The implementation of the Paycheck Protection Program (PPP) under Title I of the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) amidst the COVID-19 economic downturn has spawned a growing cottage industry of litigation, including several waves of cases against different defendants—primarily bank and non-bank lenders, and the United States Small Business Administration (SBA). The nature of the cases has varied. In the first cases filed, borrowers excluded from PPP sued banks for imposing additional restrictions on their applications, and for prioritizing bigger, institutional clients. The second wave of lawsuits saw different categories of borrowers, such as companies owned by borrowers with criminal records, companies in bankruptcy, and others, suing the SBA for excluding them from the program entirely. Finally, the latest round of cases involve financial services firms, accountants, and other borrowers’ agents initiating class actions against lenders for the failure to pay agent fees to those parties. These three “waves” encompass the bulk of PPP litigation to date, but there have been some lawsuits of other varieties as well, including at least one civil enforcement action by the Federal Trade Commission alleging unfair and deceptive practices.
In a prior update, we described one of the first court rulings in the PPP cases, in which on April 13, a federal district court in Maryland denied relief to a borrower who had sued Bank of America for imposing its own eligibility requirements on PPP borrowers. See Profiles, Inc. v. Bank of Am. Corp., No. CV SAG-20-0894, 2020 WL 1849710, at *1 (D. Md. Apr. 13, 2020). The court held that the CARES Act did not authorize a private right of action for borrowers to sue private lenders, and that the Act permitted banks to impose their own lending restrictions. Soon after, a California federal court denied relief in a similar suit, denying a temporary restraining order for borrowers alleging that JPMorgan Chase and other large banks improperly accepted PPP applications from only existing customers. Legendary Transp., LLC v. JPMorgan Chase & Co., No. 220CV03636ODWGJSX, 2020 WL 1975366, at *2 (C.D. Cal. Apr. 24, 2020). Although no court has yet ruled in favor of borrowers in this type of lawsuit, similar lawsuits have continued to be filed and remain pending, alleging violations of state laws.