Authority to notify this Court of the Second Circuit’s decision in Springfield Hospital, Inc. v

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A Notice of Supplemental Authority filed May 10, 2022 as Doc #: 24 in The U.S. Small Business Administration, et al. v. Weather King Heating & Air, Inc., Case No. 5:20CV2711, U.S. District Court for the Northern District of Ohio, Eastern Division. The United States, on behalf of the Small Business Administration (SBA) and SBA Administrator Isabella Casillas Guzman, notifies the court of the Second Circuit's decision in Springfield Hospital, Inc. v. Guzman, 28 F.4th 403 (2d Cir. Mar. 16, 2022), which it says rejected a claim virtually identical to the one Weather King presents about Section 525(a) and PPP loan guarantees for bankrupt entities. The notice also cites the Sixth Circuit's decision in Toth v. Michigan State Housing Development Authority, 136 F.3d 477 (6th Cir. 1998). The document carries an /s/ signature for Marc S. Sacks and a certificate of service dated May 10, 2022.

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UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

)
THE U.S. SMALL BUSINESS.

)

ADMINISTRATION, et al.,

)

)
CASE NO.: 5:20CV2711

Movant/Appellants,

)

)

vs.

)
Judge Charles E. Fleming

)
WEATHER KING

)
HEATING & AIR, INC.,

)

)

Respondent/Appellee.

)

NOTICE OF SUPPLEMENTAL AUTHORITY

The United States, on behalf of the Small Business Administration (SBA) and Isabella
Casillas Guzman, in her capacity as SBA Administrator, submits this Notice of Supplemental
Authority to notify this Court of the Second Circuit’s decision in Springfield Hospital, Inc. v.
Guzman, 28 F.4th 403 (2d Cir. Mar. 16, 2022).  Springfield Hospital rejected a claim virtually
identical to the one presented by Weather King here that SBA violated 11 § U.S.C. 525(a) by
declining to extend PPP loan guarantees to bankrupt entities.1  Specifically, the Second Circuit
held “Section 525(a) [of the Bankruptcy Code] does not apply to PPP loans.”  Id. at 408.
Consistent with SBA’s arguments here, the Court explained (1) “the plain text of the statute,” (2)
“prior precedent,” and (3) “subsequent Congressional action after the passage of the CARES Act”
all support the conclusion that the PPP is a loan guarantee program not covered by Section 525(a).
Id. at 418.  Therefore, the Second Circuit held “as a matter of law, [] SBA is entitled to summary

1 Here, Weather King obtained a loan after falsely certifying on its PPP application that it was not
involved in a bankruptcy proceeding when, in fact, it was.  Defs. Mot. For Summ. J. (Dkt. 19) at
1.
Case: 5:20-cv-02711-CEF  Doc #: 24  Filed:  05/10/22  1 of 4.  PageID #: 361

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judgment on the Section 525(a) claim.”  Id. at 408.
The Second Circuit’s decision on the applicability of Section 525 to the PPP loan guarantee
program is consistent with the Sixth Circuit’s controlling decision, Toth v. Michigan State Housing
Development Authority, 136 F.3d 477 (6th Cir. 1998), which held that Section 525(a) does not
cover loans or loan guarantees by its plain terms.  See Defs. Mot. For Summ. J. (Dkt. 19) at 2, 17-
21.  While Toth should be dispositive of Weather King’s Section 525(a) claim, Springfield
Hospital leaves no doubt that SBA’s exclusion of debtors in bankruptcy from the PPP does not
run afoul of Section 525(a).  Moreover, in Springfield Hospital, the Second Circuit rejected
Weather King’s argument (see Weather King Mem. In Supp. of Mot. for Summ. J. (Dkt. 17) at 19)
that the Second Circuit’s previous decision in Stoltz v. Brattleboro Housing Authority, 315 F.3d
80 (2d Cir. 2002), compelled a different result.  See Springfield Hospital, 28 F.4th at 421-23
(rejecting argument that Stoltz “disturbed” the Second Circuit’s previous case law and reaffirming
its prior holding “the plain text of Section 525(a) does not cover loan programs”).

Case: 5:20-cv-02711-CEF  Doc #: 24  Filed:  05/10/22  2 of 4.  PageID #: 362

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Dated:  May 10, 2022

Respectfully submitted,
BRYAN M. BOYNTON
Principal Deputy Assistant Attorney General

MICHELLE M. BAEPPLER
Acting United States Attorney

SUZANA K. KOCH
Assistant U.S. Attorney
United States Attorney’s Office
801 West Superior Avenue, Suite 400
Cleveland, OH  44113

/s/ Marc S. Sacks
RUTH A. HARVEY
MARGARET M. NEWELL
MARC S. SACKS
MICHAEL S. TYE
Commercial Litigation Branch
Civil Division
United States Department of Justice
P.O. Box 875
Ben Franklin Station
Washington D.C. 20044

Tel. (202) 307-1104
Fax (202) 514-9163

marcus.s.sacks@usdoj.gov

ATTORNEYS FOR THE UNITED

STATES
Case: 5:20-cv-02711-CEF  Doc #: 24  Filed:  05/10/22  3 of 4.  PageID #: 363

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on May 10, 2022 I electronically filed the foregoing with the
Clerk of the Court by using the CM/ECF system, which will send a notice of electronic filing to
all CM/ECF participants.

/s/ Marc S. Sacks
MARC S. SACKS
Commercial Litigation Branch
Civil Division

United States Department of Justice

Case: 5:20-cv-02711-CEF  Doc #: 24  Filed:  05/10/22  4 of 4.  PageID #: 364

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