Memorandum — Marshall v. Prestamos CDFI, LLC (Dkt. 36-1, E.D. Pa. No. 5:21-cv-04337)

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U.S. District Court for the Eastern District of Pennsylvania · No. 5:21-cv-04337-JMG · Doc. 36-1 · 2022-04-22 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE EASTERN DISTRICT OF PENNSYLVANIA 
 
ALICIA MARSHALL, DANIEL PRONSKY, 
PARIS TOWNSEND, NANCILEE 
HOLLAND, LEONA OWSLEY, 
KOLAWOLE AHMADOU, KIANA 
DERVIN, KRISTINA HENDERSON, 
DUSTIN INNIS, KELLY STALNAKER and 
JAMIE JONES, individually and on behalf of 
all others similarly situated, 
 
 
 
 
Plaintiffs, 
 
 
 
v. 
 
PRESTAMOS CDFI, LLC, 
 
 
 
 
Defendant. 
 
 
 
Civil Action No. 5:21-cv-04337-JMG 
 
 
 
 
 
 
MEMORANDUM OF LAW IN SUPPORT OF 
PLAINTIFFS’ MOTION FOR ACCOUNTING 
 
Introduction 
 
Plaintiffs’ Amended Complaint details facts demonstrating that Defendant Prestamos 
CDFI, LLC (“Defendant”) secured cash advances from the federal government in large amounts 
based on misrepresentations regarding the loans that secured those advances. In particular, 
Defendant falsely reported to the U.S. Small Business Administration (the “SBA”) that 
Plaintiffs’ and other proposed class members’ Paycheck Protection Program (“PPP”) loans were 
disbursed, so that Defendant could obtain nearly $1.2 billion in PPP loan processing fees. Those 
allegations are based largely on facts in the public record. Despite having made wide-ranging 
attacks on Plaintiffs’ other allegations, Defendant has never denied these particular facts.  
Also indisputably, Plaintiffs and the putative members of the proposed class were the 
intended recipients of those PPP cash advances. In fact, Plaintiffs’ and putative class members’ 
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SBA-approved PPP loan agreements necessarily and exclusively served as the collateral pursuant 
to which Defendant obtained each dollar of those advances.  
Despite Plaintiffs’ clear interests in the PPP loan advances Defendant has received on the 
backs of Plaintiffs’ and other class members’ SBA-approved but unfunded PPP loans, the status, 
whereabouts, potential theft or other intentional or unintentional disposition of those funds 
remains unanswered. Or perhaps Defendant has safely maintained the proceeds of those 
unfunded PPP loan advances secured by the plaintiff class PPP loans, although Defendant’s 
refusal to give Plaintiffs any information and Defendant’s continued opposition to any discovery 
certainly gives rise to the inference that the explanation may not be benign. Either way, this 
information should be produced and be produced now. 
Furthermore, the status and disposition of each dollar of PPP loan advances is core 
information that is not only within Defendant’s possession, but Defendant is required to update 
and maintain records and account for these cash advances by virtue of its status as a PPP lender 
and its PPP lending commitments. Indeed, Defendant and defendant’s corporate parent, Chicanos 
Por La Casa, Inc. (“CPLC”), are likely to exclusively possess this information. And although 
Defendant continues to resist producing any discovery (and CPLC has similarly opposed 
producing any information in response to Plaintiffs’ separate subpoenas to CPLC, which is 
represented by the same counsel that represents Defendant here), an accounting of those PPP 
loan dollars would not necessarily be available or produced in discovery and, even if some data 
would be produced, would not address any bottom line potential collectability issues Plaintiffs 
may face depending on the status and whereabouts of the unfunded PPP advances at issue. 
Accordingly, the Court should require Defendant to provide an accounting.  
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In particular, Plaintiffs seek that Defendant promptly provide an accounting that answers 
the following five specific questions:  
1. 
How many of the 494,415 SBA-approved PPP borrowers that Defendant 
committed to fund did Defendant fail to fund?  
2. 
How much in federally-originated Paycheck Protection Program Liquidity 
Facility (“PPPLF”) and other cash advances did Defendant receive that it failed to 
fund to SBA-approved borrowers?  
3. 
Where are those unfunded proceeds presently?  
4. 
And if Defendant paid any such PPPLF and other cash advances to others, when 
and to whom and how much and why?  
5. 
How much in PPP loan processing fees did Defendant obtain on the unfunded 
loans of Plaintiffs and the putative members of the proposed class? 
Plaintiffs have a vested interest in the PPP loan proceeds Defendant secured PPPLF 
advances on, and are clearly entitled to this information individually and to properly represent 
the proposed class and subclasses of similarly-situated SBA-approved but unfunded PPP 
borrowers they seek to represent. In addition, the answers to these fundamental questions go 
right to the core of the merits of this litigation, will enable the Court to adjudicate this matter in a 
secure, just and speedy manner on a fulsome record, and even help guide the scope and contours 
of the parties’ discovery going forward.  
Factual Background 
Plaintiffs allege that Defendant failed to fund their PPP loans despite the SBA’s approval 
of those loans. Despite lodging wide-ranging challenges to Plaintiffs’ other allegations, 
Defendant has never denied (nor could it) any of the following facts: 
• 
that, in 2021, it agreed to fund 494,415 Paycheck Protection Program (“PPP”) 
loans totaling over $7.0 billion in proceeds, representing more loans than any 
other PPP lender in 2021 (ECF 18, ¶ 7);  
• 
that it received $7,144,136,133.27 in advances from the Federal Reserve System’s 
PPPLF (id., ¶ 71); see also Board of Governors of the Federal Reserve System, 
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Paycheck Protection Program Liquidity Facility (PPPLF), available at 
https://www.federalreserve.gov/monetarypolicy/ppplf.htm (last accessed Sept. 17, 
2021);  
• 
that it failed to fund Plaintiffs’ and numerous other SBA-approved PPP loans (id., 
¶¶ 88, 108, 117, 126, 131, 140, 149, 158, 167, 176, 179, 188, 197, 203 (a) – (g), 
204 (a) – (ww);  
• 
that these SBA-approved PPP loans were the required and exclusive collateral, 
dollar-for-dollar, for every nickel of cash advances Defendant obtained from the 
PPPLF (id., ¶ 67); and 
• 
that Defendant was and is required, under clear and definitive PPP recordkeeping 
requirements, to maintain detailed records concerning its receipt and disposition 
of all such PPPLF advances. 
Multiple Plaintiffs and absent members of the proposed class report that the SBA has 
identified their loans as “disbursed” despite their never having been disbursed. See, e.g., id. 
¶¶ 86, 127-30, 203(b), 203(g), 204(j), 204(u), 204(x), 204(mm), 204(uu). Those false reports to 
the SBA came from Defendant. Id., ¶ 89. While Defendant has disputed other allegations, again 
it disputes none of the above nor reasonably could it.  
Instead, Defendant has bobbed and weaved and sought to delay, defer and derail these 
proceedings every way it can. It has successfully (at least thus far) resisted in producing a single 
document under the guise it filed a motion to dismiss (ECF 24) which Plaintiffs have opposed 
(ECF 29). It has failed to produce discovery despite the Court’s Policy and Procedure II.C.1, 
which states that “[p]ending motions will not excuse counsel from proceeding with discovery” 
and II.A.1, which states that “the Court will grant a stay of discovery only in extraordinary 
circumstances” (original emphasis), and thus resulted in Plaintiffs moving to compel. See ECF 
34 (Plaintiffs’ motion to compel); ECF 35 (Defendant’s opposition). And despite the seriousness 
and nationwide scope of its alleged wrongdoing at issue and the highly detailed and well-pleaded 
allegations in Plaintiffs’ Amended Complaint, Defendant seeks to hide behind a clearly deficient 
motion to dismiss to avoid even answering the claims. 
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To take just one issue, Defendant characterizes in its motion to dismiss its failure to 
disburse Plaintiffs’ and class members’ loans as mere “delay,” citing forms and documents that 
purport to impose no time requirements for disbursing those loans. ECF 24-1 at 7. But Defendant 
was obligated to fund class member PPP loans within the prescribed period. See, e.g., 86 Fed. 
Reg. 3692, 3710 (“The lender must make a one-time, full disbursement of the PPP loan within 
ten calendar days of loan approval”).  
Further, there is not one shred of evidence in the record indicating that Defendant has 
belatedly funded any PPP loans or is seeking to continue to fund any PPP loans. But even if 
Defendant does intend to belatedly pursue any such PPP loan funding, that likewise supports the 
accounting Plaintiffs now seek. 
Defendant’s status and dealings as an SBA-approved PPP lender also support the 
requested accounting. PPP loans are funded by advances from the PPPLF. ECF 18, ¶¶ 63-64. 
PPPLF advances are secured by PPP loans and made in amounts equal to the total amount of 
PPP loans that serve as collateral for each advance. See Paycheck Protection Program Liquidity 
Facility Term Sheet (“PPP Loans pledged as collateral to secure extensions of credit under the 
Facility will be valued at the principal amount of the PPP Loan.”).1 To the extent that Defendant 
falsely reported to the SBA that PPP loans it actually failed to fund were “disbursed,” it 
improperly received, dollar-for-dollar, those PPPLF advances. Once again, the accounting 
Plaintiffs seek will answer these vitally important questions. 
Of direct relevance, PPP recordkeeping requirements are such that Defendant already has 
compiled or should easily be able to compile the information Plaintiffs seek. The very basic 
 
1  Board of Governors of the Federal Reserve System, available at 
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20210625a1.pdf   (last 
accessed Apr. 22, 2022). 
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information Plaintiffs seek -- how much federally-originated PPP advances Defendant received; 
how much it paid out; how much it still owes; where any unfunded proceeds are or may have 
been distributed to; and how much in loan processing fees on the unfunded PPP loans it received 
– is, or necessarily had to be, literally at the fingertips of Defendant. For example, PPP lenders 
are required to comply with 13 C.F.R. § 120.461. See 85 FED. REG. 33010, 33012. 13 C.F.R. 
§ 120.461 in turn provides in relevant part that: 
An SBA Supervised Lender must permanently preserve in a manner 
permitting immediate (one business day) retrieval the following documentation 
for the financial statements and other reports required by § 120.464 (and the 
accompanying certified public accountant’s opinion):  
 
(1) 
All general and subsidiary ledgers (or other records) reflecting 
asset, liability, capital stock and additional paid-in capital, income, 
and expense accounts;  
(2) 
All general and special journals (or other records forming the basis 
for entries in such ledgers). 
13 C.F.R. § 120.461(c) (emphasis added).2 PPP regulations further require SBA-approved PPP 
lenders to comply with additional regulations pertaining to individual loans in order to be paid 
PPP loan processing fees. See 85 Fed. Reg. 33010, 33014 (referencing “retention requirements 
described in the lender application form (SBA Form 2484)”). See also SBA Form 2484 (Revised 
3/21).3 
All PPP lenders are required to enter into a Letter Agreement to access PPPLF funds. See 
Letter of Agreement – PPPLF Non-DI.4 That Letter Agreement requires compliance with “the 
 
2  13 C.F.R. § 120.464(b) requires that lenders maintain the “reports” referenced in the 
text in accordance with GAAP principles. 
3  Available at https://www.sba.gov/sites/default/files/2021-03/LenderApplication 
202484ARPrevisions%20%28final%203-18-21%29-508.pdf (last accessed Apr. 22, 2022). 
4  Available at https://www.frbdiscountwindow.org/~/media/documents/nondi_ 
ppplf_loa.docx (last accessed Apr. 22, 2022). 
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provisions of the Reserve Bank’s Operating Circular No. 10.” Id. at 1. Operating Circular No. 
10, in turn, requires that PPP lenders keep in an “accessible and secure location on the [lender’s] 
premises … a current statement of outstanding Advances and Indebtedness.” See Federal 
Reserve Banks Operating Circular No. 10 § 8.0.5 That Circular further requires that all “Lending 
Documents shall be immediately and routinely available to any examiner authorized to examine 
the [lender].” Id. § 10(I). See also SBA Procedural Notice (July 15, 2021), at 1-2 (detailing 
additional PPP recordkeeping requirements).6 
Argument 
Plaintiffs and other similarly situated SBA-approved but unfunded class member 
borrowers entered into loan agreements with Defendant and maintain an ongoing interest in the 
whereabouts of the funds Defendant secured from the PPPLF by using their undisbursed PPP 
loans and loan agreements as collateral. Defendant implies that only a single one of its 
employees maintains responsibility for the management of its PPP responsibilities. See ECF 22 
at 3. Although it is inconceivable that a single individual alone was responsible for processing 
and administering over $7 billion in PPP loans, to the extent Defendant’s PPP loan management 
is centralized, that also supports readily accessing the accounting Plaintiffs now seek.  
Even if Defendant ultimately produces some of the requested information in discovery, 
an accounting is warranted to determine the total amount of the PPPLF advances Defendant 
obtained but failed to disburse to the very SBA-approved borrowers whose standard form PPP 
loan contracts served as collateral for those funds. Additionally, the information requested 
 
5  Available at https://www.frbservices.org/binaries/content/assets/crsocms/ 
resources/rules-regulations/071613-operating-circular-10.pdf (last accessed Apr. 22, 2022). 
6  Available at https://www.sba.gov/sites/default/files/2021-07/Procedural%20Notice%20 
5000-812316%20PPP%20Guaranty%20Purchase%20%26%20Charge%20Off%20Servicing%20 
7.15.21-508.pdf (last accessed Apr. 22, 2022). 
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through an accounting is also directly relevant to Plaintiffs’ claims that Plaintiffs’ and other 
absent class members’ standard form loan agreements are valid, enforceable contracts to make 
loans and that Defendant treated them as such because Defendant submitted them as collateral to 
receive PPPLF advances and PPP loan fees, and even to certain defenses Defendant may have 
such as concerning the scope of its unfunding. An accounting also is necessary to determine the 
potential disposition and location of those funds and where they are being held or to whom they 
may have been distributed which may raise collectability issues among other things.  
Plaintiffs’ request for this information easily satisfies the requirements to seek a legal (as 
opposed to equitable) accounting. To state a claim for a legal accounting, a plaintiff must allege 
that: 
(1) 
there was a valid contract, express or implied, between the parties 
whereby the defendant 
(a)  
received monies as agent, trustee or in any other capacity whereby 
the relationship created by the contract imposed a legal obligation 
upon the defendant to account to the plaintiff for the monies 
received by the defendant, or 
(b) 
if the relationship created by the contract between the plaintiff and 
defendant created a legal duty upon the defendant to account and 
the defendant failed to account and the plaintiff is unable, by 
reason of the defendant's failure to account, to state the exact 
amount due him, and 
(2) 
the defendant breached or was in dereliction of his duty under the contract. 
Bordoni v. Chase Home Fin. LLC, 374 F. Supp. 3d 378, 387 (E.D. Pa. 2019). See also Local 
Union No. 98 IBEW v. LP Herman Co., No. 15-cv-00815, 2016 WL 245313, at *3 (E.D. Pa. 
Jan. 21, 2016) (denying motion to dismiss claim for legal accounting). See also Schutter v. 
Herskowitz, No. 07-3823, 2008 WL 4559554, at *3 (E.D. Pa., Oct. 8, 2008) (court ordered pre-
trial accounting that revealed defendant’s dissipation of funds at issue); Id., Aug. 7, 2008 Order, 
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at 2 n.1 (ECF No. 147) (order necessitated by defendant’s failure to comply with discovery 
requests).  
Plaintiffs and Defendant entered into valid and express contracts whereby Defendant 
received funds which imposed a legal obligation on Defendant to account for those funds. See 
Berger & Montague, P.C. v. Scott & Scott, LLC, 153 F. Supp. 2d 750, 754 (E.D. Pa. 2001) 
(defendant’s “failure to provide [plaintiff] with a full accounting … constituted a breach of its 
duty under the Agreement” to forward funds at issue to plaintiff). Defendant’s failure to fund the 
loans of Plaintiffs and class members likewise breached the parties’ standard form loan 
agreements and thus also supports an accounting.  
Further, plaintiff Ahmadou individually and on behalf of the Illinois Subclass seeks 
punitive damages consistent with the remedies afforded by the Illinois Consumer Fraud and 
Deceptive Business Practices Act. See ECF 18, ¶ 260. Multiple Third Circuit courts have 
compelled the production of relevant financial information “when exemplary or punitive 
damages are at issue before a plaintiff has made a prima facie showing of entitlement to such 
damages.” Hirtle Callaghan Holdings v. Thompson, No. 18-cv-2322, 2021 WL 1163739, at *5 
(E.D. Pa. Mar. 26, 2021) (compiling cases). See also Heagy v. Burlington Stores, Inc., No. 20-
cv-2447, 2021 WL 5399910, at *5 (E.D. Pa. Nov. 17, 2021) (“A plaintiff may seek discovery 
concerning punitive damages without proving entitlement to such damages.”). The possibility of 
punitive damages for the Illinois subclass further supports the requested accounting.  
Further, basic considerations of case management and discovery likewise support an 
accounting. If, for instance, Defendant failed to fund 25% of the 494,415 SBA-approved PPP 
loans it committed to fund, then the case and discovery could be focused more narrowly on those 
123,603 PPP loans. Indeed, the very accounting Plaintiffs seek could thereby potentially and 
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even very substantially narrow the discovery Plaintiffs may seek depending on the scope of the 
unfunding amounts at issue. And that approach is actually consistent with the premise of 
Defendant’s arguments in seeking a stay of discovery -- namely, that discovery should be 
commensurate with the claims at issue. ECF 35.  
Plaintiffs also are at risk of irreparable injury absent an accounting by virtue of having no 
assurance as to Defendant’s ability to satisfy any judgment Plaintiffs may obtain. There is no 
evidence in the record presently regarding Defendant’s ability to pay. Potential collectability 
issues also favor an accounting so Plaintiffs may take appropriate action now to protect their 
interests.  
Further, any burden to Defendant in producing the accounting would be minor compared 
to the harm to Plaintiffs that would result from a lack of such relief. Defendant either has or 
should have the information in a readily-accessible form as required and as noted above. To the 
extent Defendant failed to comply with its recordkeeping obligations, that is all the more reason 
why Plaintiffs and the Court should know that now and any potential issues with Defendant’s 
financial condition and potential ability to satisfy a judgment in this case.  
Conclusion 
For the foregoing reasons, the Court should order Defendant to provide the requested 
accounting. 
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Dated: April 22, 2022 
BAILEY & GLASSER LLP 
By: /s/ Lawrence J. Lederer 
 
Lawrence J. Lederer (Pa. ID 50445) 
Michael L. Murphy (admitted pro hac vice)  
Bart D. Cohen (Pa. ID 57606) 
1055 Thomas Jefferson Street NW, Suite 540 
Washington, DC 20007 
T.: 202.463-2101 
F.: 202.463-2103 
llederer@baileyglasser.com 
mmurphy@baileyglasser.com  
bcohen@baileyglasser.com  
 
 
 
and 
 
NOLAN HELLER KAUFFMAN LLP 
Justin A. Heller (admitted pro hac vice) 
Matthew M. Zapala (admitted pro hac vice)  
80 State Street, 11th Floor 
Albany, NY 12207 
T.: 518.449.3300 
F.: 518.432.3123 
jheller@nhkllp.com  
mzapala@nhkllp.com 
 
Attorneys for Plaintiffs and the Proposed Classes 
 
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