Kaya v. United States Small Business Administration

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

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:

AYDIN KAYA, et al., :

:

Plaintiffs, :

: 23-CV-1587 (VSB)

- against - :

: OPINION & ORDER

UNITED STATES SMALL BUSINESS :

ADMINISTRATION, et al., :

:

Defendants. :

:

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Appearances:

Jeffrey Benjamin

The Linden Law Group, PC

New York, NY

Counsel for Plaintiffs

Rebecca Lynn Salk

U.S. Attorney’s Office for the Southern District of New York

New York, NY

Counsel for Defendants

VERNON S. BRODERICK, United States District Judge:

Plaintiffs, a horse-drawn carriage tour business and its proprietor, obtained a $40,000

loan under the COVID-19 Economic Injury Disaster Loan program (“EIDL”) from Defendant

the United States Small Business Administration (“SBA”). Approximately a year after obtaining

the loan, the SBA denied Plaintiffs’ application for an additional $310,000 in EIDL funds,

asserting that it could not verify the existence of an eligible business. In this action, Plaintiffs

seek monetary, injunctive, and declaratory relief from Defendants the SBA and its Administrator

under the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701–06.

Before me is Defendants’ motion to dismiss Plaintiffs’ complaint and Plaintiffs’ motion

for leave to file an amended complaint. Because the congressional appropriation for the

COVID-19 EIDL program has expired, and the funds that Congress appropriated for the program

have been expended, there is no subject-matter jurisdiction to grant Plaintiffs’ requested relief.

Alternatively, even if funds were available, Plaintiffs would fail to state a claim under the

Administrative Procedure Act because the decision to deny COVID-19 EIDL loans is

discretionary and therefore unreviewable. These deficiencies are not cured in Plaintiffs’

proposed amended complaint. For these reasons and for the reasons that follow, Defendants’

motion to dismiss is GRANTED, and Plaintiffs’ motion to amend is DENIED.

Background1

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A. Statutory Background

“The Small Business Act of 1953 created the Small Business Administration,” (“SBA”), a

federal agency tasked with protecting “the interests of small-business concerns in order to

preserve free competitive enterprise.” Small Bus. Admin. v. McClellan, 364 U.S. 446, 447 (1960)

(citing 67 Stat. 232, as amended, 15 U.S.C. §§ 631–51.) The SBA is empowered “to

make . . . loans . . . as the [SBA] may determine to be necessary or appropriate to any small

business concern . . . located in an area affected by a disaster . . . if the [SBA] determines that the

[small business] concern . . . has suffered a substantial economic injury as a result of such

disaster.” 15 U.S.C. § 636(b)(2). As relevant here, such a loan is called an “economic injury

disaster loan” (“EIDL”). 13 C.F.R. § 123.300(a).

1 The factual allegations set forth herein are taken from the allegations in Plaintiffs’ complaint, (Doc. 1), and

proposed amended complaint, (Doc. 24-1). I assume Plaintiffs’ allegations to be true for purposes of this motion.

See Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). However, my reference to these

allegations should not be construed as a finding as to their veracity, and I make no such findings. Before reciting

Plaintiffs’ factual allegations, I provide a brief overview of the relevant statutory framework.

As a part of the March 2020 Coronavirus Aid, Relief, and Economic Security Act, (the

“CARES Act”), Congress authorized the SBA to make EIDL loans to small businesses affected

by the pandemic. Pub. L. No. 116-136, § 1110, 134 Stat. 281, 306–08 (2020), codified at 15

U.S.C. § 9009. The CARES Act also authorized the SBA to issue up to $10,000 of EIDL loans

as “advances” that did not need to be repaid. Id. § 1110(e).2 The SBA distributed funds for

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EIDL loans on a “‘first-come, first-served’ basis until the full amount of the congressionally

authorized loan commitment has been met.” Pharaohs GC, Inc. v. U.S. Small Bus. Admin., 990

F.3d 217, 224 (2d Cir. 2021) (citing 85 Fed. Reg. 20,813). Over the course of 2020 and 2021,

Congress appropriated $45 billion towards COVID-19 EIDL advances and $50 billion towards

EIDL loan subsidies, supporting a total of approximately $470 billion in EIDL loans. See U.S.

Gov’t Accountability Off., GAO-21-589, Economic Injury Disaster Loan Program: Additional

Actions Needed to Improve Communication with Applicants and Address Fraud Risks 4–5

(2021), https://perma.cc/BC9X-4UWY.3

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As relevant here, Congress authorized the SBA to approve applicants for EIDL loans

“based solely on the credit score of the applicant,” or “by using alternative appropriate methods

to determine an applicant’s ability to repay.” 15 U.S.C. § 9009(d)(1). Congress also authorized

the SBA to “use information from the Department of the Treasury to confirm that (A) an

applicant is eligible to receive [an EIDL] loan, or; (B) the information contained in an

2 Borrowers could use advances for things like “providing paid sick leave to employees unable to work due to the

direct effect of the [pandemic],” “maintaining payroll,” offsetting “increased costs to obtain materials,” “making rent

or mortgage payments,” and generally “repaying obligations that cannot be met due to revenue losses.” Id.

§ 1110(e)(4).

3 See also CARES Act § 1107(e)(6) ($10 billion for advances); Paycheck Protection Program and Health Care

Enhancement Act, Pub. L. 116-139, § 101(b), 134 Stat. 620, 620–21 (2020) (additional $10 billion for advances); id.

tit. II, 134 Stat. at 628 ($50 billion “for the cost of direct loans”); Consolidated Appropriations Act of 2021, Pub. L.

116-260, § 323(d)(1)(D), 134 Stat. 1182, 2021 (2020) (additional $20 billion for advances); American Rescue Plan

Act of 2021, Pub. L. 117-2, § 5002(b)(2)(B), 135 Stat. 4, 85 (2021) (additional $5 billion for advances).

application for such loan is accurate.” Id. § 9009(d)(2). The SBA’s authority to pay out EIDL

loans terminated on December 31, 2021; in other words, the appropriation “lapsed.” Id.

§ 9009(e)(8). The SBA “stopped accepting new applications” on January 1, 2022. (Doc. 1

(“Compl”) at 6.)4 The funds appropriated for EIDL loans were exhausted—i.e., ran out—on

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May 15, 2022. (Doc. 14 (“Olivas Decl.”) ¶ 5; see also Compl. 6.) After that date, the SBA

retained funding set aside for certain loans approved prior to May 16, 2022 but voluntarily

cancelled by the recipients thereafter. (Doc. 27 (“2d Olivas Decl.”) ¶ 5.) These funds “were

designated as unobligated funds.” (Id. ¶ 6.) The Fiscal Responsibility Act of 2023, signed June

3, 2023, “permanently rescinded any remaining unobligated funds” for EIDL loans. (Id. ¶ 7

(citing Fiscal Responsibility Act of 2023, Pub. L. 118-5 §§ 22, 23, 47, 137 Stat. 10, 26, 28

(2023).)

B. Factual Background

Plaintiffs Aydin Kaya and A-K Entrepreneurship, LLC (collectively, “Plaintiffs”) operate

a “horse-drawn carriage tour business” that was “crippled by the COVID-19 pandemic.”

(Compl. 7.) “[O]n or around July 9, 2020,” Plaintiffs applied for an EIDL loan, attaching

relevant “corporate documents including current tax returns.” (Doc. 24-1 (“Am. Compl.”) ¶ 24.)

On approximately four instances between July 2020 through August 2021, Plaintiffs “submitted

and re-submitted” additional documentation to the SBA and the Internal Revenue Service

(“IRS”) in order to “prove the basis for an increase” in the amount of the EIDL loan request to a

total of $350,000. (Id. ¶ 26.) On August 18, 2021, Plaintiffs received a $40,000 EIDL loan. (Id.

¶ 27.) On December 29, 2021, Plaintiffs sent in “the final document for approval” of the

additional $310,000. (Id. ¶ 28; see also id. ¶ 35.)

4 Pincites to Plaintiffs’ complaint refer to page numbers, as the paragraph numeration is inconsistent.

SBA notified Plaintiffs on January 3, 2022 that “[n]o additional information is required at

this time” for the EIDL loan request. (Id. ¶¶ 29, 31.) Nonetheless, Plaintiffs submitted

additional documentation to the SBA “in the first quarter of 2022” in an attempt to demonstrate

eligibility for the additional loan amount. (Id. ¶ 32.) On April 28, 2022, Plaintiffs “received a

declination letter from the SBA dated April 27, 2022, which stated that ‘The SBA has been

unable to verify the existence of an eligible business as reflected in the application.’” (Id. ¶ 33.)

Because the SBA did not approve the additional $310,000 that Plaintiffs requested before the

exhaustion of EIDL funds, Plaintiffs did not receive the balance of the requested EIDL loan. (Id.

¶¶ 35–37.) “Due to the negligent or otherwise improper denial of this critical infusion of

operating funds, Plaintiffs’ business was forced to cease operations.” (Id. ¶ 38.)

C. Procedural History

Plaintiffs initiated this action on February 27, 2023 by filing a complaint, naming as

Defendants the SBA and Isabella Casillas Guzman5 in her official capacity as the Administrator

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of the SBA. (See Compl.) The complaint asserted two causes of action against Defendants

under the APA: (1) that the refusal to grant Plaintiffs an additional loan was an arbitrary and

capricious action; and (2) that actions of Defendants were contrary to law and in excess of

statutory authority. (Compl. 8–10.) As relief, Plaintiffs sought: (a) a declaration that

Defendants’ actions were arbitrary and capricious and in violation of the law; (b) preliminary and

injunctive relief directing Defendants to approve and fund Plaintiffs’ loan increase requests; (c)

an award of monetary damages for loss of business; (d) attorneys’ fees; and (e) any other relief as

the Court may deem proper. (Id. 10.)

5 Guzman is automatically substituted for Defendant Kelly Loeffler by operation of Federal Rule of Civil Procedure

25(d).

On June 14, 2023, Defendants moved to dismiss Plaintiffs’ complaint under Federal

Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Doc. 11.) The same day, Defendants submitted

a supporting memorandum of law, (Doc. 13 (“MTD Mem.”)), and two supporting declarations,

(Doc. 13 (“Olivas Decl.”); Doc. 14 (“Salk Decl.”)). On October 31, 2023, Plaintiffs submitted a

memorandum of law in opposition to the motion to dismiss. (Doc. 25 (“MTD Opp’n”).) The

same day, Plaintiffs submitted a motion to amend the complaint, (Doc. 24), a supporting

memorandum of law, (Doc. 24-3 (“Amend. Mem.”)), and a proposed amended complaint, (Doc.

24-1 (“Am. Compl.”)). The proposed amended complaint contains additional factual allegations,

but does not assert additional claims for relief. (See Am. Compl.) On November 14, 2023,

Defendants submitted a memorandum of law in further support of the motion to dismiss and in

opposition to the motion to amend, (Doc. 26 (“Reply”)), and two supporting declarations, (Doc.

27 (“2d Olivas Decl.”); Doc. 28 (“2d Salk Decl.”)).

Legal Standard

A. Rule 12(b)(1)

“Determining the existence of subject matter jurisdiction is a threshold inquiry[,] and a

claim is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the

district court lacks the statutory or constitutional power to adjudicate it.” Morrison v. Nat’l

Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (internal quotation marks omitted), aff’d, 561

U.S. 247 (2010); United States v. Bond, 762 F.3d 255, 263 (2d Cir. 2014) (describing subject

matter jurisdiction as a “threshold question” (internal quotation marks omitted)). Although a

district court resolving a motion to dismiss under Rule 12(b)(1) “must take all uncontroverted

facts in the complaint . . . as true, and draw all reasonable inferences in favor of the party

asserting jurisdiction,” “where jurisdictional facts are placed in dispute, the court has the power

and obligation to decide issues of fact by reference to evidence outside the pleadings, such as

affidavits,” in which case “the party asserting subject matter jurisdiction has the burden of

proving by a preponderance of the evidence that it exists.” Tandon v. Captain’s Cove Marina of

Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014) (cleaned up). “A district court retains

considerable latitude in devising the procedures it will follow to ferret out the facts pertinent to

jurisdiction.” APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003) (internal quotation marks

omitted).

B. Rule 12(b)(6)

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). A claim will have “facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id. This standard demands “more than a sheer possibility

that a defendant has acted unlawfully.” Id. “Plausibility . . . depends on a host of considerations:

the full factual picture presented by the complaint, the particular cause of action and its elements,

and the existence of alternative explanations so obvious that they render plaintiff’s inferences

unreasonable.” L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir. 2011) (citation

omitted).

In considering a motion to dismiss, a court must accept as true all well-pleaded facts

alleged in the complaint and must draw all reasonable inferences in the plaintiff’s favor. See

Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). A complaint need not

make “detailed factual allegations,” but it must contain more than mere “labels and conclusions”

or “a formulaic recitation of the elements of a cause of action.” Iqbal, 556 U.S. at 678 (internal

quotation marks omitted). Although all allegations contained in the complaint are assumed to be

true, this tenet is “inapplicable to legal conclusions.” Id.

C. Leave to Amend

“Leave to amend is to be freely given when justice requires.” Freidus v. Barclays Bank

PLC, 734 F.3d 132, 140 (2d Cir. 2013) (citing, inter alia, Fed. R. Civ. P. 15(a)(2)). “A district

court has discretion to deny leave for good reason, including futility, bad faith, undue delay, or

undue prejudice to the opposing party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184,

200 (2d Cir. 2007) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). The “non-movant bears

the burden of showing prejudice, bad faith and futility of the amendment.” Grant v. Citibank (S.

Dakota), N.A., No. 10-CV-2955, 2010 WL 5187754, at *6 (S.D.N.Y. Dec. 6, 2010) (citing, inter

alia, Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993)). Rule 15(a)(2) is a “liberal”

and “permissive” standard in accord with the Second Circuit’s “strong preference for resolving

disputes on the merits.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160,

190 (2d Cir. 2015) (internal quotation marks omitted).

Discussion

Defendants argue that dismissal is warranted because (1) Plaintiffs lack standing, (2)

Plaintiffs’ claims are barred by sovereign immunity, and (3) Plaintiffs fail to state a claim for

which relief may be granted. (See MTD Mem. 5–12.) Additionally, Plaintiffs request leave to

file an amended complaint. For the reasons that follow, the motion to dismiss is GRANTED,

and Plaintiffs’ motion for leave to file an amended complaint is DENIED.

A. Subject-Matter Jurisdiction

“Article III of the Constitution limits federal courts’ authority—that is, our subject matter

jurisdiction—to disputes involving ‘live cases and controversies.’” Cnty. of Suffolk v. Sebelius,

605 F.3d 135, 140 (2d Cir. 2010) (quoting United States v. Quattrone, 402 F.3d 304, 308 (2d Cir.

2005); see also TransUnion LLC v. Ramirez, 594 U.S. 413, 423 (2021). In order for a “case” or

“controversy” to exist—in other words, in order to have “Article III standing”—a plaintiff must

show “(i) that he suffered an injury . . . ; (ii) that the injury was likely caused by the defendant;

and (iii) that the injury would likely be redressed by judicial relief.” TransUnion, 594 U.S. at

422–23 (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)). The plaintiff “bear[s]

the burden” of making these showings, which must be established “for each claim . . . and for

each form of relief that” is sought. Id. at 430–31. Relatedly, federal courts lack subject-matter

jurisdiction when a case is “moot[]”—when it is no longer a “live” Article III case or

controversy. Cnty. of Suffolk, 605 F.3d at 140. “[U]nder the ‘general rule’ of mootness, courts’

subject matter jurisdiction ceases when ‘an event occurs during the course of the

proceedings . . . that makes it impossible for the court to grant any effectual relief whatever to a

prevailing party.’” Id. (quoting Quattrone, 402 F.3d at 308 (cleaned up)).

Defendants argue that subject-matter jurisdiction is lacking because the appropriation for

COVID-19 EIDL loans has lapsed and the money that had been appropriated for such loans is

exhausted. (See MTD Mem. 5–6.) I agree that the lapse and exhaustion of the EIDL

appropriations mean that I lack subject-matter jurisdiction to award Plaintiffs any of the relief

they seek. In County of Suffolk v. Sebelius, the Second Circuit considered a federal court’s

subject-matter jurisdiction to order an agency to disburse funds from a “lapsed” and “exhausted”

appropriation in the context of an action under the APA. 605 F.3d at 141. The Court of Appeals

held that when an appropriation has lapsed and its funds are exhausted, “‘federal courts are

without authority to provide monetary relief’ because [(1)] the Appropriations Clause prevents

additional funds from being paid out of the Treasury” and [(2)] “awarding ‘funds available from

sources other than the [subject] appropriation’ would contravene the ‘fundamental requirement’”

under the APA “‘that a plaintiff seek relief other than monetary damages.’” Id. at 142 (quoting

City of Houston v. Dep’t of Hous. & Urban Dev., 24 F.3d 1421, 1428 (D.C. Cir. 1994) (cleaned

up)); see also infra § III.B (discussing the APA’s limited waiver of sovereign immunity).

Here, Plaintiffs seek “an award of damages for loss of business” and “injunctive relief

directing Defendants . . . to approve and fund the EIDL funding increase request.” As to the first

request, it is well established that “monetary damages are not available under the APA, which

limits relief to ‘other than money damages.’” De La Mota v. U.S. Dep’t of Educ., No. 02-CV-

4276, 2003 WL 21919774, at *4 (S.D.N.Y. Aug. 12, 2003) (quoting 5 U.S.C. § 702); accord

McGrath v. Mukasey, No. 07-CV-11058, 2008 WL 1781243, at *4 n.55 (S.D.N.Y. Apr. 18, 2008);

see also Cnty. of Suffolk, 605 F.3d at 142. The request for money damages is therefore outside

the scope of my subject-matter jurisdiction. See De La Mota, 2003 WL 21919774, at *4 (“[T]his

Court lacks subject matter jurisdiction over plaintiffs’ claim for monetary relief.”).

Plaintiffs’ request for an injunction ordering the disbursement of loan funding is

cognizable under the APA, because the statute’s “bar against monetary damages does not adhere

to claims for specific relief, even those requiring a purely monetary judgment.” Sanon v. Dep’t of

Highter Educ., No. 06-CV-4928, 2010 WL 1049264, at *4 (E.D.N.Y. Mar. 18, 2010), aff’d, 453

F. App’x 28 (2d Cir. 2011) (citing Bowen v. Massachusetts, 487 U.S. 879, 910 (1988)). This is

because federal courts construe injunctions requiring the government to disburse funds as

“specific relief (they undo the . . . refusal to [disburse appropriated funds]) rather than for money

damages (they do not provide relief that substitutes for that which ought to have been done).”

Bowen, 487 U.S. at 910; see also, e.g., Rodriguez v. Carson, 401 F. Supp. 3d 465, 471 (S.D.N.Y.

2019) (enjoining disbursements of funds under the APA). However, Plaintiffs allege in the

complaint that “the program ran out of funds” in May 2022. (Compl. 8.) Plaintiffs’ complaint is

self-defeating in this regard; since there is no COVID-19 EIDL money left, “the Appropriations

Clause prevents additional funds from being paid out of the Treasury” for the requested EIDL

loan increase. See Cnty. of Suffolk, 605 F.3d at 142 (quoting City of Houston, 24 F.3d at 1428).

Indeed, numerous district courts have relied on County of Suffolk to reach the same result in

cases challenging PPP or EIDL loan denials. See, e.g., March v. Small Bus. Admin., No. 4:22-

CV-543, 2023 WL 355906, at *2–3 (E.D. Mo. Jan. 20, 2023), reconsideration denied, 2023 WL

2327675 (E.D. Mo. Mar. 2, 2023), aff’d, No. 23-1501, 2023 WL 6474463 (8th Cir. Oct. 5, 2023);

Dini v. Guzman, No. 22-CV-511, 2023 WL 3790813, *3–5 (D.N.M. June 2, 2023). Plaintiffs

argue that Dini is distinguishable because the SBA had not determined that the plaintiff there was

eligible for an EIDL loan. (See MTD Opp’n 8). However, the relevant fact in Dini and here is

that “the appropriated funds were exhausted,” and the program was “closed.” 2023 WL

6474463, at *1. Further, Plaintiffs cite no authority—and I have not found any case—permitting

an applicant for an EIDL loan or loan increase to seek funding from the SBA following the lapse

of EIDL funding and expiration of the program.

Plaintiffs, citing Rodriguez v. Carson, 401 F. Supp. 3d 465 (S.D.N.Y. 2019), additionally

argue there is no “bar [to] relief when a claim is directed towards appropriated funds that have

been contractually obligated to third parties but not yet disbursed.” (MTD Opp’n 6–7.) In

Rodriguez, Judge Jesse M. Furman held that County of Suffolk does not apply to “appropriated

funds that [an] agency has obligated, but not yet disbursed.” 401 F. Supp. 3d at 468. Rodriguez

is plainly distinguishable—there “the funds” at issue “ha[d] not been expended.” Id. at 469. For

Rodriguez to be applicable here, Plaintiffs would need to identify a source of funding for their

requested loans. See id. at 468–69. To do so, Plaintiffs assert—contrary to their allegations in

the complaint that EIDL funding has lapsed, (see Compl. 8)—that it is premature to conclusively

determine that funding has lapsed and is exhausted because “the only ‘record’ before the Court is

the SBA’s self-serving statements” to that effect, (MTD Opp’n 6). This ignores that “where

jurisdictional facts are placed in dispute . . . the party asserting subject matter jurisdiction has the

burden of proving by a preponderance of the evidence that it exists.” Tandon, 752 F.3d at 243

(cleaned up). Plaintiffs aver that funds from cancelled EIDL loans returned to the SBA might

provide the funding source for the relief they seek. (See MTD Opp’n 8 (citing Olivas Decl. ¶ 6).)

However, “‘mere speculation’” that these funds still exist and could cover the amount of relief

Plaintiffs seek “cannot provide a substitute for the averment of jurisdictional facts.” Yellow Page

Sols., Inc. v. Bell Atl. Yellow Pages Co., No. 00-CV-5663, 2001 WL 1468168, at *9 (S.D.N.Y.

Nov. 19, 2001) (quoting Singer v. Bell, 585 F. Supp. 300, 303 (S.D.N.Y. 1984)). Moreover,

Defendants point out that the Fiscal Responsibility Act of 2023, signed June 3, 2023,

“permanently rescinded any remaining unobligated funds” for EIDL loans. (2d Olivas Decl. ¶ 7

(citing Pub. L. 118-5 §§ 22, 23, 47, 137 Stat. at 26, 28).) In other words, any money representing

loans that had been cancelled were taken back by the Government. Plaintiffs do not address the

fact that any money for EIDL loans that may have remained were “permanently” taken back by

the Government. In short, I lack subject-matter jurisdiction to order Defendants to give Plaintiffs

EIDL funding for a program that no longer exists and for which funds have been exhausted.

Although there is no subject-matter jurisdiction, in line with decisions addressing cases in

similar postures, I nevertheless address Defendants’ alternative argument that Plaintiffs fail to

state a claim. See Dini, 2023 WL 3790813, at *5 (addressing failure to state a PPP-loan claim

“[a]lternatively, only to the extent Petitioner has standing”); Reyes v. Small Bus. Admin., No. 22-

CV-6765, 2024 WL 1195051, at *4 (S.D.N.Y. Mar. 19, 2024) (addressing merits of PPP-loan

claim because “assumption of jurisdiction to consider first the merits is not barred where the

jurisdictional constraints are imposed by statute, not the Constitution, and where the

jurisdictional issues are complex and the substance of the claim is, as here, plainly without

merit” (quoting Ivanishvili v. U.S. Dep’t of Just., 433 F.3d 332, 338 n.2 (2d Cir. 2006)).6

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B. Failure to State a Claim

If there was subject matter jurisdiction, Plaintiffs’ claims would fail on the merits. The

APA permits a federal court to “set aside” an agency action that is “arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). However, “[t]he

APA does not permit a review of agency actions which are ‘committed to agency discretion by

law.’” Hyndman v. Small Bus. Admin., No. 22-CV-4973, 2024 WL 233463, at *4 (S.D.N.Y. Jan.

22, 2024) (quoting 5 U.S.C. § 701(a)(2) and citing Weyerhaeuser Co. v. U.S. Fish & Wildlife

Serv., 586 U.S. 9, 23 (2018)). This “exception” to the general “presumption favoring judicial

review of administrative action” applies in “those rare circumstances where the relevant statute is

drawn so that a court would have no meaningful standard against which to judge the agency’s

exercise of discretion.” Weyerhaeuser, 586 U.S. at 23 (internal quotation marks omitted).

The SBA’s actions in denying Plaintiffs’ requested EIDL loan increase were discretionary

and therefore unreviewable. “Under the Small Business Act, the SBA makes loans as it ‘may

6 For similar reasons, I decline to address Defendants’ arguments regarding sovereign immunity. See Vinegar

Factory, Inc. v. Small Bus. Admin., No. 23-CV-4967, 2024 WL 1116889, at *1 (S.D.N.Y. Mar. 13, 2024) (“Although

subject-matter jurisdiction [and potential waiver of sovereign immunity] is ‘usually’ a ‘threshold issue that must be

decided before proceeding to the merits of a given case,’ the Second Circuit [has] held . . . that ‘the question of the

SBA’s sovereign immunity is not a threshold question a court must decide before holding that a claim fails on the

merits.’” (quoting Springfield Hosp., Inc. v. Guzman, 28 F.4th 403, 416 (2d Cir. 2022)).

determine to be necessary or appropriate.’” Hyndman, 2024 WL 233463, at *4 (quoting 15

U.S.C. § 636(b)(2)) (emphasis in original). Similarly, 15 USC § 9009(d) provides that the SBA

Administrator “may” approve an EIDL loan request based on the applicant’s credit score or

“alternative appropriate methods” and using information from the Department of the Treasury to

confirm an applicant’s eligibility. The “word ‘may’” in these statutes “clearly connotes

discretion. Hyndman, 2024 WL 233463, at *4 (quoting Biden v. Texas, 597 U.S. 785, 802

(2022)). Moreover, the SBA’s decision to award an EIDL loan is an “allocation of funds from a

lump-sum appropriation,” the type of “agency decision[] that courts have traditionally regarded

as unreviewable.” Weyerhauser, 586 U.S. at 23 (citing Lincoln v. Vigil, 508 U.S. 182, 191

(1993)). Given the discretion expressed in the text of the relevant statutes and the lump-sum-

appropriation structure of the EIDL loan program, I conclude that Defendants’ decisions

regarding Plaintiffs’ EIDL application were committed to agency discretion by law and therefore

unreviewable. Accord Hyndman, 2024 WL 233463, at *5 (collecting cases); Reyes, 2024 WL

1195051, at *6 (same).

Considering Plaintiffs’ specific challenges to Defendants’ denial reinforces my

conclusion. As noted above, Plaintiffs received an initial $40,000 EIDL loan in August 2021, but

did not receive the additional $310,000 requested because Defendants “ha[d] been unable to

verify the existence of an eligible business as reflected in [Plaintiffs’] application.” (Am. Compl.

¶¶ 27, 33.) Plaintiffs argue this action violated the APA because the Defendants’ denial was

“based upon false and non-existent discrepancies regarding the inability to verify the existence of

a legitimate business despite previously approving the same business for funding by the SBA.”

(Am. Compl. ¶ 41(b).) However, the SBA has the discretion to use Treasury information to

verify that “the information contained in an application for [an EIDL] loan is accurate” and that

the applicant is eligible for a loan. 15 U.S.C. § 9009(d)(2). Denying an application based on

“inconsistencies in [the applicant’s] documentation” is therefore “consistent with the plain text of

the CARES Act.” Reyes, 2024 WL 1195051, at *5 (citing 15 U.S.C. § 9009(d)(2)). Plaintiffs

cite no authority to support their contention that the SBA’s prior approval of an EIDL loan for

$40,000 somehow estopped the SBA from subsequently determining that Plaintiffs were

ineligible for an additional $310,000 EIDL loan. Indeed, such an interpretation of the law would

be inconsistent with the discretion that the relevant statues afford the SBA in approving EIDL

loans.

C. Leave to Amend

Defendants have met their burden of showing that granting Plaintiffs leave to amend

would be futile. See Block, 988 F.2d at 350. Plaintiffs’ additional allegations do not cure the

two fundamental issues with the case: (1) that funding for the COVID-19 EIDL program has

lapsed and there are no EIDL funds Defendants could disburse to Plaintiffs, and (2) that the

SBA’s decision to deny Plaintiffs’ loan request is discretionary and therefore unreviewable.

Leave to amend is therefore DENIED.

Conclusion

For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ complaint is

GRANTED. Plaintiffs’ motion for leave to file an amended complaint is DENIED.

The Clerk of Court is respectfully directed to terminate the pending motions at Docs. 11

and 24 and to close the case.

SO ORDERED.

Dated: April 8, 2025 f ay

New York, New York if L/

Vernon S. Broderick

United States District Judge

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