Manier & Herod Secures Injunctive Relief Against United States Small Business Administration To Prevent Discriminatory Implementation Of The Paycheck Protection Program

Posted on June 10, 2020 at 1:02 pm

Manier & Herod attorney Robert Miller successfully obtained temporary and permanent injunctive relief on behalf of Alpha Visions Learning Academy, Inc. (“Alpha”) against the United States Small Business Administration (the “SBA”) in the United States Bankruptcy Court for the Western District of Tennessee in Alpha Visions Learning Academy, Inc. v. Jovita Carranza, in her Capacity as Administrator for the United States Small Business Administration, Adversary Proceeding No. 20-00071.

In this matter, Alpha, a childcare center located in Memphis, Tennessee, sought injunctive relief from the Court to enjoin the SBA’s discriminatory implementation of the Paycheck Protection Program (“PPP”), a federal loan guarantee program designed to provide subsidies to businesses adversely affected by the COVID-19 pandemic. The PPP allows any business with less than 500 employees, which applies for funds through any participating federally-insured lending institution, to receive funds equal to 2.5 times its average monthly payroll, up to $10 million. The SBA made the approval of any PPP loan expressly contingent on the applicant or any owner of the applicant not being “presently involved in any bankruptcy,” even though this condition was nowhere to be found in the CARES Act or the PPP.

After extensive briefing of the issues and a hearing on the merits, the Court found that (i) the SBA’s statutory sovereign immunity did not shield it from the Court’s evaluation of its implementation of the PPP pursuant to the Administrative Procedures Act,  (ii) the SBA exceeded its authority in excluding entities owned by bankrupt entities from the PPP, (iii) the SBA acted arbitrarily and capriciously in excluding entities owned by bankrupt entities from the PPP, and (iv) the SBA discriminated against Alpha in violation of Section 525(a) of the Bankruptcy Code. Therefore, based on these findings, the Court determined that Alpha was entitled to a permanent injunction on the issue and required the SBA to process the business’s PPP loan application.