Two financial institutions have now been sued in separate putative class action lawsuits concerning their implementation of the CARES Act’s Paycheck Protection Program (PPP), which is aimed at assisting small businesses keep employees on their payroll. Plaintiffs in both lawsuits allege that the financial institutions are unlawfully restricting access to PPP loans. The first case was filed against Bank of America claiming that the plaintiff was unlawfully excluded from the program because it is only a depository customer without a pre-existing debt relationship with the Bank. The second case, filed against Wells Fargo, similarly alleges that Wells Fargo is only providing access to PPP loans to existing customers with a business checking account that had been active as of February 2020. Both cases are brought under the CARES Act and Small Business’ Administration’s 7(A) loan program, 15 U.S.C. 636(a), and seek declaratory judgments and injunctions (with an additional claim for unjust enrichment in the Bank of America case). The plaintiffs essentially allege that the institutions are improperly attempting to use the program as a form of credit enhancement. The cases are Profiles, Inc. v. Bank of Am. Corp., et al., No. 1:20-cv-00894-SAG (D. Md.) & Scherer v. Wells Fargo Bank, N.A., No. 4:20-cv-01295 (S.D. Tex.).
On April 13, the court in the Bank of America matter denied the named plaintiffs’ request for a temporary restraining order and preliminary injunction in a thoughtful, well-reasoned opinion. Of note, the court reasoned:
“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. However, given the competing policy interests, the need to balance the desire to assist the widest swath of small businesses with the need to incentivize lender participation, and the overall fluidity of this epidemic, 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.”
This ruling bodes well for the Wells Fargo matter, which Goodwin will continue to monitor.