By Nathan Hale

Law360 (May 18, 2020, 5:45 PM EDT) -- Synovus Trust Co. sought dismissal Sunday of a Florida accounting firm's proposed class action alleging banks are flouting the intent of the federal Paycheck Protection Program by refusing to pay loan recipients' agents a portion of their processing fees, saying such entitlement is "found nowhere" in the governing law.

Plaintiff Sport & Wheat CPA PA, which filed its suit April 27 in federal court against Georgia-based Synovus Trust Co. NA and Alabama-based ServisFirst Bank Inc., claims Congress made clear when it passed the PPP as part of the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, that it intended for lenders to compensate agents from the processing fees they receive from the federal Small Business Administration.

But in its motion to dismiss, Synovus said this claim is "plainly wrong." The CARES Act only directed the SBA to set a cap on agent fees, and the regulations say that, in the event an agent is going to be compensated, the fees must be paid by the lender and not the borrower — but do not create an entitlement to fees, it said.

"There is no authority for S&W's proposition that someone who claims to have been an agent must be compensated by a lender, even when the lender never agreed to do so and the lender has not certified that the services were reasonable and satisfactory to it, as is required by SBA regulations," Synovus said.

Requirements from the SBA's 7(a) loan program that lenders certify and confirm an agent's work also apply to the PPP, Synovus said, noting that the complaint does not allege that Synovus authorized the work Sport & Wheat claims it provided to assist a "Client C" to apply to Synovus for a PPP loan.

"The entitlement that S&W proposes would also be susceptible to rampant fraud and abuse, requiring PPP lenders to blindly compensate any agent who purports to have assisted a PPP applicant," Synovus said. "Congress and the SBA intended the exact opposite by establishing a cap on agent fees and limitations on the source of their payment."

Synovus Trust Co. also said that while its parent company, Synovus Bank, has been involved with the PPP, it has not and thus is not a proper party to be sued. And it said that Sport & Wheat failed to properly serve the complaint when it attempted to hand a summons to a branch manager at a Synovus Bank drive-up teller window.

John S. Wirt of Wirt & Wirt PA, who is representing Sport & Wheat, said they already planned to amend their complaint this week and that doing so will cause Synovus' motion to dismiss to become moot.

"Synovus was aware of that, but chose to file its motion prematurely anyway," Wirt said. "Respectfully, we believe the motion is meritless. We are very proud of our client and its work assisting small businesses stay afloat and are hopeful to have our day in court very soon."

In its complaint, which said Sport & Wheat reserved the right to name additional lenders as defendants if they also refuse to compensate it for its services, the accounting firm said it is "simply un-American" not to compensate agents for their work, "particularly when that work is what results in the PPP loan being issued and the banks then earning a processing fee."

"The law clearly provides that a CPA's 'fees will be paid out of lender fees' and prohibits CPAs from collecting 'any fees from the applicant,'" Sport & Wheat said.

The suit seeks to form a proposed class covering PPP agents in Florida who have been refused payment of their fees by a lender for helping the bank's customers obtain PPP loans, but again left open the door to possible expansion into a national class action or multidistrict litigation.

Congress established the PPP in late March as part of the CARES Act, which was valued at $2.1 trillion. The PPP, which started with a pot of $349 billion and was later increased by another $300 billion, was intended to provide small businesses with eight weeks of cash to cover payroll through 100% federally backed loans administered by private banks. If a recipient continues to pay its employees through the two-month period, the loans would be either entirely or mostly forgiven, according to the complaint.

Counsel for Synovus said they had no further comment on the motion Monday.

Sport & Wheat is represented by John S. Wirt and Pamela Cocalas Wirt of Wirt & Wirt PA and Bill Cash, Matt Schultz and Virginia Buchanan of Levin Papantonio Thomas Mitchell Rafferty & Proctor PA.

Synovus Trust Co. is represented by Paul J. Nathanson and Antonio M. Haynes of Davis Polk & Wardwell LLP, James E. Butler Jr. and Ramsey B. Prather of Butler Wooten & Peak LLP and Philip A. Bates PA.

The case is Sport & Wheat CPA PA v. ServisFirst Bank Inc. et al., case number 3:20-cv-05425, in the U.S. District Court for the Northern District of Florida.

--Editing by Jack Karp.

Update: This story has been updated to include comment from Sport & Wheat's counsel and additional counsel information for the firm.

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