Supplemental Brief in Support of Defendants' Motion to Dismiss — No. 1:21-cv-00748 (Dkt. 67)
Summary
A supplemental brief by defendants Bank of America, N.A. and Megan Scholz supporting their November 9, 2021 motion to dismiss in Natasha Athens d/b/a Favorite Things v. Bank of America, Civil Action No. 1:21-cv-00748-SM, in the U.S. District Court for the District of New Hampshire, filed December 22, 2021 as Document 67. Responding to the court's December 6, 2021 Order, it quotes the steps of the SBA's guidance for calculating maximum PPP loan eligibility for sole proprietors with employees. The brief states that the plaintiff's 2019 Schedule C line 31 is 0 and the Form 941 wage line is blank, so maximum PPP loan eligibility is 0 and BofA was required to deny forgiveness. It asks the court to dismiss the complaint under Federal Rules of Civil Procedure 12(b)(6) and 9(b), and is signed by Thomas J. Pappas.
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“Supplemental Brief in Support of Defendants' Motion to Dismiss — No. 1:21-cv-00748 (Dkt. 67).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/supplemental-brief-in-support-of-defendants-motion-to-dismiss-no-1-21-616021effb/
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Case 1:21-cv-00748-SM Document 67 Filed 12/22/21 Page 1 of 5
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
)
NATASHA ATHENS d/b/a Favorite Things, )
)
Plaintiff, )
)
v. ) Civil Action No. 1:21-cv-00748-SM
)
BANK OF AMERICA and MEGAN SCHOLZ, )
)
Defendants. )
)
DEFENDANTS BANK OF AMERICA, N.A. AND MEGAN SCHOLZ’S
SUPPLEMENTAL BRIEF IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS
Defendants Bank of America, N.A.1 (“BofA”) and Megan Scholz (together, “Defendants”),
by and through their attorneys, Primmer Piper Eggleston & Cramer PC, respectfully submit this
supplemental brief in support of their November 9, 2021 Motion to Dismiss (the “Motion”) (Doc.
No. 33) the Complaint (the “Complaint”) (Doc. No. 1). The Court’s December 6, 2021 Order
allowed the parties to file a “supplemental brief” addressing Plaintiff’s “apparent claim that her
PPP loan is entitled to forgiveness” under the applicable law and regulations governing the
Paycheck Protection Program (“PPP”). Doc. No. 60 (“Order”) at 1. The following further clarifies
why Plaintiff was not entitled to forgiveness of her PPP loan and that her claims fail and are subject
to dismissal.
A. Defendants Correctly Determined that Plaintiff Was Not Entitled to Forgiveness of
Her PPP Loan.
As part of the PPP loan forgiveness process, the Small Business Administration (“SBA”)
requires lenders to, among other things, “confirm the borrower’s calculations . . . including the
1
Incorrectly named in Plaintiff’s Complaint as “Bank of America.”
1
Case 1:21-cv-00748-SM Document 67 Filed 12/22/21 Page 2 of 5
dollar amount of the Payroll Costs, . . . by reviewing the documentation submitted with the”
borrower’s forgiveness application. See July 23, 2020 SBA Lender Procedural Notice, Control
No. 5000-20038. If the lender “determines a borrower was ineligible for any portion of its loan
amount, forgiveness will be denied for the ineligible portion and the borrower must begin making
payments on the remaining loan amount.” January 15, 2021 SBA Lender Procedural Notice,
Control No. 5000-20078; see also Doc. No. 33-1 at 12–14.
The SBA has released guidance to determine maximum PPP loan eligibility.2 SBA
guidance provides a number of possible ways to calculate maximum PPP loan eligibility,
depending, for example, on the type of business and the number of employees. Sole proprietors
with employees who determine their maximum PPP loan eligibility based on net profits, like
Plaintiff, calculate their loan based on Question 2 of the SBA’s guidance, which instructs
borrowers to calculate maximum PPP loan eligibility as follow:3
Step 1: Compute your 20194 payroll costs by adding the following:
o 2019 IRS Form 1040 Schedule C line 31 net profit amount:
if this amount is over $100,000, reduce it to $100,000,
if this amount is less than zero, set this amount at zero;
o 2019 gross wages and tips paid to your employees whose principal place of
residence is in the United States, up to $100,000 per employee, which can
be computed using:
2
Office of Capital Access, How To Calculate Maximum Loan Amounts – By Business Type, Small Business
Administration (Apr. 24, 2020), https://www.sba.gov/sites/default/files/2020-04/How-to-Calculate-Loan-
Amounts.pdf. The SBA updated this document several times, most recently on March 12, 2021. See Office
of Capital Access, How to Calculate Maximum Loan Amounts for First Draw PPP Loans and What
Documentation to Provide – by Business Type, Small Business Administration (March 12, 2021),
https://www.sba.gov/sites/default/files/2021-03/HowtoCalculateFirstDrawLoanAmountsFAQs-3.12.21-
508.pdf.
3
See Office of Capital Access, How to Calculate Maximum Loan Amounts for First Draw PPP Loans and
What Documentation to Provide – by Business Type, Small Business Administration (March 12, 2021), at
2–3 https://www.sba.gov/sites/default/files/2021-03/HowtoCalculateFirstDrawLoanAmountsFAQs-
3.12.21-508.pdf.
4
Borrowers could also compute maximum PPP loan eligibility using 2020 tax returns.
2
Case 1:21-cv-00748-SM Document 67 Filed 12/22/21 Page 3 of 5
2019 IRS Form 941 Taxable Medicare wages & tips (line 5c-column
1) from each quarter,
Plus any pre-tax employee contributions for health insurance or
other fringe benefits excluded from Taxable Medicare wages & tips,
and
Minus (i) any amount paid to any individual employee in excess of
$100,000, and (ii) any amounts paid to any employee whose
principal place of residence is outside the United States;
o 2019 employer contributions for employee group health, life, disability,
vision, and dental insurance (the portion of IRS Form 1040 Schedule C line
14 attributable to those contributions);
o 2019 employer contributions to employee retirement plans (IRS Form 1040
Schedule C line 19); and
o 2019 employer state and local taxes assessed on employee compensation,
primarily state unemployment insurance tax (from state quarterly wage
reporting forms).
Step 2: Calculate the average monthly payroll costs amount (divide the amount
from Step 1 by 12).
Step 3: Multiply the average monthly payroll costs amount from Step 2 by 2.5.
Step 4: Add the outstanding amount of any [Economic Injury Disaster Loan
(“EIDL”)] made between January 31, 2020 and April 3, 2020 that you seek to
refinance. Do not include the amount of any advance under an EIDL COVID-19
loan (because it does not have to be repaid). . . .
As required by the SBA, BofA reviewed the two relevant documents submitted by Plaintiff:
(1) her 2019 IRS Form 1040 Schedule C (“Schedule C”), Doc. No. 33-7, and (2) her 2019 Fourth
Quarter IRS Form 941 (“Form 941”), Doc. No. 33-8. These documents establish precisely why
Plaintiff is not entitled to forgiveness of her PPP loan.
In accordance with Step 1 of the SBA’s guidance, BofA reviewed: (1) line 31 of Plaintiff’s
Schedule C, which is 0; (2) the Taxable Medicare wages & tips (line 5c-column 1) of Plaintiff’s
Form 941, which is blank; (3) line 14 of Plaintiff’s Schedule C, which is blank; and (4) line 19 of
Plaintiff’s Schedule C, which is blank. See Doc. Nos. 33-7, 33-8. Plaintiff did not submit any
other documentation reflecting eligible payroll expenses or other costs incurred by Plaintiff in
2019 or 2020. Based upon the SBA’s guidance and the documents submitted by Plaintiff,
3
Case 1:21-cv-00748-SM Document 67 Filed 12/22/21 Page 4 of 5
Plaintiff’s maximum PPP loan eligibility at Step 1 is 0. Because Step 1 is 0, Steps 2 and 3 must
also be 0. And regarding Step 4, Plaintiff submitted no documentation that it received an EIDL.5
Based on the documents submitted by Plaintiff, her maximum PPP loan eligibility is 0.
Plaintiff has failed to provide any documentation to BofA suggesting otherwise. Because BofA
was required to deny forgiveness for any “ineligible portion” of a disbursed PPP loan, BofA had
no choice but to inform Plaintiff that she was ineligible for forgiveness of her PPP loan. See
January 15, 2021 SBA Lender Procedural Notice, Control No. 5000-20078; Doc. No. 33-1 at 12–
14.
Because Plaintiff was not entitled to forgiveness of her PPP loan, her claims necessarily
fail.6
B. Conclusion
For the foregoing reasons and the reasons set forth in Defendants’ Memorandum in Support
of the Motion to Dismiss, Reply Brief in Support of the Motion to Dismiss, and Objection to
Plaintiff’s Motion to Quash Defendants’ Motion to Dismiss, the Court should grant Defendants’
Motion and dismiss Plaintiff’s Complaint in its entirety pursuant to Federal Rules of Civil
Procedure 12(b)(6) and 9(b).
5
As part of the loan calculation process, borrowers were entitled to refinance the outstanding balance of
any EIDL (a separate SBA loan program) made between January 31, 2020 and April 3, 2020, up to $10,000.
See 85 Fed. Reg. 20,811, 20,814.
6
Plaintiff’s claims fail for the additional reasons laid out in Defendants’ Motion, including because the
Coronavirus Aid, Relief, and Economic Security (“CARES”) Act does not recognize a private right of
action and because Plaintiff’s claims are inadequately pled under Federal Rules of Civil Procedure 12(b)(6)
and 9(b).
4
Case 1:21-cv-00748-SM Document 67 Filed 12/22/21 Page 5 of 5
Respectfully submitted,
BANK OF AMERICA, N.A. and MEGAN SCHOLZ
By their attorneys,
PRIMMER PIPER EGGLESTON & CRAMER PC
Dated: December 22, 2021 By: /s/ Thomas J. Pappas
Thomas J. Pappas, Esq., N.H. Bar No. 4111
P.O. Box 3600
Manchester, NH 03105-3600
(603) 626-3300
tpappas@primmer.com
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing DEFENDANTS BANK OF AMERICA, N.A.
AND MEGAN SCHOLZ’S SUPPLEMENTAL BRIEF IN SUPPORT OF DEFENDANTS’
MOTION TO DISMISS has this day been forwarded via the Court’s Electronic Case Filing System
to:
Natasha Athens
Natasha4NHGov@protonmail.com
Dated: December 22, 2021 By: /s/ Thomas J. Pappas
Thomas J. Pappas, Esq., (N.H. Bar No. 4111)
5
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