Hyndman v. Small Business Administration

Background

Dante Hyndman, proceeding without a lawyer and without paying the filing fee, sued the Small Business Administration (SBA), Isabel Guzman in her official capacity as SBA Administrator, Janet Yellen in her official capacity as Secretary of the Treasury, and the United States. He brought claims under the Administrative Procedure Act, a federal law that permits review of certain agency actions. He challenged the SBA’s denial of his COVID-19 Economic Injury Disaster Loan applications and sought, among other relief, an order requiring the defendants to declare him eligible for a loan.

Hyndman alleged that he applied for a loan in April 2020 and was denied in June 2020 because his economic injury was not substantiated. He said he reapplied 12 times during 2020 and 2021, and that later denials cited significant differences between information in his applications and information the SBA received from the Internal Revenue Service. He alleged that the SBA continued reviewing his file after he submitted tax documents and other materials, but ultimately denied his appeal in April 2022. He also alleged that the agency placed his file on hold because of suspected fraud and improperly delayed or denied his applications.

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which concerns the court’s subject-matter jurisdiction, and Rule 12(b)(6), which concerns whether a complaint states a legally sufficient claim.

Court’s analysis

The defendants argued that sovereign immunity—the general rule protecting the government from certain lawsuits—barred Hyndman’s requests for injunctive and mandamus relief. The court declined to decide that issue because it concluded that Hyndman’s claims failed on the merits.

The court held that the Administrative Procedure Act does not allow review of agency actions committed to agency discretion by law. The court explained that the Small Business Act authorizes the SBA to make loans it “may determine to be necessary or appropriate,” and that the word “may” signals discretion. The court also held that the CARES Act provision allowing the SBA to use Treasury information to confirm loan eligibility or the accuracy of an application supplied no meaningful standard for reviewing the agency’s exercise of discretion.

Based on those provisions, the court concluded that the SBA’s decisions concerning Hyndman’s Economic Injury Disaster Loan applications were committed to agency discretion and therefore were unreviewable. The court further held that Hyndman had not plausibly alleged that the SBA violated a duty imposed by the Small Business Act or the CARES Act. It rejected as unsupported his allegations that the SBA maintained an internal policy of delaying files until the program closed, that it had not processed his original application, and that it denied his applications unlawfully because it considered Internal Revenue Service information. The court also found that his argument about a secret requirement for timely filing his 2019 tax return was not supported by the allegations in his complaint.

Disposition

Judge Philip M. Halpern granted the defendants’ motion to dismiss. The complaint was dismissed with prejudice because the court concluded that amendment would be futile. The Clerk was directed to terminate the pending motions and close the case.