Suffolk Regional Off Track Betting Corp. — Order Denying Petition for Reconsideration
- Issuer
- Small Business Administration
- Document type
- Order
- Date
- 2024-10-07
- Case
- Id., citing Off. of Pers. Mgmt. v. Richmond, 496 U.S. 414, 426-33 (1990) and Dun & Bradstreet Corp. Found. v. U.S. Postal
Summary
An order of the U.S. Small Business Administration Office of Hearings and Appeals, decided August 6, 2024, denying Suffolk Regional Off Track Betting Corp.'s petition for reconsideration of Decision No. PPP-2844438000, filed as Exhibit 9 (Document 1-19) in Case 2:24-cv-07058-SJB-JMW on October 7, 2024. The order recounts that the earlier decision found the petitioner, a government-owned entity that is not a hospital, ineligible for its Paycheck Protection Program loan and not entitled to forgiveness. It summarizes the petitioner's arguments on the Fourth IFR exception, treatment of sister corporations, estoppel, the Administrative Record and loan deferment, and SBA's April 30, 2024 response. The administrative judge finds the arguments were already rejected or fall outside OHA's jurisdiction under 13 C.F.R. § 134.1211(c)(1) standards, denies the petition and affirms the earlier decision.
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Case 2:24-cv-07058-SJB-JMW Document 1-19 Filed 10/07/24 Page 1 of 6 PageID #:
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EXHIBIT
9
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United States Small Business Administration
Office of Hearings and Appeals
PAYCHECK PROTECTION PROGRAM
APPEAL OF:
Suffolk Regional Off Track Betting Corp.
Decided: August 6, 2024
Appellant
Petition for Reconsideration
of Decision No. PPP-2844438000
ORDER DENYING PETITION FOR RECONSIDERATION
I. Background
A. Prior Proceedings
On April 12, 2024, Suffolk Regional Off Track Betting Corp. (Petitioner) filed the instant
Petition for Reconsideration (PFR) of the U.S. Small Business Administration (SBA) Office of
Hearings and Appeals (OHA) decision in PPP Appeal of Suffolk Regional Off Track Betting
Corp., SBA No. PPP-2844438000 (2024) (“Suffolk I”). In that decision, OHA found that SBA
correctly determined that Petitioner was not eligible to have obtained a Paycheck Protection
Program (PPP) loan, because Petitioner is a government-owned entity and is neither a hospital
nor affiliated with a Native American tribe. Suffolk I, at 7-8. Furthermore, since Petitioner was
ineligible for the PPP loan it received, Petitioner is not entitled to forgiveness of that loan. Id., at
3, 9.
B. Petition for Reconsideration
In the PFR, Petitioner renews its claim from Suffolk I that SBA’s Final Loan Review
Decision (FLRD) improperly relied upon an “outdated” version of 13 C.F.R. § 120.110(j). (PFR
at 9.) More specifically, Petitioner maintains that SBA’s Fourth Interim Final Rule (the Fourth
IFR) pertaining to the PPP created a broad exception to 13 C.F.R. § 120.110(j), and thereby
rendered government-owned “entities like [Petitioner] eligible for a PPP loan and corresponding
PPP loan forgiveness”. (Id. at 8, citing 85 Fed. Reg. 23,450, 23,451 (Apr. 28, 2020).)
Next, Petitioner contends that OHA erred in concluding that “the mere fact that two of
[Petitioner’s] sister corporations may have had PPP loans forgiven is not compelling evidence of
disparate treatment” of Petitioner. (Id. at 10, quoting Suffolk I, at 8.) Petitioner maintains that
“all” four of its sister corporations, not only two, had PPP loans forgiven. (Id., emphasis
Petitioner’s.) Petitioner and its sister corporations have the same legal structure, so in
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Petitioner’s view, “[t]he granting and forgiveness of the PPP loans to all [off-track betting
corporations] in New York State except [Petitioner]” is compelling evidence of disparate
treatment. (Id.)
Petitioner asserts that SBA and OHA “should be estopped” from determining that
Petitioner “should never should have been approved” for a PPP loan in the first instance. (Id. at
11-12.) Petitioner relied upon the loan approval, and used the loan proceeds to pay the salaries
of its employees. (Id. at 12.) In addition, Petitioner would have undertaken “austerity measures”
if its application for a PPP loan had been immediately rejected, or if Petitioner had understood
that its PPP loan would ultimately need to be repaid. (Id.)
Petitioner takes issue with the Administrative Record, and argues that OHA erred by
reaching a decision based on an incomplete record. (Id. at 13-14.) Petitioner reiterates
arguments from Suffolk I that the Administrative Record lacks sufficient documentation to
explain: (1) SBA’s disparate treatment of Petitioner as compared with other off-tracking betting
businesses; and (2) why SBA fully denied forgiveness of Petitioner’s PPP loan, notwithstanding
that Petitioner’s lender had recommended partial forgiveness. (Id. at 15-23.)
Lastly, Petitioner complains that OHA’s decision in Suffolk I did not address whether
Petitioner is responsible for payment of fees, penalties, and interest, in addition to the principal
amount of its PPP loan. (Id. at 27.) Petitioner highlights that SBA regulations provide that a
timely appeal of an FLRD extends the deferment period for a PPP loan until OHA renders a final
decision. (Id. at 24, citing 13 C.F.R. § 134.1202(b) and (d).) Here, due to its lender’s failure to
timely forward the FLRD, Petitioner did not receive the FLRD until several months after it was
issued. (Id. at 26-27.) Although OHA determined in Suffolk I that Petitioner filed a timely
appeal, OHA did not discuss the extent to which Petitioner is responsible for additional costs.
(Id.)
C. SBA’s Response
On April 30, 2024, SBA responded to the PFR. SBA argues that Petitioner has shown no
error in Suffolk I. (Response at 1.) SBA maintains that OHA relied upon the correct legal
authority in affirming the FLRD. (Id. at 2.) SBA highlights that, contrary to Petitioner’s
assertions, the exception authorized by the Fourth IFR “explicitly applies only to hospitals”.
(Id.) Petitioner is not a hospital, and does not dispute that it is a government-owned entity, so the
exception under the Fourth IFR “plainly does not apply” to Petitioner. (Id.)
SBA argues that OHA also properly rejected Petitioner’s allegations of disparate
treatment. (Id. at 2.) Any information about other purportedly similarly-situated businesses does
not demonstrate that SBA’s conclusions regarding Petitioner were incorrect. (Id. at 2-3.) The
only matter before OHA was Petitioner’s appeal of the instant FLRD. Furthermore, SBA is not
required to conduct reviews of every PPP loan; instead, SBA may undertake a review of a PPP
loan of any size at any time in SBA’s discretion. (Id. at 3.)
Petitioner’s “estoppel” argument is equally meritless. (Id.) SBA contends that the
estoppel claim is improperly raised for the first time in the PFR. (Id.) In any event, the premise
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of Petitioner’s argument is flawed because “SBA did not approve PPP loan applications and
therefore did not approve Appellant’s loan; rather such actions are delegated by regulation to
authorized lenders”. (Id., citing 86 Fed. Reg. 8,283, 8,294 (Feb. 3, 2021) and 85 Fed. Reg.
20,811, 20,812 (Apr. 15, 2020).) Furthermore, an estoppel claim cannot be brought against a
federal agency because “the Government cannot be estopped from denying a claim for payment
of public money that is not otherwise permitted by law”. (Id., citing Off. of Pers. Mgmt. v.
Richmond, 496 U.S. 414, 426-33 (1990) and Dun & Bradstreet Corp. Found. v. U.S. Postal
Serv., 946 F.2d 189, 195 (2d Cir. 1991).)
SBA maintains that OHA correctly found that the Administrative Record need not
contain all documents, but only non-privileged, relevant documents that SBA considered in
making its FLRD. (Id. at 4.) Petitioner’s claim that the Administrative Record did not include
documentation explaining why its lender’s partial forgiveness recommendation was not adopted
is meritless, because a lender’s recommendation on forgiveness is subject to SBA’s review. (Id.,
citing 85 Fed. Reg. 33,004, 33,005 (Jun. 1, 2020).) The FLRD “represents SBA’s final decision
on the matter that is appealable and reviewable by OHA” in accordance with SBA regulations,
and the Administrative Record here amply supported the conclusion that Petitioner was ineligible
for a PPP loan based on its status as a government-owned entity. (Id. at 4-5.)
Lastly, SBA argues that Petitioner’s contentions regarding PPP loan deferment should be
rejected, because these issues are improperly raised for the first time in the PFR, and in any event
are beyond OHA’s jurisdiction. (Id. at 5, citing 13 C.F.R. §§ 134.102(w), 134.1201, 134.1210,
and 134.1212.)
II. Discussion
A. Jurisdiction and Standard of Review
A party seeking reconsideration of an OHA decision on a PPP appeal must file its PFR
within 10 calendar days after service of the written decision. 13 C.F.R. § 134.1211(c)(1). Here,
Suffolk I was issued on April 2, 2024, and Petitioner filed its PFR within 10 calendar days
thereafter, so the PFR is timely. Sections I.A and I.B, supra. To prevail on a PFR, the petitioner
“must clearly show an error of fact or law material to the decision.” 13 C.F.R. § 134.1211(c)(1).
B. Analysis
I agree with SBA that this PFR is wholly without merit. The bulk of the PFR consists of
arguments that OHA previously considered, and rejected, in Suffolk I. Petitioner repeats its
claim, for example, that the Fourth IFR created a broad exception to 13 C.F.R. § 120.110(j), but
OHA squarely addressed this argument in Suffolk I, and determined that Petitioner’s contention
lacked support in the regulatory text. Instead, the exception authorized by the Fourth IFR
pertained “specifically to hospitals owned by governmental entities”. Suffolk I, at 8. The
exception is thus irrelevant to the instant case, as Petitioner is not a hospital. Id. The record in
Suffolk I demonstrated, and Petitioner does not dispute, that Petitioner is a government-owned
entity, and such concerns (other than hospitals and entities associated with Native American
tribes) were precluded from obtaining PPP loans pursuant to 13 C.F.R. § 121.110(j) and the First
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IFR. Id., at 7-8. Accordingly, SBA, and OHA, correctly concluded that Petitioner was ineligible
for the PPP loan it received, and that Petitioner consequently is not entitled to forgiveness of that
loan.
In its PFR, Petitioner also renews its contention that other similarly-situated businesses
were granted PPP loan forgiveness, but this argument too was fully considered, and rejected, in
Suffolk I. OHA explained in Suffolk I that Petitioner, which had the burden of proof in the
proceeding, did not establish that SBA – as opposed to private lenders – made the alleged
forgiveness decisions pertaining to other borrowers. Suffolk I, at 8. Moreover, even if Petitioner
had made such a showing, this would not demonstrate that SBA’s findings with regard to
Petitioner were in error. Id. Instead, it also would be possible that “forgiveness may have been
mistakenly granted to other borrowers.” Id. Similarly, OHA found no merit to Petitioner’s
argument that the Administrative Record in the instant case was incomplete. Id. at 8-9. OHA
noted that, by regulation, the Administrative Record need only include “non-privileged, relevant
documents that SBA considered in making [the particular FLRD that is under appeal] or that
were before SBA at the time of the [FLRD].” Id. (citing 13 C.F.R. § 134.1207(b).)
Petitioner’s remaining arguments in its PFR are also meritless. Petitioner contends that
SBA and OHA should be “estopped” from concluding that Petitioner was ineligible for the PPP
loan it received, but this argument fails since Petitioner has not shown that either SBA or OHA
had any involvement in approving Petitioner for a PPP loan. Moreover, as SBA correctly
observes, federal agencies cannot be equitably estopped from enforcing public laws, even though
private parties may suffer hardship as a result in particular cases. See generally Off. of Pers.
Mgmt. v. Richmond, 496 U.S. 414 (1990).
Petitioner also complains that OHA did not address, in Suffolk I, the extent to which
Petitioner is responsible for the payment of fees, interest and penalties in addition to the principal
amount of its PPP loan. Section I.B, supra. In a PPP appeal proceeding, however, OHA’s
review is limited to the particular FLRD under appeal, and OHA may only “affirm, reverse, or
remand” that FLRD. 13 C.F.R. §§ 134.102(w), 134.1201, and 134.1212. Here, Petitioner’s
responsibility for additional fees and costs was not an issue raised in the FLRD, and such matters
thus are not within OHA’s jurisdiction.
III. Conclusion
To prevail on a PFR, the petitioner “must clearly show an error of fact or law material to
the decision.” 13 C.F.R. § 134.1211(c)(1). Here, Petitioner has not shown any valid grounds to
disturb Suffolk I. The bulk of Petitioner’s arguments on reconsideration were already thoroughly
considered, and rejected, in Suffolk I. Petitioner’s remaining contentions lack merit and/or are
beyond the scope of OHA’s review. The PFR therefore is DENIED and Suffolk I is
AFFIRMED.
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This is the reconsidered initial decision of the SBA. However, unless the SBA
Administrator elects to review this decision pursuant to 13 C.F.R. § 134.1211(d), this decision
shall become the final decision of the SBA 30 calendar days after its service. See 13 C.F.R. §
134.1211(c)(3). This decision is non-precedential but may be published. 13 C.F.R. §
134.1211(e) and (f).
______________________
KENNETH M. HYDE
Administrative Judge
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