## EL K ASSOCI ATES FUN DI NG CORPOR ATI ON, Plaintiff,

v. UNI TED STATES SMAL L BU SI NESS ADMI NI STRATI ON, and KAREN G. MI L L S, Adminis trator of the United States Small Business Administration, Def endants. UNITED STAT ES DIS TRICT COURT

F OR THE DIS TRICT OF COLUM BIA

Civil Action No. 12-00438 ( CKK)

MEMORAN DUM OP INION (April 24, 2012) Elk Associates F unding Corpor ation (“EL K”) bring s this action ag ainst the United States Small Business Administration (the “SBA ”), seeking relief under the Administrative Procedur e 1


## Act and the Due Proc ess Clause of the Fifth Ame ndment to the United States Constit ution for the SBA’s a lleg edly

arbitra ry and ca pricious conduc t. Currently befor e the Court is EL K’s [3] Motion for Preliminary

I njunction and Tempora

ry Restraining Orde r (“ Motion for Preliminary Relief”)

. Upon consider ation of the pa rties’ submissions, the releva nt authorities, and the r ecor d 2



## as a w hole, EL K’s Motion for Preliminary Relief shall be D ENI ED.

T o b e p r e c i s e , E L K n a m e s b o t h t h e S B A a n d i t s A d m i n i s t r a t o r a s d e f e n d a n t s . B e c a u s e n o p a r t y s u g g e s t s 1 t h a t t h e r e i s a m a t e r i a l d i f f e r e n c e b e t w e e n t h e S B A a n d t h e A d m i n i s t r a t o r f o r p u r p o s e s o f t h e C o u r t ’ s a n a l y s i s , t h e C o u r t s h a l l , f

o r p u r p o s e s o f c o n v e n i e n c e , s i m p l y r e f e r t o b o t h d e f

e n d a n t s a s “ t h e S B A

. ”
T h e C o u r t d e n i e d E L K ’ s M o t i o n f o r P r e l i m i n a r y R e l i e f i n s o f a r a s i t s o u g h t a t e m p o r a r y r e s t r a i n i n g o r d e r 2
o n M a r c h 2 1 , 2 0 1 2

. S e e i n f r a P a r t I I

. C

.

## I. OVERVIEW

Since 1980, EL K has be en license d to opera te as a Small Business I nvestment Company (“SB I C”) under

the auspice s of the SBA . Over the y ear s, it has rec eived substantial fina ncial assistance from the SB A and, today , EL K has more than $21 million i n outstanding de bt obliga tions that are he ld directly by the SBA.
Be g inning in Mar ch 2010, as a result of mounting losses, the condition of EL K’s priva te capital ha d deter iorated to such a point that the company

no longe r met the minimum threshold set by reg ulation—a “c ondition of capital impairment” tha t trigg ere d an eve nt of defa ult with an opportunity

to cure . On J uly

20, 2010, the SBA notified E L K that it was in defa ult and war

ned the company

that it had a per iod of fiftee n day s to cure its condition of ca pital impairment. On Aug ust 4, 2010, EL K re ceive d a modest ca sh infusion, but because its financial condition had further deter iorated by

that point, the cash infusion fa iled to cure the company ’s condition of capital impairme nt. I n the months that followed, EL K pursued a varie ty of transa ctions with third-par ty investors in an attempt to secur e the pr ivate ca pital neede d to come into compliance with the applicable reg ulations. I n the end, none of those tra nsactions ca me to fruition and
EL K’s fina

ncial condition only

continued to furthe r dete riorate . On Fe bruar y 22, 2012, more than one y ear

and seve n months after EL K was notified tha t it was in default and ne eded to c ure its condition of capital impairment, the SBA internally transfe rre d the company

to a unit responsible for

the orde rly

liquidation of SBI Cs. There afte r, fa ced w ith EL K’s thre ats of litiga tion, the SBA voluntarily ag ree d to suspend all further liquidation activities and, on Marc h 6, 2012, the SBA issued EL K a se cond for mal notice of its condition of ca pital impairment, reiter ating that the company was in def

ault and

2

## war

ning tha t it had a per iod of fiftee n day s to cure. O n Marc h 13, 2012, afte r EL K proposed submitt ing c erta in unfunded c ommitm ent letters a s a propose d cure , the SBA pr ovided EL K with a letter identify ing pote ntial problems with the company ’s proposed a pproac h. Claiming that the SBA had imposed unre asonable conditions on its abili ty to cure , EL K failed to submit the proposed c ommitm ent letters to the SB A within the fiftee n-day period or, f

or that matter, a t any

time therea fter. I

nstead, EL K commenc ed this action on Mar ch 20, 2012, seeking relief

under the Administrative Procedur e Ac t and the Due Process Clause of the Fif th Amendment for

the SBA’ s alleg edly

arbitra ry and ca pricious conduc t. After the action wa s filed, the SBA voluntar ily

ag ree d to refr ain from e ng ag ing in f urther liquidation ac tiviti es involving
EL K until and including A pril 25, 2012, prese rving the status quo until then and aff ording EL K

even mor e time to cure its condition of capital impairment.
EL K now come s to this C ourt seeking the extraordinar

y relief of a pr eliminary

injunction, claiming that the SBA a cted a rbitrar ily and ca priciously by failing to provide the c ompany with sufficie nt notice of its condition of ca pital impairment or a mea ningf ul opportunity

to cure

. Every thing in the r ecor d bespea ks to the contrar

y . The c ase c omes to the Court after EL K has alre ady been pr ovided forma l notice of its condition of ca pital impairment on two occa sions and it is undi sputed that EL K continues to have a condition of c apital impairment to this day

. Despite ha ving mor e than one y ear and nine months to do so, EL K has not cur ed its condition of capital impairme nt nor has it prese nted this Court with any cre dible evidenc e that it can

rea listi cally

do so. I n fac t, EL K’s condition of c apital impairment has only worsene d over time.

3

## On the re cord pr esente d, the Court conclude s that EL K has fa iled to car ry its burden of showing 2


## a likelihood of succ ess on the mer its. Further more, e ven assuming that EL K will suffer some irrepa rable harm a

bsent a pre liminary

injunction, the Court finds that the balance of the e quities weig h ag ainst the issuance of an injunction. Ac cording ly , considering the re cord a s a whole,
EL K’s Motion for Preliminary Relief shall be D ENI ED. II. BACKG ROUND A. Statutory and Regulatory Background Under the Small Business I nvestment Act, the SB A is empower ed to license private companies, inc luding, a t the time of EL K’s licensing , corpor ations, as SBI Cs. See 15 U.S.C. § 681(c) . To enc ourag e the f ormation and g rowth of SB I Cs, Congre ss authorized the SBA to provide fina

ncial assistanc e to SBI Cs by matching up to 200%, and in some ca ses 300%, of a n SBI C’s qualify ing c apital commitments and investments. See id. § 683(b). This fina ncial assistance , which g ener ally occur s by

the SBA’ s purcha se or g uara nty of an SB I C’s debenture s 3


## or par ticipating se curities, is known as “ lever ag e.” See id. ; 13 C.F.R. § 107.50. SBI Cs, in turn, use this low-cost, g overnme nt-g uara nteed c apital to make investments in small businesses throug hout the United States.

T h e C o u r t ’ s o p i n i o n t o d a y i s , a s a m a t t e r o f n e c e s s i t y , b a s e d s o l e l y o n t h e r e c o r d p r e s e n t e d a t t h i s e a r l y 2 p r o c e d u r a l p o s t u r e . N o t h i n g h e r e i n s h o u l d b e c o n s t r u e d a s f o r e c l o s i n g t h e p a r t i e s f r o m r e v i s i t i n g c e r t a i n a r g u m e n t s , w h e n a p p r o p r i a t e , u p o n f u r t h e r d e v e l o p m e n t o f t h e r e c o r d

. A d e b e n t u r e i s a d e b t s e c u r e d o n l y b y a d e b t o r ’ s e a r n i n g p o w e r , n o t b y a l i e n o n a n y s p e c i f i c a s s e t

. 3 B L A C K ’ S L A W D IC T IO N A R Y 4 6 0 ( 9 t h e d

. 2 0 0 9 )

. I n t h i s c o n t e x t , a d e b e n t u r e i s a d e b t o b l i g a t i o n i s s u e d b y a l i c e n s e e u n d e r 1 5 U

. S

. C

. § 6 8 3 ( a ) a n d h e l d o r g u a r a n t e e d b y t h e S B A

. 

## 4

## 1. SBI Cs and Capital I mpairment

The SBA ’s Off

ice of SBI C Opera tions, part of the Small Business I nvestment Division, is responsible for

monitoring SBI Cs. I t is the office that deter mines whether

an SBI C is in compliance with applicable r eg ulations, including, most g erma ne to this action, those re lating to “ca pital impairment.” Capital impairment is a conc ept that re fer s to the deg ree to which the private c apital of a

n SBI C has deter iorated be cause of ac cumulated losses, both re alized and

unrea liz ed, and thus ser

ves as a n important indicator of r isk in the SBA’s leve rag e position. See U.S. S M A L L 

## B U S I N E S S 

## A D M I N I S T R A T I O N 

## , O V E R S I G H T 

## & R E G U L A T I O N S O F 

## SBI C’ S 

## I N V E S T M E N T 

## D I V I S I O N 

## , S T A N D A R D 

## O P E R A T I N G 

## P R O C E D U R E S 

## 10 06 (“SOP 10 06”), c h. 6 para . 10 (2007). Capital impairment is calcula ted by adding an SBI C’s undistributed net rea liz ed loss and
net unre alized depre ciation and dividing the re sult by the SBI C’s private c apital. See 13 C.F.R. § 107.1840(c) . I f an SB I C ex cee ds the maxi mum applicable c apital impairment per centa g e, which is established by

reg ulation, then the SBI C is said to have a c ondition of capital impairment. See 4


## id. § 107.1830(c) . For

SBI Cs like EL K, a c apital impairment per centa g e in excess of 40% constitutes a condition of ca pital impairment. See id. § 107.1830(c) (2). SBI Cs are oblig ated to dete rmine whe ther they have a condition of ca

pital impairment “as of the e nd of ea ch fisca l quarter ,” and must “pr omptly ” notify the SBA if the y

do, id. § 107.1830(e) , but the SBA re tains the rig ht to make its own determination of a n SBI C’s capital impairment “a t any

time,” id. § 107.1830(f) . The SBA calc ulates an SB I C’s capital impairment
perc entag e base d on information provided by the SBI C in an audited financ ial statement known

C o n v e r s e l y , i f a n S B I C h a s p o s i t i v e u n d i s t r i b u t e d n e t r e a l i z e d e a r n i n g s a n d n e t u n r e a l i z e d a p p r e c i a t i o n , 4 t h e n i t i s c o n s i d e r e d t o h a v e n o c a p i t a l i m p a i r m e n t

. I n s u c h a c a s e , t h e S B A ’ s l e v e r a g e p o s i t i o n i s p r o t e c t e d

. 

## 5

## as a F orm 468, which a sks an SBI C to provide detailed infor mation about its assets, liabilit ies, capital, a nd financ ial activities. Eac h SBI C must fil e an a nnual For m 468 on or befor e the last day of the third month following the end of the fisca l y ear , and an SB I C with outst anding lever ag e, such a s EL K, must also file an interim F orm 468 within thirty day s of the close of ea ch fiscal qua rter. See id. §§ 107.630(a) , 107.1220. 2. Capital I mpairment as a n Event of De fault By reg ulation, a condition of ca

pital impairment is an event of defa ult with opportunit y

to

cure . See 13 C.F.R. § 107.1810(f) (5). When an SB I C has a condition of c apital impairment, the SBA must provide “ written notice” to the SBI C, id. § 107.1810(g )(1) , and af ford the SB I C “at least 15 day s to cure the defa ult(s),” id. § 107.1810(g )(2) (i). I f the SBI C “fail[s] to cure the defa ult(s) to [t he] SBA’s satisfa ction within the allotted time,” id. § 107.1810(g )(2) (ii), then the SBA may decla re the entire inde btedness evide nced by the SBI C’s debenture s, including a ccr ued interest and a

ny other a mounts owed, “immediately due and pa

y able,” id. § 107.1810(g )(1) (i), instit ute proc eeding s for the a ppointment of the SBA or its designe e as the SBI C’s rec eiver , id. § 107.1810(g )(1) (ii), or a vail itself of any other re medies ava ilable by statute, id. As afor ementioned, the SB A must affor d an SBI C “at lea st 15 day s to cure” a condition of ca pital impairment befor e invoking any available reme dies. Id. § 107.1810(g )(2) (i). B ey ond that initial fifteen-da

y period, howe ver, the SBA ha s declined to e stablish categ orica l time lim its for c uring a condition of c apital impairment, adoptinginstead a c ase- by -ca se appr oach tha t leaves it to the Office of SBI C Opera tions to ex erc ise “prude nt business judgment” based on the particula rs of a g iven ca se. SOP 10 06, ch. 5 para . 8(a) . I n making its determination, the Off ice of SBI C Opera tions must take into ac count, among other re levant conside rations, (i) whe ther the

6

## SBI C has the “a bility . . . to take the r equeste d action,” a nd (ii) “[w]hether cor

rec tive action wa s previously

reque sted.” Id. As an e x ample of a n appropr iate time fra

me, the SBA has provided that a ca pital impairment resolution plan should ge nera lly be submitted within fifteen da y s. See id. 3. Transf er to the O ffice of SBI C L iquidation When an SBI C “ca

nnot or does not cur e” a

condition of ca

pital impairment, it is transfe rre d from the Of

fice of SBI C Opera tions to t he Of fice of SBI C L iquidation, the part of the Small Business I nvestment Division that is responsible for the or derly liquidation of SBI Cs. U.S. S M A L L 

## B U S I N E S S 

## A D M I N I S T R A T I O N 

## , O F F I C E O F 

## SBI C L I Q U I D A T I O N 

## , SBI C L I Q U I D A T I O N 

## , S T A N D A R D 

## O P E R A T I N G 

## P R O C E D U R E S 

## 10 07 1 (“SOP 10 07”), c h. 9 para . 2 (2007); see also SOP 10 06, ch. 1 par a. 2(b) (4). The primary g oal of the O ffice of SBI C L iquidation is t o maxi miz e
net re cover ies in liquidation, t aking into consideration the time value of money , and fur thering the integ rity

of the SBI C prog ram while r ecog nizi ng the intere sts of aff ecte d parties, suc h as the small businesses that are funded by SBI Cs. See SOP 10 07, ch. 1 par a. 4(a ). An SBI C is said to be “in liquidation” as soon as over sight re sponsibili ty is transfer

red from the Of

fice of SBI C Opera tions to t he Of fice of SBI C L iquidation. See SOP 10 06, ch. 9
para . 1. Severa l fac tors may aff ect the de termination of pre cisely when tra nsfer is appropria te, including, but not limited to, (i) whether the SBI C has net unre alized appre ciation that, if counted, would r educe its capital impairment per centa g e below the maxi mum allowable threshold, (ii) whe ther the SB I C has prese nted satisfac tory evidenc e of a

liquidit y event due within three qua

rterly pay ment dates that would re duce its ca pital impairment perc entag e below the maxim um allowable thre shold, (iii) whether the SBI C is only “mar g inally

impaired,” define d

7

## as being within five perc entag e points of the maximum allowable c apital impairment per centa g e,

and (iv) w hether

the SBI C is in t he proc ess of ra ising ne w ca pital. SOP 10 06, app. 9-1.
“I n most cases,” an SBI C will be provided adva nce notice of a “ possible transfe r” to the Offic e of SB I C L iquidation. SOP 10 06, ch. 9 par a. 4. I n addition, “[o] nce a licensee has bee n transfe rre d, the Off

ice of SBI C L iquidation will s end a le tter notify ing the licensee of the transfe r.” Id. 4. Acc eler ation of an SB I C’s Debe ntures in L iquidation When an SBI C is transferr ed to the Of fice of SBI C L iquidation, “pay ment of [the SBI C’s] debentur es is acc eler ated.” SOP 10 06, ch. 9 para . 5. Although c onsistently confla ted by

EL K, there are actua lly

two distinct steps in t his process. As a first step, the SBA

“will arr ang e to
repur chase the license e’s de benture s . . . from the pool[ing] [ instit ution] by notify ing the trustee of the a cce lera tion of the debe ntures.” Id. At that point, the SBA holds the debe ntures dire ctly and, af ter providing “wr itten notice” to the SB I C, the SBA may acc eler ate the SB I C’s pay ment by decla ring the SBI C’s entire indebte dness, including acc rued inter est and a ny other a mount owed, “ immediately

due and pa

y able.” 13 C.F.R. § 107.1810(g )(1) (i). Unless a nd until the SBA

acc eler ates the SB I C’s pay ment, the SBI C continues to repa y any debentur es and inter est on the
same ter ms and conditions as it previously paid, albeit dire ctly

to the SBA.
5. Transf

er B ack to the O ffice of SBI C Opera tions When an SBI C is transferr ed to the Of fice of SBI C L iquidation, liqui dation is not inevitable. Rather , provided “ cer tain conditions are me t, the Offic e of SB I C L iquidation can

rec ommend that a license e be tr ansfe rre d back to [the Off ice of SBI C Opera tions] .” SOP 10 06, ch. 9 par a. 6. The Offic e of SB I C Opera tions “may impose [any ] conditi ons deeme d nece ssary at

8

## the time of transf er,” but an SBI C must, “[ a]t a minim um, . . . demonstrate viability and mee t the licensing standards in e ffe ct at the time of the proposed tra nsfer .” Id. One of the way s an SBI C may

incre ase its private capital to cur e a c ondition of capital impairment is throug h a ca sh infusion. Som etimes, transa ctions by which third par

ties infuse cash into an SB I C are struc tured in such a manner that they result in a cha

ng e in control of the SBI C, either throug h a cha ng e in owner ship or otherwise. B y reg ulation, an SBI C must obt ain the SBA’ s prior written a pproval of a

ny proposed tra

nsaction that re sults in a chang e in control by an individual or entity

that has not previously

been a pproved by

the SBA. See 13 C.F.R. § 107.410(a) . The SBA may condition approva l on (1) an inc rea se in the SBI C’s private c apital, (2) the tr ansfe ree ’s assumption of persona l liabilit y for the SB I C’s levera g e, and ( 3) “a ny other conditions set by

[t he] SBA, including compliance with the require ments for minimum capital and mana g ement-ow nership diver sity as in eff ect a t such time for ne w license applicants.” Id. § 107.440. On this final point, the so-called ma nag ement-ow nership diver sity (“MOD ”) r equire ment has its roots in the SBA’s statutory duty to ensure tha t the manag ement of ne w SBI Cs—specifica lly , those licensed a fter Septe mber 30, 1996—a re “ sufficie ntly

diversified f

rom and unaf filiated” w ith their ownership, something that is designe d to ensure ma nag ement’s “indepe ndence and objec tivity in the financ ial manag ement and ove rsig ht of the investments and
opera tions of the licensee .” 15 U.S.C. § 682(c) . But the MOD require ment is not irreleva nt for SBI Cs, like EL K, that wer e license d befor e the a pplicable statutory

date. Rathe r, as afor ementioned, whe n an SBI C seeks appr oval for a n event that r esults in a chang e of c ontrol, the SBA may condition its approval on compliance with the MOD re quirement. See 13 C.F.R. §§

9

## 107.150(a) (3), 107.440( c).

The MOD r equire ment can be further divided into three sepa

rate sub-re quirements, only one of w hich has much be aring on this case—the pe rce ntag e owne rship require ment. See 13 C.F.R. § 107.150(b)- (d). B y reg ulation, no person or g roup of a ffiliated pe rsons may direc tly or indirectly own or c ontrol more than 70% of an SB I C’s private c apital. Id. § 107.150(b)( 1).
Howeve r, an e x emption from the per centa g e owne rship require ment is made for “tra ditional investment compan[ies].” Id. § 107.150(b)( 2). To qualify for the e x ception, the c ompany “must be a pr ofessionally

manag ed firm or g anized exclusively to pool capital from more than one

source for the pur

pose of investing in businesses that are expected to g ener ate substantial re turns to the firm’s investors.” Id. I n addition, the SBA will consider : “(i) [w]hether the mana g ers of the firm ar e unre lated to and una ffiliated with the investors in the f irm; (ii) [w] hether

the
manag ers of

the firm ar e author ized and motivated to make investments that, in their indepe ndent judgme nt, are likely

to produce signific ant re turns to all investors in the firm; (iii) [w] hether the firm bene fits from the use of the SBI C only

throug h the financ ial perf ormanc e of the SBI C; and (iv) [o] ther re lated fa ctors.” Id. A sec ond way

an SBI C may

incre ase its private capital to cur e a c ondition of capital impairment is by

obtaining unf

unded binding commitments by qualified institutional investors. To qualify , an instituti onal investor must have a net worth of at least $1 milli on. See id. § 107.50. Moreove r, an unf unded binding commitment from an instituti onal investor ca nnot be counted towa

rds an SB I C’s private c apital if (1) the institut ional investor has a net worth of le ss than $10 million and (2) the commitment exceeds 10% of the investor’s ne t worth. See id. § 107.230(b)( 4). I f those conditions apply , then the commitment must be backe d by a letter of

10

## cre dit from a bank a cce ptable to the SBA

. See id.

B. Case-Specific Background 5


## EL K, a wholly

owned subsidiary

of Amer itrans Capital Corporation (“ Ameritra ns”), wa s first licensed a s an SBI C in 1980. Over the y ear s, it has rec eived substantial fina ncial assistanc e 6


## from the SB A. Today , EL K has a pproxi mately

$21,175,000 of outstanding debentur es that we re issued betwee n J uly

2002 and De cembe r 2009. A.R. 14. This fig ure r efle cts, in eff ect, public 7 

## monies that have be en extended to EL K to fac ilitate its abili ty to function in the marke tplace. 1. EL K’s Condition of Capital I mpairment On J une 21, 2010, EL K submitted its i nterim For m 468 for the f

iscal quar ter e nding on
Marc h 31, 2010. A.R. 3. EL K’s submission was more than a month and three wee ks late. EL K should have submitted its int erim F orm 468 by no later tha

n April 30, 2010. See 13 C.F.R. § 107.1220. After revie wing the financ ial information provided by EL K in its Form 468, the SBA ’s

T h e C o u r t a v o i d s t h e p h r a s e “ f a c t u a l b a c k g r o u n d ” b e c a u s e , i n s o f a r a s E L K s e e k s r e l i e f u n d e r t h e 5 A d m i n i s t r a t i v e P r o c e d u r e A c t , “ [ t ] h e e n t i r e c a s e i s a q u e s t i o n o f l a w ” a n d t h e “ c o m p l a i n t , p r o p e r l y r e a d , a c t u a l l y p r e s e n t s n o f

a c t u a l a l l e g a t i o n s , b u t r a t h e r o n l y a r g u m e n t s a b o u t t h e l e g a l c o n c l u s i o n [ s ] t o b e d r a w n a b o u t t h e a g e n c y a c t i o n . ” M a r s h a l l C n t

y
. H e a l t h C a r e A u t h

. v
. S h a l a l a , 9 8 8 F

. 2 d 1 2 2 1 , 1 2 2 6 ( D

. C

. C i r . 1 9 9 3 )

. A s a c o r p o r a t e S B I C o r g a n i z e d a n d l i c e n s e d f o r o v e r t h i r t y y e a r s , E L K e n j o y s c e r t a i n b e n e f

i t s t h a t a r e n o t 6
a v a i l a b l e t o n e w l i c e n s e e s .

W h e r e a p p r o p r i a t e , t h e C o u r t s h a l l c i t e t o t h e c e r t i f i e d A d m i n i s t r a t i v e R e c o r d w i t h t h e a b b r e v i a t i o n 7

“ A

. R

. ” f o l l o w e d b y t h e r e l e v a n t p a g e n u m b e r ( s )

. S e e E C F N o s . [ 1 3 ] , [ 1 6 ]

. I n t h i s c a s e , t h e S B A m a d e a n a d m i r a b l e e f f o r t t o c o m p i l e t h e A d m i n i s t r a t i v e R e c o r d o n a n e x t r a o r d i n a r i l y a b b r e v i a t e d s c h e d u l e , a n d i t s d e s i g n a t i o n “ i s e n t i t l e d t o a s t r o n g p r e s u m p t i o n o f r e g u l a r i t y . ” M a r c u m v
. S a l a z a r , 7 5 1 F

. S u p p . 2 d 7 4 , 7 8 ( D

. D

. C

. 2 0 1 0 )

. I n d e e d , t h e S B A c l e a r l y p r o d u c e d a l a r g e n u m b e r o f d o c u m e n t s t o w h i c h E L K n o r m a l l y w o u l d n o t e v e n b e e n t i t l e d s i m p l y t o a v o i d t r i v i a l d i s p u t e s t h a t w o u l d d e l a y t h e r e s o l u t i o n o f t h e p e n d i n g m o t i o n . D e s p i t e h a v i n g r a i s e d a l i t a n y o f c o m p l a i n t s , m a n y o f w h i c h h a v e b e e n a d d r e s s e d a n d r e j e c t e d b y t h e C o u r t d u r i n g c o n f e r e n c e s w i t h t h e p a r t i e s , E L K h a s f a i l e d t o a d d u c e a n y t h i n g r e m o t e l y a p p r o a c h i n g t h e “ c l e a r e v i d e n c e ” r e q u i r e d t o o v e r c o m e t h e s t r o n g p r e s u m p t i o n o f r e g u l a r i t y t o w h i c h t h e S B A i s e n t i t l e d

. C a l l o w a y v
. H a r v e y , 5 9 0 F

. S u p p . 2 d 2 9 , 3 7 ( D

. D

. C

. 2 0 0 8 )

. N o r h a s E L K i d e n t i f

i e d a t a i l o r e d , n o n - s p e c u l a t i v e r e q u e s t s u f f i c i e n t t o s u p p o r t a r e q u e s t f o r d i s c o v e r y i n a n y c o n t e x t , l e t a l o n e i n t h e c o n t e x t o f t h e s e e x p e d i t e d p r o c e e d i n g s . 

## 11

## Offic e of SB I C Opera tions determined that EL K had e x cee ded it maxi mum allowable ca pital impairment perc entag e—that is, 40%—an e vent of de fault with opportunity to cure

. See 13 C.F.R. §§ 107.1810(f) (5), 107.1830( c)( 2). On July 13, 2010, the Off

ice of SBI C Opera tions informed EL K that the compa ny had a c apital impairment per centa g e of 40.1% , asked EL K to confirm that it ag ree d with the calc ulation, and notified EL K that “[a] condition of Capital
I mpairment will require the sche duling of a portfolio re view mee ting to discuss the status of [EL K’s] portfolio and plan to cure the impairment and the possible issuance of a 15 day cure letter.” A.R. 7. Two day s later, on July 15, 2010, the Off

ice of SBI C Opera

tions informed EL K that the SBA w ould “issue (by the end of

the wee k or ea

rly next week) a

15 day cure letter a s a result of [EL K’s] Condit ion of Capital I mpairment as of 3/31/10.” A.R. 12. On J uly 16, 2010,
EL K re sponded to the SBA’ s communications “re g arding [EL K’s] 40.1% capital impairme nt as of Mar ch 31, 2010.” A .R. 13. EL K re prese nted that it was “a ctively working on a plan to cur e the impairment,” stating that its “Auditors and B oard of Direc tors [would m eet] next wee k to formalize a plan a

nd a re sponse.” A.R. 13. On J uly 20, 2010, the Off

ice of SBI C Opera tions, sent EL K a letter (the “ Cure L etter” ) notify ing the company

that its 40.1% capital impairment pe rce ntag e as of Marc h 31, 2010 exceede d the maxim um allowable thre shold and “instruct[ing] [EL K] to cure its condition of Capital I mpairment, no later than 15 day s from the da te of th[e] l etter [ i.e. , Aug ust 4, 2010] , to SBA’s sa tisfaction.” A.R. 14. The Cure L etter e x pressly war ned EL K that “[i] n the eve nt that the condition of Capital I mpairment [was] not cured by that date, SB A m[i g ht] invoke re medies pursuant to § 107.1810(g ) to protec t its i ntere st.” A.R. 14.

12

## By letter da ted Aug ust 3, 2010, EL K re sponded to the Cure L etter. A.R. 54. I n its letter, 8


## EL K conc eded tha t it “was not in compliance with the cited re g ulations as of Mar ch 31, 2010,” and then c ontinued to stated that EL K “ha [d] car efully revie wed this issue and ha [d] formulated a plan to bring [EL K] int o compliance , on a pro f orma ba sis, by

Aug ust 4, 2010 as y ou have require d.” A.R. 54. Specific ally , EL K re prese nted that its corpora te par ent, Amer itrans, would “invest $40,000 of ne w paid-in c apital into [ EL K] by Aug ust 4, 2010 and there by cure [EL K’s] capital impairme nt violation.” A.R. 54. EL K would there afte r “submit a new capital c ertificate to SBA demonstra ting the ba sis for [it s] compli ance with the applicable reg ulations as well as a pro for ma 468 re flec ting the inf

used ca pital.” A.R. 54. On September

1, 2010, an Ac count Executive in the Off ice of SBI C Opera tions, unaware of EL K’s letter

dated Aug ust 3, 2010, reminded EL K that the Cure L etter r equire d a re sponse within fifteen da

y s and indicate d that the ag ency had no re cord of

EL K submitti ng a re sponse, something tha t prompted EL K to send anothe r copy of the c ompany ’s re sponsive letter da ted Aug ust 3, 2010. A.R. 50, 52. Two day s later, with EL K’s re sponse in hand, the Of fice of SBI C Oper ations asked EL K to provide a copy of the c apital ce rtificate ref ere nced in the c ompany ’s letter da ted Aug ust 3, 2010. A.R. 63. W hen a c opy of the c apital ce rtificate was not forthcoming , the Off

ice of SBI C Opera tions requested a copy ag ain on September

17, 2010, and
ag ain on September

20, 2010. A.R. 65, 77, 1762. On September

22, 2010, EL K told the Offic e of SB I C Opera tions that it intended to

T h e p a r t i e s d i s p u t e w h e n t h e S B A f i r s t r e c e i v e d E L K ’ s l e t t e r d a t e d A u g u s t 3 , 2 0 1 0

. B e c a u s e t h e d i s p u t e 8 i s u l t i m a t e l y i m m a t e r i a l , t h e C o u r t s h a l l a f f o r d E L K t h e m o r e f

a v o r a b l e i n f

e r e n c e a n d a s s u m e t h a t t h e S B A ’ s o f f i c e i n W a s h i n g t o n , D

. C

. , p h y s i c a l l y r e c e i v e d E L K ’ s l e t t e r o n A u g u s t 4 , 2 0 1 0 , w i t h i n t h e f i f t e e n - d a y c u r e p e r i o d

. I r r e s p e c t i v e o f t h i s a s s u m p t i o n , e v e r y t h i n g i n t h e r e c o r d s u g g e s t s t h a t t h e r e l e v a n t a c t o r s i n t h e O f f i c e o f S B I C O p e r a t i o n s w e r e n o t a c t u a l l y a w a r e o f E L K ’ s l e t t e r u n t i l S e p t e m b e r 1 , 2 0 1 0

. S e e A

. R

. 5 0 , 5 2 , 5 5 , 5 7

. 

## 13

## “submit a new c apital ce rtificate and re vised a [sic] pro forma 468 (f or the pe riod ending 3/31/10) by

Monday September 27th.” A.R. 79. The following day , the Off ice of SBI C Oper ations responde d, reje cting EL K’s sug g ested a pproac h. A.R. 79. I n its response, the Of fice of SBI C Opera tions inst ructe d EL K that “the ne w ca pital cer tificate a nd pro for ma 468 would not be as of 3/31/10,” that instead “[t] he appr opriate da te would be the date of the c apital infusion which took place subsequent to 3/31/10,” and that a s a re sult “there w ould not be any adjustments to [ EL K’s] 3/31/10 financials.” A.R. 79. I n other wor ds, EL K was on notice that its condition of ca

pital impairment would be eva luated on an ong oing ba sis, or at the ver y least as of the date of

the ca pital infusion, and not for the f iscal quar ter e nding on Ma

rch 31, 2010. D espite these e x press instructions, by letter da ted September

29, 2010, EL K submitted a ca pital

cer tificate ba sed on EL K’s F orm 468 for the fiscal qua rter e nding on Ma

rch 31, 2010. A .R. 105- 16. Subsequently , on October 6, 2010, EL K submitted a letter f rom its banking institution confirming that $40,000 was de posited into it s acc ount on Aug ust 4, 2010. A.R. 123-24. On Octobe r 19, 2010, EL K submitted a draf t of its annual For

m 468 for the f

iscal y ear ending on J une 30, 2010, and it submitted a final ve rsion on November 22, 2010. A.R. 172-81. Even if EL K’s first submission had been in f inal form, it would have be en untimely . EL K should have submitted its annual F orm 468 by no later tha

n September 30, 2010. See 13 C.F.R. § 107.630(a) . I n any

event, the f

inancial infor

mation provided by

EL K evidenc ed that, by

the end of the fisc al y ear

on J une 30, 2010, EL K’s condition of c apital impairment had w orsene d, such that its capital impairment per centa g e had r isen to 43.5%. A.R. 199, 1762. Significa ntly , as a result of EL K’s dete riorating financ ial condition, the $40,000 capital infusion on Aug ust 4, 2010 was insuffic ient to cure EL K’s condition of c apital impairment. A.R. 199, 1762. I ndeed, in a

14

## written submission provided to the SBA on Oc tober 12, 2010, EL K ac knowledg ed that its capital

impairment perc entag e excee ded the maximum allowable threshold at the e nd of the fisc al y ear on J une 30, 2010, as w ell as at the e nd of the fisc al quar ter on Septembe r 30, 2010. A.R. 139, 156. 2. The Proposed CN Tr ansac tion On Fe bruar

y 8, 2011, approximately

seven months and two we eks af ter the Cure L etter, EL K sent a le tter to the Off ice of SBI C Opera tions, acknowledg ing tha t it had an “e x isting condition of ca

pital impairment” and infor ming the O ffice of SBI C Opera tions that it s corpor ate
pare nt, Ameritrans, “ ha[d] been a ctively seeking new c apital investment.” A.R. 213. EL K then
proce eded to de scribe a

“possible” tra

nsaction throug h which a third- party investor, an e ntity
manag ed by

Columbus Nova Partners, L L C (“CN”) , would channe l a minimum of $25 mi llion in cash into EL K throug h Ameritra ns (the “CN Tr ansac tion”). A.R. 213. I n addition, EL K informed the O ffice of SBI C Opera tions that a subsidiary of the propose d investor had e x tended Ameritra ns a loan in the a mount of $1.5 mill ion in order to fund A meritrans’ “wor king c apital needs” and that, in exchang e, Amer itrans had pledg ed all of its stock in EL K as sec urity . A.R. 214. EL K furthe r indicate d that another ag ree ment could follow, “le ad[ing] to another more signific ant investment in Ameritra ns . . . under c onditions which [ would] result in an indirect chang e of ow nership of A meritrans a nd perha ps control of [EL K].” A.R. 214. The Offic e of SBI C Oper ations responde d on Marc h 31, 2011 by notify ing EL K that, in the
ag ency ’s view, the pledg e of EL K’s stock constituted a chang e of control requiring the SBA’s prior

15

## approva l under the applicable reg ulations. A.R. 275. On April 15, 2011, EL K assure d the SBA that 9


## the clos ing of the CN Transa ction was “spec ifically predic ated on obtaining prior written SBA [a] pproval” and that it would terminate the transac tion “[i] f prior written SBA [ a] p p ro v al is not obtained.” A .R. 416. On April 5, 2011, while discussions surrounding the proposed CN Tr ansac tion were still
ong oing, E L K submitted an updated c apital impairment per centa g e ca lculation to the Offic e of SBI C Opera tions. A.R. 282. C onsistent with it s prior re prese ntations, EL K continued to acknow ledg e that it had an ong oing c ondition of capital impairment. A.R. 284. I ndeed, by
EL K’s ca lculation, which the Of fice of SBI C Opera tions later conf irmed, EL K’s ca

pital impairment perc entag e had r isen to 46.64% as of D ece mber 31, 2010. A.R. 282, 284. On May 3, 2011, the Off

ice of SBI C Opera tions, acknowledg ing tha t the terms of the proposed CN Tr ansac tion would cure EL K’s condition of c apital impairment, re commended to the SBA’ s I nvestment Commit tee that EL K be pe rmitted to pursue its proposal furthe r and, to that end, sug g ested a

meeting betwee n EL K and the I nvestment Commit tee. A.R. 437-39. T he
I nvestment Commit tee a dopted the re commendation on May 10, 2011, conditioning the

occur renc e of a meeting on EL K first submitting information about its manag ement tea m. A.R. 498. Minutes from the session of the I nvestment Commit tee e vidence that its members wer e

conce rned w ith manag ement’s a bility to execute the anticipa ted investment strateg y and the qualifica tions of the proposed ne w member s of the mana g ement tea m, who had appa

rently been denied a “g ree n light” le tter in the past. A.R. 498.

T h e O f f i c e o f S B I C O p e r a t i o n s p r o v i d e d E L K w i t h a m o r e f o r m a l n o t i c e t o t h e s a m e e f f e c t o n A p r i l 1 9 , 9 2 0 1 1

. A

. R

. 4 2 6

- 2 7

. 

## 16

## On May 10, 2011, while these discussions we re still ongoing , EL K submitted another updated c apital impairment per centa g e ca lculation to the Offic e of SB I C Opera tions. A.R. 483.
EL K continued to ac knowledg e its ong oing c ondition of capital impairment and, c onsistent with the past trend, E L K’s ca

pital impairment perc entag e had a g ain risen—to 51.31% a s of Marc h 31, 2011. A.R. 494. The months that followed involved EL K and CN submitting additional informa tion to the SBA for its consideration, as we ll as a ser ies of communica tions and meeting s betwee n the Offic e of SB I C Opera tions, the I nvestment Commit tee, EL K, and CN. On July 12, 2011, approximately

three wee ks after

EL K informed the ag ency that the new inve stor in the proposed
transac tion would be a diffe rent e ntity manag ed by

CN, the I nvestment Commit tee met with
EL K’s re prese ntatives. A.R. 593-94, 710-11. Dur ing this mee ting, EL K was infor med that the proposed CN Tr ansac tion, as modified, would likely be tre ated a s if it were a new license application in light of

its effe ct on the contr ol of EL K and, f or that re ason, EL K would have to
proce ed throug h the SBA’ s licensing proce ss on an abbr eviated sc hedule. A.R. 711. The
I nvestment Commit tee a lso raised c oncer ns about the propose d transac tion’s compliance w ith the MOD re quirement—spec ifically , the per centa g e owne rship require ment. A.R. 711. On J uly 26, 2011, the I nvestment Commit tee a g ain met with repr esenta tives of EL K, as we ll as
repr esenta tives of CN. A.R. 777, 800-01. During this meeting, a nd in a subsequent memorandum by

its lega l counsel, EL K expressed its view that, in lieu of tre ating the proposed
transac tion as a newlicense a pplication and conditioning approva l on EL K’s complianc e with the MOD re quirement, the SB A should consider “ g randf ather ing” EL K for MO D purposes. A .R. 800, 1011-16. I n particula r, EL K ar g ued that Amer itrans qualified a s a “tra ditional investment

17

## company ” exempt from the MOD r equire ment. A.R. 1014. During the J uly 26, 2011 meeting , the SBA told EL K that it would consider whe ther “ g randf ather ing” was a

ppropriate , but, at the same time, EL K was put on notice that if the transa ction was not appr oved, conside ration would have to be g iven to transfe rring EL K to the Off ice of SBI C L iquidation. A.R. 800. On Aug ust 18, 2011, repr esenta tives of EL K and CN met with the Assoc iate Administrator for I nvestment. A.R. 989. On September

7, 2011, EL K informed the SBA that, “ [w] ith respec t to compliance with
manag ement and ow nership diver sity , [EL K] ha[d] neg otiated an e conomic re lationship whereby CN will own less than 70% of the e quity of Amer itrans and the ba lance will be held by exis ting public share holders and othe r investors to be de termined.” A.R. 1191. On September 19, 2011, afte r a se ries of inter

nal and e x terna l communications, the SBA f ormally notified EL K that, in the ag ency ’s view, “ the proposed tr ansac tion would not satisfy the re quirements of § 107.150
manag ement-ow nership diver sity require ment” and tha t EL K “doe s not qualify for a n exception.” A.R. 1198. The SBA informed EL K that it would consider the ne w owner ship

1 0



## structure proposed by

EL K in its S eptember

7, 2011 communication, but advised that “ [f] or SBA to proce ed with re view of the chang e of ow nership and c ontrol reque st, [ EL K] must provide a specific proposed owne rship structure identify ing e ach of the new inve stor(s), the dollar amount they will invest, and their owner ship perce ntag e post-tra nsaction.” A .R. 1198.

T h e S B A ’ s i n t e r n a l d e l i b e r a t i o n s e c h o e d t h e c o n c e r n s i t h a d e x p r e s s e d d i r e c t l y t o E L K a n d C N

. F o r 10
e x a m p l e , d u r i n g a n I n v e s t m e n t C o m m i t t e e s e s s i o n h e l d o n J u l y 1 4 , 2 0 1 1 , C o m m i t t e e m e m b e r s q u e s t i o n e d , a m o n g o t h e r t h i n g s , w h e t h e r t h e p r o p o s e d m a n a g e m e n t t e a m h a d t h e e x p e r i e n c e t o e x e c u t e t h e i n v e s t m e n t s t r a t e g y a n d w h e t h e r t h e r e w a s s u f

f i c i e n t d i v e r s i t y t o s a t i s f y t h e M O D r e q u i r e m e n t

. A

. R

. 7 1 8

. S i m i l a r l y , d u r i n g a C o m m i t t e e s e s s i o n h e l d o n A u g u s t 2 , 2 0 1 1 , t h e C o m m i t t e e m e m b e r s w e r e i n u n a n i m o u s a g r e e m e n t t h a t t h e y d i d n o t f a v o r

“ g r a n d f a t h e r i n g ” E L K f

o r p u r p o s e s o f t h e M O D r e q u i r e m e n t , s u g g e s t i n g t h a t i t w o u l d n o t b e a p p r o p r i a t e t o g r a n t a w a i v e r , a n d a t t e n d a n t a d v a n t a g e , t h a t h a d n e v e r b e f o r e b e e n g r a n t e d t o l a r g e i n v e s t o r s . A

. R

. 8 1 1

. A n d i n a n A u g u s t 2 5 , 2 0 1 1 e - m a i l , t h e A s s o c i a t e A d m i n i s t r a t o r f o r I n v e s t m e n t e x p r e s s e d h i s v i e w t h a t E L K w o u l d n o t b e a b l e t o

“ o v e r c o m e t h e M O D i s s u e s , a n d t h e c u r r e n t s t r u c t u r e w a s n o t g o i n g t o w o r k

. ” A

. R

. 1 0 3 9

. 

## 18

## Approxim ately two wee ks later, on Oc tober 3, 2011, the SB A inquired a s to the status of
EL K’s re sponse to the ag ency ’s September 19, 2011 letter. A.R. 1221. On Oc tober 20, 2011,
one y ear and thre e months after

the SBA issued the Cure L etter, the SBA be g an interna lly delibera ting a

bout the possibili ty

of transf err ing E L K to the Off

ice of SBI C L iquidation. A.R. 1266. Howeve r, on Nove mber 15, 2011, EL K submitted a response to the SBA’s Septe mber 19, 2011 letter. A.R. 1277. I n its response, EL K desc ribed a modified transa ction in which CN would hold less than 70% of Ame ritrans’ stoc k, the exist ing ma nag ement tea

m would remain in place , and the mana g ement of both Ame ritrans a nd EL K would re port to the Boa rd of Dir ector s of ea ch compa

ny . A.R. 1277-89. The ne x t day , the SBA infor med EL K that it was ac tively revie wing the company ’s re sponse, informing EL K that the ea rliest the modified structure could be pre sented to the I nvestment Commit tee would be in Dece mber 2011. A.R. 1315. I n
prepa ration for that prese ntation, the SBA re quested, a nd EL K provided, f

urther inf ormation
reg arding the modified transa ction. A.R. 1319, 1333-41. On Dec ember

6, 2011, following oral c ommunications with EL K’s re prese ntatives, the SBA notified EL K in writing that the proposed tr ansac tion, even as modified, still “may not satisfy diversity require ments.” A.R. 1474. The SB A’s De cembe r 6, 2011 communica tion identified three conce rns re lating to the MO D re quirement: (1) whether the new c apital infusion would eff ectively be provide d by

a sing le entity

on behalf of the ne w investors; (2) w hether stock contributions by

new investors, a s non-ca sh assets, would qualify as re g ulatory

capital; and ( 3) whether the new pr oposed investors we re suf ficiently unaff iliated. A.R. 1474. During a session held on Dec ember

20, 2011, the I nvestment Commit tee c onsidered the opinion of the Off ice of SBI C Opera tions and the Off ice of Gene ral Counsel that EL K’s propose d transac tion sti ll did not

19

## satisfy

the MOD re quirement, a nd voted to deny

EL K’s re quest for a

chang e of ow nership and control. A.R. 1572. On De cembe r 22, 2011, the SBA formally notified EL K of its decision, stating tha t “the re vised proposed struc ture doe s not satisfy the re quirements of MOD as specifie d in the [age ncy ’s] reg ulations (§107.150).” A .R. 1574. The SBA a lso identified a number of othe r conc erns, the “ cumulative impact” of which “ put approva l by SBA a t risk even if MOD ca

n be satisfa ctorily

resolved.” A.R. 1574-75. Those c oncer ns included the a dequac y of the manag ement tea

m and EL K’s prospe ctive investment strate g y . A.R. 1575. On J anuar

y 9, 2012, CN withdrew the pr oposed transa ction from the SB A’s consideration. A.R. 1578. I n so doing, CN e x presse d its apprec iation to the SBA for its 1 1


## “extensive consider ation of [the] proposed investment.” A.R. 1578.

3. The Proposed B DC Transa ction On Fe bruar

y 1, 2012, sever al wee ks after the CN Tra

nsaction had be en withdra wn and more than one y ear

and six months after the Cure L etter, the Offic e of SB I C Opera tions

rec ommended to the Associa te Administrator for I nvestment that EL K be tra nsfer red to the Offic e of SB I C L iquidation. A.R. 1580. I n its recommenda tion, the Office of SBI C Opera tions indicated that ( 1) EL K had be en issued the Cure L etter on July 20, 2010, (2) in the suc cee ding months EL K’s ca

pital impairment perc entag e “inc rea sed to 59% due to a dditional unrealized losses and oper ating expenses,” (3) EL K’s var ious proposals to cure its condition of capital impairment by

raising additional private c apital had be en denie d, and (4) EL K’s fina ncial perf ormanc e wa s unlikely

to cure its condition “in a rea sonable time fr ame.” A.R. 1580.

A l t h o u g h E L K i s c l e a r l y d i s s a t i s f i e d w i t h t h e S B A ’ s h a n d l i n g o f t h e C N T r a n s a c t i o n , i t d o e s n o t s u g g e s t 11 t h a t t h e t r a n s a c t i o n c o u l d b e r e v i v e d i n t h e f u t u r e . I n d e e d , a l l o f t h e e v i d e n c e i n t h e r e c o r d s p e a k s t o t h e o p p o s i t e c o n c l u s i o n . 

## 20

## The following day , Fe bruar y 2, 2012, EL K informed the SBA that CN “ha s indicated that they [si c] are no long er inter ested in pursuing a tra nsaction,” but provide d that it was “see king a

new e quity

investor” a

nd intended to submit y et another proposal for

raising private c apital for the ag ency ’s re view. A.R. 1583. Attac hed to EL K’s F ebrua ry 2, 2012 communication was a n overvie w of the pr oposed transa ction. A.R. 1584-1612. Consistent with t he par ties’ usag e, the Court shall refe r to the propose d new investor a s “B DC” and the proposed tra nsaction as the
“B DC Transa ction.” Subsequent c ommunications with EL K re veale d that the transa ction would involve a $10 million cash infusion from B DC, both EL K and Ame ritrans would be come subsidiaries of B DC, and two of B DC’s principals would be added to EL K’s mana g ement and constitute EL K’s I nvestment Commit tee. A.R. 1620. The SBA advised EL K that the propose d transac tion would be trea ted as a new lice nse application and r equeste d additional information from the c ompany . A.R. 1620, 1669. I n particula r, the SBA advised EL K that it neede d to submit a ter m sheet “a s complete a s possible,” informing EL K that the SBA ’s I nvestment Commit tee would r ender a dec ision on the information provided a

nd advising EL K to “put [it s] best foot forwar d.” A.R. 1669. EL K submitt ed a te rm sheet outlining the proposed tra nsaction on F ebrua

ry 9, 2012. A.R. 1674. On
Fe bruar y 13, 2012, the Off

ice of SBI C Opera tions sent EL K a se ries of que stions about the proposed tra

nsaction, to which EL K re sponded in writing and ora lly on Fe bruar

y 14, 2012. A.R. 1694, 1712-16. I n its written responses, EL K ac knowledg ed its continued condition of ca pital impairment. A.R. 1715. EL K also outlined its ex pecta tions as to the time frame f or re solving its proposal. EL K stated that it hoped to re ceive “pre liminary approva l” from the SB A bymidMarc h 2012 and, assuming that EL K and B DC rec eived “ enoug h comfort,” they intended to

21

## “move f

orwa rd with draf

ting de finitive documentation, pre paring a proxy statement and

arr ang ing f

or shar eholder

votes,” whic h EL K anticipate d would be complete d by mid-J une 2012. A.R. 1715. On Fe bruar

y 15, 2012, the Off

ice of SBI C Opera tions recommende d to the I nvestment Commi ttee that it deny

EL K a “ move forw ard” ruling and instead tra nsfer EL K to the Off

ice of SBI C L iquidation. A.R. 1720. As gr ounds, the Off ice of SBI C Opera tions first found that
EL K’s ter m sheet wa s “not definite e noug h to rea sonably predic t the path that will lead to consummation of the ac quisiti on to SBA’s satisfa ction.” A.R. 1720. I t next found that 1 2 

## “[a]lt houg h the $10 million capital infusion [ would] i nitially cure [EL K’s] condition of Capital
I mpairment,” it would “not lea ve much r oom for er

ror” beca use EL K’s “f

inancial pe rfor

mance ha[d] deter iorated ove r time.” A.R. 1720. I t concluded by noting that EL K “ha d at least $1 milli on of net losses in ea ch of the last three f iscal y ear s” and ha d “$5 million of levera g e due to SBA within the next 12 mont h[s] ,” limiting the “c ash ava ilable for inve stment activities.” A.R. 1720. During a session held on F ebrua ry 16, 2012, the member s of the I nvestment Commit tee unanimously

ag ree d to give no further consideration to the proposal. A.R. 1737. Minutes from the session sug g est that the I nvestment Commit tee wa s conce rned tha t a new lice nse applica tion could not be appr oved in the time fra me re quired a

nd that the ca sh infusion provided by the
transac tion would not provide a mea ningf ul benef it. A.R. 1736-37. On Fe bruar

y 27, 2012, the SBA f

ormally notified EL K of its decision. A.R 1754. The SBA provide d that, “[a]fter sig nificant discussion, the I nvestment Division ha[d] conclude d that

E l k c o n c e d e s t h a t i t a s s e m b l e d t h e B D C T r a n s a c t i o n “ q u i c k l y , ” b u t i n t i m a t e s t h a t t h e S B A s h o u l d h a v e 12 g r a n t e d p r e - a p p r o v a l o f t h e t r a n s a c t i o n b e c a u s e t h e p r o c e s s o f s t r u c t u r i n g t h e d e a l w o u l d b e t i m e - c o n s u m i n g a n d c o s t l y . S u f

f i c e i t t o s a y t h a t E L K i d e n t i f i e s n o a u t h o r i t y f

o r t h e p r o p o s i t i o n t h a t t h e S B A i s r e q u i r e d t o p r o v i d e a d v a n c e a p p r o v a l o f a p r e l i m i n a r y t r a n s a c t i o n . 

## 22

## the proposal doe s not address [EL K’s] financial c ondition to t he SBA ’s satisfac tion,” citing a

conce rn that the $10 million capital infusion would not “have a lasting positive effe ct” g iven
EL K’s “de teriora tion and maturing Debe nture leve rag e within the next 12 mont hs,” as we ll as issues with the curr ent manag ement tea m. A.R. 1754.

4. EL K’s Tra

nsfer to the Offic e of SB I C L iquidation On Fe bruar

y 21, 2012, shortly

afte r the I nvestment Commit tee voted to discontinue consideration of the BD C Transac tion, the Office of SBI C Opera tions informed EL K that “[g]iven that [EL K] has not been able to cure its condition of capital impairment, the Of fice of SBI C Opera tions will be re commending that [EL K] be transfe rre d to the Offic e of L iquidation.” A.R. 1741. The dec ision to t ransf er EL K to the Off

ice of SBI C L iquidation was finalized on
Fe bruar y 22, 2012, more than one y ear and seve n months after the Cure L etter. A .R. 1742-43. The stated r eason f

or the tra nsfer decision wa s as follows: The L icense e initially develope d a condition of Capital I mpairment as of 3/31/10 with a Capital I mpairment Perce ntage (“CI P”) of 40.1%. I ts maxi mum permissible CI P is 40%. SBA sent out a 15 day Cure L etter on 7/20/10. SBA has since considere d sever al proposals put forth by the L icense e to cure its condition of Capital I mpairment. After signific ant discussion and consultantion [si c] with the Offic e of Gen er al Counsel, SBA conclude d that the proposals did not satisfy reg ulatory require ments. As of 9/30/11, the L icense e’s CI P incre ased to 59%. A.R. 1742. EL K was notified of the transf

er de cision on Fe bruar

y 23, 2012. A.R. 1744. On Fe bruar

y 24, 2012, EL K re sponded by asking the SBA to “ confirm . . . that the SB A will be providing [EL K] with formal notice under 13 CFR 1810(g )(2) of [EL K’s] capital impairment and a

15 day opportunity

to cure this event of def

ault.” A.R. 1746. Subsequently , by

e-ma il dated Fe bruar

y 29, 2012, EL K expressed its view that its letter date d Aug ust 3, 2012

23

## resolved the Cure L etter be cause it “stat[ed] that . . . the letter a nd its attachment we re f

ully responsive to the SB A’s Jul y 20, 2010 letter a

nd [EL K] heard no objec tions from the SBA.” A.R. 1771. EL K furthe r asse rted that “ [a] t no time did the SBA advise that [EL K] was not in compliance or that [its ] response to the J uly 20, 2010, letter ha d not satisfied the SBA’ s conce rns on the ca pital impairment issue.” A.R. 1771. I n addition, EL K claimed tha t, during a portfolio meeting held on Octobe r 19, 2010, “a ll present ac knowledg ed that the c apital impairment issue had bee n resolved.” A.R. 1771. EL K conc luded by stating tha t unless the SBA issued a new fiftee n-day

cure notice, EL K would commenc e litiga tion. A.R. 1771. L ater

that same da

y , the Offic e of SB I C Opera tions asked the Of fice of SBI C L iquidation to st ay the liquidation process. A.R. 1801.
5. The Sec ond Cure L etter On Marc h 6, 2012, the SBA se nt EL K another cure letter (the “Second Cure L etter” ), stating tha t EL K “ha s a condition of Capital I mpairment base d on its last S BA For m 468 dated September 30, 2011, w hich re veale d a Capital I mpairment Perc entag e . . . of 59% .” A.R. 1818. The SBA “dire ct[ed] [ EL K] to cure the violation to SBA’s sa tisfaction within fifteen ( 15) day s from the da te of th[e] l etter” —that is, by Marc h 21, 2012—and wa rned tha t, absent timely

cure , “SBA may

avail itself of a

ny and all leg al re medies ava ilable to it under Section 107.1810(g ) of the Reg ulations, which include de clar ing [EL K’s] total indebtedness to SBA immediately due and pay able a

nd/or the instituti on of leg al proc eeding s seeking the appointment of SBA as [EL K’s] rece iver.” A.R. 1818. At the same time, the SB A maintained that it “ne ver de termined that the $40,000 incre ase in Reg ulatory Capital [on August 4, 2010] constit uted a sa tisfactory

cure of [EL K’s] condition of Capital I mpairment.” A .R. 1819. I t reitera ted that, “by

the time

24

## that SBA wa s made a war e of [EL K’s] intent to cure its condition of Capital I mpairment by the $40,000 incre ase to Reg ulatory Capital, [EL K’s] CI P had incre ased to 43.5%.” A.R. 1819. The SBA stated its position that EL K was infor med during the Octobe r 19, 2010 portfolio mee ting that “the $40,000 c apital contribution was not conside red a satisfac tory

plan to cure its condition of Capital I mpairment.” A .R. 1819. The SBA c oncluded the Sec ond Cure L etter by advising
EL K that, “[n]ot withstanding the transfe r to the Off ice of L iquidation, SBA will suspend liquidation activities for a pe riod of 15 day s from the da te of this letter to allow [EL K] an opportunity

to cure its condition of Capital I mpairment to SBA’ s satisfaction.” A .R. 1819. On Marc h 8, 2012, EL K ac knowledg ed re ceipt of the Second Cure L etter. A .R. 1821. After stating its disag ree ment with the SBA’s position in ge nera l and non-spec ific terms, EL K indicated that the c ompany would “conc entra te on EL K’s ef forts to cure the def

ault” and tha t, “[t] o that end, Amer itrans continue[d] t o actively eng ag e with var ious potential investors.” A.R. 1821. EL K re prese nted that it intended to deliver “ binding c ommitm ent letters pr ior to the expiration of the cure period” —that is, by Marc h 21, 2012. A.R. 1821. On Marc h 13, 2012, the SBA r esponded to EL K’s stated intention to deliver “ binding commitment letters” as a

cure for its condition of ca pital impairment. A.R. 1832. The SBA advised EL K that, “[a]t thi s time, [ the] S BA cannot de termine whe ther [the company ’s] proposed

cure [would] satisfac torily resolve [its] condition of Capital I mpairment.” A .R. 1833. I n particula r, the SBA advised EL K that it would apply the g uidance articula ted in the SBA’ s T E C H 

## N O T E 

## 13: G U I D E L I N E S 

## C O N C E R N I N G 

## D E B E N T U R E 

## A P P L I C A N T S 

## S T R U C T U R E D A S A 

## B U S I N E S S 

## D E V E L O P M E N T 

## C O M P A N Y O R 

## BD C S U B S I D I A R Y 

## (“Te chNote 13” ) “to de termine whe ther binding commitments to [ Ameritra ns] wil l qualify

as Reg ulatory

Capital.” A.R. 1833. I n this reg ard, the

25

## SBA noted tha t Ameritrans’ net worth wa s neg ative as of Dec ember

31, 2011, and on that basis stated that “it is likely

that any [] commitments from [Ameritrans] to [ EL K] will need to be funded to qua lify

as Reg ulatory

Capital.” A.R. 1833. Howe ver, the SBA c lear ly stated that it could not, at that time, rende r a f inal decision, and instruc ted EL K to submit additi onal information, including “the f ully executed binding commitment letters” and a n “update d capital

cer tificate.” A.R. 1833.
EL K re sponded the following day , Marc h 14, 2012, contending that the SBA’ s had imposed “newand unre asonable conditions” in its latest corre spondence . A.R. 1838, 1841. I n its response, EL K took the position that TechNote 13 w as inapplica ble bec ause it applies only to

new a pplicants. A.R. 1839. Fur thermore , EL K stated that it still i ntended to “pr ovide binding commitment letters from qualifie d investors in an amount suffic ient to cure [EL K’s]” condition of ca pital impairment, and fur ther a dvised that “[t] he commitment letters will state that the e ntire amount of the investment will be invested into Amer itrans and then be immediately invested by Ameritra ns into [ EL K].” A.R. 1840. Howeve r, EL K offe red the proviso that, “g iven that Ameritra ns is a public company , the commitment letter[s] will provide that the commitments will be invested into Amer itrans immediately upon rec eipt of any

share holder a

pproval that may

be require d prior to the investment,” thoug h it claimed that “Ame ritrans ha s the ability to lock-up approximately

45% of the voting share s, eff ectively insuring sha

reholde r appr oval.” A.R. 1840.
EL K conc luded by

unilatera lly

asser ting that the SB A’s “Ma

rch 13, 2012 le tter ef

fec tively serve d as a modification of the Marc h 6th letter and ‘ rese t’ the 15 day notice,” a

nd asser ted that it would “conside r Mar ch 29, 2012, as the date r equire d to cure the Capital I mpairment.” A .R. 1844. On Marc h 19, 2012, the SBA r esponded in turn, stating that “[t] he purpose of the SBA ’s

26

## Marc h 13, 2012 letter wa s to provide fe edbac k on [EL K’s] proposed cur e method so that [the

company ] di d not pursue a c ure tha t, in the end, would not be to SBA’ s satisfaction.” A .R. 1846. The SBA took the position t hat it was not “imposing ne w re quirements” on E L K, claiming that
Tec hNote 13 “c odified SBA’ s policy in determining whether

a par ent business deve lopment
company ,” like Amer itrans, “qua lified as an I nstitut ional I nvestor.” A .R. 1846. The SBA note d that, beca use Amer itrans’ “ net worth is neg ative as of Dec ember

31, 2011, it is l ikely

that any commitments from [Ameritrans] to [ EL K] will need to be funded to qua lify as Reg ulatory Capital.” A.R. 1846. The SB A also obser ved that bec ause EL K appe are d to plan on conditioning the a

nticipated commitment letters on shar eholder approva l, they

would “appe ar to be subjec t to a condition prec edent making the commitment letters non-binding and thus not elig ible to be counted towa rds Reg ulatory

Capital.” A.R. 1846. Fina lly , the SBA r ejec ted EL K’s unilatera l interpreta tion of the ag ency ’s Marc h 13, 2012 letter, re aff irming tha t the cure period would expire on Marc h 21, 2012. A.R. 1847.
I t is undisput ed that EL K continues to have a condition of c apital impairment. I t is simil arly undisputed that, to date, EL K has not submitted any binding c ommitm ent letters to the SBA for its consideration.
C. P roce dural Hi story
EL K commenc ed this action on Mar ch 20, 2012, see king r elief unde r the Administrative Procedur e Ac t and the Due Process Clause of the Fif th Amendment to the United States Constit ution for what it claims is the SBA’ s arbitra ry and ca pricious conduc t. See Compl., EC F No. [1] . EL K filed its Motion for Preliminary Relief the sa me day

. See Pl.’s Mem. in S upp. of Mot. for Prelim. I nj. & TRO ( “Pl.’s Mem.”), E CF No. [3-2]. Upon rece ipt of EL K’s motion, the

27

## Court immediately contac ted the par

ties in order to sche dule furthe r proc eeding s. At that point, the par ties jointl y

repr esente d that they

had re ache d an ag ree ment to suspend any liquidation activities involving EL K throug h and including April 5, 2012. See Min. Order (Mar . 20, 2012). The Court held a

n expedited in-person Sche duling Confe renc e on Mar ch 21, 2012. EL K’s Complaint i s prolix and disjointed, rattling of f a litany of complaints about how the SB A has
trea ted the compa

ny over the parties’ long r elationship. Be cause this approac h rende red it impossibl e to asc erta in which of the SB A’s ac tions were a ctually at issue, a f

air a mount of the Court’s attention during the Scheduling Confere nce w as direc ted towar ds attempting to g et EL K to specifica lly

identify the pre cise a dminist rative a ction it intended to challeng e in conne ction with its Mot ion for Preliminary Relief. See Tr. of Initial Scheduling Conf. a t 13-19. I n addition, during the Scheduling Confere nce, the parties r epre sented that they had re ache d a fur

ther
ag ree ment to suspend any liquidation activities through a nd including A

pril 25, 2012, prese rving the status quo until then. See id. at 4-5, 28-29. O n Marc h 21, 2012, the Court set an e x pedited schedule for the br iefing of EL K’s Motion for Preliminary Relief and de nied without prejudice
EL K’s Motion for Preliminary Relief insofar

as it constituted a motion for a tempor ary
restra ining or der, since EL K had a lrea dy obtained the r elief soug ht thereby throug h the SBA’ s voluntary ag ree ment. See Scheduling & Proc edure s Order (Mar . 21, 2012), ECF N o. [7] ; Order (Mar . 21, 2012), ECF N o. [6] . Acc ording ly , EL K’s Motion for Preliminary Relief re mains extant only

insofar a s it constitut es a motion for a preliminary

injunction. Outside the scope of the Court’s sche dule, and without prior lea ve of the Court, EL K filed a suppleme nt to its Motion for Preliminary Relief on Mar ch 26, 2012. See Supplemental

28

## Aff. of

Michae l Feinsod, ECF No. [10]

. On Marc h 29, 2012, in acc ordanc e with the Court’s 1 3


## schedule , the SBA f

iled the ce rtified Administrative Rec ord. See ECF No. [13]. On April 2, 2012, the Court held an e x pedited on-the -re cord te lephonic conf ere nce to discuss the pa

rties’ dispute over the sc ope of the rec ord and the SBA’s pr ivilege log. D uring that confe renc e, EL K clar ified that, in conne ction with its Mot ion for Preliminary Relief, it is presently

challeng ing only (1) the SB A’s dec ision to t ransf er EL K to the Off

ice of SBI C L iquidation on Febr uary 22, 2012, and (2) the SBA’ s Second Cure L etter da ted Marc h 6, 2012 and the c onditions purportedly place d on the Second Cure L etter in the SB A’s letter dated Ma rch 13, 2012. See Tr. of A pr. 2, 1 4 

## 2012 Telephone Conf. at 33-34, 50-51; see also Min. Order (Apr. 2, 2012) (memorializing the same). O n April 5, 2012, consistent with the Court’s instructions during the April 2, 2012 confe renc e, the SB A filed a small supplement to the Administ rative Rec ord. See ECF No. [16]. On April 9, 2012, the SBA filed its Opposition t o EL K’s Motion for Preliminary Relief. See Def .’s Opp’n to Pl.’s Mot. for Prelim. I nj. (“De f.’s Opp’ n”), ECF No. [18] . On April 11, 2011,

U n d e r t h e L o c a l R u l e s o f t h i s C o u r t , “ [ s ] u p p l e m e n t a l a f f i d a v i t s e i t h e r t o t h e a p p l i c a t i o n o r o p p o s i t i o n 13
m a y b e f i l e d o n l y w i t h p e r m i s s i o n o f t h e c o u r t

. ” L C v R 6 5

. 1 ( c )

. T h e A p r i l 2 , 2 0 1 2 c o n f e r e n c e i n c l u d e d t h e f

o l l o w i n g e x c h a n g e b e t w e e n t h e C o u r t a n d E L K ’ s c o u n s e l : 14

T H E C O U R T : * * * I f w e c a n c l a r i f

y , I t a k e i t — a n d I d i d n o t g o b a c k a n d l o o k , b u t I t a k e i t t h e n y o u ’ r e c h a l l e n g i n g o n b o t h t h e A P A a n d d u e p r o c e s s , y o u ’ r e c h a l l e n g i n g t h e t r a n s f

e r t o t h e L i q u i d a t i o n U n i t a s w e l l a s w h a t y o u v i e w a s c o n d i t i o n s i n t h e l e t t e r t o c u r e . I s t h a t a n a c c u r a t e s t a t e m e n t , s o w e k n o w w h a t ’ s a t i s s u e ?
M R

. H E Y M A N : S o i t ’ s a b s o l u t e l y c l e a r * * * W e ’ r e c h a l l e n g i n g t h e c o n d i t i o n s t h a t w e r e p l a c e d o n t h e M a r c h 6 t h l e t t e r b y t h e M a r c h 1 3 t h e - m a i l o r l e t t e r , w h i c h i n c o r p o r a t e d T e c h N o t e 1 3 , a n d w e ’ r e a l s o c h a l l e n g i n g t h e t r a n s f e r t o L i q u i d a t i o n f o r p u r p o s e s o f t h e p r e l i m i n a r y i n j u n c t i o n . T H E C O U R T : S o , i t ’ s t h e M a r c h 6 t h a n d t h e M a r c h 1 3 t h l e t t e r s , i n e s s e n c e . M R

. H E Y M A N : A n d t h e t r a n s f e r t o L i q u i d a t i o n . T r . o f A p r . 2 , 2 0 1 2 T e l e p h o n e C o n f

. a t 5 0

- 5 1

. 

## 29

## the Court held an e x pedited on-the -re cord te lephonic conf ere nce to r esolve the pa

rties’ dispute
reg arding cer

tain items on the SBA’s pr ivilege log. O n April 12, 2012, EL K filed its Reply

. See Pl.’s Reply

Mem. in Supp. of Mot. for Prelim. I nj. (“Pl.’s Reply ”), ECF No. [22] . On April 16, 2012, afte r ca

ref ully considering the par

ties’ submissions, t he Court advised the parties that it would exercise its discre tion to decide the motion on the pape rs and without hea ring live testimony or ora l arg

ument. See Min. Order

(Apr. 16, 2012) (citing L CvR 7(f); L CvR 65.1(d)).
EL K’s Motion for Preliminary Relief is there fore fully

briefe d and ripe for a djudication.
III. PR ELIMINARY MA TTE RS As a thre shold matter, SBA c ontends that this Court is prec luded from g ranting EL K injunctive relief

by virtue of 15 U.S.C. § 634(b)( 1) (“ Section 634(b)( 1)”) , which provide s: I n the perf

ormanc e of, and with respe ct to, the functions, power s, and duties vested in [her] by this chapte r the Administrator [of the SBA] may . . . sue and be sued

. . . in any United S tates di strict court, and jurisdiction is confe rre d upon such district court to deter mine such controve rsi es without reg ard to the amount in controve rsy ; but no attachme nt, injunction, g arnishment, or other simil ar proce ss, mesne or final, shall be issued ag ainst the Administrator or [her] proper ty [.] 15 U.S.C. § 634(b)(1). Some c ourts have r ead the anti-injunction lang uag e in Section 634(b)( 1) literally and conc luded that injunctive re lief ag ainst the SBA is absolutely fore closed. See, e .g. , 1 5 

## J.C. Driskell, Inc . v. Abdnor , 901 F.2d 383, 386 ( 4th Cir. 1990); Valley Constr. Co. v. Marsh , 714 F.2d 26, 29 ( 5th Cir. 1983); Mar v. Kleppe , 520 F.2d 867, 869 ( 10th Cir. 1975). Such a

swee ping inter

preta tion of Section 634(b)(1) has not taken hold in this Circuit, where courts have strong ly intimated that injunctive relief is a vailable, a t a minimum, when the SBA e x cee ds its statutory authority

. See Valley Forge Flag Co., Inc. v. Kleppe , 506 F.2d 243, 245 ( D.C. Cir.

N e i t h e r p a r t y c o n t e n d s t h a t t h e r e i s a m a t e r i a l d i f f e r e n c e b e t w e e n t h e S B A a n d t h e A d m i n i s t r a t o r f o r 15 p u r p o s e s o f t h e C o u r t ’ s a n a l y s i s u n d e r S e c t i o n 6 3 4 ( b ) ( 1 )

. 

## 30

## 1974) (pe r cur iam); U.S. W omen’ s Chamber of Commerce v. U.S. Small Bus. Admin. , 2005 WL 3244182, at *14 (D.D .C. Nov. 30, 2005); San Antonio Gen. Maint., Inc . v. Abdnor , 691 F. Supp. 1462, 1467 (D.D.C. 1987). The que stion that remains is whether injunctive relief

is available in a

broade r set of

case s. The SBA contends, in esse nce, tha t so long a s it has not clear ly acte d outside its st atutory authority , no injunction may issue from this Court even if the SB A’s ac tions are a rbitrar y , capr icious, or an a

buse of discr etion. I n other wor ds, SBA cla ims that inj unctive re lief is unavailable provided ther e is a c olorable ba sis for conc luding that the a g ency acte d within its

enumer ated powe rs. Cf. OneSimpleLoan v. U.S. Se c’y of Educ. , 2006 WL 1596768, at *5 (S.D.N.Y. June 9, 2006), aff’d , 496 F.3d 197 ( 2d Cir. 2007), cert. de nied , 552 U.S. 1180 (2008).
I s the ava ilability

of injunctive re lief, as the SB A sug g ests, confine d to those instances in which the SBA c lear ly

exceeds its statutory

authority ? Or doe s it, as EL K sug g ests, also extend to those

case s in which the SBA a cts in a manne r that is arbitra ry , capr icious, or an a

buse of discr etion under the Administrative Procedur e Ac t? 1 6


## Unfortuna tely , the leg islative history and ca se law r elating to Section 634(b)(1) provide littl e g uidance in answer ing the se questions. The leg islative history of Section 634(b) (1) itself is silent on the prec ise purpose be hind the anti-injunction lang uag e chose n by Congr ess. See Ulstein Mar., Ltd. v. United States , 833 F.2d 1052, 1056- 57 (1st Cir. 1987); Related Indus., I nc. v. United States , 2 Ct. Cl . 517, 522 (Ct. Cl. 1983). However , the same a nti-injunction langua g e is freque ntly

found in statutes defining the power s of ag encie s that provide loans or f unds to the

T h e q u e s t i o n o f w h e t h e r i n j u n c t i v e r e l i e f i s a v a i l a b l e r i s e s a n d f a l l s o n S e c t i o n 6 3 4 ( b ) ( 1 ) b e c a u s e t h e 16 A d m i n i s t r a t i v e P r o c e d u r e A c t d o e s n o t a u t h o r i z e i n j u n c t i v e r e l i e f “ i f a n y o t h e r s t a t u t e t h a t g r a n t s c o n s e n t t o s u i t e x p r e s s l y o r i m p l i e d l y f o r b i d s t h e r e l i e f w h i c h i s s o u g h t

. ” 5 U

. S

. C

. § 7 0 2 ; s e e a l s o S c h n a p p e r v
. F o l e

y , 6 6 2 F

. 2 d 1 0 2 , 1 0 8 ( D

. C

. C i r . 1 9 8 1 ) , c e r t

. d e n i e d , 4 5 5 U

. S

. 9 4 8 ( 1 9 8 2 )

. 

## 31

## public. See, e .g. , 7 U.S.C. § 1506(d); 15 U.S.C. § 714b(c); 42 U.S.C. § 3211(13). The

leg islative history

of those statutes sug g ests that Congr ess intended the a nti-injunction langua g e “to kee p cre ditors and others suing the g overnme nt from hindering and obstructing ag ency
opera tions through mec hanisms such as attac hments of funds.” Ulstein , 833 F.2d a t 1056-57.
Meanw hile, there is no authority from this Circuit standing f or the proposition that an injunction
may issue consistent with Section 634(b)(1) when the a g ency has ac ted within the scope of its statutory authority , but has exercised its authority in a manner

that is arbitrar

y , capr icious, or an abuse of discretion. But see Oklahoma Ae rotronics, Inc. v. U nited States , 661 F.2d 976, 977 (D.C. Cir. 1981) (pe r cur iam) (r ejec ting the SB A’s unidentified “ arg uments about sovere ign immunit y and injunctive re lief [as] i rre levant” a nd providing that a “c ourt may hold unlawful and set aside a g ency

action that is ‘ar

bitrary , capr icious, an abuse of discre tion, or otherwise not in

acc ordanc e with law’ ”) ( quoting 5 U.S.C. § 706(2)( A)). B ut neither is there any authority standing for the opposite pr oposition. I n short, neither the leg islative history nor ca se law provides a r eady

answe r to the question of how Sec tion 634(b)(1) a pplies in this case.
I n interpre ting Sec tion 634(b)(1), this Court must be g uided by the United States Supreme Court’s instruction that “such sue- and-be -sued wa ivers ar e to be liber ally construed, notwithstanding the g ener al rule tha t waiver s of sovere ign immunity are to be re ad nar

rowly in favor the sovere ign.” Fed. De

posit Ins. Corp. v. Meye r , 510 U.S. 471, 480 (1994) (inter nal quotations marks and c itation omit ted); see also Fed. Housing Admin., Re gion No. 4 v. Burr , 309 U.S. 242, 245 (1940). F or this rea son, the idea of construing Section 634(b)( 1) to g rant the SB A
any g rea ter immunity

from injunctive re lief under the Administrative Proce dure A ct than is enjoy ed by

other fe dera l ag encie s g ives this Court pause. Cf. Cavalier Cl othes, Inc. v . United

32

## States , 810 F.2d 1108, 1112 ( Fe d. Cir. 1987) (“[N]othing either in the lang uag e or le g islative history of § 634 sug g ests that Congr ess intended to g rant the SB A any g rea ter immunity

from injunctive relief

than that possessed by

other g overnme ntal ag encie s.”). At the sa me time, the Court harbors some c oncer n that the spec ific injunctive re lief soug ht by EL K in this case c ould implicate the sort of inter fer ence with “the ag ency ’s assets” that other c ourts have sug g ested fa lls within the ambit of Section 634(b)(1) ’s anti-injunction lang uag e. Ulstein , 833 F.2d a t 1056. 1 7 

## Ultimately , the Court need not r esolve these difficult questions about the scope of Section 634(b)( 1) and its applica tion to thi s case . For the re asons set for

th below, eve n assuming the availability

of injunctive re lief as a

hy pothetical matter , the Court conclude s that EL K has fa iled to satisfy the traditional four -par

t test for a pr eliminary

injunction. IV. LEGAL STANDARD A pre liminary

injunction is “an extraordinary reme dy that may only be aw arde d upon a clea r showing that the plaintiff is entitled to such re lief.” W inter v. Natural Res. Def. Council,
Inc. , 555 U.S. 7, 21 (2008). A plaintiff se eking a pre liminary injunction must establish that (1) it is likely to succe ed on the mer its, (2) it is li kely to suffer irrepa rable harm in the a

bsence of preliminary

relief , (3) the ba lance of the e quities tips i n its favor, a nd (4) a n injunction would be in the public interest. Id. at 20. Historically , these four fac tors have be en eva luated on a “ sliding scale ” in this Circuit, such that a strong er showing on one fa ctor c ould make up for a we aker showing on another

. See Dave nport v. Int’l Bhd. of Teamsters , 166 F.3d 356, 360- 61 (D.C. Cir. 1991). Rece ntly , the continued viability of that appr oach ha s been c alled into some doubt, as the

F o r i n s t a n c e , t h e r e l i e f r e q u e s t e d b y E L K m i g h t p r e v e n t t h e S B A f r o m p r o t e c t i n g a g a i n s t f u t u r e l o s s e s b y 17
a c c e l e r a t i n g E L K ’ s p a y m e n t o n t h e d e b e n t u r e s t h e a g e n c y n o w h o l d s . S e e 1 3 C

. F

. R

. § 1 0 7

. 1 8 1 0 ( g ) ( 1 ) ( i )

. 

## 33

## United States Court of Appea ls for the District of Columbia Circuit has sug g ested, without

holding, that a

likelihood of succe ss on the merits is an independe nt, free -standing require ment for a preliminary

injunction. See Sherley

v. Sebe lius , 644 F.3d 388, 392- 93 (D.C. Cir. 2011);
Davis v. Pe nsion Benefit Guar. Corp. , 571 F.3d 1288, 1292 ( D.C. Cir. 2009). Howeve r, abse nt binding a uthority or cle ar g uidance from the Court of A ppeals, the Court c onsiders the most prudent c ourse to by

pass this unresolved issue a nd proce ed to explain why a pre liminary injunction is not appropr iate under the “sliding scale ” fr amewor k. I f a pla intiff cannot mee t the less demanding “sliding sc ale” standard, the n it cannot satisfy the more string ent standar d alluded to by the Court of Appe als. V. DISCUSSION Throug h its Moti on for Pre liminary Relief, EL K see ks a pre liminary injunction: (1) Requiring the SBA to issue EL K a r ight to cur e letter prese nting EL K with a “commer cially

rea sonable” period to pre sent commitment letters ref lecting funds to bring its capital impairment per centa g e to 40% or lowe r; (2) Suspending a

ny liquidation activities by

the Off ice of SBI C L iquidation during the pendenc y of this action; (3) Enjoining the SB A from taking any action that would af

fec t EL K’s status as a

n SBI C licensee; a

nd (4) Commanding the SB A to issue a public stateme nt, or allowing EL K to repr esent to investors, that the SBA will not acc eler ate EL K’s oblig ations on its

34

## debentur es. 1 8



## Considering the re cord a s a whole, the Court finds that EL K has fa iled to make a “ clea r showing ” that it is entitled to the “extraordinary relief ” of a preliminary

injunction. W

inter , 555 U.S. at 21. Acc ording ly , EL K’s Motion for Preliminary Relief shall be D ENI ED. A. Lik elihood of

Success on the Me rits
EL K, as the pa

rty seeking a pre liminary

injunction, bears the bur den of e stablishing that it is likely to succe ed on the mer its. See W inter , 551 U.S. at 20. EL K claims that a pr eliminary injunction should i ssue in this case be cause the SBA’ s alleg ed conduc t ran a foul of the Administrative Procedur e Ac t and the Due Process Clause of the Fif th Amendment. 1 9 

## Specifica lly , EL K cha lleng es: (1) the SBA’s de cision to transfer EL K to the Off

ice of SBI C
L iquidation on Febr

uary 22, 2012; and (2) the SBA’s Sec ond Cure L etter da ted Marc h 6, 2012 and the c onditions purportedly place d on the Second Cure L etter in the SB A’s letter dated Ma rch 13, 2012. Upon a se arc hing r eview of the re cord, the Court concludes tha t EL K has not ca rried 2 0

E L K f i r s t i d e n t i f

i e d t h i s f i n a l e l e m e n t o f i t s r e q u e s t e d r e l i e f i n i t s R e p l y . S e e P l

. ’ s R e p l y a t 2 n . 1

. 18 B e c a u s e E L K ’ s c h o s e n a p p r o a c h d e p r i v e d t h e S B A o f t h e o p p o r t u n i t y t o o f f e r a m e a n i n g f

u l r e s p o n s e , t h e C o u r t i s s t r o n g l y d i s i n c l i n e d t o c o n s i d e r t h e r e q u e s t a t a l l

. B u t b e c a u s e E L K ’ s M o t i o n f o r P r e l i m i n a r y R e l i e f f a i l s f o r o t h e r r e a s o n s , t h e C o u r t n e e d n o t d e c i d e w h e t h e r c o n s i d e r a t i o n o f E L K ’ s b e l a t e d r e q u e s t i s a p p r o p r i a t e .

N e i t h e r p a r t y ’ s a n a l y s i s o f f e r s a n y m e a n i n g f

u l d i s t i n c t i o n b e t w e e n E L K ’ s c l a i m s u n d e r t h e 19 A d m i n i s t r a t i v e P r o c e d u r e A c t a n d E L K ’ s c l a i m s u n d e r t h e D u e P r o c e s s C l a u s e , e x c e p t t h a t t h e p a r t i e s d i s p u t e w h e t h e r E L K c a n s h o w t h a t i t h a s a c o g n i z a b l e i n t e r e s t u n d e r t h e D u e P r o c e s s C l a u s e . F o r p r e s e n t p u r p o s e s , t h e C o u r t s h a l l a s s u m e , w i t h o u t d e c i d i n g , t h a t E L K c a n m a k e s u c h a s h o w i n g , o b v i a t i n g t h e n e e d t o d i v i d e t h e C o u r t ’ s d i s c u s s i o n b e t w e e n t h e t w o s e t s o f c l a i m s a t t h i s t i m e .

A s d e s c r i b e d i n g r e a t e r d e t a i l a b o v e , s e e s u p r a P a r t I I

. C , a l t h o u g h E L K ’ s C o m p l a i n t r a t t l e s o f f a l i t a n y o f 20
c o m p l a i n t s a b o u t h o w t h e S B A h a s t r e a t e d t h e c o m p a n y o v e r t h e p a r t i e s ’ l o n g r e l a t i o n s h i p , E L K h a s s e l f

- l i m i t e d t h e a r g u m e n t s i t i s p u r s u i n g i n c o n n e c t i o n w i t h i t s M o t i o n f o r P r e l i m i n a r y R e l i e f

. B e c a u s e t h e C o u r t a n d t h e S B A h a v e r e l i e d o n E L K ’ s r e p r e s e n t a t i o n s i n t h e c o u r s e o f s t r u c t u r i n g t h e s e e x p e d i t e d p r o c e e d i n g s , t h e C o u r t s h a l l h o l d E L K t o i t s r e p r e s e n t a t i o n s . I n t h i s r e g a r d , t h e C o u r t o b s e r v e s t h a t E L K ’ s s u b m i s s i o n s f r e q u e n t l y d e v o l v e i n t o a n i r r e l e v a n t d i s c u s s i o n o f d e c i s i o n s t h a t a r e n o t d i r e c t l y a t i s s u e i n c o n n e c t i o n w i t h E L K ’ s M o t i o n f o r P r e l i m i n a r y R e l i e f

. M o s t n o t a b l y , E L K r e p e a t e d l y c h a r a c t e r i z e s t h e S B A ’ s h a n d l i n g o f t h e p r o p o s e d C N T r a n s a c t i o n a n d t h e p r o p o s e d B D C T r a n s a c t i o n a s a r b i t r a r y a n d c a p r i c i o u s . T h e C o u r t r e j e c t s t h i s a p p r o a c h

. E L K c a n n o t m a k e t h e “ c l e a r s h o w i n g ” r e q u i r e d t o s u p p o r t t h e “ e x t r a o r d i n a r y r e m e d y ” o f a p r e l i m i n a r y i n j u n c t i o n b y p r e s e n t i n g t h e S B A , a n d t h i s C o u r t , w i t h a m o v i n g t a r g e t

. W i n t e r , 5 5 1 U

. S

. a t 2 1

. I n a n y e v e n t , c o n s i d e r i n g t h e r e c o r d a s a w h o l e , t h e C o u r t i s w h o l l y 

## 35

## its burden of e stablishing that it is likely to succe ed on the mer its in either reg ard.
Be fore proce eding to the hear t of the matter, how ever , the Court pauses to obser ve that whene ver EL K is dissatisfied with a dec ision made by the SBA, its re peate d ref rain is that the
ag ency acte d in bad fa ith. Suffice it to say that EL K’s conc lusory

and spec ulative asser

tions, unsupported by

any competent e vidence , are patently insufficient to over come the pr esumption of administrative re g ularity

. See U nited States v. Chem. Found. , 272 U.S. 1, 14-15 (1926) ( “The presumption of re g ularity supports the offic ial acts of public of fice rs, and, in the a

bsent of cle ar evidenc e to the contr ary , courts pre sume that they have pr operly

discharg ed their of

ficial duties.”). More over, the rec ord belies EL K’s spec ulation. The SBA a ffor ded EL K countless opportunities to come into compliance a nd aff orded EL K’s many

shifting pr oposals due consideration. I t is wholly unsurprising that the SBA, holding over $21 million in outst anding debentur es fr om a company whose fina

ncial condition had be en stea dily deter iorating over a period of mor e than a

y ear and seve n months, would consider protec ting its lever ag e position throug h the ver

y mecha nism contemplated by

the statutory

and re g ulatory

scheme —namely , liquidation. At the end of the da y , the SBA’ s ultim ate r esponsibiliti es in this context are to maxi miz e net r ecove ries of public f unds and to furthe r the integ rity of the SBI C prog ram while

rec og nizi ng the intere sts of aff ecte d parties. Eve ry

thing in the r ecor d evidenc es that the SBA
g ave E L K’s unfor

tunate fina

ncial condition its due when ba lancing these intere sts.

u n p e r s u a d e d b y E L K ’ s c o l l a t e r a l a t t a c k s o n t h e S B A ’ s d e c i s i o n m a k i n g . A t t h i s p r o c e d u r a l p o s t u r e , t h e r e c o r d a m p l y s u p p o r t s t h e c o n c l u s i o n t h a t t h e S B A d i d n o t a c t a r b i t r a r i l y o r c a p r i c i o u s l y , a b u s e i t s d i s c r e t i o n , o r d e p r i v e E L K o f d u e p r o c e s s i n c o n n e c t i o n w i t h i t s c o n s i d e r a t i o n o f t h e C N T r a n s a c t i o n , t h e B D C T r a n s a c t i o n , o r i n a n y o t h e r r e s p e c t

. S e e s u

p r a P a r t s I I

. B

. 2 , I I

. B

. 3

. 

## 36

## 1. Transf er to the O ffice of SBI C L iquidation The SBA transfe rre d EL K from the O ffice of SBI C Opera tions to t he Of fice of SBI C
L iquidation on Febr

uary 22, 2012, a step that off

icially put the company

“in liquidation.” SOP 10 06, ch. 9 par a. 1. Whether a transfe r to the Off

ice of SBI C Opera tions is appropriate ha s two components—the fir st procedur al and the se cond substantive. I n this case, EL K’s ar g uments focus a lmost ex clusively

on the proc edura l side of the inquiry , and so the Court beg ins there. i. Procedur al Compliance
Be fore transfe rring an SBI C to the Office of SBI C L iquidation, the SBA must provide the SBI C with “written notice” of its condition of capital impairment a nd aff ord the SBI C “at lea st 15 day s to cure the defa

ult(s).” 13 C.F.R. § 107.1810(g ). De spite EL K’s consistent ef forts to draw the attention elsew here , this much is clear: the O ffice of SBI C Opera tions sent EL K the Cure L etter on July

20, 2010, in which the ag ency (1) notified EL K that its 40.1% capital impairment perc entag e excee ded the maximum allowable threshold, (2) instruc ted EL K that it had a f ifteen- day period to cur e, and ( 3) expressly war ned EL K that, abse nt a timely cure , the
ag ency would consider invoking its statutory and re g ulatory

reme dies, which include liquidation. A.R. 14. I t is equally

bey ond cavil that, following the issuance of the Cure L etter, EL K was aff orded “ at least 15 da

y s to cure.” I ndeed, E L K had more than one y ear and seve n months to

cure befor e it was tra

nsfer red to the O ffice of SBI C L iquidation. 2 1

E L K r e l i e s o n a s e c t i o n o f t h e A d m i n i s t r a t i v e P r o c e d u r e A c t t h a t p r o v i d e s t h a t “ t h e w i t h d r a w a l , 21
s u s p e n s i o n , r e v o c a t i o n , o r a n n u l m e n t o f a l i c e n s e i s l a w f u l o n l y i f

, b e f o r e t h e i n s t i t u t i o n o f a g e n c y p r o c e e d i n g s t h e r e f o r , t h e l i c e n s e e h a s b e e n g i v e n

— ( 1 ) n o t i c e b y t h e a g e n c y i n w r i t i n g o f t h e f a c t s o r c o n d u c t w h i c h m a y w a r r a n t t h e a c t i o n ; a n d ( 2 ) o p p o r t u n i t y t o d e m o n s t r a t e o r a c h i e v e c o m p l i a n c e w i t h a l l l a w f u l r e q u i r e m e n t s . ” 5 U

. S

. C

. § 5 5 8 ( c )

. A s a t h r e s h o l d m a t t e r , E L K m i s a p p l i e s t h e p r o v i s i o n t o t h i s c a s e . T h e S B A h a s n o t a c t u a l l y w i t h d r a w n , s u s p e n d e d , r e v o k e d , o r a n n u l l e d E L K ’ s S B I C l i c e n s e . E L K c a n a t l e a s t h y p o t h e t i c a l l y e x i t t h e O f f i c e o f S B I C L i q u i d a t i o n w i t h i t s l i c e n s e i n t a c t

. S e e S O P 1 0 0 6 , c h

. 9 p a r a . 6

. H o w e v e r , e v e n a s s u m i n g , f o r t h e s a k e o f a r g u m e n t , t h a t t h e p r o v i s i o n a p p l i e s h e r e , E L K i n f a c t r e c e i v e d n o t i c e a n d a n o p p o r t u n i t y t o b e h e a r d

— a n d w a s h e a r d

— p r i o r t o b e i n g r e f e r r e d t o t h e O f

f i c e o f S B I C L i q u i d a t i o n . S e e E m p r e s a C u b a n a E x p o r t a d o r a d e A l i m e n t o s y P r o d u c t o s 

## 37

## Nonethele ss, EL K maintains that the SBA’ s transfe r dec ision was proce durally defe ctive beca use the Cure L etter w as no long er in e ffe ct at the time of the transfe r, a c ontention that rises and fa lls on EL K’s belief that it cured its condition of ca pital impairment on Aug ust 4, 2010, when it re ceive d a $40,000 ca sh infusion from Ameritra ns. Howeve r, the Court simply cannot
ag ree that EL K is likely

to show that it actually

cure d its condition of capital impairment throug h the ca sh infusion. By

J une 30, 2010, EL K’s ca pital impairment perc entag e had r isen to 43.5%, meaning that the modest ca sh infusion on Aug ust 4, 2010 was insufficie nt to cure EL K’s condition of ca

pital impairment. A.R. 199, 1762. I ndeed, E L K ac knowledg ed that its capital 2 2 

## impairment perc entag e excee ded the maximum allowable threshold as of both June 30, 2010 and September 30, 2010. A .R. 139, 156. No doubt seeing the writing on the wall, EL K counter s that the ca sh infusion constituted an ade quate c ure be cause the SBA ne ver told it otherwise. See Aff. of Michae l Feinsod (“F einsod Dec l.”), ECF No. [3-3], ¶ 7. Even while making this claim, EL K ac knowledg es that 2 3


## the “obve rse is equa lly

true,” Pl.’s Reply

at 7—that is, that the SBA neve r informed EL K that the cash infusion did

constitute a satisfac tory

cure . But e ven abse nt this acknowledg ment, the Court reje cts EL K’s theor

y of ac quiesce nce by

silence. Where as the a

pplicable r eg ulations may require

V a r i o s v
. U

. S

. D e

p ’ t o f T r e a s u r y , 6 3 8 F

. 3 d 7 9 4 , 8 0 1

- 0 2 ( D

. C

. C i r . 2 0 1 1 )

. E L K w a s o n n o t i c e t h a t i t s c o n d i t i o n o f c a p i t a l i m p a i r m e n t w o u l d b e e v a l u a t e d o n a n o n g o i n g b a s i s , o r a t 22 t h e v e r y l e a s t a t t h e t i m e o f t h e c a p i t a l i n f u s i o n , a n d n o t a s o f t h e e n d o f t h e f i s c a l q u a r t e r e n d i n g o n M a r c h 3 1 , 2 0 1 0

. A

. R

. 7 9

. W h e n E L K s u b m i t t e d a c a p i t a l c e r t i f i c a t e b a s e d o n i t s F o r m 4 6 8 f o r t h e f i s c a l q u a r t e r e n d i n g o n M a r c h 3 1 , 2 0 1 0 a s e v i d e n c e o f i t s p u r p o r t e d c u r e , i t d i d s o d e s p i t e t h e S B A ’ s e x p r e s s p r i o r i n s t r u c t i o n s t o t h e c o n t r a r y . A

. R

. 7 9 , 1 2 3

- 3 4

. T o t h e e x t e n t E L K i n t e n d s t o s u g g e s t t h a t t h e e f f e c t o f i t s a t t e m p t e d c u r e m u s t b e a p p l i e d r e t r o a c t i v e l y t o t h e e n d o f t h e f

i s c a l q u a r t e r o n M a r c h 3 1 , 2 0 1 0 , i t h a s o f f e r e d n o a u t h o r i t y

— n o n e

— f o r s u c h a n a p p r o a c h

. O n t h i s r e c o r d , t h e C o u r t c a n n o t c o n c l u d e t h a t t h e S B A a c t e d a r b i t r a r i l y o r c a p r i c i o u s l y w h e n i t a s k e d w h e t h e r t h e c a s h i n f u s i o n o n A u g u s t 4 , 2 0 1 0 w a s s u f f i c i e n t a t t h e t i m e i t w a s r e c e i v e d

. C f

. 1 3 C

. F

. R

. § 1 0 7

. 1 8 3 0 ( f ) ( “ S B A m a y m a k e i t s o w n d e t e r m i n a t i o n o f [ a n S B I C ’ s ] C a p i t a l I m p a i r m e n t c o n d i t i o n a t a n y t i m e . ” )

.

A l t h o u g h s t y l e d a s a n “ a f f i d a v i t , ” t h e s u b m i s s i o n i s i n f a c t a d e c l a r a t i o n . 23 

## 38

## the SBA to provide SBI Cs with written notice of a c ondition of capital impairment, and w here as

the SBA’ s standard ope rating proce dures may identify a pre fer ence for a ffor ding SB I Cs advance notice of a

transfe r to the Off

ice of SBI C L iquidation, there is nothing to sug g est that the SBA is somehow oblig ated to provide an SBI C with noti ce a s to the suitabilit y of an a ttempted cure , let alone in a pa

rticular f orm or at a

particula r time.
EL K’s ar g uments, howeve r, do not stop there. Eve n while ac knowledg ing tha t the SBA

never actua lly notified it that the cash infusion wa s an ade quate c ure, EL K re lies upon a ser ies of
vag ue and unilluminating sta tements, plucked e ntirely out of context, in an attempt to insi nuate that the SBA be lieved or told EL K that the compa ny had cur ed its condition of capital impairment. At this procedur al posture, the Court f inds EL K’s ar g uments, which ar e thre e-f old, wholly unpersua sive. First, EL K proff

ers the sta tement from its dec lara nt that, during a mee ting be tween the SBA a nd EL K’s re prese ntatives on Octobe r 19, 2010, “[i] t was ac knowledg ed . . . that the Capital I mpairment issue ra ised by the SBA ha d been r esolved.” Fe insod Decl. ¶ 9. Such a
vag ue and a

mbiguous stateme nt is hardly probative of

any thing, e specia lly

when it contra dicts

ever y thing in the r ecor d and stands in consider able tension with EL K’s own r epre sentations to this Court. I n its Oppositi on, the SBA r ightly faults EL K for f

ailing to “ state who made that acknow ledg ment or in what manne r it was made .” De f.’s Opp’ n at 29. EL K purports to re medy this patent defe ct in its Reply by submitt ing a

supplemental dec lara tion from its declara nt, see Second Supplemental Af

f. of Micha el Fe insod (“Second Suppl. Fe insod Decl.” ), ECF No. [22- 2 4 

## 3], but EL K neve r soug ht this C ourt’s lea ve to file its supplemental dec lara tion and there fore it

A g a i n , a l t h o u g h s t y l e d a s a n “ a f f i d a v i t , ” t h e s u b m i s s i o n i s i n f a c t a d e c l a r a t i o n . 24 

## 39

## shall not be consider ed. See L CvR 65.1(c) (“ Supplemental aff idavits either to the application or opposition m ay

be filed only

with permission of the cour t.”). More over, e ven if the Court we re inclined to consider the decla ration, EL K claims that it “explain[ s] t hat the stateme nt was made by [t he re levant Ar ea Chief

for the O ffice of SBI C Opera tions] , and that the pa

rties also discussed the ne ed for

EL K to raise r eg ulatory

capital,” Pl.’s Reply

at 8 (Sec ond Suppl. Feinsod
Dec l.”) ¶ 4) , but the cited par ag raph ha s nothing to do with the Oc tober 19, 2010 mee ting, see Second Suppl. Feinsod De cl. ¶ 4. EL K has fa iled to furnish a “ prec ise” c itation to the portion of the re cord upon w hich it relies, Scheduling & Proc edure s Order ¶ 4(c ), and the Court declines to sift throug h the re cord to a scer tain whether

there is other evidenc e supporting or contra dicting
EL K’s conte ntion. Despite these infirmities, the Court pause s to observe tha t, in his supplemental dec lara tion, EL K’s dec lara nt merely denies that he was told that the ca pital infusion did not

constitute an ade quate c ure. See Second Suppl. Feinsod De cl. ¶ 5. He does not aff irmatively

state that any one fr om the SBA said the obve rse—that is, that the c apital infusion did constitute an ade quate c ure, le t alone under circ umstances that would a llow this C ourt to conclude that any

such statement c ould be construe d as tantamount to a for mal ag ency deter mination. Second, EL K re lies upon an e- mail circula ted interna lly within the SBA that informa lly outlines a chronolog y

of eve nts releva

nt to EL K, claiming that the document shows that the SB A believed tha t EL K had c ured its condition of ca pital impairment. A.R. 1762. Howeve r, eve n EL K cha rac terizes the document a s “af ter-the -fa ct” a

nd arg ues that it should be disreg arde d altog ether on that basis. Pl.’s Reply at 7. Reg ardle ss, the statement ca nnot bear the weig ht put on it by EL K. At best, the c ursory statement, made without any explanation, sugg ests that a

40

## member of the Off ice of SBI C Opera tions thought that, eve n cre diting EL K’s position that its capital impairme nt perc entag e “w ould drop from 40.1% to 39.9% ” with a c apital infusion, such a
transac tion would not be a “sustainable ” fix for the compa ny ’s problems. A.R. 1762. The statement is not the equivalent of a for mal ag ency

deter mination that the cash infusion cur ed
EL K’s ong oing c ondition of capital impairment. Third, in a footnote una ccompa nied by fac tual or leg al ar g ument, EL K contends tha t a solitary entry from a spr eadshe et entitled “Reg ulatory Finding s” evide nces tha t “the SBA considere d that EL K had r esolved [its conditi on of ca pital] impairment as of January 19, 2011.” Pl.’s Reply

at 7 n.7. Courts need not c onsider cur sory arg uments of this kind, and the Court declines to do so her e. Cf. Hutchins v. District of Columbia , 188 F.3d 531, 539 n.3 ( D.C. Cir. 1999) (e n banc) . Howeve r, eve n if the Court wer e inclined to re ach the merits of EL K’s
arg ument, EL K’s interpr etation of the spr eadshe et is, to put it g ener ously , disinge nuous. The ref ere nced e ntry

provides:

R e p o r t D a t e R e g u l a t i o n R e g u l a t i o n D e s c r i p t i o n S t a t u s 1 / 6 / 2 0 1 1 1 0 7

. 1 8 3 0 ( e ) C a p i t a l I m p a i r m e n t V i o l a t i o n R e s o l v e d o n 1 / 1 9 / 2 0 1 1



## A.R. 2568. As EL K is almost certa inly awa re, the reg ulation refe renc ed in the spre adshee t entry descr ibes EL K’s duty

to “notify

SBA promptly

if [it is] capitally

impaired.” 13 C.F.R. § 107.1830(e) . Consist ent with this, the dates re fer ence d in the entry corr espond with the date the SBA’s O ffice of SBI C Ex aminations issued a re port finding that EL K fa iled to report its capital impairment in a timely

manner (January 6, 2011) and the date the O ffice of SBI C Opera tions

concur red w ith that finding (January 19, 2011). A.R. 199, 202. The e ntry has no bea

ring whatsoeve r on whe ther EL K was or was not ac tually

capitally impaired. I t merely

ref lects EL K’s
41

## habitual pra ctice, w ell g rounded in the r ecor d, of fa iling to timely file re ports of its financia l condition with the SBA. As a fina l matter, EL K contends tha t the SBA a cted imprope rly beca use it “neve r threa tened” EL K with a possible transf er to the O ffice of SBI C L iquidation between the time it issued the Cure L etter on July 20, 2010, and the time of the actua l transfe r on F ebrua ry 23, 2012. Pl.’s Reply

at 2. I n other wor ds, EL K fa ults the SBA for f

ailing to pr ovide EL K with advanc e notice of the transfe r dec ision. Although not cited by EL K, the SBA ’s standar d opera ting
proce dures do sug g est that SBI Cs should be provided with advanc e notice of a possible transf

er to the Offic e of SB I C L iquidation in mos t, but not necessar ily all, case s. See SOP 10 06, ch. 9
para . 4. But EL K does not eve n endea vor to explain why

the SBA w as oblig ated to provide advanc e notice in this case . Reg ardle ss, even a ssuming, for the sake of ar g ument, that the SBA was somehow r equire d to provide EL K with advanc e notice of the possible transfe r, the re cord is unequivoca l that the SBA in fa ct did so. See A.R. 800, 1741. At this procedura l posture, the

rec ord belies EL K’s conte ntion that the SBA “c landestinely ” tra nsfer red the company

to the Offic e of SB I C L iquidation without prior notice. Pl.’s Reply at 5.
I n the final a

naly sis, EL K was pr ovided with “wr itten notice” of its condition of capital impairment and “ at least 15 da y s to cure.” 13 C.F.R. § 107.1810(g ). I ndeed, the SBA g ener ously aff orded EL K more tha

n one y ear

and seve n months to cure its condition of capital impairme nt befor e tra nsfer ring the company

to the Offic e of SB I C L iquidation. On this record, the Court finds that EL K has fa iled to demonstrate that it is likely to show that the SBA’ s decision to transfe r the c ompany

to the Offic e of SB I C L iquidation was somehow proc edura lly defe ctive.

42

## ii. Substantive Compl iance

After aff ording an SBI C an opportunity to cure , and bef

ore tra nsfer ring the SBI C to the Offic e of SB I C L iquidation, the SBA must find that the SBI C “ca nnot or [has] not cure [d] ” its condition of ca

pital impairment. SOP 10 07, ch. 9 para. 2. I n this reg ard, the rec ord is clea r: despite being aff

orded more than one y ear and seve n months to right the ship, well bey ond the fiftee n-day

minimum cure period, EL K continued to have a condition of c apital impairment whe n the SBA de cided to tra

nsfer the company

to the Offic e of SB I C L iquidation. I ndeed, E L K’s financ ial condition had only further deter iorated ove r time, such that the c ompany ’s ca pital impairment perc entag e, mar g inal at first, had ba llooned to approxim ately 59% at the time of the SBA’s tra nsfer decision. A.R. 1580. EL K offe rs no meaning ful cha lleng e to the SBA ’s substantive deter

mination that EL K neither had, nor r ealistically

could, cur e its condition of capital impairme nt. Deter mining whe ther a

n SBI C has cure d, or ca

n cure , a condition of c apital impairment requir es the e x erc ise of administrative e x pertise, a nd the Court shall not lightly second g uess the SBA ’s business deter mination. Fede ral c ourts are ill-equipped to trea d into these wa ters. I n this case, the SB A’s dete rmination is amply supported by

the re cord. O n this

rec ord, the Court finds that EL K has fa iled to establish that it is likely to show that the SBA’ s decision to transfe r the c ompany to the Offic e of SB I C L iquidation was somehow substantively defe ctive. At bottom, EL K conc edes, a s it must , that “[i] f an SB I C becomes c apitally impaired, the SBA ha s the authority

under the reg ulatory

scheme to demand that the SB I C come into compliance ,” and tha t “[i] f the SBI C is unable to comply within a rea sonable time, the SBA has the authority

to refe r the matter

to the Offic e of L iquidation.” Pl.’s Mem. at 4. When it comes

43

## down to it, the rec ord in this case shows tha t EL K had a continuing a

nd worsening condition of capital impairme nt and, despite ha ving mor e than one y ear and seve n months to do so, failed to satisfac torily

cure that condition. There is, quite simpl y , no cre dible arg ument that the SBA’ s decision to transfe r EL K to the Off ice of SBI C L iquidation was proce durally or substantively defe ctive. Ac cording ly , the Court finds that EL K has fa iled to establish that it is likely to

succe ed on the mer its of its claim that the SBA’s dec ision to t ransf er EL K to the Off

ice of SBI C
L iquidation on Febr

uary 22, 2012 was a

rbitrar y , capr icious, or otherw ise improper. 2. The Sec ond Cure L etter a nd the SBA’ s Marc h 13, 2012 L etter EL K next challeng es the re asonable ness of the SB A’s Second Cure L etter, da ted Marc h 6, 2012, and the c onditions purportedly place d on the Second Cure L etter by the SBA’ s letter dated Ma rch 13, 2012. EL K’s ar g uments in this reg ard ne ed not detain the Court long , and the Court addre sses them here seriatim

. First, EL K sug g ests that the SBA’ s Second Cure L etter f ailed to af ford the c ompany

a “commer cially

rea sonable” opportunity

to cure . As an initial matter, the Court notes that ther e is no basis, in statute or re g ulation, for imposing upon the SBA a require ment that it affor d SBI Cs a “commer cially

rea sonable” opportunity

to cure . Rather, the SB A is only require d by

reg ulation to provide an SB I C with “at least 15 day s to cure the defa ult(s).” 13 C.F.R. § 107.1810(g )(2) (i). The SBA has appr opriately declined to e stablish categ orica l time lim its for curing a condition of capital impairme nt, adopting instea d a ca se-by -ca se appr oach tha t leaves it to the Off ice of SBI C Oper ations to ex erc ise “prude nt business judgment” based on the particula rs of a g iven ca se. SOP 10 06, ch. 5 para . 8(a) . Dec iding how muc h notice is appropr iate in a g iven ca se re quires the exercise of

administrative expertise, and the Court sha ll not li g htly second g uess how the

44

## SBA e x erc ises its business judgment. I n this case, the c ritical and undisputed f act is that, by

the time the Second Cure L etter w as issued, EL K had a lrea dy been a ffor ded more than one y ear and seven months to cure its condition of capital impairment and ha d not done so. See SOP 10 06 ch. 5 para . 8(a) (providing that, when se tting a c ure pe riod, the SBA ma y consider “ [w] hether

corr ective a ction was pre viously reque sted”). D espite having ample opportunity to come into compliance , EL K’s fina

ncial condition had only

deter iorated f

urther. U nder the se circ umstances, the SBA did not ac t arbitrar ily or ca priciously in limi ting EL K to the re g ulatory minimum cure period. I ndeed, E L K re prese nted that it could cure within the fifteen- day cure period. A.R. 1821. Nor c an the Court turn a blind ey e to the fa ct that, with the SBA’ s voluntary ag ree ment to ref rain fr om further

liquidation activities during the r esolution of this mot ion, EL K has now ha d

over a month and a half

since the Sec ond Cure L etter w as issued and the re is still no indi cation that EL K has a

ny rea listi c plan f

or cur ing its condition of ca pital impairment. Second, EL K claims that the Sec ond Cure L etter should have prec eded its transf er to the Offic e of SB I C L iquidation and the SBA’ s purcha se of EL K’s debe ntures fr om the pooling instit ution. This arg ument fails at the outset be cause it presupposes that EL K’s initial transfe r to the Off ice of SBI C L iquidation was improper, but the Court ha s alrea dy conclude d that EL K has failed to show that it is likely to succe ed on such a

claim. See supra Part V.A.1. The SBA is only require d to provide an SB I C with “written notice” of its condition of capital impairment a nd to affor d the SBI C “at lea st 15 day s to cure the defa ult(s),” 13 C.F.R. § 107.1810(g ), and the SBA satisfied the se re quirements whe n it issued the Cure L etter on July 20, 2010 and then aff orded EL K more tha

n one y ear

and seve n months to come into compliance. The mere fac t that
EL K was in liquidation when the SB A issued the Second Cure L etter ha rdly rende red the letter a

45

## “sham,” as EL K sug g ests, Pl.’s Reply at 13, bec ause “ the Off

ice of SBI C L iquidation can

rec ommend that a license e be tr ansfe rre d back to [the Off ice of SBI C Opera tions] ,” SOP 10 06, ch. 9 par a 6. Third, and in a similar ve in, EL K contends tha t the SBA’s c onduct—transf err ing E L K to the Off ice of SBI C L iquidation and purcha sing EL K’s debe ntures fr om the pooling instit ution—render ed EL K’s ability to cure “illusory .” Pl.’s Reply at 14. Acc ording to EL K, under the se circ umstances, “ no investor would invest in EL K” a nd “no borr ower

will borrow from EL K.” Id. at 22. Once ag ain, EL K’s ar g ument fails at the outset be cause it rests on the false pr emise that the initial transfe r to the Off ice of SBI C L iquidation was improper. See supra Part V.A.1. More to the point, despite EL K’s appa rent be lief to the contra

ry , the SBA is not require d to cre ate the c onditions for an SBI C’s ability to cure an eve nt of defa

ult. Fac ed with
EL K’s thre ats of litiga tion, the SBA voluntarily ag ree d to refr ain from f

urther liquidation activities and it issued the Second Cure L etter to g ener ously aff ord EL K y et another

opportunity
to cure its condition of capital impairment (a n opportunity

to which EL K would not have be en entitled absent the SB A’s voluntary ag ree ment). I n so doing, the SBA wa s not obligate d to take
any aff irmative mea sures that mig ht assist EL K in secur ing the private c apital the compa ny neede d to cure its condition of capital impairment. 2 5


## Four th, EL K ar g ues most force fully that the SBA’ s Marc h 13, 2012 letter “ sets at least five leg ally

impermissible conditions to cure.” Pl.’s Mem. at 23. De spite EL K’s fe rvent protestations to the contra ry , the SBA’ s Marc h 13, 2012 letter did no such thing , but instead

I n d e e d , E L K d o e s n o t e v e n i d e n t i f y w i t h a n y m e a s u r e o f e x a c t i t u d e w h a t t h o s e a f f i r m a t i v e m e a s u r e s 25
m i g h t b e . P r e s u m a b l y , h o w e v e r , t h e y i n c l u d e s o m e h o w d e v o l v i n g t h e c o m p a n y ’ s d e b e n t u r e s t o t h e p o o l i n g i n s t i t u t i o n , b u t E L K d o e s n o t e x p l a i n h o w t h a t c o u l d b e d o n e . 

## 46

## mere ly

provided EL K with preliminary fee dback on the company ’s plan to deliver binding commitment letters to the SBA for its consideration. The SB A’s letter unambig uously

provided that, “[a]t t his tim e, SBA cannot de termine whe ther [the company ’s] proposed cure [would] satisfac torily

resolve [its] condition of Capital I mpairment.” A .R. 1833. Although the SB A provided EL K with some g uidance as to its stated plan, the SBA c lear ly stated that it could not, at that time, rende r a f

inal decision, and instruc ted EL K to submit additi onal information, including the fully

executed binding commitment letters and an upda ted ca pital cer tificate. A .R. 1833. As a c onsequenc e, the SB A’s Mar ch 13, 2012 letter simply does not constitute “fina l
ag ency action” subje ct to judicial revie w. 5 U.S.C. § 704; see also Nat’l Ass’n of Home B uilders
v. Norton , 415 F.3d 8, 13 ( D.C. Cir. 2005) (“[T]he action under revie w must mark the consummation of the ag ency ’s dec isionmaking proc ess—it must not be of a mere ly tentative or interlocutory

nature .”) ( internal quotation marks omitted). And be cause EL K neve r ca rried out its proposal, the SBA wa s never place d in the position of having to make a fina l determination on these issues.
I n the end, EL K has fa iled to proffe r a c olorable ba sis for conc luding that e ither the SBA’s Sec ond Cure L etter or its letter dated Ma

rch 13, 2012 w ere arbitra ry , capr icious, or otherwise imprope r. Ac cording ly , the Court finds that EL K has fa iled to establish that it is likely
to succe ed on the mer its of this claim. * * *
I n meeting the re quisite burden for injunctive relief

, “[i] t is particularly

important for the movant to demonstrate a

likelihood of succe ss on the merits.” Konarski v. Donovan , 763 F. Supp. 2d 128, 132 (D.D.C. 2011). I n the final a naly sis, EL K has fa iled to meet that burde n here

.

47

## As a re sult, thi s fac tor weig hs ag ainst the issuance of a pr eliminary injunction.
B. Irre parable Injury, the P ubl ic Intere st, and the Balan ce of the Equi ties
EL K bea rs the burde n of “de monstrat[i ng ] t hat irre para ble injury is likely in the absenc e of an injunction,” a

nd not a mere possibili ty

. W inter , 552 U.S. at 22 (empha sis in original). T he injury identified must “be both ce rtain and g rea t; it m ust be ac tual and not theore tical.”
W isconsin Gas Co. v. Fed. Ene rgy Regulatory Comm’ n , 758 F.2d 669, 674 ( D.C. Cir. 1985). I n this reg ard, EL K offe rs var ious reasons why it believes that it will be injured in the abse nce of a preliminary

injunction, but there is a common def ect a ffe cting them all. Reg ardle ss of what one 2 6 

## might believe about the propr iety of suspending liquidation activities during the pe ndency of this action, about e njoining the SB A from taking any action that would af

fec t EL K’s status a
corpor ate lice nsee, or

about re quiring the SBA to provide EL K eve n more time to cure its condition of ca

pital impairment, the simple fac t is that EL K still has not presented the SB A or this Court wit h a conc rete plan for c uring its condition of capital impairment. True , EL K
sug g ests that it intends to t ake the time affor ded by a pre liminary

injunction to seek commitment letters re flec ting suff

icient funds to bring its capital impairment per centa g e to 40% or lowe r, but it offer s no cre dible explanation why it would be able to succ essfully do so if aff

orded a dditional time when it has not bee n able to do so to date. To the extent EL K’s optimism rests on its
sug g estion that the Court should take the unusual step of commanding the SBA to issue a public statement that the SBA will not acce lera te EL K’s pay ment on its debentures, EL K offe rs only its naked spe culation that such a step would be suff

icient to restore marke t confidenc e so that EL K

P a r e n t h e t i c a l l y , t h e C o u r t a l s o n o t e s t h a t , a l t h o u g h b y n o m e a n s d i s p o s i t i v e , t h e f a c t t h a t E L K h a s 26
a s s e r t e d a n d i n t e n d s t o p u r s u e c l a i m s f o r m o n e t a r y d a m a g e s u n d e r c u t s i t s a r g u m e n t t h a t , a b s e n t t h e e q u i t a b l e r e l i e f o f a p r e l i m i n a r y i n

j u n c t i o n , i t w i l l h a v e n o a d e q u a t e r e m e d y i n l a w . 

## 48

## could sec ure the funding it needs to cure

. This is especially troubling be cause the re cord is 2 7 

## clea r that EL K’s over all financ ial condition has consistently erode d over the past two
y ear s—something that is ce rtain to be a major fa ctor in shaping marke t perc eption. EL K simply has fa iled to expl ain to this Court’s satisfaction that the “e x traordina ry relief ” that it has
reque sted would eve n make a meaning ful diffe renc e at the e nd of the da y . W inter , 555 U.S. at 21. Turning to the cate g ories of a lleg ed har ms identified by

EL K, with one exception discussed in g rea ter de tail below, the Court is not persuade d that EL K is likely to suffer irrepa rable injury

in the absenc e of pr eliminary relief . First, EL K asser

ts that the SBA’s c onduct is violative of its procedur al rig hts, but courts g ener ally “will not base a

finding of ‘irr epar able injury ’ on a pr ocedur al violation standing a lone” a nd “any putative proc edura l violation . . . [could] be re medied by

a dec ision on the merits.” Am. Ass’n for Home care v . Leavitt , 2008 WL 2580217, at *5 (D.D .C. J une 30, 2008) ( internal number ing omitted). Sec ond, EL K claims that it will suffer injury

to its goodwill, market r eputation, and c reditworthiness, but eve n assuming, arguendo , that such har

ms are c og nizable under the “ irrepa rable injury ” standa

rd, their immediate impact has a lrea dy been f elt and henc e “a

preliminary

injunction here w ould be ver y much like locking the bar n door af ter the hor se is g one.” Marcy Playground, Inc . v. Capitol
Rec ords, Inc. , 6 F. Supp. 2d 277, 282 (S.D.N.Y. 1998) . Ag ain, EL K has not provided anonspecula tive basis for c oncluding that the issuance of a pr eliminary injunction is l ikely

to meaning fully

improve its perc eption in the marke tplace. T hird, althoug h EL K cor rec tly observe s

M o r e o v e r , r e q u i r i n g t h e S B A t o m a k e s u c h a n a f f i r m a t i v e s t a t e m e n t w o u l d c o n s t i t u t e t h e s o r t o f 27
m a n d a t o r y r e l i e f a l t e r i n g t h e s t a t u s q u o t h a t i s g e n e r a l l y d i s f a v o r e d

. S e e A l l i n a H e a l t h S e r v s
. v
. S e b e l i u s , 7 5 6 F

. S u p p . 2 d 6 1 , 6 9 ( D

. D

. C

. 2 0 1 0 )

. 

## 49

## that it may be re quired to comply

with the require ments applicable to new license es if it is able to

secur e a tr ansfe r bac k to the Offic e of SB I C Opera tions and thereby exit liquidation, see SOP 10 06, ch. 9 par a. 6, whe ther or not EL K will ever be able to meet the other conditions for exiti ng liquidation remains entirely specula tive at this point. Nonethele ss, the Court is not obl ivious to t he fa ct that there are rea l conseque nces stemming fr om EL K’s tra nsfer to the Offic e of SB I C L iquidation. I t should go without say ing that a tra nsfer to the Offic e of SB I C L iquidation necessa rily bring s with it a gr eate r risk of a ctual liquidation, som ething that would obviously aff ect EL K’s ability

to exi st in it s curr ent form a s an
ong oing c oncer

n. Once the par

ties’ standstill agr eeme nt expi res a fter A pril 25, 2012, the SBA will be fre e to continue the pr ocess of liquidation, which may

include ac cele rating EL K’s
pay ment on its debentures by decla ring the company ’s entire indebtedness “ immediately due and
pay able,” 13 C.F.R. § 107.1810(g )(1) (i), and instituting proc eeding s for the a ppointment of the SBA or its desig nee a s EL K’s re ceive r, id. § 107.1810(g )(1) (ii). L iquidation is not inevitable and there fore somewhat c onjectura l at this point , see SOP 10 06, ch. 9 para . 6, but give n EL K’s

curr ent financ ial condition and past inability to cure its condition of capital impairment, there is a sufficie ntly

concr ete r isk that EL K will most l ikely be subjec t to further liquidation proce eding s absent pre liminary

relief

. Even a cce pting this showing , howeve r, the Court finds that the irr epar able ha rm EL K might suff

er in the a bsence of a pr eliminary

injunction is out weig hed by the public intere st. Today , the SBA holds appr ox imately $21,715,000 of outstanding debentur es that we re issued by
EL K betwe en Jul y

2002 and De cembe r 2009, and a pproxi mately

$5,000,000 will be due within the next ten months . A.R. 14, 1720. These a re substantial fig ures, a

nd they repr esent public

50

## monies that have be en extended to EL K, a pr ivate entity , with the ultimate aim not of

encour ag ing E L K’s individual g rowth but rathe r the g rowth of small businesses g ener ally

. The 2 8 

## primary g oal of the O ffice of SBI C L iquidation is t o maxi miz e net r ecove ries in liquidation, taking into consideration the time value of money , and fur thering the integ rity

of the SBI C
prog ram while r ecog nizi ng the intere sts of aff ecte d parties. See SOP 10 07, ch. 1 par a. 4(a ). Permitting an SB I C like EL K to delay the liquidation process during the pende ncy of litiga tion would constitute a sig nificant interf ere nce w ith the SBA’s a

bility to protect its lever ag e position and to re cover

public funds from f

ailing institutions. S uch an outc ome would, if not evisce rate , then at the ve ry

least seve rely

undermine the SBA’s a

bility to function as a ma

rket a ctor a

nd make the sor

t of adroit business dec isions that C ong ress e nvisioned when it launche d the ag ency into the commerc ial world. The e quities do not favor such a n outcome whe re, a s here , an SBI C has alre ady

been a ffor ded a me aning ful opportunity to cure its default and ha s failed to do so or even showthat there is a rea listi c possibility that it will be able to do so. Acc ording ly , even taking into account the ha rm EL K might suff

er in the a bsence of a pr eliminary

injunction, the Court finds that the public interest and the balanc e of the equities weig h ag ainst the issuance of a preliminary

injunction.
/ / / /

T h e r e i s n o r e a s o n t o b e l i e v e t h a t s m a l l b u s i n e s s e s w i l l b e m a t e r i a l l y a f f e c t e d b y E L K ’ s a b s e n c e f r o m t h e 28
m a r k e t p l a c e , w h i c h i s a l r e a d y p a r t o f t h e s t a t u s q u o b e c a u s e E L K c o n c e d e s t h a t “ n o b o r r o w e r w i l l b o r r o w f r o m E L K t o d a y . ” P l

. ’ s R e p l y a t 2 2

. O t h e r S B I C s r e m a i n a v a i l a b l e t o p r o v i d e f u n d i n g t o s m a l l b u s i n e s s e s , a n d s m a l l b u s i n e s s e s m a y o f c o u r s e s t i l l l o o k t o b o r r o w f r o m m o r e t r a d i t i o n a l s o u r c e s . 

## 51

## VI. CONCLUSION

The Court has c onsidered the rema ining a rg uments tendere d by

EL K and ha s conclude d that they are without merit. Consi dering the re cord a s a whole, the Court finds that EL K has failed to make a “c lear

showing ” that it is entitled to the “extraordinary reme dy ” of a

preliminary injunction. W

inter , 555 U.S. at 21. Acc ording ly , EL K’s [3] Motion for Preliminary Relief shall be DEN I ED. The SB A shall file a ple ading responsive to EL K’s [1] Complaint by no later tha

n June 4, 2012 . An appr opriate O rder acc ompanies this Memorandum Opinion.

Date: April 24, 2012 /s/ COLLE EN KOLLAR-K OTEL LY United States District J udg e

52