BofA Can Keep Virus Relief Loan Gating Policy During Appeal

By Jon Hill
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Law360 (April 17, 2020, 7:23 PM EDT) -- A Maryland federal judge said Friday she won't order Bank of America to alter its Paycheck Protection Program lending practices while several small businesses that have accused the bank of unlawfully limiting access to the coronavirus relief program try to persuade the Fourth Circuit to intervene.

U.S. District Judge Stephanie Gallagher rebuffed the businesses' latest attempt to have her block eligibility requirements that the bank established for prospective borrowers under the now-depleted $349 billion program, saying it would be inappropriate to grant such a request pending their appeal.

"Under the guise of a 'stay,' plaintiffs seek to alter the status quo, and to change BofA's behavior and direct its conduct, by limiting the criteria it can impose in accepting loan applications for review," the judge wrote in an opinion. "That request for mandatory injunctive relief renders the requested 'stay' improper."

Friday's ruling marks another loss for the proposed class of small businesses suing Bank of America, which has said it is continuing to accept and process applications for Paycheck Protection Program loans in "hopeful anticipation" that Congress will replenish the program's funding after it ran out on Thursday.

The businesses are fighting to invalidate Bank of America's policy of taking PPP loan applications only from its small business checking customers that either are already borrowers at the bank or aren't borrowers at another bank.

According to the businesses, this policy stands to prevent them and other qualified borrowers from obtaining critically needed PPP loans because it effectively tightens the eligibility requirements beyond what lawmakers allowed when they authorized the loan program as part of the Coronavirus Aid, Relief and Economic Security, or CARES, Act last month.

But Judge Gallagher ruled April 13 that the law doesn't prohibit banks from setting their own additional eligibility requirements, rejecting a temporary restraining order sought by the businesses that would have forced the bank to immediately suspend its policy and start accepting a wider range of applicants.

Moving quickly to appeal the decision to the Fourth Circuit, the businesses asked Tuesday for the judge to issue an emergency injunction ordering the bank to lift the policy in the meantime. This step would ensure that they and others would still have a shot at getting aid through the program before it was too late, according to the businesses.

Judge Gallagher said Friday, however, that this injunction request doesn't seek just to maintain the status quo the way a stay is supposed to during an appeal. Rather, the businesses are asking her to "impose an affirmative obligation on BofA," the judge said.

"Plaintiffs' motion is denied on this basis alone, because a stay is not the appropriate vehicle in which to direct an actor's conduct," Judge Gallagher wrote.

The judge said the businesses also had "not offered any showing that they are likely to succeed on appeal" and did not persuade her that Bank of America's policy would doom them if left unchecked. For one, there have been more than 2,400 other banks and lenders participating in the loan program, and it is out of money anyway, according to the judge.

"Plaintiffs had opportunities, through entities other than BofA, to apply for PPP loans, and imposing an emergency stay at a point in which the PPP funding has been exhausted may have no practical effect whatsoever," Judge Gallagher wrote.

In addition, the judge reiterated her concern that an injunction could have negative spillover effects by interfering with Bank of America's PPP lending processes and scaring off other lenders in the event Congress expands the program.

"The proper balance between the competing and compelling public interests implicated in this incredibly complex situation must be struck by the legislative branch," Judge Gallagher wrote.

In an email to Law360, Alan M. Rifkin of Rifkin Weiner Livingston LLC, counsel for the small business plaintiffs, said that Friday's decision was anticipated and just wraps up this stage of the case, teeing up the issues for the Fourth Circuit to review.

"We remain committed to the scores of BOA small business clients who were gated from access to the federally funded PPP," Rifkin said. "What was considered by the court as speculative is now all too real. We will make our arguments on appeal."

A representative for Bank of America declined to comment on the decision.

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 Michael Watanabe.

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Case Information

Case Title

Profiles, Inc. et al v. Bank of America Corporation et al

Case Number




Nature of Suit

Other Statutory Actions


Stephanie A. Gallagher

Date Filed

April 03, 2020

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