Court filing

Corrected First Amended Class Action Complaint — American Video Duplicating v. Citigroup

Filed June 12, 2020 in American Video v. Citigroup; one of 5 filings from this case.

Record facts

Court	UNITED STATES DISTRICT COURT
Filed	2020-06-12

UNITED STATES DISTRICT COURT · No. 2:20-cv-03815-ODW-AGR · Doc. 80 · 2020-06-12 · Docket on CourtListener

Full text

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
GERAGOS & GERAGOS
A PROFESSIONAL CORPORATION
LAWYERS
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
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.
26500 Agoura Road, #102-127
Calabasas, CA 91302
Telephone: (818) 532-2833
Facsimile: (818) 532-2834
MICHAEL E. ADLER
SBN 236115
meadler@graylawinc.com

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
nsingh@dhillionlaw.com

Attorneys for Plaintiffs and the Proposed Class

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.

Case No.: 2:20-cv-03815-ODW-AGR

CORRECTED FIRST AMENDED
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.
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 1 of 23 Page ID #:323

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
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 BANK, N.A.; BANK OF
AMERICA CO.; BANK OF AMERICA
N.A.; MUFG BANK LTD.; MUFG UNION
BANK N.A.; LIVE OAK BANCSHARES
INC.; LIVE OAK BANKING COMPANY;
NEWTEK BUSINESS SERVICES, INC.;
HARVEST SMALL BUSINESS FINANCE;
and DOE LENDERS 1 to 4,975, inclusive,

Defendants.

(3) UNJUST ENRICHMENT

DEMAND FOR JURY TRIAL

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 Bank, N.A.; Bank of America
CO., Bank of America N.A.; MUFG Bank LTD., MUFG Union Bank N.A.; Live Oak
Bancshares Inc., Live Oak Banking Company; Newtek Business Services, Inc.; Harvest Small
Business Finance; 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
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
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 2 of 23 Page ID #:324

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
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.
Upon information and belief, 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.
Upon information and belief, 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.
Upon information and belief, 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 this District.
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 3 of 23 Page ID #:325

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
7.
Upon information and belief, at all relevant times, Defendant U.S. Bank
N.A., (“US Bank”) operates 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.
Upon information and belief, 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.
Upon information and belief, at all relevant times, Defendant JPMorgan
Chase Bank N.A., (“Chase”) is the main bank of Chase & CO. and is headquartered in
Columbus, Ohio. Chase conducts substantial business within this District.
10.
Upon information and belief, 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.
11.
Upon information and belief, 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.
Upon information and belief, 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
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 4 of 23 Page ID #:326

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
services company and headquartered in Charlotte, North Carolina. Through its
subsidiaries, Bank of America, CO. conducts substantial business within this District.
13.
Upon information and belief, 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 in Charlotte, North Carolina and conducts
substantial business within this District.
14.
Upon information and belief, 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. MUFG is headquartered in New York, New York,
and conducts substantial business within this District.
15.
Upon information and belief, 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.
Upon information and belief, at all 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.
Upon information and belief, 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.
18.
Upon information and belief, 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-
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 5 of 23 Page ID #:327

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
bank lender with the specific goal of serving small business borrowers and is located at
24422 Avenida De La Carlota, Suite 232, Laguna Hills CA 92653.
19.
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.
20.
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 defendants are responsible in some manner for the
damages and unfair business practices and violation of rights as 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
21.
The Court has original jurisdiction over this action under the Class Action
Fairness Act, 28 U.S.C. §1332(d), because this is a proposed 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.
22.
This Court has personal jurisdiction over Defendants because Defendants are
residents of California, do business in this District, and a substantial number of the events
giving rise to the claims alleged herein took place in California.
23.
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 Plaintiff applied on behalf of its clients for PPP loans,
and/or introduced its clients to the Defendants to obtain PPP loans, while in this District, and
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 6 of 23 Page ID #:328

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
Defendants marketed, promoted, and took applications for, and/or funded, PPP loans in this
District.

FACTUAL ALLEGATIONS
Background
24.
On January 21, 2020, the Center for Disease Control and Prevention (“CDC”)
confirmed the first U.S. case of a new coronavirus known as COVID-19.
25.
On January 30, 2020, the World Health Organization (“WHO”) declared the
COVID-19 outbreak to be a “public health emergency of international concern.”
26.
On March 11, 2020, the WHO declared that the spread of COVID-19 had
become a pandemic.
27.
On March 13, 2020, President Trump issued the Coronavirus Disease 2019
(COVID-19) Emergency Declaration applicable to the United States that declared that the
pandemic was of “sufficient severity and magnitude to warrant an emergency declaration for
all states, territories and the District of Columbia.”
28.
The Trump Administration 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.” See Small Business Administration - Business
Loan Program Temporary Changes; Paycheck Protection Program, 13 CFR Part 120,
Interim Final Rule (the “SBA PPP Interim Final Rule”).
29.
On March 19, 2020, Governor Gavin Newsom issued an executive Stay at
Home Order in the State of California to prevent the spread of COVID-19.
30.
On March 25, 2020, in response to the economic damage perpetrated by the
COVID-19 crisis, the United States Senate passed the Coronavirus Aid, Relief, and
Economic Security Act (the “CARES Act” or the “Act”). The CARES Act (P.L. 116-136)
was passed by the House of Representatives the following day and signed into law by
President Trump on March 27, 2020.
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 7 of 23 Page ID #:329

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
31.
The Act included $377 billion in federally-funded loans to small businesses
and a $500 billion governmental lending program, administered by the United States
Department of Treasury (“Treasury”) and the Small Business Administration (“SBA”), a
United States government agency that provides support to entrepreneurs and small
businesses nationwide.
32.
As part of the CARES Act, the Federal Government created the $349 billion
loan program, referred to as the “Paycheck Protection Program” (“PPP”), providing loans to
small businesses originated from February 15, 2020, through June 30, 2020. The PPP was
created 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 backed by the SBA, administered by Treasury, and funded through private lenders,
including banks and financial services firms (“Lenders”). Pursuant to the SBA PPP Interim
Final Rule, the PPP is a limited funding program, as funds are provided on a “first-come,
first-served basis.” See 13 CFR Part 120, p. 13.
33.
Treasury announced on April 3, 2020, that small businesses and sole
proprietors could apply and receive loans to cover their payroll and other expenses through
approved SBA Lenders. Beginning on April 10, 2020, independent contractors and self-
employed individuals could apply as well1.
34.
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 lend to $659 billion.
35.
The Treasury’s PPP Information Sheet (Lenders) (the “PPP ISL”), consistent
with the SBA PPP Interim Final Rule (collectively, the “SBA Regulations”), creates a
system with three (3) participants:
a. a Lender who funds the PPP loans backed by the Federal Government;
b. a small or medium-sized “main street” borrower who obtains the PPP loan for
the specified purpose (the “Borrower”); and

1 https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 8 of 23 Page ID #:330

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
c. an independent agent (the “Agent”), often a local accountant, business
consultant, attorney, employee of the applicant, or payroll service, who brings
the Borrower to Lenders and helps shepherd the Borrower through the PPP
loan process.
36.
It is through the Agent that the PPP ensures the proper and efficient allocation
of a limited pool of dollars under its “first come, first serve” approach. Under the SBA
Regulations, both the Lenders and Agents are paid mandatory fees under the PPP for their
respective work.
37.
The SBA Regulations define Agent under the PPP to broadly include:
 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.”2
38.
Without the critical and necessary work performed by Plaintiffs and the Class
Members as Agents under the PPP, the CARES Act would not accomplish the United States
Senate’s expressed legislative intent: The Senate requested Treasury to “issue guidance to
lenders and agents to ensure that the … loans prioritizes small business concerns and entities
in underserved and rural markets, including veterans and members of the military
community, small business concerns owned and controlled by socially and economically
disadvantaged individuals…, women, and businesses in operation for less than 2 years.”3

2 https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf
3 H.R. 748, CARES ACT, PL 116-136 (March 27, 2020; 134 Stat. 281)
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 9 of 23 Page ID #:331

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
[Emphasis added].
39.
The SBA Regulations also expressly provide how each of the PPP
participants (Borrower, Lender, and Agent) will benefit from (and be compensated under)
the PPP. For example, the PPP Borrower receives 100 percent (100%) of the loan without
any deductions for fees or costs.
40.
For the Lenders, the SBA Regulations provide that they will be compensated
based on the balance of the financing at the time of final disbursement (the “Lender Fees”).
Specifically, the SBA is required to pay Lenders fees in the following amounts for
processing PPP loans:
a. Five percent (5%) for loans of not more than $350,000;
b. Three percent (3%) for loans of more than $350,000 and less than $2,000,000;
and
c. One percent (1%) for loans of at least $2,000,000.4
41.
For the Agents, 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 “Agent Fees”). The total amount that an agent may collect from the lender for
assistance in preparing an application for a PPP loan (including referral to the lender) may
not exceed:
a. One (1) percent for loans of not more than $350,000;
b. 0.50 percent for loans of more than $350,000 and less than $2 million; and
c. 0.25 percent for loans of at least $2 million.” (Emphasis Added).5
42.
The SBA Regulations also reflect that the Secretary of the Treasury,
“determined that the agent fee limits set forth above are reasonable based upon the
application requirements and the fees that lenders receive for making PPP loans.6

4 Id.
5 Id.
6 See Small Business Administration; Business Loan Program Temporary Changes; Paycheck Protection
Program, 85 Fed. Reg. 20,816 (April 15, 2020).
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 10 of 23 Page ID #:332

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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
43.
Based on information and belief, Defendants funded PPP loans for Borrowers
represented by Plaintiffs and the proposed Class, received their Lender Fees from the Federal
Government, and failed to pay the Agent Fees earned by the Plaintiffs and proposed Class
out of the Lender Fees received.
44.
Defendants have either failed and refused to pay, or are willing to pay only a
partial percentage of, the monies owed in Agent Fees to Plaintiffs and the proposed Class,
thus retaining for themselves all of the statutory fees allotted by the Government for Agents
as part of the PPP, despite the work performed by the Agents in assisting the Borrowers in
securing their PPP loans.
Plaintiffs, in their Roles as Agents, Assist their Clients With Applying for PPP Loans
Under the CARES ACT
45.
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 significantly
impact their clients’ businesses, assisted their clients with obtaining PPP loans through
specific Defendants.
46.
Each Plaintiff spent considerable time familiarizing itself with the Act, and
the related SBA Regulations, and 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.
47.
On or about April 2020, Plaintiffs, in their roles as Agents, assisted their
clients as Borrowers under the PPP in the gathering and analysis of their documents, as well
as the calculation and preparation of each loan application (the “Applications”), and in
identifying Lenders who were processing PPP loans in the “race to the bank” environment
that ensued as a result of the first-come, first-serve nature of the PPP.
48.
Based on the SBA Regulations, Plaintiffs understood that the only
compensation they would receive was from the mandated Agent Fees that were advanced to
the Lenders by the Federal Government for the Plaintiffs’ and Class Members’ benefit as
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GERAGOS & GERAGOS, APC
HISTORIC ENGINE CO. NO. 28
644 South Figueroa Street
Los Angeles, California 90017-3411
part of the statutory Lender Fees.
49.
To prepare the documentation, Plaintiffs assisted clients in gathering the
required information and preparing the Applications, including the following, where
applicable or necessary:
a. Loan Calculator Spreadsheet;
b. SBA Form 2483;

c. Addendum A: Affiliates;

d. Information on whether the applicant received an SBA Economic Injury
Disaster Loan (“EIDL”);
e. Certificate of Beneficial Ownership Interest;

f. Driver’s Licenses;

g. Articles of Incorporation or Articles of Organization;
h. 2019 IRS/State Payroll Forms;

i. 2019 Payroll Summary Report by each Employee;

j. 2019 Health Insurance Premium Paid, including each monthly statement or
year-end summary;
k. 2019 Retirement Matching Plan Paid, including each monthly statement or
year-end summary;
l. 2020 1st QTR 941 Form;
m. January 2020 Payroll Summary by Employee;

n. February 2020 Payroll Summary by Employee;

o. March 2020 Payroll Summary by Employee;

p. Health Insurance Premium Paid – January, February, and March 2020;
q. Retirement Matching Plan Paid – January, February, and March 2020;
r. Wiring Instruction; and
s. Copy of most recent bank statement (collectively, (a) – (s) above are part of the
Application).
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50.
In addition, Plaintiffs worked to identify Lenders who were taking
Applications and funding PPP loans to connect the Borrowers to the limited federal funds
available under the PPP.
51.
In good faith, Plaintiffs believed they would receive their earned Agent Fees
from the Lenders after the funding of each of their clients’ PPP loans as required by the SBA
Regulations.
52.
Defendants did not comply with the SBA Regulations in distributing the
Agent Fees from their Lender Fees paid to them by the Federal Government under the PPP.
53.
Specifically, Defendants as Lenders under the PPP, and without any legal
authority under the SBA Regulations or otherwise, refused to pay Agents the required
statutory Agent Fees from the fees they obtained from the Government despite demand, or
the Defendants repudiated the Agent’s role and refused to pay the required Agent Fees as a
general policy.
54.
As a result of Defendants’ unlawful actions, Plaintiffs and the proposed Class
have suffered financial harm by being deprived of the statutorily mandated compensation for
the professional services that they provided in connection with assisting their clients in
applying for and obtaining PPP loans, and by being denied by Defendants just compensation
for playing the vital role of Agent in the PPP process on behalf of the intended beneficiaries
of the program, the small business owner.

Class Action Certification
55.
As noted above, Plaintiffs bring this action on behalf of themselves and all
others similarly situated as a state and nationwide Class, defined below.
56.
Plaintiffs, in accordance with Fed. R. Civ. P. 23(b)(1), (b)(2), (b)(3) and
(b)(4), seek to represent a Class composed of and defined as follows:
a. All Agents as that term is defined by the SBA Regulations that facilitated small
businesses to receive a loan under the PPP, i.e., met the criteria for eligibility
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and were not otherwise ineligible, between February 15, 2020, and June 30,
2020, who timely applied for a PPP loan through various Lenders and were
processed and approved for funding (the “Class”).
b. An “Agent” as defined by the SBA Regulations is as follows:
i. an attorney,
ii. an accountant,
iii. 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. a loan broker, or
vii. any other individual or entity representing an applicant by conducting
business with the SBA.
57.
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.
58.
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.
59.
Commonality: There is a commonality in questions of law and fact affecting
the Class. See Fed. R. Civ. P. 23(a)(2). These questions of law and fact include, but are 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
CARES Act as a lender of the PPP funds?
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c. Did Defendants have a policy and/or practice of failing to compensate Agents
and pay them the required Agent Fees for their work in facilitating PPP loans
to the detriment of the Class?
d. Did Defendants prioritize their origination own fees over abiding by the
CARES Act and PPP specifications?
e. Did Defendants’ conduct constitute an “unfair business practice” under
California Business & Professions Code § 17200, et seq.?
f. Did Defendants possess exclusive knowledge of material facts, concerning the
Application process, i.e., that the Agents would not receive the required Agent
Fees compensation when assisting applicants with PPP loan process?
g. Did Defendants actively conceal a material fact or facts from the Plaintiffs, i.e.,
that the Agents were not going to receive their earned Agent fees when
assisting with the Applications?
h. Whether Defendants’ conduct, as alleged herein, was intentional and knowing?
i. Did Defendants frustrate and tortiously interfere with Plaintiff and the Class
Members reasonable expectations of receiving the Agent Fees when assisting
the Borrowers for PPP loans that were funded;
j. 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?
k. Whether Defendants are likely to continue to mislead the public and Class
Members and continue to violate SBA Regulations regarding paying Agents
their earned fees under the CARES Act; and
l. Whether Plaintiffs and Class Members are entitled to an award of punitive
damages, pre-judgment interest, and costs of suit.
60.
Superiority: In engaging in the conduct described herein, Defendants have
acted and/or failed to act on grounds generally applicable to Plaintiffs and other Class
Members. Such conduct requires the Court’s imposition of uniform relief to ensure
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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 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 fruits of their misdeeds. Any
difficulties that might occur in the management of this proposed class action are
insubstantial. See Fed. R. Civ. P. 23(b)(1)(A).
61.
Typicality: Plaintiffs’ claims are typical of, and are not antagonistic to, the
claims of all Class Members. See Fed. R. Civ. P. 23(a)(3). 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 basis of Defendants’ liability to Plaintiffs
and each Class Member as a result of Defendants’ actions are described herein. Defendants’
purported defenses to the claims, both legal and factual, are typical of the defenses they
would try to raise to the Class claims.
62.
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. See Fed. R. Civ. P. 23(a)(4). 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.
63.
Ascertainability: Plaintiffs are informed and believe that Defendants keep
extensive electronic 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 email and mailing addresses. From this
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information, the existence of the Class Members (i.e., the Agent for the Borrower) can be
determined, and thereafter, a notice of this action can be disseminated in accordance with
due process requirements.
64.
Predominance: The above questions of law and fact predominate over
individual questions affecting the Class Members. Defendants’ conduct described in this
Complaint all stems from ignoring their obligations under the SBA Regulations setting forth
the policy and procedures for payment of Agent Fees that are readily calculable from
Defendants’ records and other Class-wide evidence. Class Members do not have an interest
in pursuing separate individual actions against Defendants as the amount of each Class
Member’s claim is relatively small compared to the expense and burden of individual
prosecution. The management of this action as a class action will not present any likely
difficulties. In the interests of justice and judicial efficiency, it would be desirable to
concentrate the litigation of all Class Members’ claims in a single action. See Fed. R. Civ. P.
23(b)(3).
65.
Neither Plaintiff nor the Class has previously litigated the claims asserted in
this Complaint.

CAUSES OF ACTION

FIRST CAUSE OF ACTION

On Behalf of the Class

Against All Defendants

(DECLARATORY RELIEF)

66.
Plaintiffs hereby incorporate by reference the foregoing allegations as if fully
set forth herein.
67.
Plaintiffs assert this cause of action on behalf of themselves and other Class
Members as Agents as defined by the SBA as follows: (i) an attorney; (ii) an accountant; (iii)
a consultant; (iv) someone who prepared an applicant’s application for financial assistance
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and is employed and compensated by applicant; (v) someone who assists a lender with
originating, disbursing, servicing liquidating, or litigating SBA loans; (vi) a loan broker; or
(vii) any other individual or entity representing an applicant by conducting business with the
SBA.
68.
Plaintiffs, as Agents under the SBA, assisted their clients with submitting
their Applications to obtain PPP loans under the CARES Act. Defendants failed to pay
Agent Fees owed to Plaintiffs as required by the SBA Regulations. Instead, Defendants kept
all of the origination and processing fees for themselves, in direct violation of the SBA
Regulations.
69.
An actual justiciable controversy has arisen between Plaintiffs and
Defendants as to the Agent Fees owed to Plaintiffs by Defendants, and, upon information
and belief, Defendants either deny that any Agent Fees are owed to Plaintiffs or claim that
only a percentage of the Agent Fees are owed.
70.
Plaintiffs and the Class Members have a legally protectable interest under the
SBA Regulations in that they are entitled to their mandated Agent Fees in connection with
the professional services rendered to their clients in preparing and submitting Applications
for PPP funds.
71.
Defendants have failed and refused, and continue to fail and refuse, to pay the
mandated Agent Fees to the Agents as required under the SBA Regulations.
72.
Plaintiff and the Class Members seek a declaration in accordance with SBA
Regulations that Defendants are required under the SBA Regulations to pay the Agent Fees
at the statutory amount on each loan funded involving an Agent. The calculations in support
of the statutory amount are shown in Attachment “A” hereto.

SECOND CAUSE OF ACTION
On Behalf of the Class
Against All Defendants
Case 2:20-cv-03815-ODW-AGR Document 80 Filed 06/12/20 Page 18 of 23 Page ID #:340

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(Violation of the “Unfair” Prong of the UCL, California Business & Professions Code §
17200, et seq.)
73.
Plaintiffs incorporate by reference the foregoing allegations as if fully set
forth herein.
74.
Plaintiffs assert this cause of action on behalf of themselves and the other
Class Members as Agents, as defined by the SBA as follows: (i) an attorney; (ii) an
accountant; (iii) 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) a
loan broker; or (vii) any other individual or entity representing an applicant by conducting
business with the SBA.
75.
The California Unfair Competition Law (hereinafter “UCL”) defines unfair
business competition to include any “unlawful, unfair or fraudulent” act or practice.
76.
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.
77.
Defendants have violated the “unfair” prong of the UCL by undermining the
Application process and the Agent Fees payment requirements.
78.
Defendants engaged in lending to businesses under the PPP and thus were
required to abide by obligations set forth in the SBA Regulations.
79.
Plaintiffs as well as all Class Members engaged in helping clients apply for
PPP loans with the understanding consistent with the SBA Regulations, that while they were
not permitted to charge their clients fees for their professional services in assisting in
compiling the Applications, they would be compensated through the mandated Agent Fees
from the Lenders.
80.
Defendants are well aware, or should have been well aware, of the mandated
Agent Fees owed to the Agents under the SBA Regulations.
81.
Defendants’ unfair practices occurred during the Application process when
Plaintiff rendered services to its clients in anticipation of being paid the mandated Agent
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Fees by the Lenders, only to be denied all or a portion of the Agent Fees owed under the
SBA Regulations.
82.
Defendants’ unfair practices of refusing to pay the mandated Agent Fees and
their failure to adhere to the SBA Regulations as to PPP loans are the proximate cause of
Plaintiff’s damages.
83.
These acts and practices were unfair because Defendants withheld monies
owed to Plaintiff that were clearly provided for pursuant to the SBA Regulations.
84.
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.
85.
Through their unfair acts and practices, Defendants have improperly obtained
money from the Federal Government at the expense of Plaintiffs and the Class.
86.
As such, Plaintiffs request that this Court cause Defendants to disgorge this
money to Plaintiff and all Class Members, enjoin Defendants from continuing to violate the
UCL as discussed herein, and award Plaintiff such other damages and relief this Court deems
just and proper.
87.
Plaintiffs, the Class, and members of the public will be 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)
88.
Plaintiffs hereby incorporate by reference the foregoing allegations as if fully
set forth herein.
89.
Plaintiffs assert this cause of action on behalf of themselves and other Class
Members as Agents as defined by the SBA as follows: (i) an attorney; (ii) an accountant; (iii)
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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) a loan broker; or
(vii) any other individual or entity representing an applicant by conducting business with the
SBA.
90.
Defendants have been, and continue to be unjustly enriched, to the detriment
and at the expense of Plaintiffs and the Class Members as a result of Defendants’ wrongful
withholding of Agent Fees from the Lender Fees they received, and are now owed to
Plaintiffs and the Class.
91.
Defendants have been unjustly benefitted through the unlawful and wrongful
retention of monies due to the Agents (i.e., the Agent Fees) as a result of the funding of the
PPP loans, and Defendants’ receipt of their Lender Fees under the same program.
Specifically, Defendants retained for their benefit Agent Fees that Plaintiffs and the Class
were entitled to be paid for work performed, and continue to benefit to the detriment and at
the expense of Plaintiffs and the Class Members.
92.
Plaintiffs and the Class Members chose specific Defendants to place the
Borrowers and the PPP Loans with the reasonable expectation of being paid as an Agent
under the SBA Regulations.
93.
Defendants are intentionally retaining the monies allocated by the Federal
Government for Agent Fees and paid to Defendants as part of their Lender Fees, despite
knowing that said monies are owed to Plaintiffs and the Class Members.
94.
Defendants refuse to pay, or are willing to pay only a partial percentage of,
the monies owed to Plaintiffs and the Class Members and are choosing to retain the Agent
Fees for themselves in direct violation of SBA regulations.
95.
It is against equity and good conscience that Defendants be permitted to
retain the benefits conferred upon them by Plaintiffs and the Class Members.
96.
Plaintiffs and the Class Members respectfully request this Court to order
Defendants to disgorge the amount of the Agent Fees which Defendants wrongfully
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misappropriated from the Plaintiffs and all Class Members, enjoin Defendants from
continuing the improper acts as discussed herein, and award Plaintiff and all Class Members
such other damages and relief that this Court deems just and proper.

PRAYER FOR RELIEF
WHEREFORE, Plaintiffs, individually and on behalf of the Class, pray for the
following relief:
1. For an Order certifying the Class as defined above, appointing Plaintiffs as Class
representatives for the Class, and appointing Plaintiffs’ counsel as Class counsel for
the Class;
2. For an Order declaring Defendants’ actions to be unlawful;
3. For an Order declaring that Defendants have been unjustly enriched
4. An award of all recoverable compensatory, statutory, treble and other damages
sustained by Plaintiff and the Class Members, as well as equitable relief including
disgorgement and enjoining Defendants from continuing the improper acts as
identified herein, and all other available relief under applicable law;
5. For equitable relief to Plaintiffs and Class Members;
6. For an award of all recoverable compensatory, statutory, and other damages
sustained by Plaintiffs and Class Members, and equitable relief including
disgorgement, unjust enrichment, and all other available relief under applicable
law;
7. For an award of punitive damages pursuant to applicable law;
8. For reasonable attorneys’ fees and expenses as permitted by applicable statutes
and law, including, but not limited to, Code of Civil Procedure section 1021.5;
9. For costs related to bringing this action;
10. For pre and post-judgment interest as allowed by law; and
11. Such further relief at law or in equity that this Court deems just and proper.

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644 South Figueroa Street
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DATED: June 5, 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

DEMAND FOR JURY TRIAL

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

DATED: June 5, 2020
GERAGOS & GERAGOS, APC