Notice of Supplemental Authority — Accordius Health at Asheville, LLC v. United States Small Business Administration (Dkt. 52, W.D.N.C.)

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The defendants' Notice of Supplemental Authority 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 March 25, 2025. The notice cites a decision in No. 24-cv-747, in which Judge John D. Bates of the District of Columbia granted summary judgment to the PPP borrower and remanded to the SBA. The defendants point to that court's conclusion that the SBA had statutory authority to adopt the Single Corporate Group Rule. They note that the court also found the SBA did not fully explain its denial of forgiveness for a second draw PPP loan.

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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.         )
                                             )

                NOTICE OF SUPPLEMENTAL AUTHORITY

      The Honorable John D. Bates, United States District Judge for the District of

the District of Columbia, granted summary judgment to the PPP borrower and

denied summary judgment to the Government Defendants and vacated and

remanded for further SBA proceedings in 35 State Street Hotel Partners, LLC v.

Loeffler, No. 24-cv-747, 2025 WL 870535 (D.D.C. Mar. 20, 2025). The decision, a

copy of which is attached, is persuasive authority pertinent to this action challenging

the Single Corporate Group (SCG) Rule, as the decision concluded that SBA had

statutory authority to adopt that rule: “SBA determined how to allocate the funds

across applicants and used the SCG Rule to do so . . . . [T]hat did not contradict the


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       Case 1:23-cv-00129-MR          Document 52   Filed 03/25/25   Page 1 of 4

text of the governing statutes. And it also did not ‘frustrate’ the purposes of those

statutes.” See 2025 WL 870535 at *10. Defendants have raised those arguments in

this action. Defs. Br. 12-15 (Doc. 35).

      Although the District Court determined in 35 State Street Hotel that SBA

validly issued the SCG Rule, that court concluded that “SBA didn’t fully explain its

decision” to deny the borrower’s forgiveness application concerning a “second

draw” PPP loan authorized by the Economic Aid Act. 2025 WL 870535 at *11. The

District Court noted that the rule provided that “an applicant who failed to notify the

lender and request cancellation of his applications for or receipt of loans in excess

of the cap would be ineligible for forgiveness,” but determined that SBA “did not

say” that its forgiveness denial rested on such failure of applicant notification to the

lender. Id. at *12. Although “[n]othing indicate[d],” the District Court observed,

“that” the applicant so “notified any lender,” meaning all of the pertinent group’s

second-draw “loans would have been ineligible for forgiveness,” SBA had without

explanation forgiven some of those loans. Id. at *13. Hence, the District Court

vacated and remanded, observing that “SBA may be able to rehabilitate its rationale

upon remand.” See id.

      But here, Plaintiffs’ challenge in this Court to the rationale for the disputed

forgiveness denials instead concerns the sufficiency of the basis for SBA’s

conclusion that, for the narrow purposes of applying the rule, Plaintiffs were

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       Case 1:23-cv-00129-MR       Document 52     Filed 03/25/25    Page 2 of 4

members of a single corporate group. See Defs. Br. 25-32 (responding to that

challenge). That issue was not raised in, and hence was not addressed in, 35 State

Street Hotel.

Respectfully submitted, this the 25th day of March 2025,

RUSS FERGUSON                          YAAKOV M. ROTH
United States Attorney                 Acting Assistant Attorney General

s/Gill P. Beck                         ERIC J. HAMILTON
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 52     Filed 03/25/25   Page 3 of 4

             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 25th day of March 2025.
                                          s/Indraneel Sur
                                          INDRANEEL SUR (DC No. 978017)
                                          Senior Counsel
                                          United States Department of Justice
                                          Civil Division, Federal Programs Branch




      Case 1:23-cv-00129-MR     Document 52     Filed 03/25/25   Page 4 of 4

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