I last wrote about why the SBA is denying requests for forgiveness of PPP loans from financial companies in January. See Dentons – Back to Basics, continued—Why Does the SBA Deny Finance Companies “Eligibility” for PPP Loans? I outlined the status of appeals filed with the SBA’s Office of Hearings and Appeals (OHA) and suggested readers stay tuned. Well, there have been other developments.
Some consumer credit companies have completely ignored the OHA’s appeals process and gone to Federal Court seeking a declaratory judgment regarding rebate eligibility. It is still too early to know if this approach will work. Generally speaking, when pursuing remedies against a federal agency, the doctrine of exhaustion of remedies appears to require that the party seeking relief first go through the administrative law process, i.e. through the SBA’s Office of Hearings and Appeals to challenge the SBA’s decision. ineligibility for forgiveness.
Many finance companies I know have gone through the SBA OHA process. Most of these agency actions have resulted in Administrative Law Judge (ALJ) rulings that uphold the SBA’s ruling of ineligibility for PPP loan forgiveness, based on loan ineligibility to begin with. Some of the ALJs have written well-reasoned opinions in support of their positions, while others have simply defaulted to the SBA’s position that an ALJ does not have the authority to review the adopted Basic Regulation. by the agency and should simply apply the agency rule without undertaking any analysis. of the fundamental argument that the SBA may have misinterpreted the CARES Act PPP loan program.
In the cases where the ALJs take a closer look, the legal issues are quite complex. For example, are federal district court preliminary injunction cases and federal appeals court decisions based on those cases “final decisions” with binding precedent authority for ALJs? This is the type of question considered.
From a lawyer’s perspective, these questions are fascinating and explain why many lawyers go to law school. From a business owner’s perspective, these issues are infuriating.
Hopefully we will get well-reasoned decisions that will provide settled law in the near future. Perhaps even finance companies that may not have appealed their loan forgiveness denials can use such a favorable ruling to their advantage.