Judge Denies Action Against Bank of America Over CARES Act Loans
In her ruling Monday, U.S. District Judge Stephanie Gallagher concluded that the CARES Act had no implied private right of action allowing plaintiffs to bring the class action over Bank of America's handling of a $349 billion loan program to small businesses. She did, however, acknowledge "a significant flaw" in the program, deferring to Congress to make any changes to the new law.
April 13, 2020 at 02:43 PM
5 minute read
A federal judge declined to grant an order that would impose requirements on Bank of America's application process in the $349 billion loan program to small businesses.
In her ruling Monday, U.S. District Judge Stephanie Gallagher of the District of Maryland concluded that the CARES Act had no implied private right of action allowing plaintiffs to bring the class action.
"The court is not persuaded that the language of the CARES Act evidences the requisite congressional intent to create a private right of action," the judge wrote. "To the extent Congress intends to create such a private right of action, it will be able to make its intent clear, if it ultimately amends the CARES Act, as is widely anticipated."
Gallagher also found that the CARES Act did not prohibit Bank of America from limiting its loans to certain applicants. In fact, she noted that other lenders had loan restrictions, such as Chase Bank, which limited applications to existing customers.
"Given the plain statutory language, the court is not at liberty to impose further limitations on lenders," she wrote.
Gallagher, however, acknowledged the impact that Bank of America's restrictions had had on small businesses.
"BofA's rigid eligibility criteria have undoubtedly made it materially harder for some small businesses to access the PPP," she wrote, referring to the Paycheck Protection Program. "Certainly, plaintiffs' experiences 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 the end, she found that Congress "is better positioned to remedy any defects in the CARES Act, and to pass the supplemental legislation it believes best aimed at ameliorating the effects of the COVID-19 crisis."
Plaintiffs attorney Alan Rifkin, managing partner of Rifkin Weiner Livingston in Annapolis, Maryland, said he would appeal the ruling.
"The class action highlights serious shortcomings in Bank of America's administering of the program, which, by application, denied scores of small businesses throughout the country the right to access these critical funds at a time when those funds are desperately needed," he wrote in an email. "During the pendency of the appeal, we call upon Congress, Bank of America and all other banks throughout America to do what is right and open the PPP process to any small business that otherwise qualifies for federal funds under the PPP program."
A representative for Bank of America, represented in the case by Williams & Connolly partners Beth Stewart and Enu Mainigi, wrote: "We remain focused on processing the more than 300,000 applications we've received so far, seeking more than $45 billion in loans."
Gallagher's ruling is among the first to interpret the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, the $2 trillion stimulus package passed March 27 to stem the financial effects of the COVID-19 outbreak.
The class action comes as several small businesses complained they were unable to apply for the loans in the first days of the paycheck program, designed to protect payroll expenses for two months. Filed April 3, the same day the Paycheck Protection Program launched, the lawsuit alleged that Bank of America limited its loans to applicants that did not have lending relationships with other banks. The next day, Bank of America began accepting depository clients but continued to restrict businesses that have credit or lending relationships with other banks, prompting Rifkin Weiner to amend its complaint.
In response to the case, Bank of America countered that a temporary restraining order would threaten the paycheck program.
On April 10, at a telephonic hearing, Gallagher questioned the plaintiffs' implied private right to sue under the CARES Act.
In her order, she disagreed with the plaintiffs that the U.S. Court of Appeals for the Fourth Circuit's 2019 decision in 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 for a private right of action.
Further, she wrote, the SBA administrator, or "a robust criminal and civil enforcement regime," could adequately enforce the program's provisions.
The judge also found the small businesses serving as lead plaintiffs in the class action had not proven they suffered irreparable harm. In her ruling, she cited Bank of America's argument that the lead plaintiffs could go to any one of the other 2,400 banks providing the loans.
She also found it "speculative" that granting injunctive relief would cure any harms, noting that, at the April 10 hearing, neither side could provide details about what percentage of the loans get approved or how much the amounts were compared to what applicants requested.
"Given the unpredictability of COVID-19, and the uncertain duration of governmental orders shutting down non-essential businesses, it would be quite extreme to attribute the dire plight facing American small businesses to one lender's eligibility criteria," she wrote.
A temporary restraining order, ultimately, could undermine Congress's goal in helping small businesses, she wrote.
"If fewer lenders are incentivized to participate in PPP, because they are prohibited from prioritizing their own customers or other entities they believe worthy of expedited consideration," she wrote, "then fewer America small businesses will have access to the pool of readily available PPP funds, and Congress' statutory scheme would be further frustrated, despite the fact that the federal government will ultimately guarantee over $300 billion in loans."
|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
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