy” go-go dancers as “strippers” and “a bit raunchy, touching their penis while dancing”

in 2020, while Club Cobra was closed due to the pandemic [Club Cobra's owner] started filming a dance show called “The Clubhouse” featuring erotic videos of the Club Cobra male go-go dancers. The videos were made available for a monthly subscription on the website OnlyFans.com. Club Cobra's Twitter page advertised the erotic dance shows with images of the dancers in highly suggestive poses . . . . [i]n one video clip, a dancer is shown wearing jockey shorts in a shower while he splashes water over his body as the camera pans down over the dancer's bare chest and genitalia. In another video, a dancer in only thong underwear is shown sitting on the edge of a bed while the camera pans up and down his body providing close ups of his seemingly aroused genitalia.

Id.; see also SBA MSJ at 5-7.

Sokol then amended its complaint to challenge the November 3, 2021 denial. Nov. 8, 2021 Joint Status Rep. ¶ 5, ECF No. 15; Am. Compl.

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II. LEGAL STANDARD

A. Motion to Dismiss

Federal courts require a statutory basis to exercise their jurisdiction over a matter. See Exxon Mobil Corp. v. Allapattah Servs. Inc., 545 U.S. 546, 552 (2005). A plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). To determine if it has jurisdiction, the court may “consider the complaint supplemented by undisputed facts evidenced in the record . . . or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.” Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (citations omitted). When evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), the court must “assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting plaintiff[s] the benefit of all inferences that can be derived from the facts alleged.'” Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)).

B. Motion for Summary Judgment

In an APA case. the court “sits as an appellate tribunal” for the agency when evaluating a motion for summary judgment under Federal Rule of Civil Procedure 56, rather than considering whether there are genuine disputes of material fact. Am Bioscience Inc., v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001). “The entire case on review is a question of law,” and the court should only consider “arguments about the legal conclusion to be drawn about the agency action.” Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993). This review is, therefore, based on “the administrative record already in existence” at the time of the agency action. Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam).

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The court's review is “narrow” and limited to an assessment of whether the agency “examine[]d the relevant data and articulate[d] a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.'” Vehicle Mfrs. Ass'n of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). The court's review is “highly deferential” and “presumes the agency's action to be valid.” Defs. of Wildlife & Ctr. for Biological Diversity v. Jewell, 815 F.3d 1, 9 (D.C. Cir. 2016) (quoting Am. Wildlands v. Kempthorne, 530 F.3d 991, 997-98 (D.C. Cir. 2008)). The court should, therefore, take care not to “substitute its own judgment for that of the agency.” State Farm, 463 U.S. at 43.

III. ANALYSIS

A. Jurisdiction

The SBA argues that the court lacks subject-matter jurisdiction in this matter because Sokol seeks monetary damages. SBA MSJ at 10-11. The APA confers jurisdiction only for matters where a plaintiff seeks “relief other than money damages.” Lamb v. ATF, 790 Fed.Appx. 222 (D.C. Cir. 2020) (citing 5 U.S.C. § 702). The SBA contends that Sokol seeks money damages because the Amended Complaint asks the court to “order Defendants to award Sokol SVOG grants in the amount for which it is eligible [and] . . . a supplemental SVOG award in the amount for which it is ineligible.”. SBA MSJ at 11 (citing Am. Compl. at 11).

That argument is unavailing. Equitable monetary relief is different...