Court filing
Letter dated July 14, 2023 by Kolawole Ahmadou, Kiana Dervin — Marshall v. Prestamos CDFI, LLC (Dkt. 76, E.D. Pa. No. 5:21-cv-04337)
Filed July 14, 2023 in Marshall v. Prestamos CDFI, LLC; one of 344 filings from this case.
Record facts
| Court | U.S. District Court for the Eastern District of Pennsylvania |
|---|---|
| Filed | 2023-07-14 |
U.S. District Court for the Eastern District of Pennsylvania · No. 5:21-cv-04337-JMG · Doc. 76 · 2023-07-14 · Docket on CourtListener
Full text
1622 Locust Street
Philadelphia, PA 19103
Tel: 202.463.2101
Fax: 202.463.2103
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July 14, 2023
Via CM/ECF
Judge John M. Gallagher
United States District Court for the
Eastern District of Pennsylvania
Edward N. Cahn Courthouse & Federal Bldg.
504 W. Hamilton Street, Suite 4701
Allentown, Pennsylvania 18101
Re:
Marshall, et al. v. Prestamos CDFI, LLC, No. 5:21-cv-04337-JMG (E.D. Pa.)
Dear Judge Gallagher:
We reluctantly write on behalf of Plaintiffs pursuant to section II.C.2 of Your Honor’s
Policies and Procedures to request a conference to resolve a simple discovery dispute that the
parties unfortunately have been unable to resolve despite numerous attempts. As explained
below, Plaintiffs seek production of the two basic forms that Prestamos had to submit to the
federal government and is required to maintain and readily access regarding the Paycheck
Protection Program (“PPP”) loans at issue in this case, and Prestamos refuses to produce those
forms on claimed grounds of relevance.
Background
Plaintiffs allege on behalf of themselves and a proposed class that defendant Prestamos
CDFI, LLC (“Prestamos”) failed to fund U.S. Small Business Administration (the “SBA”)
approved Paycheck Protection Program (“PPP”) loans for their businesses in violation of the
parties’ loan agreements. On March 30, 2023, the Court granted in part and denied in part
Prestamos’s motion to dismiss. See Marshall v. Prestamos CDFI, LLC, Civil No. 5:21-cv-04337-
JMG, 2023 WL 2727541 (E.D. Pa. Mar. 30, 2023) (ECF No. 56). The Court held that Plaintiffs
have standing to bring their breach of contract claims “except to the extent Named Plaintiffs
purport to bring state law claims under the laws of states in which they do not reside in or in
which they were never injured.” Id. at *17.
Following that ruling, the parties continued with the discovery process that had started in
November 2021, when Plaintiffs first served requests for production of documents and
interrogatories. On April 26, 2023, May 26, 2023, and June 5, 2023, the parties met and
conferred. As a result, the parties agreed that Plaintiffs would designate a subset of certain
requests as a top priority, and Prestamos would respond to those requests promptly without
prejudice to Plaintiffs’ remaining discovery requests. Plaintiffs specified five priority document
Lawrence J. Lederer
llederer@baileyglasser.com
Case 5:21-cv-04337-JMG Document 76 Filed 07/14/23 Page 1 of 4
July 14, 2023
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requests. The parties continued to meet and confer and have been unable to reach agreement on
one such priority request. In particular, Prestamos refuses to produce any documents identifying
the amount and current status or disposition of the advances that Prestamos obtained from the
Federal Reserve’s PPP Liquidity Facility (the “PPPLF”) for the PPP loans of Plaintiffs and other
putative in-state class members, including Prestamos’s PPPLF Pledge and Advance Request
forms (the “PARs”) and SBA Form 1502 monthly reports regarding those specific loans. The
PARs and 1502s are a top priority because they bear directly on the parties’ dispute regarding
whether Prestamos was obligated to fund the PPP loans at issue.
Despite the clear relevance of these documents, Prestamos initially responded as follows:
Prestamos does not believe that information related to PPPLF
advances Prestamos obtained, including PPPLF Pledge and
Advance Request forms and SBA Form 1502 monthly reports, is
relevant to Plaintiffs’ breach of contract claims or proportional to
the needs of the case. However, Prestamos is willing to meet and
confer regarding this request.
After additional discussions among the parties to resolve the issue without the Court’s
intervention, Prestamos merely doubled down and concluded as follows:
Neither the Form 1502 reports nor the PARs are relevant to the
merits of Plaintiffs’ claims. Neither of those documents relates to
any contract between Prestamos and Plaintiffs, and they are not
otherwise mentioned in Plaintiffs’ loan documents. In short, the
central issue in this case is whether Prestamos breached a
contractual obligation to Plaintiffs – not, as Plaintiffs’ email
suggests, whether Defendants collected a loan processing fee or
what Prestamos reported to the SBA concerning the loan.
Argument
As this Court has held, “[e]vidence is relevant in discovery if it ‘[encompasses] any
matter that bears on, or that reasonably could lead to other matter[s] that could bear on, any issue
that is or may be in the case.’” Cutillo v. Cutillo, No. 5:21-CV-02787-JMG, 2023 WL 1971211,
at *1 (E.D. Pa. Feb. 13, 2023) (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351
(1978)). “As a result, discovery rules are to be considered broadly and liberally.” Id.
The Form 1502 Reports and PARs are highly probative concerning Plaintiffs’ claim that
Prestamos was obligated to fund their PPP loans, and how Prestamos treated those loans. The
relevance of the 1502s and PARs is evident from the nature of the documents themselves.
The Form 1502 Report is a form which PPP lenders are obligated to submit to the SBA,
on a loan-by-loan basis, initially within 10 days after a loan was funded to advise, inter alia, that
the loan proceeds had been disbursed to the SBA-approved borrower and to enable the lender to
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obtain a loan processing fee for that loan, and then monthly thereafter to update the SBA
concerning the status of the loan. See https://www.sba.gov/document/sba-form-1502-sba-form-
1502-instructions; see also SBA Procedural Notice, Control No. 5000-20091 (Feb. 8, 2021),
Second Updated Paycheck Protection Program Lender Processing Fee Payment and 1502
Reporting Process (at 4) (“SBA Form 1502 is a spreadsheet containing identifying information
for each PPP loan.”) (available at https://www.sba.gov/sites/default/files/2021-
02/Procedural%20Notice%205000-20091%20-
%202nd%20Updated%20PPP%20Processing%20Fee%20and%201502%20Reporting-508.pdf)
(last visited July 14, 2023).
Whether Prestamos notified the SBA that it had disbursed funds for Plaintiffs’ PPP loans
is a central issue in this case. Prestamos denies that Plaintiffs have enforceable contracts that
even obligated it to fund their PPP loans. See, e.g., ECF No. 46-1 at 32 (“Neither any agreement
between Prestamos and the SBA, Prestamos’s approval of Plaintiffs’ loan applications, nor the
Loan Documents created a contract whereby Prestamos promised to fund Plaintiffs’ loans.”);
ECF No. 51 at 1 (“But Plaintiffs were not any more ‘entitled’ to a PPP loan from Prestamos than
any other applicant, approved or not.”). Plaintiffs’ position is that Prestamos cannot plausibly
deny that it had an obligation to fund a PPP loan for which it submitted a Form 1502 Report
notifying the SBA it had funded the loan, and obtained a loan processing fee. But the 1502
Reports also bear directly on Prestamos’s defense that it had no obligation to actually fund the
loans. Although resolution of that core underlying dispute is for the trier of fact, the question at
this stage is simply whether the 1502 Reports could bear on an issue in this case. The answer to
that is most certainly yes.
The PARs compel the same result. The PARs are the forms that lenders submitted to
obtain advances from the PPPLF to fund PPP loans. See Paycheck Protection Program Liquidity
Facility PPP Pledge and Advance Request (advance request) (available at
https://www.frbdiscountwindow.org/GeneralPages/ppplf_historical_documentation (last visited
July 12, 2023). Without PPPLF advances, Prestamos would not have had the liquidity to commit
to fund the more than $7 billion of PPP loans it had committed to fund. The PARs required
Prestamos to identify each borrower, loan number, advance amount sought, and other
information about the loan. A PPPLF loan advance would only be provided by the Federal
Reserve after the SBA approved the loan and the loan documents were executed, and Prestamos
submitted a completed PAR. In submitting a PAR, Prestamos confirmed that, by borrowing
from the PPPLF, it received the loan advance for the purpose of funding the SBA-approved PPP
loan, and Prestamos was obligated to pledge the loan, in turn, as collateral to secure the PPPLF
loan advance. See Paycheck Protection Program Liquidity Facility Term Sheet, available at
https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20210625a1.pdf (last
visited July 11, 2023).
Hence, whether Prestamos submitted a PAR and obtained a PPPLF loan advance for class
members’ PPP loans are also highly probative. In fact, Prestamos could only submit PARs for
loans which Prestamos was obligated to fund. See also
https://home.treasury.gov/system/files/136/SBA-Form-3507-PPP--Agreement-for-New-Lenders-
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Non-Bank-Non-Insured-Depository-Institution-Lenders.pdf (at § 4) (To be authorized by the
SBA and U.S. Treasury to make PPP loans, a lender had to agree that it “must close and disburse
each covered loan in accordance with the terms and conditions of the PPP Authorization and PPP
Loan Program Requirements.”) (emphasis added) (last visited July 12, 2023). A PPP loan could
only serve as collateral for a PPPLF advance if the underlying PPP loan documents constituted
an enforceable contract to fund a PPP loan.
Prestamos’s opposition to producing the 1502s and PARs on grounds of burden and
disproportionality is also inapt. Prestamos is required to maintain and readily access its records
concerning PPP lending. See id. (“Lender must ensure that a note and all other Loan Documents
(as defined in this paragraph) and additional documents are properly executed and take such
other actions necessary to fulfill the requirements of the Paycheck Protection Program. SBA is
entitled, at any time, to examine and obtain copies of all notes, certifications and documentation
(herein, collectively, called the ‘Loan Documents’), and all other records held by Lender which
relate to covered loans made pursuant to the Paycheck Protection Program.”). See also 13 C.F.R.
§ 120.461 (identifying additional record keeping requirements for SBA Supervised Lenders);
ECF No. 36-1 at 6-7 (discussing additional PPP record keeping requirements).
The 1502 Reports and PARs are contained in simple Excel spreadsheets, and producing
what Prestamos is already obligated to maintain and readily access is also clearly proportional to
the needs of this case to include – and, indeed, not prejudicially exclude – the loans of Plaintiffs
and other in-state putative class members. Along these lines, Prestamos recently produced a
spreadsheet indicating that there are 7,907 class member loans in Plaintiffs’ 10 respective states
representing $133,562,175.00 in total PPP loan proceeds that should have been but were not
funded for which Prestamos obtained $19,259,141.00 in loan processing fees. But that
spreadsheet only identifies the applicable SBA-approved but unfunded class member loans at
issue (segregated also by the respective subtotals for each of Plaintiffs’ 10 applicable states); it
does not even address, let alone purport to answer, whether Prestamos breached its alleged
obligation to fund those loans.
Accordingly, Plaintiffs respectfully request that the Court schedule a telephone
conference to resolve the foregoing discovery dispute.
Respectfully submitted,
/s/ Lawrence J. Lederer
Lawrence J. Lederer
cc: All counsel of record (via CM/ECF)
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