Defendants’ Supplemental Brief under Court’s Order of July 1, 2024 — Accordius Health at Asheville, LLC v. United States Small Business Administration (Dkt. 47, W.D.N.C.)

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Defendants' Supplemental Brief under Court's Order of July 1, 2024 in Accordius Health at Asheville, LLC v. United States Small Business Administration, et al., Case No. 1:23-CV-00129-MR, in the U.S. District Court for the Western District of North Carolina, filed July 18, 2024. The brief addresses Loper Bright Enterprises v. Raimondo, which overruled Chevron. It states that the defendants withdrew their alternative Chevron argument and continue to rely on the plain terms of the CARES Act and the SBA's pre-existing authorities under § 7(a) in applying the Corporate Group Rule to the plaintiffs. It disputes the plaintiffs' contention that the defendants cannot prevail without Chevron, and it is signed by Senior Counsel Indraneel Sur of the Department of Justice.

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IN THE UNITED STATES DISTRICT COURT
         FOR THE WESTERN DISTRICT OF NORTH CAROLINA
                       ASHEVILLE DIVISION
                    CASE NO. 1:23-CV-00129-MR

                                             )
 ACCORDIUS HEALTH AT                         )
  ASHEVILLE, LLC,                            )
                                             )
                         Plaintiff,          )
                                             )
                    v.                       )
                                             )
 UNITED STATES SMALL                         )
  BUSINESS ADMINISTRATION,                   )
  et al.,                                    )
                                             )
                         Defendants.         )
                                             )

                  DEFENDANTS’ SUPPLEMENTAL BRIEF
                 UNDER COURT’S ORDER OF JULY 1, 2024

      This Court ordered on July 1, 2024 supplemental briefing on Loper Bright

Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), which overruled Chevron U. S. A.

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The next day,

Defendants withdrew via a notice (Dkt. 45) the portion of their summary judgment

brief (Dkt. 35) (“Defs. Br.”) that had contended, as an alternative argument, that if

this Court were to find the relevant statutory provisions ambiguous, the denials of

PPP loan forgiveness challenged here would remain valid, because the application

of the Corporate Group Rule to Plaintiffs underlying those denials reflects a

reasonable interpretation of any such ambiguity under the second step of Chevron.
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       Case 1:23-cv-00129-MR          Document 47   Filed 07/18/24   Page 1 of 6

Importantly, that notice explained that Defendants continue to rely on the “plain

terms” of the CARES Act and the U.S. Small Business Administration’s pre-existing

authorities under § 7(a).*

       Plaintiffs nevertheless contend in their supplemental brief that “[w]ithout

Chevron, and the agency deference it created, Defendants cannot prevail.” Dkt. 46

at 1 (July 12, 2024). That contention is incorrect, because (1) it neglects the text of

the operative statutes, and (2) it overlooks key lessons from Loper Bright.

       First, as Defendants explained, SBA’s authority to adopt the Corporate Group

Rule is set forth in the plain terms of the statutes on which SBA relied. See, e.g.,

Defs. Br. 12-15 (discussing §§ 636(a)(36)(B) and (E), § 9012, and § 634(b)(7)).

Hence, the text of the CARES Act itself and the § 7(a) provisions to which the PPP

is subject warrant rejection of Plaintiffs’ statutory contentions. And, at any rate, the

appropriate inference from the subsequently enacted Economic Aid Act is that

Congress ratified the Corporate Group Rule. See Defs. Br. 21-22.

       Second, for its part, although Loper Bright overruled Chevron, the Court

reaffirmed that agencies may be “authorized to exercise a degree of discretion” in

implementing statutes, albeit subject to a reviewing court’s ultimate obligation to

“exercise independent judgment in determining the meaning of statutory



   *
     Internal citations and quotation marks are omitted throughout this supplemental
brief unless noted.
                                          2
       Case 1:23-cv-00129-MR       Document 47     Filed 07/18/24    Page 2 of 6

provisions.” Loper Bright, 144 S. Ct. at 2262-63; see also id. (“courts may . . . seek

aid from the interpretations” of the agency, which “‘constitute a body of experience

and informed judgment to which courts and litigants may properly resort for

guidance’ consistent with the” Administrative Procedure Act. (quoting Skidmore v.

Swift & Co., 323 U.S. 134, 140 (1944)). “In a case involving an agency, of course,”

the Court clarified, “the statute’s meaning may well be that the agency is authorized

to exercise a degree of discretion. Congress has often enacted such statutes. For

example, some statutes . . . empower an agency to prescribe rules to ‘fill up the

details’ of a statutory scheme, or to regulate subject to the limits imposed by a term

or phrase that ‘leaves agencies with flexibility,’ such as ‘appropriate’ or

‘reasonable.’” 144 S. Ct. at 2263 (emphasis added).

      In that regard, SBA “is authorized to exercise a degree of discretion” in

implementing the PPP because the statutes at issue here “empower” SBA to “fill up

the details of” the “statutory scheme” and also use broad language that confers

“flexibility.” See id. In particular, SBA is expressly authorized in the CARES Act

to make rules to implement the PPP, which is also subject to SBA’s pre-existing

rulemaking authorities under § 7(a). See, e.g., Defs.’ Br. 14 (CARES Act “conferred

on SBA ample discretion to exercise its rulemaking authority under 15 U.S.C. § 9012

to set a lower aggregate ceiling for borrowers constituting a single corporate group”).

Those statutes use empowering language affording SBA considerable flexibility.

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       Case 1:23-cv-00129-MR      Document 47      Filed 07/18/24   Page 3 of 6

See Defs. Br. 14-15 (“§ 634(b)(7) vests SBA with authority to ‘take any and all

actions’ it ‘determines . . . are necessary or desirable in making . . . or otherwise

dealing with’ § 7(a) loans, which include loans made under the PPP” and in that

provision “Congress adopted a standard that ‘fairly exudes deference’ to the

agency”) (quoting Webster v. Doe, 486 U.S. 592, 600 (1988)) (emphasis added).

      Indeed, the provisions undergirding the Corporate Group Rule are comparable

to those the Court in Loper Bright recognized as conferring discretion on the agency.

See 144 S. Ct. at 2263 & n.6 (quoting, as an example of a statute that allows an

agency to “regulate subject to the limits imposed by a term or phrase that ‘leaves

agencies with flexibility,’” 42 U.S.C. § 7412(n)(1)(A), which the Court described as

“directing” Environmental Protection Agency “to regulate power plants ‘if the

Administrator finds such regulation is appropriate and necessary’”) (emphasis

added).

      Where, as here, “the best reading of a statute is that it delegates discretionary

authority to an agency,” Loper Bright explains that “the role of the reviewing court

under the APA is, as always, to independently interpret the statute and effectuate the

will of Congress subject to constitutional limits.” Id. at 2263; see id. at 2273 (“when

a particular statute delegates authority to an agency consistent with constitutional

limits, courts must respect the delegation, while ensuring that the agency acts within

it"). And, again, in “exercising such judgment,” “courts may . . . seek aid from the

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       Case 1:23-cv-00129-MR      Document 47      Filed 07/18/24   Page 4 of 6

interpretations of those responsible for implementing particular statutes.” Id. at

2262.

        Thus, the explanation of SBA’s statutory authorities in Defendants’ summary

judgment brief remains correct (insofar as not withdrawn). And Loper Bright’s

reasoning comports with the conclusion that the pertinent statutes on which SBA has

relied authorize it “to exercise a degree of discretion,” Loper Bright, 144 S. Ct. at

2263, which SBA here properly exercised, see Defs. Br. 14-15. Hence, granting

summary judgment to Defendants accords with Loper Bright.

Respectfully submitted, this the 18th day of July, 2024,

DENA J. KING                            BRIAN M. BOYNTON
UNITED STATES ATTORNEY                  Principal Deputy Ass’t Attorney General

s/Gill P. Beck                          BRIAN D. NETTER
GILL P. BECK                            Deputy Assistant Attorney General
Assistant United States Attorney
Chief, Civil Division                   JOSEPH E. BORSON
N.C. Bar No. 13175                      Assistant Branch Director
Room 233, US Courthouse
100 Otis Street                         s/Indraneel Sur
Asheville, NC 28801                     INDRANEEL SUR (DC No. 978017)
Telephone: 828-271-4661                 Senior Counsel
Fax: 828-271-4327                       United States Department of Justice
E-Mail: gill.beck@usdoj.gov             Civil Division, Federal Programs Branch
                                        P.O. Box 883, Ben Franklin Station
                                        Washington, D.C. 20044
                                        Telephone: 202-616-8488
                                        Fax: 202-616-8470
                                        E-mail: indraneel.sur@usdoj.gov
                                        Counsel for Defendants




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        Case 1:23-cv-00129-MR     Document 47    Filed 07/18/24   Page 5 of 6

             Certification Under Standing Order Published June 27, 2024
      Pursuant to the Standing Order of this Court entered June 18, 2024 and
published to the Bar of the Western District on June 27, 2024, the undersigned
hereby certifies:
      1.     No artificial intelligence was employed in doing the research for the
preparation of this document, with the exception of such artificial intelligence
embedded in the standard on-line legal research sources Westlaw, Lexis, FastCase,
and Bloomberg;
      2.     Every statement and every citation to an authority contained in this
document has been checked by an attorney in this case as to the accuracy of the
proposition for which it is offered, and the citation to authority provided.
      This the 18th day of July, 2024.
                                          s/Indraneel Sur
                                          INDRANEEL SUR (DC No. 978017)
                                          Senior Counsel
                                          United States Department of Justice
                                          Civil Division, Federal Programs Branch




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      Case 1:23-cv-00129-MR     Document 47     Filed 07/18/24   Page 6 of 6

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