Citibank and JPMorgan win dismissal of lawsuit seeking PPP loan fees
Bank of America, Citibank, JPMorgan Chase and other banks notched yet another court victory over loan officers seeking fees to help small businesses apply for emergency loans in the event of a pandemic earlier this year.
The U.S. District Court for the Central District of California on Monday allowed the banks’ motion to dismiss the case after finding that the plaintiffs lacked standing because their initial allegations were “too generalized” to relate to a specific defendant.
Banks are not completely clear. Justice Otis Wright II gave the plaintiffs a chance to re-file their complaint, but said their prosecution faces great obstacles.
The CARES Act, the law enacted earlier this year to provide government guaranteed loans to troubled small businesses, does not provide a private cause of action to recover agent fees in the absence of an agreement between the agent and the lender, the judge said.
“However, because plaintiffs could presumably allege more facts to support an appropriate claim for agent fees, the court cannot say that an amendment would be in vain,” Wright said in its order.
The lawsuit was brought in June by American Video Duplicating, Inc., Tush Law, Ltd. and Kenneth M. Hahn, doing business as Cal State Financial. The complainants provided consulting, legal, accounting or tax preparation services to applicants for the Paycheck Protection Program.
This is one of many lawsuits that allege that the CARES Act and long-standing Small Business Administration rules allow agents to receive up to 1% of the fees the government paid lenders for processing. PPP loans. Federal courts in Florida , new York and Texas said banks were not required to share the costs.
A new amended claim is due within 21 days of Monday’s order. The other defendants include Wells Fargo, US Bank, Live Oak Banking Company and Harvest Small Business Finance.
The case is American Video Duplicating Inc. v Citigroup Inc., CD Cal., No. 20-cv-03815-ODW-AGR, order, 11/16/20.