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Memorandum of Decision and Order — Accordius Health at Asheville, LLC v. United States Small Business Administration (Dkt. 54, W.D.N.C.)

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A Memorandum of Decision and Order in Accordius Health at Asheville, LLC v. United States Small Business Administration, Kelly Loeffler, Scott Bessent, and United States, Civil Case No. 1:23-cv-00129-MR, in the U.S. District Court for the Western District of North Carolina, signed April 8, 2025. The court rules on cross-motions for summary judgment (Doc. 32 and Doc. 34) in the consolidated action of 48 cases challenging the SBA's denial of forgiveness of Paycheck Protection Program loans under the Administrative Procedure Act. It concludes that, as part of a single corporate group, the Hyman-Zanziper LLCs were entitled to forgiveness of their PPP loans only in the aggregate of $20 million, and it grants the defendants' motion, denies the plaintiffs' motion and dismisses their claims with prejudice.

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 April 8, 2025 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	2025-04-08

Cite this document

“Memorandum of Decision and Order — Accordius Health at Asheville, LLC v. United States Small Business Administration (Dkt. 54, W.D.N.C.).” U.S. District Court for the Western District of North Carolina, No. 1:23-cv-00129, Doc. 54, filed 2025-04-08. Archived at Pandemic Darlings, https://pandemicdarlings.com/court-filings/full-docket-united-states-small-business-administration-ncwd-112035/2025-04-08-gov-uscourts-ncwd-112035-54-0-doc-54/, SHA-256 cf400384b2d47c26e5eadbce292513794035fcba8d26951ac27b1e0b3272b80b.

Full text

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

ACCORDIUS HEALTH AT )
ASHEVILLE, LLC, )
)
Plaintiff, )
) MEMORANDUM OF
vs. ) DECISION AND ORDER
)
UNITED STATES SMALL )
BUSINESS ADMINISTRATION, )
KELLY LOEFFLER, in her official )
capacity as Administrator of the )
Small Business Administration; )
SCOTT BESSENT, in his official )
capacity as United States Secretary )
of the Treasury; and UNITED )
STATES, )
)
Defendants. )
_______________________________ )

THIS MATTER is before the Court on the Plaintiffs’ Motion for

Summary Judgment in All Consolidated Cases [Doc. 32] and the Defendants’

Motion for Summary Judgment [Doc. 34].

I. PROCEDURAL BACKGROUND

The Plaintiff Accordius Health at Asheville, LLC (“Accordius) filed this

action pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 500,

et seq., seeking judicial review of the denial by the U.S. Small Business

Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 1 of 26

Administration (“SBA”) of the Plaintiff’s application for forgiveness of a

Paycheck Protection Program (“PPP”) loan issued pursuant to the

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), 15

U.S.C. §§ 9001, et seq. [Doc. 1].1

On December 1, 2023, the parties filed a joint motion to consolidate

this case with 47 other cases filed by limited liability companies in five other

states on the grounds that these cases involve overlapping parties, a

common set of operative facts, and common questions of law. [Doc. 27]. On

December 20, 2023, the Court granted the parties’ motion. [Doc. 29].

Thereafter, the parties filed cross-motions for summary judgment,

which were fully briefed. [Docs. 32, 33, 34, 35, 36, 38]. While these motions

were pending, on June 28, 2024, the Supreme Court issued its decision in

Loper Bright Enterprises v. Raimondo, an administrative law case

overturning the longstanding principle of Chevron2 deference. 603 U.S. 369

(2024). In response to this change in law relevant to this case, the Court

ordered supplemental briefing from both parties on July 1, 2024. [Text-Only

Order entered July 1, 2024]. The Plaintiffs filed a supplemental

1
The Plaintiff named as Defendants the U.S. Small Business Administration, the SBA
Administrator, the Secretary of the United States Treasury, and the United States of
America.
2
Chevron, U.S.A., Inc. v. Nat. Resources Def. Council, 467 U.S. 837 (1984).

2
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 2 of 26

memorandum on July 12, 2024, and the Defendants filed the same on July

18, 2024. [Docs. 46, 47].

Having been fully briefed, these motions are ripe for review.

II. STANDARD OF REVIEW

The APA provides that “[a] person suffering legal wrong because of

agency action, or adversely affected or aggrieved by agency action within

the meaning of a relevant statute, is entitled to judicial review thereof.” 5

U.S.C. § 702. Pursuant to the APA, the Court may set aside the agency’s

action if such action is “arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law”; “in excess of statutory jurisdiction,

authority, or limitations, or short of statutory right”; or “without observance of

procedure required by law….” 5 U.S.C. § 706(2)(A), (C), and (D); N.C.

Wildlife Fed’n v. N.C. Dep’t of Transp., 677 F.3d 596, 601 (4th Cir. 2012).

“Because this case involves the review of agency action pursuant to

the APA, the Court’s review is confined to the administrative record on which

the agency’s decision was based.” S. Four Wheel Drive Ass’n v. U.S. Forest

Serv., No. 2:10-cv-15, 2012 WL 4106427, at *2 (W.D.N.C. Sept. 19, 2012)

(Reidinger, J.) (citations omitted). “Under APA section 706(2) review, the

court does not employ the usual summary judgment standard.” Id. (quoting

Ctr. for Sierra Nevada Conservation v. U.S. Forest Serv., 832 F.Supp.2d

3
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 3 of 26

1138, 1148 (E.D. Cal. 2011)) (other citations omitted). Rather, summary

judgment “serves as the mechanism for deciding, as a matter of law, whether

the agency action is supported by the administrative record and otherwise

consistent with the APA standard of review.” Chan v. U.S. Citizenship and

Immigration Servs., 141 F.Supp.3d 461, 464 (W.D.N.C. 2015).

As the Supreme Court recently reiterated in Loper Bright, “[c]ourts

must exercise their independent judgment in deciding whether an agency

has acted within its statutory authority, as the APA requires.” 603 U.S. at

412. “[C]ourts need not and under the APA may not defer to an agency

interpretation of the law simply because a statute is ambiguous.” Id. at 413.

However, “when the best reading of a statute is that it delegates discretionary

authority to an agency, 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 371. “The court fulfills that

role by recognizing constitutional delegations, fixing the boundaries of the

delegated authority, and ensuring the agency has engaged in reasoned

decisionmaking within those boundaries.” Id. (citation and internal quotation

marks omitted).

4
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 4 of 26

III. FACTUAL BACKGROUND

A. SBA’s § 7(a) Loan Program

Section 7(a) of the Small Business Act (“the Act”) “empower[s]” SBA to

guarantee general-purpose loans to small businesses. 15 U.S.C. § 636(a).

The Act also empowers SBA, “[i]n the performance of . . . [its] functions,

powers, and duties vested” under § 7(a) to “take any and all actions” the

agency “determines . . . are necessary or desirable in making, servicing,

compromising, modifying, liquidating, or otherwise dealing with or realizing

on loans[.]” Id. § 634(b)(7).

Ordinarily, to qualify for a § 7(a) loan an applicant must, inter alia, meet

size standards for a “small” business set forth in the Act and SBA rules,

usually stated in terms of the aggregate number of employees, or annual

receipts, of the borrower and its affiliates. 15 U.S.C. § 632(a)(1), (2); 13

C.F.R. §§ 120.100(d), 121.201. The statute does not prescribe a formula for

the exact amount of a § 7(a) loan, but states that § 7(a) loans shall be no

greater than $5,000,000, and the amount guaranteed by SBA no greater than

$3,750,000. 15 U.S.C. § 636(a)(3)(A). Typically, SBA guarantees loans by

private lenders rather than disburse funds directly. See In re Gateway

Radiology Consultants, P.A., 983 F.3d 1239, 1248 (11th Cir. 2020).

5
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B. The CARES Act and the PPP

Congress enacted the CARES Act in March 2020 in response to the

onset of the COVID-19 pandemic. See 15 U.S.C. §§ 9001, et seq. The

CARES Act included the implementation of the PPP, CARES Act § 1102,

which was enacted to extend relief to small businesses experiencing

economic hardship due to the pandemic. See 85 Fed. Reg. 20,811, 20,811-

12 (Apr. 15, 2020).

Section 1102(a)(2) of the CARES Act temporarily expanded SBA’s

business-loan authority by adding a new paragraph (36) to § 7(a), 15 U.S.C.

§ 636(a)(36). See Gateway Radiology, 983 F.3d at 1249 (“the PPP was not

created as a standalone program; instead, it was added into § 7(a)”).

Subparagraph 636(a)(36)(B) stated that “[e]xcept as otherwise provided in

this paragraph, the [SBA] may guarantee [PPP] loans,” issued by private

lenders, “under the same terms, conditions, and processes as [other] loan[s]

made under” § 7(a). 15 U.S.C. § 636(a)(36)(B) (emphasis added); see id. §

636(a)(36)(F)(ii). The statute then detailed the ways in which PPP loans

were to differ from other § 7(a) loans. Id. § 636(a)(36)(D)-(W).

Among these differences, the CARES Act relaxed size limitations to

allow businesses with as many as 500 employees (or more, in certain

industries) to receive assistance. Id. § 636(a)(36)(D)(i)(I), (II). The CARES

6
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Act also enlarged the $5,000,000 cap applicable to other § 7(a) loans,

providing that the “maximum amount” of a PPP loan was to be (1) the

borrower’s average monthly payroll costs for the preceding year, multiplied

by 2.5, plus the balance of the borrower’s eligible SBA disaster loans

(hereinafter, the “payroll-based formula,” or “amount”) or (2) $10,000,000,

whichever is less. Id. § 636(a)(36)(E).

Congress initially authorized SBA to guarantee up to $349 billion in

PPP loans by June 30, 2020. CARES Act § 1102(b)(1); 15 U.S.C. §

636(a)(36)(A)(ii)-(iii), (B). Congress instructed SBA to issue rules

implementing the PPP “[n]ot later than 15 days after” the CARES Act’s

enactment on March 27, 2020. 15 U.S.C. § 9012. Congress also instructed

SBA to issue these rules without regard to APA notice-and-comment

procedures. 15 U.S.C. § 9012 (citing 5 U.S.C. § 553(b)). Exercising this

emergency authority, SBA issued a number of rules between April 15 and

October 19, 2020. [See Doc. 35-1].

Congress authorized another $310 billion in PPP loans on April 24,

2020. Pub. L. No. 116-139, 134 Stat. 620, § 101(a)(1). Ultimately Congress

authorized SBA to guarantee more than $813 billion in PPP loans. Pub. L.

No. 117-2, 135 Stat. 4, § 5001(d)(1).

7
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C. Forgiveness of PPP Loans

Section 1106 of the CARES Act provides for the forgiveness of PPP

loans, stating that “[a]n eligible recipient” of a PPP loan “shall be eligible for

forgiveness . . . in an amount equal to” the sum of its covered payroll costs

and other allowable expenses, 15 U.S.C. § 636m(b), but not to exceed the

principal amount of the loan, id. § 636m(d)(1). To obtain forgiveness, an

eligible borrower must submit an application and supporting documentation

to its lender, which then determines if the borrower is entitled to forgiveness

under the Act; if the lender so determines, it then submits a request for

payment to SBA. 15 U.S.C. § 636m(g); see 85 Fed. Reg. 38,304, 38,306

(June 26, 2020). SBA then remits the appropriate amount to the lender—

subject, however, to any SBA review of the loan. 3 15 U.S.C. § 636m(c)(3);

85 Fed. Reg. at 38,306. If SBA agency determines during a review that “an

action by the borrower has resulted in its receipt of a PPP loan that did not

meet program requirements,” it denies forgiveness of the loan.4 85 Fed.

Reg. 33,010, 33,012-13 (June 1, 2020).

3
As such, the loan is not actually forgiven, as the lender is paid in full. The SBA simply
pays the loan on the borrower’s behalf.
4
SBA established a streamlined PPP loan-origination process based on borrower self-
certifications of eligibility. See 85 Fed. Reg. at 20,812, 20,814-16. Because borrowers’
applications and supporting documentation were maintained by lenders, not sent to SBA,
see 85 Fed. Reg. at 20,814, SBA did not (and as a practical matter could not) make
independent PPP borrower-eligibility determinations at the loan-origination stage.

8
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 8 of 26

D. Interim Final Rule No. 7

Among the rules SBA issued under its CARES Act authority, on May 4,

2020, was Interim Final Rule No. 7 (“IFR No. 7”) that stated as follows:

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. This limitation shall be immediately effective
with respect to any loan that has not yet been fully
disbursed as of April 30, 2020.

It is the responsibility of an applicant for a PPP loan
to notify the lender if the applicant has applied for or
received PPP loans in excess of the amount
permitted by this interim final rule and withdraw or
request cancellation of any pending PPP loan
application or approved PPP loan not in compliance
with the limitation set forth in this rule. Failure by the
applicant to do so will be regarded as a use of PPP
funds for unauthorized purposes, and the loan will
not be eligible for forgiveness. A lender may rely on
an applicant’s representation concerning the
applicant's compliance with this limitation.

The Administrator, in consultation with the Secretary,
determined that limiting the amount of PPP loans that
a single corporate group may receive will promote
the availability of PPP loans to the largest possible
number of borrowers, consistent with the CARES
Act. The Administrator has concluded that a limitation
of $20,000,000 strikes an appropriate balance

9
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 9 of 26

between broad availability of PPP loans and program
resource constraints.

85 Fed. Reg. 26,324, 26,325 (May 4, 2020) (footnote omitted and emphasis

added). SBA concluded that it had authority to issue an “aggregate

limitation” on the amount of PPP loans issued to a single corporate group,

because the terms of the CARES Act “specify a ‘maximum’—but not a

minimum—loan amount” for each borrower that SBA “may” guarantee. Id. at

n.1 (citing 15 U.S.C. § 636(a)(36)(B), (E)).

E. The Economic Aid Act

The PPP expired on August 8, 2020, see Pub. L. No. 116-147, 134

Stat. 660, but the Economic Aid to Hard-Hit Small Businesses, Nonprofits,

and Venues Act (the “Economic Aid Act,” or “EAA”)5 reauthorized and

extended the program to March 31, 2021, and added another $147.5 billion

in loan authority. EAA § 323(a)(1). In pertinent part, the EAA authorized SBA

to guarantee so-called “second-draw” PPP loans to certain businesses that

obtained “first-draw” PPP loans under the CARES Act, EAA § 311(a) (adding

15 U.S.C. § 636(a)(37)), under the same terms and conditions as first-draw

loans, except as the EAA otherwise provided. 15 U.S.C. § 636(a)(37)(B).

5
The EAA is part of the Consolidated Appropriations Act, 2021, Div. N, Title III, Pub. L.
No. 116-260, 134 Stat. 1182 (Dec. 27, 2020).

10
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The EAA established a “maximum loan amount” for second-draw PPP loans

based on the CARES Act’s payroll-based formula for first-draw loans, but

with a smaller cap of $2,000,000. Id. § 636(a)(37)(C).

The EAA also conferred “emergency rulemaking authority” on SBA,

directing it to issue regulations implementing the EAA’s amendments “[n]ot

later than 10 days after” the EAA’s enactment, without regard to the notice-

and-comment requirements of § 553(b). EAA § 303. Between January 14

and September 16, 2021, SBA issued an additional set of PPP rules under

this authority. [See Doc. 35-1].

F. The Plaintiffs

The Plaintiffs in these cases are 48 limited liability companies (“LLCs”)

operating in five states as skilled nursing facilities. Each is owned in equal

measure (50 percent each) by two individuals: Simcha Hyman and Naftali

Zanziper. [Administrative Record (“A.R.”)6 at 672-75]. The Plaintiffs are part

of a larger group of 343 LLCs jointly owned by Hyman and Zanziper. [A.R.

at 680, 695-705]. Hyman and Zanziper also own and operate an investment

firm, the Portopiccolo Group. [A.R. at 1116]. Hyman is the CEO of the

Portopiccolo Group, and Zanziper is the President. [Id.].

6
The Certified Administrative Record is found in the record of this case at Docs 24, 25,
and 26.

11
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Beginning in February 2021, 84 of these companies, including the 48

Plaintiffs, applied for and received first-draw PPP loans, totaling almost $45

million. [A.R. at 670, 672-75, 708-09]. Between June and September 2022,

all 84 companies applied for loan forgiveness. [See A.R. at 670]. SBA

granted forgiveness of the first 36 loans but denied forgiveness of the 48

loans issued to the 48 Plaintiffs. [A.R. at 10-11, 670-71, 680-81]. The SBA’s

basis for denial was that the 84 companies owned by Hyman and Zanziper

constituted a single corporate group, and therefore they exceeded the

aggregate $20 million limit allowed under IFR No. 7. [A.R. at 10-11, 670-71,

680-81]. In its notice denying loan forgiveness, the SBA explained:

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

12
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 12 of 26

forgiveness of the Paycheck Protection Program
Loan.

[A.R. at 10-11]. All 48 Plaintiffs appealed to SBA’s Office of Hearings and

Appeals (“OHA”), which consolidated 38 of the appeals in one proceeding

and the remaining 10 in another. [A.R. at 23-24, 822-23]. The administrative

law judges in both proceedings denied the Plaintiffs’ appeals. [A.R. at 745-

65, 1081-97]. This lawsuit followed.

IV. DISCUSSION

The Plaintiffs argue that they are entitled to summary judgment in their

favor because (1) IFR No. 7 is inconsistent with the CARES Act and therefore

the SBA exceeded its statutory authority in enacting such rule; (2) the

enactment of IFR No. 7 was arbitrary and capricious; (3) the SBA violated its

rulemaking duties when it enacted IFR No. 7; and (4) the SBA’s

determination of the Plaintiffs’ ineligibility for loan forgiveness was based on

a legally and factually incorrect application of IFR No. 7. [Doc. 33]. The

Defendants contend, on the other hand, that (1) IFR No. 7 is authorized

under the CARES Act; (2) the enactment of IFR No. 7 was rationally related

to the purposes of the CARES Act and the PPP; (3) the SBA did not violate

APA rulemaking requirements; and (4) that the SBA properly applied IFR No.

7. [Doc. 35]. The Court addresses each of these arguments in turn.

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A. Statutory Authority for Enacting IFR No. 7

The Plaintiffs were denied forgiveness of their loans because they

exceeded the $20 million loan cap set for corporate groups in IFR No. 7. The

Plaintiffs contend that IFR No. 7 directly conflicts with the plain language of

the CARES Act, which sets a loan cap of $10 million per borrower. As such,

the Plaintiffs argue, the SBA acted exceeded its statutory authority in

enacting this rule.

In making this argument, the Plaintiffs contend that the CARES Act

provides that “any business concern . . . shall be eligible to receive a covered

loan” and that “the only maximum borrowing limit Congress placed on loan

amounts in the CARES Act was $10 million per eligible borrower.” [Doc. 33

at 17]. The Plaintiffs argue that eligibility for loan forgiveness extends to all

loans for which a borrower is eligible to receive under this program.

Therefore, they contend that this statutory language means that every

statutorily qualified business concern was eligible for forgiveness of a PPP

loan of up to $10 million, regardless of whether such business fell within the

parameters of IFR No. 7. Thus, they conclude that the statute provides no

basis for the SBA to cap loan forgiveness at $20 million per corporate group.

Contrary to the Plaintiffs’ argument, the plain terms of § 636(a)(36)(B)

and (E) provide ample authority for SBA to adopt a regulation such as IFR

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Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 14 of 26

No. 7. Section 636(a)(36)(B) provides that SBA “may guarantee [PPP] loans

under the same terms [and] conditions” as other § 7(a) loans, “[e]xcept as

otherwise provided” in the ensuing provisions of § 636(a)(36). 15 U.S.C. §

636(a)(36)(B) (emphasis added). The word “may” in a statute “clearly

connotes discretion.” Biden v. Texas, 597 U.S. 785, 802 (2022) (citation and

internal quotation marks omitted); see also Air Line Pilots Ass’n, Int’l v. U.S.

Airways Grp., Inc., 609 F.3d 338, 342 (4th Cir. 2010) (“‘[M]ay’ typically

indicates authorization without obligation” and “sometimes means ‘won’t.’”)

(citations and internal quotation marks omitted). Thus, the CARES Act grants

the SBA discretion, but does not require it, to guarantee PPP loans meeting

the Act’s criteria. See Gateway Radiology, 983 F.3d at 1257 (“[T]he

permissive word ‘may’ vests the SBA with discretionary authority.”).

Section § 636(a)(36)(E), in turn, provides that “the maximum [PPP]

loan amount shall be the lesser of” a borrower’s payroll-based amount or $10

million. 15 U.S.C. § 636(a)(36)(E) (emphasis added). Section 636(a)(36)(E)

does not require that the PPP loan be equal to the borrower’s payroll-based

amount, or $10 million, whichever is less; rather, it sets the maximum amount

that can be approved (and thus guaranteed) by the SBA. Thus, §

636(a)(36)(E) does not entitle the loan applicant to receive the maximum

award, or indeed any award at all. See 85 Fed. Reg. at 26,325 n.1 (noting

15
Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 15 of 26

that § 636(a)(36)(E) “specified a ‘maximum’—but not a minimum—[PPP]

loan amount”).

When read together, these statutory provisions establish a ceiling on

the size of the PPP loans that the SBA permitted. These sections do not

require that the maximum amount be approved, or that any amount be

approved at all. By its plain language, § 636(a)(36) confers on the 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. This conclusion makes sense given the fact that Congress only

authorized a total amount for all such loans. If the aggregate of the eligible

applications exceeded that total, then some applicants might get the

maximum amount while others receive nothing at all.

Congress vested the SBA with authority to “take any and all actions

[SBA] determines . . . are necessary or desirable in making . . . or otherwise

dealing with” § 7(a) loans. 15 U.S.C. § 634(b)(7) (emphasis added). Such

authority extends to loans made under the PPP. See Gateway Radiology,

983 F.3d at 1256 (noting that PPP is subject to SBA’s existing authority

because “the PPP was not created as a standalone program” but rather was

incorporated into the existing § 7(a) program). By situating the PPP within §

7(a), Congress through the CARES Act clearly deferred to the SBA and

16
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contemplated that the SBA would exercise substantial discretion, within the

boundaries of the statute, in fashioning “necessary or desirable” rules for

“making” or “otherwise dealing with” PPP loans from the limited amount of

money authorized by Congress.

The SBA found it was necessary to adopt IFR No. 7 in order “[t]o

preserve finite appropriations for PPP loans and [to] ensure broad access for

eligible borrowers,” “in light of the previous lapse of . . . appropriations and

the high demand for PPP loans.” 85 Fed. Reg. at 26,325 & n.1.

Implementation of this Rule falls within the broad discretion that Congress

conferred in §§ 636(a)(36)(B) and (E) and § 634(b)(7). The Plaintiffs’

argument that the SBA acted inconsistently with the CARES Act in enacting

IFR No. 7, therefore, is rejected.

B. Whether IFR No. 7 is Arbitrary and Capricious

“Unlike contrary-to-law analysis, arbitrary and capricious review is

‘very deferential.’ It is focused not on the substance of the regulation, but on

‘the reasonableness of the agency’s decisionmaking processes.’” Vanda

Pharms., Inc. v. Ctrs. for Medicare & Medicaid Servs., No. 23-1457, 2024 WL

1547092, at *10 (4th Cir. Apr. 10, 2024) (citations omitted), cert. denied,

2025 WL 76437 (Jan. 13, 2025).

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“The arbitrary and capricious standard is not meant to reduce judicial

review to a rubber-stamp of agency action. While the standard of review is

narrow, the court must nonetheless engage in a searching and careful inquiry

of the record.” Ohio Valley Env’t Coal. v. Aracoma Coal Co., 556 F.3d 177,

192 (4th Cir. 2009) (citations and internal quotation marks omitted). The

Court may find an agency action to be arbitrary and capricious where “the

agency relied on factors that Congress has not intended it to consider,

entirely failed to consider an important aspect of the problem, offered an

explanation for its decision that runs counter to the evidence before the

agency, or is so implausible that it could not be ascribed to a difference in

view or the product of agency expertise.” Coleman v. Kendall, 74 F.4th 610,

619 (4th Cir. 2023) (citation omitted), cert. denied, 144 S. Ct. 818 (2024).

The Court “must ensure that the agency has examined the relevant data and

articulated a satisfactory explanation for its action.” Sierra Club v. W. Va.

Dep’t of Env’t Prot., 64 F.4th 487, 501 (4th Cir. 2023) (citation and internal

quotation marks omitted).

In enacting IFR No. 7, the SBA considered a number of relevant

factors, including the legislative intent of the CARES Act and the PPP.

Specifically, the SBA explained that its purpose was “[t]o preserve the limited

resources available to the PPP program,” noting “the previous lapse of PPP

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appropriations and the high demand for PPP loans.” 85 Fed. Reg. at 26,325.

The agency also explained that the $20 million cap on loans would help make

loans available to the highest number of borrowers. Id. As a result, IFR No.

7 made PPP loans more broadly available to smaller businesses that are

without the financial resources available to businesses belonging to large

corporate groups. The limitation on loans to businesses that belong to large

corporate groups—in an effort to maximize the overall number of businesses

that could receive loan assistance from the agency’s finite resources—is a

rational policy choice consistent with the goals of the PPP and the CARES

Act in general. See Forest View Rehab. & Nursing Ctr., LLC v. U.S. Small

Bus. Admin., No. 24 CV 1490, 2024 WL 5247837, at *10 (N.D. Ill. Dec. 30,

2024) (noting that SBA’s “explanation is especially reasonable considering

the high demand for loan dollars at the start of the COVID-19 pandemic.”).

For the foregoing reasons, the Court finds that the SBA’s decision to

implement IFR No. 7 was not arbitrary or capricious.

C. Whether SBA Violated Notice-and-Comment Requirements

The APA establishes the procedure that federal administrative

agencies must use for rule making. 5 U.S.C. § 553. This procedure of

“notice-and-comment rulemaking” requires the agency to issue a general

notice of proposed rule, give opportunity for public comments, and then

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consider and respond to significant comments received before promulgating

the final rule. Id. In this case, however, Congress gave the SBA explicit

statutory authority to bypass the usual notice-and-comment procedures

when promulgating rules implementing the PPP. Specifically, Congress

directed that, “[n]ot later than 15 days after March 27, 2020, the Administrator

shall issue regulations to carry out this title and the amendments made by

this title without regard to the notice requirements under section 553(b) of

Title 5.” 15 U.S.C. § 9012. The Plaintiffs argue that, because the IFR No. 7

was promulgated outside of this 15-day window, the rule needed to go

through the typical rulemaking process, and therefore the rule was enacted

unlawfully.

The Supreme Court has “expressed reluctance ‘to conclude that every

failure of an agency to observe a procedural requirement voids subsequent

agency action, especially when important public rights are at stake.’”

Barnhart v. Peabody Coal Co., 537 U.S. 149, 158 (2003) (quoting Brock v.

Pierce County, 476 U.S. 253, 260 (1986)). Accordingly, “if a statute does not

specify a consequence for noncompliance with statutory timing provisions,

the federal courts will not in the ordinary course impose their own coercive

sanction.” United States v. James Daniel Good Real Prop., 510 U.S. 43, 63

(1993); see also Holland v. Pardee Coal Co., 269 F.3d 424, 431 (4th Cir.

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2001) (“[S]tatutory provisions imposing a mandatory duty on an agency to

act before a specific date are not generally construed to remove the agency’s

power to act after that date.”). Here, § 9012 does not specify a consequence

for noncompliance with the 15-day window. As such, the 15-day directive

imposed by the statute should be read as an intent “to spur the

[Administrator] to action, not to limit the scope of [her] authority.” Barnhart,

537 U.S. at 158 (quoting Brock, 476 U.S. at 265). Accordingly, the Court

concludes the SBA’s failure to comply with that timeline does not invalidate

its subsequent actions.7

For the foregoing reasons, the Court rejects the Plaintiffs’ argument

that the SBA violated its rulemaking duties in enacting IFR No. 7.

D. Application of IFR No. 7 to Plaintiffs

The Plaintiffs also challenge as arbitrary and capricious the SBA’s

finding that the Plaintiffs are part of a “single corporate group” within the

meaning of IFR No. 7.

As noted supra, IFR No. 7 provides, in relevant part:

7
It is also noteworthy that the SBA did not promulgate any rules implementing the PPP
until April 15, 2020, more than 15 days after March 27, 2020. See 85 Fed. Reg. 20811
(Apr. 15, 2020). Therefore, accepting the Plaintiffs’ argument that the SBA lacked
authority to enact rules without notice-and-comment procedures after the statutory
deadline would mean that the SBA lacked authority for all of the rules related to the PPP,
and that the Plaintiffs are challenging those rules as well. This is simply not logical, as
the Plaintiffs do not contest the authority of the SBA to implement the PPP, and indeed,
they themselves received loans under the program pursuant to agency rules.

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[B]usinesses 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 Fed. Reg. at 26325 (emphasis added). Thus, the $20 million limit set

forth in IFR No. 7 is triggered if a company is part of a “single corporate

group,” meaning one that is “majority owned…by a common parent.”

The Plaintiffs contend that they do not fall within the scope of IFR No.

7 for two reasons. First, the Plaintiffs argue that they do not share a

“common parent” with each other or with any other entity that has received

PPP loans. Second, the Plaintiffs argue that they are not “majority owned”

by any one person or entity.

In arguing that they do not share a “common parent,” the Plaintiffs

primarily rely upon part of the Federal Acquisition Regulation (“FAR”), 48

C.F.R. §§ 4.900-4.904, which in pertinent part defines “common parent” as a

“corporate entity that owns or controls an affiliated group of corporations.”

48 C.F.R. § 4.901. This section, however, defines “common parent” solely

for purposes of obtaining taxpayer-identification information from

government contractors that may be used for debt collection and reporting

to the IRS. The Plaintiffs contend that § 4.901 “applies to SBA government

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contracts,” citing PDS Consultants, Inc. v. United States, 907 F.3d 1345 (Fed.

Cir. 2018). [Doc. 33: Pls.’ Brief at 19]. PDS Consultants, however, in fact

states that the FAR sets “policies and procedures for government acquisition

of supplies and services,” to which end it implements, inter alia, the small-

business set-aside requirements of the Small Business Act. 907 F.3d at

1349, 1351. The present case does not concern SBA contracts to acquire

supplies and services from small businesses, but rather SBA-guaranteed

loans to small businesses. FAR § 4.901 does not apply to the interpretation

of “common parent” within IFR No. 7.

There is substantial evidence in the record before the Court to support

the SBA’s conclusion that the Plaintiffs are all majority-owned by a “common

parent” entity, namely, the partnership-in-fact between Simcha Hyman and

Naftali Zanziper. The evidence in the administrative record reflects that

Hyman and Zanziper intended to associate with one another as co-owners

of a conglomerate of more than 340 LLCs, all subject to their joint control (as

exercised through oversight by the Portopiccolo Group), with the two of them

sharing the companies’ profits (and responsibility for their losses). The record

therefore contains more than sufficient evidence from which the SBA

reasonably could conclude (i) that a de facto Hyman-Zanziper partnership

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Case 1:23-cv-00129-MR Document 54 Filed 04/08/25 Page 23 of 26

existed, and (ii) that this partnership is the “common parent” of each of the

Plaintiffs.

The Plaintiffs argue that the Hyman-Zanziper partnership is not their

common parent, because as a matter of form they are owned by Hyman and

Zanziper as individuals, with neither individual holding a majority share in

each entity. This argument, however, ignores the plain text of IFR No. 7,

which provides that borrowers are part of the same corporate group if they

are owned “directly or indirectly, by a common parent.” 85 Fed. Reg. at

26,325 (emphasis added). Further, it is well recognized that the members of

a partnership may form separate business entities (such as corporations or

LLCs) as means to carry out the partnership’s objectives, while still remaining

partners as between themselves. Thus, even though Hyman and Zanziper

have structured their joint enterprise so that in form each constituent LLC,

viewed in isolation, is directly owned by the two of them individually, their de

facto partnership is in substance the indirect owner of all 84 LLCs that sought

PPP loans, including the Plaintiffs.

In sum, substantial evidence supports the conclusion that the Plaintiffs

are owned directly or indirectly by a common parent entity within the meaning

of IFR No. 7. Therefore, the Plaintiffs have failed to carry their burden of

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showing that the SBA acted arbitrarily or capriciously when it found that the

Plaintiffs were part of the same corporate group.

V. CONCLUSION

In conclusion, the Court concludes that the SBA enacted IFR No. 7

within its statutory authority and in compliance with administrative

rulemaking procedures. Therefore, the Hyman-Zanziper LLCs were only

entitled to forgiveness of their PPP loans in the aggregate of $20 million.

After having forgiven that amount the SBA denied further forgiveness, and

thus properly denied loan forgiveness to the 48 LLCs before this Court.

Accordingly, the Court grants the Defendants’ Motion for Summary

Judgment, denies the Plaintiffs’ Motion for Summary Judgment, and will

enter Judgment in favor of the Defendants.

ORDER

IT IS THEREFORE ORDERED that the Defendants’ Motion for

Summary Judgment [Doc. 34] is GRANTED, and the Plaintiffs’ Motion for

Summary Judgment [Doc. 32] is DENIED. The Plaintiffs’ claims against the

Defendants are hereby DISMISSED WITH PREJUDICE.

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The Clerk of Court is respectfully directed to enter a judgment

consistent with this Memorandum of Decision and Order contemporaneously

herewith.
Signed: April 8, 2025
IT IS SO ORDERED.

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