Florida Federal Court Holds Agent Who Arranged SBA Paycheck Protection Program Loans Was Not Entitled to Fees from Lender Without Express Agreement

The Small Business Administration (the “SBA”) Paycheck Protection Program (the “PPP”) has been a fertile source of litigation in its short history. In the first of an avalanche of cases on this issue, the United States District Court for the Northern District of Florida dismissed a complaint brought by an accounting firm in which the firm claimed that it was entitled to agent fees from the defendant lenders in exchange for helping borrowers obtain loans under the PPP from the lenders. See Sport & Wheat, CPA, PA v. ServisFirst Bank, Inc., No. 3:20CV5425-TKW-HTC (N.D. Fla. August 17, 2020). Plaintiff assisted borrowers in obtaining PPP loans from three different lenders. After the loans were issued, plaintiff brought this action claiming that the defendant lenders were required to pay plaintiff fees under the CARES Act (15 U.S.C. 636), which created the PPP. Under the CARES Act, the SBA Administrator “shall reimburse” lenders who make the PPP loans, and “[a]n agent that assists an eligible recipient to prepare an application for a covered loan may not collect a fee in excess of the limits established by the [SBA] Administrator.” 15 U.S.C. 636(a)(36)(P). The SBA also issued an interim final rule in which it stated that agent fees “will be paid by the lender out of the fees the lender receives from SBA,” that “[a]gents may not collect fees from the borrower or be paid out of the PPP loan proceeds,” and that “[t]he total amount that an agent may collect from the lender for assistance in preparing an application for a PPP loan (including referral to the lender) may not exceed” certain limits.  85 Fed. Reg. 20,816 (Apr. 15, 2020). Based on these provisions, plaintiff claimed it was entitled to agent fees.

The Court nonetheless dismissed the complaint. The Court found that the language of the interim final rule sets forth from whom agents may receive fees (the lender) and what the fee limits are. However, the rule “does not require that lenders share their fees—nor does it (or could it) create or provide a right of action for agents to collect fees from the lender; instead, the language simply explains that, if an agent is to be paid a fee, the fee must be paid by the lender from the fee it receives from the SBA.” (Emphasis in original). The Court further found that existing SBA regulations—which were not superseded by and do not conflict with the new PPP regulations—require that the agent or borrower submit a particular form regarding agent fees, which was not submitted in this case. Accordingly, the Court found that there was no agreement under which plaintiff could be entitled to fees here. 

Based on this holding, the Court also found that plaintiff’s claim for conversion should be dismissed, because plaintiff had no legal right to any of defendants’ fees. The Court also dismissed the unjust enrichment and contract implied in law counts, finding that the direct beneficiaries of plaintiff’s efforts were the borrowers, not the lenders, and that “Plaintiff’s indirect conferral of a benefit on Defendants is insufficient to satisfy the first element of a claim for unjust enrichment or contract implied in law against Defendants.” Finally, the Court found that it is “highly unlikely” that plaintiff would be able to amend its complaint to state a claim, but stated that “it will keep an open mind if Plaintiff seeks leave to file a second amended complaint. Alternatively, if Plaintiff would rather forego further proceedings in this Court and try its luck at the Eleventh Circuit on the legal issues in this case, the Court will (upon Plaintiff’s request) direct the Clerk to enter judgment dismissing the amended complaint with prejudice based on the rulings in this Order.” This decision is extremely significant for both PPP lenders and the agents who helped them with these loan applications, and sets a precedent that lenders are not required to pay agents fees without some agreement. The decision will obviously be challenged at the Court of Appeals level. Thus, there is much more to come on this PPP battleground.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Anthony Lombardo at alombardo@riker.com.