Today, a federal judge in Maryland denied an emergency motion seeking to block Bank of America from applying eligibility restrictions to its lending under the $349 billion Paycheck Protection Program (“PPP”). The motion for a temporary restraining order and preliminary injunction was filed by four small businesses, which had alleged that Bank of America only accepted applications for PPP loans from small business checking customers that were already borrowers at the bank or that were not also borrowers at any other bank. The businesses alleged that these limitations violated the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which established the PPP, and the Small Business Act (“SBA”).

In a 23-page decision, US District Judge Stephanie Gallagher denied the plaintiff’s emergency motion. Judge Gallagher first found that PPP applicants do not have a private right of action to bring a lawsuit challenging a lender’s conduct under the CARES Act. According to the judge, “[t]he plain language of the statute does not suggest an intent to confer . . . a private remedy against participating . . . lenders.”

In addition, even assuming that PPP applicants have a private right of action against participating lenders, Judge Gallagher found that Bank of America’s “challenged conduct here does not run afoul of the CARES Act.” Although the CARES Act imposes certain limited eligibility criteria for PPP loans, Judge Gallagher found that the Act “does not constrain banks such that they are prohibited from considering other information when deciding from whom to accept applications, or in what order to process applications it accepts.” Judge Gallagher also expressed concern that blocking lenders from applying eligibility criteria to applicants could discourage them from offering loans under the program, which would be contrary to the intent of Congress in passing the CARES Act.

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