On April 27, 2020, Plaintiff American Video Duplicating, Inc., Tush Law Ltd., and Kenneth M. Hahn (dba Cal State Financial) filed a class action lawsuit in the United States District Court, Central District of California (case number 2:20-cv-03815-ODW-AGR) against a number of defendant-lenders. Plaintiffs are represented by Geragos & Geragos APC, Graylaw Group, Inc., and Dhillon Law Group Inc.
Plaintiffs allege they became aware the CARES Act had been signed into law on or about March 25, 2020, and each Plaintiff subsequently spent 50-100 hours becoming familiar with the new law, particularly Section 1102, which temporarily permits the SBA to guarantee up to 100% of PPP loans, and Section 1106, which provides forgiveness up to the full principal amount of qualifying loans. Plaintiffs allege they knew the COVID-19 crisis would seriously impact their clients’ businesses and so sought to obtain PPP loans through various lenders on behalf of their clients. Plaintiffs assert they assisted their clients in gathering and analyzing documents, and preparing loan applications. In many instances the applications had to be amended or redone at least once because the SBA or the defend-lenders changed forms, requested additional documents, or added new requirements. Plaintiff understood they were not allowed to charge clients a fee relating to the applications, but instead would be compensated by agent fees paid by the defendant-lenders, which Plaintiffs contend are mandated under the CARES Act. Plaintiffs assert the defendant-lenders either retained all of the agent fees or stated they would only pay the agent 50% of the required fees causing plaintiffs financial harm and damages.
Plaintiffs’ complaint pleads causes of action for declaratory relief, unfair business practices in violation of California Bus. & Prof. Code § 17200 et. seq., and unjust enrichment. Plaintiffs seek damages from the defendant-lender for refusing to pay, or for only being willing to pay a partial percentage of agent fees. Plaintiffs seek that approximately 19.14% of all administrative fees ($3,848,597,082) paid to the defendant-lenders Defendants be deposited into a mutually agreeable fund to be distributed to the designated agent of each PPP loan recipient.
One of the defendant-lenders has filed a motion to dismiss set for hearing on June 22, 2020. The motion challenges subject matter jurisdiction arguing that the complaint fails to include any allegations establishing any connection between any of the plaintiffs and the lender. The motion also argues that plaintiffs lack standing, that the claims are not ripe because the SBA has not yet disbursed processing fees to lenders.