Court filing
Complaint and Petition for Review — Accordius Health at Asheville LLC v. United States Small Business Administration (Dkt. 1, W.D.N.C.)
Summary
A complaint and petition for review by Accordius Health at Asheville LLC against the U.S. Small Business Administration and Administrator Isabella Casillas Guzman, Case No. 1:23-cv-129, in the U.S. District Court for the Western District of North Carolina, Asheville Division, filed May 16, 2023 as Document 1. It seeks review of a decision of the SBA's Office of Hearings and Appeals denying its appeal of a Paycheck Protection Program loan review decision. It challenges both the SBA's authority to limit PPP loans to $20,000,000 per corporate group and the application of that limit to the petitioner, reviewing the CARES Act, the interim final rule of April 2020 and the Paycheck Protection Program Flexibility Act of 2020.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Filed May 16, 2023 in Accordius Health at Asheville LLC v. United States Small Business Administration; one of 14 filings from this case.
Record facts
| Court | U.S. District Court for the Western District of North Carolina |
|---|---|
| Filed | 2023-05-16 |
Cite this document
“Complaint and Petition for Review — Accordius Health at Asheville LLC v. United States Small Business Administration (Dkt. 1, W.D.N.C.).”
U.S. District Court for the Western District of North Carolina, No. 1:23-cv-00129, Doc. 1, filed 2023-05-16. Archived at Pandemic Darlings, https://pandemicdarlings.com/court-filings/full-docket-united-states-small-business-administration-ncwd-112035/2023-05-16-gov-uscourts-ncwd-112035-1-0-doc-1/
, SHA-256 91524ef5efc2e83d9ba7a2865780aa4a13a379e9400c41ef21dff4a52d09ad96.Full text
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
ACCORDIUS HEALTH AT ASHEVILLE LLC ) CASE NO. 1:23-cv-129
500 Beaverdam Road )
Asheville, NC 28804, )
)
Petitioner/Plaintiff, )
)
vs. )
)
UNITED STATES SMALL BUSINESS )
ADMINISTRATION )
409 3rd Street, SW )
Washington, DC 20416, )
)
Isabella Casillas Guzman, in her official capacity
)
as Administrator of the Small Business
)
Administration
)
409 3rd Street, SW
)
Washington, DC 20416,
)
Janet Yellen, in her official capacity as United )
States Secretary of Treasury )
1500 Pennsylvania Avenue, NW )
Washington, DC 20220, )
)
- AND - )
)
The United States of America, )
c/o United States Attorney General )
Assistant Attorney General for )
Administration )
950 Pennsylvania Avenue, NW )
Washington, DC 20530, )
)
c/o United States Attorney for the )
Western District of North Carolina )
227 West Trade St., Suite 1650 )
Charlotte, NC 28202, )
)
Respondents/Defendants. )
Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 1 of 24
COMPLAINT AND PETITION FOR REVIEW
Petitioner/Plaintiff Accordius Health at Asheville LLC (“Petitioner”) hereby files this
Complaint and Petition for Review of the Orders of the Office of Hearings and Appeals (“OHA”)
denying Petitioner’s appeal of a Paycheck Protection Program (“PPP”) loan review decision
issued by the U.S. Small Business Administration (“SBA”), and state as follows:
OVERVIEW OF DISPUTE
1. This dispute challenges both the authority of SBA to limit PPP loans to $20,000,000
per corporate group and the application of that limitation to Petitioner itself.
2. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the
“CARES Act”) to corral the economic devastation caused by the COVID-19 pandemic. 15 U.S.C.
§§ 9001, et seq.
3. Congress enacted the CARES Act to protect the millions of Americans employed
by small businesses.
4. Part of the CARES Act included the PPP, which provided SBA with the funding
and authority to operate a loan program designed to financially assist small businesses with their
cash-flow during the COVID-19 pandemic. See 15 U.S.C. § 636.
5. “Specifically, the CARES Act amends section 7(a) of the Small Business Act, a
preexisting statutory scheme that authorizes the SBA to issue loans, and guarantee loans made by
private lenders, to qualifying businesses.” Daniel T.A. Cotts PLLC v. American Bank, N.A., 2021
WL 2196636, at *1 (S.D. Tex. 2021) (citing 15 U.S.C. § 636(a); 13 C.F.R. § 120.2(a)).
6. Pursuant to its delegated authority, SBA issued an interim final rule (“IFR”) in
April 2020 to implement the PPP. Id. (citing IFR, Business Loan Program Temporary Changes;
Paycheck Protection Program, 85 FR 20811 (April 15, 2020)). Section 1106 of the CARES Act
“provides that a borrower’s indebtedness under a PPP loan will be forgiven to the extent that the
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 2 of 24
borrower uses the funds to pay expenses relating to payroll, mortgage interest, rent, and utilities
during the eight-week period following the loan’s origination.” Camelot Banquet Rooms, Inc. v.
SBA, 458 F. Supp. 3d 1044, 1050 (E.D. Wis. 2020) (citing IFR, Business Loan Program Temporary
Changes; Paycheck Protection Program, 85 FR 20,811, 20,813-14 (Apr. 15, 2020)).
7. Congress amended the CARES Act numerous times to address developing
circumstances, including the following:
a. On April 24, 2020, then-President Donald Trump signed the Paycheck
Protection Program and Health Care Enhancement Act (Pub. L. 116-139),
which provided additional funding and authority for the PPP.
b. On June 5, 2020, then-President Trump signed the Paycheck Protection
Program Flexibility Act of 2020 (the “Flexibility Act”) (Pub. L. 116-142),
which changed key provisions of the PPP, including provisions relating to
the maturity of PPP loans, the deferral of PPP loan payments, and the
forgiveness of PPP loans. Section 3(d) of the Flexibility Act provided that
the amendments relating to PPP loan forgiveness and extension of the
deferral period for PPP loans were effective as if included in the CARES
Act, which meant they were retroactive to March 27, 2020.
c. On July 4, 2020, Public Law 116-147 extended SBA’s authority to
guarantee PPP loans to August 8, 2020.
d. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act (the “Economic Aid Act”) extended the
authority to make PPP loans through March 31, 2021 and revised certain
PPP requirements.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 3 of 24
8. Notwithstanding the numerous amendments to the details of the PPP program, the
only maximum borrowing limit Congress placed on loan amounts was to limit loans to no more
than $10 million for a single eligible borrower. CARES Act § 1102(1)(E)(ii); 15 U.S.C.
§ 636(a)(36)(E)(ii).
9. Despite extensive involvement in and amendment of the PPP program eligibility
details, whether in the CARES Act itself or in any of the subsequent amendments, Congress never
adopted a limitation in the form of a maximum cap that a so-called “corporate group” might borrow
or seek forgiveness of, and did not even mention corporate groups as a category.
10. Instead, Congress repeatedly made significant appropriation increases to fund
additional PPP loans to support small business concerns throughout the country to survive and
retain their employees during the COVID-19 pandemic.
11. Nonetheless, on April 30, 2020, SBA issued another IFR (referred to as “IFR #7”),
with an effective date of May 4, 2020, purporting to place a $20,000,000 limitation on the amount
of PPP loans that businesses in a “single corporate group” can receive.
12. IFR #7 provided, in part:
To preserve the limited resources available to the PPP program, and in light of the
previous lapse of PPP appropriations and the high demand for PPP loans,
businesses that are part of a single corporate group shall in no event receive more
than $20,000,000 of PPP loans in the aggregate. For purposes of this limit,
businesses are part of a single corporate group if they are majority owned, directly
or indirectly, by a common parent.
85 FR 26324-01, 26325, 2020 WL 2099740 (footnote omitted).
13. The concept of a borrowing limit upon corporate groups was solely a construct of
SBA in IFR #7.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 4 of 24
PETITIONER’S PPP LOAN
14. In or about February 2021, Petitioner applied for a first-draw PPP loan (the “AH at
Asheville Application”).
15. On February 25, 2021, SBA approved the AH at Asheville Application in the
amount of $355,800.00, under Loan No. 4336458510 (the “PPP Loan”).
16. On or about June 28, 2022, Petitioner applied to SBA for loan forgiveness.
SBA’S DECISION ON PETITIONER’S APPLICATION FOR
FORGIVENESS OF ITS PPP LOAN
17. On November 1, 2022, SBA issued its Decision (the “Decision”) denying
Petitioner’s request for loan forgiveness and sent the Decision to Petitioner’s lender, ConnectOne
Bank. The Decision stated, in part:
SBA has determined that the borrower was ineligible for the PPP loan amount
received. The reason(s) for SBA’s decision is as follows:
After a review of the documentation provided, the SBA concludes that the
Borrower business which is part of a corporate group has received more than
$20,000,000 of First Draw PPP loans in the aggregate.
Ownership by Naftali Zanziper and Simcha Hyman comprise of one single
corporate group, Naftali Simcha et al, consisting of 343 entities, of which 84 entities
received First Draw PPP loans totaling $44,983,180.44. The 84 entities meet SBA’s
alternative size standard and were eligible for PPP funding.
However, of the 84 loans within the Naftali Simcha et al corporate group 48 First
Draw loans exceed the limitation of $20,000,000 in aggregate to a single corporate
group and were disbursed after April 30, 2020. Therefore, the Borrowers of these
48 First Draw loans do not meet eligibility requirements for forgiveness of the
Paycheck Protection Program Loan.
18. Petitioner was one of 48 entities owned by Naftali Zanziper and Simcha Hyman for
which SBA denied requests for forgiveness of PPP loans.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 5 of 24
PETITIONER’S APPEAL TO OHA
19. On December 7, 2022, Petitioner appealed the Decision to OHA, seeking a reversal
of the Decision.
20. In its Appeal Petition, Petitioner argued that OHA should reverse the Decision
because the $20,000,000 limit purportedly imposed by IFR #7 is improper because it is not found
in the CARES Act or in the Economic Aid Act, and IFR #7 was enacted in violation of the rule-
making requirements of the Administrative Procedure Act, 5 U.S.C. § 551, et seq. (“APA”).
Petitioner also argued that it does not share a “common parent” with the 47 other companies, is
not part of a “corporate group” with any entity and, thus, is not subject to any purported
$20,000,000 corporate group limitation for PPP loans in IFR #7 or otherwise.
21. On December 22, 2022, Petitioner, the other 47 companies seeking review of the
same Decision, and SBA entered into a joint motion to consolidate the 48 pending appeals in front
of two OHA Administrative Judges. Both Judges subsequently granted that request.
22. On February 6, 2023, Petitioner, the other 47 companies seeking review of the same
Decision, and SBA entered into a joint stipulation of fact and stipulated Administrative Record in
the consolidated appeals.
23. On March 3, 2023, SBA filed its Responses to the Appeal Petition, arguing that the
Decision should be affirmed because Petitioner is part of a “corporate group” subject to a
$20,000,000 limit in PPP funds. Specifically, SBA argued that (1) it has broad discretion to take
all necessary actions related to the making of loans, including enacting the IFR at issue; (2) a “plain”
reading of “common parent” includes two individuals with equal ownership; (3) it would be unfair
for Petitioner to receive PPP funds because it would take away funds from other small business;
and (4) Petitioner and the other 47 entities are owned by a “common parent.”
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 6 of 24
OHA’S ORDERS AFFIRMING THE DECISION
24. On March 8, 2023, OHA issued an Order affirming the Decision (the “March 8
Order”).
25. In the March 8 Order, OHA explained the requirement that, to be eligible for a PPP
loan, a small business together with its affiliates must meet SBA’s size standard rules. (See March
8 Order, pp. 3-6.)
26. The March 8 Order acknowledges that Petitioner together with its affiliates met
SBA’s alternative size standard test and thus was eligible for the PPP loan. (Id., p. 9.)
27. OHA also found that “Section 1114 of the CARES Act grants the SBA
Administrator emergency rulemaking authority and provides that no later than fifteen (15) days
after March 27, 2020, the Administrator shall issue regulations to carry out the Act and
amendments made to the Act without regard to the notice requirements of 5 U.S.C. § 553(b).” (Id.,
p. 11 (citing 15 U.S.C. § 9012).)
28. OHA also found that the “broad authority” given by Congress to the SBA “to take
actions that ‘are necessary or desirable in making…loans’” under 15 U.S.C. § 634(b)(6)-(7)
“naturally extends to the PPP lending program.” (Id., p. 11 (citing Camelot Banquet Rooms, Inc.
v. SBA, 2022 WL 221616 (7th Cir. 2022).) Thus, according to OHA, SBA’s notice and comment
requirements under the Administrative Procedure Act are waived. (Id.)
29. Next, OHA disagreed with Petitioner’s argument that the IFR is improper because
neither the CARES Act nor the Economic Aid Act impose a limit on PPP loans for “corporate
group.” In reaching that conclusion, OHA determined that it has no authority to assess the validity
of a regulation and, instead, is bound by all SBA regulations. (Id., pp. 11-12.)
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 7 of 24
30. In the March 8 Order, OHA determined that Petitioner is part of a “corporate group”
with a “common parent” under the IFR. (Id., p. 18.)
31. OHA attempted to explain SBA’s affiliation rules found in 13 C.F.R. § 121.301(f).
(See id., pp. 14-17). OHA explained that there are “four principles that can establish an affiliate
relationship between a PPP borrower and another entity: 1) Equity ownership; 2) Stock options,
convertible securities, and agreements to merge; 3) Management; and 4) Identity of interest.” (Id.)
32. OHA acknowledged that “Appellants [including Petitioner here] were deemed a
small-business concern after application of SBA’s alternative size standards. This means the
Appellants, as a group [which includes Petitioner here], were eligible for one of SBA’s 7(a) loan
programs, to-wit: PPP.” (Id., p. 16). According to OHA, “The sole issue in dispute is whether the
$20,000,000.00 PPP corporate group maximum loan limitation is applicable to the Appellants
[including Petitioner here].” (Id.)
33. Next, OHA found that SBA exercised its authority under Section 1102 of the
CARES Act in setting the $20,000,000 limit in IFR #7. (Id., p. 17).
34. According to OHA, because Section 7(a) of the Small Business Act authorizes SBA
to make loans to qualified small businesses, and because the CARES Act subjected PPP borrowers
to SBA’s 7(a) program affiliation rules, “The Appellants should have been aware, through review
of existing SBA 7(a) loan program regulations/policy, that by qualifying as a small-business
concern after application of the affiliation rules, the loan limitations set forth in IFR #7 would be
applied to them, as a group. Here, that limitation was set at $20,000,000.00.” (Id. p. 17.) Then,
in a nonsequitur, OHA concluded: “As such, the meaning of corporate group in IFR #7 has the
same meaning as affiliate under existing 7(a) loan program policy.” (Id.)
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 8 of 24
35. OHA also found that although “SBA did not explicitly define the term corporate
group within IFR #7 (or any other PPP related publication), [] the meaning of the term can easily
be derived from other SBA 7(a) loan program policy existing prior to the Appellants receipt of
these PPP loans.” (Id., p. 18.) OHA explained, “This policy can be seen through a plain reading
of SOP 50 10 5(K) and Section 1102 of the CARES Act. When put together, the same clearly
provide that when a 7(a) loan program applicant is required to affiliate entities to meet the
definition of a small-business concern, the affiliated group of entities is carried forward when
considering if any authorized maximum loan limitation has been reached.” (Id.)
36. Nonetheless, neither OHA nor SBA has ever provided any explanation for why the
term “corporate group” as used in IFR #7 would or should have the same meaning as the different
term “affiliate” under the 7(a) loan policy program, or where or how SOP 50 10 5(K) and Section
1102 of the CARES Act results in those two different terms having the same meaning.
37. Denying the Appeal Petition, OHA concluded:
Overall, the Appellants are affiliates of each other, as defined by 13 C.F.R.
§ 121.301(f)(1-4). As of the date of applying for the PPP loans at issue, together
with its affiliates, the Appellants met the small-business concern alternative size
standard. 13 C.F.R. § 121.301(a-b). (Joint Stipulations). The Administrator created
a maximum loan limitation for PPP by limiting SBAs guarantee of PPP loans
exceeding $20,000,000.00 for corporate groups. Section 1102 of the CARES Act.
As affiliation exists among the Appellants, the PPP $20,000,000.00 corporate group
maximum loan limitation applies to each Appellant, as if all Appellants were a
single business, to-wit: a corporate group. SOP 50 10 5(K), Part 2, Section B, Ch
1: Basic 7(a) Loans, 1.c. At the time of applying for the PPP loans, the aggregate
amount of the SBA portions of all PPP loans to the Appellants, including all
affiliates as defined in 13 C.F.R. § 121.301(f), exceeded the $20,000,000.00
maximum loan limitation otherwise authorized by IFR #7. See 15 U.S.C.
636(a)(36)(E)(ii). The Appellants are a corporate group and were ineligible for the
PPP loans at issue.
(Id. p. 18.)
38. On March 17, 2023, Petitioner sought reconsideration of the March 8 Order.
Petitioner argued that reconsideration was proper because nothing in IFR #7, SBA’s Rules, or in
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 9 of 24
any other source or guidance provide a definition of “corporate group” or “common parent.”
Additionally, nothing in IFR #7, SBA Rules, or in any other source or guidance suggests that
SBA’s affiliation rules apply to IFR #7.
39. In its April 4, 2023 Responses to Petitioner’s Motion for Reconsideration, SBA
argued that OHA should affirm the March 8 Order because there was no “clear error” in that
decision.
40. On April 10, 2023, OHA affirmed its March 8 Order denying the Appeal Petition
(the “April 10 Order”), setting forth the same bases for denial as the March 8 Order.
41. As to the interpretation of “corporate group” and “common parent” under IFR #7,
OHA restated its prior unsupported findings that:
“The Petitioners should have been aware, through review of existing SBA 7(a) loan
program regulations/policy, that by qualifying as a small-business concern after
application of the affiliation rules, the loan limitations set forth in IFR #7 would be
applied to them, as a group.”
“SBA did not explicitly define the term corporate group within IFR #7 (or any other
PPP related publication), but the meaning of the term can easily be derived from
other SBA 7(a) loan program policy existing prior to the Petitioners receipt of these
PPP loans. This policy can be seen through a plain reading of SOP 50 10 5(K) and
Section 1102 of the CARES Act.
(April 10 Order, p. 21.)
PETITIONER AND THE OTHER 47 ENTITIES ARE NOT PART OF THE SAME
“CORPORATE GROUP”
42. Petitioner is a separate and distinct operating company from the other 47 entities
for which SBA denied loan forgiveness.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 10 of 24
43. Petitioner itself is not a holding or parent company.
44. Petitioner itself does not have a holding or parent company.
45. Petitioner is owned by two individuals, Simcha Hyman and Naftali Zanziper, who
are unrelated to one another, and neither of whom holds a majority of the membership interests in
any of the other 47 entities for which SBA denied loan forgiveness.
46. Because Petitioner does not have a parent company, it cannot share a common
parent with any of each other or the other 47 entities for which SBA denied loan forgiveness.
47. The ownership of the 48 entities, including Petitioner, is as follows:1
Entity Name EIN Ownership, Ownership,
Simcha Hyman Naftali Zanziper
1 Accordius Health at Asheville LLC 83-1067371 50% 50%
2 Accordius Health at Bay Pointe LLC 84-1834295 50% 50%
3 Accordius Health at Brevard LLC 82-4995597 50% 50%
4 Accordius health at Charlotte LLC 35-2635108 50% 50%
5 Accordius Health at Concord LLC 84-3019363 50% 50%
6 Accordius Health at Greensboro LLC 83-2892228 50% 50%
7 Accordius Health at Hendersonville 84-1860789 50% 50%
LLC
8 Accordius Health at Lynchburg LLC 84-1842593 50% 50%
9 Accordius Health at Midwood LLC 83-0920689 50% 50%
10 Accordius Health at Monroe LLC 83-0911497 50% 50%
11 Accordius Health at Mooresville LLC 83-0911539 50% 50%
12 Accordius Health at River Pointe LLC 84-1873147 50% 50%
13 Accordius Health at Rose Manor LLC 83-4379870 50% 50%
14 Accordius Health at Statesville LLC 83-1266854 50% 50%
15 Accordius Health at Wilkesboro LLC 84-3019410 50% 50%
16 Accordius Health at Wilson LLC 84-3034457 50% 50%
17 Accordius Health at Winston Salem 82-1950692 50% 50%
LLC
18 Anderson SC Opco LLC 84-2229236 50% 50%
19 Carolina Pines at Asheville LLC 83-1070351 50% 50%
20 Carolina Pines at Greensboro LLC 83-2910607 50% 50%
21 Countryside Center for Rehabilitation 82-4099791 50% 50%
and Nursing LLC
1
The entry relevant to Petitioner is emphasized.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 11 of 24
Entity Name EIN Ownership, Ownership,
Simcha Hyman Naftali Zanziper
22 Covington TN Opco LLC 82-4521413 50% 50%
23 Fair Oaks Health And Rehabilitation 84-4045154 50% 50%
LLC
24 Farthing Mayfield KY Opco LLC 84-3805896 50% 50%
25 Greenville KY Opco LLC 84-1905340 50% 50%
26 Hopkinsville KY Opco LLC 84-2845834 50% 50%
27 Knoxville Opco LLC 84-1934790 50% 50%
28 Leitchfield KY Opco LLC 84-2876916 50% 50%
29 Loudon Opco LLC 84-1934811 50% 50%
30 Madisonville Health and 83-1038279 50% 50%
Rehabilitation LLC
31 Maryville Fairpark Opco LLC 84-1950741 50% 50%
32 Maryville Jamestown Opco LLC 84-1970538 50% 50%
33 Mayfield KY Opco LLC 84-1970598 50% 50%
34 Mount Pleasant TN Opco LLC 84-3554353 50% 50%
35 Paducah Center for Health and 82-4099870 50% 50%
Rehabilitation LLC
36 Pelican Health at Asheville LLC 83-3731856 50% 50%
37 Pelican Health at Charlotte LLC 83-3863893 50% 50%
38 Pelican Health Norfolk LLC 84-3460391 50% 50%
39 Pelican Health Randolph LLC 84-3034473 50% 50%
40 Pelican Health Reidsville LLC 84-2982789 50% 50%
41 Pelican Health Rutherfordton LLC 84-3132402 50% 50%
42 Pelican Health Thomasville LLC 84-3055734 50% 50%
43 Princeton KY Opco LLC 84-2882729 50% 50%
44 Red Boiling Springs TN Opco LLC 84-2302627 50% 50%
45 Russellville KY Opco LLC 84-2882747 50% 50%
46 The Citadel at Myers Park LLC 83-3882594 50% 50%
47 The Citadel at Winston Salem 83-3904410 50% 50%
48 The Citadel Elizabeth City LLC 83-4298447 50% 50%
48. Because the above 48 entities do not have a “common parent,” they do not
constitute a “single corporate group” for purposes of any purported $20,000,000 limitation on PPP
loans.
49. None of the above 48 entities was owned at any time by a corporation, any other
type of entity, or any parent.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 12 of 24
50. Upon its review, including the information relating to the “common parent” issue,
ConnectOne Bank recommended approval of Petitioner’s loan forgiveness request.
51. The information set forth in the chart above showing the ownership of the 48
entities was available to Petitioner’s lender at the time it recommended approval of Petitioner’s
loan forgiveness requests.
PETITIONER EXHAUSTED ADMINISTRATIVE REMEDIES
52. On November 8, 2022, Petitioner received from ConnectOne Bank a copy of SBA’s
Decision.
53. Petitioner timely appealed SBA’s Decision on December 7, 2022, within 30 days
of their receipt of SBA’s Decision.
54. OHA issued its decisions affirming SBA’s Decision on March 8, 2023, and April
10, 2023.
55. The required 30 days has elapsed since the April 10 Order and, therefore, this
appeal is ripe and timely.
56. Petitioner has exhausted administrative remedies prior to filing this Complaint and
Petition.2
57. In light of OHA’s Orders, Petitioner also has begun repaying the PPP Loan.
PARTIES
58. Petitioner is a skilled nursing facility located in Asheville, North Carolina, and
organized as a limited liability company.
59. Respondent/Defendant SBA is a federal agency created and authorized pursuant to
15 U. S.C. § 633, et seq. Under the CARES Act, SBA administers the PPP.
2
The other 37 entities that are subject to the OHA Orders are filing separate appeals of those
Orders. The remaining 10 companies’ appeals to federal court from OHA are not yet ripe.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 13 of 24
60. Respondent/Defendant Isabella Casillas Guzman is the Administrator of SBA and
is named as a respondent only in her official capacity.
61. Because she is the officer with final authority for administering the PPP within SBA,
Administrator Guzman is a proper respondent/defendant for causes of action brought under the
Administrative Procedures Act (“APA”). See 5 U.S.C. § 702.
62. Respondent/Defendant Janet Yellen is the Secretary of the United States
Department of Treasury and is named as respondent only in her official capacity.
63. Because she is the officer with final authority on all matters relating to the
Department of Treasury consulting with SBA for the implementation of the PPP, Secretary Yellen
is a proper respondent/defendant for causes of action brought under the APA. See 5 U.S.C. § 702.
64. Defendant United States of America is a proper defendant in APA cases. See 5
U.S.C. § 702.
65. SBA, Isabella Casillas Guzman as Administrator of SBA, Janet Yellen as Secretary
of the United States Department of Treasury, and the United States of America are referred to
collectively as “Respondents.”
VENUE AND JURISDICTION
66. This action arises out of the arbitrary, capricious, and clear error of facts and law in
the SBA’s Decision, and OHA’s March 8 Order and April 10 Order affirming that Decision.
67. Jurisdiction is proper under 28 U.S.C. § 1331 because this is a civil action arising
under the Constitution, laws, or treaties of the United States, namely the CARES Act and the APA.
68. Jurisdiction also is proper under 15 U.S.C. § 634(b)(1).
69. As detailed above, Congress enacted the CARES Act to increase eligibility and to
make PPP loans available to any business concern. SBA later improperly restricted those
businesses eligible for receipt of PPP loans through IFR #7.
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Case 1:23-cv-00129-MR Document 1 Filed 05/16/23 Page 14 of 24
70. Venue is proper in the United States District Court for the Western District of North
Carolina under 28 U.S.C. § 1391 as the PPP Loan’s proceeds were remitted to locations within
this District.
71. SBA’s review and denial of Petitioner’s appeal through OHA became final on May
10, 2023, 30 days after service of OHA’s April 10 Order. See 13 C.F.R. § 134.1211(b).
72. Petitioner is entitled to judicial review of SBA’s Decision. 13 C.F.R. § 134.1201(d)
(“An appeal to OHA is an administrative remedy that must be exhausted before judicial review of
a final SBA loan review decision may be sought in a Federal district court.”); § 134.1211(g)
(“Appeal to Federal district court. Final decisions may be appealed to the appropriate Federal
district court only”) (emphasis in original)).
STANDARD OF REVIEW
73. Pursuant to the APA, 5 U.S.C. §§ 701-06, a court reviewing a final agency action
must “hold unlawful and set aside agency action, findings, and conclusions to be found to be…
(A) arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law.” 5
U.S.C. § 706(2).
74. Section 704 of the APA states that “[a]gency action made reviewable by statute and
final agency action for which there is no other adequate remedy in a court are subject to judicial
review.” 5 U.S.C. § 704.
75. OHA’s March 8 Order denying Petitioner’s appeal meets the requirements of final
agency action subject to review.
76. OHA’s April 10 Order denying Petitioner’s appeal meets the requirements of final
agency action subject to review.
77. A court “is not to substitute its judgment for that of the agency.” Motor Vehicle
Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). However, a “court must
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satisfy itself that the agency ‘considered the relevant factors and explained the facts and policy
concerns on which it relied, and [that] those facts have some basis in the record.’” Larry Grant
Const. v. Mills, 956 F. Supp. 2d 93 (D.D.C. 2013) (quoting Nat’l Treasury Employees Union v.
Horner, 854 F.2d 490, 498 (D.C. Cir. 1988)).
78. Here, SBA’s enactment of IFR #7 violated SBA’s rulemaking authority, was
arbitrary and capricious, constituted an abuse of discretion, and was not in accordance with law.
79. Additionally, SBA’s Decision and OHA’s March 8 and April 10 Orders must be
set aside and reversed, including their findings and conclusions, because they are arbitrary and
capricious, constitute an abuse of discretion, and are not in accordance with law.
COUNT I
ADMINISTRATIVE PROCEDURE ACT
SBA EXCEEDED STATUTORY AUTHORITY IN ENACTING IFR #7
80. Petitioner incorporates by reference the allegations set forth in paragraphs 1-79
above, as though restated here.
81. Under the APA, courts must “hold unlawful and set aside agency action” that is “in
excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C.
§ 706(2)(C).
82. In enacting rules and regulations, Respondents may only exercise authority
consistent with the authority conferred by statute. See, e.g., City of Arlington v. FCC, 569 U.S.
290, 297-98 (2013).
83. IFR #7 exceeds Respondents’ authority under the statutes it purports to implement
because the IFR would limit SBA loans in a way that is contrary to the CARES Act and the
Economic Aid Act.
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84. Specifically, the only monetary limitation Congress placed on PPP loan amounts
was to limit them to no more than $10 million for a single eligible borrower. CARES Act
§ 1102(1)(E)(ii); 15 U.S.C. § 636(a)(36)(E)(ii).
85. Congress never adopted a loan limitation in the form of a cap on how much money
a so-called “corporate group” might borrow.
86. In the IFR, however, SBA itself purported to impose an aggregate limit of
$20,000,000 on PPP loans that could be obtained by a single undefined “corporate group,” despite
that limitation appearing nowhere in the CARES Act, the Economic Aid Act, or any other
applicable legislation.
87. That purported $20,000,000 “corporate group” limitation would result in PPP funds
that would be available to qualifying small businesses (like Petitioner) being unavailable by agency
fiat, irrespective of whether or not the funds existed for such a loan.
88. The purported $20,000,000 “corporate group” limitation is not authorized by any
statute.
89. IFR #7 is “in excess of statutory jurisdiction, authority, or limitations, or short of
statutory right,” in violation of the APA. 5 U.S.C. § 706(2)(C).
90. Respondents’ violation of the APA in implementing IFR #7 has caused and causes
ongoing harm to Petitioner and other small businesses.
91. Thus, IFR #7 must be vacated and set aside and not used as a basis to refuse
Petitioner’s request for forgiveness of its PPP Loan.
COUNT II
ADMINISTRATIVE PROCEDURE ACT
SBA VIOLATED ITS RULEMAKING OBLIGATIONS WHEN IT ENACTED IFR #7
92. Petitioner incorporates by reference the allegations set forth in paragraphs 1-91
above, as though restated here.
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93. Under the APA, whenever an agency promulgates a rule that intends to create new
law, rights, or duties, it must engage in a process known as notice-and-comment rulemaking.
94. There are three steps involved in that rulemaking process:
a. First, the agency must publish a notice of proposed rulemaking in the
Federal Register.
b. Second, the agency must afford interested persons an opportunity to
participate in the rulemaking through submission of written data, views, or
arguments.
c. Third, after considering the relevant matter presented, the agency must
incorporate in the rules adopted a concise general statement of the rules’
basis and purpose.
95. SBA did not undertake any of those steps with respect to IFR #7.
96. Thus, SBA lacks authority to impose IFR #7’s purported $20,000,000 limit, IFR #7
must be vacated and set aside, and it may not used as a basis to refuse Petitioner’s request for
forgiveness of its PPP Loan.
COUNT III
SBA’S DETERMINATION THAT PETITIONER IS INELIGIBLE FOR LOAN
FORGIVENESS BASED ON IFR #7 HAS NO BASIS IN FACT, AND IS ARBITRARY
AND CAPRICIOUS, AN ABUSE OF DISCRETION, AND OTHERWISE NOT IN
ACCORDANCE WITH APPLICABLE LAW
97. Petitioner incorporates by reference the allegations set forth in paragraphs 1-96
above, as though restated here.
98. The purported $20,000,000 corporate group limitation on PPP loans was SBA’s
sole basis for refusing to forgive Petitioner’s PPP Loan.
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99. OHA recognized that the sole issue in dispute is whether the $20,000,000.00 PPP
corporate group maximum loan limitation is applicable to Petitioner (and the other entities
challenging SBA’s Decision).
100. Even if IFR #7 were valid and enforceable generally, it was applied improperly to
Petitioner’s PPP Loan and request for forgiveness.
101. IFR #7 provides that “businesses are part of a single corporate group if they are
majority owned, directly or indirectly, by a common parent,” and if those businesses are majority
owned by a “common parent,” they are subject to an aggregate limitation of $20,000,000 in PPP
loans.
102. Nothing in the IFR itself, or in any other document, provides any guidance on the
meaning of the term “common parent” as used in the IFR.
103. Without guidance defining the term “common parent,” the plain meaning – i.e., a
common parent company – must be applied to determining whether two or more companies
constitute a “corporate group.” See, e.g., Bostock v. Clayton Cnty., Georgia, 140 S. Ct. 1731, 1738
(2020) (courts “normally interpret[] a statute in accord with the ordinary public meaning of its
terms at the time of its enactment”); see also Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,
467 U.S. 837, 843 (1984) (“[I]f the statute is silent or ambiguous with respect to the specific issue,
the question for the court is whether the agency’s answer is based on a permissible construction of
the statute.”).
104. Using the plain meaning of the term “common parent,” the record is devoid of any
support for a finding that Petitioner shares a common parent with any other entity and, therefore,
whether it is part of a “corporate group” with any other entity.
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105. Although nothing in SBA #7 defines the term “common parent,” SBA argued to
OHA that OHA should disregard the term’s plain meaning and, instead, find that equal ownership
by two individuals, neither of whom holds a majority interest in Petitioner, constitutes a “common
parent.” SBA cited no authority to support such a definition, and adopting it required OHA to
disregard IFR #7’s plain language in favor of one SBA impermissibly contrived for purposes of
this appeal.
106. Not only does SBA’s preferred interpretation find no support in the IFR #7’s plain
language, but it also violates at least two rules of statutory construction: (1) specific language used
in a statute or rule determines the intent of that statute or rule; and (2) use of different words in
similar contexts is presumed to require different meanings to attach to those different words.
107. Rules of statutory interpretation apply when interpreting IFR #7. See Cont. Servs.,
Inc. v. United States, 104 Fed. Cl. 261, 275 (2012).
108. The fundamental rule of statutory interpretation is that one must first look to the
specific language of the statute to determine congressional intent. See In re Perelman, 419 B.R.
168, 175 (Bankr. E.D.N.Y. 2009). And the cardinal principle of statutory construction is that
Congress says in a statute what it means and means in a statute what it says. See id. at 174 (quoting
Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254 (1992)).3
3
This rule is as well-settled as it is long-standing. See, e.g., Kellogg Brown & Root Servs., Inc. v.
United States, 575 U.S. 650, 660 (2015) (“Only two months after enacting the [Wartime
Suspension of Limitations Act], Congress passed a tolling statute for violations of the antitrust
laws…now indictable or subject to civil proceedings. Congress obviously could have included a
similar ‘civil proceedings’ clause in the WSLA, but it did not do so.”); Catskill Mountains Chapter
of Trout Unlimited, Inc. v. Env’t Prot. Agency, 846 F.3d 492, 514 (2d Cir. 2017) (“If Congress had
thought about the question and meant for Section 502(12) of the Clean Water Act to refer to
individual water bodies, it could have referred to something like ‘any addition of any pollutant to
a navigable water from any point source,’ or ‘any addition of any pollutant to any navigable water
from any point source.’”); In re U.S. for an Ord. Authorizing Installation & Use of a Pen Reg.,
415 F. Supp. 2d 211, 214-15 (W.D.N.Y. 2006) (“One would assume that if Congress wanted
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109. A second rule of construction provides that use of different words in the context of
statutes dealing with the same subject matter indicates a difference in legislative intent. See W.
Sur. Co. v. State, 1999 WL 1289053, *2 (Conn. Super. Ct. Dec. 15, 1999). Collecting numerous
cases standing for the same proposition, one federal appellate court explained as follows:
It is a well-established canon of statutory interpretation that the use of different
words or terms within a statute demonstrates that Congress intended to convey a
different meaning for those words. Congress’s explicit decision to use one word
over another in drafting a statute is material. It is a decision that is imbued with
legal significance and should not be presumed to be random or devoid of meaning.
Even words with remarkably similar definitions can still convey a unique or distinct
meaning or flavor from words that are similar or even synonymous in nature
because of their differing tone or usage within a sentence.
S.E.C. v. McCarthy, 322 F.3d 650, 656 (9th Cir. 2003) (collecting cases; citations omitted).
110. Applying both those rules here requires a determination that SBA’s interpretation
of the term “common parent” must be rejected.
111. There is no definition, rule, or guidance construing the term “common parent” as
used in IFR #7.
112. However, SBA chose to use that phrase (“common parent”) instead of, for example,
“common owner” or “common management.”
113. If SBA wanted IFR #7 to apply to situations involving “common ownership” or
“common management” to result in a finding of a “single corporate group,” SBA could have – and
would have – said so.
judges to grant the disclosure of real time cell site data by importing the procedural rules and
safeguards of [another statute], Congress could have and would have clearly said so. Congress did
not. The familiar ‘easy-to-say-so-if-that-is-what-was-meant’ rule of statutory interpretation has
full force here.”).
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114. For example, in 13 CFR § 121.103, SBA does use the terms “common ownership”
and “common management” when defining affiliation generally. It does not use those terms in
IFR #7.
115. Likewise, in 13 CFR § 121.301 SBA provides specific definitions of “[a]ffiliation
based on ownership” and “[a]ffiliation based on management.” 13 CFR § 121.301(f)(1), (3).
116. That SBA chose not to use the affiliation terms and definitions from the CFR in
IFR #7, where it instead used the term “common parent,” triggers the different words mean
different things rule of construction.
117. There is no definition of “common parent” that fits the definition SBA seeks to
impose here on the issue of Petitioner’s PPP Loan that is permitted within recognized rules of
statutory construction.
118. Petitioner does not share a “common parent” with any other entity.
119. Because Petitioner does not share a “common parent” with any other entity, there
is no legal basis to hold Petitioner to the purported $20,000,000 limitation on PPP loans for
corporate groups as set forth in IFR #7.
120. Thus, Petitioner is entitled to a reversal of SBA’s denial of its request for
forgiveness of its PPP Loan and OHA’s affirmance of SBA’s Decision, and in their place an order
granting forgiveness of Petitioner’s PPP Loan in its entirety.
COUNT IV
ATTORNEYS’ FEES
121. Petitioner incorporates by reference the allegations set forth in paragraphs 1-120
above, as though restated here.
122. Recovery of attorneys’ fees for the relief requested in this Complaint and Petition
for review is authorized by the Equal Access to Justice Act, 28 U.S.C. § 2412.
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123. As a result of Respondents’ actions contrary to fact and law, Petitioner has been
required to obtain legal counsel to bring this suit; therefore, it is entitled to reasonable and
necessary attorneys’ fees that may be awarded by this Court.
PRAYER FOR RELIEF
WHEREFORE, Petitioner/Plaintiff Accordius Health at Asheville LLC prays for judgment
against Respondents/Defendants United States Small Business Administration, Isabella Casillas
Guzman (in her official capacity as Administrator of the Small Business Administration), Janet
Yellen (in her official capacity as United States Secretary of Treasury), and the United States of
America as follows:
1. A declaration that IFR #7, 85 FR 26324-01, 2020 WL 2099740 should be and is
vacated and set aside.
2. A declaration that IFR #7, 85 FR 26324-01, 2020 WL 2099740 may not be used as
a basis to refuse Petitioner’s request for forgiveness of its PPP Loan, Loan Number
4336458510, in the amount of $355,800.00.
3. A reversal of SBA’s November 1, 2022, Decision denying Petitioner’s request for
loan forgiveness, and OHA’s March 8, 2023, and April 10, 2023 Orders affirming
SBA’s Decision and, as a result, an order directing SBA to forgive Petitioner’s PPP
Loan, Loan Number 4336458510, in the amount of $355,800.00.
4. An Order requiring Respondents to reimburse Petitioner for all sums repaid (and
that will be repaid) on the PPP Loan, plus interest, in an amount to be proven.
5. Attorneys’ fees.
6. And such other and further relief as the Court may find just and proper.
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Respectfully submitted, this the 16th day of May, 2023.
/s/ Kirk G. Warner
Kirk G. Warner
N.C. State Bar No. 16238
kwarner@smithlaw.com
Jang H. Jo
N.C. State Bar No. 35686
jjo@smithlaw.com
Mark M. Rothrock
N.C. State Bar No. 56747
mrothrock@smithlaw.com
SMITH, ANDERSON, BLOUNT, DORSETT,
MITCHELL & JERNIGAN, L.L.P.
Post Office Box 2611
Raleigh, North Carolina 27602-2611
Ph: (919) 821-1220
Fax: (919) 821-6800
Attorneys for Petitioner/Plaintiff
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