Houston Law Firm Sues Its Bank Over Small Business Loan Process
"We are in the same position as everyone else here. Why not take the lead?" said Alfonso Kennard, managing shareholder of Kennard Law in Houston.
April 21, 2020 at 09:35 PM
4 minute read
Alleging he has been left in the dark about the status of his small law firm's Paycheck Protection Program loan, a Houston lawyer is suing his bank, and two others on behalf of his small business clients.
Alfonso Kennard Jr. filed the class action lawsuit on Monday against Frost Bank, alleging it failed to process or properly submit his firm's PPP application and prioritized "select customers and 'bigger businesses.'"
"Defendant made misrepresentations to many small business owners that they would assist them with the PPP loan applications and submit them for approval," Kennard Law alleged in the suit.
Kennard focuses on employment law, general litigation and small business matters. According to the firm's petition, filed in State District Court in Harris County, it applied for $160,000 in funding through the PPP on April 3, the first day applications were accepted by the Small Business Administration. But, the firm alleged, Frost Bank has not provided any information about the loan's status.
Kennard said in an interview on Tuesday that he knows his 15-employee firm isn't alone. Contacted by other small businesses in Texas also wondering about the status of their loan applications, Kennard filed two similar class actions in state district courts on Monday—one against Chase Bank in Dallas County and against BBVA in Bexar County.
While his clients do not currently include other Texas law firms, Kennard said he is confident some will seek to be class members.
"Everyone I've been talking to has the same story without fail. There's a lot of folks who are really upset, and I don't blame them," he said.
In the Harris County suit, Kennard Law alleged that, after filing the application on April 3, it heard nothing more from Frost Bank until April 12, when a banker informed Alfonso Kennard that he had "no idea" what was happening with the loan process and that he had no information on the firm's loan. By April 16, the petition alleged, the banker could only confirm the loan application had been processed but had no further information.
By that time, the $349 billion in stimulus money Congress had earmarked for the PPP had run out. Congress is working on legislation that would add money to the program.
Kennard Law Firm brought fraud and fraudulent inducement, breach of fiduciary duty, breach of contract and negligence causes of action against Frost Bank and alleged that the bank violated the Texas Deceptive Trade Practices-Consumer Protection Act.
Plaintiff Zamora-Orduna Realty Group brought the same causes of action against BBVA in the Bexar County suit, and in Dallas County plaintiffs Starwalk of Dallas and Kona-Wood Houston brought the same against Chase Bank. The plaintiffs and class members in each suit are seeking up to $10 million in damages, the maximum amount any small business can receive in PPP loans.
A spokesman for Frost Bank in San Antonio said the bank has not been served with a copy of the suit and declined to comment beyond court filings. A spokesman for BBVA in San Antonio said the bank does not comment on pending litigation.
A spokesman for Chase in Texas declined to comment on the allegations but provided information from the bank's website that stated it did not prioritize larger commercial banking customers over smaller businesses when working on PPP applications.
Kennard said the situation is frustrating, because no one at Frost Bank—his bank for more than a year—can tell him what's going on with his loan application. He said the money would come in handy, because his firm, like many businesses, is feeling the effects of the economic downturn caused by the coronavirus.
"I have kept every single person on payroll. I haven't reduced anyone's pay. No layoffs, and daily I see the largest firms in the country are constantly furloughing, laying off, those things. I made a conscious decision to not do those things," he said.
Because his firm does employment litigation and work for small businesses, it felt right to file suit over issues with the government stimulus program.
"We are in the same position as everyone else here. Why not take the lead?" Kennard said.
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