Imaginarium, LLC v. United States ( 2023 )

In the United States Court of Federal Claims
IMAGINARIUM, LLC,
Plaintiff, No. 22-cv-1453
v. Filed: June 7, 2023
THE UNITED STATES,
Defendant.
John Robert Grimm, HWG LLP, Washington, D.C. argued for Plaintiff. With him on the briefs
are Jonathan O. Hafen, Michael S. Anderson, Victoria R. Luman, and W. Ash McMurray, Parr
Brown Gee & Loveless, P.C., Salt Lake City, UT.
Patrick Angulo, United States Department of Justice, Civil Division, Washington, D.C. argued for
Defendant. With him on the briefs are Brian M. Boynton, Principal Deputy Assistant Attorney
General; Patricia M. McCarthy, Director, Commercial Litigation; William J. Grimaldi, Assistant
Director, Commercial Litigation; and Jennifer M. Narvaez, United States Small Business
Administration, Office of General Counsel.
MEMORANDUM AND ORDER
In December 2020, Congress enacted the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act (Act). See Pub. L. No. 116-260 §§ 301–48. Section 324 of the Act
established the Shuttered Venue Operators Grant program (SVOG Program). Id. § 324 (codified
at 15 U.S.C. § 9009a). The SVOG Program’s purpose was “to provide assistance to eligible live-
entertainment businesses impacted by the [COVID-19] pandemic.” Transfer Complaint (ECF
No. 48) (Transf. Compl.) ¶ 1. The Act tasked the United States Small Business Administration
(SBA) with administering the SVOG Program. See 15 U.S.C. § 9009a(b)(1)(A).
Plaintiff Imaginarium, LLC is a self-described “small live-event production company”
that applied for a grant through the SVOG Program. Transf. Compl. ¶ 2. The SBA initially
signaled that Imaginarium’s application was approved and a grant would be forthcoming. Id. ¶ 3.
Ultimately, however, the SBA declined Imaginarium’s grant application because Imaginarium
did not qualify under the SVOG Program’s eligibility criteria. Id. ¶¶ 9–13. After initially filing
suit in the United States District Court for the District of Utah, this action was transferred to the
United States Court of Federal Claims, where Imaginarium filed a Transfer Complaint. ECF Nos.
39, 40, 48. Plaintiff’s Transfer Complaint contends that the SBA breached a contract with
Imaginarium by denying Imaginarium’s SVOG Program grant application. Id. ¶¶ 108–12.
Imaginarium seeks $1,611,445.16, the amount in grant funds it contends it is entitled to receive
under the SVOG Program. Id. at 26. 1
Pending before this Court is Defendant United States’ (Defendant’s or Government’s)
Motion to Dismiss for Failure to State a Claim (Motion). See ECF No. 60 (Mot.). The Defendant
urges this Court to dismiss this action for breach of contract pursuant to Rule 12(b)(6) because
“Imaginarium’s complaint fails to plausibly allege the required elements for a contract with the
United States.” Mot. at 9. The Motion is fully briefed, and this Court conducted oral argument
on April 11, 2023. Having considered the parties’ arguments and applicable law, this Court holds
that Imaginarium failed to plead facts sufficient to establish the existence of a contract with the
United States, and, consequently, Imaginarium’s Transfer Complaint fails to state a claim for
breach of contract as a matter of law. Accordingly, this Court GRANTS the Government’s
Motion to Dismiss for Failure to State a Claim (ECF No. 60) pursuant to Rule 12(b)(6).
1
Citations throughout this Memorandum and Order reference the ECF-assigned page numbers,
which do not always correspond to the pagination within the cited document.
2
BACKGROUND
I. The SVOG Program
As part of its effort to lessen the burdens of COVID-related measures on businesses,
Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act,
which set aside approximately $15 billion to the SVOG Program. Pub. L. No. 116-260
§ 323(d)(1)(H). The subsequent American Rescue Plan Act of 2021 added an additional $1.25
billion to the pool of funds available to shuttered venue operators. See Pub. L. No. 117-2 § 5005.
Venue operators impacted by the pandemic could apply for monetary grants through the
SVOG Program. The SVOG Program prescribed eligibility criteria for businesses seeking a
grant: only live venue operators or promoters, theatrical producers, live performing arts
organization operators, relevant museum operators, motion picture theatre operators, and talent
representatives that met certain requirements were eligible for grants. See 15 U.S.C.
§ 9009a(a)(1)(A). A business was required, for example, to have been “fully operational . . . on
February 29, 2020” and have suffered a 25% decline in gross earned revenue between one quarter
in 2019 and the same quarter in 2020. Id. § 9009a(a)(1)(A)(i). Eligible businesses must also
have intended to reopen and resume normal operations when permitted by law. Id.
§ 9009a(a)(1)(A)(ii).
Additionally, the SVOG Program imposed physical and operational requirements to
qualify for a grant. A live venue operator or promoter, theatrical producer, or live performing
arts organization operator was defined as an entity that, “as a principal business activity,
organizes, promotes, produces, manages, or hosts live concerts, comedy shows, theatrical
productions, or other events by performing artists.” Id. § 9009a(3)(A)(i)(I). Furthermore, the
venues at which a live venue operator or promoter “promotes, produces, manages, or hosts
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events” must have “[a] defined performance and audience space[,] . . . [m]ixing equipment, a
public address system, and a lighting rig,” among other required characteristics. Id. §
9009a(a)(1)(A)(iii). Theatrical producers, live performing arts organization operators, motion
picture theatre operators, and museum operators were subject to similar physical and operational
requirements. See id. § 9009a(a)(1)(A)(iii)–(v); see also id. § 9009a(a)(3)–(10).
The SVOG Program limited the use of grant funds. A grant recipient could use the funds
for costs incurred between March 1, 2020 and June 30, 2022. 15 U.S.C. § 9009a(d)(1)(A)(i)–(ii).
Recipients could spend the grant on payroll costs, rent or mortgage payments, utilities, and other
“ordinary and necessary business expenses.” Id. § 9009a(d)(2)(B)(i)–(viii). Recipients were
prohibited from using the funds to purchase real estate, pay loans that originated after February
15, 2020, or invest or re-lend. Id. § 9009a(d)(3)(A)–(E). To enforce these prohibitions, the
SVOG Program required that the SBA “increase oversight of eligible persons and entities
receiving grants.” Id. § 9009a(e). The SVOG likewise required the SBA to create an “audit plan”
detailing “policies and procedures . . . for conducting oversight and audits of grants.” Id.
§ 9009a(f).
The Act required the SBA’s Office of Disaster Assistance to “coordinate and formulate
policies relating to the administration of grants.” 15 U.S.C. § 9009a(b)(1)(A). The SBA took
several measures toward that end. On March 26, 2021, the SBA issued a “Notice of funding
opportunity” (SVOG Notice) in the Federal Register. See Notice of funding opportunity, 86 Fed.
Reg. 16,270–74 (Mar. 26, 2021). The SVOG Notice explained the SBA would receive
applications under the SVOG Program through its website. Id. at 16,270.
The SBA also issued SVOG Post-Application Guidance (SVOG Guidance) to “answer[]
common questions about the SVOG program for applicants.” Shuttered Venue Operators Grant
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Post-Application Guidance (July 28, 2021), https://www.sba.gov/document/support-post-
application-guidance-svog-applicants (SVOG Guidance Ver. 1); see also Shuttered Venue
Operators Grant Post-Application Guidance (July 22, 2022),
https://www.sba.gov/document/support-post-application-guidance-svog-applicants (SVOG
Guidance Ver. 4). The SVOG Guidance explained the SBA’s process for receiving, reviewing,
and accepting or declining applications.
The SBA required applicants to create an account on the SVOG Application Portal
(SVOG Portal) and submit their applications through the SVOG Portal. SVOG Guidance Ver. 4
at 2. The SBA would then review each application to determine if the applicant was eligible for
a grant. Id. at 2–4. If the SBA approved the application, the applicant’s “[a]ward amount [wa]s
finalized,” and the SBA would issue a Notice of Award/Form 1222. Id. at 5. However, “prior to
disbursement” of any grant funds, the applicant was required to sign and return the Notice of
Award. Id. The Notice of Award could also be accompanied by a Form 1222 Addendum, which
listed Special Conditions that the applicant must satisfy prior to receiving grant funds. Id. The
applicant was required to “return [the] properly executed [Notice of Award] and complete any
Special Conditions prior to disbursement.” Id. at 6. After the SBA received the completed Notice
of Award, the applicant would “become an Awardee/Grantee and the SBA [would] schedule[] a
disbursement of funds.” Id. If, on the other hand, the SBA declined the application, the applicant
would “receive an email and an update in [the] SVOG portal indicating [the applicant is] eligible
to submit an appeal.” Id. at 7.
The SVOG Program provided “specific time periods” for awardees “to incur eligible costs
and to charge costs to the SVOG award.” SVOG Guidance Ver. 4 at 10. A Notice of Award
therefore provided information regarding those deadlines. The “Project Period” defined the
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“complete length of time for which funds are available for award making.” Id. The Project Period
lasted from the date the SBA issued the grant until the “[e]nd date for incurring eligible and
allowable costs.” Id. The “Budget Period” defined the “complete length of time . . . to spend
award funds on eligible and allowable costs” incurred during the Project Period. Id. The Budget
Period lasted from the first to the last allowable days to spend award funds. Id. The period
between the issuance of the Notice of Award and the end of the Budget Period was titled the
“Active Grantee Phase” and involved “identifying eligible and allowable expenditures and
spending grant award funds.” Id. at 8. The SVOG Guidance also created a “Closeout Phase,”
during which an applicant would submit an expense report with records documenting the
applicant’s SVOG Program expenditures. Id. at 12–13.
II. Imaginarium’s SVOG Application
Imaginarium submitted its application to the SVOG Program on April 26, 2021. Transf.
Compl. ¶ 52. On July 13, 2021, Imaginarium’s application status in the SVOG Portal changed to
“Awarded” and listed a grant amount of $1,611,445.16. Id. ¶ 54. The next day, the SBA sent an
email to Imaginarium stating, “Congratulations once again on your Shuttered Venue Operator’s
Grant!” Id. ¶ 56. The SBA’s July 14 email referenced Imaginarium as an “awardee.” Id. ¶ 57.
On July 19 and 26, 2021, the SBA published a list of SVOG grant recipients; Imaginarium
appeared on both lists. Id. ¶ 59.
On July 30, 2021, the SBA sent another email to Imaginarium stating, “Congratulations!
Your Shuttered Venue Operator’s Grant is approved.” Id. ¶ 64. The SBA issued to Imaginarium
a Notice of Award, with a Project Period of July 13 to December 31, 2021, confirming a grant
amount of $1,611,445.16. Id. ¶ 65. The SBA also forwarded several action items required of
Imaginarium, such as completing a “Program Assurances” document and watching an
6
informational video. Id. ¶¶ 64–65; see also Mot. at 11–12. Imaginarium signed and returned the
Notice of Award and completed the action items at some point on July 30, 2021. Id. ¶ 67.
Also on July 30 — eight minutes after it sent its “Congratulations” email — the SBA sent
Imaginarium another email stating, “SBA has fully reviewed your request for SVOG funding,
but additional information and technical corrections are required to confirm your eligibility.
Please respond to the Action Item SBA has created for you in the SVOG Portal by 8/14/2021 at
8 PM PT to move your application forward.” Transf. Compl. ¶ 68; Mot. at 12. Imaginarium
requested clarification from the SBA but did not receive a response. Transf. Compl. ¶¶ 69–71,
76. Nonetheless, Imaginarium stated it had “endeavored to spend the approved budget amount .
. . by the deadline of December 31, 2021.” Id. ¶ 73. Imaginarium hosted the Tampa Bay Comic
Convention between July 30 and August 1, 2021, and the Atlanta Comic Convention between
August 6 and August 8, 2021. Id. ¶¶ 74–75.
On August 14, 2021, the SBA emailed Imaginarium, stating “You have the option to file
an appeal of the decline decision for your SVOG application.” Transf. Compl. ¶ 79. Imaginarium
appealed, “despite having never received an actual denial or explanation providing a substantive
basis for the purported denial” of its application. Id. ¶¶ 81–90. Through its appeal, Imaginarium
sought to “substantiate that Imaginarium meets all [eligibility] criteria.” Id. ¶ 82. While its appeal
was pending, Imaginarium hosted the Indiana Comic Convention between October 15 and
October 17, 2021. Id. ¶ 85.
The SBA denied Imaginarium’s appeal on October 27, 2021, and this time provided an
explanation for its denial. Transf. Compl. ¶ 86. The SBA explained that Imaginarium did not
meet the principal business activity definition and did not meet various, unspecified eligibility
criteria. Id. ¶ 86. Subsequently, Imaginarium informed the SBA it intended to file a complaint
7
in the District of Utah and, as a result, the SBA agreed to continue reviewing Imaginarium’s
application. Id. ¶¶ 87–88. Ultimately, on December 14, 2021, the SBA informed Imaginarium
its application “remain[ed] declined.” Id. ¶ 91. Specifically, the SBA concluded Imaginarium’s
primary business involved hosting and operating comic book conventions, which “feature talks
by comics and entertainment industry speakers, photograph and autograph opportunities, and
retail vending.” Id. ¶ 93. In contrast, the Act limited eligibility to live venue operators whose
principal business activity involved organizing, promoting, producing, managing, or hosting “live
concerts, comedy shows, theatrical productions, or other events by performing artists.” Id.; see
15 U.S.C. § 9009a(a)(3)(A). Although Imaginarium’s events sometimes included performances
by musicians or comedians, the SBA concluded that such activities were secondary or
supplemental. Transf. Compl. ¶ 93. In its December 14, 2021 final denial of Imaginarium’s
application, the SBA also stated it had “erroneously issued [the] Notice of Award” to
Imaginarium. Id. ¶ 92.
III. Procedural Background
Imaginarium initially filed this action on December 23, 2021, in the United States District
Court for the District of Utah (District of Utah). See Complaint (ECF No. 2). That original
Complaint alleged three causes of action: (1) breach of contract; (2) promissory estoppel; and (3)
an APA claim that the agency’s action was arbitrary and capricious. Id. The parties began
discovery in April 2022. See ECF No. 15 (Scheduling Order). On May 24, 2022, the Government
filed a motion to dismiss for lack of subject matter jurisdiction. See ECF No. 16. On August 1,
2022, the District of Utah granted the Government’s motion to dismiss for lack of subject matter
jurisdiction and transferred the case to the United States Court of Federal Claims. See ECF No.
38. In doing so, the District of Utah held that the SBA’s waiver of sovereign immunity did not
8
apply to the SVOG Program; therefore, it held Imaginarium’s breach of contract and promissory
estoppel claims belonged in the Court of Federal Claims. Id. at 3–7. Furthermore, because the
APA waives sovereign immunity “only when there is no other adequate remedy in a court,” the
District of Utah held that waiver did not apply because Imaginarium’s APA claim was redundant
to its breach of contract claim. Id. at 7–9 (quoting 5 U.S.C. § 704).
The case was transferred from the District of Utah to this Court on October 6, 2022. See
ECF Nos. 39 & 40. Imaginarium filed its Transfer Complaint in this Court on November 3, 2022.
See Transf. Compl. Distinct from its original complaint, Imaginarium’s Transfer Complaint
included only a single breach of contract claim. See Transf. Compl. ¶ 24 n.3 (explaining
Imaginarium “amended its causes of actions herein to voluntarily omit and dismiss without
prejudice its cause of action for promissory estoppel” because this Court “lacks jurisdiction over
[promissory estoppel] claims”); id. at 25–26. Imaginarium’s sole cause of action alleges, “The
Notice of Award constitutes a binding and enforceable contract to which the SBA expressly and
impliedly agreed.” Id. ¶ 109. According to Imaginarium, the SBA breached the agreement when
it revoked the Notice of Award and withheld grant funds from Imaginarium. Id. ¶ 111.
The Government moved to dismiss Plaintiff’s Transfer Complaint under Rule 12(b)(6)
for failure to state a claim upon which relief can be granted. See Mot. The Government contends
the “SBA could not have breached any contract with Imaginarium . . . because no contract
required the agency to find Imaginarium eligible for the SVOG program or disburse any funds to
Imaginarium.” Id. at 15. The Government argues, in essence, there was no contract formed
between Imaginarium and the SBA. Id. at 9.
9
APPLICABLE LEGAL STANDARD
To withstand a motion to dismiss pursuant to Rule 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). The plaintiff’s complaint must include “more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.
At the motion to dismiss stage, this Court must “accept as true the complaint’s well-pled factual
allegations” but need not “accept the asserted legal conclusions.” Am. Bankers Ass’n v. United
States, 932 F.3d 1375, 1380 (Fed. Cir. 2019). Dismissal for failure to state a claim upon which
relief can be granted under Rule 12(b)(6) “is appropriate when the facts asserted by the claimant
do not entitle him to a legal remedy.” Lindsay v. United States, 295 F.3d 1252, 1257 (Fed. Cir.
2002); see also Welty v. United States, 926 F.3d 1319, 1323 (Fed. Cir. 2019) (citing Lindsay).
The Court “must consider the complaint in its entirety” as well as “documents incorporated into
the complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc.
v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
DISCUSSION
As noted, the sole cause of action alleged by Imaginarium’s Transfer Complaint is one
for breach of contract. See Transf. Compl. ¶¶ 108–12. Specifically, Imaginarium contends “[t]he
Notice of Award constitutes a binding and enforceable contract to which the SBA expressly and
impliedly agreed.” Id. ¶ 109. Imaginarium further alleges that the SBA then “materially breached
the Agreement by revoking the Award without explanation and subsequently denying
Imaginarium’s Appeal.” Id. ¶ 111. The Government counters that there was “no contract”
10
formed between Imaginarium and the SBA. Mot. at 15.
To prevail on a breach of contract claim, Imaginarium must first establish the existence
of a contract. 2 “To prove the existence of a contract with the government, a plaintiff must prove
four basic elements: (1) mutuality of intent to contract; (2) offer and acceptance; 3 (3)
consideration; and (4) a government representative having actual authority to bind the United
States.” Hometown Fin., Inc. v. United States, 409 F.3d 1360, 1364 (Fed. Cir. 2005); see also
Anderson v. United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003). These elements apply to both
2
The alleged contract between Imaginarium and the SBA is a “grant.” See 15 U.S.C. § 9009a(b)(2)
(characterizing SVOG Program awards as “grants”). However, there is no dispute, and the parties
agree, that courts “treat[] federal grant agreements as contracts when the standard conditions for a
contract are satisfied.” Columbus Reg’l Hosp. v. United States, 990 F.3d 1330, 1338 (Fed. Cir.
2021); see Mot. at 20; Opp. at 17.
3
The parties appear to disagree about what the “offer” and “acceptance” would be here. In its
Motion, the Government characterizes the Notice of Award as the “offer.” See Mot. at 25 n.8,
29–31. Under the Government’s theory, Imaginarium’s execution of the Notice of Award was
its “acceptance” of the Government’s offer. Id. The Government thus contends the SBA revoked
the offer when, eight minutes after issuing Imaginarium’s Notice of Award, the SBA sent another
email asking for “additional information and technical corrections” to confirm Imaginarium’s
eligibility for a SVOG grant. See Mot. at 29–31; see also Transf. Compl. ¶ 68.
Imaginarium has a slightly different take. It contends “Imaginarium’s application was an offer
that the SBA accepted by issuing a Form 1222 Notice of Award to Imaginarium.” Opp. at 7.
Under Imaginarium’s framework, there was no revocation because the contract was formed as
soon as the SBA issued Imaginarium’s Notice of Award. Id. at 32. Any potential “revocation”
that occurred after the SBA issued the Notice of Award — including the SBA’s follow-up email
asking for “additional information and technical corrections” — was ineffectual because “[o]nce
an offer has been duly accepted, it is fundamental that revocation of the offer is no longer possible.”
Id. (quoting 1 Williston on Contracts § 5:10 (4th ed.)).
This Court need not resolve the parties’ dispute over offer and acceptance, however, because it is
immaterial to the resolution of the present Motion; as explained further below, under any theory
of offer and acceptance, Imaginarium cannot establish the first required element of contract
formation.
11
express and implied-in-fact contracts. 4 See Anderson, 344 F.3d at 1353 n.3. Both parties agree
these four elements provide the proper framework for analyzing Imaginarium’s breach of contract
claim. See Mot. at 15–16; Plaintiff’s Opposition to Defendant’s Motion to Dismiss (ECF No. 61)
(Opp.) at 7 (arguing Imaginarium “sufficiently alleged” the four required elements of a contract
with the United States); id. at 17; Defendant’s Reply in Support of its Motion to Dismiss (ECF
No. 62) (Reply) at 6 (“The parties agree that a plaintiff alleging the existence of a contract with
the Government must prove four basic elements.”).
The Government argues Imaginarium’s Transfer Complaint “fails to plausibly allege”
three required elements of contract formation: mutuality of intent; unambiguous offer and
acceptance; and a government representative having actual authority. Mot. at 9, 16. This Court
agrees with the Government at least with respect to the first element of contract formation —
mutuality of intent to contract — and accordingly need not analyze the remaining elements. See
Am. Bankers, 932 F.3d at 1384 (affirming dismissal of contract claim because plaintiff failed to
adequately plead a necessary element). In sum, Imaginarium cannot prove a contract exists
between it and the SBA because it cannot show mutuality of intent to contract.
Mutuality of intent is “a threshold condition for contract formation.” Anderson, 344 F.3d
at 1353. To establish a mutual intent to contract, a plaintiff must demonstrate an “objective
manifestation of voluntary, mutual assent” to enter a binding contract. Id.; see also Columbus
Reg’l Hosp., 990 F.3d at 1339 (concluding first element satisfied by “objective evidence of the
parties’ intent to be bound”). There must be “a clear indication of intent to contract . . . for
4
Imaginarium acknowledges that its express and implied-in-fact contract arguments are
duplicative. See Opp. at 17 n.5 (acknowledging requirements for implied-in-fact contract are the
same as for an express contract and explaining “Imaginarium largely addresses [both theories]
together herein”).
12
concluding that a contract was formed.” D & N Bank v. United States, 331 F.3d 1374, 1378 (Fed.
Cir. 2003).
When a plaintiff seeks to enforce an alleged contract against the United States, the
plaintiff’s intent to contract is rarely in dispute. Rather, the United States’ intent to contract is at
the forefront of the dispute. See Mot. at 17–21 (Government arguing no evidence of the SBA’s
intent to contract); Hometown Fin., 409 F.3d at 1365 (characterizing dispute as whether there was
“objective evidence of the government’s intent”); Am. Bankers, 932 F.3d at 1384 (concluding the
plaintiff “did not plead facts sufficient to establish the government’s intent to contract”).
Evidence of the United States’ intent to bind itself in contract may take several, nonexclusive
forms. The United States’ intent may be found in the statute and/or regulations enabling the
government’s conduct with respect to the alleged contract. See Am. Bankers, 932 F.3d at 1381–
84 (analyzing the Federal Reserve Act for “evidence of the government’s intent to contract”);
Columbus Reg’l Hosp., 990 F.3d at 1339 (citing FEMA regulations as “objective evidence of the
parties’ intent to be bound by the agreement”). Other documentary evidence, such as written
agreements, can also establish the United States’ intent to contract. See Hometown Fin., 409 F.3d
at 1365–66 (noting “in particular four documents as evidence of the government’s intent to
contract”). Regardless, while evidence of the United States’ intent to contract often “depends on
the surrounding factual circumstances,” id. at 1365, “there needs to be something more than a
cloud of evidence that could be consistent with a contract to prove a contract and enforceable
contract rights.” D & N Bank, 331 F.3d at 1377.
Imaginarium contends “the SBA made clear its intention to enter a contractual agreement
. . . by express words and conduct, including through regulations and policies implementing the
SVOG Program’s enabling statute and direct communication with Imaginarium.” Opp. at 20.
13
Imaginarium thus relies on several sources that, when viewed in their totality, allegedly reflect a
mutual intent to contract between Imaginarium and the SBA under the SVOG Program. Opp. at
17–25. In support of its position, Imaginarium cites the SVOG Program’s enabling statute, 15
U.S.C. § 9009a; the SVOG Notice; the SVOG Guidance; and correspondence between the SBA
and Imaginarium, including the Notice of Award, as evidence of mutual intent. Id. However,
none of these sources, even when viewed as a collective, demonstrate the United States’ intent to
bind itself in contract with Imaginarium under the SVOG Program.
Imaginarium’s first contention that the SVOG Program’s enabling statute, Section 9009a,
provides evidence of the Government’s intent to contract, is without merit. It is well-established
that “absent some clear indication that the legislature intends to bind itself contractually, the
presumption is that ‘a law is not intended to create private contractual or vested rights but merely
declares a policy to be pursued until the legislature shall ordain otherwise.’” Nat’l R.R. Passenger
Corp. v. Atchison, Topeka and Santa Fe Ry. Co., 470 U.S. 451, 465–70 (1985) (quoting Dodge
v. Bd. of Educ., 302 U.S. 74, 79 (1937)) (holding Rail Passenger Service Act of 1970 did not
manifest an intent on Congress’s part to bind itself contractually to the railroads). Indeed, “the
principal function of a legislature is not to make contracts, but to make laws that establish . . . .
policy [and, accordingly, for the judicial branch] . . . . to construe laws as contracts when the
obligation is not clearly and unequivocally expressed would be to limit drastically the essential
powers of a legislative body.” Id. at 466 (citations omitted). Section 9009a is silent as to the
SBA’s ability to enter into contracts. It simply requires the SBA to “coordinate and formulate
policies” for administering the SVOG Program and permits the SBA to “make initial [and
supplemental] grants” to eligible entities. 15 U.S.C. § 9009a(b)(1)–(3). There is nothing in the
statute that reflects an intent to bind the United States in contract. It does not authorize the SBA
14
to enter into contracts or any other binding arrangements. Instead, it merely requires the SBA to
administer a grant program based on congressionally-defined criteria. Indeed, Section 9009a
stands in stark contrast to other statutory or regulatory provisions courts have found to
demonstrate the government’s intent to contract. For example, in Columbus Regional Hospital,
the relevant regulations described “‘FEMA-State Agreements’ as ‘impos[ing] binding obligations
on FEMA [and] States . . . in the form of conditions for assistance which are legally enforceable.’”
Columbus Reg’l Hosp., 990 F.3d at 1339 (citing 44 C.F.R. § 206.44(a)). The regulations in
Columbus Regional Hospital indicated, through express terms, that the government intended to
enter binding contracts. Id. Section 9009a does not include similar expressions of intent. Section
9009a is closer to the statutory language in American Bankers that the Federal Circuit found to
be “devoid of the traditional indicia of a contractual undertaking.” Am. Bankers, 932 F.3d at
1382. There, the relevant statute did not “speak of a contract” nor “provide for the execution of
a written contract on behalf of the United States.” Id. (quoting Nat’l R.R. Passenger Corp., 470
U.S. at 467). Instead, the statute simply “set[] forth a regulatory system.” Id. So too here; Section
9009a simply outlines a framework the SBA must use to issue monetary grants to eligible entities.
The SVOG Program’s governing statute therefore does not provide any evidence of the United
States’ intent to contract.
Imaginarium, perhaps conceding the point, does not cite to any particular provision in
Section 9009a as evincing intent to contract. Instead, Imaginarium relies primarily on “other
clear evidence.” Opp. at 24. However, this “other evidence” does not demonstrate “a clear
indication of intent to contract” either. D & N Bank, 331 F.3d at 1378. Imaginarium first points
to the SVOG Notice in support of its contention. The SVOG Notice, however, likewise lacks
evidence of the SBA’s intent to enter contracts on behalf of the United States. The SVOG Notice
15
“invit[ed] applications for new awards” pursuant to the SVOG Program. See 86 Fed. Reg. 16,270.
It simply provided relevant dates for applicants, see id.; summarized the content of the SVOG
Program, see id. at 16,270–73; publicized application and submission instructions, see id. at
16,272–73; and gave information regarding the SBA’s application review process, see id. at
16,273–74. The SVOG Notice is “devoid of the traditional indicia of a contractual undertaking”
that could reflect the United States’ intent to enter into a contract. Am. Bankers, 932 F.3d at 1382.
The SVOG Notice does not provide evidence of the United States’ intent to enter contracts with
grant recipients and, accordingly, does not support Imaginarium’s claim.
Imaginarium’s reliance on the SVOG Guidance suffers the same flaws. The SVOG
Guidance is essentially a guideline for applicants that “answers common questions about the
SVOG [P]rogram.” SVOG Guidance Ver. 4 at 1. The SVOG Guidance explains what to expect
while an application is under review and after a decision has been rendered. Id. at 3–8. The
SVOG Guidance also details the post-approval process, including the “Active Grantee Phase” —
which involves “identifying eligible and allowable expenditures and spending grant award funds”
— and the “Closeout Phase” — which involves documenting expenditures and submitting
recordkeeping documents to the SBA. Id. at 8–13. Despite Imaginarium’s claims, the SVOG
Guidance does not contain any statements suggesting the SBA intended to contract with grant
recipients. The SVOG Guidance appears to reflect the SBA’s effort to “coordinate and formulate
policies relating to the administration of grants,” as the SVOG Program required. 15 U.S.C. §
9009a(b)(1)(A). Creating administrative procedures and policies to implement the SVOG
Program is not objective evidence of the SBA’s intent to enter binding contracts. See Chattler v.
United States, 632 F.3d 1324, 1330 (Fed. Cir. 2011) (“[S]tatements of information or definition
are not statements of obligation.”).
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Imaginarium finally references the Notice of Award and the SBA’s “direct
communication with Imaginarium” as evidence of intent to contract. Opp. at 20. This Court
disagrees with Imaginarium’s characterization of the Notice of Award and other SBA
communications. The Notice of Award includes important information regarding Imaginarium’s
“grant,” including the Project Period, Budget Period, and Award Amount, among other
information. See Mot. at 38 (Ex. C.). However, this information would be included in any grant
document and does not necessarily indicate an intent to contract. Indeed, the face of the Notice
of Award states its purpose is “to notify grant recipients of award reporting and record keeping
requirements.” Id. The Notice of Award is just that: an informational notice. It does not establish
mutual obligations owed by each party, nor does it contain any other indications of intent to bind
the United States to contract. The Notice of Award is more akin to a regulatory approval
document than a manifestation of assent to a binding contract. See Am. Bankers, 932 F.3d at
1384 (evidence of alleged express contract insufficient where it “merely states that [plaintiff’s]
application and payment have been processed” and is more a “statement of policy based on [the
statute] . . ., not the language of a promise or contractual undertaking”).
Furthermore, the SBA’s “direct communications” with Imaginarium appear to be
notifications alerting Imaginarium — erroneously — that its application was approved. See Opp.
at 22–23 (listing “communications . . . indicating that [Imaginarium’s] Application was
approved”). Without explanation, Imaginarium asserts these communications “constitute
objective evidence that the SBA and Imaginarium intended to enter into the contractual grant
agreement.” Opp. at 23. These errant communications do little to advance Imaginarium’s
argument. The communications are not framed within the context of a binding contract, and there
is simply nothing in the communications that indicates the SBA intended to contract with
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Imaginarium. Imaginarium’s conclusory reliance on these communications underscores the
overall dearth of evidence supporting an SBA intent to contract. See Opp. at 22–23.
Imaginarium’s primary argument is that the SVOG Program and the SBA imposed rules
on applicants — such as eligibility requirements, spending limitations, and recordkeeping
procedures — and those rules indicate the SBA’s intent to contract. See Opp. at 22. For example,
Imaginarium argues “the SBA and Imaginarium demonstrated mutual intent to contract through
their common reliance on the grant-agreement terms . . . and by manifesting an intent to ensure
each other’s compliance with the terms.” Id. According to Imaginarium, the SBA indicated its
intent to contract by enforcing “eligibility and application requirements,” defining “allowable and
restricted uses of funds,” and mandating “auditing, monitoring, reporting, and documentation
requirements.” Id. And Imaginarium asserts that by agreeing to be bound by those terms in
exchange for a grant, it likewise indicated its intent to contract. Id.Imaginarium’s argument is not persuasive. Under Imaginarium’s theory, if a federal
agency promulgates rules to govern a program or initiative, such rules would be prima facie
evidence of the agency’s intent to enter binding contracts. This is untenable and would be
counterproductive to agencies’ efforts to administer federal programs. Not surprisingly,
Imaginarium does not reference a single case finding an intent to contract based solely on an
agency’s adoption of rules or guidelines. Imaginarium’s theory also misses the purpose of the
mutual intent requirement, which is to confirm both parties understand and assent to a binding
contract. See Restatement (Second) of Contracts § 18 (1981); Anderson, 344 F.3d at 1353.
Furthermore, “a statute does not create contractual obligations merely by setting forth ‘benefits
to those who comply with its conditions.’” Am. Bankers, 932 F.3d at 1383 (quoting Wis. & Mich.
Ry. Co. v. Powers, 191 U.S. 379, 387 (1903)). Accordingly, the mere fact that SVOG grantees
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must comply with certain requirements as a condition of a grant does not mean that the United
States has somehow manifested its intent to contract. “[S]omething more is necessary;” but here,
“the government’s intention to be bound is nowhere to be found.” D & N Bank, 331 F.3d at1378–79.
The only case Imaginarium cites to support its mutuality of intent argument is Thermalon
Industries, Ltd. v. United States. 34 Fed. Cl. 411 (1995); see also Opp. at 18–20, 22. However,
Thermalon is easily distinguishable from the present case in a crucial respect. In Thermalon, the
Court of Federal Claims analyzed a breach of contract claim regarding the plaintiff’s “work under
a research grant from the National Science Foundation (NSF).” Thermalon, 34 Fed. Cl. at 413.
The court determined “the parties’ mutual intent to enter a contract [was] demonstrated by each
party’s dependency on the other’s compliance with the terms of the grant agreement.” Id. at 415.
Notably, however, the applicable statute at issue in Thermalon, 42 U.S.C. § 1870(c), specifically
“authorized the NSF to enter into contracts to promote scientific activities,” indicating a clear
intent to bind the United States in contract. Pa. Dep’t of Pub. Welfare v. United States, 48 Fed.
Cl. 785, 791 (2001). Specifically, there the NSF had awarded plaintiff a grant “pursuant to NSF’s
authority under the National Science Foundation Act of 1950 . . . which authorize[d] NSF to
promote scientific activities by entering ‘contracts or other arrangements.’” Id. at 413 (quoting
42 U.S.C. § 1870(c)). As discussed, such an unequivocal expression of intent is absent from the
SVOG Program’s enabling statute, 15 U.S.C. § 9009a, or any other official SBA source.
Thermalon is therefore inapposite to Imaginarium’s argument. See Pa. Dep’t of Pub. Welfare,
48 Fed. Cl. at 791 (observing “[t]he present case is distinguishable from Thermalon” because
“[h]ere, there is no statue authorizing [the agency] to enter into a contract”).
It is well-established that “[t]he government may implement statutorily mandated subsidy
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programs without employing contracts as a vehicle for doing so.” Boaz Hous. Auth. v. United
States, 994 F.3d 1359, 1368 (Fed. Cir. 2021); see also Thermalon, 34 Fed. Cl. at 421 (“[T]he
government always has the choice when designing a grant scheme to select a scheme that does
or does not involve contracts.”). The SVOG Program is clearly one such program that does not
employ contracts. This is demonstrated by the lack of intent to contract reflected in any statute,
regulation, or other SBA documents or communications concerning the SVOG Program.
Imaginarium may — perhaps rightly — feel misled by the SBA’s poor handling of Imaginarium’s
application and initial, mistaken representation that the application was approved, and an award
would be forthcoming. But despite this valid frustration, Imaginarium cannot bypass the legal
requirement to demonstrate a mutual intent to contract. See Hometown Fin., 409 F.3d at 1364;
Anderson, 344 F.3d at 1353. Imaginarium’s remedy, to the extent one exists, does not sound in
breach of contract in this Court. 5
Imaginarium cannot “satisfy its burden to prove . . . a mutuality of intent” to contract.
Anderson, 344 F.3d at 1353. As Imaginarium’s Transfer Complaint does not — and cannot —
plausibly satisfy one of the required elements of a contract, it cannot establish the existence of a
contract with the United States as a matter of law. Imaginarium’s breach of contract cause of
5
In the District of Utah, Imaginarium asserted a claim under the APA alleging that Defendant
acted arbitrarily and capriciously in declining to award Imaginarium a grant while approving grant
applications for similar businesses. See Complaint (ECF No. 2) at ¶¶ 117–26 (alleging the SBA
“treat[ed] Imaginarium disparately from similarly situated businesses that were granted SVOG
awards”). Imaginarium also asserted a promissory estoppel claim in the District of Utah. See id.¶¶ 110–16. Those claims are not before this Court. During the April 11, 2023 oral argument,
Imaginarium confirmed the only claim present in this action is Imaginarium’s breach of contract
claim and that Imaginarium did not assert its promissory estoppel and APA claims in its Transfer
Complaint. See also Transf. Compl. ¶ 24 n.3 (explaining Imaginarium “voluntarily omit[ted] and
dismiss[ed] without prejudice its cause of action for promissory estoppel”); id. n.4 (Imaginarium
reserving its right to “bring or appeal its APA Claims and/or its claims for promissory estoppel . .
. at a later time”); id. at 25–26 (Transfer Complaint including only breach of contract cause of
action).
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action therefore fails to state a claim upon which relief can be granted. See Am. Bankers, 932
F.3d at 1384 (“Because [plaintiff] did not plead facts sufficient to establish the government’s
intent to contract, the complaint fails to state a plausible claim for breach of contract.”).
CONCLUSION
For the reasons explained, Defendant’s Motion to Dismiss for Failure to State a Claim
(ECF No. 60) is GRANTED. Imaginarium’s Transfer Complaint (ECF No. 48) is DISMISSED
pursuant to Rule 12(b)(6). The Clerk of Court is DIRECTED to enter Judgment accordingly.
IT IS SO ORDERED.
Eleni M. Roumel
ELENI M. ROUMEL
Judge
June 7, 2023
Washington, D.C.
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