The judge decides that the CARES law does not prevent BofA from limiting its PPP loans to certain companies
A federal judge has refused to grant an order that would place requirements on Bank of America’s application process under the $ 349 billion small business loan program.
In her decision Monday, U.S. District Judge Stephanie Gallagher of the District of Maryland found that the CARES Law did not prohibit Bank of America from limiting its lending to certain candidates. In fact, she noted that other lenders had lending restrictions, such as Chase Bank, which limited applications to existing customers.
“Given the clear language of the law, the court is not free to impose additional restrictions on lenders,” she wrote.
Gallagher, however, acknowledged the impact that the Bank of America restrictions had had on small businesses.
“BofA’s rigid eligibility criteria have undoubtedly made access to PPP considerably more difficult for some small businesses,” she wrote, referring to the Paycheque Protection Program. “Certainly, the experiences of the Complainants demonstrate a significant flaw, from their perspective and that of many other small businesses, in the implementation of the massive and complex PPP program. “
In addition, the judge concluded that the CARES Act had no implicit private right of action allowing the plaintiffs to bring the class action. “The court is not persuaded that the wording of the CARES Act reflects the required intention of Congress to create a private right of action,” the judge wrote. “To the extent that Congress intends to create such a private right of action, it will be able to clearly indicate its intention, if it ultimately amends the CARES Act, as is widely expected. “
Ultimately, she found that Congress “is in a better position to remedy any flaw in the CARES Act and to pass additional legislation it believes is best intended to ameliorate the effects of the COVID-19 crisis.”
Plaintiffs’ attorney Alan Rifkin, managing partner of Rifkin Weiner Livingston in Annapolis, Md., Said he would appeal the decision.
“The class action lawsuit highlights serious flaws in the administration of the program by Bank of America, which by enforcement denied many small businesses across the country the right to access these vital funds at a time when these funds are desperately needed, ”he wrote in an email. “While the appeal is on, we call on Congress, Bank of America and all other US banks to do the right thing and open the PPP process to any small business that is otherwise eligible for funds. federal under the P3 program. “
A Bank of America representative, represented in the case by Williams & Connolly partners Beth Stewart and Enu Mainigi, wrote: “We remain focused on processing the more than 300,000 requests we have received to date, seeking over $ 45 billion in loans. “
Gallagher’s decision is among the first to interpret the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, the $ 2 trillion stimulus package adopted on March 27 to stem the financial effects of the COVID epidemic. 19.
The class action lawsuit comes as several small businesses complained that they were unable to apply for the loans in the early days of the paycheck program, designed to protect payroll expenses for two months. Filed on April 3, the same day the paycheck protection program launched, the lawsuit alleged that Bank of America limited its lending to applicants who did not have lending relationships with other banks. The next day, Bank of America began accepting custodian customers, but continued to restrict businesses that have credit or loan relationships with other banks, prompting Rifkin Weiner to modify his complaint.
In response to the case, Bank of America against that a temporary injunction would threaten the paycheck program.
On April 10, in a telephone hearing, Gallagher questioned the implied private right of plaintiffs to sue under the CARES Act.
In her order, she disagreed with the plaintiffs that the U.S. Court of Appeals decision for the Fourth Circuit in 2019 Planned Parenthood South Atlantic v. Baker gave them the private right to sue, adding that the Small Business Act, which the CARES Act amended, does not allow a private right of action.
Further, she wrote, the administrator of the SBA, or “a robust criminal and civil enforcement regime”, could adequately enforce the provisions of the program.
The judge also found that the small businesses acting as principal plaintiffs in the class action had not proven that they had suffered irreparable harm. In her ruling, she cited Bank of America’s argument that the main plaintiffs could go to one of the 2,400 other banks providing the loans.
She also found it “speculative” that granting an injunction would remedy any prejudice, noting that at the April 10 hearing neither party was able to provide details on the percentage of loans approved or the amount of the amounts compared to what the applicants requested.
“Given the unpredictability of COVID-19 and the uncertain length of government orders shutting down non-essential businesses, it would be quite extreme to attribute the plight of small U.S. businesses to a lender’s eligibility criteria,” she wrote.
A temporary injunction could ultimately undermine Congress’ goal of helping small businesses, she wrote.
“If fewer lenders are encouraged to participate in PPP, because they are prohibited from giving priority to their own clients or to other entities that they deem worthy of expedited consideration,” she said. writes, “then fewer US small businesses will have access to the readily available P3 pool.” funds, and the statutory scheme of Congress would be even more frustrated, despite the fact that the federal government will ultimately guarantee more than $ 300 billion in loans. “