PENSACOLA – Banks don’t have to pay accountants and other consultants fees for helping applicants for federal Paycheck Protection Program (PPP) loans, a federal judge has ruled.
The suit was filed by accounting firm Sport & Wheat CPA, PA against ServisFirst Bank, Inc.
Existing Small Business Administration regulations require agents, lenders and borrowers to complete Form 159 in order for agents to be paid, U.S. District Court Judge Kent Wetherell of the Northern District of Florida, said in a ruling.
The PPP program was “added to and exists within” section 7 of the Small Business Act, Wetherell said. The Form 159 requirement in section 7 therefore applies to the PPP program, the judge held.
“Here, it is undisputed that neither plaintiff nor the borrowers executed Form 159,” he said. “Accordingly, defendants have no legal obligation under the CARES Act to pay plaintiff an ‘agent fee’ for helping the borrowers get PPP loans.”
The judge dismissed the lawsuit. He left open the possibility of an amended lawsuit by the accounting firm.
“The court finds it highly unlikely that plaintiff will be able to further amend the complaint to state a claim against defendants, but the court is not yet prepared to say that amendment would be ‘futile’ and it will keep an open mind if plaintiff seeks leave to file a second amended complaint,” the judge said.
The ruling was “the first of its kind,” the legal publication JD Supra reported.
“Sixty copy-cat lawsuits followed in more than a dozen federal courts across the country,” according to the JD Supra report. "In all of these cases, plaintiffs attempt to twist regulatory language establishing caps on agent compensation into an ironclad obligation for banks to pay agents – even if the bank never heard of the agent, did not know the agent was preparing a borrower’s application, or did not ask for the agent’s assistance."
The Florida Bankers Association did not immediately return emails or phone calls requesting comment on the ruling.
Under the PPP program, businesses can have loans forgiven if they used at least 60% of the funds to keep employees on the payroll during the COVID-19 pandemic.
Sport & Wheat v. ServisFirst Bank, Inc., U.S. District Court, Northern District of Florida, 3:20-cv-05425-TKW-HTC