Court filing
Exhibit Regions' Motion to Dismiss — Agent Fee Litigation (Dkt. 150.3)
Summary
Defendant Regions Bank's motion to dismiss in Leigh, King, Norton & Underwood, LLC v. Regions Financial Corporation and Regions Bank, No. 2:20-cv-00591, in the U.S. District Court for the Northern District of Alabama, submitted June 4, 2020 and marked Exhibit C in a filing in MDL No. 2950 on June 17, 2020. Under Rules 12(b)(1) and (6), it asks the court to dismiss the plaintiff's claims under the CARES Act, for unjust enrichment and for injunctive relief over PPP loan agent fees. Regions argues that the CARES Act creates no private cause of action and that the plaintiff cannot plead a benefit conferred or a reasonable expectation of payment. It also argues the claims are not ripe because, citing an attached declaration, the SBA has not yet paid Regions lender fees, out of which agent fees are paid. The motion closes with a certificate of service.
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EXHIBIT C
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
LEIGH, KING, NORTON )
& UNDERWOOD, LLC, on behalf )
of itself and all others similarly )
situated in the United States of )
America )
)
Plaintiff, )
)
v. ) No. 2:20-cv-00591
)
REGIONS FINANCIAL ) OPPOSED
CORPORATION and REGIONS )
BANK, ) ORAL ARGUMENT REQUESTED
)
Defendants. )
DEFENDANT REGIONS BANK’S MOTION TO DISMISS
Defendant Regions Bank (“Regions”) moves the Court under Federal Rules
of Civil Procedure 12(b)(1) and (6) to dismiss this action and all claims in the
Complaint filed by Plaintiff Leigh, King, Norton & Underwood, LLC (“LKNU”).
LKNU alleges that Regions wrongfully withheld fees from “agents” who prepared
and submitted Paycheck Protection Program (“PPP”) loan applications and brings
claims for an alleged violation of the Coronavirus Aid, Relief, and Economic
Security Act, Pub. L. 116-136 (the “CARES Act”) (Count II), unjust enrichment
(Count I), and injunctive relief (Count III).
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LKNU’s alleged claims, however, are untenable under the law. The CARES
Act does not provide a private cause of action, and LKNU fails to plead a viable
unjust enrichment claim because it cannot allege that it provided a “benefit” to
Regions or that it maintained a “reasonable expectation of payment.” The Court also
should dismiss the entire action for an independent reason: LKNU’s claims are not
ripe and therefore not justiciable because the Small Business Administration
(“SBA”) has not yet disbursed to Regions the fees allegedly owed to LKNU. If
LKNU had not jumped the gun and filed this lawsuit too early, it would have learned
that Regions intends to pay agent fees but cannot do so unless and until it actually
receives lender fees from the SBA. Finally, without any plausible independent
claims for relief, LKNU cannot maintain a request for an injunction.
The Court, therefore, should dismiss the claims for failure to state a claim
under Rule 12(b)(6) and the entire action for lack of a justiciable controversy under
Rule 12(b)(1). In further support of this motion, Regions states the following
grounds:
GROUNDS
I. The CARES Act Does Not Create a Private Cause of Action
1. The CARES Act created the PPP by amending the SBA 7(a) small
business loan program, and well-established law in the Eleventh Circuit holds that
no private right of action exists for alleged violations of the program’s rules. See
2
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Tectonics, Inc. v. Castle Constr. Co., 753 F.2d 957, 960 (11th Cir. 1985) (holding
that “there was no intent to create civil rights of action in private persons”
(emphasis added)).
2. The holding in Tectonics has been confirmed by all subsequent rulings
and is directly applicable here. See, e.g., United States v. Fid. Capital Corp., 920
F.2d 827, 838 n. 39 (11th Cir. 1991); Bulluck v. Newtek Small Bus. Fin., Inc., __
Fed. App’x __, No. 19-10238, 2020 WL 1490702, at *3 (11th Cir. Mar. 27, 2020).
Every circuit that has considered the question has reached the same conclusion: The
SBA creates no private right of action. See, e.g., Aardwoolf Corp. v. Nelson Capital
Corp., 861 F.2d 46, 48 (2d Cir. 1988); Royal Servs., Inc. v. Maint., Inc., 361 F.2d
86, 92 (5th Cir. 1966); Crandal v. Ball, Ball & Brosamer, Inc., 99 F.3d 907, 909 (9th
Cir. 1996); Integrity Mgmt. Int’l, Inc. v. Tombs & Sons, Inc., 836 F.2d 485, 487 n. 4
(10th Cir. 1987).
3. Nothing in the CARES Act, its implementing regulations, or agency
guidance abrogates these holdings or otherwise creates a cause of action for an
alleged violation of the PPP. Thus, without a statutory basis for a private cause of
action, the Court should dismiss the claims under Rule 12(b)(6).
II. The Unjust Enrichment Claim Fails Because LKNU Cannot Plausibly
Plead a Reasonable Expectation of Payment or a Benefit Conferred
4. “To prevail on a claim of unjust enrichment under Alabama law, a
plaintiff must show that: (1) the defendant knowingly accepted and retained a
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benefit, (2) provided by another, (3) who has a reasonable expectation of
compensation.” Portofino Seaport Vill., LLC v. Welch, 4 So. 3d 1095, 1098 (Ala.
2008). LKNU fails to satisfy each element.
5. LKNU has failed to plead that it has “provided” any benefit to Regions.
LKNU has expressly averred that it provided services for the benefit of its client, not
Regions. See Complaint ¶ 23 (“On April 6, 2020, LKNU, by and through Tim Leigh,
who is a certified public accountant and one of its owners, timely submitted a loan
application to the Defendant on behalf of a client . . . .”). Accordingly, LKNU has
not plausibly alleged that it has bestowed any “benefit” to Regions, rather than its
client. See, e.g., Hancock-Hazlett General Const. Co., Inc. v. Trane Co., 499 So. 2d
1385, 1387 (Ala. 1986) (explaining that “unjust enrichment” applies only where the
“defendant holds money” which belongs to the plaintiff or which was “improperly
paid” to the defendant).
6. LKNU also cannot plausibly allege that Regions has accepted and
retained a “benefit” because it has not alleged — and cannot plausibly allege — that
the SBA actually has paid lender fees to Regions. In truth, Regions has not received
and thus does not “hold” those fees. See Trane, 499 So. 2d at 1387.
7. In its Complaint, LKNU alleges that it was explicitly told by Regions
that Regions would not pay it an agent fee, prior to LKNU’s submitting the
application. Complaint ¶ 26. Consequently, based on the face of the Complaint,
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LKNU cannot allege that it had a “reasonable expectation of compensation.” See
Welch, 4 So. 3d at 1098. Thus, as a matter of law, LKNU cannot clear the Rule
12(b)(6) hurdle on the unjust enrichment claim.
III. LKNU’s Claims Are Not Ripe Because Regions Has Not Received Any
Lender Fees From the SBA
8. Under Rule 12(b)(1), the plaintiff bears the burden of establishing the
elements necessary for jurisdiction, including ripeness. McCormick v. Aderholt, 293
F.3d 1254, 1257 (11th Cir. 2002). “A claim is not ripe for adjudication if it rests
upon ‘contingent future events that may not occur as anticipated, or indeed may not
occur at all.’” Texas v. United States, 523 U.S. 296, 300 (1998). If a claim is not ripe,
the district court lacks jurisdiction to issue a ruling on the merits. Georgia Advocacy
Office, Inc. v. Camp, 172 F.3d 1294, 1299 (11th Cir. 1999). LKNU’s claims are not
ripe.
9. The Interim Final Rule pertaining to the PPP states that “[a]gent fees
will be paid by the lender out of the fees the lender receives from the SBA.” 85
Fed. Reg. 20811, 20816 (emphasis added). This guidance importantly reflects that
the lender can pay agent fees only after it has received the lender fees from the SBA.
LKNU does not and cannot allege that Regions received lender fees from the SBA
as of the filing of the Complaint or as of the date of this Motion. In fact, as the
attached Declaration shows, “the SBA has not paid Regions fees for making any
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PPP loans.” Declaration of Timothy M. Monte ¶ 10 (attached hereto as Exhibit A).1
10. Indeed, on May 21, 2020 — three weeks after LKNU filed its
Complaint — the SBA issued guidance to lenders regarding the steps necessary to
receive the lender fees. See SBA Procedural Notice re: Paycheck Protection Program
Lender Processing Fee Payment and 1502 Reporting Process, at 1 (May 21, 2020),
available at https://www.sba.gov/sites/default/files/2020-05/5000-20028.pdf.
(“When a PPP Lender successfully reports to SBA that a loan has been fully
disbursed, SBA will initiate the process of paying the PPP processing fee which the
PPP Lender is eligible to receive. Lenders will use an SBA Form 1502 (1502 report)
to report fully disbursed loans to SBA . . . .”). Although it has submitted its initial
Form 1502 to the SBA, as a matter of undisputed fact, Regions has not received any
lender fees from the SBA, let alone the lender fees that would be applicable to the
loan underlying this lawsuit. See Declaration ¶¶ 9–12. LKNU does not and cannot
directly allege otherwise.
11. Consequently, as a matter of law, Regions could not and has not
wrongfully withheld agent fees because Regions had yet to receive the capital out of
1
In deciding a Rule 12(b)(1) motion, a district court may look outside of the complaint’s
allegations and consider evidence that has been submitted on the issue of jurisdiction. See, e.g.,
McElmurray v. Consol. Gov’t of Augusta-Richmond Cty., 501 F.3d 1244, 1251 (11th Cir. 2007)
(recognizing that a district court may decide a Rule 12(b)(1) motion based on “the complaint
supplemented by undisputed facts evidenced in the record” or “the complaint supplemented by
undisputed facts plus the court’s resolution of disputed facts”). None of the facts in the Declaration
is or could be disputed. The SBA has not yet paid any fees to Regions.
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which the IFR says agent fees, if any, should be paid. Thus, LKNU’s claim is
contingent on future events — i.e., Regions’ receipt of the fees from the SBA and
subsequent decision not to pay agent fees out of those lender fees — and therefore
is not ripe for adjudication. See Texas v. United States, 523 U.S. at 300; see also In
re Jacks, 642 F.3d 1323, 1332 (11th Cir. 2011) (holding that bankruptcy debtor’s
lawsuit seeking injunction preventing mortgage lender from collecting fees was
unripe because the lender represented that it would not make efforts to collect the
fees and, regardless of that representation, such matters were contingent on what
might or might not happen in the future); Nat’l Park Hosp. Ass’n v. Dep’t of Interior,
538 U.S. 803, 807–08 (2003) (explaining that ripeness is designed to prevent courts
from adjudicating disputes before the “effects” of an administrative policy are “felt
in a concrete way by the challenging parties”).
12. Further pushing this case outside the realm of a justiciable “case or
controversy,” as stated in the Declaration, “[a]fter Regions receives payment of
lender fees from the SBA on the PPP loans, Regions intends promptly to make
payment of agent fees to those agents who have appropriately documented their
assistance.” Declaration ¶ 11. As a matter of law, Regions cannot do so until it
receives the lender fees from the SBA, and consequently Regions “does not know
exactly when it will pay agent fees.” Id. ¶ 12.
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13. Therefore, without a live controversy as to whether Regions has
improperly withheld fees that it has obtained from the SBA, this case is not
justiciable because LKNU’s claims are not ripe for review. See Camp, 172 F.3d at
1299. The Court therefore should dismiss the action under Rule 12(b)(1).
IV. Without a Viable Cause of Action, LKNU Cannot Pursue a Claim for
Injunctive Relief
14. LKNU alleges a stand-alone claim for injunctive relief against Regions
(Count III). “Any motion or suit for an injunction must be based upon a cause of
action,” however; “an injunction is a type of relief rather than an independent cause
of action.” Spearman v. Wyndham Vacation Resorts, Inc., 69 F. Supp. 3d 1273, 1292
(N.D. Ala. 2014) (citing Alabama v. U.S. Army Corps. of Eng’rs, 424 F.3d 1117,
1127 (11th Cir. 2005)).
15. Because LKNU cannot maintain a stand-alone claim for injunctive
relief, and because Counts I and II fail to state a claim for which relief can be granted,
Count III should be dismissed as well.
CONCLUSION
Because LKNU fails to plead any claims for which this Court may grant relief,
Regions respectfully asks the Court to dismiss the action and all claims in the
Complaint.
Submitted on June 4, 2020.
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s/Larry B. Childs
Larry B. Childs
Helen L. Eckinger
Charles W. Prueter
WALLER LANSDEN DORTCH & DAVIS, LLP
1901 Sixth Avenue North, Suite 1400
Birmingham, Alabama 35203
larry.childs@wallerlaw.com
helen.eckinger@wallerlaw.com
charles.prueter@wallerlaw.com
205.226.5700 telephone
Counsel for Regions Bank
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CERTIFICATE OF SERVICE
I certify that, on June 4, 2020, I electronically filed the foregoing document in
Leigh King Norton & Underwood, LLC v. Regions Bank, No. 2:20-cv-00591, in the
United States District Court for the Northern District of Alabama via the CM/ECF
system. All counsel of record will be notified electronically.
Joseph “Jay” H. Aughtman, Esq.
AUGHTMAN LAW FIRM, LLC
1722 Platt Place
Montgomery, Alabama 36117
jay@aughtmanlaw.com
334.215.9873 telephone
Richard D. Morrison, Esq.
THE MORRISON LAW FIRM, LLC
418 Scott Street
Montgomery, Alabama 36104
rick.morrison@morrisonfirm.com
334.513.1323 telephone
Adam B. Burchell, Esq.
JOHNSON, PASEUR & MEDLEY, LLC
1847 North Wood Avenue
Post Office Box 2760
Florence, Alabama 35630
adam.burchell@johnsonpaseur.com
256.766.3131 telephone
s/Larry B. Childs
Larry B. Childs
WALLER LANSDEN DORTCH & DAVIS, LLP
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