Court filing
Letter dated March 8, 2024 by Kolawole Ahmadou, Kiana Dervin — Marshall v. Prestamos CDFI, LLC (Dkt. 100, E.D. Pa. No. 5:21-cv-04337)
Filed March 8, 2024 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 | 2024-03-08 |
U.S. District Court for the Eastern District of Pennsylvania · No. 5:21-cv-04337-JMG · Doc. 100 · 2024-03-08 · Docket on CourtListener
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1622 Locust Street
Philadelphia, PA 19103
Tel: 215.274.9420
Fax: 304.342.1110
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March 8, 2024
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:
On behalf of the Plaintiffs, this responds to defendant Prestamos CDFI, LLC’s
(“Prestamos”) letter filed on March 4, 2024 (ECF No. 98) regarding certain discovery issues
addressed below as directed by the Court.
First, Prestamos’s position seeks to manufacture a discovery dispute but ignores the fact
that Plaintiffs have not withheld any discovery based on any objection to any of Defendants’
discovery requests despite the overly broad scope of many of those requests. Instead,
Prestamos’s position boils down to a dissatisfaction with what documents and information
Plaintiffs have, and when Plaintiffs will complete their productions. Discovery in this litigation
remains in its early stages. The Court has indicated it will issue a scheduling order. Defendant
Prestamos likewise owes Plaintiffs substantial written and documentary discovery. Prestamos’s
dissatisfaction with what Plaintiffs have produced to date does not give rise to a substantive
dispute ripe for adjudication particularly in the circumstances here with discovery ongoing.
Second, Prestamos’s position continues to ignore the disparities in the respective
bargaining power, role and function of the parties and the relative Paycheck Protection Program
(“PPP”)-related documents and other information they have as a consequence. See, e.g.,
Greathouse v. Capital Plus Financial. LLC, No. 4:22-CV-0686-P, 2023 WL 5759250, at *15
(N.D. Tex. Sept. 6, 2023) (holding that the release in the parties’ loan contract, just like the one
Prestamos argues here immunizes Prestamos (ECF No. 46-1 at 33), is void as against public
policy; “But when one party has substantially less bargaining power in a relationship, the
exculpatory agreement will be declared void.”). During the November 16, 2023 initial
conference with the Court, Prestamos’s counsel said that Prestamos received “only 30%” of the
PPP loan processing fees it obtained. But 30% of $1.2 billion is $360 million, on 494,415 total
PPP loans for over $7.4 billion in federally-guaranteed PPP loan proceeds that Prestamos
obtained from the PPP Liquidity Facility (the “PPPLF”) and contracted with Plaintiffs and the
class under the same standard form U.S. Small Business Administration (“SBA”) note and
accompanying loan documents to fund. Prestamos obtained those fees despite its professed status
Lawrence J. Lederer
llederer@baileyglasser.com
Case 5:21-cv-04337-JMG Document 100 Filed 03/08/24 Page 1 of 5
Judge John M. Gallagher
March 8, 2024
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as a tax advantaged, allegedly devoted CDFI, and the nonprofit, tax exempt status of its parent,
Chicanos Por La Causa, Inc. (“CPLC”), to whom it upstreamed those fees and whose CEO and
President, David Adame, departed the company just a week before it filed its motion to dismiss
on grounds of jurisdiction (ECF No. 84) amid reported government investigation of “financial
malfeasance” regarding CPLC’s/Prestamos’s PPP lending. See, e.g.,
https://www.cplc.org/blog/viewpost.php?id=1162 (last visited Mar. 8, 2024); Arizona
Independent, Allegations of Fraud Haunt Chicanos Por La Causa As Adame Exits (Dec. 4, 2023)
(“While the organization released a statement claiming that Adame left to ‘pursue other
opportunities,’ sources say allegations of financial malfeasance preceded his exit.”), available at
https://arizonadailyindependent.com/2023/10/05/allegations-of-fraud-haunt-chicanos-por-la-
causa-as-adame-exits/ (last visited Mar. 8, 2024). Although by Order on December 5, 2023 (ECF
No. 93) the Court granted that motion and CPLC is thus no longer a defendant in this case,
Plaintiffs are all sole proprietors not corporations that operate (or, during the PPP, operated)
home healthcare, hair care, real estate brokerage, construction, janitor, clothing, cleaning and
driving businesses and whose SBA-approved loans ranged between $1,875 and $20,832. In sum,
Plaintiffs can only produce the documents and other information they have, and Prestamos is
also free to depose each of them including regarding their records and record keeping.
Third, Prestamos’ position also continues to ignore that the claim at issue is whether
Prestamos’ failure to disburse the PPP loans to already SBA-approved borrowers violates the
parties’ standard form notes. As this Court stated in granting in part and denying in part
Prestamos’ motion to dismiss (ECF No. 56), “Plaintiffs do not allege merely that they applied for
PPP loans, but rather that they were approved for PPP loans that Prestamos agreed to fund, and
because they were approved, they were precluded from applying for other PPP loans.” Marshall
v. Prestamos CDFI, LLC, Civil No. 5:21-cv-04337-JMG, 2023 WL 2727541, at *6 (E.D. Pa.
March 30, 2023) (emphasis in original). Contrary to Prestamos, the claim is not about front-end
PPP loan eligibility, no matter how much Prestamos repeats its professed desire for discovery
from Plaintiffs regarding that. See, e.g., ECF No. 98 at 3 (“The issues … include … whether the
Plaintiffs were lawfully entitled to PPP loans in the first instance.”). Instead, it is about
borrowers who were already approved for their federally-guaranteed, forgivable PPP loan
proceeds, and who were locked into and reliant solely upon Prestamos to fund them. See also 86
F.R. 8283, at 8287 (identifying loan forgiveness process); id., at 8293 (identifying
documentation required). Prestamos was also obligated under the PPP to underwrite and do a due
diligence review for each PPP loan it agreed to fund, including Plaintiffs’ loans. See, e.g., 86
F.R. at 3707-08. It defies common sense for Prestamos to even suggest wrongdoing here on
Plaintiffs’ part, where each Plaintiff has knowingly and voluntarily stepped up, and brought this
lawsuit seeking loan funding and to serve as representatives of a class of other similarly situated
SBA-approved but unfunded small business owners, and subjecting themselves to cross-
examination regarding their loans. The fact that other actual PPP loan recipients are being
prosecuted for fraud says nothing about Plaintiffs or class members – none of whom, by
definition, were funded. The court’s holding in another PPP case is in accord. See Greathouse,
2023 WL 5759250, at *15 (N.D. Tex. Sept. 6, 2023) (the lender’s “only job was mechanical – to
approve or deny the loan and then release the funds”). In truth, Prestamos seeks this “front end
eligibility” discovery only pretextually.
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Judge John M. Gallagher
March 8, 2024
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Fourth, Prestamos mischaracterizes several other aspects of the PPP in a continued effort
to impose excess discovery on Plaintiffs and manufacture a dispute regarding it under the ploy
that Prestamos seeks to police fraud. To qualify for a PPP loan (and to again quote the PPP
rather than characterize it all), “[t]he applicant must submit Paycheck Protection Program
Borrower Application Form (SBA Form 2483), or lender’s equivalent form, and payroll
documentation, as described above.” 86 F.R. 3692 at 3703. Payroll “documentation sufficient to
establish eligibility and to demonstrate the qualifying payroll amount … may include, as
applicable, payroll records, payroll tax filings, Form 1099-MISC, Schedule C or F, income and
expenses from a sole proprietorship, or bank records.” Id. at 3695.
Similarly, PPP loan forgiveness was likewise streamlined especially for loans under
$150,000 – as would have applied to each Plaintiff had Prestamos actually funded their loans.
See 86 F.R. 8283-02, at 8287 (“To receive loan forgiveness on either a First Draw PPP Loan or a
Second Draw PPP Loan, a borrower must complete and submit the Loan Forgiveness
Application to its lender (or to the lender servicing its loan). For Second Draw PPP Loans in
excess of $150,000, the borrower must submit its loan forgiveness application for the First Draw
PPP Loan before or simultaneously with the loan forgiveness application for the Second Draw
PPP Loan, even if the calculated amount of forgiveness on the First Draw PPP Loan is zero.”).
See also SBA Form 3805S (PPP Loan Application Forgiveness Form for PPP loans of $150,000
or less).
In fact, borrowers with loans of $150,000 or less are not required to submit any
documentation with Form 3508S in order to apply and be approved for forgiveness. See 86 F.R.
8293 (“An eligible borrower that received a loan of $150,000 or less should use the SBA Form
3508S and shall not, at the time of its application for loan forgiveness, be required to submit any
application or documentation in addition to the certification and information required by section
7A(l)(1)(A) of the Small Business Act”); see also 15 U.S.C. § 636m(l)(1)(b) (“An eligible
recipient of a covered loan that is not more than $150,000 shall not, at the time of the application
for forgiveness, be required to submit any application or documentation in addition to the
certification and information required to substantiate forgiveness.”).
Indisputably, Prestamos’ discovery requests go far beyond this. For example, Prestamos
seeks “[a]ll of [Plaintiffs’] state and federal tax returns filed for each tax year from 2018 through
the present” (RFP # 3); “All Documents concerning the financial operations of Your Business,
including without limitation Your sources of funding, financial condition, profit and loss (P&L)
statements, balance sheets, revenues, expenses, costs, profits, cash flow, capital, loans, liens,
collateral, lines of credit, equity, debt, financings, accounts receivable, accounts payable,
investments, profit margins, bank accounts, and bank statements.” (RFP # 21); “Describe the
business activities of Your Business that was the subject of Your PPP loan application, including
but not limited to trade names used to conduct business, day-to-day operations, the time period
during which Your Business has been operating, locations of Your activities, number of
employees, the products and/or services that You offer, and the nature of Your customers or
clients.” (Interrogatory # 1); “Identify all federal, state, and local licenses or permits held by
Your Business, such as business activity licenses, retail or seller’s licenses, rental licenses,
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Judge John M. Gallagher
March 8, 2024
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professional licenses, trade licenses, health-related licenses, and safety certifications.”
(Interrogatory # 2); “For each year from 2019 through 2022, state the amount of the following
attributable solely to Your Business: (a) payroll costs; (b) rent or mortgage interest; (c) covered
operations expenditures; (d) covered property damage; (e) covered supplier costs; (f) covered
worker protection expenditures; and (g) other expenditures that served as the basis for Your
application for a PPP loan.” (Interrogatory # 3); “Identify all Persons with whom You consulted
or communicated with regarding the PPP ….” (Interrogatory # 6). Despite their broad scope,
Plaintiffs have already provided documents and Interrogatory responses and withheld no
discovery based on any objection, and again discovery is at its relatively early state and is
ongoing, and Prestamos is free to depose each Plaintiff including as to any of these details
regarding their businesses.
Specific Objections
As to Prestamos’s more specific objections, Plaintiffs respectfully add the following:
• Verified Interrogatory Responses (ECF No. 89 at 3): Plaintiffs will endeavor to provide
verification to their Interrogatory responses.
• 16 Interrogatory Responses (id. at 3-4): Plaintiffs continue to collect the available
information they have and will supplement their Interrogatory responses to the fullest
extent practicable given the information they have. Prestamos claims Plaintiffs’ responses
to Interrogatory No. 3 are the most “egregious[]” (id.) but that is inapt. Plaintiffs simply
lack the amount of information that Prestamos (again pretextually) seeks for that
Interrogatory, such as regarding Plaintiffs’ so-called “covered operations expenditures,”
“covered property damage,” “covered supplier costs,” and “covered worker protection
expenditures”, among other things. Plaintiffs are or were all sole proprietors involved in
home healthcare (Marshall, Ahmadou, Stalnaker), food catering (Pronsky), hair care
(Townsend), real estate brokerage (Holland), construction (Owsley), janitor (Dervin),
clothing (Henderson), upholstery cleaning (Innis) and driving (Jones) businesses. Yet
again, Plaintiffs can only produce the discovery they have, but that doesn’t mean that
they are flouting their discovery obligations. And also again, Prestamos is free to depose
Plaintiffs including on these topics to the extent it really seeks information regarding
them.
• Allegedly Omitted Interrogatory Responses (id. at 4): Prestamos’ claims that Plaintiffs
omit at least one named plaintiff from every Interrogatory response. But in many
instances, that is because certain Plaintiffs have no responsive information. Plaintiffs will
clarify that where it is the case.
• Plaintiffs’ Document Productions (id. at 4-5): Plaintiffs are continuing in their efforts to
search for and intend to produce responsive documents that they actually have. More
fundamentally, Plaintiffs have not withheld production of any responsive documents on
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Judge John M. Gallagher
March 8, 2024
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grounds of privilege or on grounds of any objection Plaintiffs asserted in their written
responses to Prestamos’ RFPs.
ESI Protocol (id. at 5-6): Plaintiffs will review and supplement their productions to the
fullest practicable and endeavor to take further steps to comply with the ESI Protocol to
the extent applicable. That said, Plaintiffs have relatively limited technical capabilities
given their capacities as sole proprietors and the electronic and other information they
have, unaccompanied by IT or other technical personnel, and this is also recognized in
and is part of the ESI Protocol although not mentioned in Prestamos’ letter. See, e.g.,
ECF No. 80 at 1. D. iii. (identifying non-discoverable ESI, including among other things
“[e]lectronic data … sent to or from mobile devices”).
Respectfully submitted,
/s/ Lawrence J. Lederer
Lawrence J. Lederer
cc: All ECF Recipients
Certificate of Service
I, Lawrence J. Lederer, hereby certify that, on this 8th day of March 2024 I caused a copy
of the forgoing to be served via the Court’s ECF system on counsel for all parties of record.
/s/ Lawrence J. Lederer .
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