Respondent's Response to Motion for Summary Judgment — Concessions HH, JV v. SBA (N.D. Ga.)

Record facts

U.S. District Court for the Northern District of Georgia, Atlanta Division · No. 1:24-cv-01870-WMR · Doc. 18 · 2024-12-23 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF GEORGIA 
ATLANTA DIVISION 
 
CONCESSIONS HH, JV, 
 
 
PETITIONER, 
v. 
THE UNITED STATES SMALL 
BUSINESS ADMINISTRATION, 
 
 
RESPONDENT. 
 
 
Civil Action No. 
1:24-cv-01870-WMR 
RESPONDENT’S RESPONSE TO PETITIONER’S MOTION FOR  
SUMMARY JUDGMENT 
Concessions HH, JV (Concessions) and its parent company, the Russell 
Group, violated the Small Business Administration’s (SBA) well-established 
Corporate Group Rule (CGR) when they obtained over $4,000,000 of Paycheck 
Protection Program (PPP) loans under the Economic Aid Act (EAA).  They knew 
that one of the consequences for doing so was that their PPP loans would not be 
eligible for forgiveness.  Despite this, Concessions sought to have its PPP loans 
forgiven.  Following its clearly established rule, the SBA declined to do so.  
Concessions administratively challenged the SBA’s decision and the 
administrative law judge (ALJ) affirmed.  Concessions now asks the Court to 
order the SBA to forgive its PPP loans.  In support, Concessions argues that the 
CGR conflicts with the affiliation waiver provision of the CARES Act; and that 
the SBA applied the CGR in an arbitrary manner. 
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These arguments lack merit.  First, the CGR does not conflict with the 
affiliation waiver provision because it merely limits the total amount in loans 
affiliated eligible borrowers can receive, while the Affiliation Rule concerns 
whether a borrower is eligible to receive a loan in the first place.  Even more, 
Congress declined to eliminate the CGR and its application to businesses like 
Concessions when it reauthorized the PPP.  Second, the CARES Act, EAA, and 
Small Business Act all gave the SBA broad authority to adopt the CGR and apply 
it to second-draw PPP loans.  Third, the SBA’s application of the Rule to 
Concessions was not arbitrary.  The SBA used a consistent method to determine 
that the Russell Group obtained over $4,000,000.00 (an undisputed fact), and it 
correctly applied that method to conclude that the loans at issue here should not 
be forgiven.  Accordingly, the Court should deny Concessions’ motion for 
summary judgment.  But even if the Court were to find that the SBA erred, the 
only appropriate remedy should be a remand to the SBA for reconsideration.    
I. 
BACKGROUND       
A. The SBA’s § 7(a) Loan Program and its Affiliation Rule 
Section 7(a) of the Small Business Act (“§ 7(a)”) “empower[s]” the SBA to 
guarantee general purpose loans to small businesses.  15 U.S.C. § 636(a).  Section 
7(a) matters here because “the PPP was not created as a standalone program; 
instead it was added to § 7(a) ….”  In re Gateway Radiology Consultants, P.A., 983 
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F.3d 1239, 1249 (11th Cir. 2020) (citing CARES Act, § 1102, 134 Stat. at 
286 (amending § 7(a)); see also 15 U.S.C. § 636(a)(36)(B)).   
The Small Business Act also broadly authorizes the SBA to “make such rules 
and regulations” as the agency “deems necessary” to implement the loan 
program, and to “take any and all actions” the agency “determines . . . are 
necessary or desirable in making, servicing, compromising, modifying, 
liquidating, or otherwise dealing with or realizing on loans[.]”  15 U.S.C. § 
634(b)(6), (b)(7).  Indeed, Congress delegated “extraordinarily broad powers” to 
the SBA to “accomplish [its] objectives….”  See Gateway Radiology, 983 F.3d at 
1247-48 (citing SBA v. McClellan, 364 U.S. 446, 447 (1960)).   
As its name suggests, the SBA serves only small businesses.  15 U.S.C. § 
632(a)(1), (2)(A); 13 C.F.R. §§ 120.100(d), 121.201.  Therefore, to ordinarily qualify 
for a § 7(a) loan, an applicant must meet the size standards for a “small” business 
set forth in the Act and SBA regulations. 15 U.S.C. § 632(a)(1), (2)(A); 13 C.F.R. §§ 
120.100(d), 121.201.  The Small Business Act “grants the SBA broad authority to 
craft general criteria for establishing which entities qualify as small business 
concerns, as well as to make particularized size assessments.”  DSE, Inc. v. United 
States, 169 F.3d 21, 25 (D.C. Cir. 1999).  Those criteria include “affiliation rules” 
that determine when an applicant is affiliated with another entity, such that the 
two are properly regarded as a single, larger entity (in terms of number of 
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employees or revenue) for the purpose of determining whether the applicant 
qualifies as an eligible “small” business.  See 13 C.F.R. §§ 121.103; 121.301(f).       
B. The CARES Act, the PPP, and Waiver of SBA’s Affiliation Rule 
In 2020, in response to the economic impact of the COVID-19 pandemic on 
small businesses, Congress passed the Coronavirus Aid, Relief, and Economic 
Security Act (“CARES Act”), which inter alia, created the PPP program to extend 
relief to small businesses experiencing economic hardship.  15 U.S.C. § 636(a)(36); 
Pub. L. 116-136, 134 Stat 281.  Subparagraph 636(a)(36)(B) stated that “[e]xcept as 
otherwise provided in this paragraph, the [SBA] may guarantee [PPP] loans,” 
issued by private lenders, “under the same terms, conditions, and processes as 
[other] loan[s] made under” § 7(a). 15 U.S.C. § 636(a)(36)(B) (emphasis added); 
see id. § 636(a)(36)(F)(ii).   
  The statute then detailed the ways in which PPP loans differ from other § 
7(a) loans.  15 U.S.C. § 636(a)(36)(D)-(W).  Relevant here, the CARES Act waived 
the SBA’s Affiliation Rule for businesses, like Concessions, that had been 
assigned a North American Industry Classification System (NAICS) code 
beginning with 72—restaurants and hotels.  The pertinent part of the Act 
provides as follows: 
(iv) Waiver of affiliation rules: 
During the covered period, the provisions applicable to affiliations 
under section 121.103 of title 13, Code of Federal Regulations, or any 
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successor regulation, are waived with respect to eligibility for a 
[Paycheck Protection Program] loan for— 
(I) any business concern with not more than 500 employees 
that, as of the date on which the covered loan is disbursed, is 
assigned a North American Industry Classification System code 
beginning with 72; 
 
15 U.S.C. § 636(a)(36)(D)(iv)(I) (emphasis removed).  Neither the CARES Act, nor 
Congress’s subsequent legislation, altered or amended the SBA’s longstanding 
Affiliation Rule except to the extent set forth in Section 636(a)(36)(D)(iv).  See 
generally CARES Act, § 1102; 134 Stat. at 286-94.   
  
The CARES Act also enlarged the $5,000,000 cap applicable to other § 7(a) 
loans, providing that the “maximum amount” of a PPP loan was to be “the lesser 
of” (1) the borrower’s average monthly payroll costs for the preceding year, 
multiplied by 2.5, plus the balance of the borrower’s eligible SBA disaster loans; 
or (2) $10,000,000.  15 U.S.C. § 636(a)(36)(E) (emphasis added).  Congress initially 
authorized the SBA to guarantee up to $349 billion in PPP loans by June 30, 2020.  
CARES Act § 1102(b)(1); 15 U.S.C. § 636(a)(36)(A)(ii)-(iii), (B).     
The CARES Act also directed the SBA to “issue regulations to carry out this 
title”—that is, regulations for PPP loans.  CARES Act, § 1114, 134 Stat. at 314 
(codified at 15 U.S.C. § 9012).  And Congress directed the SBA to issue 
regulations no later than “15 days after the date of the enactment of this Act” 
without adhering to the notice requirement of the rule making process.  Id.   
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Following Congress’ directive, the SBA issued regulations to help execute the 
PPP program.  See e.g. 85 Fed. Reg. 23450 (PPP Requirements—Promissory Notes, 
Authorizations, Affiliation, and Eligibility); 85 Fed. Reg. 26324 (PPP Program 
Requirements—Corporate Groups and Non-Bank and Non-Insured Depository 
Institution Lenders).  The SBA also established a highly streamlined PPP loan-
origination process based on borrower’s self-certification of eligibility.  See 85 
Fed. Reg. at 20,812, 20,814-16; SBA Form 2483.  Because borrowers’ applications 
and supporting documentation were maintained by lenders, not sent to the SBA, 
see 85 Fed. Reg. at 20,814, the SBA did not (and as a practical matter could not) 
make independent PPP borrower eligibility determinations at the loan-
origination stage. 
The SBA launched the PPP on April 3, 2020.  SBA Press Release No. 20-30.  
The program’s termination date was June 30, 2020, but the entire $349 billion 
authorized by Congress was exhausted in less than two weeks because of the 
high demand for PPP loans.  CARES Act § 1102(b) (termination date); SBA Press 
Release No. 20-32 (exhaustion of funds).     
C. The Economic Aid Act (EAA) 
The PPP expired on August 8, 2020.  See Act of July 4, 2020, Pub. L. No. 116-
147, 134 Stat. 660.  However, the Economic Aid to Hard-Hit Small Businesses, 
Nonprofits, and Venues Act, (Consolidated Appropriations Act, 2021, Div. N, 
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Title III, Pub. L. No. 116-260, 134 Stat. 1182, 1993–2052) (Dec. 27, 2020)) (the 
“Economic Aid Act,” or “EAA”), reauthorized and extended the program to 
March 31, 2021, and added another $147.5 billion in loan authority.  EAA § 
323(a)(1).  Important here, the EAA also added a new section to the § 7(a) 
program, 15 U.S.C. § 636(a)(37), that authorized SBA to guarantee so-called 
“second-draw” PPP loans to certain businesses that had already received “first-
draw” PPP loans under the CARES Act, under the same terms and conditions as 
first-draw loans, except as the EAA otherwise provided.  EAA § 311(a); 15 U.S.C. 
§ 636(a)(37)(B).  The EAA established a “[m]aximum loan amount” for second-
draw loans based on the CARES Act’s payroll-based formula for first-draw loans, 
but with a smaller cap of $2,000,000.  Id. § 636(a)(37)(C).  The EAA also specified 
that the Affiliation Waiver applicable to first-draw loans would also apply to 
second-draw PPP loans, “for purposes of determining eligibility[,]” though it 
lowered the number of employees a NAICS Code 72 business could have while 
qualifying for the Waiver from 500 to 300 employees.  Id. § 636(a)(37)(E). 
Like the CARES Act, the EAA gave the SBA “emergency rulemaking 
authority” and directed the SBA to issue regulations implementing the EAA 
“[n]ot later than 10 days after” the EAA’s enactment, without regard to the 
notice-and-comment requirements of 5 U.S.C. § 553(b).  EAA § 303.   
D. Forgiveness of PPP Loans 
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The CARES Act also provides for the forgiveness of PPP loans, stating that 
“[a]n eligible recipient” of a PPP loan “shall be eligible for forgiveness” “in an 
amount equal to” the sum of its covered payroll costs and other allowable 
expenses, but not to exceed the principal amount of the loan.  15 U.S.C. § 636m(b) 
& (d)(1).  To obtain forgiveness, an eligible borrower submits an application and 
supporting documents to its lender, which then determines if the borrower is 
entitled to forgiveness under the Act, and, if so, submits a request for payment to 
the SBA.  15 U.S.C. § 636m(g); see 85 Fed. Reg. 38,304, 38,306 (June 26, 2020).   The 
SBA then remits the appropriate amount to the lender—subject, however, to any 
SBA review of the loan.  15 U.S.C. § 636m(c)(3); 85 Fed. Reg. at 38,306.  If the 
agency determines during a review that “an action by the borrower has resulted 
in its receipt of a PPP loan that did not meet program requirements,” it denies 
forgiveness of the loan.  85 Fed. Reg. 33,010, 33,012-13 (June 1, 2020)). 
E. The Corporate Group Rule 
While Congress expressly exempted business like Concessions from the SBA’s 
Affiliation Rule to be eligible for PPP loans, it did not do the same for the SBA’s 
Corporate Group Rule—an altogether different rule that sets a cap on the amount 
of PPP loans a corporate group can borrow.     
 
On May 4, 2020, the SBA published the Corporate Group Rule.  85 Fed. Reg. 
26,324 (May 4, 2020). Under the Rule, “businesses that are part of a single 
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corporate group shall in no event receive more than $20,000,000 of PPP loans in 
the aggregate.”  Id. at 26,325.  The Rule defined a “corporate group” as 
businesses “owned, directly or indirectly, by a common parent.”  Id.  The Rule 
advised borrowers that loans received in disregard of its terms “will not be 
eligible for forgiveness.” Id. 
The SBA explained that the Rule’s purpose was to “preserve the limited 
resources available to the PPP . . . in light of the previous lapse of PPP 
appropriations and the high demand for PPP loans[.]”  Id.  The SBA “determined 
that limiting the amount of PPP loans that a single corporate group may receive 
[would] promote the availability of PPP loans to the largest possible number of 
borrowers, consistent with the CARES Act.”  Id.  It also concluded that it had 
authority to issue an “aggregate limitation” on the amount of PPP loans issued to 
a single corporate group, because the terms of the CARES Act “specify a 
‘maximum’—but not a minimum—loan amount” for each borrower that the SBA 
“may” guarantee.  Id .at n. 1 (citing 15 U.S.C. § 636(a)(36)(B), (E)). 
The SBA also noted that its “affiliation rules, which relate to an applicant’s 
eligibility for PPP loans” as well as “any waiver of those rules under the CARES 
Act” would “continue to apply independent of this [aggregate] limitation.”  Id. at 
26,325 (emphasis added).  Conversely, applicants were subject to the CGR “even 
if the businesses are eligible for the waiver-of-affiliation provision under the 
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CARES Act or are otherwise not considered to be affiliates under SBA’s 
affiliation rules.”  Id.  In other words, the Rule applied to all eligible borrowers, 
regardless of whether the SBA considered affiliation in determining those 
borrowers’ eligibility to participate in the program.   
The CGR was in effect when Congress passed the EAA, and the SBA 
continued to apply it to second-draw loans to “promote the availability of PPP 
loans to the largest possible number of borrowers[.]”  86 Fed. Reg. 3712, 3716 
(Jan. 14. 2021).  Consistent with the lower maximum individual loan amount 
authorized by the EAA for second-draw loans, SBA capped the total amount a 
single corporate group could receive in second-draw loans at $4,000,000.00.  Id. at 
3716, 3720.  
II. 
PROCEDURAL HISTORY AND UNDISPUTED FACTS 
Concessions makes two arguments: (1) that the CGR violated the waiver-of-
affiliation-for-eligibility provision of the CARES Act; and (2) that, in any event, 
the SBA’s application of the CGR here was arbitrary and capricious in violation 
of the Administrative Procedures Act (APA).  The undisputed material facts 
related to these arguments are as follows:  
Concessions is in the food-service business; it is therefore a part of the 
hospitality industry, and it has a NAICS code beginning with 72.  Doc. 17-2 at ¶¶ 
1-2 (ECF 13-1 at 57-59; 13-3 at 17-21, 350-51).  It is also one of 98 entities that 
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forms the Russell Group.  Id. at ¶ 3 (ECF 13-3 at 350).  The Russell Group, and its 
subsidiaries, employs over 1,100 employees and would not ordinarily be 
considered a small business eligible for SBA programs.  Id. at ¶ 3-4 (ECF 13-3 at 
350); see also 13 C.F.R. §§ 121.103; 121.301(f).  However, the CARES Act waived 
the SBA’s Affiliation Rule and made the Russell Group eligible for PPP loans for 
its businesses in the hospitality industry.  Id. at ¶ 4 (ECF 13-3 at 350).  The Russell 
Group, including Concessions, borrowed $8,597,783.48 in first-draw PPP loans 
under the CARES Act.  Id. at ¶ 6 (ECF 13-3 at 351).  The Russell Group sought 
and received forgiveness for all its first-draw PPP loans.  Id. at ¶ 7 (ECF 13-3 at 
351, 357).  Accordingly, this case is not about first-draw loans under the CARES 
Act.  Id.  
Rather, this case is about the Russell Group’s second-draw PPP loans under 
the EAA.  See generally id. at ¶ 7-20.  Altogether, the Russell Group obtained 
$5,409,573.82 in second-draw PPP loans.  Id. at ¶ 14 (ECF 13-3 at 351).  Of that, 
Concessions received $2,000,000.00.  Id. at ¶ 11 (ECF 13-5 at 1).  Concessions 
sought to have its part of the Russell Group loans forgiven and the SBA denied 
its application on the basis that the Russell Group had violated the CGR when it 
borrowed over $4,000,000.00 in second-draw EAA loans.  Id. at ¶¶ 18, 21 (ECF 13-
1 at 17-18; 13-3 at 351-52; 13-5 at 1).  
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Concessions appealed the SBA’s decision.  Id. at ¶ 26 (ECF 13-4 at 1).  The ALJ 
found that the Russell Group, that is Concessions and its affiliates, borrowed 
over $1,400,000.00 above the maximum permitted for second-draw loans for 
corporate groups.  Id. at ¶ 29 (ECF 13-8 at 6).  It then found that Concessions 
failed to show that the SBA’s denial of forgiveness “was based on clear error” 
and it affirmed the SBA’s decision.  Id. at ¶¶ 30-31 (ECF 13-8 at 6).  Concessions 
now seeks judicial review of the ALJ’s decision.  Id. at ¶ 32 (ECF 1).      
III. 
 ARGUMENT AND CITATION TO AUTHORITY  
A. Standard of Review 
The Court “must exercise [its] independent judgment in deciding whether the 
[SBA] has acted within its statutory authority” by adopting the CGR.  Loper 
Bright Enter.s v. Raimondo, 144 S. Ct. 2244, 2273 (2024).  Where, as here, the 
relevant statute confers discretionary authority on the agency, the Court 
“fulfill[s] [its] obligations under the APA” by “identify[ing] and respect[ing]” 
that delegation.  Id. at 2268; see also id. at 2273. 
The Court may only set aside an agency action under the APA where it finds 
that the action is “arbitrary, capricious, an abuse of discretion, or otherwise not 
in accordance with law.”  5 U.S.C. § 706(2)(A); Fund for Animals, Inc. v. Rice, 85 
F.3d 535, 541 (11th Cir. 1996).  The standard of review under the APA is 
“exceedingly deferential” to the agency.  Fund for Animals, 85 F.3d at 541.  It 
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merely requires agencies to engage in “reasoned decisionmaking.”  Dept. of 
Homeland Sec. v. Regents of the Univ. of Cal., 591 U.S. 1, 16 (2020) (citations 
omitted).   Indeed, “under this narrow standard of review … it is not the role of 
the reviewing court to substitute its judgment for the judgment of the 
agency.” Id. (citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009).   
B. The Corporate Group Rule Does Not Violate the Waiver-of-Affiliation 
for Eligibility Provision of the CARES Act or the EAA   
 
Concessions does not, and indeed cannot, dispute that the Russell Group 
violated the CGR when its companies, including Concessions, borrowed over 
$4,000,000.00 in second-draw EAA loans.  Doc. 17-2 at ¶¶ 8 & 14 (ECF 13-3 at 
351).  Instead, it argues that the CGR contravenes the affiliation waiver provision 
of the CARES Act and the EAA.  Concessions is wrong on several fronts.   
1. The language of the waiver provision speaks only to eligibility.  
In determining whether the CARES Act bars the CGR, the “starting point is 
the language of the statute” itself.  Diamond v. Diehr, 450 U.S. 175, 182 (1981); see 
also EEOC v. STME, LLC, 938 F.3d 1305, 1313-14 (11th Cir. 2019).  And, unless 
otherwise defined, “words will be interpreted as taking their ordinary, 
contemporary, common meaning.”  Id.  Here, the plain language of the CARES 
Act and the EAA belies Concessions’ argument.  
15 U.S.C. § 636(a)(36)(D)(iv), titled “waiver of affiliation rules,” states that 
“[d]uring the covered period, the provisions applicable to affiliations under 
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section 121.103 of title 13, Code of Federal Regulations, or any successor 
regulation, are waived with respect to eligibility for a [Paycheck Protection 
Program] loan” for business “with not more than 500 employees that” is 
assigned a NAICS code beginning with 72. (emphasis added).  And because the 
EAA, in most respects, was a continuation of the CARES Act, Congress 
incorporated the waiver provision in the EAA.  15 U.S.C. § 636(a)(37)(E).  By its 
plain language, the CARES Act and the EAA expressly waived the SBA’s 
affiliation rules only “with respect to eligibility” for PPP loans—not with respect 
to administration, guarantee, or forgiveness of those loans.  Id.   
Moreover, the SBA’s Affiliation Rule and Corporate Group Rule perform 
distinctly different functions.  The Affiliation Rules concern whether an entity is 
eligible for a § 7(a) loan in the first place.  The CGR, by contrast, sets a cap on the 
total amount that related entities may receive, without categorically prohibiting 
any entity from participating in the PPP.  Simply put, these rules are not the 
same statutorily or functionally.   
Despite this, Concessions argues that the CGR is a “successor regulation” of 
the Affiliation Rule and, therefore, it too is waived.  Doc. 17-1 at pp. 20-21.  
Concession argues that because the SBA used the same language to define large 
businesses for both rules, the CGR is necessarily a “successor regulation” of the 
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Affiliation Rule.  Doc. 17-1 at pp. 20-21.  Again, this argument ignores the text of 
the statute and the function of the Affiliation Rule.   
In the CARES Act, Congress waived “the provisions applicable to affiliations 
under” 13 C.F.R. § 121.103 “or any successor regulation … with respect to 
eligibility for a covered loan.” 15 U.S.C. § 636(a)(36)(D)(iv)(I).  First, Concessions 
ignores the “with respect to eligibility” language.  United States v. Aldrich, 566 
F.3d 976, 978 (11th Cir. 2009) (“[c]ourts’ construction should avoid tendering any 
clause, sentence, or word superfluous, void, or insignificant.”).  Second, this 
Court must read words “in their context and with a view to their place in the 
overall statutory scheme,” because a court’s duty, “after all, is to construe 
statutes, not isolated provisions.”  King v. Burwell, 576 U.S. 473, 486 (2015) 
(citations and quotations omitted).  Read in context of the sentence, the statue 
waives successor regulations for the Affiliation Rule, that is 13 C.F.R. § 121.103, 
with respect to eligibility for PPP loans.   
Section 121.103 outlines SBA’s “general principles of affiliation” and specifies 
that the size standards and bases for affiliation applicable to § 7(a) loans are set 
out in § 121.301. See 13 C.F.R. § 121.103(a)(6), (8).  Section 121.301 in turn provides 
that in determining an entity’s size—and thus its eligibility for a § 7(a) loan—
SBA considers the size (based on receipts, employees, or applicable alternate size 
standard) of the applicant “and all of its domestic and foreign affiliates[.]” 
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13 C.F.R. § 121.301(f)(6) (2020).  In other words, the affiliation provisions ensure 
that SBA loans go to businesses that are, in fact, small.  By waiving those 
regulations for certain categories of entities “with respect to eligibility,” the 
CARES Act makes entities that would otherwise be too large to participate in the 
§ 7(a) program eligible for PPP loans.  15 U.S.C. § 636(a)(36)(D)(iv).  Accordingly, 
the CARES Act, the affiliation rule and its “successor regulations” all concern 
eligibility for PPP loans and nothing more.   
The CGR does not conflict with the affiliation waiver provision because the 
CGR does not restrict eligibility.  It does not close the door to participation in the 
PPP—it simply requires owners of multiple eligible businesses to exercise 
judgment about how to allocate the loans SBA made available among their 
businesses.  Concessions’ argument fails to recognize the distinction between a 
limit on loan amount (like the CGR) and a limit on eligibility (like the Affiliation 
Rule).  Again, it’s worth noting here that had the SBA not waived its Affiliation 
Rule (as directed by the CARES Act and the EAA), the Russell Group, including 
Concessions, would not have been otherwise eligible for PPP loans.  Doc. 17-2 at 
¶¶ 3-4.   
Even more, the SBA specifically addressed the Affiliation Rule when it issued 
the CGR.  The SBA provided the statutory basis for the Rule and emphasized 
that the Rule does not compromise eligibility created by the waiver of its 
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Affiliation Rule.  85 Fed. Reg. 26,325 (May 4, 2020).  In other words, when it 
issued the CGR, the SBA made clear that the CGR was distinct and separate from 
the Affiliation Rule.    
So, the plain language of the statue is clear, and the SBA’s regulations are 
clear—the Affiliation Rule and the CGR address two different aspects of the PPP 
and serve two different functions.  Yet, Concessions asks the Court to ignore 
plain language of the law and the regulation and conflate the two rules.  For all 
the reasons discussed above, the Court should decline to do so.     
2. Congress authorized the SBA to enact the Corporate Group Rule.  
By housing the CARES Act in §7(a) of the Small Business Act, Congress 
delegated “extraordinarily broad powers” to the SBA to “make such rules and 
regulations” the agency “deems necessary” to implement the loan program.  15 
U.S.C. § 634(b)(6), (b)(7); Gateway Radiology, 983 F.3d at 1247-48.  Even more, both 
the CARES Act and the EAA directed the SBA to “issue regulations” to disburse 
PPP loans expeditiously and without adhering to the notice requirements of the 
rule making process.  CARES Act, § 1114, 134 Stat. at 314 (codified at 15 U.S.C. § 
9012); EAA § 303.  Accordingly, the SBA had broad statutory authority to issue 
the CGR.   
The SBA also had discreet statutory authority to do so.  The CARES Act 
provides that SBA “may” guarantee second-draw loans to eligible entities up to a 
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maximum of the borrower’s payroll-based amount or $2 million, whichever is 
less.  15 U.S.C. § 636(a)(77)(B)–(C).  And it is well-established that “[t]he word 
‘may’ customarily connotes discretion.”  Jama v. Immigr. & Customs Enf’t, 543 U.S. 
335, 346 (2005).  Thus, even when an entity is eligible for a guaranteed loan, the 
SBA retains discretion to decide whether to guarantee it. The Corporate Group 
Rule is merely an exercise of that discretion.  
In any event, the SBA’s interpretation of the CARES Act and the EAA to issue 
the CGR is the type of contemporaneous and consistent interpretation that may 
be “especially useful in determining the statute’s meaning.”  Loper Bright, 144 S. 
Ct. at 2262.  Respect for the SBA’s interpretation of a statute is “especially 
warranted” when the agency adopted it “roughly contemporaneously with 
enactment of the statute and remained consistent over time.”  Id. at 2247.  That is 
the case here.  The SBA promulgated the CGR shortly after the CARES Act was 
passed.  Therefore, the SBA’s interpretation of the CARES Act to allow for a limit 
on the loan amount is entitled to deference.  
In sum, the SBA had statutory authority to issue the CGR.  Additionally, the 
CGR serves a different function than the Affiliation Rule and, as a result, is not a 
“successor regulation” of the latter.  Therefore, the CGR does not conflict with 
the waiver-of-affiliation provision of either the CARES Act or the EAA.  And 
Petitioner’s motion for summary judgment on this basis should be denied.    
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3. Congress sanctioned the Corporate Group Rule with the EAA.      
Even if the CARES Act left any question about the SBA’s authority to 
implement the CGR to NAICS Code 72 businesses, Congress confirmed the 
Rule’s validity in the EAA.  “Congress is presumed to be aware of an 
administrative or judicial interpretation of a statute and to adopt that 
interpretation when it re-enacts a statute without change.”  Lorillard v. Pons, 434 
U.S. 575, 580 (1978); see also N. Haven Bd. of Educ. v. Bell, 456 U.S. 512, 535 (1982) 
(“Where ‘an agency’s statutory construction has been fully brought to the 
attention of the public and the Congress, and the latter has not sought to alter 
that interpretation although it has amended the statute in other respects, then 
presumably the legislative intent has been correctly discerned.’” (citation 
omitted)).  
The Lorillard presumption disposes of Concessions’ arguments here.  The SBA 
first issued the CGR on May 4, 2020.  85 Fed. Reg. 26,324.  The CARES Act PPP 
program expired on August 8, 2020.  Pub. L. No. 116-147, 134 Stat. 660.  Then, on 
December 27, 2020, Congress reauthorized (and refunded) the PPP through the 
EAA.  EAA § 323(a)(1).  In other words, Congress was fully aware of the CGR 
when it enacted the EAA and left the CGR untouched.  Moreover, the EAA did 
nothing to unsettle the SBA’s authority to provide less than the maximum loan 
amount authorized by the CARES Act.  To the contrary, the EAA added 
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maximum loan amount calculations for second-draw PPP loans that are modeled 
on the same payroll-based formula as in § 636(a)(36)(E).  EAA §§ 311, 313 (adding 
15 U.S.C. § 636(a)(36)(V), (37)(B)).   
Even more, the EAA made specific changes to both the maximum loan 
calculation for NAICS Code 72 business and the affiliation waiver applicable to 
those businesses, but it did nothing to prohibit SBA from applying the CGR to 
those businesses.  For example, the EAA increased the multiplier for calculating 
the maximum allowable second-draw loan for NAICS Code 72 businesses and 
decreased the total number employees such businesses could have while 
qualifying for the affiliation waiver, which continued to apply only “for 
purposes of determining eligibility.”  See EAA § 311 (adding 15 U.S.C. § 
636(a)(37)(B) and (37)(E)).  Again, it made these adjustments without restricting 
the CGR.  Accordingly, the appropriate inference under Lorillard, 434 U.S. at 580, 
and Bell, 456 U.S. at 535, is that the EAA represents Congress’ affirmative 
decision to ratify the SBA’s conclusion that the SBA could issue and enforce the 
CGR without running afoul of the CARES Act. 
C. The SBA’s Decision Not To Forgive Concessions’ PPP Loans, After 
Concessions Violated the CGR, Was Not Arbitrary and Capricious.  
 
Despite violating the SBA’s Corporate Group Rule, and knowing that its PPP 
loans would not be forgiven for doing so, Concessions nevertheless argues that 
the SBA’s decision not to forgive its second-draw loans violated the APA by 
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being arbitrary.  Doc. 17-1 at pp. 24-29.  Concessions argues that the SBA acted 
arbitrarily when it considered a $2,000,000.00 loan that H.J. Russell—one its 
sister-companies under the Russell Group umbrella—obtained because H.J. 
Russell was never eligible for a PPP loan to begin with.  Id. at pp. 24-26.  In other 
words, the SBA should simply ignore another Russell Group company’s ill-
gotten PPP loans.  Petitioner also argues that the SBA acted arbitrarily when it 
declined to not partially forgive the $4,000,000.00 corporate group maximum that 
they were allowed to borrow—presumably including H.J. Russell’s ill-gotten 
loans.  Id. at 26-29.  These arguments too lack merit.    
“The APA’s arbitrary-and-capricious standard requires that agency action be 
reasonable and reasonably explained.”  FCC v. Prometheus Radio Project, 592 U.S. 
414, 423 (2021).  “Judicial review under that standard is deferential, and a court 
may not substitute its own policy judgment for that of the agency.”  Id.  A court 
simply ensures that the agency has acted within a zone of reasonableness and, in 
particular, has reasonably considered the relevant issues and reasonably 
explained the decision.”  Id. (citing FCC v. Fox Television Stations, Inc., 556 U. S. 
502, 513-514 (2009)). 
Here, the SBA’s decision is reasonable based on the record, and the SBA 
reasonably explained its decision.  The undisputed facts in the record here are 
that Concessions is one of 98 affiliated businesses that form the Russell Group, 
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that the Russell Group collectively employed over 1,100 individuals, and that the 
CGR therefore covered the Russell Group.  Doc. 17-2 at ¶¶ 3-4 (ECF 13-3 at 350).  
Also undisputed is the fact that the Russell Group violated the CGR when it 
borrowed over $4,000,000.00 in second-draw PPP loans.  Id. at ¶¶ 8-14 (ECF 13-3 
at 351).  Indeed, before borrowing second-draw loans, the Russell Group 
(including Concessions), obtained first-draw PPP loans, complied with the CGR, 
sought forgiveness of those loans, and the SBA forgave those loans.  Id. at ¶¶ 6-7 
(ECR 13-3 at 351, 357).  And, by the time Russell Group borrowed second-draw 
loans under the EAA, the CGR was well-established and sanctioned by Congress.  
Also well-established was the SBA’s admonition that failure to comply with the 
CGR would result in “loans not [being] eligible for forgiveness.”  85 Fed. Reg. 
26,325.   
Moreover, the SBA explained that the Russell Group companies were 
affiliated because they had “common ownership” and “common management … 
as disclosed and attested on Borrower’s addendums to Form 3511.”  Doc. 17-2 at 
¶ 19 (ECF 13-5 at 1).  It is also undisputed that Concessions is one of 98 affiliated 
companies that form the Russell Group.  Id. at ¶ 3 (ECF 13-3 at 350).  Thus, the 
SBA followed well-established definitions for affiliation, found that these Russell 
Group affiliated companies were subjected to the CGR, and denied forgiveness 
because Russell Group affiliated companies violated the CGR.  Accordingly, the 
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SBA did not act arbitrarily by following its well-established, and publicized, 
rules.    
Concessions does not dispute any of this.  Doc. 17-2 at ¶¶ 18-19.  Instead, it 
argues that the SBA should not have considered the ill-gotten loan that H.J. 
Russell obtained.  Doc. 17-1 at pp. 24-25.  But, as discussed above, in section I(B) 
& (D), companies apply to lenders for PPP loans (not the SBA), and as a practical 
matter, the SBA was unaware that H.J. Russell had not been entitled to receive its 
EAA loans until the Agency reviewed the information Concessions provided in 
its application for forgiveness.  See 85 Fed. Reg. at 20,812, 20,814-16; Doc. 17-2 at 
19 (ECF 13-5 at 1).  The Russell Group should not be able to benefit both from 
being able to obtain a loan for which it is not eligible while still treating that loan 
as if it was never made.    
Concessions also argues that the SBA should have forgiven the $4,000,000.00 
maximum for second-draw loans that the Russell Group obtained.  Doc. 17-2 at 
pp. 26-29.  In other words, Concessions believes that it should still receive the 
benefit of a partial forgiveness despite its knowing violation of the CGR.  
However, as discussed above at Sections I(A)&(B), the SBA has “extraordinarily 
broad” statutory authority to fashion remedies—whether that be partial denial or 
full denial.  Gateway Radiology, 983 F.3d at 1247-48 (Congress gave the SBA 
“extraordinarily broad powers.”).  Moreover, when it enacted the EAA, Congress 
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was aware of the sanction the SBA would impose for violating the CGR and 
Congress left the SBA’s rule untouched.  For these reasons, the SBA did not act 
arbitrarily when it declined to forgive Concessions’ second-draw loans.   
D. Concessions is Not Entitled to the Relief it Seeks.  
  
Concessions asks the Court to “direct the SBA to issue a new decision 
forgiving [its] second-draw PPP Loan…”  Doc. 17-1 at p. 29.  Such relief is neither 
appropriate nor available against the SBA, even if the Court were to agree with 
Concessions arguments on the merits.   
Except in rare situations, if a reviewing court finds an agency action 
erroneous, it “[must] set aside the agency’s action and remand the case—even 
though the agency . . . might later . . . reach the same result for a different 
reason.”  FEC v. Akins, 524 U.S. 11, 25 (1998).  Here, the appropriate remedy 
would be, at most, a remand.  Because the SBA determined that the Russell 
Group violated the CGR, it has not had the opportunity to determine whether 
Concessions’ second-draw loans would be otherwise forgivable absent the Rule.  
It would therefore be premature for the Court to decide whether Concessions is 
entitled to full forgiveness of its second-draw loan without the SBA first 
determining the same.  Smith v. Berryhill, 587 U.S. 471, 488 (2019) (“a federal court 
generally goes astray if it decides a question that has been delegated to an agency 
if that agency has not first had a chance to address the question.”).   
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IV. 
CONCLUSION  
For the above stated reasons, the Court should deny Petitioner’s motion for 
summary judgment and enter judgment in Respondent’s favor as a matter of 
law.   
Respectfully submitted, 
RYAN K. BUCHANAN 
United States Attorney 
600 U.S. Courthouse   
75 Ted Turner Drive SW    
Atlanta, GA 30303 
(404) 581-6000   fax (404) 581-6181 
/s/RODNEY H. ATREOPERSAUD 
Assistant United States Attorney 
Georgia Bar No. 309454 
Rodney.Atreopersaud@usdoj.gov  
 
 
 
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Certificate of Compliance 
I hereby certify, pursuant to Local Rules 5.1 and 7.1D, that the foregoing brief 
has been prepared using Book Antiqua, 13-point font. 
This 23rd day of December, 2024. 
/s/RODNEY H. ATREOPERSAUD  
Assistant United States Attorney 
 
 
 
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Certificate of Service 
The United States Attorney’s Office served this document today by filing it 
using the Court’s CM/ECF system, which automatically notifies the parties and 
counsel of record. 
December 23, 2024 
 
/s/ RODNEY H. ATREOPERSAUD 
 
RODNEY H. ATREOPERSAUD 
 
Assistant United States Attorney 
 
 
 
 
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