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Case Name Defy Ventures v. Small Business Administration CJ-MD-0006
Docket / Court 1:20-cv-01838-CCB ( D. Md. )
State/Territory Maryland
Case Type(s) Criminal Justice (Other)
Public Benefits / Government Services
Special Collection COVID-19 (novel coronavirus)
Attorney Organization ACLU National (all projects)
Public Interest Law Center (PILCOP)
Washington Lawyers' Committee
Case Summary
COVID-19 Summary: This is a case challenging the legality of the Small Business Administration's decision to exclude small business owners from parts of the CARES Act, passed in response to the COVID-19 pandemic. On July 21, the court granted a preliminary injunction extending the deadline to apply ... read more >
COVID-19 Summary: This is a case challenging the legality of the Small Business Administration's decision to exclude small business owners from parts of the CARES Act, passed in response to the COVID-19 pandemic. On July 21, the court granted a preliminary injunction extending the deadline to apply for a loan for the named plaintiffs.

In response to the economic crisis caused by the COVID-19 pandemic of 2020, Congress passed the CARES Act, which created, among other things, the “Paycheck Protection Program.” Under this program, small business owners could apply for a loan from the Small Business Administration; if they later certified that all of the loan funds had been used for qualifying expenses, the loan would be forgiven. The Act authorized the SBA to use a streamlined rulemaking process, in order to distribute the $669 billion fund as quickly as possible. The SBA’s Interim Final Rules rendered many small business owners with criminal records ineligible; the Interim Final Rules were changed several times between April and June 2020.

On June 16, 2020, three organizations and two individual plaintiffs filed this lawsuit challenging the legality of the SBA’s decision to exclude small business owners based on their criminal histories. Represented by the ACLU, the Public Interest Law Center, the Washington Lawyers’ Committee for Civil Rights and Urban Affairs, and private counsel, they sued the Small Business Administration in the U.S. District Court for the District of Maryland. Their complaint alleged that the SBA had no statutory authority under the CARES Act to add the criminal record exclusions; that the exclusions were arbitrary and capricious in violation of the Administrative Procedure Act; that the exclusions had a disparate impact on communities of color; and that the multiple changes to the Interim Final Rules had made it impossible for some qualifying small business owners to apply before the June 30 application deadline. The case was assigned to Judge Catherine C. Blake.

The plaintiffs sought a judgment declaring unlawful and setting aside the SBA’s rulemaking action. They also sought an injunction that would:
  1. bar the SBA from denying Paycheck Protection Program funds to applicants because of their criminal records,
  2. compel the SBA to extend the application deadline three weeks (to July 21, 2020) in all of the states where the plaintiffs operated (Maryland, California, Colorado, Connecticut, Illinois, New York, and Washington), and
  3. reserve sufficient funds ($31,500) to fill the plaintiffs’ loan requests.
They also sought attorneys’ fees and costs.

The SBA issued a new set of rules on June 24, which made all of the plaintiffs eligible to apply for loans. However, in a June 29, 2020 ruling, the court declined to dismiss the plaintiffs’ claims as moot. The SBA had not demonstrated that the plaintiffs would not again be excluded from loan consideration; additionally, the SBA had not granted the requested deadline extension. In that decision, the court found that the June 24 Interim Final Rule was a permissible interpretation of SBA’s statutory authority under the CARES Act. The plaintiffs were thus unlikely to prevail on their claims that the June 24 Interim Final Rule was arbitrary and capricious or contrary to law. The court found, however, that the plaintiffs were likely to succeed on their arbitrary-and-capricious claims regarding the earlier incarnations of the Interim Final Rule; for that reason, the court granted a preliminary injunction ordering the deadline extended to July 21 for the named plaintiffs, but declined to issue any other requested relief.

On July 4, 2020, President Trump signed follow-up legislation that gave all business owners eligible under the June 24 Interim Final Rule until August 8, 2020 to apply.

As of July 29, 2020, further developments in the litigation are pending.

Gregory Marsh - 08/05/2020


compress summary

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Issues and Causes of Action
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Issues
Content of Injunction
Preliminary relief granted
General
Funding
Public benefits (includes, e.g., in-state tuition, govt. jobs)
Plaintiff Type
Non-profit NON-religious organization
Private Plaintiff
Causes of Action Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.
Defendant(s) United States Department of the Treasury
United States Small Business Administration
Plaintiff Description Small business owners with prior criminal convictions, seeking to qualify for Paycheck Protection Program loans during the COVID pandemic.
Indexed Lawyer Organizations ACLU National (all projects)
Public Interest Law Center (PILCOP)
Washington Lawyers' Committee
Class action status sought No
Class action status granted No
Filed Pro Se No
Prevailing Party Mixed
Public Int. Lawyer Yes
Nature of Relief Preliminary injunction / Temp. restraining order
Source of Relief Litigation
Filed 06/16/2020
Case Ongoing Yes
Additional Resources
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  See this case at CourtListener.com (May provide additional documents and, for active cases, real-time alerts)
  Defy Ventures, Inc. v. Small Business Administration
American Civil Liberties Union
Date: Jun. 18, 2020
By: American Civil Liberties Union
[ Detail ] [ External Link ]

Docket(s)
1:20-cv-1838-CCB (D. Md.)
CJ-MD-0006-9000.pdf | Detail
Date: 06/29/2020
Source: PACER [Public Access to Court Electronic Records]
General Documents
Complaint for Declaratory and Injunctive Relief [ECF# 1 (incl. 1-1 to 1-27)]
CJ-MD-0006-0001.pdf | Detail
Date: 06/16/2020
Source: PACER [Public Access to Court Electronic Records]
Plaintiffs' Emergency Motion for Preliminary Injunction [ECF# 2, 2-1, 2-2]
CJ-MD-0006-0002.pdf | Detail
Date: 06/16/2020
Source: PACER [Public Access to Court Electronic Records]
Defendants' Memorandum in Opposition to Plaintiffs' Motions for Temporary Restraining Order and Preliminary Injunctions [ECF# 29, 29-1, 29-2]
CJ-MD-0006-0003.pdf | Detail
Date: 06/24/2020
Source: PACER [Public Access to Court Electronic Records]
Defendants' Notice of Supplemental Authority in Support of their Opposition to Plaintiffs' Motions for Temporary Restraining Orders on Preliminary Injunctions [ECF# 32]
CJ-MD-0006-0007.pdf | Detail
Date: 06/25/2020
Source: PACER [Public Access to Court Electronic Records]
Reply Memorandum in Support of Emergency Motion for Preliminary Injunction [ECF# 34 (incl. 34-1 to 34-15)]
CJ-MD-0006-0005.pdf | Detail
Date: 06/25/2020
Source: PACER [Public Access to Court Electronic Records]
Defendants' Second Notice of Supplemental Authority in Support of their Opposition to Plaintiffs' Motions for Temporary Restraining Orders or Preliminary Injunctions [ECF# 36]
CJ-MD-0006-0008.pdf | Detail
Date: 06/26/2020
Source: PACER [Public Access to Court Electronic Records]
Defendants' Notice of Filing [ECF# 37]
CJ-MD-0006-0009.pdf | Detail
Date: 06/27/2020
Source: PACER [Public Access to Court Electronic Records]
Update in Response to Court's Request for Clarification at June 29, 2020 Conference Call [ECF# 38 (& 38-1)]
CJ-MD-0006-0006.pdf | Detail
Date: 06/29/2020
Source: PACER [Public Access to Court Electronic Records]
Memorandum [ECF# 39, 40] (2020 WL 3546873) (D. Md.)
CJ-MD-0006-0004.pdf | WESTLAW | Detail
Date: 06/29/2020
Source: PACER [Public Access to Court Electronic Records]
show all people docs
Judges Blake, Catherine C. (D. Md.) show/hide docs
CJ-MD-0006-0004 | CJ-MD-0006-9000
Plaintiff's Lawyers Alderdice, Jacob (New York) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Bracey, Kali (District of Columbia) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Calvo-Friedman, Jennesa (New York) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
De Palma, Claudia (Pennsylvania) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Deutsch, Elizabeth (District of Columbia) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Lieberman, Hannah E. M. (District of Columbia) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006
Moore, ReNika C (New York) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Morris, Lauren (District of Columbia) show/hide docs
CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Niles-Weed, Robert (New York) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Ortiz, Alejandro (New York) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Tripp, Zachary D. (District of Columbia) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Wasik, Joanna K. (District of Columbia) show/hide docs
CJ-MD-0006-0001 | CJ-MD-0006-0002 | CJ-MD-0006-0005 | CJ-MD-0006-0006 | CJ-MD-0006-9000
Defendant's Lawyers Gilligan, James J (District of Columbia) show/hide docs
CJ-MD-0006-0003 | CJ-MD-0006-0007 | CJ-MD-0006-0008 | CJ-MD-0006-0009 | CJ-MD-0006-9000
Griffiths, John R. (District of Columbia) show/hide docs
CJ-MD-0006-0003 | CJ-MD-0006-0007 | CJ-MD-0006-0008 | CJ-MD-0006-0009
Hunt, Joseph H. (District of Columbia) show/hide docs
CJ-MD-0006-0003 | CJ-MD-0006-0007 | CJ-MD-0006-0008 | CJ-MD-0006-0009
Morrell, David Michael (District of Columbia) show/hide docs
CJ-MD-0006-0003 | CJ-MD-0006-0007 | CJ-MD-0006-0008 | CJ-MD-0006-0009
Sur, Indraneel (District of Columbia) show/hide docs
CJ-MD-0006-0003 | CJ-MD-0006-0007 | CJ-MD-0006-0008 | CJ-MD-0006-0009 | CJ-MD-0006-9000
Womack, Eric R. (District of Columbia) show/hide docs
CJ-MD-0006-0003 | CJ-MD-0006-0007 | CJ-MD-0006-0008 | CJ-MD-0006-0009

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