Today, a federal judge in Maryland denied an emergency motion seeking to block Bank of America from applying eligibility restrictions to its lending under the $349 billion Paycheck Protection Program ("PPP"). The motion for a temporary restraining order and preliminary injunction was filed by four small businesses, which had alleged that Bank of America only accepted applications for PPP loans from small business checking customers that were already borrowers at the bank or that were not also borrowers at any other bank. The businesses alleged that these limitations violated the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which established the PPP, and the Small Business Act ("SBA").
In a 23-page decision, US District Judge Stephanie Gallagher denied the plaintiff's emergency motion. Judge Gallagher first found that PPP applicants do not have a private right of action to bring a lawsuit challenging a lender's conduct under the CARES Act. According to the judge, "[t]he plain language of the statute does not suggest an intent to confer . . . a private remedy against participating . . . lenders."
In addition, even assuming that PPP applicants have a private right of action against participating lenders, Judge Gallagher found that Bank of America's "challenged conduct here does not run afoul of the CARES Act." Although the CARES Act imposes certain limited eligibility criteria for PPP loans, Judge Gallagher found that the Act "does not constrain banks such that they are prohibited from considering other information when deciding from whom to accept applications, or in what order to process applications it accepts." Judge Gallagher also expressed concern that blocking lenders from applying eligibility criteria to applicants could discourage them from offering loans under the program, which would be contrary to the intent of Congress in passing the CARES Act.
Visit us at mayerbrown.com
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2020. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.