Shuttered Venues Are Suing the SBA Over Grant Denials

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Venues who are were denied federal funding under the Shuttered Venue Operators Grant program are taking their cases to court.

The Small Business Administration and SBA administrator Isabella Casillas Guzman are now facing multiple lawsuits over the program, which was signed into law last December to help independent live entertainment businesses that have been shutdown due to the pandemic. Since finally opening the application portal for the grants on April 26, the SBA has distributed $9.5 billion to more than 12,000 companies — but also denied more than 4,500 applications.

On Thursday, law firm Akin Gump Strauss Hauer & Feld filed two lawsuits in the U.S. District Court for the District of Columbia on behalf of Sokol World Entertainment in Beverly Hills, Calif., and MomoCon in Atlanta, claiming its clients were unlawfully declined for the grants. 

Sokol owns North Hollywood, Calif. Space Club Cobra that the lawsuit describes as a Latin gay club that “puts on shows by local singers, DJs, dancers, and performers, tailored to the LGBTQ+ and Latino community.” The company claims to have lost 90% of its revenue in 2020 due to the pandemic. 

MomoCon in Atlanta, according to the lawsuit, is a small business that promotes live concerts, performances, panels, competitions, and theatrical productions by rock bands, R&B artists, electronic artists, orchestras and cultural performers. It sought more than $1 million in federal funds from the grant program and, like Sokol, had its initial application and appeal denied last month.  

Both lawsuits are requesting that the SBA set aside the funds the businesses believe they are eligible for, reassess their applications and award the requested funds for both the initial and the second round of supplemental grant amounts. Lawyers from Akin Gump Strauss Hauer & Feld declined to comment 

The SBA’s troubles don’t stop there — more lawsuits may be coming. Maher Law Firm in Florida has created a website for declined grant applicants to file suit against the SBA as well. The site reads, “Have you or your business been denied necessary money under the Shuttered Venue Operators Grant (SVOG) program? If so, you’re not alone.” The site claims that the denial rates for the SVOG program “significantly exceed typical government grant programs.” The Maher Firm has teamed up with Wagstaff & Cartmel, as well as the law firm of Jeffrey E. McFadde to bring the cases to Washington, D.C. and, according to the site, the cases will be handled on a contingency fee basis, meaning there will be no cost for clients unless their case is resolved. The Maher Firm also declined to comment.  

Applications for the Shuttered Venue Operators Grant closed on Aug. 20 after a rocky rollout. Following the bill’s signing in December, the SBA took more than four months to successfully launch the grant application process. Venues, promoters, agencies and others did not begin to see funds until late May and by August 1 in 5 applications had been denied without explanation. The SBA is currently in the process of awarding supplemental grants — which can total 50% of a business’s initial grant — with the additional $6 billion.  

“There is a balancing act we have to do. The level of specificity slows things down,” SBA senior advisor for COVID-19 programs Deidra Henry-Spires told Billboard in late July. “There are conversations we can have after we’ve seen the whole unit of declines once we’ve gotten through [all the applications that came in the first 60 days]. But often in grant programs, you don’t get a personalized reason for your declination.” 

When asked for comment, the SBA told Billboard, “As per longstanding agency policy, SBA does not comment on ongoing litigation.”

 
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