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MOTION to Dismiss the Amended Complaint and Memorandum of Law in Support Thereof by… — Agent Fee Litigation (Dkt. 69)
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A motion to dismiss the amended complaint, with a supporting memorandum of law, filed by defendant The First in Sport & Wheat CPA PA v. ServisFirst Bank Inc, Case No. 3:20-cv-05425-TKW-HTC, in the U.S. District Court for the Northern District of Florida, dated July 6, 2020. Brought under Federal Rule of Civil Procedure 12(b)(6), the motion argues that the CARES Act, Pub. L. No. 116-136, creates no private right of action and that 15 U.S.C. § 636(a)(36)(P)(ii) caps agent fees rather than entitling agents to payment. It recites the First Interim Final Rule caps of 1 percent for loans of not more than $350,000 down to 0.25 percent for loans of at least $2 million. It also argues the unjust enrichment, contract implied in law and conversion claims fail and that the case is unsuitable for class treatment. The filing certifies 2,575 words under Local Rule 7.1(F).
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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,
Case No. 3:20-cv-05425-TKW-HTC
Plaintiff,
v.
SERVISFIRST BANK INC, et. al.
Defendants.
DEFENDANT THE FIRST’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 The First, A
National Banking Association (“The First”) submits this Motion to Dismiss the
Amended Complaint and Memorandum of Law in Support Thereof.
Plaintiff Sport & Wheat (“S&W”) claims that it is entitled to fees for assisting
borrowers in submitting loan applications under the Coronavirus Aid, Relief, and
Economic Security Act, Pub. L. No. 116-136 (the “CARES Act”) and the Paycheck
Protection Program (“PPP”). The underlying federal statute, however, does not
create a private right of action and the state law claims fail as a matter of law.
In addition to the arguments made herein, The First hereby joins, adopts, and
incorporates by reference as if fully set forth herein the arguments in support of
LEGAL02/39888403v4
dismissal as set forth in Defendant Synovus Bank’s Motion to Dismiss the Amended
Complaint and Memorandum of Law in Support Thereof (Dkt. Nos. 46, 65),
Defendant ServisFirst Bank’s Motion to Dismiss the Amended Complaint and
Supporting Memorandum of Law (Dkt. No. 49), and Defendant Truist Bank’s
Motion to Dismiss the Amended Complaint and Memorandum of Law in Support
Thereof (Dkt. No. 67).
Statement of Facts
I. Enactment of the CARES Act and the Paycheck Protection Program
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 Small Business Administration (“SBA”) funding and authority to
establish a new loan program for small businesses, called the Paycheck Protection
Program. 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 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).
2
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:
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.
3
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).
There is nothing 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.
II. Facts as Alleged in the Complaint Against The First
Plaintiff S&W alleges that, on April 8, 2020, it was approached by Borrower
I to assist in applying for a PPP loan. Dkt. No. 21, Am. Compl., ¶ 115. On April
9, 2020, S&W allegedly prepared a PPP loan application and supporting documents.
Am. Compl., ¶ 119. S&W inaccurately alleges that it signed the “application” in a
space marked “Borrowers Agent.” Id. (There is no space on the application marked
“Borrowers Agent”). S&W then alleges that it emailed the application to Borrower
I, and Borrower I submitted the application to The First. Am. Compl., ¶ 119.
S&W alleges, on April 10, 2020, Borrower I was informed by The First that
the application needed to be redone, and that only the borrower should sign the
application. Am. Compl., ¶ 120. The First also requested a spreadsheet showing
how the loan amount had been calculated. Am. Compl., ¶ 121. S&W alleges that it
4
spent a total of 1.8 hours preparing Borrower I’s PPP loan application and gathering
supporting documents. Am. Compl., ¶ 118.
From these alleged interactions, S&W speculates that “TheFirst knew that
Sport & Wheat was acting as Borrower I’s PPP Agent in connection with the loan.”
Am. Compl. ¶ 123. S&W further assumes that The First has received or will receive
a PPP loan origination fee of $378.73. Am. Compl., ¶ 125. Finally, S&W claims
that The First is required to share its fee with S&W as Borrower I’s PPP agent. Am.
Compl., ¶ 126.
Argument and Citations of Authority
I. The CARES Act Does Not Provide a Private Right of Action1
S & W’s claims should be dismissed because 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
1
The First hereby joins, adopts, and incorporates the arguments in support of dismissal as set forth
in Section I of Defendant Synovus Bank’s Motion to Dismiss the Amended Complaint and
Memorandum of Law in Support Thereof (“Synovus MTD”) Dkt. No. 46, at pp. 12-16, Section II
of Defendant ServisFirst Bank’s Motion to Dismiss the Amended Complaint and Supporting
Memorandum of Law (“ServisFirst MTD”) Dkt. No. 49, at pp. 16-20, and Section I of Defendant
Truist Bank’s Motion to Dismiss the Amended Complaint and Memorandum of Law in Support
Thereof (“Truist MTD”) Dkt. No. 67, at pp. 9-12.
5
of action, nor could it. See Profiles, Inc. v. Bank of Am. Corp., No. SAG-20-0894,
2020 WL 1849710, at *7 (D. Md. Apr. 13, 2020) (“[T]he CARES Act does not
expressly provide a private right of action.”).
Nor does S&W allege an implied private right of action. When determining
whether an implied private right of action exist Courts consider four factors: (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 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 v. S.
Farm Bureau Life Ins. Co., 291 F.3d 718, 722 (11th Cir. 2002) (quoting Cort v. Ash,
422 U.S. 66, 78 (1975)). However, the “central inquiry” is “whether Congress
intended to create, either expressly or by implications, a private cause of action.” Id.
(quoting Sandoval, 532 U.S. at 286). Nothing in the CARES Act evidences any
intent to create a private right of action in favor of PPP agents.
Additionally, 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. See United States v. Fid. 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).
6
II. The CARES Act and Its Regulations Create No Affirmative Entitlement
for Agents That Assists PPP Applicants2
The CARES Act only 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; however, there is no basis
to create such an affirmative right.
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’ fee.
2
The First hereby joins, adopts, and incorporates the arguments in support of dismissal as set forth
in Section II of the Synovus MTD Dkt. No. 46, at pp. 18-24, Section I of the ServisFirst MTD Dkt.
No. 49, at pp. 7-16, and Section I of the Truist MTD Dkt. No. 67, at pp. 12-26.
7
III. S&W Fails to State a Claims for Unjust Enrichment or Contract Implied
in Law3
S&W’s claims for unjust enrichment (Count One) and contract implied in law
(Count Two) are duplicative, and both fail. See Resnick v. AvMed, Inc., 693 F.3d
1317, 1325 n.2 (11th Cir. 2012) (“To the extent Plaintiffs allege a contract implied
in law, such contracts must be pled in the same way as unjust enrichment claims[.]”);
Monahan v. WHM, LLC, 2010 WL 11504336, at *4 (S.D. Fla. Mar. 18, 2010). 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).
S&W does not allege that it conferred a direct benefit on The First. Rather, it
alleges that Borrower I asked S&W for assistance and Borrower I received S&W
services. Am. Compl., ¶ 115. Thus, if S&W conferred a direct benefit on anyone,
it is Borrower I, not The First. Additionally, S&W cannot plausibly allege that The
3
The First hereby joins, adopts, and incorporates the arguments in support of dismissal as set forth
in Section III of the Synovus MTD Dkt. No. 46, at pp. 24-29, Section II of the ServisFirst MTD
Dkt. No. 49, at pp. 20-25, and Section III A of the Truist MTD Dkt. No. 67, at pp. 26-31.
8
First accepted any benefit conferred by S&W or that The First’s actions are
inequitable.
IV. S&W Fails to State a Claim for Conversion4
S&W’s conversion claim fails because a monetary obligation cannot be the
subject of a conversion 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). A traditional monetary
obligation claim, like the one claimed here, never gives rise to a conversion claim
under Florida law. 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); Belford Trucking Co. v. Zagar, 243 So. 2d 646, 648 (Fla.
Dist. Ct. App. 1970) (“A mere obligation to pay money may not be enforced by a
conversion action.”).
V. This Case is Not Suitable for Class Action Treatment5
S&W will not be able to satisfy the class certification requirements for three
reasons. First, 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
4
The First hereby joins, adopts, and incorporates the arguments in support of dismissal as set forth
in Section IV of the Synovus MTD Dkt. No. 46, at pp. 29-30, Section IV of the ServisFirst MTD
Dkt. No. 49, at pp. 25-27, and Section III B of the Truist MTD Dkt. No. 67, at pp. 31-32.
5
The First hereby joins, adopts, and incorporates the arguments in support of dismissal as set forth
in Section V of the Synovus MTD Dkt. No. 46, at pp. 31-33.
9
v. T-Mobile USA, Inc., 564 F.3d 1256, 1266–67 (11th Cir. 2009) (quoting Fed. R.
Civ. P. 23(a)(1)). S&W’s allegation that the punitive class consist of “thousands of
agents,” Am. Compl. ¶ 150, is unsupported. After processing more than 3,000 PPP
applications, The First is only aware of one entity, S&W, with a dispute related to
agent fees.
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.”
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).
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
10
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).
CONCLUSION
Based on the foregoing, and pursuant to the Federal Rule of Civil Procedure
12(b)(6), The First respectfully requests that the Court dismiss Plaintiff’s Amended
Complaint with prejudice.
Respectfully submitted this 6th day of July 2020.
/s/Christopher A. Riley
CHRISTOPHER A. RILEY
Florida Bar No. 0168165
ALSTON & BIRD LLP
1201 West Peachtree Street
Atlanta, GA 30309
Telephone: (404) 881-4790
Chris.riley@alston.com
Counsel for Defendant The First, A
National Banking Association
11
LOCAL RULES 7.1(F) WORD LIMIT CERITIFCATION
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 this Court’s word limit. According to the word
processing program used to prepare this motion and memorandum, the document
contains 2,575 words, exclusive of the case style, signature block, and this
certification.
/s/Christopher A. Riley
CHRISTOPHER A. RILEY
Counsel for Defendant The First, A
National Banking Association
12
CERTIFICATE OF SERVICE
I hereby certify that on this 6th day of July 2020, I electronically filed the
foregoing with the Clerk of Court using the CM/ECF system which will send
electronic notification of such filing to all counsel of record.
/s/Christopher A. Riley
CHRISTOPHER A. RILEY
Counsel for Defendant The First, A
National Banking Association
13
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