Court filing

Exhibit F — Agent Fee Litigation (Dkt. 98.8)

One of 3 filings in Agent Fee Litigation.

What This Document Is

The CM/ECF docket sheet for N.D. Ill. No. 1:20-cv-03256, Exhibit F among the seven related actions attached to Document 98. Filed 06/02/2020 by Prinzo & Associates, LLC against BMO Harris Bank, N.A. and BMO Financial Corp., assigned to Judge Gary Feinerman — the only N.D. Illinois action in this cluster, and notable for a $9,999,000 demand figure, the highest specific dollar demand among this notice's exhibits.

Factual Summary

Prinzo & Associates, LLC, on behalf of itself and all others similarly situated, filed a class-action complaint 06/02/2020 against BMO Harris Bank, N.A. and its holding company BMO Financial Corp., pled under diversity-contract jurisdiction (28 U.S.C. § 1332, "190 Contract: Other"), assigned to Judge Gary Feinerman. Counsel is Derek Yeats Brandt and Leigh Michele Perica of McCune Wright Arevalo, LLP's Edwardsville, Illinois office — the same firm representing plaintiffs in four of the other six exhibits in this cluster (98-3 through 98-6), operating through its Illinois branch for this N.D. Ill. filing rather than the California offices used elsewhere.

Key Facts

Filed 2020-06-02, the latest-filed of the S.D.N.Y./Illinois actions in this cluster (later only than the Zions Bancorporation suit, Exhibit G, filed 06/09); assigned to Judge Gary Feinerman, N.D. Ill. (Eastern Division).
$9,999,000 demand — the single highest specific dollar demand figure among the seven related actions in this notice, notably just below the $10 million CAFA jurisdictional-amount threshold commonly referenced in this litigation wave's class pleadings.
Same McCune Wright Arevalo firm as four sibling exhibits (98-3 through 98-6), but filed through the firm's Edwardsville, Illinois office rather than its California or New York offices — indicating deliberate local counsel staffing for the Illinois forum.
Prinzo & Associates, LLC is also a co-plaintiff (with Quinn and Fahmia) in the Chase action (Exhibit A, 98-3), making this its second suit within this notice's cluster.

Source Caveats

This is a docket sheet, not the underlying complaint itself; substantive allegations are inferred from docket-entry descriptions only.
Clean born-digital text (68,304 chars over 27 pages); no rendering defect.

Full text

Case MDL No. 2950 Document 98-8 Filed 06/10/20 Page 1 of 27

EXHIBIT F
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COLE
United States District Court
Northern District of Illinois − CM/ECF LIVE, Ver 6.3.3 (Chicago)
CIVIL DOCKET FOR CASE #: 1:20−cv−03256

Prinzo & Associates, LLC v. BMO Harris Bank, N.A. et al Date Filed: 06/02/2020
Assigned to: Honorable Gary Feinerman Jury Demand: Plaintiff
Demand: $9,999,000 Nature of Suit: 190 Contract: Other
Cause: 28:1332 Diversity−Contract Default Jurisdiction: Diversity
Plaintiff
Prinzo & Associates, LLC represented by Derek Yeats Brandt
on behalf of itself and all others similarly McCune Wright Arevalo, LLP
situated 231 North Main Street
Suite 20
Edwardsville, IL 62025
618 307−6116
Email: dyb@mccunewright.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED

Leigh Michele Perica
Mccune Wright Arevalo, Llp
231 North Main Street
Suite 20
Edwardsville, IL 62025
(618) 307−6116
Email: Lmp@mccunewright.com
ATTORNEY TO BE NOTICED

V.
Defendant
BMO Harris Bank, N.A.

Defendant
BMO Financial Corp.
a Delaware corporation

Defendant
Does 1−100
inclusive

Date Filed # Docket Text
05/26/2020 5 ORDER Fourth Amended General Order 20−0012 IN RE: CORONAVIRUS
COVID−19 PUBLIC EMERGENCY Signed by the Chief Judge Rebecca R.
Pallmeyer on May 26, 2020. This Order does not extend or modify any deadlines set in
civil cases. For non−emergency motions, no motion may be noticed for presentment
on a date earlier than July 15, 2020. See attached Order. Signed by the Honorable
Rebecca R. Pallmeyer on 5/26/2020: Mailed notice (ec, ) (Entered: 06/02/2020)
06/02/2020 1 COMPLAINT filed by Prinzo & Associates, LLC; Jury Demand. Filing fee $ 400,
receipt number 0752−17074486.(Brandt, Derek) (Entered: 06/02/2020)
06/02/2020 2 CIVIL Cover Sheet (Brandt, Derek) (Entered: 06/02/2020)
06/02/2020 3 ATTORNEY Appearance for Plaintiff Prinzo & Associates, LLC by Derek Yeats
Brandt (Brandt, Derek) (Entered: 06/02/2020)
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06/02/2020 CASE ASSIGNED to the Honorable Gary Feinerman. Designated as Magistrate Judge
the Honorable Jeffrey Cole. Case assignment: Random assignment. (acm, ) (Entered:
06/02/2020)
06/02/2020 4 ATTORNEY Appearance for Plaintiff Prinzo & Associates, LLC by Leigh Michele
Perica (Perica, Leigh) (Entered: 06/02/2020)
06/03/2020 6 Entered in Error (pj, ) (Docket Text Modified by Clerk's Office on 6/3/2020)(pj, ).
(Entered: 06/03/2020)
06/03/2020 7 NOTICE of Correction regarding 6 . (pj, ) (Entered: 06/03/2020)
06/08/2020 8 MINUTE entry before the Honorable Gary Feinerman:Initial status hearing set for
8/3/2020 at 9:15 a.m. Initial Status Report shall be filed by 7/27/2020. Please see
Judge Feinerman's web page (http://www.ilnd.uscourts.gov) for details on the initial
status hearing and initial Status Report.Mailed notice. (jlj, ) (Entered: 06/08/2020)
06/09/2020 SUMMONS Issued as to Defendants BMO Financial Corp., BMO Harris Bank, N.A.
(ng, ) (Entered: 06/09/2020)
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IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

Prinzo & Associates, LLC, on behalf of itself and )
all others similarly situated, )
)
Plaintiff, )
v. ) Case No.: 1:20-cv-3256
)
BMO Harris Bank, N.A.; BMO Financial Corp., a )
Delaware corporation; and Does 1-100, inclusive, ) Jury Trial Demanded
)
Defendants. )
)
)

CLASS ACTION COMPLAINT

Plaintiff Prinzo & Associates, LLC (“Prinzo” or “Plaintiff”) brings this Class Action

Complaint and Demand for Jury Trial against BMO Harris Bank, N.A. (“BMO Harris Bank”),

Defendant BMO Financial Corp. (“BMO Financial” and, together with BMO Harris Bank,

“Defendants”) and Does 1 through 100, inclusive (collectively “Defendants”), seeking

compensation from Defendants, who refuse to comply with the CARES Act that requires it to

pay out of the compensation it received for processing PPP loans, for services Plaintiff Prinzo

and a large number of other agents rendered on behalf of recipients of Small Business

Administration (“SBA”) emergency loans. Plaintiff alleges as follows upon personal knowledge

as to itself and its own acts and experiences, and, as to all other matters, upon information and

belief.

1
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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, 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 that failure to provide true and

accurate information could subject the small business owner to five 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

professional accountants, tax preparers, financial advisors, attorneys, and other such agents

normally relied upon by small businesses.

2
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5. On March 27, 2020, Congress passed 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 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 loan. The amount of the total compensation and the

allocation between the lender and the agents assisting the borrowers in preparing the application

was specifically set out in the PPP. For the majority of 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 an amount equal to 1% of the loan

amount to the agent. 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.

7. Defendants are part of one of the largest banking groups in North America. They

have hundreds of branches and specialize in, inter alia, small business banking. Defendants

reported that they successfully processed more than 10,000 applications totaling over $4.4 billion

3
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in borrowed funds during the first round of funding (PPP I). 1 Defendants also participated in the

second phase of funding, PPP II. The average PPP loan approved by Defendants in PPP I was

approximately $440,000. Assuming a conservative average fee of four percent, they have,

accordingly, been allocated over $176 million in origination fees, from which they were required

to pay the agents who assisted the borrowers in submitting applications.

8. However, Defendants apparently decided that they do not need to complete the

final step of the process. They have refused to pay the agents who assisted PPP loan recipients

with their applications. Although applicable PPP regulations require Defendants to pay agents

who assist clients with loan applications, Defendants’ practice reflects a deliberate, firm-wide

practice that is not the result of oversight or inadvertence. Indeed, Defendants brazenly assert

that they “will not accept applications that are prepared by or with assistance of agents.” 2 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 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. The Defendants’ 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.”

9. These agents, including Plaintiff, have no other recourse for collecting fees for

assisting borrowers on PPP loan applications because the PPP regulations delegate the

1
BMO Harris Bank Affirms Commitment to Chicago Homeowners Impacted by the
COVID-19 Pandemic (Press Release, Apr. 29, 2020), available at
https://finance.yahoo.com/news/bmo-harris-bank-affirms-commitment-204100988.html (last
visited June 1, 2020).
2
See About the SBA Paycheck Protection Program, “Who is Eligible,” available at
https://www.bmoharris.com/main/personal/bmo-branches-coronavirus-update/ (last visited June
1, 2020).
4
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responsibility for paying agents to the lenders alone. And yet, Defendants have disregarded the

regulations and refused to pay agents who assisted small businesses in receiving PPP funds.

10. Plaintiff has been harmed by Defendants’ practice. As a CPA firm that does

payroll and other small business support functions, Plaintiff assisted a small business client who

submitted an application to Defendants and was then funded through the PPP program. Based on

information and belief, Defendants have received the 5% compensation related to that loan, but

have not paid Plaintiff its 1% agent fee related to the loan.

11. As a result of Defendants’ acts and omissions, Plaintiff and a large number of

others like it have been 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, and to force Defendants to account for their blatant violation of the PPP and to pay

agents their portion of the compensation.

PARTIES

12. Plaintiff Prinzo & Associates is a Certified Public Accounting (“CPA”) firm

organized under the laws of Pennsylvania, with its principal place of business located in

McMurray, Pennsylvania.

13. Defendant BMO Harris Bank, N.A., is a chartered national banking association

headquartered in Chicago, Illinois. BMO Harris Bank focuses on commercial and retail lending

from over 500 locations in numerous states around the country. BMO Harris Bank is a

subsidiary of the Bank of Montreal, which owns BMO Harris Bank through the U.S. bank

holding company BMO Harris Financial Corp.

5
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14. Defendant BMO Harris Financial Corp. is a Delaware entity, and the U.S. holding

company of Defendant BMO Harris Bank. BMO Harris Financial is headquartered in Chicago,

Illinois. Together, Defendants are North America’s eighth largest bank by assets, reporting over

$300 billion of assets as of Q1 2020.

15. In this Complaint, references made to any act of any Defendant shall be deemed

to mean that officers, directors, agents, employees, or representatives of the Defendants named in

this lawsuit committed or authorized such acts, or failed and/or 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 Defendants 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 Doe Defendants 1 through 100, but is informed and believes and thereon alleges that such

fictitiously-named defendants are responsible in some manner for the damages and unfair

business practices and violation of rights as described herein. Plaintiff will amend this

Complaint to state the true names, identities, or capacities of such fictitiously-named Defendants

when ascertained.

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 to the proposed Class and Subclasses, (a) at least

one member of the proposed Class, which consists of at least 100 members, is a citizen of a

different state than Defendants; (b) the claims of the proposed Class Members exceed

$5,000,000 in the aggregate, exclusive of interest and costs, and (c) none of the exceptions under

that subsection apply to this action.

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18. Personal jurisdiction over Defendants is proper because Defendants transact

business in the State of Illinois, and a substantial number of the events giving rise to the claims

alleged herein took place in Illinois.

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 judicial District pursuant to 28 U.S.C. § 1391(b)(2)

because a substantial part of the events, acts or omissions giving rise to the claim occurred in this

judicial District, and Defendants are headquartered in this judicial District.

FACTUAL 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.” 3

3
See Business Loan Program Temporary Changes; Paycheck Protection Program, 13
CFR Part 120, Interim Final Rule (“SBA PPP Final Rule”).
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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. Business 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 to overwhelming public pressure, the U.S. Senate passed the Coronavirus Aid,

Relief, and Economic Security Act, or the CARES Act. The CARES Act was passed by the

House of Representatives the following day and signed into law by President Trump on 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 business with

fewer than five hundred employees, called the “Paycheck Protection Program” (“PPP”) 4. 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 Small Business Administration

(“SBA”). 5

27. Basically, PPP loans operate more like grants if the recipient follows certain rules,

including that at least 75 percent of the loan goes toward payroll. 6 Businesses that follow the

4
The first phase of the PPP was for $349 billion, and when that quickly ran out, a second
phase was funded for $310 billion.
5
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).
6
85 Fed. Reg. 20812 § (2)(e); id. at 20813 § (2)(o).
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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. 7

28. The SBA was charged with creating the PPP implementing regulations. It 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

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

face a crush of 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. 8

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

7
Id. at 20813 § (2)(j).
8
Id.
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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 an 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.” 9

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 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. 10

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 documents for the client’s application; (ii) the client

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

9
U.S. Dep’t of Treasury, Paycheck Protection Program (PPP) Information Sheet Lenders,
https://home.treasury.gov/system/files/136PPP%20%Lender%20Information%20Fact%20Sheet.
pdf (last accessed May 25, 2020).
10
85 Fed. Reg. 20816 § (4)(c).
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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, Defendants are refusing to pay the fees of agents for their

assistance in providing an accurate and truthful application for funding.

36. This refusal is a company-wide policy. Indeed, Defendants assert that they “will

not accept applications that are prepared by or with assistance of agents.” 11 Defendants make no

similar requirement of their other lending as a “preferred” SBA lender. 12

37. This policy of refusal to pay to agents “Agent Fees” that are due, 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.

38. This policy stands in stark contrast to Defendants’ public statements touting BMO

Harris Bank as a “preferred” SBA lender and that it succeeded in securing SBA approval for

$4.4 billion in total funding for more than 10,000 borrowers during the first phase of PPP

funding. 13

39. Refusing to pay Agent Fees is also inconsistent with agreements Defendants made

in order to become approved PPP lenders. Specifically, based on information and belief,

11
See About the SBA Paycheck Protection Program, “Who is Eligible,” available at
https://www.bmoharris.com/main/personal/bmo-branches-coronavirus-update/ (last visited June
1, 2020).
12
See Loan/line of credit application, available via download link at
https://www.bmoharris.com/main/business-banking/business-funding/sba-loans/ (last viewed
June 1, 2020).
13
BMO Harris Bank Affirms Commitment to Chicago Homeowners Impacted by the
COVID-19 Pandemic (Press Release, Apr. 29, 2020), available at
https://finance.yahoo.com/news/bmo-harris-bank-affirms-commitment-204100988.html (last
visited June 1, 2020).
11
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Defendants were required to execute the “CARES Act Section 1102 Lender Agreement” for each

loan. 14 This submission 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.”

40. To the extent Defendants had to certify, at any point, that they would follow the

PPP’s regulations in making PPP loans, they were not being truthful. Defendants’ policy to

refuse to pay Agent Fees directly violates the PPP’s implementing regulations.

41. It is pursuant to these representations that BMO Harris Bank was able to process

over 10,000 PPP applications worth over $4.4 billion during just the first round of funding.

BMO Harris Bank also processed PPP loans during the second round of PPP funding, until it

stopped accepting new applications effective April 28, 2020. Even just among the first phase

loans, Defendants’ average loan was approximately $440,000. Assuming a conservative average

fee of four percent, Defendants have, accordingly, been allocated over $176 million in

origination fees, from which they were required to pay agents.

42. Knowing that they were required to pay agents a percentage of PPP loan

origination fees if an agent assisted an applicant in preparing and submitting the application,

Defendants elected not to ask borrowers whether they utilized an “agent” to assist them in the

14
U.S. Small Bus. Admin., CARES Act Section 1102 Lender Agreement,
https://www.sba.gov/sites/default/files/2020-04/PP--Agreement-for-New-Lenders-Banks-Credit-
Unions-FCS-w-seal-fillable.pdf (last accessed May 25, 2020).
12
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application process and have not paid Plaintiff or similarly situated agents compensation from

funded PPP loans.

PLAINTIFF PRINZO & ASSOCIATES’ EXPERIENCE

43. Plaintiff Prinzo & Associates is a Pennsylvania CPA firm which has provided

financial services to clients in sixteen different states and four different countries since 1991,

including bookkeeping, taxation, payroll services, and financial planning and consulting for

small businesses and individuals. In March, Plaintiff became aware that the CARES Act had

been signed into law. Plaintiff, 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.

44. Plaintiff’s professionals spent considerable time familiarizing themselves with the

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.

45. In or about March, April, and May, 2020, Plaintiff assisted many clients in the

gathering and analysis of their documents, as well as the calculations and preparation of the loan

applications.

46. Based on the SBA Regulations, Plaintiff 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.

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47. For its clients, Plaintiff had the primary role in calculating the payroll information

needed for the application, and providing the clients’ accounting information, advice, and

documentation in support of the PPP loan application. Plaintiff will have ongoing responsibility

for advising clients on the forgiveness of the PPP loan.

48. Plaintiff provided all of these services to a client who obtained a PPP loan from

BMO Harris Bank in the amount of $13,583. Based on information and belief, BMO Harris

Bank was paid or will be paid, an origination fee of $679.15, of which Plaintiff is entitled to

$135.83 (1% of total loan amount) of that fee for its work as the agent of the borrower in

submitting the application and documentation.

49. Defendants did not comply with the SBA Regulations because they have not paid

Plaintiff the agent fees to which it is entitled despite awarding PPP loans to Plaintiff’s client for

whom Plaintiff acted as a PPP agent. Instead, Defendants retained all of the Agent Fees for

themselves.

50. As a result of Defendants’ 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

51. 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 BMO Harris Bank which
resulted in a loan being funded under the PPP. Plaintiff further brings this
action on behalf of a subclass of individuals defined as follows:

Illinois Subclass. All persons and businesses in Illinois who served as an
agent in relation to, and provided assistance to a client in relation to, the

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preparation and/or submission of a client’s PPP loan application to BMO
Harris Bank which resulted in a loan being funded under the PPP.

52. Excluded from this Class and Subclass (hereinafter “the Class” unless otherwise

indicated) are: (1) any Judge or Magistrate presiding over this action and members of their

families; (2) Defendants, Defendants’ subsidiaries, parents, successors, predecessors, and any

entity in which Defendants 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 of otherwise released; (5) Plaintiff’s counsel and Defendants’ counsel; and (6) the

legal representatives, successors, and assigns of any such excluded persons.

53. 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 any other time, based upon new facts obtained during discovery.

54. 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.

55. 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 Defendants’ conduct violates the CARES Act and/or its implementing

regulations;

b. Whether Defendants are required to compensate Plaintiff out of the origination

fees obtained from SBA through the PPP;

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c. Whether Plaintiff is entitled to compensation by Defendants for its work assisting

in its client’s PPP loan application;

d. Whether Defendants’ conduct was willful and knowing;

e. Whether Defendants submission of completed Form 2484 constituted an

agreement;

f. Whether Defendants breached that agreement;

g. Whether Defendants’ conduct was pursuant to a company-wide policy or policies;

and

h. Whether Defendants’ conduct constitutes unjust enrichment.

56. 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 Defendants’ actions.

Thus, it would be difficult and not economical for the individual members of the Class to obtain

effective relief from Defendants’ misconduct. Even if members of the Class could 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 Compliant. 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.

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57. 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

Defendants’ uniform wrongful conduct.

58. 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 consumer fraud and 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 Defendants’ uniform conduct. Plaintiff also has no interests antagonistic to those of

the Class, and Defendants have 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.

59. Ascertainability: Plaintiff is informed and believes that Defendants keep

extensive computerized records of their loan applications through, inter alia, computerized loan

application systems and federally-mandated record-keeping practices. Defendants have 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,

and thereafter, a notice of this action can be disseminated in accordance with due process

requirements.

60. Defendants have 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.

CLAIMS FOR RELIEF

COUNT I – DECLARATORY RELIEF

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61. Plaintiff incorporates by reference each preceding and succeeding paragraph as

though fully set forth at length herein.

62. Plaintiff and the Class represent individuals who are “agents” as defined by the

SBA regulations for the PPP.

63. Plaintiff and the putative Class have assisted clients with the process of preparing

applications, and applying for, PPP loan funds. Defendants, despite the clear command of the

SBA’s PPP regulations, have refused to make these payments. An actual controversy has arisen

between Plaintiff and the Class, on one hand, and Defendants on the other, wherein Defendants

deny by their refusal to pay that they are obligated to pay Plaintiff’s and the Class’s “agent” fees

pursuant to PPP regulations.

64. Plaintiff and the Class seek a declaration, in accordance with SBA regulations and

pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, that Defendants are 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.

COUNT II – BREACH OF CONTRACT, THIRD PARTY BENEFICIARY

65. Plaintiff incorporates by reference each preceding and succeeding paragraph as

though fully set forth at length herein.

66. Based on information and belief, Defendants entered into an agreement with the

SBA in connection with the loans funded in the PPP.

67. The agreements required that Defendants would adhere to all PPP rules and

regulations and incorporate these requirements by reference. Defendants and the SBA

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understood that agents involved in the preparation and submission of PPP loan applications

would need to be compensated.

68. 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.

69. Defendants understood that Plaintiff and the Class were intended beneficiaries in

this agreement. Nevertheless, Defendants have refused to live up to their end of the bargain, and

have uniformly refused to pay agent fees to Plaintiff and the Class.

70. By refusing to pay agent fees in accordance with SBA regulations, Defendants are

violating the terms of their agreement, thereby damaging Plaintiff and the Class. Plaintiff and

the class thus ask this Court to award them damages sufficient to make them whole, and

compensate them for work they did in preparing clients’ PPP loan application for loans that were

funded, consequential damages, and all other damages available at law.

COUNT III - VIOLATIONS OF THE ILLINOIS CONSUMER FRAUD AND
DECEPTIVE BUSINESSES PRACTICES ACT
(815 ILCS 505 et seq.)

71. Plaintiff incorporates by reference each preceding and succeeding paragraph as

though fully set forth at length herein.

72. The Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA)

declares unlawful any use or employment of any unfair or deceptive acts or practices in the

conduct of any trade or commerce. 815 ILCS 505/2 et seq.

73. 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.

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74. Defendants have uniformly refused to pay these fees to Plaintiff and the Class.

As a result, Defendants have engaged in unlawful conduct that has cost Plaintiff and the Class

millions of dollars in fees, collectively.

75. Defendants have represented that they were processing SBA’s PPP loans in a

lawful manner, consistent with the PPP laws and regulations. In refusing to pay agent fees as set

forth in the PPP loan regulations, Defendants render these representations materially false.

76. Defendants have also engaged in “unfair” business practice through this conduct,

as well as set forth above.

77. Defendants’ conduct implicates consumer protection concerns generally.

78. As a direct and proximate result of the foregoing acts and practices, Defendants

have received, or will receive, income, profits, and other benefits, which they would not have

received if they had not engaged in the violations of the ICFA described in this Complaint.

79. Because Plaintiff and the Class have been harmed by Defendants’ deceptive and

unfair business practice of refusing to pay agents who assist in the preparation and submission of

PPP loan application materials, Plaintiff asks that they be held liable for restitution, be enjoined

from further refusing to pay such agent fees, and that Plaintiff be awarded all other such relief

available by law.

COUNT IV – UNJUST ENRICHMENT

80. Plaintiff incorporates by reference each preceding and succeeding paragraph as

though fully set forth at length herein.

81. 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.

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82. Here, Defendants have 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 Defendants are refusing to pay

those fees, in contravention of PPP regulations.

83. Principles of justice, equity, and good conscience demand that Defendants not be

allowed to retain these agent fees. Defendants have fallen short in their duties as lenders, 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.

84. Accordingly, Defendants must disgorge the portion of any and all PPP origination

fees that they have retained to the extent they are due to Plaintiff and the putative Class in their

capacities as agents.

COUNT V – CONVERSION

85. Plaintiff incorporates by reference each preceding and succeeding paragraph as

though fully set forth at length herein.

86. 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 Defendants for

processing the funded PPP loan applications of Plaintiff’s client and the Class’s clients.

87. 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.

88. 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.”

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89. 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, through applications made with Defendants. As such, Plaintiff has a right to immediate

possession of the agent fees.

90. Although Plaintiff is entitled to agent fees under the SBA regulations, Defendants

have refused to provide those fees to Plaintiff and the class, thus keeping the agent fees that were

paid to it for purposes of being passed on to the agents. By withholding these fees, Defendants

have maintained wrongful control over Plaintiff’s property inconsistent with Plaintiff’s

entitlements under the SBA regulations.

91. Defendants committed civil conversion by retaining monies owed to Plaintiff and

Class members.

92. Plaintiff and the Class have been injured as a direct and proximate cause of

Defendants’ misconduct. Plaintiffs, as such, seek recovery from Defendants in the amount of the

owed agent fees, and all other relief afforded under the law.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Prinzo & Associates, LLC, 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 Defendants’ actions, as set out above, constitute

unjust enrichment, conversion, breach of contract on behalf of third-party beneficiary, violate the

ICFA, 815 ILCS 505/1 et seq., and violate the SBA’s PPP regulations;

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and punitive damages available under the law and caused by Defendants’ conduct, including

without limitation, actual damages for past, present and future expenses caused by Defendants’

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-judgment 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.

Dated: June 2, 2020 Respectfully submitted,

By: /s/ Derek Y. Brandt
Derek Y. Brandt
Leigh M. Perica
MCCUNE WRIGHT AREVALO LLP
231 North Main Street, Suite 20
Edwardsville, Illinois 62025
Telephone: (618) 307-6116
Facsimile: (618) 307-6161
Email: dyb@mccunewright.com
lmp@mccunewright.com

Richard D. McCune*
Michele M. Vercoski*
MCCUNE WRIGHT AREVALO LLP
18565 Jamboree Road, Suite 550
Irvine, California 92612
Telephone: (909) 557-1250
Facsimile: (909) 557-1275
Email: rdm@mccunewright.com
mmv@mccunewright.com
Attorneys for Plaintiff and Putative Class
* Application for admission pro hac vice to be submitted

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JURY DEMAND
Plaintiff, on behalf of itself and the putative Class, demands a trial by jury on all issues so
triable.
MCCUNE WRIGHT AREVALO LLP

By: /s/ Derek Y. Brandt
Derek Y. Brandt
Attorney for Plaintiff

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Exhibit F — Agent Fee Litigation (Dkt. 98.8)

What This Document Is

Factual Summary

Key Facts

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