U.S. Small Business Administration v. Weather King Heating & Air, Inc. — N.D. Ohio

Case summary

This case came to the U.S. District Court for the Northern District of Ohio, Eastern Division, No. 5:20-cv-2711, from the district's bankruptcy court. On May 22, 2020 the bankruptcy court granted Weather King Heating & Air, Inc. a preliminary injunction in case number 19-52957, concluding that it would likely prevail on its claim that the Small Business Administration exceeded its statutory authority by categorically excluding bankruptcy debtors from Paycheck Protection Program eligibility. The SBA moved to withdraw the reference and appealed, and the two matters were consolidated. Both sides moved for summary judgment on October 25, 2021. On January 31, 2023 the court vacated the preliminary injunction, granted the SBA's motion and denied Weather King's.

Case at a glance

What did the bankruptcy court's injunction do?

It enjoined the SBA from rescinding or altering Weather King's PPP loan approval or the SBA's guarantee of that loan, and prohibited the SBA from considering Weather King's bankruptcy status in connection with its application for loan forgiveness.

What did the district court hold?

That the SBA did not exceed its statutory authority when it excluded debtors in bankruptcy from PPP loan eligibility, that it did not engage in retroactive rulemaking as applied to Weather King, and that the bankruptcy exclusion is not arbitrary, capricious or an abuse of discretion and does not violate 11 U.S.C. § 525(a).

What does the opinion say about the loan application?

That Weather King filed a Chapter 11 bankruptcy on December 16, 2019 and applied for a PPP loan through Dollar Bank on April 14, 2020, and that the application checked the "no" box when asked whether it was presently involved in any bankruptcy. The opinion records that the parties do not dispute the misrepresentation and that Weather King argued the question on SBA Form 2483 is compound and confusing.