Bank of America Says Class Action Could Threaten Loans to Small Businesses
A team from Williams & Connolly opposed a motion that would force Bank of America to stop limiting applications under the federal government's $349 billion relief program, in which small businesses receive loans to stay afloat during the COVID-19 outbreak.
April 09, 2020 at 07:38 PM
5 minute read
Bank of America has turned to a team from Williams & Connolly to fight a court action that it says would threaten the federal government's $349 billion relief program in which small businesses receive loans to stay afloat during the COVID-19 outbreak.
The filing, made Thursday, opposes a motion for a temporary restraining order in a class action alleging Bank of America limited its loans under the Paycheck Protection Program to applicants that don't have lending relationships with other banks. The program, launched April 3 to protect payroll expenses for two months, is part of the $2 trillion stimulus package called the Coronavirus Aid, Relief and Economic Security Act, or CARES Act.
Bank of America said the lawsuit, and any potential temporary restraining order, would threaten its ability and that of other financial institutions to get loans to small businesses efficiently.
"Plaintiffs' lawsuit, asking this court to dictate the criteria under which banks must accept applications, would significantly interfere with efforts by BofA to provide these needed loans," wrote Williams & Connolly partners Beth Stewart, Enu Mainigi, Kenneth Smurzynski and Craig Singer. "Such an injunction would perversely chill PPP lending, not just by BofA but by all other lending institutions, because even to enter the program at all risks lawsuits of this very sort."
Alan Rifkin, managing partner of Rifkin Weiner Livingston in Annapolis, Maryland, who filed the lawsuit, continued to push for a temporary restraining order that would prevent Bank of America from imposing restrictions on loan applicants. His motion says the restrictions threaten the shutdown of thousands of small businesses.
"This is no small harm," he said. "Some of these folks who accessed the program and were denied, when they should not have been denied, shut their doors."
U.S. District Judge Stephanie Gallagher of the District of Maryland, has set a hearing on the motion for Friday.
The lawsuit comes as several small businesses complained they were unable to apply for the loans in the first days of the paycheck program. Sen. Marco Rubio, a Republican from Florida, aired complaints about Bank of America on Twitter. Two U.S. Congressmen from Maryland, Rep. David Trone and Sen. Chris Van Hollen, both Democrats, wrote in a Monday letter to U.S. Department of Treasury Secretary Steven Mnuchin that its recent guidance "seems to weaken the program" and that several Maryland constituents "are facing difficulties obtaining loans."
"For example, some financial institutions have required that businesses have an existing line of credit or a credit card account in order to obtain a loan," they wrote. "Imposition of such requirements, which are outside the purpose of the program, are unnecessary at best and, in the case of some of our constituents, harmful to their ability to access the program."
Rafkin's firm originally filed the case against Bank of America on April 3, after the bank began denying loans to applicants that were not its existing lending customers. The next day, Bank of America began accepting depository clients but continued to impose restrictions on businesses that have credit or lending relationships with other banks, prompting Rifkin Weiner Livingston to amend its complaint.
"Bank of America, like most banks, has a loan portfolio, which is very important to the financial wherewithal for the bank," Rifkin said. "By prioritizing their lending portfolio over those that don't owe them money, they were prioritizing their own balance sheet to ensure that small businesses that owe them money got enough resources to pay Bank of America back. That wasn't the justification for the program. That kind of distinction is not supposed to be made."
In the class action, four small businesses serve as lead plaintiffs. They tried to apply for a loan through Bank of America, but only one was successful.
Bank of America, on Thursday, raised questions about the standing of the lead plaintiffs, noting that any of them could go to another of the 2,400 financial institutions providing loans through the program, which is available until June 30.
It also insisted that the CARES Act and Small Business Act, cited in the complaint, provided no private right of action to bring the lawsuit.
Moreover, Bank of America wasn't violating the CARES Act, which does not require banks to provide the loans, and had imposed the restrictions, as other banks have done, to streamline the process of approving applications, the company's lawyers assert. As of April 6, Bank of America had received applications from 177,000 small businesses for $32.6 billion in financing.
"BofA's decision to prioritize lending to clients who do not have lending relationships with other banks is simply an effort to direct its resources quickly and efficiently," the Williams & Connolly lawyers wrote. "Because lenders already have information about their existing clients, prioritizing those clients streamlines the application process, meaning more loans are processed faster."
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllDivided State Court Reinstates Dispute Over Replacement Vehicles Fees
5 minute readAm Law 200 Firm to Defend PUMA in Latest Quarrel Over Patented Shoe Technology
Apple Asks Judge to 'Follow the Majority Practice' in Dismissing Patent Dispute Over Night Vision Technology
Who Got the Work: 16 Lawyers Appointed to BioLab Class Action Litigation
4 minute readLaw Firms Mentioned
Trending Stories
- 1On the Move and After Hours: Brach Eichler; Cooper Levenson; Marshall Dennehey; Archer; Sills Cummis
- 2Review of Ex-parte orders by the Appellate Division
- 3'Confusion Where Previously There Was Clarity': NJ Supreme Court Should Void Referral Fee Ethics Opinion
- 4How Amy Harris Leverages Diversity to Give UMB Financial a Competitive Edge
- 5Pa. Judicial Nominee Advances While Trump Demands GOP Unity Against Biden Picks
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250