Class Action Complaint — American Video Duplicating v. Citigroup (C.D. Cal. 2020) (C.D. Cal.)

Record facts

U.S. District Court for the Central District of California · No. 2:20-cv-03815-ODW-AGR · Doc. 1 · 2020-04-27 · Docket on CourtListener

Full text

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e 2:20-cv-03815-ODW-AGR Document1 Filed 04/27/20

GERAGOS & GERAGOS

A PROFESSIONAL CORPORATION
LAWYERS
HISTORIC ENGINE Co. No. 28
644 SOUTH FIGUEROA STREET
Los ANGELES, CALIFORNIA 90017-341 1
TELEPHONE (213) 625-3900
FACSIMILE (213) 232-3255
GERAGOS@GERAGOS.COM

MARK J. GERAGOS SBN 108325
mark@geragos.com

BEN J. MEISELAS SBN 277412
ben@geragos.com

MATTHEW M. HOESLY SBN 289593

mhoesly@geragos.com

GRAYLAW GROUP, INC.
21515 Hawthorne Blvd, Suite 450
Torrance, CA 90503

Tel: (310) 540-2000 ext. 274
Fax: (310) 540-6609
MICHAEL E. ADLER
meadler@graylawinc.com

SBN 236115

DHILLON LAW GROUP INC.
177 Post Street, Suite 700

San Francisco, California 94108
Telephone: (415) 433-1700
Facsimile: (415) 520-6593

HARMEET K. DHILLON SBN: 207873
harmeet@dhillonlaw.com
NITOJ P. SINGH SBN: 265005

nsingn@dhillionlaw.com
Attorneys for Plaintiffs and the Proposed Class

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

AMERICAN VIDEO DUPLICATING,
INC., a California corporation; TUSH LAW
LTD., a California limited partnership, and
KENNETH M, HAHN, a sole proprietor,
DBA CAL STATE FINANCIAL,
individually and on behalf of a class of
similarly situated businesses and individuals,

Plaintiffs,
vs.

CITIGROUP INC., CITIBANK, N.A.; U.S.
BANCORP., U.S. BANK, N.A.;

Case No.::

CLASS ACTION COMPLAINT FOR
DECLARATORY RELIEF AND
DAMAGES

(1) DECLARATORY RELIEF

(2) UNFAIR BUSINESS
PRACTICES IN VIOLATION
OF CALIFORNIA BUSINESS &
PROFESSIONS CODE § 17200,
et seq.

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JPMORGAN CHASE & CO., JPMORGAN (3) UNJUST ENRICHMENT
CHASE BANK, N.A., WELLS FARGO &
CO., WELLS FARGO N.A.; BANK OF DEMAND FOR JURY TRIAL

AMERICA CO., BANK OF AMERICA
N.A.; MUFG BANK LTD., MUFG UNION
BANK N.A.; LIVE OAK BANCSHARES
INC., LIVE OAK BANKING COMPANY;
PAYPAL HOLDINGS, INC.; NEWTEK
BUSINESS SERVICES, INC.; HARVEST
SMALL BUSINESS FINANCE; and; DOE
LENDERS 1 to 4,975, inclusive,

Defendants.

Plaintiffs American Video Duplicating, INC., Tush Law, LTD., and Kenneth M. Hahn,
a sole proprietor, dba Cal State Financial, bring this class action complaint on behalf of
themselves and those similarly situated (hereinafter “Plaintiffs) against Defendants Citigroup,
INC., Citibank N.A., U.S. Bancorp, U.S. Bank N.A., JPMorgan Chase & CO., JPMorgan
Chase Bank, N.A., Wells Fargo & CO., Wells Fargo N.A.; Bank of America CO., Bank of
America N.A.; MUFG Bank LTD., Union Bank of California N.A.; Live Oak Bancshares
Inc., Live Oak Banking Company; PayPal Holdings, Inc; Newtek Business Services, Inc.;
Harvest Small Business Finance, LLC.; and DOE LENDERS 1 to 4,975, inclusive,
(hereinafter “Defendants”’) to stop Defendants’ unlawful conduct and to obtain monies owed
as a result of Defendants’ conduct. For their class action complaint, Plaintiffs allege as
follows based upon their personal knowledge and upon information and belief, including
investigation conducted by their attorneys.

PARTIES
1, Plaintiff, American Video Duplicating, Inc. (““AVD”) is a California

corporation organized and authorized to do business and doing business in the State of
California. Among providing other services, AVD is a consulting firm in good standing
with the State of California. President, David M. Wohl (“Wohl”), has been a business
consultant since 1996. In the 1980s, Wohl passed all four parts of the CPA Exam. Wohl

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was licensed as a CPA on or about December 16, 2010. AVD is located at 12722 Riverside
Drive, #204, Valley Village, CA 91607.

2. Plaintiff, Tush Law Ltd., (“TLL”) is a California limited partnership
authorized to do business and doing business in the State of California. TLL is a law firm
in good standing with the State of California. President, Alan S. Turlington (“Turlington”)
received his JD from Georgetown University Law Center and became a licensed California
attorney on December 3, 2013. Turlington founded TLL on January 3, 2018. TLL is located
at 2024 N. Broadway, Suite 204, Santa Ana, CA 92706.

3. Plaintiff, Kenneth M. Hahn, DBA Cal State Financial (“CSF”) is a sole
proprietorship organized and authorized to do business and doing business in the State of
California. CSF has been in business for approximately twenty-nine (29) years, and Hahn
has been a Registered Tax Preparer in good standing with the State of California for seven
(7) years. CSF is located at 1108 Sartori Ave., #200, Torrance, CA 90501.

4. At all relevant times, Defendant, Citigroup, Inc., is a Delaware corporation
and the parent company of Citibank., N.A. Citigroup, Inc., engages in the provision of
financial products and services in all 50 states and internationally. Citigroup, Inc., is
headquartered in New York, New York. Through its subsidiaries, Citigroup, Inc., conducts
substantial business in the State of California.

5 At all relevant times, Defendant Citibank N.A., (“Citi”) is the consumer
division of financial services multinational Citigroup, Inc and is headquartered in New
York, New York. Citi conducts substantial business in this District.

6. At all relevant times, Defendant U.S. Bancorp, is a Delaware corporation
and the parent company of U.S. Bank., N.A. U.S. Bancorp is an American bank holding
company that provides banking, investment, mortgage, trust and payment services to
individuals, businesses, governmental entities, and other financial institutions. U.S.
Bancorp is headquartered in Minneapolis, Minnesota. Through its subsidiaries, U.S.
Bancorp conducts substantial business in the State of California.

7. At all relevant times, Defendant U.S. Bank N.A., (“US Bank”) operates

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more than 3,000 banking offices and nearly 5,000 ATMS, and provides a comprehensive
line of banking, brokerage, insurance, investment, mortgage, trust and payment-services
products to consumers, businesses and institutions. US Bank is headquartered in
Minneapolis, Minnesota, and conducts substantial business in this District.

8. At all relevant times, Defendant JPMorgan Chase & CO., is a Delaware
corporation and the parent of all Chase entities. JPMorgan Chase & CO. is a diversified
financial services company providing banking, insurance, investments, mortgage banking,
and consumer finance to individuals, businesses and institutions in all 50 states and
internationally. Chase & CO. is headquartered in New York, New York. Through its
subsidiaries, JPMorgan Chase & CO. conducts substantial business within this District.

9, At all relevant times, Defendant JPMorgan Chase Bank N.A., (“Chase”) is
the main baking of Chase & CO. and is headquartered in Columbus, Ohio. Chase conducts
substantial business within this District.

10. At all relevant times, Defendant Wells Fargo & CO. is a Delaware
corporation and the parent company of Wells Fargo Bank N.A. Wells Fargo & CO. is an
American multinational financial services company headquartered in San Francisco,
California. Through its subsidiaries, Wells Fargo & CO. conducts substantial business
within this District.

tl. At all relevant times, Defendant Wells Fargo Bank N.A., (“Wells Fargo”) is
the national bank and subsidiary of Wells Fargo & CO. Wells Fargo is headquartered in San
Francisco, California, and conducts substantial business within this District.

12. At all relevant times, Defendant Bank of America, CO., is a Delaware
corporation and the parent company of Bank of America N.A. Bank of America, CO., is an
American multinational investment bank and financial services company and headquartered
in Charlotte, North Carolina. Through its subsidiaries, Bank of America, CO. conducts

substantial business within this District.

13. At all relevant times, Defendant Bank of America, N.A., (“BofA”) is a
federally chartered bank and a subsidiary of Bank of America, CO., BofA is headquartered

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in Charlotte, North Carolina and conducts substantial business within this District.

14, At all relevant times, Defendant MUFG Bank Ltd., is a Japanese bank and
wholly owns MUFG Union Bank, N.A. (““MUFG”). MUFG is a subsidiary of MUFG Bank
Ltd., and an American full-service bank with 398 branches in California, Washington, and
Oregon. MUF is headquartered in New York, New York, and conducts substantial business
within this District.

15. At all relevant times, Defendant Live Oak Bancshares Inc., is a North
Carolina corporation and the holding company of Live Oak Banking Company. Live Oak
Bancshares is in the business of State commercial banks and headquartered in Wilmington,
North Carolina.

16.  Atall relevant times, Defendant Live Oak Banking Company (“Live Oak”)
is a subsidiary of Live Oak Bancshares, Inc. Live Oak specializes in originating business
loans that are guaranteed by the SBA. Live Oak is headquartered in Wilmington, North
Carolina, and conducts substantial business within the State of California.

17. At all relevant times, Defendant PayPal Holdings, Inc. (“PayPal’’) is a
Delaware corporation and authorized to do business and conducting business in the State of
California. PayPal is an American company operating a worldwide online payment system
that supports online money transfers and serves as an electronic alternative to traditional
paper methods like checks and money orders. PayPal is headquartered in San Jose,
California.

18. At all relevant times, Defendant Newtek Business Services, Inc. (“Newtek”)
is a New York corporation and authorized to do business and conducting business in the
State of California. Newtek is a services business that provides solutions designed to help
organizations grow sales, reduce, costs, and minimize risk. Newtek is headquartered in New
York, New York.

19. At all relevant times, Defendant, Harvest Small Business Finance
(“Harvest”) is a limited liability company organized and authorized to do business and

doing business in the State of California. Harvest is a non-bank lender with the specific goal

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of serving small business borrowers and is located at 24422 Avenida De La Carlota, Suite
232, Laguna Hills CA 92653.

20. In this Complaint, when 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.

21. Plaintiffs are unaware of the names, identities, or capacities of the
Defendants sued as Doe Lenders 1 to 4,975, but are informed and believe and thereon allege
that such fictitiously-named defendant is responsible in some manner for the damages and
abridgment of rights described in this Complaint. Plaintiffs will amend this Complaint to
state the true names, identities, or capacities of such fictitiously-named defendants when

ascertained.
JURISDICTION AND VENUE

22. The Court has original jurisdiction over this Action under the Class Action
Fairness Act, 28 U.S.C. §1332(d), because this is a class action in which (1) at least some
members of the proposed Class have different citizenship from Defendant(s); (2) the proposed
class consists of more than 100 persons or entities; and (3) the claims of the proposed members
of the Class exceed $5,000,000 in the aggregate.

23. This Court has personal jurisdiction over Defendants because Defendants do
business in this District, and a substantial number of the events giving rise to the claims alleged

herein took place in California.

24. The 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 given that Plaintiffs applied for the PPP loans while in this District and Defendants,

marketed, promoted, and took applications for the PPP loans in this District.

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1 BACKGROUND

2 25. On January 21, 2020, the Center for Disease Control and Prevention (“CDC”)

3 || confirmed the first U.S. case of a new coronavirus, also known as COVID-19.

4 26. On January 30, 2020, the World Health Organization (“WHO”) declared the

5 || coronavirus outbreak to be a “public health emergency of international concern.”

6 27. On March 11, 2020, the WHO declared that the spread of COVID-19 had

7 || become a pandemic.

8 28. On March 19, 2020, Governor Gavin Newsom issued an executive Stay at

9 || Home Order in the State of California to prevent the spread of COVID-19.
10 29. On March 25, 2020, in response to the economic damage perpetrated by the
11 |} COVID-19 crisis, The United States Senate passed the Coronavirus Aid, Relief, and Economic
12 || Security Act, also known as the CARES Act. The CARES Act was passed by the House the
13 || following day and signed into law by President Trump on March 27, 2020. This legislation
14 |] included $377 billion in federally funded loans to small businesses and a $500 billion
15 |} governmental lending program.
16 30. Aspart of the CARES Act, the Federal Government created a $349 billion loan
17 || program, as referred to as the “Paycheck Protection Program” (PPP), for small businesses with
18 || funds available for loans/grants originated from February 15 through June 30, 2020. The PPP
19 || was created to provide American small businesses with eight weeks of cash-flow assistance,
20 || with a certain percentage forgivable if utilized to retain employees and fund payroll. The loans
21 || are backed by the United States Small Business Administration (SBA). The SBA is a United
22 || States government agency that provides support to entrepreneurs and small businesses. The
23 || loans were backed by the Federal Government and SBA but administered by private banks.
24 31. The United States Department of the Treasury announced on April 3, 2020,
25 |} that small businesses and sole proprietors could apply and receive loans to cover their payroll
26 || and other expenses through SBA lenders (the “Lenders”). Beginning on April 10, 2020,
27 || independent contractors and self-employed individuals could apply as well. !
28 | https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf

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32. On April 24, 2020, President Trump signed the Paycheck Protection Program
and Health Care Enhancement Act (““PPPEA”’). The PPPEA added an additional $310 billion
in PPP funding, bringing the total PPP funds available to $659 billion.

33. Under the United States Department of the Treasury’s PPP Information Sheet
Lenders (“PPP ISL”), guidance is provided that Lenders will be compensated for processing
fees based on the balance of the financing at the time of final disbursement.’ SBA will pay
Lenders fees for processing PPP loans in the following amounts:

e Five (5) percent for loans of not more than $350,000;

e Three (3) percent for loans of more than $350,000 and less than
$2,000,000; and

e One (1) percent for loans of at least $2,000,000.

34. | The PPP ISL not only includes compensation for Lenders but also for agents.

“An ‘Agent’ is an authorized representative and can be:

e An attorney;

e An accountant;

e A consultant;

e Someone who prepares an applicant’s application for financial
assistance and is employed and compensated by the applicant;

e Someone who assists a lender with originating, disbursing, servicing,
liquidating, or litigating SBA loans;

e A loan broker; or

e Any other individual or entity representing an applicant by conducting
business with the SBA.”*

35. Additionally, PPP ISL guidance provides 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.

2 https://home.treasury. gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf
3 Id.
4 Id.

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The total amount that an agent may collect from the lender for assistance in preparing an
application for a PPP ”° loan is as follows:
e One (1) percent for loans of not more than $350,000;
e 0.50 percent for loans of more than $350,000 and less than $2 million;
and
e 0.25 percent for loans of at least $2 million.

36. As mentioned above, the PPP ISL established limits on agent fees. The SBA
Regulations and Treasury Guidance determined that the agent fee limits set forth above are
reasonable based upon the application requirements and the fees that Lenders receive for
making PPP loans.

37. Within this context, Defendants served as the intermediary between small
businesses and federal funds. Plaintiffs served as the Agent for the small businesses applying

for the PPP loans with the Defendants.

38. Based on information and belief, Defendants received approval from the SBA
and funded loans for numerous businesses, yet failed to issue compensation to Plaintiffs (or
“Agents”), that facilitated the loan process between Lenders and applicants.

39. Defendants are refusing to pay or are willing to pay only a partial percentage
of the monies owed to Agents.

40. As calculated on Attachment A, Plaintiffs, on behalf of themselves and the
proposed Class (as defined below), seek $3,848,597,082.00, to be set aside pro-rata by the
banks for distribution to a designee of the borrower of the PPP loan.

FACTUAL ALLEGATIONS
41. On or about March 25, 2020, Plaintiffs became aware that the CARES Act had

been signed into law. Plaintiffs, knowing that the COVID-19 crisis would seriously impact its

clients’ businesses, sought to obtain a PPP loan through various Lenders on behalf of its

clients.

42. Each Plaintiff spent between 50-100 hours familiarizing itself with the Act, and

> Id. (Emphasis added)

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in particular, Section 1102, which temporarily permits SBA to guarantee 100% of 7(a) loans
under PPP and Section 1106, which provides forgiveness of up to the full principal amount of
qualifying loans guaranteed under the “Paycheck Protection Program”.
43. In or about April 2020, Plaintiffs assisted their clients in the gathering and
analysis of their documents, as well as the calculation and preparation of their Applications.
44. Based on PPP ISL, Plaintiffs understood that they were not allowed to charge
their clients a fee relating to the Application and that the only compensation they would receive
would be the mandated Agent fees.
45. Plaintiffs spent between two (2) and ten (10) hours on each application,
depending on the complexity of the client and the amount of available data.
46. To fill out the Applications, Plaintiffs assisted clients in gathering the required
information and filling out the applications, including the following documents, if applicable:
a. Loan Calculator Spreadsheet;
b. SBA Form 2483 — Each Owner 20% or more or Officer;
c. Addendum A: Affiliates — Each Owner 20% or more must complete;
d. Information if the applicant received an SBA Economic Injury Disaster Loan
(“EIDL”);
e. Certificate of Beneficial Ownership Interest - Each Owner 20% or more must
complete;

Driver’s License for each 20% or more owner;

rh

Articles of Incorporation or Articles of Organization;

2019 IRS/State Payroll Forms: 940 or all four quarterly 941;

a 9

2019 Payroll Summary Report by Employee;

pate

j. 2019 Health Insurance Premium Paid — Each monthly statement or year-end

summary;

k. 2019 Retirement Matching Plan Paid —- Each monthly statement or year-end

summary;

1. 2020 Ist QTR 941 Form;

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m. January 2020 Payroll Summary by Employee;

n. February 2020 Payroll Summary by Employee;

o. March 2020 Payroll Summary by Employee;

Health Insurance Premium Paid — January, February, and March 2020;

2S 'S

Retirement Matching Plan Paid — January, February, and March 2020;

Wiring Instruction; and

m

s. Copy of most recent Business Bank Statement (collectively, letters a—s above
may herein be referred to as the “Application”).

47, In most instances, the Application had to be amended or redone at least once
as the SBA or the Lenders changed the forms, added new documentation and addendum
requirements, or admittedly refused to compensate the mandated Agent fees. Plaintiffs spent
additional hours making the required changes, and in some cases, resubmitted the entire
Application because Defendants required Plaintiff to do so, or because Defendants outright
refused to compensate Plaintiffs.

48. Plaintiffs believed in good faith that they would receive the Agent fees from
the Lenders upon funding of their clients’ Applications.

49. On information and belief, Defendants did not comply with the SBA or
Treasury Regulations in distributing PPP funds. Instead, Defendants either retained all of the

Agent Fees or stated that they would only pay to the Agent 50% of the required fees.

50. As a result of the conduct of Defendants, Plaintiffs suffered financial harm,
wrongfully lost the opportunity to collect compensation during unprecedented economic
times, and generally lost economic opportunities to conduct business due to decreased
operating capital.

CLASS ACTION ALLEGATIONS

51. As noted above, Plaintiffs bring this action on behalf of themselves and all

others similarly situated as a state and nationwide Class, defined as indicated below.
52. Plaintiffs seek to represent a Class composed of and defined as follows:

a. All agents as defined by the SBA Regulations that facilitated small businesses

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to receive a loan under the PPP, i.e., met the criteria for eligibility and were not
otherwise ineligible, between February 15 and June 30, 2020, who timely
applied for a PPP loan through various banking institutions and were processed
and approved for funding.
b. An “Agent” as defined by the SBA is as follows:
i. an attorney,
ii. an accountant,
ili. a consultant,
iv. someone who prepared an applicant’s application for financial assistance
and is employed and compensated by applicant,
v. someone who assists a lender with originating, disbursing, servicing
liquidating, or litigating SBA loans,
vi. aloan broker, or
vii. any other individual or entity representing an applicant by conducting
business with the SBA.

53. Plaintiffs reserve the right to expand, limit, modify, or amend this Class
definition, including the addition of one or more subclasses, in connection with Plaintiffs’
motion for class certification, or any other time, based upon, inter alia, changing circumstances
and/or new facts obtained during discovery.

54. Numerosity: The Class is composed of thousands of Agents (the “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: There is a well-defined community of interest 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. Did Defendants comply with all applicable SBA Regulations in processing
Applications for PPP funds and in distributing PPP funds?
b. Did Defendants comply with their legal obligations under the terms of the

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56.

acted and failed to act on grounds generally applicable to Plaintiffs and other Class Members.

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CARES Act as a lender of the PPP funds?

. Did Defendants have a policy and/or practice of failing to compensate Agents

who facilitated PPP loans to the detriment of the Class?

. Did Defendants prioritize their origination fees over abiding by the CARES Act

and PPP specifications?

. Did Defendants’ conduct constitute an “unfair business practice” under

California Business & Professions Code § 17200, et seq.?
Did Defendants possess exclusive knowledge of material facts, with respect to
the Application process, i.e., that the Agents were not receiving compensation

when assisting applicants with PPP loan process?

. Did Defendants actively conceal a material fact or facts from the Plaintiffs, i.e.,

that the Agents were not going to receive their earned fees from assisting with

the Applications?

. Whether Defendants’ conduct, as alleged herein, was intentional and knowing?

Whether Class Members are entitled to damages and/or restitution; and if so,
what is the amount of revenues and/or profits Defendants received and/or was
lost by Class Members as a result of the conduct alleged herein?

Whether Defendants are likely to continue to mislead the public and Class
Members and continue to violate SBA Regulations regarding paying Agent their
earned fees under the CARES Act; and

. Whether Plaintiffs and Class Members are entitled to an award of reasonable

attorney’s fees, pre-judgment interest and costs of suit.

Superiority: In engaging in the conduct described herein, Defendants have

Such conduct requires the Court’s imposition of uniform relief to ensure compatible standards
of conduct toward Class Members. A class action is superior to all other available means for
the fair and efficient adjudication of Plaintiffs’ and the Class Members’ claims. Few, if any,

Class Members could afford to seek legal redress of the wrongs complained herein on an

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individual basis. Absent class action, Class Members and the general public would not likely
recover, or have the chance to recover, damages or restitution, and Defendants would be
permitted to retain the proceeds of their misdeeds.

Di Typicality: Plaintiffs’ claims are typical of, and are not antagonistic to, the
claims of all Class Members. Plaintiffs and the Class Members have all been deceived by
Defendants’ unfair and unlawful PPP loan application and funding practices, as alleged herein.
The factual and legal bases of Defendants’ liability to Plaintiffs and each Class Member as a
result of Defendants’ actions are described herein.

58. Adequacy: Plaintiffs are adequate representatives of the Class because they are
members of the Class, and Plaintiffs’ interests do not conflict with the interests of the other
Class Members that Plaintiffs seek to represent. Plaintiffs will fairly and adequately represent
and protect the interests of the other Class Members. Plaintiffs have retained counsel with
substantial experience in litigating complex cases, including consumer fraud and class actions.
Both Plaintiffs and their counsel will vigorously prosecute this action on behalf of the Class
and have the financial ability to do so. Neither Plaintiffs nor counsel have any interest adverse
to other Class Members.

59. Ascertainability: Plaintiffs are informed and believe that Defendants keep
extensive computerized records of their loan applications through, inter alia, computerized
loan application systems, and Federally mandated record keeping. Defendants have one or
more databases through which a significant majority of the Class Members, if not 100% of the
Class Members, may be identified and ascertained, and it maintains contact information,
including email and mailing addresses, through which notice of this action could be

disseminated in accordance with due processes requirements.

CAUSES OF ACTION

FIRST CAUSE OF ACTION

On Behalf of the Class

Against All Defendants

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HISTORIC ENGINE Co. No. 28
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Cas@ 2:20-cv-03815-ODW-AGR Document1 Filed 04/27/20 Page15o0f21 Page !ID#:15
I (DECLARATORY RELIEF)
2
3 60. Plaintiffs hereby incorporate by reference the foregoing allegations as if fully
4 || set forth herein.
5 61. Plaintiffs assert this cause of action on behalf of themselves and other Class
6 || Members as Agents as defined herein.
7 62. As previously alleged, Plaintiffs assisted their clients with the application
g || process. Defendants failed to pay Agent fees owed to Plaintiffs as required by SBA regulations
g || and instead kept all of the origination and processing fees for themselves, in direct violation
10 || of PPP ISL.
11 63. An actual controversy has arisen between Plaintiffs and Defendants as to the
12 || Agent fees owed to Plaintiffs by Defendants, and on information and belief, Defendants either
13 || deny that any Agent fees are owed to Plaintiffs, or that only a percentage of the Agent fees are
14 || owed to Plaintiffs.
15 64. Plaintiffs and the Class Members seek a declaration in accordance with SBA
16 || guidance that approximately 19.14% of all administrative fees paid to all Defendants, should
17 || be deposited into a mutually agreeable fund or funds, within 60 days, to be distributed to the
18 || designee/Agent of each recipient of a PPP loan. The calculations in support of this 19.14% are
19 || shown in Attachment A.
SECOND CAUSE OF ACTION
. On Behalf of the Class
9 Against All Defendants
73 (Violation of the “Unfair” Prong of the UCL, California Business & Professions Code §
17200, et seq.)
24 65. Plaintiffs hereby incorporate by reference the foregoing allegations as if fully
25 || set forth herein.
26 66. Plaintiffs assert this cause of action on behalf of themselves and the other Class
27 || Members.
28 67. The California Unfair Competition Law (hereinafter “UCL”) defines unfair
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business competition to include any “unlawful, unfair or fraudulent” act or practice.

68. A business act or practice is “unfair” under the UCL if the reasons,
justifications, and motives of the alleged wrongdoer are outweighed by the gravity of the harm
to the alleged victims.

69. Defendants have violated the “unfair” prong of the UCL by undermining the
Application process and the Agent fee payment requirements.

70. These acts and practices were unfair because Defendants withheld monies owed
to Plaintiffs that were provided for pursuant to PPP ISL. Moreover, Defendants failed to adhere
to SBA regulations as to PPP loans.

71. The gravity of the harm to Class Members resulting from these unfair acts and
practices outweighed any conceivable reasons, justification, and/or motives of Defendants. By
committing the acts and practices alleged above, Defendants engaged in unfair business
practices within the meaning of California Business & Professions Code §17200, et seq.

de Through its unfair acts and practices, Defendants have improperly obtained
money from the Federal Government at the expense of Plaintiffs and the Class. As such,
Plaintiffs request that this Court cause Defendants to disgorge this money to Plaintiffs and all
Class Members, and to enjoin Defendants from continuing to violate the UCL as discussed
herein and/or from violating the UCL in the future. Otherwise, Plaintiffs, the Class, and
members of the public may be irreparably harmed and/or denied an effective and complete

remedy if such an order is not granted.

THIRD CAUSE OF ACTION

On Behalf of the Class
Against All Defendants

(UNJUST ENRICHMENT)
73. Plaintiffs hereby incorporate by reference the foregoing allegations as if fully

set forth herein.

74, Plaintiffs assert this cause of action on behalf of themselves and all Class

Members.

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HISTORIC ENGINE Co. No. 28
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1 75. Defendants have been, and continue to be unjustly enriched, to the detriment
2 || and at the expense of the Class Members as a result of Defendants’ wrongful withholding of
3 || Agent fees owed to Plaintiffs and the Class.
A 76. Defendants have unjustly benefitted through the unlawful and wrongful
5 || collection of money from the Federal Government through the SBA funding PPP loan
6 || applications and continue to benefit to the detriment and at the expense of Plaintiffs and Class
7 || Members.
8 T, Accordingly, Defendants should not be allowed to retain the proceeds from the
9 || benefits conferred upon it by Plaintiffs. Therefore, Plaintiffs seek disgorgement of Defendants’
10 |} unjustly acquired profits and other monetary benefits resulting from Defendants’ unlawful
11 |] conduct, and seek restitution for the benefit of the Plaintiffs and Class Members, equitably and
12 || efficiently to be determined by the Court.
13 PRAYER FOR RELIEF
14 Wherefore, Plaintiffs, individually and on behalf of the Class, pray for the following
15 || relief:
16 1. For an Order certifying the Class as defined above, appointing Plaintiffs as Class
17 representatives for the Class, and appointing Plaintiffs’ counsel as Class counsel for the
18 Class;
19 2. For an Order declaring Defendants’ actions to be unlawful;
20 3. For a declaration in accordance with SBA guidance that approximately 19.14% of all
21 administrative fees paid to all Defendants, should be deposited into a mutually
22 agreeable fund or funds, within 60 days, to be distributed to the designee/Agent of each
23 recipient of a PPP loan. The calculations in support of the 19.14% are shown on
24 Attachment A.;
25 4. For equitable relief to Plaintiffs and Class Members;
26 5. For an award of all recoverable compensatory, statutory, and other damages
27 sustained by Plaintiffs and Class Members, including disgorgement, unjust
28 enrichment, and all other available relief under applicable law;
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6. For an award of punitive damages pursuant to applicable law;

7. For reasonably attorney’s fees and expenses as permitted by applicable statutes

and law, including, but not limited to, Code of Civil Procedure section 1021.5;

8. For taxable costs;

9. For pre and post-judgment interest as allowed by law; and

10. For any other relief the Court deems just.

DATED: April 27, 2020

GERAGOS & GERAGOS, APC

/s/ Mark J. Geragos
Mark J. Geragos
Ben J. Meiselas
Matthew M. Hoesly

GRAYLAW GROUP, INC.

/s/ Michael E. Adler
Michael E. Adler

DHILLON LAW GROUP INC.

/s/ Harmeet K. Dhillon
Harmeet K. Dhillon
Nitoj P. Singh

Attorneys for Plaintiffs and the
Proposed Class

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Los ANGELES, CALIFORNIA 90017-3411

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DEMAND FOR JURY TRIAL

Plaintiffs hereby demand trial of its claims by jury to the extent authorized by

law.

DATED: April 27, 2020

GERAGOS & GERAGOS, APC

/s/ Mark J. Geragos
Mark J. Geragos
Ben J. Meiselas
Matthew M. Hoesly

GRAYLAW GROUP, INC.

/s/ Michael E. Adler
Michael E. Adler

DHILLON LAW GROUP INC.

/s/ Harmeet K. Dhillon
Harmeet K. Dhillon
Nitoj P. Singh

Attorneys for Plaintiffs and the
Proposed Class

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Attachment “A”
ATTACHMENT A
CARES Act PPP Funded Loans Through April 16, 2020*

Approved PPP Loans
Loan Size through April 16, 2020* SBA Funded Amount % of Loans % of Amount
$150K and Under 1,229,893 $ 58,321,791,761 74.0% 17.0%
>$150K-$350K 224,061 $ 50,926,354,675 13.5% 14.9%
>$350K-$1M 140,197 $ 80,628,410,796 8.4% 23.6%
>$1M-$2M 41,238 $ 57,187,983 ,464 2.5% 16.7%
>$2M-$5M 21,566 $ 64,315,474,825 1.3% 18.8%
>$5M 4,412 $ 30,897,983,582 0.3% 9.0%
1,661,367 $ 342,277,999,103 100.0% 100.0%
Mandated Lender

Loan Size Percentage SBA Funded Amount Mandated Lender Fee

$150K and Under 5.00% $ 58,321,791,761 $ 2,916,089,588

>$150K-$350K 5.00% $ 50,926,354,675 $ 2,546,317,734

>$350K-$1M 3.00% $ 80,628,410,796 $ 2,418,852,324

>$1M-$2M 3.00% $ 57,187,983,464 $ 1,715,639,504

>$2M-$5M 1.00% $ 64,315,474,825 $ 643,154,748

>$5M 1.00% $ 30,897,983,582 $ 308,979,836

$ 342,277,999,103  $ 10,549,033,734

| Average Lender Percentage

3.08% |

Mandated Agent

Loan Size Percentage SBA Funded Amount Mandated Agent Fee
$150K and Under 1.00% $ 58,321,791,761 $ 583,217,918
>$150K-$350K 1.00% $ 50,926,354,675 $ 509,263,547
>$350K-$1M 0.50% $ 80,628,410,796 $ 403,142,054
>$1M-$2M 0.50% $ 57,187,983,464 $ 285,939,917
>$2M-$5M 0.25% $ 64,315,474,825 $ 160,788,687
>$5M 0.25% $ 30,897,983,582 $ 77,244,959

$ 342,277,999,103  $ 2,019,597,082

[Average Agent Percentage

0.59%|

* https://home.treasury.gov/system/files/136/SBA PPP Loan Report Deck.pdf

Paycheck Protection Program and Health Care Enhancement Act (“PPPEA”)**

Supplemental

PPPEA Funding Average Mandated Agent
signed into law _ Percentage from Original

April 24, 2020

$310,000,000,000

Supplemental
PPPEA Funding

PPP Funding

0.59%

Extrapolated Mandated
Agent Fees from
Supplemental PPPEA
Funding

$1,829,000,000

Extrapolated Mandated

signed by President Average Mandated Lender Lender Fees from
Trump on April 24, Percentage from Original

2020

$310,000,000,000

PPP Funding

3.08%

Supplemental PPPEA
Funding

$9,554,223 ,368

Average Agent Percentage divided by Average Lender Percentage

** https://www.congress.gov/bill/116th-congress/house-bill/266/text

Maximum A gent Fees
owed to Class based on
Original PPP and
PPPEA Funding

$3,848,597,082

Approximate Lender
Fees based on Original
PPP and PPPEA
Funding

$20, 103,257,102

19.14%

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