Court filing
Second amended class action complaint — Byrnes v. Fountainhead
Filed August 20, 2021 in Byrnes v. Fountainhead; one of 8 filings from this case.
Record facts
| Court | U.S. District Court, Central District of California |
|---|---|
| Filed | 2021-08-20 |
U.S. District Court, Central District of California · No. 2:20-cv-04149-DDP-RAO · Doc. 36 · 2021-08-20 · Docket on CourtListener
Full text
SECOND AMENDED CLASS ACTION COMPLAINT
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Joshua H. Haffner, SBN 188652
(jhh@haffnerlawyers.com)
Trevor Weinberg, Esq. SBN 330778
tw@haffnerlawyers.com
HAFFNER LAW PC
445 South Figueroa Street, Suite 2625
Los Angeles, California 90071
Telephone: (213) 514-5681
Facsimile: (213) 514-5682
Bart I. Ring, SBN: 126235
(bart@bartringlaw.com)
THE RING LAW FIRM APLC
5550 Topanga Canyon Blvd., Suite 200
Woodland Hills, California 91367
Telephone: (818) 587-9292
Attorneys for Plaintiff Elizabeth M.
Byrnes, Inc., and all others similarly
situated
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
ELIZABETH M. BYRNES, INC., a
corporation, on behalf of itself and all
others similarly situated,
Plaintiff,
v.
FOUNTAINHEAD COMMERCIAL
CAPITAL, LLC; and DOES 1
through 10, inclusive,
Defendant.
Case No. 2:20-cv-04149-DDP (RAOx)
SECOND AMENDED CLASS
ACTION COMPLAINT FOR:
1. FRAUDULENT
CONCEALMENT;
2. FRAUDULENT DECEIT;
3. UNFAIR BUSINESS
PRACTICES;
4. FALSE ADVERTISING;.
DEMAND FOR JURY TRIAL
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Plaintiff Elizabeth M. Byrnes, Inc. (“Plaintiff”) is informed and believe, and
on that basis allege, as follows:
NATURE OF THE ACTION
1.
This is a California state-wide class action for fraudulent concealment,
unfair business practices, and false advertising arising out of Defendants
Fountainhead Commercial Capital, LLC and Fountainhead SBF LLC’s scheme to
enrich themselves at the expense of small businesses in connection with the federal
government’s Paycheck Protection Program (“PPP”), enacted to ameliorate the
financial impact on small businesses from the coronavirus crisis.
2.
As more fully alleged herein, Defendants solicited PPP loan
applications despite knowing they were not licensed to make these loans in
California, and did not have adequate funding in place to make the loans. Further,
although PPP funding was intended to be processed on a first come, first served
basis, and Defendant represented that it would process and prioritize loans as
received in a “queue,” Defendant had a secret priority system, whereby it shuffled
the queue, and prioritized for processing high value PPP loans, or loans from
favored customers, that earned Defendants larger fees.
3.
As a result, Plaintiff and many other class members who did not meet
Defendants’ prioritization criteria, did not receive PPP funding through Defendant.
4.
Plaintiff seeks among other things, compensatory damages,
restitutionary disgorgement, punitive damages, and injunctive relief.
PARTIES
5.
Plaintiff Elizabeth M. Byrnes, Inc. was, at all relevant times, a
corporation and small business operating in Los Angeles, California.
6.
Defendant Fountainhead Commercial Capital, LLC is a non-bank
lender, including for Small Business Administration (“SBA”) loans, and is
actually conducting business in the State of California. Defendant Commercial
Capital, LLC designates its main office in Florida.
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7.
Defendant Fountainhead SBF LLC is a non-bank lender, including
for SBA loans, and is actually conducting business in the State of California.
Defendant Fountainhead SBF LLC designates its main office in Florida.
8.
Defendant Fountainhead Commercial Capital, LLC and Defendant
Fountainhead SBF LLC are related companies, with the same or similar ownership,
and a unity of interest, such that they are alter egos, and it would work a fraud or
injustice to not so recognize. Additionally and alternatively, Defendant
Fountainhead Commercial Capital, LLC and Fountainhead SBF LLC were joint
venturers in connection with the PPP lending program alleged herein. Defendants
Fountainhead Commercial Capital, LLC and Fountainhead SBF LLC will be
collectively referred to as “Defendant FCC.”
9.
Plaintiff is currently ignorant of the true names and capacities,
whether individual, corporate, associate, or otherwise, of the Defendants sued
herein under the fictitious names Does 1 through 10, inclusive, and therefore sue
such Defendants by such fictitious names. Plaintiff will seek leave to amend this
complaint to allege the true names and capacities of said fictitiously named
Defendants when their true names and capacities have been ascertained. Plaintiff
is informed and believes and thereon alleges that each of the fictitiously named
Defendants is legally responsible in some manner for the events and occurrences
alleged herein, and for the damages suffered by the Class.
10.
Plaintiff is informed and believes and thereon alleges that all
Defendants, including the fictitious Doe Defendants, were at all relevant times
acting as actual agents, conspirators, ostensible agents, alter egos, partners and/or
joint venturers and/or employees of all other Defendants, and that all acts alleged
herein occurred within the course and scope of said agency, employment,
partnership, and joint venture, conspiracy or enterprise, and with the express and/or
implied permission, knowledge, consent authorization and ratification of their co-
Defendant; however, each of these allegations are deemed “alternative” theories
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whenever not doing so would result in a contradiction with other allegations.
JURISDICTION AND VENUE
11.
This Court has jurisdiction over the entire action by virtue of the fact
that this is a civil action wherein the matter in controversy, exclusive of interest
and costs, exceeds the jurisdictional minimum of the Court. The acts and
omissions complained of in this action took place in part in the State of California.
At least one Defendant is a citizen of a state outside of California, and federal
diversity jurisdiction exists and/or jurisdiction under the Class Action Fairness Act
(“CAFA”). The class amount at issue exceeds $5,000,000 and the jurisdictional
minimum of this Court under CAFA. Venue is proper because this is a class
action, the acts and/or omissions complained of took place, in whole or in part
within the venue of this Court.
FACTUAL ALLEGATIONS
12.
In or about March 2020, the coronavirus outbreak emerged as a
nationwide crisis in the United States. On March 19, 2020, the Governor of
California issued a stay at home order for all Californians in order to slow the
spread of the coronavirus. The impact on small business of the coronavirus
outbreak, social distancing, and the stay at home order, was devastating.
13.
On March 27, 2020, in response to the economic fallout of the
coronavirus crisis, the Coronavirus Air, Relief, and Economic Security (“CARES”)
Act was signed into law.
14.
As part of the CARES Act, the federal government created an initial
allocation of $349 billion program, called the Paycheck Protection Program
(“PPP”), for small businesses. The PPP program initially made these funds
available for loans originated through June 30, 2020. The PPP loans are backed by
the SBA, but administered by private lenders. The PPP loans provide for loan
forgiveness if certain criteria are met, including not laying off employees during
the crisis.
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15.
Defendant FCC advertises itself as the largest non-bank SBA lender in
the United States. Immediately upon the CARES Act became law, Defendant FCC
began advertising on its website, social media and elsewhere that it was one of the
few nonbank lenders licensed to make PPP loans, and that it would process PPP
loan applications and make such loans for small businesses. Defendant FCC
encouraged small businesses through advertisements to apply with it for PPP loans,
and to act fast.
16.
Defendant FCC failed to disclose, however, that at the time they were
representing to the public they could accept and process PPP loans, they were in
fact not licensed to do so in California.
a.
As to Defendant Fountainhead Commercial Capital, LLC, its
license to conduct business as a finance lender in California was
revoked by The California Department of Business Oversight, on April
3, 2019, for violations of Financial Code 22159. Defendant
Fountainhead Commercial Capital, LLC’s California license has not
been reinstated.
b.
With respect to Fountainhead SBF LLC, it was first licensed by
the State of California as a finance lender on April 21, 2020.
c.
Because neither Defendant Fountainhead Commercial Capital,
LLC or Defendant Fountainhead SBF LLC were licensed to conduct
lending activities in California, their advertising to Californians that
they would accept applications, and process their loans was false and
misleading. Defendants’ conduct in acting as lenders in California
without a license violated California Financial Code §22100(a).
17.
On March 27, 2020, at approximately 1:56 p.m., Chris Hurn,
Defendant FCC’s founder and president tweeted, on the media platform Twitter,
the following information:
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“#CARESAct SIGNED INTO LAW. We will soon be
tackling the loan inquiries lined up in our queue, providing
business owners with capital they need within days.”
18.
On March 31, 2020, at approximately 7:13 a.m., Mr. Hurn tweeted, on
the media platform Twitter, the following information:
“The SBA simply won’t be able to process the
#PaymentProtectLoans as quickly as the private sector. Our
team at @Fountainhead504 is ready to help your
#smallbusiness. I dive more into the benefit of private lending
here: glob.com/2020/03/31/sma
19.
In his tweet at 7:13 a.m. on March 31, 2020, Mr. Hurn also referred
to, and included in his tweet, a link that leads the reader to an article on
GlobeSt.net, entitled SBA Leans on Private Sector for Influx of Distressed
Borrowers. The article quotes Chris Hurn, who is identified in the article as the
CEO and founder of Fountainhead, and contains the following passages:
• Fountainhead is able to approve loans within a few hours,
• Banks, however, will not be able to process loans quickly,
• Which is why small business owners should explore the private
sector, Hurn said.
20.
On March 31, 2020, at approximately 1:29 p.m., Mr. Hurn tweeted the
following information:
“Starting to receive regulations from the SBA regarding
#PaycheckProtectionProgram… if you’re not already in our
queue, apply today, we hope to make these loans within days.
..
21.
On April 1, 2020, at approximately 8:24 a.m., Mr. Hurn tweeted the
following information:
“The best thing you can do for your business today is get your
documents together and apply to get in our queue. I say this
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with urgency, as the longer you wait, the longer it will take to
receive funds. . .”
22.
The representation that Fountainhead is able to approve loans within a
few hours, quickly, and is ready to help were false, fraudulent, and omitted
material information. In fact, neither Defendant Fountainhead Commercial
Capital, LLC, or Defendant Fountainhead SBF LLC were licensed by the State of
California at the time. Moreover, at the time, Defendants had no access to any
credit or funding facility to actually fund the loans they were soliciting.
23.
In submitting PPP loan applications, time was of the essence. The
SBA regulations for the PPP program required that funds be distributed under a
first come, first serve basis. Specifically, SBA Interim Final Rule §2m, states that
the answer to the question “Is the PPP ‘first-come, first-served?’” is “Yes.”
24.
On April 3, 2020, at approximately 1:30 p.m., Defendants FCC’s
company Twitter account, tweeted out the following information:
“Apply with us. . . We require not prior relationship, no
special (money-making) criteria, and are processing first
come, first serve . . . no prioritization.”
25.
Plaintiff is informed and believes, and on that basis alleges, that there
was, in essence, a line or queue to obtain PPP loans, and your position in the line
would be determined by when your PPP application was submitted to the SBA.
26.
Plaintiff is informed and believes, and on that basis alleges, that
Defendant FCC, using the PPP loan applications it had obtained, finally obtained
$25,000,000 in funding from a third-party financial institution for PPP loans for
the first time on or about April 21, 2020. However, by that time Defendant had
accepted PPP loan applications seeking funding far in excess of $25,000,000.
27.
Because of their inadequate funding, Defendants FCC could not fulfill
their promise to fund many of the loans they accepted, and had no way of honoring
its promise to “approve loans within a few hours.” Rather, Defendants FCC
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prioritized which of its PPP applicants received loan funding, picking the higher
value loans or businesses that Chris Hurn, or others with Defendant FCC favored,
like prior borrowers with a pre-existing relationship with Chris Hurn and/or
Defendant FCC.
28.
Plaintiff submitted a PPP loan application to Defendant FCC on
March 28, 2020. Plaintiff’s PPP application was for less than $25,000. That same
day, March 28, 2020, Defendant FCC responded with an email stating, among
other things, “We’ve received your loan app and you are in the queue!” and “Help
is on the way Elizabeth!” On March 29, 2020, Defendant FCC sent Plaintiff an
email thanking her for the “Paycheck Protection Loan Program submission with
Fountainhead!”, and stating that “we’re committed to helping as many small to
mid-size businesses as possible to recover from the effects the coronavirus has had
on their operations and financial condition.” Defendant FCC’s March 29 email
asked Plaintiff to gather certain documentation, and stated “You can expect an
invitation to a secure portal for document upload within the next 48 business
hours.” Defendant FCC failed to provide the portal link to upload documents
within that 48-hour time-frame.
29. On April 9, 2020, Plaintiff wrote to Defendant FCC inquiring about
the status of her application, specifically asking “will you please confirm my
business is in the PPP loan queue.” On April 9, 2020, Defendant FCC responded
“Yes” and further stated “you will soon be receiving an email which provides a
link to register for and access our borrower portal. Once you have registered, you
will be given the opportunity to upload required documents. . . We will be
distributing the portal registration emails over the next 24-48 hours.”
30. On April 13, 2020, Defendant FCC sent an email to Plaintiff with the
subject heading “PPP links being sent,” and stating “We ask for your patience with
us . . . as we process your requests as quickly and responsibly as we can. Should
you feel the need to remove yourself from our loan queue and join another lender’s
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list, kindly let us know . . . so we may continue to prioritize our list.”
31. In reliance on Defendant FCC’s representation it would process her
loan and she was in the queue, Plaintiff gathered the requested documents, waited
for the link to upload them, made personnel and strategic business decisions, did
not then seek funding through an alternative PPP lender, and took other steps to
manage her business. Plaintiff incurred costs and lost money, including copying
and printing costs, gathering and preparing the documents to submit for her PPP
loan.
32. Defendant FCC later received additional funding from another third
party financial institution, in or about the first week of May 2020, but it was still
inadequate to fund all PPP loans that had applied for funding to date. Defendants
FCC never returned to the earlier applicants such as Plaintiff who had not been
funded to process their loans once the additional funding came in. Instead,
Defendant FCC prioritized loans of high value or with a favorable connection.
33. Plaintiff is informed and believes, and on that basis alleges, that
Defendant FCC received thousands of PPP loan applications. Plaintiff is further
informed and believes, and on that basis alleges, that because Defendant did not
have adequate funding for the PPP loan applications, it decided to prioritize which
of the applicants would receive PPP funding. Defendants, therefore, chose to
prioritize higher loans that would yield higher fees for Defendant FCC, and loans
from favored customers. Defendant FCC did not disclose to the public that it was
prioritizing loans not on a first come, first served basis, but on criteria relating to
the value of the loan and whether the business had a favorable relationship with
Defendants FCC.
34. Plaintiff is informed and believes, and on that basis alleges, that
Defendant FCC failed to disclose and knowingly concealed from the public their
unlawful practice of prioritizing higher value loans, or loans from favored
customers, in order to benefit itself. Plaintiff is informed and believes, and on that
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basis alleges, that because of Defendant’s undisclosed criteria for prioritizing
loans, Plaintiff and Class members’ loans were not processed by Defendant FCC.
35. Plaintiff is informed and believes, that Defendant FCC has now
suspended its program processing applications for and making PPP loans.
36. Plaintiff is informed and believes, and on that basis alleges, that
Defendant FCC knew it had received more PPP loans applications than it would be
able to process or fund, but concealed that from the public.
37. Plaintiff and the Class reasonably relied on Defendant FCC’s
representations, communications and advertising in making the choice to apply for
their PPP loan through Defendant FCC, not knowing that, contrary to its
representations, Defendant FCC was not licensed, did not have funding, would
prioritize large or favored borrowers, all to the detriment of Plaintiff and other
small business owners. As a result of their reliance on Defendant FCC’s
representations and omissions, Plaintiff and the Class suffered economic harm.
Had Plaintiff and class known Defendant FCC’s prioritization practice, they could
have applied for a loan with a different lender.
38. As a direct and proximate result of Defendant FCC’s wrongful
conduct, Plaintiff and the Class have suffered financial harm including, but not
limited to, loss of the time value of PPP funds.
CLASS DEFINITIONS AND CLASS ALLEGATIONS
39. Plaintiff brings this action on behalf of herself, and on behalf of all
others similarly situated, and as a member of the Class defined as follows:
All businesses in the State of California who applied to
Defendant FCC, either directly or through a broker, for PPP
funding, who met the SBA’s criteria for PPP loan eligibility,
and whose applications were not processed and funded by
Defendant FCC.
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40.
Plaintiff reserves the right to amend or otherwise alter the sub-class
definitions presented to the Court at the appropriate time, or to propose or
eliminate sub-classes, in response to facts learned through discovery, legal
arguments advanced by Defendant or otherwise.
41.
This action has been brought and may be properly maintained as a
class action pursuant to California Code of Civil Procedure § 382 and other
applicable law, as follows:
42.
Numerosity of the Class: Members of the Class are so numerous
that their individual joinder is impracticable. The precise number of Class
members and their addresses are known to Plaintiff or will be known to Plaintiff
through discovery. Class members may be notified of the pendency of this action
by mail, electronic mail, the Internet, or published notice.
43.
Existence of Predominance of Common Questions of Fact and
Law: Common questions of law and fact exist as to all members of the Class.
These questions predominate over any questions affecting only individual Class
members. These common legal and factual questions include:
a. Whether Defendant failed to process loan applications on a first come,
first serve basis;
b. Whether Defendant prioritized higher value loans;
c. Whether Defendant prioritized loans from favored customers;
d. Whether Defendants were licensed to act as lenders in California during
the appropriate time;
e. Whether Defendant had sufficient funding available to process the loans
they accepted;
f. Whether Defendant failed to disclose that it prioritized higher value
loans;
g. Whether Defendant failed to disclose that it prioritized loans for favored
customers;
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h. Whether Defendant complied with SBA regulations in processing
applications for PPP loans;
i. Whether Defendants engaged in an unfair business practice in violation
of Business & Professions Code §17200, et seq.
j. Whether Defendants engaged in false advertising in violation of
Business & Professions Code §17500, et seq.
k. Whether Defendants fraudulently concealed they were prioritizing
higher value PPP loans;
l. The nature and extent of class-wide injury and the measure of damages
for the injury.
44. Typicality: Plaintiff’s claims are typical of the claims of the members
of the subclasses they represent because Plaintiff, as a mortgage consultant for
Defendant, was exposed and subjected to the same unlawful business practices as
other mortgage salespersons employed by Defendant during the liability period.
Plaintiff and the members of the class she represents sustained the same types of
damages and losses.
45. Adequacy: Plaintiff is an adequate representatives of the Class they
seeks to represent because their interests do not conflict with the interests of the
members of the subclasses Plaintiff seeks to represent. Plaintiff has retained
counsel competent and experienced in complex class action litigation and Plaintiff
intends to prosecute this action vigorously. The interests of members of each
Class will be fairly and adequately protected by Plaintiff and their counsel.
46. Superiority and Substantial Benefit: The class action is superior to
other available means for the fair and efficient adjudication of Plaintiff and the
Class members’ claims. The violations of law were committed by Defendant in a
uniform manner and class members were exposed to the same unlawful practices.
The damages suffered by each individual Class member may be limited. Damages
of such magnitude are small given the burden and expense of individual
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prosecution of the complex and extensive litigation necessitated by Defendant’s
conduct. Further, it would be virtually impossible for the Class members to
redress the wrongs done to them on an individual basis. Even if members of the
Class themselves could afford such individual litigation, the court system could
not. Individualized litigation increases the delay and expense to all parties and the
court system, due to the complex legal and factual issues of the case. By contrast,
the class action device presents far fewer management difficulties, and provides
the benefits of single adjudication, economy of scale, and comprehensive
supervision by a single court.
47. The Class should also be certified because:
a. The prosecution of separate actions by individual members of the Class
would create a risk of inconsistent or varying adjudications with respect
to individual Class members which would establish incompatible
standards of conduct for Defendant;
b. The prosecution of separate actions by individual members of the Class
would create a risk of adjudication with respect to them, which would, as
a practical matter, be dispositive of the interests of the other Class
members not parties to the adjudications, or substantially impair or
impede their ability to protect their interests; and
c. Defendant has acted or refused to act on grounds generally applicable to
the Class, and/or the general public, thereby making appropriate final
and injunctive relief with respect to the Classes as a whole.
FIRST CAUSE OF ACTION
FRAUDULENT CONCEALMENT
(Violation of California’s Unfair Competition Law, Bus. & Prof. Code §§
17500 et seq.)
48. Plaintiff re-alleges and incorporates all preceding paragraphs as if
fully set forth herein.
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49. In March and April 2020, Defendant represented to the public through
its website and advertisements that it would process PPP loan applications for
small businesses. Defendant represented via email, when persons submitted an
application that they were in the “queue” with respect to prioritizing PPP loan
application processing. Defendant made these representations to Plaintiff via email
March 28, 2020, April 9, 2020, and April 13, 2020. Each of these emails came
from email address info@fountainheadcc.com. The March 28, 2020 and April 13,
2020, stated they were from Chris Hurn, who Plaintiff is informed and believes,
and on that basis alleges, is Defendant FCC’s founder and CEO. The April 9, 2020
email from defendant FCC did not identify an author.
50. Defendant had a duty to disclose material information related to the
transaction, including its lack of licensing, funding, and practice of prioritizing
high value or favored loans. Among other things, a duty to disclose existed
because (a) Defendant has exclusive knowledge of material information relating to
its licensure status, its available funding, and its PPP loan application process,
including that it was not prioritizing on a first come, first serve basis, and instead
prioritizing high value or favored customer loans; (b) The law required that
Defendant FCC be licensed, adequately funded, and that loans be processed on a
first-come first serve basis, and Defendant had a legal duty to disclose practices
inconsistent with these regulations; and (c) Defendant’s made representations
regarding its ability to accept and process applications, Plaintiff and Class
members need to act quickly to submit PPP applications, that there was a queue
and that help was on the way which were, at best, misleading half-truths that
required disclosure of Defendants FCC’s licensure status, lack of adequate
funding, and prioritizing practice.
51. Defendants omitted, failed to disclose, and fraudulently concealed
material information, specifically that Defendant was not licensed, was not
adequately funded, and was prioritizing large or favored loans for PPP loan
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processing and submission to the SBA.
52. Plaintiff and Defendant were parties transacting business in order to
enter into a contractual, borrower-lender relationship. The Defendant’s relationship
with Plaintiff and the Class gave Defendant a duty to disclose.
53. Plaintiff and the Class justifiably, reasonably, and actually relied on
Defendants fraudulent concealment by submitting PPP loan applications through
Defendant FCC, paying for copies of requested loan documents, waiting for a link
to upload loan documents, not at that time submitting applications with another
PPP lender, and other acts, as alleged herein.
54. As a result of Defendants’ fraudulent concealment, Plaintiff and the
Class have suffered economic harm, including but not limited to, loss of use of
money. Plaintiff also suffered other harm, including by refraining from applying
elsewhere thereby losing priority and further delaying receipt of any monies
needed to fund her business.
55. On the basis of all of the facts alleged hereinabove, Defendants’
conduct and actions were despicable, and were done maliciously, oppressively
and/or fraudulently, with a willful and conscious disregard of Plaintiffs’ rights,
entitling plaintiff to punitive damages under California Civil Code Section 3294.
As to all Defendants, the officers, directors and managing agents were personally
involved in the decision-making process with respect to the misconduct alleged
herein and to be proven at trial. As to the conduct engaged in by representatives of
the Insurer Defendants, their officers, directors and managing agents authorized
and ratified each and every act on which Plaintiffs’ allegations of punitive damages
herein are based.
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SECOND CAUSE OF ACTION
FRAUDULENT DECEIT
(Violation of California Civil Code Section 1709 et seq.)
56. Plaintiff re-alleges and incorporates all preceding paragraphs as if
fully set forth herein.
57. Pursuant to California Civil Code Section 1709, et seq., “One who
willfully deceives another with intent to induce him to alter his position to his
injury or risk, is liable for any damage which he thereby suffers.”
58. As alleged herein, upon the CARES Act becoming law, Defendant
FCC represented that it was able to promptly make PPP loans, and that it would
process applications on a first-come, first serve basis, and applicants did not need a
prior relationship.
59. Plaintiff is informed and believes, and on that basis alleges, that these
representations were false because Defendant was not licensed, did not have
adequate funding for the PPP loan applications, and prioritized higher loans that
would yield higher fees for Defendant FCC, and loans from favored customers.
60. After receiving Plaintiff’s application, Defendant represented Plaintiff
would receive a link or invitation to upload documentation to process Plaintiff’s
application. Plaintiff is informed and believes, and on that basis alleges, that these
representations were false, as no link was sent.
61. Plaintiff is informed and believes, and on that basis alleges, that
Defendant wanted to generate as much fees and profits as quickly as possible on
PP loans, and intended to, and actually did, induce Plaintiff and the Class to
reasonably rely on Defendant’s misrepresentations.
62. Plaintiff and the Class justifiably, reasonably, and actually relied on
Defendant’s fraudulent deceit by submitting PPP loan applications through
Defendant FCC, paying for copies of requested loan documents, waiting for a link
to upload loan documents, not at that time submitting applications with another
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PPP lender, and other acts, as alleged herein.
63. Plaintiff and the Class have lost money or property as a result of
Defendant’s fraudulent deceit because they would not have incurred copying costs
for loan documents required by Defendants, would not have applied for PPP
funding through Defendant, and would have received PPP funding sooner.
64. On the basis of all of the facts alleged hereinabove, Defendants’
conduct and actions were despicable, and were done maliciously, oppressively
and/or fraudulently, with a willful and conscious disregard of Plaintiffs’ rights,
entitling plaintiff to punitive damages under California Civil Code Section 3294.
As to all Defendants, the officers, directors and managing agents were personally
involved in the decision-making process with respect to the misconduct alleged
herein and to be proven at trial. As to the conduct engaged in by representatives of
the Insurer Defendants, their officers, directors and managing agents authorized
and ratified each and every act on which Plaintiffs’ allegations of punitive damages
herein are based.
THIRD CAUSE OF ACTION
UNFAIR BUSINESS PRACTICES
(Violation of California’s Unfair Competition Law, Bus. & Prof. Code §§
17200 et seq.)
65. Plaintiff re-alleges and incorporates all preceding paragraphs as if
fully set forth herein.
66. Section 17200 of the California Business and Professions Code (the
“UCL”) prohibits any unlawful, unfair, or fraudulent business practices.
67. Through its actions alleged herein, Defendant has engaged in unfair
competition within the meaning of the UCL. Defendant’s conduct, as alleged
herein, constitutes unlawful, unfair, and/or fraudulent business practices under the
UCL.
68. Defendant’s unlawful conduct under the UCL includes, but is not
limited to, violating: (a) California Financial Code §22100(a), acting as lender
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without a license; (b) 15 U.S.C. §52(a), with false advertisements, as alleged
herein; and (c) SBA regulations governing PPP funds, specifically 13 CFR Part
120, Docket No. SBA-2020-0015, RIN 3245-AH34, Business Loan Program
Temporary Changes; Paycheck Protection Program, §2m, requiring that PPP loans
be processed and funded on first come, first served basis.
69. Defendant’s fraudulent conduct includes, but is not limited to,
representing that it would process PPP applications, that Plaintiff and class
members were in the queue for priority, and that help was on the way, without
disclosing that Defendants were not licensed to do these loans, did not have
adequate capitalization, and were prioritizing high value or favored PPP loans.
70. Defendant’s unfair conduct includes, but is not limited to, failing to
disclose there lack of a license or a funding facility, and that they were prioritizing
large or favored loans, to enrich itself, at the expense of smaller businesses getting
timely PPP loan funding.
71. Plaintiff has standing to assert this claim because it has suffered injury
in fact and has lost money as a result of Defendant’s conduct, including but not
limited to, copying costs and use of PPP funds.
72. To the extent Plaintiff lacks common law claims, Plaintiff alleges in
the alternative that Plaintiff lacks any plain, speedy, and/or adequate remedy at law
to prevent the harm, injury, and/or loss, and, therefore, is entitled to equitable
relief.
73. Plaintiff and the Class seek restitutionary disgorgement from
Defendant, and an injunction prohibiting them from engaging in the unlawful,
unfair, and/or fraudulent conduct alleged herein.
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FOURTH CAUSE OF ACTION
FALSE ADVERTISING
(Violation of California’s Unfair Competition Law, Bus. & Prof. Code §§
17500 et seq.)
74. Plaintiff re-alleges and incorporates all preceding paragraphs as if
fully set forth herein.
75. This cause of action is brought by Plaintiff and the Class under
California Business & Professions Code §17500. Pursuant to California Business
& Professions Code §17500, et seq., it is “unlawful for any person to make or
disseminate or cause to be made or disseminated before the public in this state,…in
any advertising device...or in any other manner or means whatever,…any
statement, concerning…personal property or services…which is untrue or
misleading and which is known, or which by the exercise of reasonable care should
be known, to be untrue or misleading.”
76. As described herein, Defendants committed acts of false advertising,
as defined by §17500 by making or disseminating, or causing to be made or
disseminated, before the public in this State, untrue or misleading statements in
connection with the sale of goods or services, that Defendants knew or should have
known were untrue or misleading.
77. Plaintiff was aware of and reasonably relied on Defendant’s
statements.
78. Plaintiff and the Class have lost money or property as a result of
Defendants’ false advertising because they would not have incurred copying costs
for loan documents required by Defendants, would not have applied for PPP
funding through Defendant, and would have received PPP funding sooner.
79. To the extent Plaintiff lacks common law claims, Plaintiff alleges in
the alternative that Plaintiff lacks any plain, speedy, and/or adequate remedy at law
to prevent the harm, injury, and/or loss, and, therefore, is entitled to equitable
relief.
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80. Pursuant to section 17535 of the California Civil Code, Plaintiff, on
behalf of itself and the Class, seeks restitution, a Court order enjoining Defendants
from such future conduct and any other such orders as may be necessary to rectify
Defendants’ false advertising, including requiring Defendants to cease using
misleading statements and to fully disclose the terms of the agreement.
PRAYER
WHEREFORE, Plaintiff, on behalf of itself and all others similarly situated
and also on behalf of the general public, pray for judgment against Defendant as
follows:
A. An order that this action may proceed and be maintained as a class
action;
B. Awarding Plaintiff and Class members damages, including special
and consequential damages;
C. Awarding Plaintiff and Class members compensatory damages in an
amount according to proof at trial;
D. Public injunctive relief enjoining Defendants unfair business practices
or false advertising;
E. Awarding restitution from Defendants to Plaintiff and the Class;
F. Punitive damages;
G. Attorney’s fees and costs;
H. For such other relief the Court deems just and proper.
DATED: August 20, 2021
HAFFNER LAW PC
By:
/s/ Joshua H. Haffner
Joshua H. Haffner
Attorneys for Plaintiff and others
Similarly situated
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DEMAND FOR JURY TRIAL
Plaintiff demands a trial by jury for itself and the Class members on all
claims so triable.
DATED: August 20, 2021
HAFFNER LAW PC
By:
/s/ Joshua H. Haffner
Joshua H. Haffner
Attorneys for Plaintiff and others
Similarly situated
Case 2:20-cv-04149-DDP-RAO Document 36 Filed 08/20/21 Page 21 of 21 Page ID
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