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MOTION to Dismiss First Amended Complaint by SYNOVUS BANK. (Internal deadline for… — Agent Fee Litigation (Dkt. 46)

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Synovus Bank's motion to dismiss the amended complaint, with memorandum of law, dated June 10, 2020, in Sport & Wheat CPA PA v. ServisFirst Bank Inc., Case No. 3:20-cv-05425, in the U.S. District Court for the Northern District of Florida, Pensacola Division. Brought under Federal Rule of Civil Procedure 12(b)(6), it argues the plaintiff accounting firm claims Paycheck Protection Program agent fees found in neither the CARES Act, Pub. L. No. 116-136, nor the Small Business Administration's First Interim Final Rule. It further argues the CARES Act creates no private right of action and that the Florida claims for unjust enrichment, contract implied in law and conversion fail. The memorandum recites agent fee caps of 1 percent for loans of not more than $350,000 and 0.25 percent for loans of at least $2 million, and states the plaintiff's maximum alleged claim is $1,633.03.

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
:
SPORT & WHEAT CPA PA, a Florida :
corporation, individually and on behalf of :
Case No. 3:20-cv-05425-
a class of similarly situated businesses and :
TKW-HTC
individuals, :
:
Plaintiff, :
:
:
v. :
:
SERVISFIRST BANK INC.; SYNOVUS :
BANK; THE FIRST, A NATIONAL :
BANKING ASSOCIATION; and :
TRUIST BANK, :
:
Defendants. :
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DEFENDANT SYNOVUS BANK’S
MOTION TO DISMISS THE AMENDED COMPLAINT AND
MEMORANDUM OF LAW IN SUPPORT THEREOF
Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendant Synovus

Bank (“Synovus”) respectfully submits this Motion to Dismiss the Amended

Complaint and Memorandum of Law in Support Thereof, dated June 10, 2020.

Plaintiff Sport & Wheat CPA PA (“S&W”) claims an entitlement to fees

found nowhere in the statute or regulations underlying this suit, brings a claim

under a federal statute that provides no private right of action, and asserts state law
claims that do not, as a matter of law, support any relief on the basis of the facts

alleged. The Amended Complaint should be dismissed.

PRELIMINARY STATEMENT

This action involves the Paycheck Protection Program (“PPP”), created as

part of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-

136 (the “CARES Act” or the “Act”). The CARES Act is part of the federal

government’s response to the economic hardship caused by the COVID-19

pandemic. To provide emergency assistance to small businesses affected by the

pandemic, the PPP significantly expanded the Small Business Administration’s

(“SBA”) 7(a) loan program for small businesses and provided a mechanism by

which borrowers could receive funds to cover payroll and other expenses and, in

certain circumstances, have their loans forgiven by the government. PPP loans are

processed and disbursed through private lenders, and those lenders receive a

statutory processing fee from the government for each approved loan.

Plaintiff S&W is an accounting firm. S&W claims it assisted a client,

identified only as “Borrower C,” when that client made an application to Synovus

for a PPP loan. S&W admits Synovus did not authorize such work and never

agreed to pay an agent’s fee. Instead, S&W alleges that the CARES Act and SBA

regulations thereunder create an absolute entitlement to fees for any agent who

merely claims to have assisted a PPP borrower in preparing an application. S&W

2
insists that lenders must pay those fees even where, as here, the lender in no way

authorized the agent’s activities.

S&W is plainly wrong. It asks the Court to effect a wholesale change to the

SBA 7(a) loan program—which has never required the involuntary payment of

agent fees—rather than read the applicable regulation as a limitation on such fees,

as the CARES Act clearly requires. That statute merely directs the SBA to set a

cap on agent fees. The regulations promulgated pursuant to that statutory

authorization provide that if an agent is to be compensated for assisting a borrower,

such compensation will be paid by lender and not borrower. There is no authority

for the proposition that someone who claims to have been an agent must be

compensated by a lender, particularly when the lender never agreed to do so and

the lender has not certified that the services were reasonable and satisfactory to it,

as is required by SBA regulations. The entitlement that S&W proposes would also

be susceptible to rampant fraud and abuse, requiring PPP lenders to blindly

compensate any agent who merely claims to have assisted a PPP applicant.

Congress and the SBA intended the exact opposite by establishing a cap on agent

fees and limitations on the source of their payment. S&W has thus failed to plead

a violation of federal law.

S&W has not only failed to plead a violation of federal law, it is attempting

to make an errant claim for declaratory relief for which there is no private right of

3
action. Am. Compl. ¶¶ 186–190 (Count Four). The CARES Act did not create a

new right for agents to bring a suit of this kind. The Eleventh Circuit has

repeatedly held that the Small Business Act, which the CARES Act amends, does

not create a private right of action, and the only court to address whether the

CARES Act itself confers a private right of action has correctly held that it does

not. See Profiles, Inc. v. Bank of Am. Corp., 2020 WL 1849710, at *7 (D. Md.

Apr. 13, 2020).

S&W fails to state any claim under Florida law. S&W attempts to assert a

claim for unjust enrichment—and an entirely duplicative claim based on “contract

implied in law”—arising out of Synovus’s allegedly unjust retention of a loan

processing fee from the SBA. Am. Compl. ¶¶ 160–181 (Counts One and Two).

But the Amended Complaint fails to plead facts sufficient to satisfy even the first

element required to sustain such a claim: that the plaintiff has conferred a direct

benefit on the defendant. S&W then attempts to assert a claim for conversion, id.

¶¶ 182–185 (Count Three), even though an alleged monetary obligation cannot

give rise to a conversion claim and Synovus has not yet received the loan

processing fees at issue.

Based on its own maximum alleged claim on Synovus of a mere $1,633.03,

Am. Compl. ¶ 112, S&W purports to seek to represent a nationwide class of

supposed agents. S&W’s claim is not remotely appropriate for class action

4
treatment. Notably, Synovus management is currently aware of a total of only nine

entities or persons that have even contacted the Bank about possible agents’ fees,

of the approximately 20,000 PPP applications the Bank has processed. Synovus is

unaware of any communications from S&W inquiring about agents’ fees or

insisting upon entitlement to such fees prior to the filing of S&W’s April 26, 2020

Complaint. It appears S&W rushed to file suit to position itself among other

plaintiffs that have filed similar putative class action complaints claiming

entitlement to agent fees.

Because the Amended Complaint fails to state a claim under federal or state

law, it should be dismissed in its entirety.

STATEMENT OF FACTS

I. The Enactment of the CARES Act and PPP

On March 27, 2020, President Trump signed the CARES Act into law. The

purpose of the Act was to provide “emergency assistance and health care response

for individuals, families, and businesses affected by the coronavirus pandemic.”

First Interim Final Rule, 85 Fed. Reg. at 20,811 (“IFR” or “First IFR”). The

CARES Act granted the SBA funding and authority to establish a new loan

program for small businesses, called the PPP. The PPP amended section 7(a) of

the Small Business Act, which is the federal government’s primary small business

loan program. Id. Under the PPP, SBA guarantees 100 percent of loans made by

5
eligible lenders to eligible borrowers. Id. SBA reimburses lenders for making PPP

loans through a loan-processing fee, with the reimbursement amount determined

based on the size of the loan. See 15 U.S.C. § 636(a)(36)(P)(i). As of June 7,

2020, approximately $511 billion in PPP loans had been approved, leaving more

than $130 billion in remaining funds available to applicants.1

This action concerns the role of agents in the PPP. Congress delegated to

the SBA the authority to set a maximum limit for fees paid to agents who assist

borrowers with preparing an application for a PPP loan. 15 U.S.C.

§ 636(a)(36)(P)(ii). Congress did not otherwise modify the existing regulatory

framework applicable to agents assisting lenders and borrowers with 7(a) loans,

nor did Congress delegate to the SBA any authority to do so.

On April 15, 2020, the SBA promulgated the First IFR which, among other

things, exercised the SBA’s statutory authority to establish limits on agent fees.

The First IFR states:

Who pays the fee to an agent who assists a borrower?

Agent fees will be paid by the lender out of the fees the lender receives
from SBA. Agents may not collect fees from the borrower or be paid
out of the PPP loan proceeds. The 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:

1
SBA, Paycheck Protection Program Report: Approvals through 06/06/2020, at 2, 9
(2020), https://home.treasury.gov/system/files/136/SBA-Paycheck-Protection-Program-Loan-
Report-Round2.pdf. With more than $130 billion still available, funds are not, as S&W alleges,
“quickly running out.” Am. Compl. ¶¶ 19–20.

6
i. One (1) percent for loans of not more than $350,000;
ii. 0.50 percent for loans of more than $350,000 and less
than $2 million; and
iii. 0.25 percent for loans of at least $2 million.

The Act authorizes the Administrator [of the SBA] to establish limits
on agent fees. The Administrator, in consultation with the Secretary [of
the Treasury], determined that the agent fee limits set forth above are
reasonable based upon the application requirements and the fees that
lenders receive for making PPP loans.

85 Fed. Reg. at 20,816. The First IFR does not state that lenders must pay agent

fees regardless of whether or not an agent has been authorized by the lender.

Rather, it speaks to what an agent “may collect from the lender.” Id. (emphasis

added).

On April 22, 2020, shortly after the First IFR was released, the Association

of International Certified Professional Accountants released a special report on the

PPP confirming that interpretation of the IFR. Ex. A, AICPA, Small Business

Loans Under the Paycheck Protection Program: Issues Related to CPA

Involvement (Apr. 22, 2020) (“AICPA Report”). The report advises that “CPAs

should note, that even though the Treasury has outlined guidelines related to

agency fees, there is a possibility that you will not be paid for your services, even

when noting you are an agent to the application. . . . It is important to discuss this

issue with clients and the banks to ensure there is an understanding, preferably in

writing, as to how and when any fees will be paid.” Id. at 3 (emphasis added).

7
There is not a word in either the CARES Act or the First IFR even

suggesting that an agent who claims to have helped a borrower is entitled to be

paid a fee by the lender. Congress and the SBA were focused on putting a cap on

agents’ fees and ensuring that borrowers did not pay them—that is all, as the

AICPA report implicitly acknowledges.

II. S&W Claims It Helped a Client Apply for a
PPP Loan and Files Suit Alleging Synovus Must Pay Its Fees

Plaintiff S&W alleges that, on March 24, 2020, it was approached by a small

business client—identified only as “Borrower C”—for assistance in applying for a

PPP loan. Am. Compl. ¶ 99. S&W alleges that “Borrower C hired [S&W] to

prepare a loan application intended to be submitted to Synovus Bank,” id. ¶ 102,

and that on April 1, 2020, it “prepared a PPP loan application that Borrower C

signed as the borrower, and that [S&W] signed as its PPP Agent,” id. ¶ 104. There

is no allegation that S&W actually submitted this or any other application to

Synovus, or that any application submitted to Synovus identified S&W as an agent.

S&W alleges that, also on April 1, 2020, it “communicated with Synovus

Bank” to resolve “a mismatching of Borrower C’s name.” Id. ¶ 105.2 From that

alleged interaction, S&W speculates that “Synovus Bank knew that [S&W] was

acting as Borrower C’s PPP Agent in connection with Borrower C’s PPP loan

2
Synovus is unaware of the identity of Borrower C and has requested that S&W identify
the borrower, but S&W has not done so.

8
application.” Id. ¶ 106. S&W does not allege that it sought authorization from

Synovus to do any work, that Synovus authorized S&W to do any work, or that

Synovus agreed to compensate S&W. Other than that one alleged communication,

S&W does not claim that Synovus had any knowledge of what work S&W was

purportedly doing.

In the meantime, on April 3, 2020, Synovus Bank began processing PPP

loans to small business borrowers. To facilitate expeditious and efficient

processing of applications, Synovus set up a user-friendly, web-based portal to

process applications and made Bank personnel available to assist applicants.

On April 9, 2020, S&W alleges that it asked an unidentified Synovus

employee “about the payment of [S&W’s] fees as Borrower C’s PPP Agent,” id.

¶ 107, and that Synovus “advised . . . that it would not pay PPP Agents’ fees,” id.

¶ 108. Indeed, from the inception of the PPP, Synovus included notices on its PPP

application portal making clear it would not be paying applicant agents’ fees.3

More than a week after S&W alleges it was told by Synovus that agent fees would

not be paid, S&W alleges that Borrower C proceeded to submit its PPP loan

application through Synovus’s online portal. Id. ¶ 109. S&W alleges that four

3
See, e.g., CARES Act – Paycheck Protection Program, SYNOVUS,
https://www.synovus.com/covid-19/paycheck-protection-program/ (current version of website).

9
days later, on April 21, 2020, “Borrower C received the funds from its PPP loan as

requested.” Id. ¶ 110.

In connection with that loan, S&W alleges that Synovus “will receive or has

received” a loan processing fee. Id. ¶ 111. As S&W’s allegation seems to

acknowledge, Synovus has not yet received any statutory fees under the CARES

Act for PPP loans, and understands that the SBA will authorize and process any

such fees at a future date. Those fees, moreover, are subject to clawback by the

SBA if the borrower is later determined to be ineligible. Loan Review Procedures

IFR, 85 Fed. Reg. at 33,014. Nevertheless, S&W alleges that it “has not been

compensated by Synovus Bank for its services as Borrower C’s PPP Agent.” Id.

¶ 113. S&W further claims—without elaboration and with full knowledge of

Synovus’s position that it will not pay any such fees—that it “has assisted and will

assist other clients with their PPP loan applications with Synovus Bank” and

“expects to be paid for its services in connection with each loan.” Id. ¶ 114.

Based only on the foregoing, on April 26, 2020, S&W filed a Complaint

seeking to represent a statewide class of all agents purporting to have assisted

clients to obtain PPP loans, and seeking to recover for all such persons. Synovus

Trust Company moved to dismiss the Complaint on May 17, 2020, ECF No. 14,

pointing out that the wrong Synovus entity had been named and that proper service

had not been effected, in addition to S&W’s failure to state a claim. S&W filed the

10
Amended Complaint on May 28, 2020, ECF No. 21, attempting to expand the

putative statewide class to a nationwide class, naming additional defendants, and

attempting to remedy its prior pleading deficiencies.

LEGAL STANDARD

“[T]o survive a motion to dismiss, a complaint must . . . contain sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

face.’” Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010)

(quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals of

the elements of a cause of action, supported by mere conclusory statements,”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), or a “formulaic recitation of the

elements of a cause of action,” Twombly, 550 U.S. at 555, are insufficient. When

plaintiffs “have not nudged their claims across the line from conceivable to

plausible, their complaint must be dismissed.” Id. at 570.

ARGUMENT

The Court should dismiss the Amended Complaint. As explained below,

S&W’s claim for declaratory relief (Count Four) fails because the CARES Act

does not create a private right of action and S&W has failed to plead a violation of

federal law. S&W’s unjust enrichment claim (Count One), contract implied in law

claim (Count Two), and conversion claim (Count Three) likewise fail to state a

claim under Florida law. We address the CARES Act claim first below, because

11
all of S&W’s claims rely on the faulty premise that federal law creates an absolute

entitlement to PPP agent fees, and then turn to S&W’s state law claims.

I. The CARES Act Does Not Provide a Private Right of Action

S&W claims entitlement to a declaration that “because it performed work for

Borrowers, it is entitled to fees, to be paid from Defendants’ origination fees under

the Paycheck Protection Program.”4 Am. Compl. ¶ 189. But the CARES Act

provides neither an express nor implied right of action for private parties to bring

suit. “[P]rivate rights of action to enforce federal law must be created by

Congress.” Alexander v. Sandoval, 532 U.S. 275, 286 (2001). Absent “[s]tatutory

intent” to create a private remedy, “a cause of action does not exist and courts may

not create one.” Id. S&W does not allege that the CARES Act contains an express

private right of action, nor could it. Profiles, 2020 WL 1849710, at *7 (“[T]he

CARES Act does not expressly provide a private right of action.”). The Amended

Complaint concedes this by seeking a ruling under the Declaratory Judgment Act.

Am. Compl. ¶ 187. But the Declaratory Judgment Act does not create a private

right of action. See, e.g., Rebuild Nw. Fla., Inc. v. Fed. Emergency Mgmt. Agency,

4
S&W also seeks a declaration that “Defendants acted unlawfully, in refusing to
maintain [S&W]’s name as PPP Agent on loan applications and documents filed with the Small
Business Administration.” Am. Compl. ¶ 190. While S&W has alleged such conduct on the part
of other defendants, see id. ¶ 120, it has not alleged any such conduct as to Synovus and the
claim should be dismissed as to Synovus on that ground. Additionally, the claim fails because it
seeks a declaration of rights under a federal statute that provides no private right of action.

12
2018 WL 7351690, at *1 (N.D. Fla. July 12, 2018) (citing Musselman v. Blue

Cross & Blue Shield of Ala., 684 F. App’x 824, 829 (11th Cir. 2017)). Because no

express private right of action exists under the CARES Act, “the burden rests with

[plaintiff] to establish that an implied private right of action exists.” McCulloch v.

PNC Bank Inc., 298 F.3d 1217, 1221 (11th Cir. 2002).

S&W fails to meet that burden: it does not even allege an implied private

right of action, because there is none. The Eleventh Circuit has repeatedly held

that the Small Business Act, which the CARES Act amends in limited part, does

not confer a private right of action at all. See United States v. Fidelity Capital

Corp., 920 F.2d 827, 838 n.39 (11th Cir. 1991); Bulluck v. Newtek Small Bus. Fin.,

Inc., 2020 WL 1490702, at *3 (11th Cir. Mar. 27, 2020).5 Nothing in the CARES

Act changes this analysis, and the only court to address whether the CARES Act

itself creates a private right of action has held that it does not. See Profiles, 2020

WL 1849710, at *7.6

Courts have sometimes looked to four factors to determine the existence of

an implied private right of action.7 See, e.g., McDonald v. S. Farm Bureau Life

5
Accord Crandal v. Ball, Ball & Brosamer, Inc., 99 F.3d 907, 909 (9th Cir. 1996);
Searcy v. Houston Lighting & Power Co., 907 F.2d 562, 563–64 (5th Cir. 1990).
6
See also Order, Profiles, No. 20-1438 (4th Cir. May 1, 2020), ECF No. 27 (denying
plaintiff’s request for an emergency injunction pending appeal).
7
The four factors are: (1) whether “the statute create[s] a federal right in favor of the
plaintiff”; (2) whether there is “any indication of legislative intent, explicit or implicit, either to

13
Ins. Co., 291 F.3d 718, 722 (11th Cir. 2002). The “central inquiry,” however, is

“whether Congress intended to create, either expressly or by implication, a private

cause of action.” Id. (quoting Sandoval, 532 U.S. at 286). “[T]he Supreme Court

has gradually receded from its reliance on [the other] three . . . factors,” which

“remain relevant only insofar as they provide evidence of whether Congress

intended to create a private right of action.” Love v. Delta Air Lines, 310 F.3d

1347, 1351–52 (11th Cir. 2002); see also Hernandez v. Mesa, 140 S. Ct. 735, 751

(2020) (Thomas, J., concurring) (noting that Sandoval rejected the Court’s

previous “freewheeling approach” to implying private rights of action).

“[T]he bar for showing legislative intent is high.” Love, 310 F.3d at 1352.

(quotation omitted). “Congressional intent to create a private right of action will

not be presumed,” and “[t]here must be clear evidence of Congress’s intent to

create a cause of action.” McDonald, 291 F.3d at 722 (quoting Baggett v. First

Nat’l Bank of Gainesville, 117 F.3d 1342, 1345 (11th Cir. 1997)).

S&W cannot clear that high bar. The entirety of the section of the CARES

Act at issue here, captioned “FEE LIMITS,” provides: “An agent that assists an

eligible recipient to prepare an application for a covered loan may not collect a fee

create such a remedy or to deny one”; (3) whether it “is consistent with the underlying purposes
of the legislative scheme to imply such a remedy for the plaintiff”; and (4) whether “the cause of
action [is] one traditionally relegated to state law.” McDonald, 291 F.3d at 722 (quoting Cort v.
Ash, 422 U.S. 66, 78 (1975)).

14
in excess of the limits established by the Administrator.” 15 U.S.C.

§ 636(a)(36)(P)(ii). Neither this text nor the rest of the statute evince any intent to

create a private right of action in favor of PPP agents.

First, the relevant statutory provision does not contain “[r]ights-creating

language” that confers rights “directly” on PPP agents. See Love, 310 F.3d at 1352

(quoting Cannon v. Univ. of Chicago, 441 U.S. 677, 690 n.3 (1979)). Rather than

creating rights in the agents’ favor, the fee-cap provision prohibits certain conduct

by agents. A private right of action will not be inferred where, as here, the plaintiff

is not the intended beneficiary of the statute. See Armstrong v. Exceptional Child

Ctr., Inc., 575 U.S. 320, 332 (2015) (“We doubt . . . that providers are intended

beneficiaries . . . of the Medicaid agreement, which was concluded for the benefit

of the infirm whom the providers were to serve, rather than for the benefit of the

providers themselves.”). Indeed, the CARES Act does not even confer a private

cause of action to small business borrowers, who are the intended beneficiaries.

Profiles, 2020 WL 1849710, at *7.

Second, as the recent Profiles decision notes, “the view that Congress did

not intend to create a separate private right of action in the CARES Act is further

bolstered by the criminal and civil enforcement regime codified in the SBA.” 2020

WL 1849710, at *6; see 15 U.S.C. § 650(a)(2), (c) (conferring enforcement

authority upon the SBA Administrator). Because Congress “provide[d] a

15
discernable enforcement mechanism,” that mechanism should not be disturbed by

implying a private right of action. Love, 310 F.3d at 1353.

Finally, the First IFR does not and cannot create a private right of action.

“[I]f examination of a statute’s text, structure, and history does not yield the

conclusion that Congress intended it to confer a private right and a private

remedy, . . . such a right may not be created or conferred by regulations

promulgated to interpret and enforce it[.]” Id. at 1353. In other words,

“[l]anguage in a regulation may invoke a private right of action that Congress

through statutory text created, but it may not create a right that Congress has not.”

Sandoval, 532 U.S. at 291. Because the CARES Act clearly does not reflect

Congressional intent to confer a private right of action, that ends the inquiry.

Count Four of the Amended Complaint therefore must be dismissed.

II. The CARES Act and Its Regulations Create No
Affirmative Entitlement for Agents That Assist PPP Applicants

Even if the CARES Act created a private right of action, which it does not,

S&W has failed to plead any violation of federal law. While S&W contends that

PPP lenders “must” pay agents, Am. Compl. ¶ 50, it cannot convert a statutory fee

limit or regulatory guidance as to “Who pays the fee to an agent who assists a

borrower?” into an affirmative entitlement to such fees. See 15 U.S.C.

§ 636(a)(36)(P)(ii); 85 Fed. Reg. at 20,816. That is especially true where, as here,

the lender has made it clear to agents that it will not pay agent fees. See Am.

16
Compl. ¶ 108. As explained below, any attempt to convert a limitation into an

entitlement is antithetical to the statutory and regulatory language and the SBA

7(a) program overall.

A. The CARES Act Does Not Create an
Entitlement to Agent Fees—It Limits Agent Fees

The Court’s analysis begins and ends with the plain text of the statute.

Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004) (“[W]hen the statute’s language is

plain, the sole function of the courts . . . is to enforce it according to its terms.”

(quotations omitted)); Hartford Underwriters Ins. Co. v. Union Planters Bank,

N.A., 530 U.S. 1, 6 (2000) (same).

As noted above, in a section captioned “FEE LIMITS,” the CARES Act

provides that “[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

Administrator.” 15 U.S.C. § 636(a)(36)(P)(ii). That is the entirety of the statutory

language as it relates to agent fees: an establishment of a limitation on agents’ fees

and an authorization to the SBA to establish those precise limits.

S&W would have the Court read into that clear language an affirmative

entitlement for anyone who claims to be an agent to be compensated by the lender

upon demand, regardless of whether the agent’s services were engaged, authorized,

or agreed to by the lender, or were reasonable. There is no basis to create such an

affirmative right out of a negative limitation. See Sandoval, 532 U.S. at 289

17
(“Statutes that focus on the person regulated rather than the individuals protected

create no implication of an intent to confer rights on a particular class of persons.”

(quotation omitted)). Indeed, Congress knows exactly how to create an affirmative

entitlement to fees, and did so in the provision immediately preceding the one on

which S&W relies—but as to lenders only. There, the CARES Act provides that

“[t]he Administrator [of the SBA] shall reimburse a lender authorized to make a

covered loan at a rate” pursuant to a schedule that is set out in the statute. Id.

§ 636(a)(36)(P)(i) (emphasis added). The deliberate difference between what

lenders “shall [be] reimburse[d]” and what agents “may not collect” is striking.

See In re Failla, 838 F.3d 1170, 1176–77 (11th Cir. 2016) (“The presumption of

consistent usage instructs that ‘[a] word or phrase is presumed to bear the same

meaning throughout a text’ and that ‘a material variation in terms suggests a

variation in meaning.’” (quoting Antonin Scalia & Bryan A. Garner, Reading Law

170 (2012)). While S&W would like the CARES Act to say “agents shall be

compensated by lenders,” S&W cannot rewrite the statute and create an

entitlement Congress deliberately rejected.

B. The First IFR Does Not Create an Entitlement to Agent Fees

1. The Plain Language of the First IFR
Creates No Entitlement to Agent Fees
Unable to find support in the CARES Act itself, S&W contends that the First

IFR makes it “entitled to fees” paid by lenders, even absent lender authorization.

18
Am. Compl. ¶¶ 112, 189. The First IFR does no such thing. Rather, as authorized

by the CARES Act, the First IFR (1) sets out a schedule of maximum fees “an

agent may collect” for assistance in preparing an application for a PPP loan, and

(2) states that such fees will be paid by the lender out of the fees the lender

receives from the SBA instead of by the borrower or out of the loan proceeds. 85

Fed. Reg. at 20,815 (emphasis added). Nothing in the rule requires a lender to pay

agents’ fees. Just like the governing statute, it is a limitation on amount and

source.

2. Existing SBA Regulations Confirm
There Is No Entitlement to Agent Fees

Existing SBA regulations applicable to the 7(a) loan program confirm there

is no entitlement to agent fees. The First IFR makes clear that the 7(a) background

regulations are applicable, see id. at 20,815, and S&W agrees that the PPP

regulations must be read in the context of the existing 7(a) regulatory scheme, see

Am. Compl. ¶¶ 43, 65–67.

The SBA does not require borrowers or lenders to use agents in connection

with 7(a) loans—borrowers and lenders may “conduct business with SBA without

a representative.” 13 C.F.R. § 103.2(a). But when agents are used, the SBA

regulations dictate who may pay the fee. The background regulations governing

the 7(a) loan program recognize three categories of agents: (1) lender service

providers, who work for the lender and are paid by the lender; (2) “packagers,”

19
“who prepare[] the Applicant’s application for financial assistance and [are]

employed and compensated by the Applicant”; and (3) loan brokers, who

intermediate between lenders and borrowers and can be paid by either the lender or

the borrower, but not both. See 13 C.F.R. § 103.1(a). The agents referred to in the

CARES Act and the First IFR are akin to the “packagers” who are, by preexisting

regulation, “compensated by the Applicant.” See id. The First IFR varies that rule

by requiring such agents to be paid, if at all, by the lenders. And just as Section

103.1(a) does not create an affirmative obligation of borrowers to use or pay

“packagers,” the First IFR imposes no such obligation on lenders.

Section 103.1(a) also requires that an agent, whether of a lender or a

borrower, be an “authorized representative.” Id. As S&W concedes, Synovus

clearly communicated that it was not compensating agents. Am. Compl. ¶ 108.

Synovus did not enter into any agreement to compensate S&W or otherwise

authorize it to serve as an agent on a PPP application, so S&W was therefore not

“authorized” under Section 103.1(a) as required. S&W’s theory that an agent is

entitled to compensation by the lender so long as the borrower “agrees to hire a

PPP agent,” id. ¶ 65, has it exactly backwards.8

8
Reading the First IFR as S&W suggests would upend long-established agency law,
which does not recognize “involuntary agency.” An agency relationship can only arise where
the principal “manifests assent” through words or conduct that an agent can act on its behalf. See
Restatement (Third) of Agency §§ 1.01, 1.03 (2006).

20
S&W’s claim of entitlement to fees is also contrary to 7(a) loan program

agent certification requirements. To ensure that agents are properly authorized and

have performed the services claimed, agents must disclose and certify their

services to the SBA. See 13 C.F.R. § 103.5(a). This certification is embodied in

SBA Form 159, the “Fee Disclosure and Compensation Agreement,” which “must

be completed and signed by the SBA Lender and Applicant whenever an Agent is

paid by either the Applicant or the SBA Lender in connection with the SBA loan

application.” SBA Form 159 (rev. Apr. 2018).9 Form 159 also requires the lender

to certify that “representations of services rendered and the amounts charged as

identified in this form are reasonable and satisfactory to it.” Id.; see also 13 C.F.R.

§ 103.5(b) (requiring that total compensation charged by an agent be reasonable).

S&W agrees that Form 159 “must” be submitted as a precondition to agent

compensation. Am. Compl. ¶ 65. But S&W does not allege that the form was ever

submitted here, or that Synovus certified its services. S&W’s contention that

lenders must compensate unauthorized agents is at odds with the lender’s

obligation to certify that the agent’s services were “reasonable and satisfactory.”

9
Available at https://www.sba.gov/document/sba-form-159-fee-disclosure-
compensation-agreement.

21
3. Explicit Agreements Between Lenders and Agents Are
Necessary to Address Contingencies Associated with SBA
Payments

An explicit agreement between lender and agent, as contemplated by the

authorization requirement in the 7(a) regulations, is also necessary to address

contingencies specific to the SBA’s review of PPP applications and the potential

clawback of lenders’ processing fees. The SBA may review any PPP loan at any

time in its discretion. Loan Review Procedures IFR, 85 Fed. Reg. at 33,012. In

connection with that review, the SBA may claw back the lender processing fee if it

determines the borrower is ineligible. Id. at 33,014. The SBA may also claw back

the processing fee if the lender fails to abide by PPP rules. See id. Absent an

explicit agreement between lenders and agents addressing such contingencies,

lenders would have no ability to recover an agent fee paid out of funds clawed

back by the SBA—even in circumstances where the agent is responsible for the

borrower’s ineligibility. Neither Congress nor the SBA could have intended such

an inequitable result.

4. S&W’s Interpretation of the First IFR Would Lead to
Fraud and Abuse

Automatic payment by lenders to any agent that claims to have assisted a

borrower—to which S&W contends it is entitled—would lead to fraud and abuse.

If a lender is required to compensate an agent, regardless of whether the lender has

certified in Form 159 that the services were “reasonable and satisfactory,” there is

22
no control over the quality of the services rendered or the appropriateness of the

fee charged—or even whether the purported services were provided at all. S&W’s

apparent contention that the agent may certify its own services, Am. Compl. ¶ 65,

makes no sense and runs counter to the SBA’s long-held concerns about agent-fee

fraud and the fact that SBA has consistently pointed to Form 159 as a safeguard

against such fraud. See, e.g., SBA, Off. of the Inspector Gen., Report on the Most

Serious Management and Performance Challenges Facing the Small Business

Administration in Fiscal Year 2019, at 8, 9 (Oct. 11, 2018) (“OIG investigations

have revealed a pattern of fraud by loan packagers and other for-fee agents in the

7(a) Loan program, involving hundreds of millions of dollars.”).10 Such a scheme

would also upend the typical SBA practice of permitting lenders to choose the

agents with whom they wish to associate, again, in part, to guard against fraud.

See SBA Info. Notice No. 9000-1793, SBA, Off. of the Inspector Gen. (Apr. 7,

2009) (outlining lender guidelines “[t]o protect against a potentially corrupt loan

agent”).11

10
Available at https://www.sba.gov/sites/default/files/2019-08/SBA-OIG-Report-19-
012.pdf.
11
Available at https://www.sba.gov/document/information-notice-9000-1793-detecting-
fraud-small-business-administration-lending-programs.

23
5. The First IFR Must Be Construed Consistently with the
CARES Act

Even if the language in the First IFR were ambiguous as to the payment of

agents’ fees—which it is not—the First IFR cannot create an entitlement that does

not exist in the CARES Act itself. See Love, 310 F.3d at 1352–53; see also Lyng v.

Payne, 476 U.S. 926, 937 (1986) (“[A]n agency’s power is no greater than that

delegated to it by Congress.”). Instead, the First IFR must be read in a way that is

consistent with its empowering statute. See Sec’y of Labor, Mine Safety & Health

Admin. v. W. Fuels-Utah, Inc., 900 F.2d 318, 320 (D.C. Cir. 1990).

In sum, the notion that lenders must simply accept and compensate any

demand for payment by anyone who claims to have been an agent is contrary to the

regulatory scheme and the SBA’s historical concerns about agent fraud.

III. S&W Fails to State a Claim for Unjust Enrichment or Contract
Implied in Law

S&W’s claims for unjust enrichment (Count One) and contract implied in

law (Count Two) are duplicative, and both fail. Under Florida law, there is no

difference between claims for unjust enrichment and contract implied in law. See

Monahan v. WHM, LLC, 2010 WL 11504336, at *4 (S.D. Fla. Mar. 18, 2010). “To

the extent Plaintiffs allege a contract implied in law, such contracts must be pled in

the same way as unjust enrichment claims[.]” Resnick v. AvMed, Inc., 693 F.3d

1317, 1325 n.2 (11th Cir. 2012).

24
There are four elements to an unjust enrichment claim (or contract implied

in law) under Florida law: (1) the plaintiff has conferred a direct benefit on the

defendant; (2) the defendant has knowledge of the benefit; (3) the defendant has

accepted or retained the benefit; and (4) the circumstances are such that it would be

inequitable for the defendant to retain the benefit. Am. Safety Ins. Serv. v. Griggs,

959 So. 2d 322, 331 (Fla. 5th DCA 2007).

As further evidence that the claims are duplicative as a matter of law, S&W

pleads the same facts in support of Counts One and Two. Compare Am. Compl.

¶¶ 160–172, with id. ¶¶ 173–181. The only distinction is that S&W alleges in

Count Two that “certain Defendants . . . affirmatively requested further assistance

from Sport & Wheat in connection with various transactions.” Id. ¶ 175 (emphasis

added). But no such allegation is made as to Synovus.

A. S&W Does Not Allege It Conferred a Direct Benefit on Synovus, or
That Synovus Had Knowledge of or Accepted a Benefit from S&W

Florida courts strictly adhere to the requirement that the plaintiff confer a

direct benefit on the defendant. Donoff v. Delta Air Lines, Inc., 2020 WL

1226975, at *12 (S.D. Fla. Mar. 6, 2020); see GVB MD, LLC v. United Healthcare

Ins. Co., 2019 WL 5260274, at *4 (S.D. Fla. Aug. 14, 2019) (applying direct

benefit requirement to claim for unjust enrichment and contract implied in law).

The Amended Complaint does not allege that S&W conferred a benefit

directly on Synovus. Even if Synovus had incurred an obligation to pay S&W for

25
its alleged agent services (it did not), S&W provided those services to PPP

applicants, not to Synovus. See, e.g., Am. Compl. ¶ 79. Indeed, as alleged, the

borrower asked S&W for assistance, hired S&W, and received S&W’s services.

Id. ¶¶ 99, 102, 113. Synovus did not receive the benefit of those services. See A &

E Auto Body, Inc. v. 21st Century Centennial Ins. Co., 2015 WL 12867010, at *5–

6 (M.D. Fla. Jan. 22, 2015) (auto repair shop’s work for customers did not confer

benefit on insurer, which merely incurred an obligation to pay by virtue of its

contract with the customers).

Nor did Synovus have knowledge of the scope of S&W’s alleged services.

The only alleged interaction between S&W and Synovus is that, on one occasion,

“[S&W] communicated with Synovus Bank, assisting Synovus Bank in resolving

the bank’s mismatching of Borrower C’s name”—but even then, S&W alleges that

it was acting on behalf of and at the direction of Borrower C, not Synovus. See id.

¶ 105. S&W speculates that “Defendants performed less work than they would

have, absent Sport & Wheat’s involvement,” id. ¶ 164, but “[a]n indirect benefit”

of this sort “is not sufficient to support a claim for unjust enrichment.” See Tilton

v. Playboy Entm’t Grp., Inc., 2007 WL 80858, at *3 (M.D. Fla. Jan. 8, 2007).

The purported benefit that Synovus will receive—“origination fees from the

SBA”—is by definition conferred by the SBA, not S&W. Id. ¶ 168. This

illustrates the attenuated nature of S&W’s theory: S&W allegedly provided agent

26
services to an applicant, who then submitted a loan application to Synovus, who

then submitted that application to the SBA (a third party) and will receive a

processing fee from the SBA. Such attenuated allegations cannot sustain an unjust

enrichment claim under Florida law. See Johnson v. Catamaran Health Sol., LLC,

687 F. App’x 825, 830 (11th Cir. 2017) (dismissing claim where plaintiff paid

membership fees to a third party that in turn paid a premium to defendant);

Peoples’ Nat’l Bank of Commerce v. First Union Nat’l Bank of Fla., N.A., 667 So.

2d 876, 879 (Fla. 3d DCA 1996) (claim failed where the alleged payments in

which plaintiff claimed an interest were made by a third party, not plaintiff);

Extraordinary Tile Servs., LLC v. Fla. Power & Light Co., 1 So. 3d 400, 403 (Fla.

3d DCA 2009) (dismissing unjust enrichment claim based on attenuated

relationship between plaintiff and defendant).

B. Synovus’s Actions Cannot Be Inequitable Because It Refused
to Pay an Agent’s Fee Before the Application Was Submitted

The unjust enrichment claim also fails because Synovus’s actions are not

inequitable as a matter of law. An unjust enrichment claim only lies if the

“circumstances are such that it would be inequitable under the circumstances for

the defendant to retain the benefit.” Griggs, 959 So. 2d at 331. “A claim for

unjust enrichment . . . requires examination of . . . the expectations of the parties to

determine whether an inequity would result or whether their reasonable

expectations were met.” Porsche Cars N. Am., Inc. v. Diamond, 140 So. 3d 1090,

27
1100 (Fla. 3rd DCA 2014) (emphasis added) (citations omitted). Although Florida

courts do not require that a reasonable expectation of compensation exist for every

unjust enrichment claim, it is nonetheless relevant to evaluating the inequity prong.

See Tooltrend, Inc. v. CMT Utensili, SRL, 198 F.3d 802, 807–08 & n.5 (11th Cir.

1999).

S&W does not and cannot allege that it had a reasonable expectation that

Synovus would pay its agent fee. S&W concedes that it knew Synovus would not

pay an agent’s fee. Am. Compl. ¶ 108. Synovus transacted with the applicant, not

S&W: it was Borrower C itself that accessed Synovus’s online portal and

submitted an application days later on April 17, 2020. Id. ¶ 109. This timeline of

events demonstrates that S&W fails to plausibly allege that Synovus’s retention of

the entire loan processing fee is inequitable. See Skytruck Co., LLC v. Sikorsky

Aircraft Corp., 2012 WL 12898020, at *3 (M.D. Fla. Jan 31, 2012) (claim failed

where plaintiff “had sufficient notice” that defendant “did not intend to pay

commissions to [plaintiff]”).

As explained in Part II above, S&W also clearly had no right to payment of

fees under the CARES Act and thus could have had no reasonable expectation of

payment of such fees absent Syonvus’s agreement and authorization. This is why

the professional organization for CPAs counseled its members “to discuss this

28
issue with clients and the banks to ensure there is an understanding, preferably in

writing, as to how and when any fees will be paid.” Ex. A, AICPA Report, at 3.

IV. S&W Fails to State a Claim for Conversion

S&W’s final state law claim—conversion—fails both because a monetary

obligation can never be the subject of a conversion claim and because Synovus has

not received the loan processing fee on which S&W bases its claim.

Conversion is an “act of dominion wrongfully asserted over another’s

property inconsistent with his ownership therein.” United Techs. Corp. v. Mazer,

556 F.3d 1260, 1270 (11th Cir. 2009). “In order to maintain an action for

conversion, one must have possession of the property or an immediate right to

possession.” Scherer v. Laborers’ Int’l Union of N. Am., 746 F. Supp. 73, 84 (N.D.

Fla. 1988). That means that a conversion claim cannot stand unless the plaintiff

has “a present or immediate right of possession of the property in question”—here,

the loan processing fee. Allen v. Universal C.I.T. Credit Corp., 133 So. 2d 442,

445 (Fla. 1st DCA 1961).

A monetary obligation cannot give rise to a conversion claim. Kee v. Nat’l

Reserve Life Ins. Co., 918 F.2d 1538, 1541–42 (11th Cir. 1990); Neelu Aviation,

LLC v. Boca Aircraft Maint., LLC, 2019 WL 3532024, at *8 (S.D. Fla. 2019).

S&W alleges that “[a] portion of the origination fee each Defendant received was

the rightful property of [S&W].” Am. Compl. ¶ 183. Yet under S&W’s own

29
theory of recovery, the processing fees are “paid directly to lenders by the SBA,”

id. ¶ 9, 49, and then any agent fees “will be paid” to the agent “by the lender,” id.

¶ 12. Thus, S&W does not actually allege that Synovus has “converted” S&W’s

property but that Synovus has not fulfilled an alleged monetary obligation, which

does not give rise to a conversion claim.

S&W also cannot possibly have a “present or immediate right of possession”

of a fee that Synovus has not yet received. S&W acknowledges as much, noting

that “Synovus Bank will receive or has received its PPP loan origination fee.” Am.

Compl. ¶ 111 (emphasis added). Even then, the fee is subject to clawback under

certain circumstances, so it is unclear what, if any, payment Synovus will receive

and retain. See supra Part II.B.4. Assuming Synovus eventually receives a

processing fee, S&W’s alleged future possessory interest in that fee is

“insufficient” to sustain a conversion claim. See United States v. Bailey, 288 F.

Supp. 2d 1261, 1271–72 (M.D. Fla. 2003) (collecting cases). And, regardless, as

discussed above, S&W has no entitlement that could support a property interest in

any loan processing fee Synovus eventually receives.

For these reasons, Count Three should be dismissed.

30
V. This Case Is Not Suitable for Class Action Treatment

The decision of S&W’s lawyers to package S&W’s meritless claims in a

putative class action does not change the fact that the Amended Complaint should

be dismissed as a matter of law.12

First, S&W will not be able to satisfy Rule 23(a)’s numerosity requirement.

S&W’s allegation that the putative class consists of “thousands of agents,” Am.

Compl. ¶ 150, is unsupported and certainly not correct: after processing

approximately 20,000 PPP applications, Synovus management is aware of only

nine entities or persons that even contacted the Bank about possible agents’ fees.

There is considerable doubt that S&W could possibly demonstrate that “the class is

so numerous that joinder of all members is impracticable.” See Vega v. T-Mobile

USA, Inc., 564 F.3d 1256, 1266–67 (11th Cir. 2009) (quoting Fed. R. Civ. P.

23(a)(1)).

Second, “common issues will not predominate over individual questions”

because, “as a practical matter, the resolution of an overarching common issue

breaks down into an unmanageable variety of individual legal and factual issues.”

12
Remarkably, the Amended Complaint, dated May 28, 2020, alleges that S&W is
“unaware of any other case involving these particular Defendants,” Am. Compl. ¶ 155, despite a
consolidation motion pending before the Judicial Panel on Multidistrict Litigation that seeks to
join this case with another similar action naming Synovus as a defendant. See Motion to
Transfer & Schedule of Actions, In re Paycheck Protection Program (PPP) Agent Fees Litig.,
MDL No. 2950 (May 22, 2020), ECF Nos. 1, 1-2. As of the date of this filing, at least 19 similar
cases had been filed nationwide.

31
Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1274 (11th Cir. 2019) (quotation

omitted). Because the CARES Act sets a cap on agent fees—not a fixed fee—the

reasonableness and amount of each specific fee claimed by each specific agent

would have to be litigated individually. With respect to the state law claims in

particular, “common questions will rarely, if ever, predominate an unjust

enrichment claim, the resolution of which turns on individualized facts.” Vega v.

T-Mobile USA, Inc., 564 F.3d 1256, 1274 (11th Cir. 2009). Each of S&W’s

claims, if they survive the instant motion, will turn on individualized factual

questions.

Finally, the Amended Complaint makes no effort to allege how putative

class members will be identified. It states in a conclusory fashion that “[c]lass

members are . . . readily ascertainable, because the Defendants have a record of

every loan they have made under the Paycheck Protection Program.” Am. Compl.

¶ 156. While lenders could identify PPP borrowers in this manner, the existence

of a database of borrowers will not identify agents. See Karhu v. Vital Pharm.,

Inc., 621 F. App’x 945, 948–50 (11th Cir. 2015) (allegation of the existence of a

“sales database” insufficient to satisfy ascertainability requirement). Indeed,

Synovus’s online application portal does not collect agent information and does not

contemplate the use of an agent, consistent with the fact that the SBA’s PPP

32
borrower application itself does not include a field to identify agents.13 Because

the Amended Complaint seeks recovery on behalf of an unascertainable class of

unreported and unverified agents, it merely presents another opportunity for agent

fraud, and needless litigation.

CONCLUSION

Based on the foregoing, and pursuant to Federal Rule of Civil Procedure

12(b)(6), Defendant Synovus Bank respectfully requests that the Court dismiss

Plaintiff’s claims in their entirety.

Dated: Washington, D.C.
June 10, 2020

By: /s/ Paul J. Nathanson

Paul J. Nathanson (pro hac vice)
District of Columbia Bar #982269
DAVIS POLK & WARDWELL LLP
901 15th Street, N.W.
Washington, D.C. 20005
paul.nathanson@davispolk.com
(202) 962-7000

13
Available at https://home.treasury.gov/system/files/136/PPP-Borrower-Application-
Form-Fillable.pdf.

33
Antonio M. Haynes (pro hac vice)
New York Bar #5151816
DAVIS POLK & WARDWELL LLP
450 Lexington Ave.
New York, NY 10017
antonio.haynes@davispolk.com
(212) 450-4000

James E. Butler, Jr. (pro hac vice)
Georgia Bar #099625
Ramsey B. Prather (pro hac vice)
Georgia Bar #658395
BUTLER WOOTEN & PEAK LLP
105 Thirteenth Street
P.O. Box 2766
Columbus, GA 31902
jim@butlerwooten.com
ramsey@butlerwooten.com
(404) 321-1700

Philip A. Bates
Florida Bar #228354
PHILIP A. BATES, P.A.
25 West Cedar Street, Suite 550 (32502)
Post Office Box 1390
Pensacola, FL 32591
pbates@philipbates.net
(850) 470-0091

Attorneys for Defendant
Synovus Bank

34
LOCAL RULE 7.1(F) WORD LIMIT CERTIFICATION

Pursuant to Northern District of Florida Local Rule 7.1(F), I certify that this

Motion to Dismiss the Amended Complaint and Memorandum of Law in Support

Thereof is in compliance with the Court’s word limit. According to the word

processing program used to prepare this motion and memorandum, the document

contains 7,965 words, exclusive of the case style, signature block, and this

certification.