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further found that existing SBA regulations—which were not superseded by and do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 or Anthony Lombardo at alombardo@riker.com.