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MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM by TRUIST BANK — Agent Fee Litigation (Dkt. 67)
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Truist Bank's motion to dismiss the amended complaint and memorandum of law in Sport & Wheat CPA PA v. ServisFirst Bank Inc., Synovus Bank, The First, A National Association, and Truist Bank, Case No. 3:20-cv-5425-TKW-HTC, in the U.S. District Court for the Northern District of Florida, dated July 3, 2020. Brought under Federal Rule of Civil Procedure 12(b)(6), it argues that federal law gives agents no private cause of action and no entitlement to PPP agent fees. It contends that the CARES Act, Pub. L. No. 116-136, limits agent fees rather than creating an entitlement, and that the agency exceeded its authority in the first interim final rule at 85 Fed. Reg. 20,811. It argues the plaintiff fails to state claims for unjust enrichment or conversion under Florida law and asks for dismissal with prejudice. A Local Rule 7.1(F) certification states the filing contains 7,950 words.
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION
SPORT & WHEAT CPA PA,
a Florida corporation, individually
and on behalf of a class of
similarly situated businesses and
individuals,
Plaintiff,
Case No. 3:20-cv-5425-TKW-HTC
v.
SERVISFIRST BANK INC.;
SYNOVUS BANK;
THE FIRST, A NATIONAL
ASSOCIATION; and
TRUIST BANK,
Defendants.
DEFENDANT TRUIST BANK’S
MOTION TO DISMISS THE AMENDED COMPLAINT
AND MEMORANDUM OF LAW IN SUPPORT THEREOF
TABLE OF CONTENTS
Page
INTRODUCTION ...........................................................................................................1
STATEMENT OF FACTS................................................................................................2
I. Congress Requires the SBA to Reimburse PPP Lenders
While Limiting Agent Fees. ...........................................................................2
II. The Regulatory Framework Focuses on Limiting Agent Fees.......................5
III. Sport & Wheat Had No Reason to Believe Truist Would
Pay It Agent Fees. ...........................................................................................6
STANDARD OF REVIEW...............................................................................................8
ARGUMENT ................................................................................................................9
I. Federal Law Does Not Provide a Private Cause of Action
for PPP Agent Fees. ........................................................................................9
II. Federal Law Does Not Entitle Agents to PPP Fees......................................12
A. The CARES Act Limits Agent Fees—It Does Not
Create an Entitlement that Lenders Must Pay. ..................................12
B. The PPP Regulations, Even if Valid, Do Not Create
an Entitlement to Agent Fees. ...........................................................14
1. The SBA Exceeded Its Authority by Providing
that Agent Fees Will be Paid Out of Statutorily
Mandated Lender Fees. ............................................................15
2. The Plain Language of the First IFR Creates
No Entitlement to Agent Fees. .................................................19
3. Pre-existing SBA Regulations Confirm There
Is No Entitlement to Agent Fees. .............................................19
4. The Common Law Confirms There Is No
Entitlement to Agent Fees........................................................23
C. Federal Law Bars Any Claim for Payment of
Purported Fees. ..................................................................................24
i
III. Sport & Wheat Also Fails to State Any Claim under Florida Law. .............26
A. Sport & Wheat Fails to State a Claim for Unjust
Enrichment or Contract Implied in Law. ..........................................26
1. Sport & Wheat Does Not Allege it Conferred a
Direct Benefit on Truist of which Truist Had
Knowledge. ..............................................................................27
2. It is Not Inequitable for Truist to Retain the Fee
the CARES Act Guarantees. ....................................................30
B. Sport & Wheat Fails to State a Claim for Conversion. .....................31
CONCLUSION ............................................................................................................32
ii
TABLE OF AUTHORITIES
Page(s)
Cases
A & E Auto Body, Inc. v. 21st Century Centennial Ins. Co.,
No. 14-0310, 2015 WL 12867010 (M.D. Fla. Jan. 22, 2015) ............................28
Alexander v. Sandoval,
532 U.S. 275 (2001) ............................................................................................13
Am. Dental Ass’n v. Cigna Corp.,
605 F.3d 1283 (11th Cir. 2010) ............................................................................8
Am. Safety Ins. Serv. v. Griggs,
959 So. 2d 322 (Fla. 5th DCA 2007) ............................................................26, 30
Ashcroft v. Iqbal,
556 U.S. 662 (2009) ..............................................................................................9
Bel-Bel Int’l Corp. v. Cmty. Bank of Homestead,
162 F.3d 1101 (11th Cir. 1998) ..........................................................................31
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) .......................................................................................... 8-9
Bulluck v. Newtek Small Bus. Fin., Inc.,
808 F. App’x 698, 2020 WL 1490702 (11th Cir. Mar. 27, 2020) ......................11
Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,
467 U.S. 837 (1984) ............................................................................................15
Cremeens v. City of Montgomery,
602 F.3d 1224 (11th Cir. 2010) ..........................................................................15
In re Failla,
838 F.3d 1170 (11th Cir. 2016) ..........................................................................14
First Fed. Sav. & Loan Ass’n of Lake Worth v. Brown,
707 F.2d 1217 (11th Cir. 1983) ..........................................................................10
In re Gateway Radiology Consultants, P.A.,
—B.R.—, No. 19-4971, 2020 WL 3048197
(Bankr. M.D. Fla. June 8, 2020) .........................................................................18
iii
Johnson v. Catamaran Health Sol., LLC,
687 F. App’x 825 (11th Cir. 2017) .....................................................................29
Kee v. Nat’l Reserve Life Ins. Co.,
918 F.2d 1538 (11th Cir. 1990) ..........................................................................31
King v. Burwell,
135 S. Ct. 2480 (2015) ........................................................................................17
Kopel v. Kopel,
229 So. 3d 812 (Fla. 2017) ........................................................................... 26-27
Lamie v. United States Tr.,
540 U.S. 526 (2004) ............................................................................................13
Lindley v. FDIC,
733 F.3d 1043 (11th Cir. 2013) ..........................................................................18
Love v. Delta Air Lines,
310 F.3d 1347 (11th Cir. 2002) .................................................................... 11-12
Lyng v. Payne,
476 U.S. 926 (1986) ............................................................................................15
McDonald v. S. Farm Bureau Life Ins. Co.,
291 F.3d 718 (11th Cir. 2002) ............................................................................11
Musselman v. Blue Cross & Blue Shield of Alabama,
684 F. App’x 824 (11th Cir. 2017) (Tjoflat, J., concurring) ..............................10
Peoples’ Nat’l Bank of Commerce v. First Union Nat’l Bank of Fla., N.A.,
667 So. 2d 876 (Fla. 3d DCA 1996) ...................................................................29
Porsche Cars N. Am., Inc. v. Diamond,
140 So. 3d 1090 (Fla. 3rd DCA 2014)................................................................30
Profiles, Inc. v. Bank of Am. Corp.,
—F. Supp. 3d—, No. 20-0894, 2020 WL 1849710
(D. Md. Apr. 13, 2020) ..................................................................... 10-11, 16, 25
Resnick v. AvMed, Inc.,
693 F.3d 1317 (11th Cir. 2012) ..........................................................................26
iv
Scherer v. Laborers’ Int’l Union of N. Am.,
746 F. Supp. 73 (N.D. Fla. 1988) .......................................................................31
Skelly Oil Co. v. Phillips Petroleum Co.,
339 U.S. 667 (1950) ............................................................................................10
Tectonics, Inc. of Fla. v. Castle Const. Co.,
753 F.2d 957 (11th Cir. 1985) ...................................................................... 24-26
United States v. Fidelity Capital Corp.,
920 F.2d 827 (11th Cir. 1991) ............................................................................11
Utley v. Donaldson,
94 U.S. 29 (1876) ................................................................................................23
Statutes
Coronavirus Aid, Relief, and Economic Security Act,
Pub. L. No. 116-136, 134 Stat. 281 (2020) ....................................................1, 17
15 U.S.C. § 636 ............................................................................... 2-3, 13-14, 16, 19
28 U.S.C. § 2201(a) ...................................................................................................9
Regulations
13 C.F.R. § 103.1 ...........................................................................................4, 17, 20
13 C.F.R. § 103.2 .................................................................................................4, 20
13 C.F.R. § 103.5 ...........................................................................................4, 20, 22
13 C.F.R. § 120.10 .....................................................................................................5
Business Loan Program Temporary Changes; Paycheck Protection
Program, 85 Fed. Reg. 20,811 (Apr. 15, 2020) ........................................5, 16, 19
Immediate Disaster Assistance Program,
75 Fed. Reg. 60,588, 60,594 (Oct. 1, 2010) .......................................................21
Other Authorities
Restatement (First) of Restitution § 2 (1937) ..........................................................23
v
Restatement (Second) of Agency § 441 (1958) .......................................................23
Restatement (Second) of Contracts § 17 (1981) ......................................................23
Restatement (Third) of Agency §§ 1.01, 1.03 (2006)..............................................17
vi
Under Federal Rule of Civil Procedure 12(b)(6), Defendant Truist Bank
(“Truist”) submits this Motion to Dismiss the Amended Complaint and
Memorandum of Law in Support Thereof.
INTRODUCTION
Plaintiff Sport & Wheat CPA PA (“Sport & Wheat”) seeks to turn a federal
statute’s limitation on agent fees into an affirmative entitlement. This effort fails
on multiple fronts. Sport & Wheat identifies no valid cause of action it can pursue
to obtain fees under federal law, a failure that defeats both its claim for declaratory
relief and its common law claims. Sport & Wheat casts these common law claims
as arising under state law. But the viability of each depends on whether the federal
Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 134
Stat. 281 (2020) (the “CARES Act”) entitles purported “agents” to receive a
portion of the fees the Small Business Administration (“SBA”) must pay lenders
for processing Paycheck Protection Program (“PPP”) loans. The CARES Act
provides no such right. Nor do the SBA’s implementing regulations—assuming
those regulations are a valid exercise of the SBA’s authority. Because federal law
does not entitle purported agents to be paid fees by lenders, especially if those
agents lack authorization and a contractual agreement, any remedy under state law
for nonpayment of those fees would conflict with and undermine federal law.
Such a remedy is thus unavailable, and Sport & Wheat’s claims fail.
1
Not only does federal law defeat Sport & Wheat’s claims, but Sport &
Wheat’s factual allegations do not support any claim for relief. Even if state law
governed, Sport & Wheat does not state a claim for relief under that law because it
fails to allege facts showing it conferred a direct benefit on Truist or that Truist
exercised control over any Sport & Wheat property. The Amended Complaint
should be dismissed with prejudice.
STATEMENT OF FACTS
I. Congress Requires the SBA to Reimburse PPP Lenders While Limiting
Agent Fees.
This action arises from the federal government’s unprecedented response to
an equally unprecedented national crisis. The COVID-19 pandemic threw the
country and its small businesses into economic turmoil. To help those businesses
survive this uncertain time, Congress created the PPP as part of the CARES Act.
Am. Compl. ¶ 2. Section 1102 of the Act grafted the PPP onto section 7(a) of the
Small Business Act, the federal government’s longstanding small business loan
program. The PPP greatly expanded the pool of small businesses eligible to
receive SBA-backed loans to cover payroll and other costs through 2020. See 15
U.S.C. § 636(a)(36)(A), (D), (F).
Although the SBA would guarantee these loans, the Act asked private
lenders to process and fund them. Id. § 636(a)(36)(F)(iii). The CARES Act
required the SBA to reimburse lenders for this work. The Act provides that “[t]he
2
[SBA] Administrator shall reimburse a lender authorized to make a covered loan.”
Id. § 636(a)(36)(P)(i). The Act sets out the specific rates the SBA must pay
lenders “based on the balance of the financing outstanding at the time of
disbursement of the covered loan.” Id. Under this statutory provision, the SBA
must reimburse lenders at a rate of:
(I) 5 percent for loans of not more than $350,000;
(II) 3 percent for loans of more than $350,000 and less than
$2,000,000; and
(III) 1 percent for loans of not less than $2,000,000.
Id. Any lender that processes a PPP loan is thus entitled under the statute’s clear
terms to reimbursement by the SBA in a set amount. And the statute entitles that
lender to receive that reimbursement within five days of the loan’s disbursement.
Id. § 636(a)(36)(P)(iii).
Congress took a different approach with respect to “agent fees.” Unlike the
CARES Act’s affirmative requirement that the SBA “shall reimburse a lender” a
specific amount based on loan size, the Act addresses only the “Fee limits”
applicable to agents. Id. § 636(a)(36)(P)(ii). Under the statute, “[a]n agent that
assists an eligible [PPP] recipient to prepare an application for a covered loan may
not collect a fee in excess of the limits established by the Administrator.” Id.
(emphasis added). Congress thereby delegated to the SBA the authority to set a
maximum limit on the fees that an agent could collect as part of the PPP. Congress
3
did not provide that agents shall collect a fee, nor did it provide that any particular
party shall pay agents any fee.
Beyond these provisions, Congress did not otherwise modify the existing
7(a) framework applicable to agents. Nor did it delegate to the SBA any authority
to do so.
Congress instead left intact the existing regulatory scheme for agent fees.
Under that framework, borrowers and lenders participating in the 7(a) loan
program are not required to use an agent—they may “conduct business with SBA
without a representative.” 13 C.F.R. § 103.2(a). But the regulations outline three
kinds of agents that borrowers or lenders may authorize to assist them in the loan
process. See id. § 103.1(a). The party that chooses to use an agent and authorizes
that agent as its representative is the party that pays the agent. See id. For the type
of agent at issue here—what the regulations call a “packager” that helps a borrower
prepare its application—the borrower authorizes the agent and pays the agent. Id.
§ 103.1(a)(2).1 The agent must, however, execute a written “compensation
agreement” governing this arrangement. See id. § 103.5(a).
1
Along with “packagers,” the regulations describe a “Lender Service Provider” that assists and
is paid by a lender, and a “Loan Broker” that either assists a borrower or an agent, and is paid by
the party it assists. Id. § 103.1(a)(1), (3).
4
II. The Regulatory Framework Focuses on Limiting Agent Fees.
The SBA purported to exercise its delegated authority to limit agent fees
when it promulgated the First Interim Final Rule (the “First IFR”). 2 The First IFR
sets out maximum limits for agent fees, states that the fees will be paid by the
lender out of origination fees received from the SBA, and may not be collected
from the borrower or out of the PPP loan proceeds. 85 Fed. Reg. at 20,816. The
First IFR focuses on what an agent affirmatively may not do: it may not collect
fees from the borrower, out of the PPP loan proceeds, or beyond the set amounts.
In contrast, the IFR’s passive reference to fees “being paid” out of lender fees does
not place an affirmative obligation on lenders to pay agents no matter if lenders
have authorized those agents or permitted borrowers to use them. It simply finds
that the listed amounts would be “reasonable” should a lender authorize and decide
to pay an agent. The First IFR does not establish that lenders must pay any person
who purports to act as a borrower agent.3
2
The First IFR states that “[t]he program requirements of the PPP identified in this rule
temporarily supersede any conflicting Loan Program Requirement (as defined in 13 CFR
120.10).” 85 Fed. Reg. 20,811, 20,812 (Apr. 15, 2020). The First IFR specifically provided that
PPP lenders need not comply with the 7(a) program’s stringent lending criteria when reviewing
PPP loans and could instead rely on borrowers’ certifications to determine eligibility. Id.
3
Beyond stating that lenders would pay agents that assisted borrowers—a change in the existing
framework that required borrowers to pay such “packagers”—the First IFR did not set out any
other provisions for agents that conflict with pre-existing requirements. In particular, the First
IFR did not promulgate any provision conflicting with or eliminating the requirements that an
agent be authorized and complete a written compensation agreement to receive payment.
5
Industry associations communicating with the types of entities that might
consider acting as borrower agents share this view that neither the CARES Act nor
First IFR guarantees agent fees. The Association of International Certified
Professional Accountants advised CPAs that:
[E]ven 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.
Ex. A, AICPA, Small Business Loans Under the Paycheck Protection Program:
Issues Related to CPA Involvement (Apr. 22, 2020). This CPA advocacy
organization thus recognized that nothing assured payment to agents claiming to
assist with borrower applications—and it voiced that view to accounting firms like
Sport & Wheat.
III. Sport & Wheat Had No Reason to Believe Truist Would Pay It Agent
Fees.
Even with no law, regulation, or industry paper suggesting Sport & Wheat
would receive fees under the PPP, Sport & Wheat alleges that it performed
services for Truist clients for which it now expects payment. Yet Sport & Wheat
does not allege that Truist ever agreed to pay Sport & Wheat agent fees.
Sport & Wheat alleges “Borrower M” hired it to apply for a PPP loan
through Truist. Am. Compl. ¶ 130. Jill Sport, a partner in Sport & Wheat,
6
allegedly “wrote to Truist” stating Sport & Wheat would be “acting as [Borrower
M’s] agent.” Id. Sport & Wheat does not identify what it means to “wr[i]te to
Truist.” Nor does it specify any particular recipient of its writing or how Sport &
Wheat transmitted that writing.
Sport & Wheat further claims that it spent four hours “preparing Borrower
M’s loan application and gathering supporting documents” before uploading the
application and documentation to Truist’s application portal. Id. ¶¶ 131, 133.
Sport & Wheat states it “signed . . . as Borrower M’s PPP Agent,” but does not
explain what that allegation means. Id. ¶ 133. Whose name did Sport & Wheat
sign? And in response to what certification or attestation sought by Truist on the
application?
Leaving these questions unanswered, Sport & Wheat alleges that it
communicated with “Truist” by email because Sport & Wheat had improperly
uploaded documentation to Truist’s application portal, thereby slowing down the
application and review process. Id. ¶ 134. Again, Sport & Wheat does not identify
the name or email address of any Truist employee with whom it corresponded.
Nor does Sport & Wheat explain why that individual’s communications with Sport
& Wheat confer knowledge on Truist that Sport & Wheat was acting as Borrower
M’s agent.
Sport & Wheat further claims that it “asked Truist what information it would
7
need in order to compensate Sport & Wheat,” but received no reply. Id. ¶ 135.
Again, Sport & Wheat provides no more detail on whom it corresponded with at
Truist or the specific contents of its communication.
Sport & Wheat instead explains that it created another impediment to
Truist’s processing of Borrower M’s application, because Truist had to follow up
with Sport & Wheat to ask that an application be signed by an authorized
representative of Borrower M—which Sport & Wheat evidently was not. Id.
¶ 136. After this issue was corrected, Truist funded Borrower M’s loan. Id. ¶ 137.
Sport & Wheat alleges that it asked about a fee after Truist funded Borrower
M’s loan but was told by another unidentified party at Truist that Truist was
evaluating its response. Id. ¶ 140. Sport & Wheat asserts that it has not received a
fee from Truist and that Truist owes it fees for assisting other unidentified clients
with Truist PPP applications. Id. ¶¶ 141–43. Although Sport & Wheat concedes
that the SBA regulations require it to submit a compensation agreement to receive
payment, Sport & Wheat never alleges that it did so. See id. ¶ 65. Sport & Wheat
instead resorts to its putative class claims against Truist for unjust enrichment,
contract implied in law, conversion, and declaratory relief. Id. at 36–41.
STANDARD OF REVIEW
“[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
8
face.’” Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010)
(quoting Bell Atl. Corp. 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 Amended Complaint fails in its entirety to state any claim on which
relief can be granted. Sport & Wheat’s claim for declaratory relief fails because
the CARES Act does not provide Sport & Wheat with a private right of action
under federal law. Sport & Wheat’s remaining state law claims fail because
federal law does not entitle Sport & Wheat to fees. Any state remedy providing
those fees would therefore conflict with the purposes and objectives of the federal
law that controls in this area and is preempted. Sport & Wheat also fails to state
any claim under Florida law. This Court should dismiss the Amended Complaint
with prejudice.
I. Federal Law Does Not Provide a Private Cause of Action for
PPP Agent Fees.
Sport & Wheat’s claims fail because they hinge on the faulty assumption
that the CARES Act and implementing regulations permit an agent to pursue a
9
cause of action for fees. In particular, Count Four of the Amended Complaint
seeks a declaration under the federal Declaratory Judgment Act, 28 U.S.C.
§ 2201(a), that Sport &Wheat is entitled to fees “to be paid from [Truist’s]
origination fees under the Paycheck Protection Program.” Am. Compl. ¶¶ 187,
189–90. That claim’s viability depends on whether federal law provides a private
cause of action for agents claiming an entitlement to fees under the federal CARES
Act and PPP. Because federal law does not so provide, this claim fails.
The Declaratory Judgment Act is procedural only and does not establish an
independent cause of action. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S.
667, 671 (1950). It merely operates to provide a “remedy in cases or controversies
for which an independent basis of federal jurisdiction exists.” First Fed. Sav. &
Loan Ass’n of Lake Worth v. Brown, 707 F.2d 1217, 1220 (11th Cir. 1983). Sport
& Wheat’s claim for declaratory relief thus requires an underlying cause of action
for agent fees. See Musselman v. Blue Cross & Blue Shield of Alabama, 684 F.
App’x 824, 829 (11th Cir. 2017) (Tjoflat, J., concurring) (“Congress plainly
intended that the declaratory judgment serve as a primary remedy available for any
underlying cause of action.”).
Sport & Wheat makes no attempt to identify a cause of action—under any
body of law—allowing it to pursue a declaratory judgment for agent fees. See Am.
Compl. ¶¶ 186–90. Count Four therefore fails on its face because Sport & Wheat
10
does not plead any cause of action supporting it.
Sport & Wheat does not plead any cause of action because none exists.
“[T]he CARES Act does not expressly provide a private right of action” for agent
fees. Profiles, Inc. v. Bank of Am. Corp., —F. Supp. 3d—, No. 20-0894, 2020 WL
1849710, at *4 (D. Md. Apr. 13, 2020). The statute establishes only a limit on the
fees agents may collect.
The Act also does not provide an implied private right of action for PPP
agent fees. The Small Business Act, which the CARES Act amends, does not
confer any private right of action, express or implied. See United States v. Fidelity
Capital Corp., 920 F.2d 827, 838 n.39 (11th Cir. 1991); Bulluck v. Newtek Small
Bus. Fin., Inc., 808 F. App’x 698, 2020 WL 1490702, at *3 (11th Cir. Mar. 27,
2020). As the only court to evaluate the CARES Act for a private right of action
has determined, the CARES Act does not change this conclusion or add any
private right of action. Profiles, —F. Supp. 3d—, 2020 WL 1849710, at *7.
Nothing in the statute reflects any intent by Congress to create a cause of
action for agents. See McDonald v. S. Farm Bureau Life Ins. Co., 291 F.3d 718,
723 (11th Cir. 2002) (“There must be clear evidence of Congress’s intent to create
a cause of action.”); Love v. Delta Air Lines, 310 F.3d 1347, 1352 (11th Cir. 2002)
(courts rarely impute an intent to create a private right of action when a statute
lacks “[r]ights-creating language . . . explicitly conferring a right directly on a class
11
of persons that includes the plaintiff in a case”). The statute reflects only an intent
to prohibit agents from collecting excessive fees. Without statutory evidence of
Congressional intent to permit agents to pursue claims for fees, the First IFR also
does not provide a private right of action. See Love, 310 F.3d at 1353 (if a statute
does not confer a private right of action, “such a right may not be created or
conferred by regulations promulgated to interpret and enforce it”).
Because no underlying cause of action supports Sport & Wheat’s claim for
declaratory relief, that claim fails as a matter of law. This Court should dismiss
Count Four. This conclusion also undermines Sport & Wheat’s additional claims
for relief. Those claims depend on an asserted entitlement to agent fees for which
federal law does not provide a cause of action and that federal law in fact
precludes.
II. Federal Law Does Not Entitle Agents to PPP Fees.
Even if Sport & Wheat had a private right of action to pursue, its entire case
rests on the baseless view that PPP lenders “must” pay agents. Am. Compl. ¶ 50.
Lenders have no such payment obligation under federal law. To hold otherwise
would conflict with the CARES Act’s unambiguous language and the broader
regulatory scheme. Because federal law precludes the relief sought here—
automatic payment of fees to purported agents using lender reimbursement
funds—that relief is also unavailable under state law.
12
A. The CARES Act Limits Agent Fees—It Does Not Create an
Entitlement that Lenders Must Pay.
The CARES Act’s plain language bars Sport & Wheat’s claims that it has a
right to receive portions of origination fees Truist receives under the CARES Act.
See Lamie v. United States 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.”) (citation omitted). The CARES Act limits agent fees; nothing more.
Congress directed 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 [SBA] Administrator.” 15 U.S.C. § 636(a)(36)(P)(ii). This
unequivocal restraint on agents cannot impose an affirmative duty on lenders—
especially because it does not even mention lenders. 4
Sport & Wheat’s arguments rely on the premise that this language
establishes an affirmative entitlement for anyone who claims to be an agent to be
paid by a lender on demand, no matter if the lender agreed to those services or
agrees that they were reasonable. The statute’s negative limitation provides no
basis to create such an affirmative right. See Alexander v. Sandoval, 532 U.S. 275,
289 (2001) (“Statutes that focus on the person regulated rather than the individuals
4
Sport & Wheat similarly relies on an “Information Sheet” issued by the Department of
Treasury. Am. Compl. ¶ 56. The Information Sheet merely paraphrases the statute and
regulations and does not mandate agent fees be paid.
13
protected create no implication of an intent to confer rights on a particular class of
persons.”).
Congress knew how to create an affirmative right to fees when it wanted to:
it did so for lenders in the provision immediately preceding its limitation on agent
fees. There, the CARES Act provides that “[t]he [SBA] Administrator shall
reimburse a lender” at set rates. 15 U.S.C. § 636(a)(36)(P)(i) (emphases added).
The stark difference between the lender fee provision and the agent fee limitation
reflects Congress’s deliberate decision not to guarantee fees to agents. 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.’”). Sport & Wheat cannot rewrite the statute to create an entitlement that
Congress rejected.
B. The PPP Regulations, Even if Valid, Do Not Create an
Entitlement to Agent Fees.
Sport & Wheat further contends that the First IFR entitles it to fees paid by
lenders. Am. Compl. ¶¶ 112, 189. But the SBA’s First IFR, by purporting to wrest
from lenders the statutorily required fees the SBA must pay, exceeds the SBA’s
authority to implement the PPP. Even if that regulation were valid, it still provides
no right for agents to be paid regardless of lender authorization.
14
1. The SBA Exceeded Its Authority by Providing that Agent
Fees Will be Paid Out of Statutorily Mandated Lender Fees.
Congress gave the SBA two responsibilities for PPP fees. First, it required
the SBA to pay lenders set reimbursement amounts within a set time. Second, it
delegated to the SBA the authority to set limits on agent fees. The SBA properly
used its delegated authority to limit agent fees. But it improperly exceeded that
authority by calling for lenders to use their statutory reimbursements to pay agents.
The SBA also threw the once-straightforward system of agent authorization and
payment into disarray by providing that lenders would pay agents that they did not
authorize—a result Congress could not have intended by its limited delegation. In
two respects, then, the SBA exceeded its authority in issuing the First IFR, its
unauthorized subsection regarding agent fees is invalid. 5
“[A]n agency’s power is no greater than that delegated to it by Congress.”
Lyng v. Payne, 476 U.S. 926, 937 (1986). Congress may expressly delegate
authority to an agency “to elucidate a specific provision of [a] statute,” but that
agency may not then promulgate a regulation that is “manifestly contrary to the
statute.” Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 844
5
Truist asserts only that the First IFR’s subsection addressing the payment of agent fees from the
lender’s fee is invalid. That provision can be severed from the remainder of the First IFR. See K
Mart Corp. v. Cartier, Inc., 486 U.S. 281, 294 (1988) (“The severance and invalidation of this
subsection will not impair the function of the statute as a whole, and there is no indication that
the regulation would not have been passed but for its inclusion. Accordingly, [the subsection]
must be invalidated for its conflict with the unequivocal language of the statute.”).
15
(1984). If the agency’s regulation “conflicts with [the] statute, the statute
controls.” Cremeens v. City of Montgomery, 602 F.3d 1224, 1227 (11th Cir.
2010).
Congress expressly required that lenders receive a prescribed amount of fees
under the CARES Act. Congress’s delegation on agent fee limits did not mention
lender reimbursements. Instead, in the provisions immediately preceding and
following that delegation, Congress obligated the SBA to reimburse lenders. That
statutory language does not admit exception and does not delegate to the SBA the
authority to change those reimbursement amounts.
Yet the SBA did just that. By providing that “[a]gent fees will be paid by
the lender out of the fees the lender receives from SBA,” the SBA directly
contradicted the statutory requirement that the SBA “shall reimburse a lender” at
set rates. 85 Fed. Reg. at 20,816; 15 U.S.C. § 636(a)(36)(P)(i). Under the First
IFR, the SBA rewrites the statute to subtract from those set rates varying amounts
of agent fees. This result is contrary to the SBA’s limited delegation of authority
and to the statute’s unambiguous language, which expresses Congress’s intent that
the SBA would provide specific reimbursement amounts to encourage lender
participation in the PPP. The SBA’s regulation reduces those amounts and
discourages the voluntary participation that Congress sought to promote. Cf.
Profiles, —F. Supp. 3d—, 2020 WL 1849710, at *11. This direct contradiction of
16
the statute renders the First IFR invalid.
The First IFR also exceeds the SBA’s authority by going beyond the scope
of its express delegation to provide that lenders would pay agents that assist (and
are purportedly authorized by) borrowers. In expressly delegating to the SBA the
authority to limit the fee amounts agents could collect for PPP work, Congress
never mentioned who would pay those fees. Nor did it delegate to the SBA
express authority to regulate on that point. Congress otherwise gave the SBA
general authority to implement the CARES Act, see Pub. L. No. 116-136,
§ 1102(a), 134 Stat. 281 (2020), but the statutory scheme shows Congress left no
ambiguity or “gap” for the SBA to fill on the question of who should pay agent
fees.6 See King v. Burwell, 135 S. Ct. 2480, 2488 (2015). Instead, the statutory
scheme and language show that Congress intended for the pre-existing system of
regulations to remain in force, with the SBA simply establishing what fee amounts
would be reasonable under that system for the PPP.
Congress enacted the PPP against the backdrop of the existing regulations,
which establish that only the party who authorizes an agent to assist them should
pay that agent. 13 C.F.R. § 103.1(a).7 This approach adhered to the foundational
6
Congress left no ambiguity for the SBA to address about who would pay agent fees. But even
if it had, the SBA’s interpretation of the statute to require payment by lenders would be
unreasonable and invalid.
7
For example, either an applicant or a lender could authorize a loan broker to assist them, but
only one of those parties could authorize and pay that loan broker. See id. § 103.1(a)(3) (“A
17
principle that an agency relationship cannot exist unless the principal “manifests
assent” for the agent to act on its behalf. Restatement (Third) of Agency §§ 1.01,
1.03 (2006). By ensuring that one principal authorized and compensated one
agent, the regulations also avoided the untenable situation driving this litigation: an
agent asserting it was authorized by a borrower but seeking payment from a lender
it did not assist and by whom it was not authorized.
This involuntary agency problem is not what Congress intended. Congress
would have said so had it wished to upend the longstanding approach to SBA
agency relationships. Lindley v. FDIC, 733 F.3d 1043, 1055–56 (11th Cir. 2013)
(“Congress is presumed to know the content of existing, relevant law, and where
Congress knows how to say something but chooses not to, its silence is
controlling.”); see also In re Gateway Radiology Consultants, P.A., —B.R.—, No.
19-4971, 2020 WL 3048197, at *12 (Bankr. M.D. Fla. June 8, 2020) (“Congress’
silence ought to be conclusive that Congress did not intend to exclude an entire
class of small businesses . . . from the Paycheck Protection Program.”). Congress
instead wanted the existing payment system to remain intact—just with new
controls on the fees agents could seek from borrowers they assisted.
Because the SBA exceeded its authority by promulgating a regulation
Loan Broker may be employed and compensated by either the Applicant or the SBA Lender (but
not both).”).
18
manifestly contrary to the CARES Act and Congress’s intent in enacting that
statute, the First IFR’s provision for agent fees to be paid out of lender fees to
borrower’s agents is invalid. Sport & Wheat therefore has no claim for agent fees
against Truist.
2. The Plain Language of the First IFR Creates No
Entitlement to Agent Fees.
The same result obtains even if the First IFR is a valid exercise of the SBA’s
authority. Even if the First IFR validly requires lenders to pay agents in some
circumstances, it does not affirmatively obligate lenders to use agents or to pay
fees to an unauthorized agent that has not complied with the SBA’s requirements.
The IFR instead imposes caps on the “total amount that an agent may collect” and
prohibits agents from “collect[ing] fees from the borrower or . . . out of the PPP
loan proceeds.” 85 Fed. Reg. at 20,816 (emphasis added). Like the governing
statute, the IFR focuses on limiting agent action and fee collection, not on
obligating it.
3. Pre-existing SBA Regulations Confirm There Is No
Entitlement to Agent Fees.
The SBA’s agent fee regulations pre-dating the PPP confirm that Sport &
Wheat lacks any entitlement to agent fees. As Sport & Wheat asserts, the PPP
regulations must be read in the context of this pre-existing 7(a) regulatory scheme.
See Am. Compl. ¶¶ 43, 65–67; see also 15 U.S.C. § 636(a)(36)(B). The broader
19
regulatory scheme imposes substantial checks on the role of “agents,” including
the circumstances under which an agent may be paid. The PPP-related guidance
creates additional limits on the amount an agent may be paid—it does not mandate
an unchecked transfer of compensation from lenders to purported agents.
The SBA does not require borrowers or lenders to use agents for Section
7(a) loans. See 13 C.F.R. § 103.2(a). But any agent used must be an “authorized
representative.” Id. § 103.1(a). As explained above, the pre-PPP regulations
required that the party using the agent authorize and pay that agent, but the SBA
has thrown that system into disarray. At best, it remains unclear whether the
borrower or lender or both must authorize a PPP agent.
The SBA did not alter, however, the requirement that an authorized agent
execute a written agreement for compensation.8 Id. § 103.5(a). Sport & Wheat
purports to be authorized by Borrower M—and it is uncertain whether that
supposed authorization suffices—but does not allege it executed any such
agreement with any party involved here. In fact, Sport & Wheat acknowledges
that Truist did not consider it to be an authorized representative, as Truist required
Borrower M’s signature before funding the loan. Am. Compl. ¶¶ 136–37. Without
8
Secretary of the Treasury Mnuchin confirmed that lenders were not required to use agents and
any dealings should be documented in a written agreement during recent Congressional
testimony. Secretary Mnuchin stated that the SBA’s guidance said “that banks could pay agent
fees out of the fees that they received,” and that this payment “was intended to be based upon a
contractual relationship between the agent and the bank.” J. Hill, LAW360, Mnuchin Says He’ll
Look At PPP Agent Fee ‘Confusion,’ https://www.law360.com/articles/1287681 (June 30, 2020).
20
a compensation agreement, nothing in the CARES Act or regulations requires (or
allows) any party to pay Sport & Wheat. Sport & Wheat acknowledges this
requirement, but asserts it is entitled to fees even without meeting it. Am. Compl.
¶ 65.
The requirement for a compensation agreement imposes a basic check on
third parties involved in SBA loan transactions. Requiring lenders to pay agents
for unauthorized and unverified work would exacerbate the risks of fraud and
abuse that for-fee agents pose. The SBA has identified a “pattern of fraud by loan
packagers and other for-fee agents in the 7(a) Loan program.” U.S. Small Bus.
Admin., 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). 9 The SBA’s pre-existing regulations seek to combat
this problem by requiring an agent, applicant, and lender to complete SBA Form
159. That requirement ensures that lenders know agents’ identities and can comply
with their obligations to avoid doing business with disbarred or suspended
agents. SBA, Lender and Development Company Loan Programs, Standard
Operating Procedures (SOP) 50 10 5(J), Subpart A, Ch. 1, at 11 (2018). The
written compensation agreement also serves to prevent “agents” and “loan
9
Available at https://www.sba.gov/sites/default/files/2019-08/SBA-OIG-Report-19-012.pdf.
21
packagers” from “charging inappropriate or unreasonable fees to applicants and
lenders.” 75 Fed. Reg. 60,588, 60,594 (Oct. 1, 2010).
Although an agent authorized to perform PPP-related work need not fill out
a Form 159, which the SBA marks “[f]or use with 7(a) and 504 Loan Programs,” 10
the execution of a “compensation agreement” between the payor and the agent is
required by SBA regulation. 13 C.F.R. § 103.5(a). And perhaps the SBA will still
amend Form 159 or roll out a new form documenting agent/lender agreements.11
Regardless, an agent’s obligation to complete an agreement remains. Yet Sport &
Wheat alleges it is entitled to fees despite not executing any such agreement or
obtaining authorization from Truist to perform services for which it asks Truist to
pay.
Given the risks posed by for-fee agents, it would both impede the SBA’s
efforts to combat fraud and defy common sense to require lenders to pay
unauthorized agents with no written agreement governing their fees. In particular,
10
Available at https://www.sba.gov/sites/default/files/2018-09/Form%20159%20-
%20%28FINAL%29%209.10.18.pdf
11
The SBA would be understandably delayed in issuing any such new form given the extremely
expedited and often haphazard nature of the PPP’s regulatory rollout. The SBA only released the
form that lenders must complete to obtain origination reimbursements on May 21, months after
the enactment of the CARES Act’s requirement that the SBA pay lenders and do so within five
days of loan disbursement. See SBA Procedural Notice, Paycheck Protection Program Lender
Processing Fee Payment and 1502 Reporting Process (May 21, 2020), available at
https://www.sba.gov/sites/default/files/2020-05/5000-20028.pdf. And in Secretary Mnuchin’s
Congressional testimony, he indicated that Treasury may issue additional guidance clarifying any
confusion its agent fee guidance has caused. See supra n. 7.
22
there would be no mechanism for lenders to verify agents’ identities or the
satisfactory nature of any work supposedly performed. Nor would there be
anything to prohibit multiple purported agents from claiming fees for work
purportedly performed on behalf of a single borrower. The regulations are clear,
and they preclude Sport & Wheat’s claimed entitlement.
4. The Common Law Confirms There Is No Entitlement to Agent
Fees.
Mandating payment of claimed agent fees not only runs contrary to the
statutory and regulatory texts, but it upends common law. By requiring a written
agreement, the SBA makes agent compensation a question of contract. “There can
be no contract without the mutual assent of the parties.” Utley v. Donaldson, 94
U.S. 29, 47 (1876); see also Restatement (Second) of Contracts § 17 (1981)
(“[T]he formation of a contract requires a bargain in which there is a manifestation
of mutual assent to the exchange and a consideration.”). The agreement is what
creates the payment obligation: “it is inferred that a person promises to pay for
services which he requests or permits another to perform for him as his
agent.” Restatement (Second) of Agency § 441 (1958) (emphasis added). In
contrast, “one has no duty to pay for services officiously rendered without
request.” Id.; accord Restatement (First) of Restitution § 2 (1937). “A person is
not required to deal with another unless he so desires.” Id.
Even if the First IFR validly requires lenders to pay agent fees in some
23
cases, it does not require lenders to do so absent a voluntary agreement with the
agent. The Amended Complaint ignores these governing principles by demanding
millions of dollars with no such agreement.
C. Federal Law Bars Any Claim for Payment of Purported Fees.
At every turn, federal law precludes the entitlement that Sport & Wheat
claims. Nothing in the CARES Act or regulations gives Sport & Wheat (1) a cause
of action or (2) a right to agent fees for unauthorized work ungoverned by a
compensation agreement. Sport & Wheat’s federal declaratory judgment claim
fails on both counts to state a claim on which relief can be granted.
So do Sport & Wheat’s purported state law claims. Sport & Wheat cannot
pursue a state remedy for agent fees when federal law bars such a remedy. Giving
Sport & Wheat agent fees under state law would both directly conflict with the
CARES Act and stand as an obstacle to the accomplishment of the Act’s purposes
and objectives. Federal law therefore precludes any remedy based on state law.
Tectonics, Inc. of Fla. v. Castle Const. Co., 753 F.2d 957, 962 (11th Cir. 1985).
First, federal law not only does not require, but also does not permit payment
of agent fees out of lender fees to an unauthorized agent without a compensation
agreement. The CARES Act does not guarantee fees to an agent or require that a
lender share federal funds with an agent. And even if fully valid, the First IFR
does not permit payment to an unauthorized agent who has not complied with the
24
SBA’s requirements. As a result, no state law can require a lender to pay an
unauthorized agent without a contract a portion of its federal reimbursement. Such
a requirement would directly contradict the CARES Act and the applicable
regulations. Federal law thus precludes Sport & Wheat’s state law claims.
Tectonics, 753 F.2d at 962.
Second, permitting a state law remedy for a claimed entitlement to agent
fees would impede the CARES Act’s objectives. Congress passed the CARES Act
“with the goal of affording some relief to American small businesses.” Profiles, —
F. Supp. 3d—, 2020 WL 1849710, at *1. Congress relied on private lending
institutions to accomplish this goal by rapidly processing and funding billions of
dollars of loans for small businesses in need. Am. Compl. ¶ 6. Because lenders
could opt not to take on this demanding enterprise, Congress sought to encourage
their participation by requiring the SBA to reimburse the lenders for a small
portion of their work. Cf. Profiles, —F. Supp. 3d—, 2020 WL 1849710, at *11
(noting “the voluntary nature of PPP”).
A party cannot invoke state law to take from lenders part of those
reimbursement fees the statute provides they receive. Permitting a state law
remedy for agent fees paid out of lender reimbursements would lessen incentives
to participate in the PPP and thereby “undermine Congress’s goal to maximize
relief for American small businesses.” Id. Permitting a state law remedy for agent
25
fees paid to unauthorized agents with no compensation agreement would also
discourage lender participation by exposing lenders to heightened risks of fraud
and liability. Supra at 21–22. This use of state law is precluded because it would
impede the CARES Act’s purposes and objectives. Tectonics, 753 F.2d at 962.
Sport & Wheat cannot pursue its claims for agent fees under federal or state law.
III. Sport & Wheat Also Fails to State Any Claim under Florida Law.
Even if Sport & Wheat could pursue claims under Florida law, it does not
state any claim for relief.
A. Sport & Wheat Fails to State a Claim for Unjust Enrichment or
Contract Implied in Law.
Florida law treats claims for unjust enrichment and contract implied in law
as equivalents. Resnick v. AvMed, Inc., 693 F.3d 1317, 1325 n.2 (11th Cir. 2012).
Sport & Wheat’s claims in Counts One and Two are duplicative, and neither states
a claim under Florida law. A plaintiff alleging unjust enrichment must show that:
(1) the plaintiff has conferred a direct benefit on the defendant; (2) the defendant
knows about 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).
26
1. Sport & Wheat Does Not Allege it Conferred a Direct
Benefit on Truist of which Truist Had Knowledge.
“[T]o prevail on an unjust enrichment claim, the plaintiff must directly
confer a benefit to the defendant.” Kopel v. Kopel, 229 So. 3d 812, 818 (Fla. 2017)
(emphasis added). Sport & Wheat pleads no facts showing it directly conferred
any benefit to Truist.
Sport & Wheat conclusorily alleges that its actions “benefited each of the
Defendants, by bringing completed loan packages to Defendants’ banks, earning
them origination fees.” Am. Compl. ¶ 163. Sport & Wheat also asserts, without
factual detail, that the “Defendants performed less work than they would have,
absent Sport & Wheat’s involvement,” id. ¶ 164, because Sport & Wheat
“perform[ed] work which Defendants did not do” and made it “easier and faster for
Defendants to process loans,” id. ¶ 174. But Sport & Wheat pleads no specific
facts to support these bare allegations.
To the contrary: the facts Sport & Wheat pleads about its purported work for
Borrower M’s Truist application show that Sport & Wheat (1) did not submit a
complete loan application to Truist, (2) slowed down the application process, and
(3) created more work for Truist. Sport & Wheat improperly uploaded
documentation to Truist’s application portal, requiring Truist personnel to halt their
review to request new documentation. Id. ¶ 134. Sport & Wheat further impeded
Truist’s progress by signing Borrower M’s application. Id. ¶ 136. This error
27
required Truist employees to spend time they would not otherwise have spent
requesting and waiting on a newly signed application.12 Sport & Wheat fails to
explain how its struggle to properly complete Borrower M’s application somehow
lessened Truist’s workload or expedited the process. Its allegations show instead
that Truist performed the same work, if not more, as it would have done without
Sport & Wheat’s involvement: it would have still reviewed Borrower M’s
documentation, followed up on issues that arose, and funded the loan when the
application was complete.
If anyone received a direct benefit from Sport & Wheat, it was Borrower M:
the party that allegedly hired Sport & Wheat to complete its application so
Borrower M would not have to. Perhaps Borrower M avoided work it otherwise
would have done because of Sport & Wheat’s assistance, but Truist did not. Any
help Borrower M received does not translate to a direct benefit for Truist. See A &
E Auto Body, Inc. v. 21st Century Centennial Ins. Co., No. 14-0310, 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 because of its contract with the customers).
12
Sport & Wheat alleges that “certain Defendants . . . affirmatively requested further assistance
from Sport & Wheat in connection with various transactions.” Am. Compl. ¶ 175. This
allegation does not identify which defendant it describes, but it cannot describe Truist’s alleged
interactions with Sport & Wheat centered on resolving problems Sport & Wheat created.
28
Nor do the statutorily required reimbursements Truist will receive from the
SBA qualify as a benefit conferred by Sport & Wheat. The attenuated connection
between Truist receiving a reimbursement fee and Sport & Wheat purportedly
assisting a borrower cannot support an unjust enrichment claim. Sport & Wheat
does not pay Truist that money, and Sport & Wheat has no impact on whether
Truist receives that money. Truist is entitled to the same reimbursement amount if
it processes and funds a PPP loan, no matter how quickly it processes that loan or
how much work is involved. Sport & Wheat does not allege that Borrower M
would not have applied for a PPP loan from Truist without Sport & Wheat’s
assistance. So with or without Sport & Wheat in the picture, Truist would have
funded Borrower M’s loan and received the same fee. No connection exists
between Sport & Wheat and the origination fees, much less a direct one that would
support an unjust enrichment claim. 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).
Sport & Wheat also fails to allege that Truist knew about a purported benefit
from Sport & Wheat. Sport & Wheat alleges that its owner interacted with
29
“Truist,” but does not identify any specific Truist employee or representative,
much less how that individual’s purported knowledge could reflect Truist’s
knowledge of Sport & Wheat’s involvement. And even if someone at Truist knew
of that involvement, the allegations show they would have only known of the
problems Sport & Wheat caused—incorrect documentation, improper signature—
not of any benefit conferred.
2. It is Not Inequitable for Truist to Retain the Fee the
CARES Act Guarantees.
Sport & Wheat’s unjust enrichment claim also fails because Truist’s actions
are not inequitable. An unjust enrichment hinges on whether “the circumstances
are such that it would be inequitable for the defendant to retain the benefit.”
Griggs, 959 So. 2d at 331. The Court should examine “the particular
circumstances of [the] individual case as well as 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,
1100 (Fla. 3rd DCA 2014).
Sport & Wheat had no reasonable expectation under the circumstances that
Truist would pay it agent fees. First, the CARES Act and regulations do not
require Truist to pay those fees and did not assure Sport & Wheat of any
entitlement to them—a view industry guidance expressed to Sport & Wheat.
Supra at 6–7. Second, Truist never authorized Sport & Wheat to act as its agent
30
and never agreed to pay Sport & Wheat agent fees. Third, Sport & Wheat’s
allegations show it never completed a compensation agreement as the SBA
requires.
Not only did Sport & Wheat not have a reasonable expectation of receiving
fees, Truist had a reasonable expectation that it would not have to pay agent fees if
it did not authorize or use an agent. Truist also had a reasonable expectation that it
would receive and retain its full and fair reimbursement for processing thousands
of loans to assist small businesses. No inequity supports Sport & Wheat’s unjust
enrichment claim.
B. Sport & Wheat Fails to State a Claim for Conversion.
Sport & Wheat claims in Count Three that “[a] portion of the origination fee
each Defendant received was the rightful property of Sport & Wheat.” Am.
Compl. ¶ 183. “[T]o 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). As the above discussion
shows, Sport & Wheat never possessed the fees at issue and has no right to possess
any portion of the reimbursement fees to which Truist is statutorily entitled.
Sport & Wheat also cannot seek to enforce an alleged obligation to pay
money using a conversion action. Kee v. Nat’l Reserve Life Ins. Co., 918 F.2d
1538, 1541–42 (11th Cir. 1990). This rule reflects “the principle that an action in
31
tort is inappropriate where the claim is based on a breach of contract.” Bel-Bel
Int’l Corp. v. Cmty. Bank of Homestead, 162 F.3d 1101, 1109 (11th Cir. 1998).
Sport & Wheat’s conversion claim reflects an attempt to circumvent the
contractual nature of agent fees under the PPP. The SBA’s regulations make agent
fees, and claims to them, a creature of contract by requiring an agent to complete a
compensation agreement. Supra at 23–25. That Sport & Wheat has not done so
confirms it lacks any right to fees. This requirement also shows that Sport &
Wheat cannot maintain a tort action for a claim that should sound in contract.
Count Three should be dismissed.
CONCLUSION
For the reasons above, this Court should dismiss the Amended Complaint
with prejudice.
This 3rd day of July, 2020.
/s/ Cheryl L. Haas
Cheryl L. Haas (Admitted Pro Hac Vice)
Georgia Bar No. 316081
chaas@mcguirewoods.com
Meredith Laughlin Allen (Admitted Pro Hac Vice)
Georgia Bar No. 901999
mlallen@mcguirewoods.com
MCGUIREWOODS LLP
1230 Peachtree Street N.E.,
Suite 2100
Atlanta, GA 30309-3534
T: (404) 443-5500
F: (404) 443-5599
32
Kathryn M. Barber (Admitted Pro Hac Vice)
Virginia Bar No. 88992
kbarber@mcguirewoods.com
MCGUIREWOODS LLP
Gateway Plaza
800 East Canal Street
Richmond, VA 23219-3916
T: (804) 775-1227
F: (804) 698-2227
Emily Y. Rottman
Florida Bar No. 93154
erottman@mcguirewoods.com
MCGUIREWOODS LLP
50 N Laura Street, Suite 3300
Jacksonville, FL 32202
T: (904) 798-3200
F: (904) 798-3207
Attorneys for Truist Bank
33
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 7,950 words, exclusive of the case style, signature block, and this
certification.
34
CERTIFICATE OF SERVICE
I, Cheryl L. Haas, do hereby CERTIFY that a true and correct copy of the
foregoing Motion to Dismiss the Amended Complaint and Memorandum of Law in
Support Thereof have been furnished to all counsel of record via ECF on this 3rd
day of July 2020.
/s/ Cheryl L. Haas
Cheryl L. Haas (Admitted Pro Hac Vice)
Georgia Bar No. 316081
chaas@mcguirewoods.com
35
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