(Reuters) - About two dozen banks and bank holding companies on Wednesday urged the Judicial Panel on Multidistrict Litigation not to consolidate dozens of class actions accusing them of failing to pay billions of dollars in fees to accountants and financial advisers that assisted businesses with Paycheck Protection Program loan applications.
The banks, including KeyBank, Synovus and PNC, argued in a joint filing that the class actions involve too many disparate policies and fact patterns to warrant consolidation. (Citibank and Bank of America filed separate motions opposing consolidation but endorsed the joint motion.) The only thing the suits have in common, according to the banks’ joint brief, is that all are premised on a “baseless legal theory”: Neither the Coronavirus Aid, Relief and Economic Security Act that created the PPP nor the Small Business Administration rules implementing the program entitle PPP applicants’ agents to fees from the banks that processed PPP loans, according to the motion.
The CARES Act, as the banks’ interpreted it, simply delegated to the SBA the authority to set a limit on agents’ fees. The SBA, in turn, drafted rules that, according to the banks, were focused on making sure that accountants and financial advisers did not take advantage of businesses rushing to file PPP loan applications. So the SBA set a cap on agent fees and specified that any such fees to accountants and financial advisers would not be paid by borrowers but from banks’ fees for processing PPP loans.
Those rules did not, however, specify that agents are entitled to fees, according to the banks. Moreover, the banks said, the accounting firms and financial advisers have no private right to sue under any of the federal laws at issue – and the agents’ state law claims ultimately fail for the same reason as their supposedly dead-on-arrival federal claims: They’re not entitled under the CARES Act to the fees they are seeking.
So that’s the consensus view of the banks. But – perhaps crucially – there are significant dissenters. For one thing, the big banks are not completely unified in their opposition to the proposed MDL over agents’ fees. Wells Fargo, represented by Sullivan & Cromwell, argued that cases should be consolidated to answer the threshold question of whether accountants and financial advisers are entitled to any fees at all. JPMorgan Chase lawyers at Greenberg Traurig opposed consolidation of all of the agent fee cases in their brief, but called on the MDL panel to consolidate the cases against Chase. (Other banks also said that if the panel believes consolidation would streamline the litigation, the judges should create separate MDLs for different defendants.)
Both Wells Fargo and JPMorgan Chase echoed the joint bank brief’s arguments that the CARES Act and the SBA rules do not entitle accountants and financial advisors to fees. But in its brief to the MDL panel, Regions Bank said that it and at least some other banks intend to pay the fees of agents that helped borrowers who received PPP loans. “Now that Regions has begun receiving lender fees from the SBA, Regions will begin paying agent fees promptly,” the brief said.
I talked Thursday to three of the plaintiffs’ lawyers who have asked the MDL panel to combine the PPP agent fee cases, Michael Popok of Zumpano Patricios & Popok, Brian Gudmundson of Zimmerman Reed and Michael Adler of GrayLaw Group. Of course, they disputed the banks’ assertion that accountants and financial advisers are not entitled to fees under the CARES Act or the SBA rules implementing it. If the statute did not intend for PPP borrowers’ agents to receive fees for helping clients in the rush to complete applications, they said, the SBA would not have had to make rules setting a fee cap and directing that the money be paid by banks that received processing fees. The very existence of the rules, they said, proves that the government intended for accountants and financial advisers to be paid for their work on PPP loans.
Gudmundson called the banks’ arguments about a private right of action “a silly diversion.” He and Popok said their clients are asserting straightforward claims under state and common law for money they believe they’re entitled to but have not been paid.
The MDL panel will presumably consider consolidation of the PPP agent fee cases at its meeting at the end of July.