Profiles, Inc. v. Bank of Am. Corp.

453 F.Supp.3d 742

PROFILES, INC., et al., Plaintiffs,

v.BANK OF AMERICA CORP., et al., Defendants.

Civil Case No.: SAG-20-0894

United States District Court, D. Maryland.

Signed April 13, 2020

Alan M. Rifkin, Liesel Johanna Schopler, Rifkin Weiner Livingston Levitan and Silver LLC, Annapolis, MD, Barry L. Gogel, Rifkin Weiner Livingston, LLC, Baltimore, MD, Charles S. Fax, Marie Celeste Bruce, Rifkin Livingston Levitan and Silver LLC, Bethesda, MD, for Plaintiff Profiles, Inc.

Marie Celeste Bruce, Rifkin Weiner Livingston, LLC, Bethesda, MD, for Plaintiffs Proline Products, Inc., Diaspora Salon, LLC, Elite Security Group, LLC.

Enu Mainigi, Beth Stewart, Pro Hac Vice, Craig Darren Singer, Kenneth Charles Smurzynski, Williams and Connolly LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

Stephanie A. Gallagher, United States District Judge

Profiles, Inc. filed a Second Amended Complaint on behalf of a putative class ("Plaintiffs") against Bank of America Corporation and Bank of America, N.A., (collectively, "BofA"). ECF 5. Plaintiffs now move for a Temporary Restraining Order and Preliminary Injunction, seeking to temporarily, and preliminarily, enjoin BofA from imposing restrictions on borrowing under the Payroll Protection Program ("PPP"). ECF 7. BofA filed an opposition, ECF 15, and a telephonic hearing was held on April 10, 2020. For the reasons explained below, Plaintiffs' Motion will be DENIED.

I. FACTUAL BACKGROUND

The novel coronavirus ("COVID-19") pandemic has caused unprecedented disruptions to the way of life for the American people. In particular, many small businesses across the country have been effectively shuttered for nearly one month, with no apparent end in sight. In response to the crisis, the federal government enacted emergency legislation, with the goal of affording some relief to American small businesses. Congress passed, and on March 27, 2020, President Trump signed, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), P.L. 116-136 ; ECF 7-8, "to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic," Interim Final Rule, 13 C.F.R. Part 120, ECF 7-2.

Under the CARES Act, the Administrator of the Small Business Administration (the "Administrator") has the authority "to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency." Id. at 3. Section 1102 of the CARES Act amended the Small Business Act ("SBA"), 15 U.S.C. § 636, and established the $349 billion PPP, under which participating lenders are authorized to make loans to eligible small businesses. See P.L. No. 11-136, § 1102(a)(2).

BofA began accepting online applications for PPP loans on April 3, 2020. ECF 15 at 6. At that time, BofA only permitted applications from customers with a preexisting borrowing relationship with BofA. Plaintiffs Elite Security Group ("Elite") and Proline Products, Inc., ("Proline") attempted to submit applications on this date. Elite provides security services to bars and other non-essential businesses in Maryland. ECF 7-4 ¶ 2. However, as a result of Governor Hogan's recent orders, most of Elite's clients have temporarily closed, causing Elite to lose significant revenue. Id. ¶ 4. Proline is a Connecticut-based sole proprietorship, which sells automotive roof racks and related accessories. ECF 7-5 ¶ 2. Proline has also experienced a dramatic decrease in monthly revenue as a result of COVID-19 and the related governmental orders. Id. ¶ 4.

Proline has been a banking customer with BofA for the past 25 years. Id. ¶ 7. On April 3, 2020, Proline's owner contacted BofA about submitting an application for a PPP loan, but BofA would not accept Proline's application, because the company had no borrowing relationship with BofA. Id. ¶ 8. A branch manager advised Proline to " ‘go someplace else’ so that [it] didn't miss out on the PPP loan program." Id. ¶ 9. Elite had a similar experience when its owner attempted to apply for a PPP loan through BofA on April 3, 2020. Although Elite, similarly, has a longstanding deposit relationship with BofA, BofA would not accept the company's application, because it had no borrowing relationship with the bank. ECF 7-4 ¶ 8.

Thus, because of BofA's policy, Proline and Elite were unable to successfully apply for a PPP loan on April 3, 2020. Subsequently, however, the respective owners of Proline and Elite learned that BofA had made substantive changes to its PPP loan application requirements. Id. ¶ 9, ECF 7-5 ¶ 10. Namely, on April 4, 2020, BofA revised its policy to allow depository -only clients to apply for PPP loans as well. See ECF 7-6. However, under the new policy, businesses maintaining only a depository relationship with BofA can apply for a PPP loan only if they do not have a credit or borrowing relationship with another bank:

To be eligible, you must have a Small Business lending and Small Business checking relationship with Bank of America as of February 15, 2020 or a Small Business checking account opened no later than February 15, 2020 and do not have a business credit or borrowing relationship with another bank.

Id. at 2 (second emphasis added).

On April 6, 2020, BofA told Proline that because it has credit cards with Chase and American Express, it should apply for a loan through one of those entities, but not BofA. ECF 7-5 ¶ 11. Also on April 6, 2020, Elite's owner, Brandon Burr, completed an application on BofA's website. ECF 7-4 ¶ 9. Elite has a lending relationship with another bank that its owner believes is not "an SBA lender." Id. Accordingly, Burr "checked that Elite did not have a lending relationship at another bank." Id. Even so, he remains "greatly concerned that [BofA] will reject Elite's PPP loan application based on Elite's other lending relationship." Id. ¶ 10.

Plaintiffs contend that other class members have had difficulty applying for PPP loans with BofA. Plaintiff Diaspora Salon, LLC ("Diaspora") is a hair salon, and Plaintiff Profiles, Inc., ("Profiles") is a public relations firm — each located in Baltimore, Maryland. ECF 5 ¶¶ 17, 19. On April 4, 2020, the founder and owner of Diaspora successfully applied for a PPP loan from BofA. Id. ¶ 61. However, she was not asked to indicate whether Diaspora had a borrowing relationship with another financial institution. Id. She attempted to alter her application the following day, but was prevented from doing so when she attested that Diaspora indeed had a borrowing relationship with another financial institution. Id. ¶¶ 62, 104. Similarly, the owner of Profiles tried to apply for a loan under the original BofA restrictions, which were in effect on April 3, 2020. Id. ¶ 44. Profiles is a banking client of BofA's, but does not have a borrowing relationship with the bank. Id. ¶¶ 41, 42. Profiles has not attempted to apply since BofA changed its policy to allow applications from entities with only a depository relationship. Instead, its owner applied for the PPP through a different institution, but had not yet received a loan number as of April 10, 2020. Hrg. Tr. at 26:23–27:6.

Plaintiffs filed their original Complaint on April 3, 2020, ECF 1, and filed an Amended Complaint the next day, ECF 3. Following BofA's policy change on April 4, 2020, Plaintiffs filed the operative Second Amended Complaint on April 7, 2020. ECF 5.

II. LEGAL STANDARD

A temporary restraining order ("TRO") or a preliminary injunction is warranted when the movant demonstrates four factors: (1) that the movant is likely to succeed on the merits, (2) that the movant will likely suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities favors preliminary relief, and (4) that injunctive relief is in the public interest. League of Women Voters of N.C. v. North Carolina , 769 F.3d 224, 236 (4th Cir. 2014) (quoting Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) ); Wilson v. Williams , 2019 WL 4942102, at *1 (D.S.C. Oct. 8, 2019). The movant must establish all four elements in order to prevail. Pashby v. Delia , 709 F.3d 307, 320–21 (4th Cir. 2013).

A temporary restraining order, much like a preliminary injunction, affords " ‘an extraordinary and drastic remedy’ prior to trial." Ultimate Outdoor Movies, LLC v. FunFlicks, LLC , 2019 WL 2642838, at *6 (D. Md. June 27, 2019) (quoting Munaf v. Geren , 553 U.S. 674, 689–90, 128 S.Ct. 2207, 171 L.Ed.2d 1 (2008) ); see also MicroStrategy, Inc. v. Motorola, Inc. , 245 F.3d 335, 339 (4th Cir. 2001) (stating preliminary injunctive relief is an "extraordinary remed[y] involving the exercise of very far-reaching power [that is] to be granted only sparingly and in limited circumstances.") (citation omitted). Since preliminary injunctions are intended to preserve the status quo during the pendency of litigation, injunctions that "alter rather than preserve the status quo" are particularly disfavored. Mountain Valley Pipeline, LLC v. 6.56 Acres of Land , 915 F.3d 197, 216 n.8 (4th Cir. 2019). Courts should grant such "mandatory" preliminary injunctions only when "the applicant's right to relief [is] indisputably clear." Id.

III. ANALYSIS

A. Likelihood of Success on the Merits

To obtain preliminary injunctive relief, Plaintiffs bear the burden to show that they are likely to succeed on one of their claims. See, e.g. , Stinnie v. Holcomb , 355 F. Supp. 3d 514, 527 (W.D. Va. 2018). Here, Plaintiffs contend that BofA's "unlawful gating requirements interfere with and prevent Plaintiffs from exercising their statutory right to apply for PPP loans under Section 1102 of the CARES Act." ECF 7-1 at 14.

1. Statutory Background

The CARES Act authorizes participating lenders to make general business loans to eligible recipients, permitting the businesses to cover payroll and other expenses. See § 1102(a)(2), (b)(1). To implement the Act, the Administrator issued an ...