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

PROFILES, INC., et al., Plaintiffs, v. BANK OF AMERICA CORP., et al., Defendants.

Civil Case No.: SAG-20-0894

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

April 17, 2020

MEMORANDUM OPINION

THIS MATTER concerns a Motion to Stay filed by Profiles, Inc., on behalf of itself and a putative class of small businesses (collectively, "Plaintiffs"). ECF 21. Bank of America ("BofA") filed an opposition, ECF 25, and Plaintiffs filed a reply, ECF 26. No hearing is necessary. See Loc. R. 105. 6 (D. Md. 2018). For the reasons explained below, the Motion will be DENIED.

I. FACTUAL BACKGROUND

A brief recitation of some of the more comprehensive facts set forth in this Court's Memorandum Opinion denying Plaintiffs' request for a Temporary Restraining Order and Preliminary Injunction, ECF 17, 2020 WL 1849710, at *1-2 (D. Md. Apr. 13, 2020), will be useful. In response to the novel coronavirus ("COVID-19") pandemic and its devastating effects on many American small businesses, the federal government enacted emergency legislation. Congress passed, and on March 27, 2020, President Trump signed, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). H.R. 748 P.L. 116-136; ECF 7-8. The CARES Act's objective is "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.

The CARES Act gave the Small Business Administration 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. In particular, section 1102 of the CARES Act amended the Small Business Act, 15 U.S.C. § 636 ("SBA"), and established the $349 billion Paycheck Protection Program ("PPP"), under which participating lenders are authorized to make certain loans to eligible small businesses. See § 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 businesses with a preexisting borrowing relationship with BofA. However, on April 4, 2020, BofA revised its policy to allow certain depository-only clients to apply for PPP loans as well. See ECF 7-6. The new policy stated:

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.

Plaintiffs contend that the class members have had difficulty applying for PPP loans with BofA. Plaintiffs filed their original Complaint on April 3, 2020, ECF 1, and filed an Amended Complaint the following day, ECF 3. Following BofA's policy change on April 4, 2020, Plaintiffs filed their Second Amended Complaint on April 7, 2020. ECF 5. This Court held a telephonic hearing on Plaintiffs' Motion for a Temporary Restraining Order ("TRO") and Preliminary Injunction, ECF 7, on April 10, 2020. In its Memorandum Opinion dated April 13, 2020, ECF 17, the Court concluded that the CARES Act provides neither an express nor an implied private right of action. Id. at 7-13. Furthermore, the Court found that BofA's eligibility criteria do notcontravene the plain language of the CARES Act. Id. at 13-15. Both of these grounds, the Court concluded, were independently sufficient to deny both Plaintiffs' requests for a TRO and a preliminary injunction. Id. at 7-15. Finally, the Court concluded that even assuming arguendo that the CARES Act provides a private right of action, and that BofA's conduct ran afoul of the statute, Plaintiffs had failed to establish the remaining factors necessary for the entry of a TRO. Id. at 16-23. Accordingly, the Court issued an Order denying Plaintiffs' Motion. ECF 18. Plaintiffs filed an interlocutory appeal with the United States Court of Appeals for the Fourth Circuit, and now seek an emergency stay pending that appeal, ECF 21.

II. LEGAL STANDARD

The issuance of a stay is "an exercise of judicial discretion" and its propriety "depend[s] upon the circumstances of the particular case." Nken v. Holder, 556 U.S. 418, 433 (2009). Courts consider four factors when determining whether to grant a stay pending appeal: (1) the movant's likelihood of success on the merits; (2) whether denial would cause irreparable injury to the movant; (3) whether issuance of the stay will substantially injure the non-movant; and (4) where the public interest lies. Id. at 434. Critically, a stay pending appeal does not "direct[] an actor's conduct," but rather "suspend[s] judicial alteration of the status quo." Id. at 428-29 (citation omitted).

III. ANALYSIS

As an initial matter, Plaintiffs' Motion does not seek a "stay," as the term is typically understood and applied by courts. Specifically, Plaintiffs characterize their stay as "an injunction enjoining [BofA] from imposing any requirements other than those stated in the [CARES Act]." ECF 21 at 1. This request simply rephrases the relief sought in Plaintiffs' Motion for a TRO and Preliminary Injunction. See ECF 7-9 (proposing TRO that would enjoin BofA "from imposingeligibility requirements other than those requirements set forth in section 1102 of the [CARES Act]"). Indeed, granting Plaintiffs' requested "stay" would impose the precise "mandatory" injunction that this Court rejected in its Opinion earlier this week.

The purpose of a stay pending appeal is perhaps best illustrated with an example. In Realvirt, LLC v. Lee, United States District Judge T.S. Ellis, III had issued a Memorandum Opinion and Order directing the plaintiff to pay more than $100,000 to the defendant Patent and Trademark Office. 220 F. Supp. 3d 704, 705 (E.D. Va. 2016). However, the plaintiff appealed that Order to the Court of Appeals and, simultaneously, moved to stay Judge Ellis's Order. Id. Judge Ellis analyzed the four Nken factors, and found that the plaintiff would "suffer irreparable financial injury should it be required to pay the full amount of the Order." Id. at 706. Accordingly, Judge Ellis stayed the plaintiff's obligation to pay the amount in his Order, pending resolution of the appeal. Id. In contrast, Plaintiffs here do not seek merely to preserve the status quo as they litigate their appeal at the Fourth Circuit. Whereas the stay in Realvirt temporarily delayed the imposition of an obligation on the plaintiff, here, Plaintiffs seek to have this Court impose an affirmative obligation on BofA. Plaintiffs' Motion is denied on this basis alone, because a stay is not the appropriate vehicle in which to direct an actor's conduct. See, e.g., Sanofi-Aventis U.S. LLC v. Sandoz, Inc., Nos. 2009-1427, 2009-1444, 2009 WL 7365766, at *2 (Fed. Cir. Aug. 13, 2009) (Moore, J., concurring) (explaining that a stay did not allow court to "direct" the FDA's conduct).

The case cited by Plaintiffs for the proposition that a stay can be appropriate even when injunctive relief has been denied, American Beverage Association v. City & County of San Francisco, further illustrates the inappropriate nature of a "stay" in this case. See 187 F. Supp. 3d 1123 (N.D. Cal. 2016). The injunction that had been denied in American Beverage Ass'n sought to enjoin enforcement of an ordinance requiring any entity marketing sugar-sweetened beveragesto include a warning about adverse health effects associated with their consumption. Id. at 1130-31. As a result of that denial, the marketers would have to begin including the required warnings during the pendency of the appeal. See 2016 WL 9184999, at *1-2 (N.D. Cal. June 7, 2016). The district court agreed to stay the denial of the injunction pending appeal, which resulted in the maintenance of the status quo, i.e., the marketers did not have to change their behavior to include the warnings until the appeal was resolved. Id. at *2.

The instant case presents the reverse situation. Since April 4, 2020, BofA has been participating in the PPP program under the guidelines in its amended policy. Because this Court denied the requested injunctive relief, the status quo is maintained, and BofA can continue implementing its existing policy (to the extent any additional PPP loans can be issued). 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. That request for mandatory injunctive relief renders the requested "stay" improper. Nevertheless, the Court will briefly address each Nken factor in turn.

A. Likelihood of Success on the Merits

"The likelihood-of-success standard does not mean that the trial court needs to change its mind or develop serious doubts concerning the correctness of its decision in order to grant a stay pending appeal." Goldstein v. Miller, 488 F. Supp. 156, 172 (D. Md. 1980). On appeal, the Fourth Circuit will assess whether this Court, with its Memorandum Opinion and Order, abused its discretion. Roe v. Dep't of Def., 947 F.3d 207, 219 (4th Cir. 2020) ("Abuse of discretion is a deferential standard, and we may not reverse so long as the district court's account of the evidence is plausible in light of the record viewed in its entirety.") (citation omitted). Plaintiffs correctly point out that this case involves several issues of first impression in the Fourth Circuit. ECF 21 at5. Namely, because the CARES Act is just a weeks-old law, no other court has addressed whether it contains an implied private right of action. Even so, several courts have found that provisions of the SBA, which was amended by Title I of the CARES Act, do not contain a private right of action. See, e.g., Bulluck v. Newtek Small Bus. Fin., Inc., No. 19-10238, 2020 WL 1490702 (11th Cir. Mar. 27, 2020) (per curiam); Crandal v. Ball, Ball and Brosamer, Inc., 99 F.3d 907 (9th Cir. 1996...