REBOOT MACON LLC v. UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION

District Court, M.D. Georgia·Decided May 4, 2022·No. 5:21-cv-00221·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA MACON DIVISION

REBOOT MACON, LLC, et al., ) ) ) Plaintiffs, ) ) v. ) CIVIL ACTION NO. 5:21-CV-221 (MTT) ) UNITED STATES OF AMERICA, et al., ) ) ) Defendants. ) __________________ )

ORDER Plaintiffs Reboot Macon, LLC, and Per Diem Market, LLC, bring this action under various theories of contract and constitutional law against the Small Business Administration (“SBA”), the SBA’s Administrator Isabella Casillas Guzman in her official and individual capacity, the SBA’s Deputy Associate Administrator for Capital Access John A. Miller in his individual capacity, and unnamed employees or agents of the SBA in their individual capacities.1 Docs. 25-1; 25-2. The defendants moved to dismiss all claims. Doc. 16. For the following reasons, that motion is GRANTED in part and DENIED in part.

1 Plaintiffs Reboot and Per Diem filed separate complaints that have now been consolidated at the request of the parties. Docs. 12; 13. After consolidation, and two days before the government’s reply brief was due, the plaintiffs moved to amend (Doc. 25) and attached the proposed second amended complaints for both Reboot and Per Diem. Docs. 25-1; 25-2. In response, the government argued the plaintiffs were not diligent in seeking leave to amend, and even if they were, such an amendment would be futile. Doc. 29 at 7-12. The second amended complaints drop claims clearly lacking merit and clarify, at least for purposes of analysis, others. The second amended complaints do not moot the government’s motion to dismiss. Accordingly, the plaintiffs’ motion to amend (Doc. 25) is GRANTED. I. BACKGROUND In March of 2021, Congress passed the American Rescue Plan Act (“ARPA” or “Act”) as a part of the federal government’s efforts to provide relief to individuals and businesses that most suffered the economic and public health effects of the COVID-19 pandemic. Pub L. No. 117-2, 135 Stat. 4 (2021). The Act allocated $28.6 billion for a Restaurant Revitalization Fund (“RRF” or “Fund”) to be administered by the SBA to grant relief to eligible restaurants. Docs. 25-1 ¶ 19; 25-2 ¶ 19. The Act required the SBA for the first 21 days the RRF operated (“the priority period”) to prioritize processing

claims from restaurants “owned and controlled” by women, veterans, and socially and economically disadvantaged individuals.2 Docs. 25-1 ¶ 20; 25-2 ¶ 20. The RRF opened May 3, 2021, and thus the priority period ended on May 24, 2021. See 25-1 ¶ 1; 25-2 ¶ 1. Reboot and Per Diem—both partially owned by a female and thus eligible to apply for relief during the priority period—submitted applications the day the Fund opened. See Docs. 25-1 ¶¶ 2, 24; 25-2 ¶¶ 2, 24. On May 15, 2021, Reboot and Per Diem received approval notices for $125,571.00.3 Docs. 25-1 ¶¶ 3, 30; 25-2 ¶¶ 3, 30.

2 Specifically, the Act provides:

During the initial 21-day period in which the Administrator awards grants under this subsection, the Administrator shall prioritize awarding grants to eligible entities that are small business concerns owned and controlled by women (as defined in section 3(n) of the Small Business Act (15 U.S.C. 632(n))), small business concerns owned and controlled by veterans (as defined in section 3(q) of such Act (15 U.S.C. 632(q))), or socially and economically disadvantaged small business concerns (as defined in section 8(a)(4)(A) of the Small Business Act (15 U.S.C. 637(a)(4)(A))). The Administrator may take such steps as necessary to ensure that eligible entities described in this subparagraph have access to grant funding under this section after the end of such 21-day period.

Pub L. No. 117-2, § 5003(c)(3)(A), 135 Stat. 4, 88 (2021).

3 While Per Diem’s second amended complaint claims the approval notice was for $125,571.00, the plaintiffs’ response to the government’s motion to dismiss claims “Reboot and Per Diem received confirmation letters from the SBA that their applications were approved in the amounts of $125,571.00 On June 23, 2021, Reboot and Per Diem “received an e-mail from the SBA stating that it would not be issuing funds for [their] approved application[s] due to lawsuits filed in Tennessee and Texas.” Docs. 25-1 ¶ 45; 25-2 ¶ 47. Those lawsuits, which challenged the constitutionality of the priority afforded some applicants, led the SBA to stop processing priority applications. Docs. 25-1 ¶¶ 45, 47, 49; 25-2 ¶¶ 47, 49, 50. That meant the SBA funded applications filed after the plaintiffs’ applications. Although Reboot and Per Diem were “assured on multiple occasions that funds were allocated and set aside for its grant award,” neither received grants. Docs. 25-1 ¶ 58;

25-2 ¶ 67. The SBA closed the RRF on July 2, 2021, with $18 billion paid to priority applicants, and the remainder to non-priority applicants. Docs. 25-1 ¶ 53; 25-2 ¶ 63. Nonetheless, the plaintiffs allege $85,589,836.30 remains undispersed. Docs. 25-1 ¶ 57; 25-2 ¶ 66. And while Reboot remains operational, Per Diem was forced to close, with creditors of Per Diem owed approximately $150,000.00. Doc. 25-2 ¶ 56. Reboot and Per Diem filed their complaints on June 30, 2021, their amended complaints on October 22, 2021, and most recently, their second amended complaints on January 26, 2022. Docs. 1; 9; 25-1; 25-2. In short, the plaintiffs allege they were

“discriminated against based on the ‘priority’ status of [their] application[s]” based solely on the sex of their owner. Docs. 25-1 ¶ 58; 25-2 ¶ 67. The plaintiffs’ operative complaints seek recovery under the theories of: (1) “recovery of grant;” (2) “equal protection violations and due process;” and (3) “Bivins [sic] claims.”4 Docs. 25-1 ¶¶ 59-

and $108,108.54, respectively.” Doc. 23-1 at 1. This discrepancy, however, is not material to the Court’s analysis.

4 The plaintiffs’ first amended complaints, now superseded by their second, sought recovery under the theories of: (1) “recovery of grant;” (2) “contract;” (3) “promissory estoppel;” (4) “fraud and deceit;” (5) an 94; 25-2 ¶¶ 68-103. As for relief, the plaintiffs seek injunctions that direct the SBA to fund their awards and cease any further discriminatory actions, or in the alternative, monetary damages. Docs. 25-1 at 25-26; 25-2 at 23-24. II. STANDARD A. Federal Rule of Civil Procedure 12(b)(1) “A defendant can move to dismiss a complaint under Rule 12(b)(1) for lack of subject matter jurisdiction by either facial or factual attack.” Stalley v. Orlando Reg’l Heathcare Sys., Inc., 524 F.3d 1229, 1232 (11th Cir. 2008). “A facial attack on the

complaint requires the court merely to look and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion.” Id. at 1232-33 (internal quotations and citation omitted). A factual attack, however, “challenges the existence of subject matter jurisdiction using material extrinsic from the pleadings, such as affidavits or testimony.” Id. at 1233. While the government here initially introduced evidence outside the pleadings, that evidence has since been withdrawn. Docs. 16-2; 28 at 3. Accordingly, the Court will look only to the pleadings to determine whether there is jurisdiction. B. Federal Rule of Civil Procedure 12(b)(6)

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REBOOT MACON LLC v. UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION, (M.D. Ga. 2022).

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