By Jon Hill

Law360 (April 15, 2020, 9:22 PM EDT) -- A group of small businesses is appealing a Maryland federal judge's decision to allow Bank of America to continue turning away certain customers seeking loans under the $349 billion Paycheck Protection Program and has asked for an emergency injunction while their fight goes to the Fourth Circuit.

The businesses, which say Bank of America has prevented them from accessing the federal coronavirus relief loan program, filed court papers on Tuesday to formally initiate an appeal after U.S. District Judge Stephanie Gallagher ruled Monday that she would not force the bank to suspend restrictions it has put on which applicants it will consider for the government-backed loans.

The judge's decision shot down a temporary restraining order that the businesses had sought as part of a proposed class action challenging those restrictions, under which a small business can apply for a PPP loan from the bank only if it's a Bank of America checking customer and either already borrows from the bank or is not a borrower at another bank.

The suit alleges this gating policy unlawfully imposes eligibility requirements beyond those set by lawmakers in March when they authorized the loan program in the CARES Act. In doing so, the bank is really trying to help itself out by placing its existing debtors at the front of the line for aid, according to the suit.

But Judge Gallagher said Monday that Bank of America's policy "does not run afoul of the CARES Act," ruling that the relief law doesn't prohibit banks from establishing additional applicant eligibility requirements. The judge also found the law contains no private right of action that would permit the suit against the bank.

In their filings on Tuesday, however, the small business plaintiffs behind the suit urged Judge Gallagher to block Bank of America from holding them to its gating policy during their appeal of her ruling

The plaintiffs, which are depository clients of the bank but don't qualify to apply for a PPP loan under its gating policy, said such an emergency court order is necessary to preserve any shot they have left of getting aid through the program, whose lending capacity is dwindling. 

Federal officials said late Wednesday that they have already approved applications for more than $300 billion in PPP loans, which are being offered on a first-come, first-serve basis. Although Republicans want to add $250 billion in lending capacity to the relief program, that effort has stalled in recent days.

"Without an opportunity to apply for these PPP loans through BOA, plaintiffs and other eligible businesses are unlikely to survive financially throughout the duration of the appeal," the plaintiffs told the court on Tuesday. "Plaintiffs — together with their employees and the communities in which they operate — will suffer immeasurable and irreparable harm without an injunction pending appeal to remove the unlawful barriers to entry that have been erected by BOA."

And though Judge Gallagher concluded previously that the small business plaintiffs hadn't established their case was strong enough to justify a preemptive suspension of Bank of America's gating policy, the plaintiffs insisted otherwise on Tuesday and argued she can be more flexible anyway, given the novel nature of their case.

"While plaintiffs here demonstrate a likelihood of success on appeal, at a minimum, plaintiffs show a 'substantial case on the merits' to warrant an injunction pending appeal since this case raises an issue of first impression and the Fourth Circuit may resolve the issue differently," the plaintiffs wrote.

In an opposition brief filed Wednesday, Bank of America dismissed the plaintiffs' latest request to block the gating policy as no more compelling than the one the judge rejected on Monday and called it "exceedingly unlikely" that her decision would be overturned on appeal.

"This court appropriately considered each of the four factors of the test for granting preliminary injunctive relief and found plaintiffs' arguments wanting," the bank said.

Bank of America also reiterated its position that the gating policy plays an important role in allowing the bank to provide PPP loans as quickly and efficiently as possible and said the plaintiffs are understating the bar they have to clear in order to get the injunction they're seeking against the policy. 

"BofA respectfully requests that this court deny plaintiffs' emergency motion for injunctive relief pending appeal," the bank said.

In a statement to Law360, Alan M. Rifkin of Rifkin Weiner Livingston LLC, counsel for the small business plaintiffs, said Wednesday that his side remains "committed to the countless numbers of small businesses around the country who have been denied access to this critically important lifeline."

"The funds in the PPP program are near depletion," Rifkin said. "All the while BOA continues to impose restrictive gating requirements that block their own clients from those funds. Our appeal seeks to remedy that wrong." 

A representative for Bank of America declined to comment.

The small business plaintiffs are represented by M. Celeste Bruce, Charles S. Fax, Alan M. Rifkin, Liesel J. Schopler and Barry L. Gogel of Rifkin Weiner Livingston LLC.

Bank of America is represented by Enu Mainigi, Kenneth C. Smurzynski, Craig D. Singer and Beth A. Stewart of Williams & Connolly LLP.

The case is Profiles Inc. v. Bank of America Corp. et al., case number 1:20-cv-00894, in the U.S. District Court for the District of Maryland.

--Editing by Amy Rowe.

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