Court filing
Exhibit E — Agent Fee Litigation (Dkt. 98.7)
Summary
Exhibit E to a filing in MDL No. 2950, filed June 10, 2020 as Document 98-7. The 27-page exhibit reproduces the civil docket sheet and the class action complaint in Ratliff CPA Firm, PC v. First-Citizens Bank & Trust Company, Civil Action No. 2:20-cv-2041-BHH, in the U.S. District Court for the District of South Carolina, Charleston Division, filed May 29, 2020. The complaint pleads five counts — declaratory relief, breach of contract as third-party beneficiary, violation of the South Carolina Unfair Trade Practices Act, unjust enrichment and conversion — and alleges the bank kept origination compensation for Paycheck Protection Program loans without paying agents the 1% fee. It states the bank reported helping nearly 23,000 businesses secure loans totaling $3.2 billion, and invokes the Class Action Fairness Act, 28 U.S.C. § 1332(d), with aggregate class claims exceeding $5,000,000.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 1 of 27
EXHIBIT E
Case: 2:20-cv-02041-BHH As of: 06/10/2020 03:21 PM EDT 1 of 2
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 2 of 27
JURY,LC 1
U.S. District Court
District of South Carolina (Charleston)
CIVIL DOCKET FOR CASE #: 2:20−cv−02041−BHH
Ratliffe CPA Firm PC v. First−Citizens Bank & Trust Company Date Filed: 05/29/2020
et al Jury Demand: Plaintiff
Assigned to: Honorable Bruce Howe Hendricks Nature of Suit: 370 Other Fraud
Cause: 28:1332 Diversity−Fraud Jurisdiction: Diversity
Plaintiff
Ratliffe CPA Firm PC represented by Mark Charles Tanenbaum
a South Carolina Professional Mark C Tanenbaum PA
Corporation, individually and on behalf 1017 Chuck Dawley Boulevard
of a class of similar situated businesses Suite 101
and individuals Mount Pleasant, SC 29464
843−577−5100
Fax: 843−722−4688
Email: mark@tanenbaumlaw.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Michael D Wright
Savage Royall and Sheheen
PO Drawer 10
Camden, SC 29020
803−432−4391
Email: mwright@thesavagefirm.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Richard A Harpootlian
Richard A Harpootlian PA
1410 Laurel Street
Columbia, SC 29201
803−252−4848
Email: rah@harpootlianlaw.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Vincent A Sheheen
Savage Royall and Sheheen
PO Drawer 10
Camden, SC 29020
803−432−4391
Fax: 803−425−4816
Email: vsheheen@thesavagefirm.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
V.
Defendant
First−Citizens Bank & Trust Company
Defendant
Does 1 through 100
inclusive
Date Filed # Docket Text
Case: 2:20-cv-02041-BHH As of: 06/10/2020 03:21 PM EDT 2 of 2
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 3 of 27
05/29/2020 1 COMPLAINT against First−Citizens Bank & Trust Company ( Filing fee $ 400 receipt
number 0420−9126782.), filed by Ratliffe CPA Firm PC, Does 1 through 100. Service
due by 8/27/2020. (vdru, ) (Entered: 06/01/2020)
05/29/2020 2 Local Rule 26.01 Answers to Interrogatories by Does 1 through 100, Ratliffe CPA
Firm PC.(vdru, ) (Entered: 06/01/2020)
05/29/2020 3 Summons Issued as to First−Citizens Bank & Trust Company. (vdru, ) (Entered:
06/01/2020)
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 1 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 4 of 27
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Ratliff CPA Firm, PC, a South Carolina Civil Action No.: 2:20-cv-2041-BHH
Professional Corporation, individually and
on behalf of a class of similar situated CLASS ACTION COMPLAINT FOR:
businesses and individuals,
1. DECLARATORY RELIEF
Plaintiff,
2. BREACH OF CONTRACT,
vs. THIRD-PARTY BENEFICIARY
First-Citizens Bank & Trust Company and
DOES 1 through 100, inclusive, 3. VIOLATION OF SOUTH
CAROLINA UNFAIR TRADE
Defendants. PRACTICES ACT
4. UNJUST ENRICHMENT
5. CONVERSION
(JURY TRIAL DEMANDED)
CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL
Plaintiff Ratliff CPA Firm, PC (“Plaintiff or “Ratliff”) brings this Class Action Complaint
and Demand for Jury Trial (the “Complaint”) on behalf of itself and those similarly situated
against Defendant First-Citizens Bank & Trust Company (hereinafter “First-Citizens”) and
DOES 1 through 100, inclusive, to seek compensation from First-Citizens, which refuses to
comply with the CARES Act that requires it to pay out of the compensation it received for
processing PPP loans, for services Plaintiff and a large number of other agents rendered on behalf
of recipients of Small Business Administration (“SBA”) 7(a) emergency loans. For its class
1
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 2 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 5 of 27
action complaint, Plaintiff alleges as follows based upon its personal knowledge and upon
information and belief, to include investigations conducted by its attorneys.
NATURE OF THE ACTION
1. In response to the shut-down of virtually every business across all non-essential
industries due to COVID-19, the federal government has raced over the past few months to ease
the impact of the shut-down on the U.S. economy. In order to keep afloat small businesses, and
to encourage those businesses to avoid massive worker layoffs and furloughs further damaging
the economy, Congress decided to create an economic relief program to distribute money to small
businesses.
2. In order to distribute the money swiftly to small businesses, Congress decided to
utilize the nation’s financial institutions to take applications and distribute the funds that would
be fully guaranteed by the federal government. However, in order to avoid delay in disbursing
funds to businesses, Congress decided that the financial institutions would not be required to
verify the accuracy of the applications. Instead, the burden to provide accurate information was
put directly and solely on the small businesses submitting applications.
3. The applications would need to be simple and the amount of the economic relief
would be based on historical payroll information with specific limitations. However, as the
lenders would not be verifying the information, there would need to be a number of
representations and certifications, and specific warnings because the failure to provide true and
accurate information could subject the small business owner to five (5) years in prison and a
$250,000 fine.
4. In order for these small businesses to be able to make timely, truthful, and accurate
applications, Congress understood that small businesses would need assistance from the nation’s
2
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 3 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 6 of 27
professional accountants, tax preparers, financial advisors, attorneys, and other such agents
normally relied upon by small businesses.
5. On March 27, 2020, the United States Congress enacted the Coronavirus Aid,
Relief, and Economic Security Act (hereinafter the “CARES Act”). A signature piece of this
landmark legislation is the SBA’s Paycheck Protection Program (“PPP”) which initially
authorized up to $349 billion in forgivable loans to small businesses to cover payroll and other
expenses (“PPP I”). After the initial funds quickly dried up, Congress added $310 billion
additional dollars to the program (“PPP II”).
6. The PPP was designed to be a fast and straightforward, allowing business to apply
through SBA-approved lenders and await approval. Once approved, lenders would be
compensated in the form of a generous origination fee paid by the federal government, with the
requirement that the lender would be responsible for paying the fee owed to the loan applicant’s
agent (e.g., attorney or accountant). Both the lender and the agents were specifically forbidden
by the PPP from charging the small business borrower any amounts for the loan or the assistance
in preparing the application for the lending. The amount of the total compensation and the
allocation between the lender and the agents assisting the borrowers in preparing the application
was specifically laid out in the PPP. For the majority of the loans (those under $350,000), the
lender would receive an amount equal to 5% of the loan as compensation, and if the borrower
used an agent such as a CPA or accountant, the lender was to pay to the agent an amount equal
to 1% of the loan amount. In other words, for the allocation of the compensation, 80% went to
the lender and 20% went to the agent assisting the small business borrower.
7. First-Citizens has more than five hundred (500) branches across nineteen (19)
different states and regularly transacts business in the District. First-Citizens was very active in
3
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 4 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 7 of 27
processing PPP I and PPP II loans, having created its own online portal for which small
businesses and/or their agents were to apply for the PPP loan proceeds. In other words,
compensation from the federal government to the lender and the borrower’s agent was allocated
as 80% to the lender and 20% to the CPA or attorney assisting the small business borrower.
8. First-Citizens is one of the largest banks in the country, with over 500 individual
branches spanning from the State of Washington to the State of Florida. First-Citizens holds over
$39 billion in assets. First-Citizens reports that it has “helped nearly 23,000 businesses across
our footprint secure loans totaling $3.2 billion through the Small Business Administration’s
Paycheck Protection Program.” 1 The average PPP loan First-Citizens approved was thus worth
approximately $139,130. Assuming a conservative average fee of four percent, First-Citizens
has been allocated over $128 million in origination fees, from which they were required to pay
the agents who assisted the borrowers in submitting applications.
9. However, First-Citizens has apparently decided it does not need to complete the
final step of the process and, based on information and belief, has refused to pay the agents who
assisted PPP loan recipients with their applications. This practice seemed to be a deliberate
scheme from the beginning as even though First-Citizens was required to pay agents that assisted
in the application process, it did not set up a structure or ask any questions to determine whether
borrowers utilized an agent in completing applications. It appears that this scheme was to claim
ignorance of the existence of the agent as an excuse not to pay the agent its share of the
compensation. This refusal is harming accountants, attorneys, and other agents who dropped
everything (in the midst of tax season) to assist their customers in filling out these vital loan
1
See FirstCitizens Bank SBA Paycheck Protection Program Update, available at
https://www.firstcitizens.com/paycheck-protection-program (last visited May 28, 2020).
4
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 5 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 8 of 27
applications correctly and in compliance with the PPP, and who were specifically only allowed
to be paid for these services out of the compensation paid to the lender. First-Citizen’s failure to
pay agents is in blatant violation of PPP regulations stating that agent fees “will be paid by the
lender out of the fees the lender receives from SBA.” 2
10. These agents, including Plaintiff, have no other recourse for collecting fees for
assisting borrowers on PPP loan applications because the PPP regulations delegate the
responsibility for paying agents to the lenders alone. And yet, First-Citizens has disregarded the
regulations and refused to pay agents who assisted small businesses in receiving PPP funds.
11. Plaintiff has been harmed by First-Citizens’ practices. As a CPA firm that
provides corporate and individual tax advice, accounting, payroll, and other small-business
support functions, Plaintiff was naturally positioned to assist clients who submitted applications
to Defendant and was then funded through the PPP program. Plaintiff assisted at least one small
business client who submitted an application to Defendant and was then funded through the PPP
program. Based on information and belief, First-Citizens has or will receivethe 5% compensation
from that loan, but have not paid Plaintiff its 1% agent fee related to the loan.
12. As a result of First-Citizen’s acts and omissions, Plaintiff and a large number of
others like it are being deprived of payment for their critical work in supporting their clients’ PPP
loan applications. As such, Plaintiff brings this Class Action Complaint and Demand for Jury
Trial in order to vindicate its rights and those of agents everywhere who are similarly situated, to
force First-Citizens to account for its blatant violation of the PPP, and to pay agents their legally-
mandated portion of the compensation.
PARTIES
2
SBA Interim Final Rule, Federal Register, Vol. 85, No, 73, first issued on April 2, 2020.
5
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 6 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 9 of 27
13. Plaintiff Ratliff is a South Carolina Professional Corporation with its principal
place of business in Mount Pleasant, South Carolina. Ratliff provides corporate and individual
taxation advice to its clients and performs financial planning and consulting for both businesses
and individuals in the local community. Ratliff meets the criteria to be a PPP Agent under the
CARES Act.
14. On information and belief, Defendant First-Citizens is a North Carolina
corporation with its principal place of business in Raleigh, North Carolina, that provides, inter
alia, banking services to individuals and businesses. On information and belief, First-Citizens
conducts substantial business in this District either directly and/or through its subsidiaries and/or
affiliates.
15. When in this Complaint reference is made to any act of any Defendant, such shall
be deemed to mean that officers, directors, agents, employees, or representatives of the Defendant
named in this lawsuit committed or authorized such acts, or failed and omitted to adequately
supervise or properly control or direct their employees while engaged in the management,
direction, operation or control of the affairs of the Defendant and did so while acting within the
scope of their employment or agency.
16. Plaintiff is unaware of the names, identities, or capacities of the Defendants sued
as Does 1-100, but is informed and believes and thereon alleges that each such fictitiously-named
defendant is acting as a lender and providing PPP loans to small businesses and is responsible in
some manner for the damages and abridgement of rights described in this Complaint. Plaintiff
will amend its Complaint to state the true names, identities or capacities of such fictitiously-
named defendants when ascertained. 3
3
Plaintiff is aware that in South Carolina alone, there are 58,300 approved loans for a total of $5,643,833,539 to
small businesses in this state. See U.S. Small Business Administration Paycheck Protection Program (PPP) Report,
6
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 7 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 10 of 27
JURISDICTION AND VENUE
17. This Court has subject matter jurisdiction over this Action under the Class Action
Fairness Act, 28 U.S.C. § 1332(d), because, as the proposed Class, (1) at least one member of
the proposed Class, which consists of at least 100 members, is a citizen of a different state than
Defendant; (2) the claims of the proposed Class Members exceed $5,000,000 in the aggregate,
exclusive of interest and costs, and (2) none of the exceptions under that subsection apply to this
action.
18. Personal jurisdiction over Defendant is proper because Defendant transacts
business in the State of South Carolina and a substantial number of the events giving rise to the
claims alleged herein took place in South Carolina.
19. This Court has jurisdiction to grant declaratory relief under 28 U.S.C. § 2201
because an actual controversy exists between the parties as to their respective rights and
obligations under 85 Fed. Reg. 20816 § (4)(c) (hereinafter, the “PPP regulations”).
20. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(2) because a
substantial part of the events or omissions giving rise to the alleged claims occurred in this
District, including from work performed by Ratliff on behalf of business clients within this
District, and Defendant marketed, promoted, and accepted applications for PPP loans in this
District.
Approvals through 05/23/2020, https://home.treasury.gov/system/files/136/SBA-Paycheck-Protection-Program-
Loan-Report-Round2.pdf (last accessed May 26, 2020)
7
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 8 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 11 of 27
BACKGROUND
21. The spread of COVID-19 was declared a pandemic by the World Health
Organization (“WHO”) on March 11, 2020.
22. On March 13, 2020, President Donald Trump issued the Coronavirus Disease
2019 (COVID-19) Emergency Declaration, which declared that the pandemic was of “sufficient
severity and magnitude to warrant an emergency declaration for all states, territories and the
District of Columbia.”
23. The Federal Government expressly recognized that with the COVID-19
emergency, “many small businesses nationwide are experiencing economic hardship as a direct
result of the Federal, State and local public health measures that are being taken to minimize the
public’s exposure to the virus.” 4
24. The economic fallout from COVID-19, and the national response to it, was
immediate and enormous. As “stay at home” issues were ordered by states across the nation,
countless businesses were forced by law to overhaul their business models, scale back their
business dramatically, or shutter–either temporarily or permanently. Businesses were further
harmed as the public began to avoid all public spaces. Furloughs and layoffs were rampant in
the private sector.
25. On March 25, 2020, in response to the economic damage caused by the COVID-
19 crisis and the overwhelming public pressure that resulted from it, the U.S. Senate passed the
Coronavirus Aid, Relief, and Economic Security, or CARES, Act. The CARES Act was passed
by the House of Representatives the following day and signed into law by President Trump on
4
See Business Loan Program Temporary Changes; Paycheck Protection Program, 13 CFR Part 120, Interim Final
Rule (“SBA PPP Final Rule”).
8
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 9 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 12 of 27
March 27, 2020. Amounting to approximately $2 trillion, the CARES Act was the single-largest
economic stimulus bill in American history.
26. Critically, the CARES Act created a $659 billion loan program for businesses
with fewer than five hundred employees, the PPP. 5 The goal of the PPP was to provide American
small businesses with eight weeks of cash-flow assistance, with a certain percentage forgivable
if utilized to retain employees and fund payrolls. The loans are fully federally guaranteed and
administered by the SBA. 6
27. The PPP loans operate more like grants if the recipient follows certain rules,
including that at least 75 percent of the loan goes toward payroll. 7 Businesses that follow the
rules are permitted to submit a request to their SBA lender for total forgiveness. Otherwise, the
loan matures in two years and carries a one percent interest rate. 8
28. The SBA was charged with creating the PPP implementing regulations. The SBA
issued the first interim final rule (“Initial Rule”) on April 2, 2020, allowing businesses to begin
applying for PPP loans with all SBA lenders on April 3, 2020.
29. An important piece of the PPP was that applications were to be processed and
funded on a “first-come, first-served” basis—that is, the SBA was to process applications and
distribute funds based on the order in which they were received. This made the SBA’s list of
approved lenders key gatekeepers in this process, which the lenders certainly understood.
Because the PPP was to be administered only through SBA-approved lenders, and because
5
The initial $349 billion in funding was all allocated within the span of thirteen (13) days, stopping many small
businesses from taking advantage of the PPP. Accordingly, Congress approved an additional $310 billion in funding
through the Paycheck Protection Program and Health Care Enhancement Act, signed by President Trump on April
24, 2020.
6
Small Bus. Admin., Docket No. SBA-2020-0015, 13 CFR Part 120, Paycheck Protection Program 3245-AH34,
Interim Final Rule, 85 Fed. Reg. 20814 § (2)(o) (Apr. 15, 2020)
7
85 Fed. Reg. 20812 § (2)(e); id. at 20813 § (2)(o).
8
Id. at 20813 § (2)(j).
9
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 10 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 13 of 27
applicants were applying for funds from the single pot allocated for the program, submitting an
accurate application for a loan through the SBA-approved lender as quickly as possible was
critical.
30. Congress added an incentive for the SBA-affiliated lenders, knowing they would
be inundated with PPP loan applications: for each loan processed and approved, the bank would
receive an origination fee of five percent for loans up to $350,000; three percent for loans
between $350,000 and $2 million; and one percent for loans between $2 million and $10 million. 9
31. With similar incentives in mind, Congress and the SBA also carved out a specific
benefit for the countless accountants, attorneys, and advisors who would need to lead or assist
their clients in preparing and filing PPP loan applications. These individuals and entities are
referred to as “Agents” in the CARES Act and PPP implementing regulations.
32. As explained in the PPP Information Sheet provided for “lenders,” the SBA states
that ‘[a]n ‘Agent’ is an authorized representative and can be: an attorney; an accountant; a
consultant; someone who prepares an applicant’s application for financial assistance and is
employed and compensated by the applicant; someone who assists a lender with originating,
disbursing, servicing, liquidating, or litigating SBA loans; a loan broker; or any other individual
or entity representing an applicant by conducting business with the SBA.” 10
33. In addition, the SBA Regulations provide that “Agent fees will be paid out of
lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant.
The total amount that an agent may collect from the lender for assistance in preparing an
9
Id.
10
U.S. Department of the Treasury, Small Business Paycheck Protection Program Information For Lenders,
Originally posted on March 31, 2020,
https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf (last accessed
May 26 2020)
10
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 11 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 14 of 27
application for a PPP” loan is as follows (“Agent Fees”): one percent (1%) for loans up to
$350,000; 0.50% for loans between $350,000 and $2 million; and 0.25% for loans between $2
million and $10 million.” 11
34. Within this context, Congress and the SBA set up a straightforward system for the
disbursement of PPP loan funds where the applicant is assisted by an Agent: (i) the Agent
prepares the application and/or necessary supporting application documents for the client; (ii) the
client or Agent applies for the PPP loan through the lender; (iii) the lender submits the application
to the SBA; (iv) the SBA approves the loan and sends the client the money through the lender,
and eventually pays the lender’s origination fee; and (v) the Agent submits the request for fee
payment to the lender with the Agent’s fee based upon (a) the work performed for the client and
(b) the caps on agent fees provided by the SBA’s PPP regulations.
35. Unfortunately, based on information and belief, First-Citizens is refusing to pay
the fees of Agents for their assistance in providing an accurate and truthful application for
funding.
36. Upon information and belief, this refusal is a company-wide policy. Further,
based on the fact that First-Citizens set up the application process without even asking borrowers
if they utilized an agent to assist them, suggests that First-Citizens did not want to have any
record of the Agent information in its files.
37. This policy of refusal to pay Agents the “Agent Fees” due to them, and that only
the lenders are authorized to pay, stands as an immediate threat to these Agents’ abilities to
receive payment. In the midst of an unprecedented economic/pandemic crisis, this policy
represents short-sighted profit-padding at best, and blatantly illegal conduct, at worst.
11
Id. (emphasis added); see also 85 Fed. Reg. 20816 § (4)(c)
11
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 12 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 15 of 27
38. Refusing to pay Agent Fees is also inconsistent with agreements First-Citizens
made in order to become an approved PPP lender. Specifically, based on information and belief,
First-Citizens was required to fill out and sign the “CARES Act Section 1102 Lender Agreement”
for each loan. This agreement requires each putative PPP lender to certify, under penalty of
perjury, that it (i) “is in compliance and will maintain compliance with all applicable
requirements of the [PPP], and PPP Loan Program Requirements[,]” (ii) will “service and
liquidate all covered loans made under the Paycheck Protection Program in accordance with PPP
Loan Requirements[,] and (iii) will “close and disburse each covered loan in accordance with the
terms and conditions of the PPP Authorization and PPP Loan Requirements.” 12
39. To the extent First-Citizens had to certify, at any point, that it would follow the
PPP’s regulations in making PPP loans, it was not being truthful. First-Citizens’ policy to refuse
to pay third-party agents fees directly violates the PPP’s implementing regulations.
40. It is pursuant to these representations that First-Citizens was able to process over
23,000 PPP applications worth over $3.2 billion in funding, an average loan of approximately
$140,000. Assuming a conservative average fee of four percent, First-Citizens has been allocated
over $128 million in origination fees, from which it was required to pay agents.
41. Ultimately, despite knowing that they were required to pay Agents a percentage
of their PPP loan origination fees if an Agent assisted an applicant in preparing and submitting
the application, First-Citizens elected not to ask borrowers whether they utilized an “Agent” (or
purposely left off this inquiry when developing its application procedures) to assist them in the
12
U.S. Small Business Administration CARES Act Section 1102 Lender Agreement,
https://www.sba.gov/sites/default/files/2020-
04/SBA%20Form%203506%20CARES%20Act%20Section%201102%20Lender%20Agreement%2004022020.pd
f (last accessed May 26, 2020)
12
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 13 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 16 of 27
application process and have not paid Plaintiff or similarly situated Agents compensation from
funded PPP loans.
FACTUAL ALLEGATIONS
42. Ratliff is a CPA firm with locations in Mount Pleasant, South Carolina; Sumter,
South Carolina; and Mt. Prospect, Illinois. John W. Ratliff, III, the sole owner of Ratliff, has been
a professional accountant since 1975 and has provided public accounting services to clients for
thirty-six (36) years. Ratliff currently has approximately 1,000 clients that it services between
its three locations. Upon information and belief, approximately 50 are small businesses and/or
sole proprietorships. Ratliff, knowing that the COVID-19 crisis would significantly impact
clients’ businesses, sought to obtain PPP loans through various SBA-approved lenders on behalf
of clients.
43. Ratliff’s professionals spent considerable time familiarizing themselves with the
CARES Act and the related SBA Regulations, in particular (a) Section 1102, which permits the
SBA to guarantee 100% of Section 7(a) loans under the PPP and (b) Section 1106 of the Act,
which provides forgiveness of up to the full principal amount of qualifying loans guaranteed
under the PPP.
44. In or about March, April and May, 2020, Ratliff assisted many clients in the
gathering and analysis of their documents, as well as the calculations and preparation of the loan
applications.
45. Based on the SBA Regulations, Ratliff understood that it was not allowed to
charge clients a fee relating to the application process. The agents were only allowed to receive
compensation from the agents’ share of the estimated $20 billion in fees that the Federal
Government paid the Lenders for originating the PPP loans.
13
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 14 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 17 of 27
46. For its clients, Ratliff had the primary role in calculating the payroll information
needed for the application, and providing the clients’ accounting information, advice,
documentation in support of the PPP loan application, and will have ongoing responsibility for
advising on the forgiveness of the PPP loan.
47. Ratliff provided all of these services to two clients (hereinafter, “Client BP” and
“Client JM”) who obtained PPP loans from First-Citizens. Client BP obtained a PPP loan from
First-Citizens in the amount of $67,300 on April 20, 2020. Based upon information and belief,
First-Citizens was paid or will be paid, an origination fee of $3,365, of which Ratliff is entitled
to $637.00 (1% of total loan amount) of that fee for their work as the agent of the borrower in
submitting the application and documentation. Client JM applied for and obtained a PPP loan
from First-Citizens on April 15, 2020 in the amount of $24,939. Based upon information and
belief, First-Citizens was paid or will be paid, an origination fee of $1,246.95, of which Ratliff
is entitled to $249.39 (1% of total loan amount) of that fee for its work as the agent of the
borrower in submitting the application and documentation.
48. First-Citizens did not comply with the SBA Regulations because it has not paid
Ratliff any agent fees despite awarding PPP loans to Ratliff’s clients for whom Ratliff acted as a
PPP Agent. Instead, First-Citizens retained all of the Agent Fees for itself. Ratliff asked First-
Citizens about payment of its fees as PPP Agent, to which First-Citizens responded that “the bank
made the decision [it] would not pay agent fees for the PPP loans.”
49. As a result of First-Citizens’ unlawful and unfair actions, Plaintiff and the Class
have suffered financial harm by being deprived of the statutorily-mandated compensation for the
professional services provided to clients in assisting them with obtaining PPP loans.
CLASS ALLEGATIONS
14
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 15 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 18 of 27
50. As noted above, Plaintiff brings this action on behalf of itself and all others
similarly situated as a nationwide Class, defined as follows:
All persons and businesses who served as an agent in relation to, and provided
assistance to a client in relation to, the preparation and/or submission of a client’s
PPP loan application to First-Citizens, which resulted in a loan being funded by
First-Citizens under the PPP.
South Carolina Subclass. All persons and businesses in South
Carolina who served as an agent in relation to, and provided assistance
to a client in relation to, the preparation and/or submission of a client’s
PPP loan application to First-Citizens which resulted in a loan being
funded by First-Citizens under the PPP.
51. Excluded from this Class are: (1) any Judge or Magistrate presiding over this
action and members of their families; (2) Defendant, Defendant’s subsidiaries, parents,
successors, predecessors, and any entity in which Defendant or its parents have a controlling
interest and its current or former employees, officers and directors; (3) persons who properly
execute and file a timely request for exclusion from the Class; (4) persons whose claims in this
matter have been finally adjudicated on the merits or otherwise released; (5) Plaintiff’s counsel
and Defendant’s counsel; and (6) the legal representatives, successors, and assigns of any such
excluded persons.
52. Plaintiff reserves the right to expand, limit, modify, or amend this Class definition,
including the addition of one or more subclasses, in connection with Plaintiff’s motion for Class
certification, or at any other time, based upon, inter alia, changing circumstances and/or new
facts obtained during discovery.
53. Numerosity: The Class is composed of hundreds of Agents (“Class Members”),
whose joinder in this action would be impracticable. The disposition of their claims through this
class action will benefit all Class Members, the parties, and the courts.
15
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 16 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 19 of 27
54. Commonality and Predominance: There is a commonality in questions of law and
fact affecting the Class. These questions of law and fact predominate over individual questions
affecting individual Class Members, including, but not limited to, the following:
a. Whether First-Citizens’ conduct violates the CARES Act and/or its
implementing regulations;
b. Whether First-Citizens is required to compensate Plaintiff out of the
origination fees obtained from SBA through the PPP;
c. Whether Plaintiff is entitled to compensation by First-Citizens for Plaintiff’s
work assisting in its client’s PPP loan application;
d. Whether First-Citizens’ conduct was willful and knowing;
e. Whether First-Citizens’ submission of completed Form 2484 constituted an
agreement;
f. Whether First-Citizens breached that agreement;
g. Whether First-Citizens’ conduct was pursuant to a company-wide policy or
policies; and
h. Whether First-Citizens’ conduct constitutes unjust enrichment.
55. Superiority: This case is also appropriate for class certification because class
proceedings are superior to all other available methods for the fair and efficient adjudication of
this controversy given that joinder of all parties is impracticable. The damages suffered by the
individual members of the Class will likely be relatively small, especially given the burden and
expense of individual prosecution of the complex litigation necessitated by First-Citizens’
actions. Thus, it would be difficult and not economical for the individual members of the Class
to obtain effective relief from First-Citizens’ misconduct. Even if members of the Class could
16
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 17 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 20 of 27
sustain such individual litigation, it would still not be preferable to a class action, because
individual litigation would increase the delay and expense to all parties due to the complex legal
and factual controversies presented in this Complaint. By contrast, a class action presents far
fewer management difficulties and provides the benefits of single adjudication, economy of
scale, and comprehensive supervision by a single court. Economies of time, effort, and expense
will be fostered and uniformity of decisions ensured.
56. Typicality: Plaintiff’s claims are typical of, and are not antagonistic to, the claims
of all Class Members, in that Plaintiff and members of the Class sustained damages arising out
of First-Citizens’ uniform wrongful conduct.
57. Adequacy: Plaintiff will fairly and adequately represent and protect the interests
of the Class and has retained counsel with substantial experience in litigating complex cases,
including class actions. Plaintiff’s claims are representative of the claims of the other members
of the Class. That is, Plaintiff and members of the Class sustained damages as a result of First-
Citizens’ uniform conduct. Plaintiff also has no interests antagonistic to those of the Class, and
First-Citizens has no defenses unique to Plaintiff. Both Plaintiff and its counsel will vigorously
prosecute this action on behalf of the Class and have the financial ability to do so. Neither
Plaintiff nor counsel have any interest adverse to other Class Members.
58. Ascertainability: Plaintiff is informed and believes that First-Citizens keeps
extensive computerized records of its loan applications through, inter alia, computerized loan
application systems and federally-mandated record-keeping practices. Defendant has one or
more databases through which all of the borrowers may be identified and ascertained, and it
maintains contact information, including electronic mail and mailing address. From this
information, the existence of the Class Members (i.e., borrowers’ Agents) can be determined,
17
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 18 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 21 of 27
and thereafter, a notice of this action can be disseminated in accordance with due process
requirements.
59. First-Citizens has acted, and refused to act, on grounds generally applicable to the
Class, thereby making appropriate final equitable relief with respect to the Class as a whole.
FOR A FIRST CAUSE OF ACTION
On Behalf of the Class
(Declaratory Judgment)
60. Plaintiff re-alleges each and every allegation set forth above as if fully set forth
herein.
61. Plaintiff and the Class represent individuals who are “Agents” as defined by the
SBA regulations for the PPP.
62. Plaintiff and the putative Class have assisted clients with the process of preparing
applications, any applying for, PPP loan funds. First-Citizens, despite the clear command of the
SBA’s PPP regulations, has refused to make these payments. An actual controversy has arisen
between Plaintiff and the Class, on one hand, and First-Citizens on the other, wherein First-
Citizens denies by its refusal to pay that it obligated to pay Plaintiff’s and the Class’ “Agent”
fees pursuant to PPP regulations.
63. Plaintiff and the Class seek a declaration, in accordance with the SBA regulations
and pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, that First-Citizens is obligated
to set aside money to pay, and pay third-party agents—within the SBA-approved limits—for the
work performed on behalf of a client in relation to the preparation and/or submission of a PPP
loan application that resulted in a funded PPP loan.
FOR A SECOND CAUSE OF ACTION
On Behalf of the Class
(Breach of Contract, Third Party Beneficiary)
18
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 19 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 22 of 27
64. Plaintiff re-alleges each and every allegation set forth above as if fully set forth
herein.
65. On information and belief, First-Citizens entered into an agreement with the SBA
in connection with the loans funded in the PPP.
66. The agreements required that First-Citizens adhere to all PPP rules and regulations
and incorporate these requirements by reference. First Citizens and the SBA understood that
Agents involved in the preparation and submission of the PPP loan applications would need to
be compensated.
67. The SBA’s PPP regulations specifically require that PPP lenders pay the fees of
any Agent that assists with the PPP loan application process, within limits.
68. First-Citizens understood that Plaintiff and the Class were intended beneficiaries
in this agreement. Nevertheless, First-Citizens has refused to live up to its end of the bargain and
has uniformly refused to pay Agent fees to Plaintiff and the Class.
69. By refusing to pay Agent fees in accordance with the SBA regulations, First-
Citizens is violating the terms of its agreement, thereby damaging Plaintiff and the Class. Plaintiff
and the Class thus ask this Court to award it damages sufficient to make it whole, and compensate
it for work it did in preparing client’s PPP loan application for loans that were funded,
consequential damages, and all other damages available at law.
FOR A THIRD CAUSE OF ACTION
On Behalf of the Class
(Violation of the South Carolina Unfair Trade Practice Act)
70. Plaintiff re-alleges each and every allegation set forth above as if fully set forth
herein.
19
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 20 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 23 of 27
71. Upon information and belief, First-Citizens’ actions constitute an unfair and/or
deceptive trade practice in the conduct of trade or commerce, in violation of the South Carolina
Unfair Trade Practices Act (“SCUTPA”), S.C. Code Ann. § 39-5-10, et. seq.
72. The SBA’s PPP regulations specifically provide that “lenders” who provide loans
under the program will be responsible for paying Agent fees, within prescribed limits.
73. First-Citizens has uniformly refused to pay these fees to Plaintiff and the Class.
As a result, First-Citizens has engaged in unlawful conduct that has cost Plaintiff and the Class
millions of dollars in fees, collectively.
74. First-Citizens has also engaged in “unfair” business practices through this
conduct, as well as set forth above.
75. Upon information and belief, the unfair trade practices have an adverse impact on
the public interest and the Class and members of the general public have been and may continue
to be irreparably harmed.
76. Upon information and belief, the SCUTPA violation was willful, as First-Citizens
knew or should have known their conduct was a violation of the SCUTPA.
77. As a result of such unlawful and illegal conduct, Plaintiff and other Class
Members have suffered damages in numerous and substantial ways.
78. As a direct and proximate result of First-Citizen’s violations of the SCUTPA,
Plaintiff has been damaged, and therefore, is entitled to treble damages, plus attorneys’ fees and
costs for prosecuting this action.
FOR A FOURTH CAUSE OF ACTION
Against All Defendants
(Unjust Enrichment)
20
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 21 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 24 of 27
79. Plaintiff re-alleges each and every allegation set forth above as if fully set forth
herein.
80. Unjust enrichment, or restitution, may be alleged where a defendant unjustly
obtains and retains a benefit to the plaintiff’s detriment, where such retention violates
fundamental principles of equity, justice, and good conscience.
81. Here, First-Citizens has obtained millions of dollars in benefits in the form of
PPP loan origination fees. A portion of those fees were to be paid to agents, like and including
Plaintiff, who assisted in their clients’ PPP loan applications. But First-Citizens is refusing to pay
those fees, in contravention of PPP regulations.
82. Principles of justice, equity, and good conscience demand that First-Citizens not
be allowed to retain these agent fees. First-Citizens has fallen short in its duty as a lender, and
during a crisis no less. As a result, Plaintiff and the putative Class have been unable to obtain the
agent fees due to them.
83. Accordingly, First-Citizens must disgorge the portion of any and all PPP
origination fees that it has retained to the extent they are due to Plaintiff and the putative Class
in their capacities as agents.
FOR A FIFTH CAUSE OF ACTION
On Behalf of the Class
(Conversion)
84. Plaintiff re-alleges each and every allegation set forth above as if fully set forth
herein.
85. Under the SBA regulations, Plaintiff and the Class, as PPP agents, have a right
to Agent fees that must be paid from the amount of lender fees provided to First-Citizens for
processing Plaintiff’s client’s PPP loan applications.
21
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 22 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 25 of 27
86. The SBA regulations state that “[a]gent fees will be paid out of lender fees” and
provide guidelines on the amount of agent fees that should be paid to the PPP Agent, based upon
the size of the PPP loan.
87. Additionally, the SBA regulations require that lenders, not loan recipients, pay
the agent fees. The SBA regulations unequivocally state that “[a]gents may not collect fees from
the applicant.”
88. Plaintiff and the Class assisted clients with applying for PPP loans, including
gathering and curating information necessary for completing PPP loan applications that were
subsequently funded. Due to Plaintiff’s and the Class’s efforts, their clients were awarded PPP
loans from First-Citizens. As such, Plaintiff has a right to immediate possession of the Agent
fees.
89. Although Plaintiff is entitled to agent fees under the SBA regulations, First-
Citizens has refused to provide those fees to Plaintiff and the class, thus keeping the Agent fees
that were paid to it for passing on to the agents. By withholding these fees, First-Citizens has
maintained wrongful control over Plaintiff’s property inconsistent with Plaintiff’s entitlements
under the SBA regulations.
90. First-Citizens has committed civil conversion by retaining monies owed to
Plaintiff and Class members.
91. Plaintiff and the Class have been injured as a direct and proximate cause of First-
Citizens’ misconduct. Plaintiff seeks recovery from First-Citizens in the amount of the owed
agent fees, and all other relief afford under the law.
22
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 23 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 26 of 27
DEMAND FOR JURY TRIAL
92. Plaintiff demands a trial by jury on all issues to the fullest extent permitted under
applicable law.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Ratliff, individually and on behalf of the Class, respectfully
prays for the following relief:
A. An order certifying the Class as defined above, appointing Plaintiff as the representative
of the Class, and appointing its counsel as Class Counsel;
B. An order declaring that First-Citizens’ actions, as set out above, constitute unjust
enrichment, conversion, breach of contract on behalf of third-party beneficiary, violate
the South Carolina Unfair Trade Practices Act, S.C. Code Ann. § 39-5-10, et. seq., and
violate the SBA’s PPP regulations;
C. An award of all economic, monetary, actual, consequential, compensatory, and punitive
damages available under the law and caused by First-Citizens’ conduct, including without
limitation, actual damages for past, present and future expenses caused by First-Citizens’
misconduct, lost time and interest, and all other damages suffered, including any damages
likely to be incurred by Plaintiff and the Class;
D. An award of reasonable litigation expenses and attorneys’ fees;
E. An award of pre- and post-judgement interest, to the extent allowable;
F. The entry of an injunction and/or declaratory relief as necessary to protect the interests of
the Plaintiff and the Class; and
G. Such other further relief that the Court deems reasonable and just
23
2:20-cv-02041-BHH Date Filed 05/29/20 Entry Number 1 Page 24 of 24
Case MDL No. 2950 Document 98-7 Filed 06/10/20 Page 27 of 27
Respectfully submitted,
By: /s/ Michael D. Wright
Richard A. Harpootlian (Fed I.D. No.1730)
RICHARD A. HARPOOTLIAN, P.A.
1410 Laurel Street (29201)
Post Office Box 1090
Columbia, SC 29202
Telephone: (803) 252-4848
Facsimile: (803) 252-4810
rah@harpootlianlaw.com
Mark C. Tanenbaum (Fed I.D. No. 4071)
MARK C. TANENBAUM, P.A.
1017 Chuck Dawley Blvd., Suite 101
Mt. Pleasant, SC 29464
Telephone: (803) 577-5100
Facsimile: 843-722-4688
mark@tanenbaumlaw.com
Vincent A. Sheheen (Fed I.D. No. 7016)
Michael D. Wright (Fed I.D. No. 11452)
SAVAGE, ROYALL & SHEHEEN, L.L.P.
P.O. Drawer 10
Camden, S.C. 29021
Telephone: (803) 432-4391
Facsimile: (803) 425-4812
mwright@thesavagefirm.com
Richard D. McCune (pro hac vice motion forthcoming)
Michele M. Vercoski (pro hac vice motion forthcoming)
MCCUNE WRIGHT AREVALO LLP
18565 Jamboree Road, Suite 550
Irvine, California 92612
Telephone: (909) 557-1250
Facsimile: (909) 557-1275
Email: rdm@mccunewright.com
Attorneys for Plaintiff and Putative Class
May 29, 2020
24
File and source
- File
- gov.uscourts.jpml.1161172.98.7.pdf
- Size
- 447,369 bytes
- SHA-256
- 2c3dbe2ee1e4f2ff30ec668f59ddb89ee1d40c9f34825942f0404e5c86ef5034
- Original
- No public link identified.