Case: 1:20-cv-1838 As of: 07/13/2020 11:56 AM EDT 1 of 10
U.S. District Court District of Maryland (Baltimore) CIVIL DOCKET FOR CASE #: 1:20−cv−01838−CCB

Defy Ventures, Inc. et al v. United States Small Business Administration et al Assigned to: Judge Catherine C. Blake Related Case: 1:20−cv−01736−CCB Cause: 05:551 Administrative Procedures Act
Plaintiff

Date Filed: 06/16/2020 Jury Demand: None Nature of Suit: 899 Other Statutes: Administrative Procedures Act/Review or Appeal of Agency Decision Jurisdiction: U.S. Government Defendant

Defy Ventures, Inc.

represented by Kali Bracey Jenner & Block 1099 New York Avenue, NW Suite 900 Washington, DC 20001 2026396867 Email: kbracey@jenner.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Alejandro Agustin Ortiz American Civil Liberties Union 125 Broad St. 18th Fl. New York, NY 10004 3323233888 Email: ortiza@aclu.org PRO HAC VICE ATTORNEY TO BE NOTICED

Claudia De Palma The Public Interest Law Center 2 Penn Center 1500 JFK Blvd. Ste. 802 Philadelphia, PA 19102 2675461313 Email: cdepalma@pubintlaw.org PRO HAC VICE ATTORNEY TO BE NOTICED

Elizabeth Deutsch Jenner & Block LLP 1099 New York Ave. NW Ste. 900 Washington, DC 20001 2026396074 Fax: 2026396066 Email: edeutsch@jenner.com PRO HAC VICE ATTORNEY TO BE NOTICED

Jacob D Alderdice Jenner and Block LLP 919 Third Ave. New York, NY 10022 2128911625 Fax: 2128911699 Email: jalderdice@jenner.com PRO HAC VICE ATTORNEY TO BE NOTICED

Jennesa Calvo Friedman American Civil Liberties Union

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Foundation 125 Broad St. 18th Fl. New York, NY 10004 6468858347 Email: jcalvo−friedman@aclu.org PRO HAC VICE ATTORNEY TO BE NOTICED

Joanna Karolina Wasik Washington Lawyers Committee for Civil Rights and Urban Aff 700 14th Street Suite 400 Washington, DC 20005 202−319−1000 Email: joanna_wasik@washlaw.org ATTORNEY TO BE NOTICED

Lauren Morris Weil Gotshal and Manges 2001 M St. NW Washington, DC 20036 2026827169 Email: lauren.morris@weil.com PRO HAC VICE ATTORNEY TO BE NOTICED

ReNika Cheraun Moore American Civil Liberties Union 125 Broad St. 18th Fl. New York, NY 10004 6468858364 Fax: 2126073318 Email: rmoore@aclu.org PRO HAC VICE ATTORNEY TO BE NOTICED

Robert Niles−Weed Weil Gotshal and Manges 767 Fifth Ave. New York, NY 10153 2123108651 Email: robert.niles−weed@weil.com PRO HAC VICE ATTORNEY TO BE NOTICED

Zachary D Tripp Weil Gotshal and Manges 2001 M St. NW Washington, DC 20036 2026827220 Email: zack.tripp@weil.com PRO HAC VICE ATTORNEY TO BE NOTICED

Plaintiff Sekwan Merritt

represented by Kali Bracey (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Alejandro Agustin Ortiz (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Case: 1:20-cv-1838 As of: 07/13/2020 11:56 AM EDT 3 of 10

Plaintiff
Prop Prep Properties, LLC doing business as Lightning Electric

Claudia De Palma (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Elizabeth Deutsch (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Jacob D Alderdice (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Jennesa Calvo Friedman (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Joanna Karolina Wasik (See above for address) ATTORNEY TO BE NOTICED
Lauren Morris (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
ReNika Cheraun Moore (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Robert Niles−Weed (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Zachary D Tripp (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
represented by Kali Bracey (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Alejandro Agustin Ortiz (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Claudia De Palma (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Elizabeth Deutsch (See above for address) PRO HAC VICE

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ATTORNEY TO BE NOTICED

Jacob D Alderdice (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Jennesa Calvo Friedman (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Joanna Karolina Wasik (See above for address) ATTORNEY TO BE NOTICED

Lauren Morris (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

ReNika Cheraun Moore (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Robert Niles−Weed (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Zachary D Tripp (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Plaintiff John D. Garland

represented by Kali Bracey (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Alejandro Agustin Ortiz (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Claudia De Palma (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Elizabeth Deutsch (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Jacob D Alderdice (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Jennesa Calvo Friedman (See above for address)

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PRO HAC VICE ATTORNEY TO BE NOTICED

Joanna Karolina Wasik (See above for address) ATTORNEY TO BE NOTICED

Lauren Morris (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

ReNika Cheraun Moore (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Robert Niles−Weed (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Zachary D Tripp (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Plaintiff
Sign Me Up Bethpage, Inc. doing business as Fastsigns 2323

represented by Kali Bracey (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Alejandro Agustin Ortiz (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Claudia De Palma (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Elizabeth Deutsch (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Jacob D Alderdice (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Jennesa Calvo Friedman (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Joanna Karolina Wasik (See above for address) ATTORNEY TO BE NOTICED

Lauren Morris (See above for address)

Case: 1:20-cv-1838 As of: 07/13/2020 11:56 AM EDT 6 of 10
PRO HAC VICE ATTORNEY TO BE NOTICED
ReNika Cheraun Moore (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Robert Niles−Weed (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Zachary D Tripp (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

V. Defendant United States Small Business Administration
Defendant Jovita Carranza in her official capacity as Administrator, U.S. Small Business Administration
Defendant United States Department of the Treasury

represented by James Jordan Gilligan United States Department of Justice Civil Division, Federal Programs Branch 1100 L Street, N.W. Room 11200 Washington, DC 20005 2025143358 Fax: 2026168470 Email: james.gilligan@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
Indraneel Sur PO Box 883 Washington, DC 20044 2026168488 Fax: 2026168470 Email: indraneel.sur@usdoj.gov ATTORNEY TO BE NOTICED
represented by James Jordan Gilligan (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Indraneel Sur (See above for address) ATTORNEY TO BE NOTICED
represented by James Jordan Gilligan (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Indraneel Sur (See above for address) ATTORNEY TO BE NOTICED
Jacob D Alderdice

Case: 1:20-cv-1838 As of: 07/13/2020 11:56 AM EDT 7 of 10

(See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Defendant
Steven Mnuchin in his official capacity as Secretary, U.S. Department of the Treasury

represented by James Jordan Gilligan (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Indraneel Sur (See above for address) ATTORNEY TO BE NOTICED

Date Filed 06/16/2020
06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/16/2020

# Docket Text
1 COMPLAINT against Jovita Carranza, Steven Mnuchin, United States Department of the Treasury, United States Small Business Administration ( Filing fee $ 400 receipt number 0416−8704711.), filed by Sekwan Merritt, John D. Garland, Defy Ventures, Inc., Sign Me Up Bethpage, Inc., Prop Prep Properties, LLC. (Attachments: # 1 Civil Cover Sheet, # 2 Index of Exhibits, # 3 Exhibit A, # 4 Exhibit B, # 5 Exhibit B−1, # 6 Exhibit B−2, # 7 Exhibit B−3, # 8 Exhibit C, # 9 Exhibit D, # 10 Exhibit D−1, # 11 Exhibit E, # 12 Exhibit F, # 13 Exhibit G, # 14 Exhibit H, # 15 Exhibit I, # 16 Exhibit J, # 17 Exhibit K, # 18 Exhibit L, # 19 Exhibit M, # 20 Exhibit N, # 21 Exhibit O, # 22 Summons, # 23 Summons, # 24 Summons, # 25 Summons, # 26 Summons, # 27 Summons)(Bracey, Kali) (Entered: 06/16/2020)
2 Emergency MOTION for Preliminary Injunction by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc. (Attachments: # 1 Memorandum in Support, # 2 Proposed Order)(Bracey, Kali) (Entered: 06/16/2020)
3 Local Rule 103.3 Disclosure Statement by Defy Ventures, Inc. identifying Other Affiliate Defy Ventures Colorado, Inc., Other Affiliate Defy Ventures Washington, Inc. for Defy Ventures, Inc..(Bracey, Kali) (Entered: 06/16/2020)
4 Local Rule 103.3 Disclosure Statement by Sign Me Up Bethpage, Inc. identifying Corporate Parent Clic Clix Media Group, LLC for Sign Me Up Bethpage, Inc..(Bracey, Kali) (Entered: 06/16/2020)
5 Local Rule 103.3 Disclosure Statement by Prop Prep Properties, LLC (Bracey, Kali) (Entered: 06/16/2020)
6 MOTION to Appear Pro Hac Vice for ReNika C. Moore (Filing fee $100, receipt number 0416−8704960.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
7 MOTION to Appear Pro Hac Vice for Alejandro A. Ortiz (Filing fee $100, receipt number 0416−8704990.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
8 MOTION to Appear Pro Hac Vice for Claudia De Palma (Filing fee $100, receipt number 0416−8705016.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
9 MOTION to Appear Pro Hac Vice for Elizabeth B. Deutsch (Filing fee $100, receipt number 0416−8705025.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
10 MOTION to Appear Pro Hac Vice for Jacob D. Alderdice (Filing fee $100, receipt number 0416−8705039.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered:

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06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/16/2020 06/17/2020 06/18/2020 06/18/2020 06/18/2020 06/18/2020 06/18/2020 06/18/2020 06/18/2020 06/18/2020

06/16/2020)
11 MOTION to Appear Pro Hac Vice for Robert B. Niles−Wee (Filing fee $100, receipt number 0416−8705049.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
12 MOTION to Appear Pro Hac Vice for Zachary D. Tripp (Filing fee $100, receipt number 0416−8705064.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
13 MOTION to Appear Pro Hac Vice for Jennesa Calvo−Friedman (Filing fee $100, receipt number 0416−8705073.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/16/2020)
14 Summons Issued 60 days as to Jovita Carranza, Steven Mnuchin, United States Department of the Treasury, United States Small Business Administration, U.S. Attorney and U.S. Attorney General(ds3, Deputy Clerk) (Entered: 06/16/2020)
15 MOTION to Expedite Briefing Schedule on Emergency Motion for a Preliminary Injunction by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc. (Attachments: # 1 Proposed Order)(Bracey, Kali) (Entered: 06/16/2020)
16 NOTICE by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc. re 1 Complaint,,, / Exhibit C−1 to Complaint (Bracey, Kali) (Entered: 06/17/2020)
17 RESPONSE in Opposition re 15 MOTION to Expedite Briefing Schedule on Emergency Motion for a Preliminary Injunction filed by Jovita Carranza, Steven Mnuchin, United States Department of the Treasury, United States Small Business Administration.(Lazerow, Alan) (Entered: 06/18/2020)
18 PAPERLESS ORDER granting 6 Motion to Appear Pro Hac Vice on behalf of ReNika Moore. Directing attorney ReNika Moore to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
19 PAPERLESS ORDER granting 7 Motion to Appear Pro Hac Vice on behalf of Alejandro A Ortiz. Directing attorney Alejandro A Ortiz to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
20 PAPERLESS ORDER granting 8 Motion to Appear Pro Hac Vice on behalf of Claudia De Palma. Directing attorney Claudia De Palma to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
21 PAPERLESS ORDER granting 9 Motion to Appear Pro Hac Vice on behalf of Elizabeth Deutsch. Directing attorney Elizabeth Deutsch to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
22 PAPERLESS ORDER granting 10 Motion to Appear Pro Hac Vice on behalf of Jacob Alderdice. Directing attorney Jacob Alderdice to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
23 PAPERLESS ORDER granting 11 Motion to Appear Pro Hac Vice on behalf of Robert Niles−Weed. Directing attorney Robert Niles−Weed to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
24 PAPERLESS ORDER granting 12 Motion to Appear Pro Hac Vice on behalf of Zachary D Tripp. Directing attorney Zachary D Tripp to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on

Case: 1:20-cv-1838 As of: 07/13/2020 11:56 AM EDT 9 of 10

06/18/2020
06/18/2020 06/19/2020 06/19/2020 06/23/2020 06/24/2020
06/24/2020 06/25/2020 06/25/2020 06/25/2020 06/25/2020

6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
25 PAPERLESS ORDER granting 13 Motion to Appear Pro Hac Vice on behalf of Jennesa Calvo Friedman. Directing attorney Jennesa Calvo Friedman to use the attorney's existing CM/ECF login and password previously issued in this Court. The account password can be reset at http://www.mdd.uscourts.gov/electronic−case−filing−password−reset. Signed by Clerk on 6/18/2020. (srds, Deputy Clerk) (Entered: 06/18/2020)
Telephone Conference held on 6/18/2020 before Judge Catherine C. Blake. (kams, Deputy Clerk) (Entered: 06/29/2020)
26 MOTION to Appear Pro Hac Vice for Lauren E. Morris (Filing fee $100, receipt number 0416−8711569.) by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.(Bracey, Kali) (Entered: 06/19/2020)
27 ORDER confirming the results of the conference call held on 6/18/2020; granting 15 Motion to Expedite Briefing Schedule, to the extent that the defendants' response to the motions for preliminary injunction is due 6/24/2020. Signed by Judge Catherine C. Blake on 6/19/2020. (krs, Deputy Clerk) (Entered: 06/19/2020)
28 PAPERLESS ORDER granting 26 Motion to Appear Pro Hac Vice on behalf of Lauren Morris. Directing attorney Lauren Morris to register online for CM/ECF at http://www.mdd.uscourts.gov/electronic−case−filing−registration. Signed by Clerk on 6/23/2020. (srds, Deputy Clerk) (Entered: 06/23/2020)
29 RESPONSE in Opposition re 2 Emergency MOTION for Preliminary Injunction (Defendants' Opposition to Plaintiffs' Motions for Temporary Restraining Order and Preliminary Injunctions) filed by Jovita Carranza, Steven Mnuchin, United States Department of the Treasury, United States Small Business Administration. (Attachments: # 1 Affidavit (Declaration of John A. Miller), # 2 Affidavit (Declaration of James J. Gilligan))(Gilligan, James) (Entered: 06/24/2020)
30 MOTION for Leave to File Excess Pages (Defendants Motion For Leave To File Excess Pages In Opposition To Plaintiffs Motions For Temporary Restraining Orders Or Preliminary Injunctions) by Jovita Carranza, Steven Mnuchin, United States Department of the Treasury, United States Small Business Administration(Gilligan, James) (Entered: 06/24/2020)
31 NOTICE of Appearance by Indraneel Sur on behalf of All Defendants Associated Cases: 1:20−cv−01838−CCB, 1:20−cv−01736−CCB(Sur, Indraneel) (Entered: 06/25/2020)
32 NOTICE by Small Business Administration re (29 in 1:20−cv−01838−CCB) Response in Opposition to Motion, (10 in 1:20−cv−01736−CCB) Response in Opposition to Motion, of Supplemental Authority (Attachments: # 1 Attachment Decision in Civil Action ELH−20−1324)Associated Cases: 1:20−cv−01838−CCB, 1:20−cv−01736−CCB(Sur, Indraneel) (Entered: 06/25/2020)
33 NOTICE by Small Business Administration re (29 in 1:20−cv−01838−CCB) Response in Opposition to Motion, (10 in 1:20−cv−01736−CCB) Response in Opposition to Motion, of Errata with Corrected Brief (Attachments: # 1 Errata SBA Redline Corr. Opp.)Associated Cases: 1:20−cv−01838−CCB, 1:20−cv−01736−CCB(Sur, Indraneel) (Entered: 06/25/2020)
34 REPLY to Response to Motion re 2 Emergency MOTION for Preliminary Injunction − Plaintiffs' Reply Memorandum in Support of Emergency Motion for Preliminary Injunction filed by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc.. (Attachments: # 1 Declaration of Afraz Khan, # 2 Exhibit 1 to Khan Declaration, # 3 Exhibit 2 to Khan Declaration, # 4 Exhibit 3 to Khan Declaration, # 5 Exhibit 4 to Khan Declaration, # 6 Exhibit 5 to Khan Declaration, # 7 Exhibit 6 to Khan Declaration, # 8 Supplemental Declaration of Andrew Glazier, # 9 Exhibit 1 to Glazier Supp. Declaration, # 10 Supplemental Declaration of Sekwan Merritt, # 11 Exhibit 1 to Merritt Supp. Declaration, # 12 Supplemental Declaration of John D. Garland, # 13 Exhibit 1 to Garland Supp. Declaration, # 14 Exhibit 2 to Garland Supp. Declaration, # 15 Exhibit 3 to Garland

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06/26/2020 06/26/2020
06/27/2020
06/29/2020 06/29/2020 06/29/2020

Supp. Declaration)(Bracey, Kali) (Entered: 06/25/2020)
35 NOTICE of Appearance by Joanna Karolina Wasik on behalf of All Plaintiffs (Wasik, Joanna) (Entered: 06/26/2020)
36 NOTICE by Small Business Administration re (29 in 1:20−cv−01838−CCB) Response in Opposition to Motion, (10 in 1:20−cv−01736−CCB) Response in Opposition to Motion, of Supplemental Authority (Attachments: # 1 Attachment Decision in WDNY No. 20cv665)Associated Cases: 1:20−cv−01838−CCB, 1:20−cv−01736−CCB(Sur, Indraneel) (Entered: 06/26/2020)
37 NOTICE by Jovita Carranza, Steven Mnuchin, Small Business Administration, The United States of America, Jovita Carranza, Steven Mnuchin, United States Department of the Treasury, United States Small Business Administration re (34 in 1:20−cv−01838−CCB) Reply to Response to Motion,,, (15 in 1:20−cv−01736−CCB) Reply to Response to Motion (Defendants' Notice of Filing) Associated Cases: 1:20−cv−01736−CCB, 1:20−cv−01838−CCB(Gilligan, James) (Entered: 06/27/2020)
38 NOTICE by Defy Ventures, Inc., John D. Garland, Sekwan Merritt, Prop Prep Properties, LLC, Sign Me Up Bethpage, Inc. / Update in Response to Court's Request for Clarification at June 29, 2020 Conference Call (Attachments: # 1 Proposed Order)(Bracey, Kali) (Entered: 06/29/2020)
39 MEMORANDUM. Signed by Judge Catherine C. Blake on 6/29/2020. (krs, Deputy Clerk) (Entered: 06/30/2020)
40 ORDER granting in part and denying in part 2 Motion for Preliminary Injunction; extending the application deadline until 7/21/2020; denying the additional injunctive relief requested by the plaintiffs; granting 30 Defendant's motion for leave to file excess pages. Signed by Judge Catherine C. Blake on 6/29/2020. (krs, Deputy Clerk) (Entered: 06/30/2020)

 
 Case 1:20-cv-01838-CCB Document 1 Filed 06/16/20 Page 1 of 39

UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND

DEFY VENTURES, INC., 3550 Wilshire Blvd., Ste 1550, Los Angeles, CA, 90010;

SEKWAN MERRITT, 2123 Brigadiere Blvd, Odenton, MD, 21113, Anne Arundel County;

PROP PREP PROPERTIES, LLC d/b/a LIGHTNING ELECTRIC, 3520 Ailsa Avenue, Baltimore, MD, 21214, Baltimore County;

JOHN D. GARLAND, 218-32 99th Ave, Queens Village, NY, 11429;
SIGN ME UP BETHPAGE, INC. d/b/a FASTSIGNS 2323, 392 North Wantagh Avenue, Bethpage, NY, 11714,

Civil Action No.

Plaintiffs, v.

UNITED STATES SMALL BUSINESS

ADMINISTRATION, 409 3rd St., SW, COMPLAINT FOR DECLARATORY

Washington, DC, 20416;

AND INJUNCTIVE RELIEF

JOVITA CARRANZA, in her official capacity as Administrator, U.S. Small Business Administration, 409 3rd St., SW, Washington, DC, 20416;

UNITED STATES DEPARTMENT OF THE TREASURY, 1500 Pennsylvania Ave., NW, Washington, DC, 20220;

STEVEN MNUCHIN, in his official capacity as Secretary, U.S. Department of the Treasury, 1500 Pennsylvania Ave., NW, Washington, DC, 20220,

Defendants.

Case 1:20-cv-01838-CCB Document 1 Filed 06/16/20 Page 2 of 39
INTRODUCTION 1. In the first quarter of 2020, the United States economy suffered its most severe contraction in more than a decade. As the threat of the novel coronavirus mushroomed into the country’s gravest public health crisis in a century, businesses were forced to shutter. 2. Small-business owners, in particular, faced a dire struggle for survival. According to federal data, between February and April, the total number of active business owners plummeted by 22%,1 the “largest drop on record.”2 By comparison, from the start to end of the Great Recession, the number of business owners decreased by 730,000—only a 5% reduction.3 3. The shutdowns hit business owners of color especially hard: 41% of African-American-owned businesses and 32% of Latinx-owned businesses disappeared between February and April 2020 alone.4 4. The cascading waves of closures and layoffs caused the national unemployment rate to soar to 14.7% in April, its highest peak since the Great
1 Hannah Knowles, Number of Working Black Business Owners Falls 40 Percent, Far More Than Other Groups Amid Coronavirus, Wash. Post (May 25, 2020), https://www.washingtonpost.com/business/2020/05/25/black-minority-businessowners-coronavirus/. 2 Robert W. Fairlie, The Impact of Covid-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey 1 (Nat’l Bureau Econ. Research, Working Paper No. 27309 (June 2020) (analyzing data from the Bureau of Labor Statistics Current Population Survey). 3 Id. at 8-9. 4 Id.
1

Case 1:20-cv-01838-CCB Document 1 Filed 06/16/20 Page 3 of 39
Depression.5 Analyses noted that, even for the businesses able to remain afloat in May, thirty million small-business jobs remained vulnerable to layoff or furlough.6
5. In the midst of the fallout, Congress stepped in to keep the economy on life support. The CARES Act was enacted on March 27, 2020. The Act, in part, created a $669 billion small business grant program called the Paycheck Protection Program (the “PPP”).
6. Congress established the PPP to help all eligible businesses and other entities, including sole proprietorships and nonprofits, continue to pay their workers.
7. The CARES Act expressly provides that “any” business that satisfies the specified eligibility criteria relating to size “shall” be eligible for relief under the PPP. 15 U.S.C. § 636(a)(36)(D).
8. However, the Small Business Administration (“SBA”), the agency responsible for administering the program, thereafter created exclusions that bar a broad swath of small-business owners with a history of involvement in the criminallegal system from PPP funds (the “criminal-record exclusions”). The SBA has continued to shift the terms of the criminal-record exclusions through various, inconsistent policy documents. But throughout it all, the SBA has excluded from the
5 Catherine Thorbecke, US Unemployment Rate Skyrockets to 14.7%, the Worst Since the Great Depression, ABC News (May 8, 2020), https://abcnews.go.com/ Business/us-economy-lost-205-million-jobs-april-unemployment/story?id=70558779. 6 André Dua et al., COVID-19’s Effect on Jobs at Small Businesses in the United States, McKinsey & Co. (May 5, 2020), https://www.mckinsey.com/industries/socialsector/our-insights/covid-19s-effect-on-jobs-at-small-businesses-in-the-unitedstates#.
2

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PPP’s promised relief small-business owners who have had past interactions with the criminal-legal system, as well as those they employ. The SBA has not explained why.
9. The criminal-record exclusions are inconsistent with the text and purpose of the CARES Act. They tell a sweeping category of small-business owners
across the country that, at a time of acute financial fragility, there is no lifeline for them or their employees.
10. The criminal-record exclusions unlawfully and arbitrarily increase the already considerable barriers to economic success faced by the 1 in 3 working-age Americans with criminal records.7 The criminal-record exclusions also harm all
Americans who happen to work for a small business whose owner has a covered criminal record.
11. Even in a booming economy, people with criminal records experience unemployment at nearly five times the average rate.8 Defying the odds already
stacked against them, many start their own small businesses because they are unable to obtain traditional employment, and in turn create jobs for other people with criminal records who have historically been excluded from the workforce.9 In the
7 Bureau of Justice Statistics, U.S. Dep’t of Justice, Survey of State Criminal History Information Systems, 2012 (2014), https://www.ncjrs.gov/pdffiles1/bjs/grants/244563.pdf. 8 Lucius Couloute & Daniel Kopf, Out of Prison & Out of Work: Unemployment Among Formerly Incarcerated People, Prison Pol’y Initiative (July 2018), https:// www.prisonpolicy.org/reports/outofwork.html. 9 See generally Joyce Klein & Lavanya Mohan, Prison to Proprietor: Entrepreneurship as a Re-Entry Strategy, Aspen Inst. (2016), https://assets.aspen institute.org/content/uploads/2016/09/AFN-PrisonToProprietor.pdf?_ga=2.13870965. 336196160.1587652799-828052410.1587652799; Nicole Lindahl and Debbie A. Mukamal, Venturing Beyond the Gates: Facilitating Successful Reentry with
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current economic climate, these individuals and their communities face financial devastation.
12. The SBA’s criminal-record exclusions have also exacerbated the pandemic’s disproportionate health and economic impacts on communities of color. Due to systemic racism in the criminal-legal system, the criminal-record exclusions fall hardest on minority business owners and workers. Black Americans are 3.6 times more likely than white people to be arrested for marijuana, despite similar usage rates.10 Black Americans are incarcerated at more than five times the rate of white people;11 one-third of Black American men have a felony conviction.12 Data suggest that of all U.S. business owners, 2% of white business owners, 15% of Black business owners, and 10% of Latinx business owners have been incarcerated at some point in their lives. See Exhibit D (Decl. of Dr. Christopher Wildeman) ¶ 1.
13. The SBA’s criminal-record exclusions violate the Administrative Procedure Act (“APA”) because they impose additional eligibility requirements for PPP funds contrary to the CARES Act.
Entrepreneurship, Prisoner Reentry Institute, John Jay College of Criminal Justice (2007), https://files.eric.ed.gov/fulltext/ED540831.pdf. 10 Ezekiel Edwards et al., A Tale of Two Countries: Racially Targeted Arrests in the Era of Marijuana Reform at 29, ACLU (2020), https://www.aclu.org/report/tale-twocountries-racially-targeted-arrests-era-marijuana-reform. 11 Criminal Justice Fact Sheet, NAACP, https://www.naacp.org/criminal-justice-factsheet/ (last visited June 15, 2020). 12 Race & Justice News: One-Third of Black Men Have Felony Convictions, Sentencing Project (Oct. 10, 2017), https://www.sentencingproject.org/news/5593/.
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14. The criminal-record exclusions also violate the APA because they are arbitrary and capricious. The SBA has repeatedly changed the scope of the criminalrecord exclusions without explanation or notice. These constant shifts and inconsistencies in criteria have altered the eligibility of business owners as the deadline draws near, depriving them of the opportunity to apply for loans.
15. The criminal-record exclusions cause irreparable harm to Plaintiffs and similarly situated business owners, businesses, and the organizations that devote resources to funding and advising them. As Congress’s passage of the PPP reflects, all small-business owners urgently need relief right now to keep their businesses afloat and to continue paying their workers.
16. This lawsuit asks the Court to declare unlawful and set aside Defendants’ criminal-record exclusions, and to enjoin the Defendants from continuing to bar PPP applicants with criminal records from the critical federal aid that Congress promised.
PARTIES 17. Plaintiff Sekwan Merritt, a resident of Maryland, is the sole owner of Prop Prep Properties LLC, an electrical contracting company doing business as Lightning Electric. He resides at 2123 Brigadiere Boulevard, Odenton, Maryland, 21113, Anne Arundel County. 18. Plaintiff Prop Prep Properties LLC, doing business as Lightning Electric (“Lightning Electric”), is a limited liability company duly organized and authorized to conduct business in the State of Maryland. Lightning Electric does business at 3520 Ailsa Avenue, Baltimore, Maryland, 21214.
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19. Plaintiff John D. Garland, a resident of New York, is the majority owner of Sign Me Up Bethpage, Inc., doing business as Fastsigns 2323. He resides at 21832 99th Avenue, Queens Village, New York, 11429.
20. Plaintiff Sign Me Up Bethpage, Inc., doing business as Fastsigns 2323 (“Fastsigns Bethpage”), is a domestic business corporation duly organized and authorized to conduct business in the State of New York. Fastsigns Bethpage does business at 392 North Wantagh Avenue, Bethpage, New York, 11714.
21. Plaintiff Defy Ventures, Inc. (“Defy”) is a nonprofit organization incorporated in New York, with its main office located at 3550 Wilshire Boulevard, Suite 1550, Los Angeles, California. 90010. Defy’s mission is to use entrepreneurship and employment as tools for currently and formerly incarcerated individuals to address the social problems of mass incarceration and recidivism. Defy has chapters in New York, Northern California, Southern California, Connecticut, and Illinois, and licensed affiliates in Colorado and Washington.
22. Defendant United States Small Business Administration is an independent federal agency created and authorized pursuant to 15 U.S.C. § 633, et seq. The SBA maintains a branch location at 100 S. Charles Street #1201, Baltimore, Maryland, 21201. Its headquarters are located at 409 3rd Street, SW, Washington, District of Columbia, 20416.
23. Defendant Jovita Carranza (the “Administrator”) is the Administrator of the SBA, a Cabinet-level position, and is sued in her official capacity. The SBA is
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headquartered at 409 3rd Street, SW, Washington, District of Columbia, 20416. Authority to sue the Administrator is granted by 15 U.S.C. § 634(b).
24. Defendant United States Department of the Treasury (“Treasury”) is a department of the executive branch of the United States government headquartered at 1500 Pennsylvania Avenue, NW, Washington, District of Columbia, 20220.
25. Defendant Steven Mnuchin (the “Secretary”) is the Secretary of the United States Department of the Treasury and is sued in his official capacity. The Treasury is headquartered at 1500 Pennsylvania Avenue, NW, Washington, District of Columbia, 20220.
JURISDICTION AND VENUE 26. Jurisdiction is proper in this Court under 28 U.S.C. § 1331. The Court has remedial authority pursuant to 28 U.S.C. § 1361, 28 U.S.C. § 2201, and 5 U.S.C. § 702. 27. Venue is proper pursuant to 28 U.S.C. § 1391(e)(1)(B) because a substantial part of the events or omissions giving rise to the claim occurred in this District.
FACTUAL ALLEGATIONS I. Congress Enacts the Paycheck Protection Program. 28. On March 13, 2020, President Trump declared the “ongoing Coronavirus Disease 2019 (COVID–19) pandemic is of sufficient severity and magnitude to
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warrant an emergency determination” that “an emergency exists nationwide.”13
29. On March 27, 2020, Congress passed the CARES Act, allocating $2
trillion in assistance to individuals and businesses. The Act included direct Economic
Impact Payments of up to $1,200 per American adult and $367 billion to assist small
businesses through the SBA.14
30. By late March 2020, small businesses were already “scrambling to make
payroll, sort out which staff they can keep on—and which they can’t—and figure out
some way to keep money coming in.”15
31. Title I of the CARES Act is entitled “Keeping American Workers Paid
and Employed Act.” Pub. L. No. 116-136, 134 Stat. 281, 286 (2020).
32. As part of Title I, Congress created the Paycheck Protection Program.
Id. § 1102.
33. Although PPP funds are distributed in the form of bank loans, the PPP
more closely resembles an emergency grant program: The CARES Act provides that
13 Letter from President Donald J. Trump on Emergency Determination Under the Stafford Act (Mar. 13, 2020), https://www.whitehouse.gov/briefingsstatements/letter-president-donald-j-trump-emergency-determination-stafford-act. 14 The initial tranche of PPP funding was almost immediately exhausted. Subsequently, on April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. No. 116–139, 134 Stat. 620 (2020)), which appropriated an additional $310 billion in funding. On June 5, 2020, Congress then passed the Paycheck Protection Program Flexibility Act of 2020 as an amendment to the CARES Act “to allow recipients of loan forgiveness under the paycheck protection program to defer payroll taxes, and for other purposes.” Pub. L. No. 116-142, 134 Stat. 641. Neither piece of legislation altered the provision of the CARES Act that defines eligibility for the PPP. 15 Kimberly Adams, Despite Imminent Federal Aid, Small Businesses are Desperate, MarketPlace (Mar. 27, 2020), https://www.marketplace.org/2020/03/27/will-covid19stimulus-package-help-small-businesses/.
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PPP funds will be guaranteed by the SBA and entirely forgiven to the extent that the
money is used for certain purposes, including payroll costs, health care benefits, and
insurance premiums. 15 U.S.C. § 636(a)(36)(A)(viii). Accordingly, so long as the
business spends the funds for those purposes, the “loans” need not be repaid.
34. The provision of the CARES Act that defines eligibility for the PPP is
entitled “Increased eligibility for certain small businesses and organizations.” Id.
§ 636(a)(36)(D).
35. Under that heading, the text of the CARES Act unequivocally directs
that “[d]uring the covered period, in addition to small business concerns, any business
concern ... shall be eligible to receive a covered loan if the business concern ... employs
not more than the greater of (I) 500 employees; or (II) if applicable, the size standard
in number of employees established by the Administration for the industry in which
the business concern … operates.” Id. § 636(a)(36)(D)(i) (emphasis added).16
36. The application deadline for PPP funding is June 30, 2020.17
16 Under the CARES Act, small business loans were also made available to “individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals.” Id. § 636(a)(36)(D)(ii). 17 See U.S. Senate Committee on Small Business & Entrepreneurship, Paycheck Protection Program FAQs for Small Businesses, https://www.rubio.senate.gov/public/_cache/files/ac3081f6-14ae-4e6f-9197172ede28badd/71AB6CB05A08E369E0D488A80B3874A5.faqs---paycheckprotection-program-faqs-for-small-businesses.pdf.(“Applicants are eligible to apply for the PPP loan until June 30th, 2020.”); see also Joint Statement by Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza Regarding Enactment of the Paycheck Protection Program Flexibility Act, U.S. Dep’t of the Treasury (June 8, 2020) (“June 30, 2020 remains the last date on which a PPP loan application can be approved”); SBA, Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule, Docket No. SBA-2020-0036 (June 12, 2020), https://www.sba.gov/sites/default/files
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II. The Small Business Administration Imposes Criminal-Record Exclusions on PPP Eligibility.
37. The CARES Act provides that the PPP shall be administered by the SBA under Section 7(a) of the Small Business Act, id. § 636(a), and instructs the SBA to “issue regulations to carry out this title and the amendments made by this title without regard to the notice requirements under section 553(b) of title 5, United States Code” within 15 days. Pub. L. No. 116-136, § 1114, 134 Stat. at 312 (“Emergency Rulemaking Authority”).
38. Since the enactment of the CARES Act, the SBA has issued a series of confusing, contradictory, and continuously shifting eligibility criteria for the PPP far exceeding those exclusive conditions Congress enumerated in the CARES Act.
39. On March 31, 2020, the SBA released a sample application form for PPP funding (“March application form”), which included questions regarding criminal history, to be answered by small-business owners with greater than 20% ownership stakes. The March application form instructed that a “Yes” answer to either of the following questions would mean that the “loan will not be approved”:
Question 5: Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, on probation or parole? Question 6: Within the last 7 years, for any felony or misdemeanor for a crime against a minor, have you: 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been
/2020-06/PPP-IFR-Revisions-to-First-Interim-Final-Rule_06%2012%2020.pdf (discussing expiration of SBA’s authority to guarantee loans).
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placed on any form of parole or probation (including probation before judgment)?18
40. Notably, the March application form disqualified applicants who had
been placed on probation or parole within the last seven years but who had been
subsequently discharged.
41. On April 2, 2020, the SBA posted on its website an Interim Final Rule
for the PPP. This Interim Final Rule (“April IFR”) was published in the Federal
Register on April 15, to “implement the CARES Act.” 85 Fed. Reg. 20,811 (Apr. 15,
2020) (“Business Loan Program Temporary Changes; Paycheck Protection
Program”).19 The April IFR explained that the CARES Act and PPP are designed to
18 See SBA, Paycheck Protection Program Application Form, SBA Form 2483 (03/20), OMB Control No.: 3245-0407 (Expiration Date: 09/30/2020), https://www. sba.gov/sites/default/files/2020-03/Borrower%20Paycheck%20Protection%20 Program%20Application_0.pdf (emphasis added). 19 SBA has also issued several additional interim final rules on other aspects of the PPP not at issue in this case. See 85 Fed. Reg. 20,817, 20,817 (Apr. 15, 2020) (“supplements the Initial Rule with additional guidance regarding the application of certain affiliate rules”); 85 Fed. Reg. 21,747 (Apr. 20, 2020) (“Additional Eligibility Criteria and Requirements for Certain Pledges of Loans”); 85 Fed. Reg. 23,450 (Apr. 28, 2020) (“Requirements-Promissory Notes, Authorizations, Affiliation, and Eligibility”); 85 Fed. Reg. 23,917 (Apr. 30, 2020) (“Additional Criterion for Seasonal Employers”); 85 Fed. Reg. 26,321 (May 4, 2020) (“Requirements-Disbursements”); 85 Fed. Reg. 26,324 (May 4, 2020) (“Paycheck Protection Program-RequirementsCorporate Groups and Non-Bank and Non-Insured Depository Institution Lenders”); 85 Fed. Reg. 27,287 (May 8, 2020) (“Nondiscrimination and Additional Eligibility Criteria”); 85 Fed. Reg. 29,845 (May 19, 2020) (“Extension of Limited Safe Harbor With Respect to Certification Concerning Need for PPP Loan Request”); 85 Fed. Reg. 29,842 (May 19, 2020) (“Paycheck Protection Program-Loan Increases”); 85 Fed. Reg. 29,847 (May 19, 2020) (“Eligibility of Certain Electric Cooperatives”); 85 Fed. Reg. 30,835 (May 21, 2020) (“Treatment of Entities With Foreign Affiliates”); 85 Fed. Reg. 31,357 (May 26, 2020) (“Second Extension of Limited Safe Harbor With Respect to Certification Concerning Need for PPP Loan and Lender Reporting”); 85 Fed. Reg. 33,004 (June 1, 2020) (“Requirements—Loan Forgiveness”), 85 Fed. Reg. 33,010 (June 1, 2020) (“SBA Loan Review Procedures
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“provide immediate assistance to individuals, families, and businesses affected by the COVID-19 emergency” and instructed that “[l]enders must comply with the applicable lender obligations set forth” in the IFR. Id. at 20,811-12.
42. The April IFR included the following exclusion:
Could I be ineligible even if I meet the eligibility requirements in (a) above? You are ineligible for a PPP loan if, for example: … iii. An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years;20 43. The April IFR contradicted the March application form, imposing a fiveyear felony ban instead of a seven-year felony or misdemeanor ban. 44. The April IFR also claimed that “[b]usinesses that are not eligible for PPP loans are identified in 13 CFR 120.110 and described further in SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2,” referencing an earlier SBA rule and interpreting document that specified businesses ineligible to receive loans under a different SBA loan program. Id.21 However, those rules nowhere contain the felony ban imposed by the April IFR.
and Related Borrower and Lender Responsibilities”); 85 Fed. Reg. 35550 (June 11, 2020) (“eligibility requirements for certain telephone cooperatives”). 20 85 Fed. Reg. at 20812. 21 That earlier rule excluded “Businesses with an Associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude.” See 13 C.F.R. § 120.110(n). Pursuant to SBA guidance on that rule, applicants with
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45. On April 3, 2020, the same day that the PPP opened for applications,22
the SBA published a new PPP borrower application form (“April application form”).
The April application form asked two questions regarding criminal history, with a
“Yes” answer to either one resulting in disqualification:
Question: Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole?
Question: Within the last 5 years, for any felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)?23
“a deferred prosecution, conditional discharge, order of protection, or on a sex offender registry” were “treated as if the individual is on probation or parole,” and applicants were also excluded if they were “currently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction.” (SOP) 50 10, Subpart B, Chapter 2, at 292293, https://www.sba.gov/sites/default/files/201902/SOP%2050%2010%205%28K%29%20FINAL%202.15.19%20SECURED%20copy %20paste.pdf. 22 See Christopher Zara, Paycheck Protection Program: What Small Businesses Need to Know as SBA Loan Applications go Live, Fast Company (Apr. 3, 2020). 23 SBA, Paycheck Protection Program, Borrower Application Form, SBA Form 2483 (04/20) OMB Control No.: 3245-0407 (Expiration Date: 09/30/2020), https://www. sba.gov/sites/default/files/2020-04/PPP%20Borrower%20Application%20Form.pdf (emphasis added).
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46. This “snapshot” comes from the April application form:
47. The April application form conflicted with the April IFR. The April application form described the grounds for criminal history-based disqualification even more broadly than the April IFR.
48. For example, the April application form disqualified anyone who has been discharged from probation or parole but was previously placed on probation or parole in the last five years.
49. The April application form also disqualified people who have “pleaded nolo contendere,” or who have been “placed on pretrial diversion” or “placed on … probation before judgment,” despite the fact that these pleas are entered into without formal test of the validity of the underlying charge, and despite the fact that the very purpose of accepting these dispositions is to avoid the consequences of a criminal record.
50. In response to the April IFR and April application form, members of Congress pointed out that the criminal-record exclusions contravene the CARES Act. Lawmakers questioned the SBA’s authority to bar business owners with records from PPP relief under the Act, and several asked Defendants to explain the exclusions.
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51. On April 6, 2020, Representative Cedric L. Richmond and ten other members of Congress submitted a letter to Secretary Mnuchin and Administrator Carranza pointing out that “[t]he [criminal-record exclusions] contain[] many restrictions that were not only not included in the CARES Act” but “not intended by Congress at all. Specifically, Congress did not intend for people who have been released from prison and followed the law to start or help start a business to be prevented from getting the capital they need to save it.” Exhibit E.
52. On April 8, Senator Jeffrey A. Merkley submitted a letter to Secretary Mnuchin and Administrator Carranza calling “the breadth of [the criminal-record exclusions] unconscionable, as it punishes individuals who should be innocent until proven guilty and those who have already served their time and, due to the wellknown racial disparities in our justice system, disproportionately disqualifies minority-owned businesses.” Exhibit F.
53. On April 30, Senators Rob Portman and Benjamin L. Cardin submitted a letter to Secretary Mnuchin and Administrator Carranza asking the SBA to revise its criminal-record exclusions “so that it properly reflects Congress and the Administration’s support for second chances” and noting that the criminal-record exclusions “will only hurt the economy, and further diminish the workforce and the tax base they generate.” Exhibit G. Senators Portman and Cardin stated that the PPP “was not intended to exclude business owner[s] who have made mistakes, paid their debt, and turned their lives around. Rather, it was intended to provide a bridge to hard-working American small-business owners who are keeping people employed
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and supporting the essential services that benefit all of us during this unprecedented crisis.” Id.
54. On May 19, Representative Dina Titus and sixteen other members of Congress submitted a letter to the Administrator asserting that “the SBA has failed to provide any sort of reasoning for requiring applicants to indicate whether they have any history of a criminal offense other than a minor vehicle violation.” Exhibit H. The letter demanded that the SBA “issue specific guidance on how criminal history is being used in the distribution of congressionally appropriated assistance.” Id. Representative Titus’s letter further stated that “[d]enying assistance to rehabilitated citizens who have served their sentences and contributed to the economy is unjust and harmful to our nation’s recovery from this pandemic.” Id.
55. Advocates across the country and political spectrum also voiced opposition to the SBA’s actions. On April 20, 2020, Right on Crime—a “national campaign to promote successful, conservative solutions on American criminal justice policy”24—and eight other groups submitted a letter to Defendants asking the administration to “tailor the Final Interim Rule to reflect common-sense.” Exhibit I. The Council of State Governments Justice Center and a dozen other groups issued a joint statement noting that “The Small Business Administration’s policies regarding people with criminal records go against the intent of the legislation and the Trump
24 The Conservative Approach To Criminal Justice, Right on Crime (last visited June 15, 2020), http://rightoncrime.com.
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administration’s ongoing support of second chances for people who have served their time.” Exhibit J.
56. During the notice-and-comment period, numerous organizations submitted letters questioning both the legality and the logic of the restrictions. See, e.g., Citizens for Juvenile Justice et al., Re: U.S. Small Business Administration Business Loan Program; Paycheck Protection Program Interim Final Rule, No. SBA2020-0015, RIN 3245-AH34 (May 15, 2020) (“To exclude a class of business owners or partial owners from the Paycheck Protection simply on the basis of their past involvement with the criminal justice system or unadjudicated allegations concerning their present involvement is not only contrary to law, it is wrong.”) (Exhibit K); Collateral Consequences Resource Center et al., Re: U.S. Small Business Administration Business Loan Program; Paycheck Protection Program Interim Final Rule, No. SBA-2020-0015, RIN 3245-AH34 (May 15, 2020) (“SBA’s new restrictions on eligibility for its loan programs, which already operate to exclude many people with a record, contravene the intent of the CARES Act, and are inconsistent with SBA’s more general mandate of encouraging entrepreneurship and expanding access to employment.”) (Exhibit L); Institute for Justice Clinic on Entrepreneurship, Re: U.S. Small Business Administration Business Loan Program; Paycheck Protection Program Interim Final Rule, No. SBA-2020-0015, RIN 3245-AH34 (May 15, 2020) (“the SBA’s Interim Final Rule arbitrarily cuts some American businesses off from emergency funding, leaving them to fail despite their importance to the economy. The Rule thwarts the intent and text of the PPP….”) (Exhibit M).
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57. On June 11, 2020, the SBA issued yet another revised PPP application form, the “Paycheck Protection Program Borrower Application Form Revised June 2020,” SBA Form 2483 (06/20), OMB Control No.: 3245-0407 (Expiration Date: 10/31/2020), https://home.treasury.gov/system/files/136/PPP-Borrower-ApplicationForm-Revised-June-2020.pdf?utm_medium=email&utm_source=govdelivery (“June 11 application form”). The June 11 application form deleted the exclusion of businesses with an owner who has been placed on pretrial diversion for any felony within the last five years, but it left the remaining exclusions intact.
58. On the afternoon of Friday, June 12, 2020—days before the PPP’s June 30 application deadline—the SBA announced a new Interim Final Rule on its website. See SBA, Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule, Docket No. SBA-2020-0036, at 5 (June 12, 2020), https://www.sba.gov/sites/default/files/2020-06/PPP-IFR-Revisionsto-First-Interim-Final-Rule_06%2012%2020.pdf (“June IFR”) (Exhibit N).
59. The June IFR again modified this exclusion: You are ineligible for a PPP loan if, for example: * * * iii. An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year;
60. The June IFR left the remaining exclusions intact.
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61. Although the SBA never explained the basis for its felony exclusion in the first place, it now stated that “[a]fter further consideration, the Administrator, in consultation with the Secretary of the Treasury (the Secretary), has determined that a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391).” June IFR at 5 (emphasis added).
62. That same day, the SBA also published another new “Paycheck Protection Program Borrower Application Form,” OMB Control No.: 3245-0407 (Expiration Date: 10/31/2020) (“June 12 application form”) (Exhibit O). The following is a “snapshot” of the relevant questions on the June application form:
63. The June 12 application form left in place the exclusions imposed by the April application form regarding nolo contendere and probation before judgment records, despite the fact that those exclusions appeared nowhere in either the April IFR or the June IFR.
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64. The June IFR stated that it will not be effective until its “date of filing at the office of the federal register.” June IFR at 1 (original capitalization omitted).
65. In these unprecedented times, the SBA has taken Congress’s straightforward mandate to administer the PPP to sustain small businesses—and the workers they employ—and added unnecessary, confusing, inconsistent, unexplained, and shifting exclusions of small-business owners who have had contact with the criminal-legal system.
66. To date, Defendants have not explained the basis or logic of the criminalrecord exclusions, despite repeated requests to do so—including by members of Congress.
67. To date, Defendants have not identified any nexus between applicants’ criminal history and the reason for their disqualification from PPP funds.
68. Because they are contrary to the plain text of the CARES Act and are arbitrary and capricious, the criminal-record exclusions violate the APA. They also cause irreparable harm to otherwise eligible applicants whose businesses have been impacted by COVID-19, illegally barring them from critical federal aid. The criminalrecord exclusions likewise harm the employees of those businesses and the organizations who devote resources to funding and advising them.
III. The Criminal-Record Exclusions Harm Plaintiffs. a. Sekwan Merritt and Lightning Electric.
69. Sekwan Merritt owns Lightning Electric, an electrical contracting company licensed to provide electrical wiring services in seven Maryland counties.
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70. Mr. Merritt is also a restorative justice advocate. In 2017, he testified on Capitol Hill regarding the Pretrial Integrity and Safety Act.25 He discussed how the jail and cash bail system impacts people of color, and how facilities can increase rehabilitative resources to stop the revolving door of local jails. Mr. Merritt has spoken before the Baltimore City Council and at universities on topics related to the criminal-legal system.
71. Mr. Merritt returned home from prison in 2017 and is currently on parole. He pleaded guilty to non-violent drug offenses in 2012. During his five years in prison, he enrolled in an education partnership run by a local Maryland college, and he earned 40 credits toward his Bachelor’s degree.26 He also continued to learn about electrical work. He created business plans for starting his own company.
72. Mr. Merritt founded his company in October 2017. Lightning Electric serves both residential and commercial clients, providing installation of low and highvoltage electrical wiring.
73. Mr. Merritt has used Lightning Electric to create economic opportunities for members of his community who are facing barriers to employment. Of the five contracted electricians who work for Lightning Electric, four are formerly incarcerated individuals. Mr. Merritt provides his workers with opportunities to
25 Shoshana Weissmann, Locked Up Without Conviction: Pretrial Integrity and Safety Act, Strategies for Public Safety, R Street (Nov. 5, 2017), https://www.rstreet. org/2017/11/05/locked-up-without-conviction-pretrial-integrity-and-safety-actstrategies-for-public-safety/. 26 Danielle Douglas-Gabriel, 12,000 Inmates to Receive Pell Grants to Take College Classes, Wash. Post (June 24, 2016), https://www.washingtonpost.com/news/gradepoint/wp/2016/06/24/12000-inmates-to-receive-pell-grants-to-take-college-classes/.
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learn about every aspect of the contracting business, including estimating costs for projects and material logistics. His goal is that his workers learn the skills they need to become entrepreneurs in their own right.
74. Mr. Merritt is proud of his success as a business owner in the electrical contracting field. He hopes to provide electrical contracting in underserved communities, to set an example for the next generation of minority contractors and, in particular, to provide opportunity and hope for incarcerated individuals and those returning home from prison.
75. On March 5, 2020, Maryland Governor Larry Hogan declared a state of emergency in response to the novel coronavirus.27 On March 23, Governor Hogan issued an order closing all non-essential business in the state.28 On March 30, he issued a stay-at-home order and directed Marylanders to leave their homes only for an essential reason.
76. Businesses across the state closed their doors, and unemployment claims spiked to record highs as Marylanders lost their jobs. By May 28, more than 660,000 people in Maryland had filed for unemployment. The state’s unemployment rate soared to 9.9%.29
27 Maryland, Proclamation: Declaration of State of Emergency of Catastrophic Health Emergency - COVID-19 (Mar. 5, 2020), https://governor.maryland.gov/wpcontent/uploads/2020/03/Proclamation-COVID-19.pdf. 28 Maryland, Order No. 20-03-23-01 (Mar. 23, 2020), https://governor.maryland.gov/ wp-content/uploads/2020/03/Gatherings-THIRD-AMENDED-3.23.20.pdf. 29 Jessica Iannetta, New Md. Unemployment Claims Hold Steady After Weeks of Dramatic Swings, Balt. Bus. J. (May 28, 2020), https://www.bizjournals.com/ baltimore/news/2020/05/28/maryland-unemployment-claims-pandemic-hold-
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77. Lightning Electric was forced to shut down operations almost completely in March as a result of the coronavirus and Governor Hogan’s orders. During the time that the stay-at-home order was in place, Mr. Merritt was unable to pay the electricians working for Lightning Electric. While the company received jobs from customers intermittently, the work coming in was not nearly enough to keep all of Lightning Electric’s workers busy at their pre-coronavirus capacity.
78. Mr. Merritt applied for PPP funds on April 15, 2020. He used the online portal of his bank, Wells Fargo, to fill out the application, which tracked the SBA’s mandated language.
79. Specifically, the application form contained two questions regarding criminal history. The first asked:
Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation, or parole? 80. The second question asked: Within the last five years, for any felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)? 81. Because Mr. Merritt is on parole, he answered “yes” to both questions.
steady.html#:~:text=Since%20the%20pandemic%20began%2C%20more,the%20stat e%20lost%20349%2C300%20jobs.
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82. Immediately upon submission of the application, a screen popped up stating: “Based on the answers provided, your application cannot be processed at this time.”
83. Had Mr. Merritt received the PPP funding he sought, he intended to use it to pay Lightning Electric’s workers when the company’s operations were almost fully shut and the electricians unable to work. He also would have used it to pay the costs essential for running his business, including general liability insurance, which Lightning Electric is required to maintain to be eligible for certain types of contracts.
84. While Maryland has recently begun to open in stages, and Lightning Electric has some more work slowly coming in, the company’s finances remain highly precarious. The two contracts that Lightning Electric secured in early 2020 will proceed, but on a much longer timeframe due to strict restrictions on how many people can be present at the job sites at one time. As a result, Lightning Electric must wait longer to get paid.
85. Despite the significant decrease in work, Lightning Electric continues to have approximately $9,000 in biweekly payroll expenses. Mr. Merritt desperately wants to keep all the electricians on his payroll, because his workers are important to him. Maintaining the company’s team of electricians is critical to the business’s ongoing survival because it allows the company to preserve its reputation and customer relationships.
86. Lightning Electric also has other overhead expenses, including insurance and advertising costs.
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87. Mr. Merritt has been pouring his own savings, as well as money from his family, into Lightning Electric to keep it afloat. He estimates that, in the past months, he has cobbled together approximately $30,000 in savings and small familial gifts and loans to help the company survive in the short term.
88. Mr. Merritt is constantly worried about funding for his company and is in dire need of financial assistance. Without an influx of cash, there is a substantial risk that Lightning Electric might not survive this time of intense economic distress.
b. John D. Garland and Fastsigns Bethpage. 89. John D. Garland is the owner and President of Fastsigns Bethpage, a franchise of Fastsigns Inc., a company providing sign, business card, letter, and other graphic design services for commercial and residential uses. Fastsigns Bethpage employs three people, including Mr. Garland, as full-time, salaried employees. 90. Mr. Garland has spent over thirteen years building his graphic design business, which he first started in 2007 from a small shop in Bronx, New York. 91. Mr. Garland was incarcerated from 1987 to 2003. While incarcerated, he learned graphic design and commercial printing. 92. Mr. Garland had difficulty obtaining employment after his 2003 release. As a result, he decided to start his own business for graphic design and printing, called ClixClix Media Group, LLC. 93. In 2018, Mr. Garland entered into business with Sign Me Up, Inc., a sign-making and graphic design company. He became the majority owner of a Sign Me Up location in Bethpage, New York, and the Vice President and 15% owner of a
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Sign Me Up location in West Babylon, New York. In 2019, Fastsigns International, Inc. acquired Sign Me Up, and the Bethpage and West Babylon Sign Me Up locations became Fastsigns locations.
94. Mr. Garland is committed to assisting people who, like him, have had difficult upbringings and experience with the criminal-legal system. In 2019, he started a partnership with the United Way to train and eventually employ thirteen young people from troubled backgrounds. Mr. Garland intends to expand the program to the formerly incarcerated and veterans. He also partners with New York State in a program to assist youths with autism.
95. Mr. Garland contributes to the Bethpage community, as well, including by donating signs to local schools for their graduations and providing masks to senior citizens during the COVID-19 pandemic.
96. In October 2019, after a domestic argument with his wife, Mr. Garland was charged with a domestic violence offense. He denied all of the allegations, and in December 2019, the case was adjourned in contemplation of dismissal, with a limited order of protection remaining entered against him.
97. In December 2019, Mr. Garland was charged with petit larceny, after his wife alleged that he had moved her personal property from one location to another in their home. Mr. Garland was also charged with a violation of the order of protection as a result of this offense. In February 2020, Mr. Garland appeared in court and pleaded not guilty. The case was adjourned for him to locate legal counsel. In the
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meantime, the New York State courts closed a result of COVID-19, and thus the unproven charges against Mr. Garland remain pending.
98. On March 7, 2020, New York Governor Andrew Cuomo declared a state of emergency in response to the coronavirus. On March 20, Governor Cuomo issued an order closing all non-essential businesses in the state and prohibited all nonessential gatherings of individuals of any size, effective March 22.
99. Businesses across the state closed their doors, and, as in Maryland, unemployment claims in New York spiked to record highs. Between mid-March and June 2020, over 2.6 million New Yorkers filed for unemployment, and the unemployment rate soared to 14.5%.30
100. Fastsigns Bethpage was shut down initially. It then reopened as an “essential business.” Prior to the pandemic, Fastsigns Bethpage primarily engaged other businesses as clients. With so many businesses closed, Fastsigns Bethpage’s revenue thus dropped dramatically. Mr. Garland has been unable to pay his employees, and he has fallen behind on his rent and utility bills.
101. On April 10, 2020, Mr. Garland and his business partner began filling out an application for PPP funding. Mr. Garland then saw Question No. 5 on the form, excerpted in paragraph 46 above, and the statement immediately above those questions, which read: “If questions (5) or (6) are answered ‘Yes,’ the loan will not be approved.” Mr. Garland did not complete the application due to the pending charge
30 Michelle Breidenbach, New NYS Unemployment Claims Reach 2.6M Since March, Syracuse (June 11, 2020), https://www.syracuse.com/coronavirus/2020/06/new-nysunemployment-claims-reach-26m-since-march.html.
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against him. He followed up with his bank, Chase, to confirm that he was ineligible. Chase confirmed that Mr. Garland was excluded from the PPP under the SBA’s directives based on his pending charge.
102. Mr. Garland and his business partners had carefully determined the intended uses to which they would put the $100,000 in PPP funding they sought. They planned to use the funds for payroll costs, rent, utilities, and other essential expenses.
103. New York is presently in the early stages of re-opening, but Fastsigns Bethpage’s commercial business remains slow to non-existent. Mr. Garland has worked diligently to keep the business afloat, including by pivoting his business to serve individual customers and residences (instead of other businesses), for example by printing and selling graduation lawn signs. But, still without assistance from the PPP, Fastsigns Bethpage is thousands of dollars behind on rent and utilities, and Mr. Garland has been unable to take a paycheck for some time.
104. Based on its growing rent arrears and limited income, there is a real risk that Fastsigns Bethpage will not survive the economic crisis brought about by the COVID-19 pandemic.
c. Defy Ventures, Inc. 105. Defy Ventures, Inc. (“Defy”) is a nonprofit organization founded in 2010 with chapters in the New York Tri-State area (New York, New Jersey, Connecticut), Northern California, Southern California, and Illinois. Defy also has licensed affiliates in Colorado and Washington.
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106. Defy’s mission is to use entrepreneurship and employment as tools for currently and formerly incarcerated individuals to address the social problems of mass incarceration and recidivism. Defy’s ultimate goal is for its members and graduates to achieve economic independence so that they may have a successful reentry after prison. Defy believes that individuals returning home from prison deserve a true second chance, or, in many cases, a “legitimate first chance,” and that an arrest or conviction record should not be a lifetime punishment.
107. To carry out its mission, Defy has established training programs both inside and outside of prisons. These programs include “the CEO of Your New Life” (“CEO YNL”) for individuals who are currently in prison or transitional facilities, as well as “Entrepreneur Bootcamp” for individuals who have returned home from prison and have stable housing. Both programs include six to eight months of coursework focused on reentry planning, employment readiness, personal development, and entrepreneurship.
108. CEO YNL is delivered through textbooks, DVDs, in-person instruction and facilitated discussion groups. Volunteers—many from the business community— support the enrolled “entrepreneurs-in-training” through in-person coaching events. Entrepreneur Bootcamp is an entry point to Defy’s entrepreneurship pathway for those who did not complete CEO YNL while incarcerated. It is offered through selfdirected online courses.
109. Graduates of CEO YNL or Entrepreneur Bootcamp are eligible to apply to Defy’s “Business Incubator” program. This program includes advanced coursework
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in entrepreneurship and business management. Defy also provides training on the process of incorporating, launching, and growing new businesses.
110. It typically takes entrepreneurs-in-training six to eighteen months to launch a business. Defy works with these individuals for the entire period.
111. Defy also runs alumni programs and keeps in touch with its graduates. The “Defy Entrepreneurship Network” is a long-term supportive network for entrepreneurs who have successfully launched businesses. Members of this network are invited to quarterly networking meetings or business workshops; are paired with an executive mentor to support their business, if they desire; and have the opportunity to be featured on the Defy website or newsletter.
112. In its ten years of operation, Defy has helped formerly incarcerated individuals launch over 140 small businesses. It has worked with over 5,200 entrepreneurs-in-training. The vast majority of Defy’s entrepreneurs-in-training have been people of color, reflective of the prison population in the United States.
113. Defy has proven results. Based on Defy’s analysis, compared to a nationwide one-year recidivism rate of approximately 30%, the recidivism rate of Defy’s graduates is less than 8%.
114. The criminal-record exclusions have frustrated Defy’s mission and hindered its operations.
115. Like businesses across the country, small businesses run by Defy graduates have been experiencing severe economic distress from the COVID-related shutdowns.
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116. When they learned about the PPP’s exclusion of individuals with arrest and conviction records, small-business-owner graduates of Defy’s programs, as well as small-business owners who are not Defy graduates, sought advice and help from Defy.
117. These individuals were in dire circumstances. Due to lack of funds, their businesses were forced to lay off workers, go into arrears, and, in some cases, shut down. Defy graduates typically own businesses operating in the service industry, because these require less start-up capital. These businesses, like the service industry at large, were especially hard-hit by COVID-19.
118. The criminal-record exclusions imperil those who seek Defy’s help and frustrate Defy’s mission. Defy’s organizing purpose is to use entrepreneurship and employment tools to provide economic security and successful reentry for formerly incarcerated individuals, and to help formerly incarcerated individuals have a real second chance.
119. The criminal-record exclusions made it necessary for Defy to take action to try to help its graduates save their businesses and continue to pay their workers during the crisis.
120. President and CEO of Defy, Andrew Glazier, together with Defy’s staff, devoted their limited resources to understanding the SBA’s changing rules and application forms, so that they could provide advice. They found Questions 5 and 6 on the PPP application form to be highly confusing and unclear. But Defy staff know that the stakes for providing the correct advice are high: an inadvertently incorrect
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answer could potentially amount to a violation of the terms of probation or parole, or expose Defy’s graduates to other liability. As a result, Defy staff poured hours into trying to parse the SBA’s conflicting and confusing directives.
121. As the SBA changed its regulations and application forms, Defy’s graduates became even more confused about whether they might be eligible for PPP funds. Defy staff needed to expend yet more time and resources to understand these conflicting rules and to try to provide answers to those in need who have continued to turn to Defy for advice.
122. Defy staff, including the CEO, the CFO, and the Director of Development and Marketing, have also had to spend their time, energy, and limited resources finding alternative funding sources for graduates’ businesses, because they were wrongfully excluded from the PPP. Defy’s work in this regard has included reaching out to community lenders, exploring the option of creating a separate fund for Defy graduates, working with graduates to start and publicize GoFundMe pages, and researching other funding resources.
123. The PPP criminal-record exclusions have thus caused a significant diversion of Defy’s resources. Had the SBA not excluded its graduates, Defy would have instead devoted this time and energy to its previously planned programming and training activities.
124. Plaintiffs continue to suffer under the SBA’s unlawful and everchanging criminal-record exclusions.
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CAUSES OF ACTION COUNT I
Administrative Procedure Act The Criminal-Record Exclusions Exceed Statutory Authority and
Are Not in Accordance with Law (5 U.S.C. § 706(2)(A), (C))
125. Plaintiffs repeat and incorporate by reference each and every allegation contained in the foregoing paragraphs as if fully set forth herein.
126. Under the APA, a court shall “hold unlawful and set aside agency action, findings, and conclusions found to be … not in accordance with law” or “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C. § 706(2)(A), (C).
127. The criminal-record exclusions constitute final agency action subject to review under the APA.
128. The SBA exceeded its statutory authority, and acted not in accordance with law, in violation of the APA, by promulgating the criminal-record exclusions. These exclusions add eligibility requirements for PPP funds based on a business owner’s criminal record. These eligibility conditions are contrary to the CARES Act. Congress mandated that “any” business that satisfies the criteria Congress specified “shall” be eligible, not merely a subset of those businesses.
129. Defendants’ violation of the APA causes ongoing and irreparable harm to Plaintiffs and similarly situated business owners, businesses, and the organizations who devote resources to funding and advising them.
130. Plaintiffs have no adequate remedy at law.
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COUNT II Administrative Procedure Act The Criminal-Record Exclusions are Arbitrary, Capricious,
and an Abuse of Discretion (5 U.S.C. § 706(2)(A))
131. Plaintiffs repeat and incorporate by reference each and every allegation contained in the foregoing paragraphs as if fully set forth herein.
132. The APA instructs courts to “hold unlawful and set aside agency action” that is “arbitrary, capricious, [and] an abuse of discretion.” 5 U.S.C. § 706(2)(A).
133. The criminal-record exclusions constitute final agency action subject to review under the Administrative Procedure Act.
134. The criminal-record exclusions preventing business owners with criminal records from accessing PPP funds are arbitrary, capricious, and an abuse of discretion because they are contrary to the purpose of the CARES Act, which is to provide emergency support to American workers facing loss of income.
135. Defendants failed to furnish any explanation for the criminal-record exclusions and failed to explain the inconsistencies between differing, inconsistent versions of these exclusions.
136. Defendants’ violation of the APA causes ongoing and irreparable harm to Plaintiffs and similarly situated business owners, and to those who work for them and devote resources to advising them.
137. Plaintiffs have no adequate remedy at law.
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COUNT III Administrative Procedure Act The Criminal-Record Exclusions Were Adopted without Observance of Procedure Required by Law
(5 U.S.C. § 706(2)(D)) 138. Plaintiffs repeat and incorporate by reference each and every allegation contained in the foregoing paragraphs as if fully set forth herein. 139. Under the APA, a court shall “hold unlawful and set aside agency action, findings, and conclusions found to be without observance of procedure required by law.” 5 U.S.C. § 706(2)(D). 140. In issuing substantive rules, federal agencies are required to follow the notice and comment process set forth in the APA, 5 U.S.C. § 553(b). 141. Although the SBA is authorized to “dispense with the 30-day delayed effective date provided in the Administrative Procedure Act” and issue rules without “advance notice and public comment,” 85 Fed. Reg. at 20,811 (emphasis added), the agency may not dispense with the notice and comment process entirely; interim final rules must be published in the Federal Register to give the public notice and a chance to comment even when the rule may go into effect contemporaneously. 142. The official application forms for PPP funds issued by the SBA exclude categories of business owners from applying beyond the categories of business owners who were identified in the April and June IFRs. 143. By changing who was eligible for PPP funds by application form, and without providing notice or the opportunity to comment through publication in the
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federal register, Defendants issued substantive rules not in accordance with procedures required by law.
144. Defendants’ violation of the APA causes ongoing and irreparable harm to Plaintiffs and similarly situated business owners, and to those who work for them and devote resources to advising them.
145. Plaintiffs have no adequate remedy at law. PRAYER FOR RELIEF
WHEREFORE, Plaintiffs respectfully that this Court enter judgment in their favor and grant the following relief:
A. Declare the criminal-record exclusions unlawful pursuant to 5 U.S.C. § 706(2);
B. Preliminarily and permanently enjoin the SBA and the Treasury and its officers, employees, and agents from applying and enforcing the criminal-record exclusions contained in the SBA IFRs and application forms;
C. Order the SBA to extend the PPP application deadline, which is currently set to close on June 30, 2020, by 21 days, to July 21, 2020, for those applicants unlawfully excluded under the challenged criminal-record exclusions;
D. Order that the SBA Administrator and the Treasury Secretary not authorize, guaranty, or disburse funds appropriated for loans under the PPP without reserving sufficient funds to cover applicants wrongfully excluded under the challenged terms of the IFR and the application form, in an amount to be determined based on SBA data and submitted by the SBA to this Court for approval;
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E. Vacate and set aside Part III.2.b.iii. of the April Interim Final Rule (85 Fed. Reg. at 20,811, 20,812, as modified by the Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule Docket No. SBA-2020-0036 (June 12, 2020));
F. Enter such other declaratory and/or injunctive relief as Plaintiffs may specifically request hereafter;
G. Award Plaintiffs their reasonable costs, litigation expenses, and attorney’s fees associated with this litigation; and
H. Award any other relief the Court deems just and proper.

Dated:

June 16 , 2020

Respectfully submitted,

ReNika C. Moore (PHV pending) Alejandro A. Ortiz (PHV pending) Jennesa Calvo-Friedman (PHV pending) AMERICAN CIVIL LIBERTIES UNION FOUNDATION 125 Broad St., 18th Floor New York, NY 10004 Tel: (212) 549-2500 Fax: (212) 549-2654 RMoore@ACLU.org OrtizA@ACLU.org JCalvo-Friedman@ACLU.org
Joanna K. Wasik (Federal Bar No. 21063) Hannah E. M. Lieberman (Federal Bar No. 05456) WASHINGTON LAWYERS’ COMMITTEE FOR CIVIL RIGHTS AND URBAN AFFAIRS 700 14th St. NW, Ste 400 Washington, DC 20005 Tel.: (202) 319-1000

/s/ Kali N. Bracey Kali N. Bracey (Federal Bar No. 20752) Elizabeth B. Deutsch (PHV pending) JENNER & BLOCK LLP 1099 New York Avenue NW, Suite 900 Washington, DC 20001 Tel.: (202) 639-6000 Fax: (202) 639-6066 KBracey@Jenner.com EDeutsch@Jenner.com
Jacob D. Alderdice (PHV pending) JENNER & BLOCK LLP 919 Third Avenue New York, NY 10022 Tel.: (212) 891-1625 Fax: (212) 891-1699 JAlderdice@Jenner.com
Zachary D. Tripp (PHV pending) WEIL, GOTSHAL & MANGES LLP 2001 M Street, NW, Suite 600 Washington, DC 20036 Tel.: (202) 682-7000

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Fax: (202) 319-1010 Joanna_Wasik@washlaw.org Hannah_Lieberman@washlaw.org
Claudia De Palma (PHV pending) PUBLIC INTEREST LAW CENTER 1500 JFK Blvd., Suite 802 Philadelphia, PA 19102 Tel: (215) 627-7100 cdepalma@pubintlaw.org

Zack.Tripp@Weil.com
Robert B. Niles-Weed (PHV pending) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Tel.:(212) 310-8000 Robert.Niles-Weed@Weil.com

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JS 44 (Rev. 08/16)

Case 1:20-cv-01838-CCICVBILDCocOuVmEenRt 1S-H1 EFEilTed 06/16/20 Page 1 of 2

The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON NEXT PAGE OF THIS FORM.)

ID.e(fay)VePnLtuAreINs,TInIcF.F; SSekwan Merritt; Prop Prep Properties, LLC d/b/a Lightning Electric; John Garland; Sign Me Up Bethpage Inc. d/b/a/ Fastsigns 2323

UD.SE. SFmENalDl BAuNsiTneSss Administration; Jovita Carranza; U.S. Department of the Treasury; Steven Mnuchin

(b) County of Residence of First Listed Plaintiff Los Angeles
(EXCEPT IN U.S. PLAINTIFF CASES)

County of Residence of First Listed Defendant (IN U.S. PLAINTIFF CASES ONLY)
NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE TRACT OF LAND INVOLVED.

Ka(lci )N.ABttroarcneeyys, (JFeirnmnNeamr e&, ABddlorecssk,,an1d0T9e9lepNhoenwe NYumobrekr)Ave. NW 900, Washington, DC 20001, (202) 639-6000

Attorneys (If Known)

II. BASIS OF JURISDICTION (Place an “X” in One Box Only)

’ 1 U.S. Government Plaintiff

’ 3 Federal Question (U.S. Government Not a Party)

III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff

(For Diversity Cases Only) PTF DEF

and One Box for Defendant) PTF DEF

Citizen of This State

’ 1 ’ 1 Incorporated or Principal Place of Business In This State

’ 4 ’4

’ 2 U.S. Government Defendant

’ 4 Diversity (Indicate Citizenship of Parties in Item III)

Citizen of Another State

’ 2 ’ 2 Incorporated and Principal Place of Business In Another State

’ 5 ’5

IV. NATURE OF SUIT (Place an “X” in One Box Only)

CONTRACT

TORTS

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’ 3 ’ 3 Foreign Nation

’ 6 ’6

Click here for: Nature of Suit Code Descriptions.

FORFEITURE/PENALTY

BANKRUPTCY

OTHER STATUTES

’ 110 Insurance

PERSONAL INJURY

PERSONAL INJURY ’ 625 Drug Related Seizure

’ 422 Appeal 28 USC 158

’ 120 Marine

’ 310 Airplane

’ 365 Personal Injury -

of Property 21 USC 881 ’ 423 Withdrawal

’ 130 Miller Act

’ 315 Airplane Product

Product Liability

’ 690 Other

28 USC 157

’ 140 Negotiable Instrument

Liability

’ 367 Health Care/

’ 150 Recovery of Overpayment ’ 320 Assault, Libel &

Pharmaceutical

PROPERTY RIGHTS

& Enforcement of Judgment

Slander

Personal Injury

’ 820 Copyrights

’ 151 Medicare Act

’ 330 Federal Employers’

Product Liability

’ 830 Patent

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Liability

’ 368 Asbestos Personal

’ 840 Trademark

Student Loans

’ 340 Marine

Injury Product

(Excludes Veterans)

’ 345 Marine Product

Liability

LABOR

SOCIAL SECURITY

’ 153 Recovery of Overpayment

Liability

PERSONAL PROPERTY ’ 710 Fair Labor Standards

’ 861 HIA (1395ff)

of Veteran’s Benefits

’ 350 Motor Vehicle

’ 370 Other Fraud

Act

’ 862 Black Lung (923)

’ 160 Stockholders’ Suits

’ 355 Motor Vehicle

’ 371 Truth in Lending

’ 720 Labor/Management

’ 863 DIWC/DIWW (405(g))

’ 190 Other Contract

Product Liability

’ 380 Other Personal

Relations

’ 864 SSID Title XVI

’ 195 Contract Product Liability ’ 360 Other Personal

Property Damage

’ 740 Railway Labor Act

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’ 196 Franchise

Injury

’ 385 Property Damage

’ 751 Family and Medical

’ 362 Personal Injury -

Product Liability

Leave Act

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’ 790 Other Labor Litigation

REAL PROPERTY

CIVIL RIGHTS

PRISONER PETITIONS ’ 791 Employee Retirement

FEDERAL TAX SUITS

’ 210 Land Condemnation

’ 440 Other Civil Rights

Habeas Corpus:

Income Security Act

’ 870 Taxes (U.S. Plaintiff

’ 220 Foreclosure

’ 441 Voting

’ 463 Alien Detainee

or Defendant)

’ 230 Rent Lease & Ejectment ’ 442 Employment

’ 510 Motions to Vacate

’ 871 IRS—Third Party

’ 240 Torts to Land

’ 443 Housing/

Sentence

26 USC 7609

’ 245 Tort Product Liability

Accommodations

’ 530 General

’ 290 All Other Real Property ’ 445 Amer. w/Disabilities - ’ 535 Death Penalty

IMMIGRATION

Employment

Other:

’ 462 Naturalization Application

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Other

’ 550 Civil Rights

Actions

’ 448 Education

’ 555 Prison Condition

’ 560 Civil Detainee -

Conditions of

Confinement

’ 375 False Claims Act ’ 376 Qui Tam (31 USC
3729(a)) ’ 400 State Reapportionment ’ 410 Antitrust ’ 430 Banks and Banking ’ 450 Commerce ’ 460 Deportation ’ 470 Racketeer Influenced and
Corrupt Organizations ’ 480 Consumer Credit ’ 490 Cable/Sat TV ’ 850 Securities/Commodities/
Exchange ’ 890 Other Statutory Actions ’ 891 Agricultural Acts ’ 893 Environmental Matters ’ 895 Freedom of Information
Act
’ 896 Arbitration ’ 899 Administrative Procedure
Act/Review or Appeal of Agency Decision ’ 950 Constitutionality of State Statutes

V. ORIGIN (Place an “X” in One Box Only)

’ 1 Original

’ 2 Removed from

Proceeding

State Court

’ 3 Remanded from Appellate Court

’ 4 Reinstated or ’ 5 Transferred from

Reopened

Another District

(specify)

’ 6 Multidistrict Litigation Transfer

’ 8 Multidistrict Litigation Direct File

Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):
Administrative Procedure Act VI. CAUSE OF ACTION Brief description of cause:
Challenge to criminal-record exclusions from the Paycheck Protection Program under the CARES ACT

VII. REQUESTED IN COMPLAINT:

’ CHECK IF THIS IS A CLASS ACTION
UNDER RULE 23, F.R.Cv.P.

DEMAND $

CHECK YES only if demanded in complaint:
JURY DEMAND: ’ Yes x’ No

VIII. RELATED CASE(S)

IF ANY

(See instructions): JUDGE George L. Russell, III

DOCKET NUMBER 20-cv-1736

DATE
06/16/2020

SIGNATURE OF ATTORNEY OF RECORD
/s/ Kali N. Bracey

FOR OFFICE USE ONLY

RECEIPT #

AMOUNT

APPLYING IFP

JUDGE

MAG. JUDGE

JS 44 Reverse (Rev. 08/16) Case 1:20-cv-01838-CCB Document 1-1 Filed 06/16/20 Page 2 of 2
INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44 Authority For Civil Cover Sheet

The JS 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service of pleading or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court for each civil complaint filed. The attorney filing a case should complete the form as follows:

I.(a) (b) (c)

Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency, use only the full name or standard abbreviations. If the plaintiff or defendant is an official within a government agency, identify first the agency and then the official, giving both name and title. County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at the time of filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time of filing. (NOTE: In land condemnation cases, the county of residence of the "defendant" is the location of the tract of land involved.) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment, noting in this section "(see attachment)".

II. Jurisdiction. The basis of jurisdiction is set forth under Rule 8(a), F.R.Cv.P., which requires that jurisdictions be shown in pleadings. Place an "X" in one of the boxes. If there is more than one basis of jurisdiction, precedence is given in the order shown below. United States plaintiff. (1) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States are included here. United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an "X" in this box. Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution of the United States, an amendment to the Constitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code takes precedence, and box 1 or 2 should be marked. Diversity of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties are citizens of different states. When Box 4 is checked, the citizenship of the different parties must be checked. (See Section III below; NOTE: federal question actions take precedence over diversity cases.)

III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if diversity of citizenship was indicated above. Mark this section for each principal party.

IV. Nature of Suit. Place an "X" in the appropriate box. If there are multiple nature of suit codes associated with the case, pick the nature of suit code that is most applicable. Click here for: Nature of Suit Code Descriptions.

V. Origin. Place an "X" in one of the seven boxes. Original Proceedings. (1) Cases which originate in the United States district courts. Removed from State Court. (2) Proceedings initiated in state courts may be removed to the district courts under Title 28 U.S.C., Section 1441. When the petition for removal is granted, check this box. Remanded from Appellate Court. (3) Check this box for cases remanded to the district court for further action. Use the date of remand as the filing date. Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date. Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or multidistrict litigation transfers. Multidistrict Litigation – Transfer. (6) Check this box when a multidistrict case is transferred into the district under authority of Title 28 U.S.C. Section 1407. Multidistrict Litigation – Direct File. (8) Check this box when a multidistrict case is filed in the same district as the Master MDL docket. PLEASE NOTE THAT THERE IS NOT AN ORIGIN CODE 7. Origin Code 7 was used for historical records and is no longer relevant due to changes in statue.
VI. Cause of Action. Report the civil statute directly related to the cause of action and give a brief description of the cause. Do not cite jurisdictional statutes unless diversity. Example: U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable service
VII. Requested in Complaint. Class Action. Place an "X" in this box if you are filing a class action under Rule 23, F.R.Cv.P. Demand. In this space enter the actual dollar amount being demanded or indicate other demand, such as a preliminary injunction. Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded.
VIII. Related Cases. This section of the JS 44 is used to reference related pending cases, if any. If there are related pending cases, insert the docket numbers and the corresponding judge names for such cases.
Date and Attorney Signature. Date and sign the civil cover sheet.

Case 1:20-cv-01838-CCB Document 1-2 Filed 06/16/20 Page 1 of 1

INDEX OF EXHIBITS

TO PLAINTIFFS’ COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

EXHIBIT A
EXHIBIT B B-1 B-2 B-3
EXHIBIT C C-1
EXHIBIT D D-1
EXHIBIT E
EXHIBIT F EXHIBIT G
EXHIBIT H EXHIBIT I EXHIBIT J
EXHIBIT K EXHIBIT L
EXHIBIT M
EXHIBIT N EXHIBIT O

Declaration Of Andrew Glazier, President and CEO of Defy Ventures, Inc. Declaration of Sekwan Merritt
Articles of Incorporation Screenshot of Application Form Screenshot of Denial Page Declaration of John Garland Screenshot of Application Form Declaration of Dr. Christopher Wildeman Dr. Christopher Wildeman CV Rep. Richmond et al. Ltr to Mnuchin & Carranza (Apr. 6, 2020) Sen. Merkley Ltr to Mnuchin & Carranza (Apr. 8, 2020) Sen. Portman & Sen. Cardin Ltr to Mnuchin & Carranza (Apr. 30, 2020) Rep. Titus et al. Ltr to Carranza (May 19, 2020) Am. for Prosperity & Right on Crime Ltr (Apr. 20, 2020) Council of State Governments Justice Center et al. Ltr (Apr. 16, 2020) Citizens for Juvenile Justice et al. Comment (May 15, 2020) Collateral Consequences Resource Center et al. Comment (May 15, 2020) Institute for Justice Clinic on Entrepreneurship Comment (May 15, 2020) June IFR June 12 Application Form

Case 1:20-cv-01838-CCB Document 1-3 Filed 06/16/20 Page 1 of 9
Exhibit A

Case 1:20-cv-01838-CCB Document 1-3 Filed 06/16/20 Page 2 of 9

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.
Defendants.

CASE NO.:

DECLARATION OF ANDREW GLAZIER IN SUPPORT OF PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
I, Andrew Glazier, declare:
1. I am over the age of eighteen. I have personal knowledge of the facts stated herein and am competent to testify to them. Defy Ventures 2. I am the President and CEO of Defy Ventures, Inc. (“Defy”), a nonprofit organization founded in 2010. I first joined Defy Ventures as the Executive Director of the Defy Southern California chapter in 2017. I then served as the National Chief Program Officer for Defy’s national organization, and assumed the President role in the spring of 2018. I am based in Defy’s main offices in Los Angeles, with all of Defy’s chapters under my management. 3. Defy’s mission is to use entrepreneurship and employment as tools for currently and formerly incarcerated individuals to address the social problems of mass incarceration and recidivism. Our ultimate goal is for our members and graduates to achieve economic independence so that they may have a successful reentry after prison. Defy Ventures works to
1

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change the hearts and minds of the business community in support of a common thesis that people with a criminal history deserve a fair chance to reenter society and fulfill their potential. 4. Defy Ventures was originally founded in New York City, and the organization remains incorporated there. Defy now has chapters in New York Tri-State area (covering NY, CT and NJ), Northern California, Southern California, and Illinois. The organization (inclusive of these chapters) has thirteen full-time staff members, five of whom are located in Defy’s main Los Angeles office. The Illinois chapter was started just last month. 5. Defy also has licensed affiliates in Colorado and Washington. The Colorado location has three employees, and the Washington location, which started in late 2018, has one employee. Defy’s Programs 6. In order to accomplish its mission, Defy Ventures has training programs both inside and outside of prisons. 7. Our program model is not static; we frequently iterate and revise our programs in response to data and outcomes to better serve our entrepreneurs-in-training. However, the following is a general description of Defy’s core programs. 8. The CEO of Your New Life (CEO YNL) is a holistic entrepreneurship, career readiness and personal development program run by Defy Ventures for individuals who are currently in prison or transitional facilities. We call our participants “Entrepreneurs-in-Training.” This program includes six to eight months of coursework and is delivered through textbooks, DVDs, in person instruction and facilitated discussion groups. Volunteers, many from the business community, support the Entrepreneurs-in-Training through in-person coaching events. 9. The Entrepreneur Bootcamp is similar to the program we run in prisons and transitional facilities, but it is primarily designed as an entry point to our entrepreneurship pathway for those who did not complete CEO YNL while incarcerated, have returned home from prison and already have stable housing and employment. The program is offered through self-directed
2

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online courses in which Entrepreneurs-in-Training are responsible for reading chapter contents, watching supplemental videos, responding to discussion questions and uploading deliverables. 10. Defy recognizes the innate entrepreneurial talent in our entrepreneurs-in-training and the powerful virtuous cycle that formerly incarcerated individuals can create when they are given the opportunity to own and operate their own business. After completing CEO YNL, being released from prison, and obtaining stable housing, or after completing Entrepreneur Bootcamp, entrepreneurs-in-training are eligible to apply to our Business Incubator program, which includes advanced coursework in entrepreneurship and business management. As part of the application process, entrepreneurs-in-training must successfully pitch their business ideas to an admissions panel. 11. Through Business Incubator, we support Entrepreneurs-in-Training through the process of incorporating, launching, and growing new businesses. The program provides additional curriculum and coaching regarding the steps to launching a business. As part of this program, each Defy student is paired with a mentor in the business community for weekly or biweekly coaching and feedback. Entrepreneurs-in-Training also participate in monthly meetings with other entrepreneurs-in-training, allowing them to share their business successes and challenges and receive peer feedback. 12. It typically takes Entrepreneurs-in-Training 6-18 months to launch a business. Defy works with them for this entire time, and then continues its relationship once the entrepreneurs become graduates of our programs. I would estimate that, of Defy’s entrepreneurs-in-training who are released from prison and join our post-release program, around 10% pursue entrepreneurship and creation of a business. 13. Financing is critical to the success of our graduates’ businesses. Typically, Defy tries to raise money in order to be able to provide our graduates with some seed money for their businesses. At present, I am in the midst of such a fundraising effort. We also speak with community lenders who are willing to give unsecured loans to our graduates.
3

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14. Defy also runs alumni programs and keeps in touch with its graduates. The Defy Entrepreneurship Network is a long-term supportive network for entrepreneurs who have successfully launched businesses. Members of this network are invited to quarterly networking meetings or business workshops; are paired with an executive mentor to support their business, if they desire; and have the opportunity to be featured on the Defy website or newsletter. 15. We have also surveyed our graduates regarding the success of their businesses, and Defy actively seeks to use the services offered by our graduates. For example, a Defy graduate in Northern California owns a trade show business that sells banners, swag, and other trade show items. Defy has purchased his goods. Further, when Defy held a fundraiser in New York City, we served cupcakes provided by our graduate Chef Fresh. 16. Defy has worked with over 5200 entrepreneurs-in-training since its inception ten years ago. The large majority of our entrepreneurs-in-training have been people of color; this racial makeup is reflective of the prison population in the United States. 17. In its ten years of operation, Defy has helped formerly incarcerated individuals launch over 140 small businesses. The businesses that are started by Defy graduates are typically in the service industry, because they require relatively less start-up money, and they have relatively low overhead and inventory costs at startup. For example, our graduates have started janitorial services, fitness, plumbing, and food and art businesses. The largest business started by one of our graduates is CONBODY, a fitness bootcamp with approximately six employees and two gyms in New York and London. 18. Many of the businesses started by our graduates go on to employ other formerly incarcerated individuals. For example, CONBODY makes a point of hiring the formerly incarcerated as trainers. 19. Defy Ventures has proven results. In contrast to the nationwide one-year recidivism rate, which according to some analyses is approximately 30%, the recidivism rate of the graduates of Defy Ventures is less than 8%.
4

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The SBA’s PPP Rule 20. I first learned of the exclusions of individuals with arrest and conviction records from the Small Business Administration (SBA)’s Paycheck Protection Program (PPP) in mid-April 2020, when graduates of Defy’s programs brought it to my attention. 21. The graduates of the program explained their concern that they were ineligible for the PPP program. They asked me and other staff members at Defy whether we had any way to help them, and whether we had any ideas on how they could secure PPP or other funding during the coronavirus-related shutdowns. We also heard similar questions from formerly incarcerated businesses owners who were not even graduates of our program, but reached out to us because they were aware of our program. 22. The businesses run by our graduates were experiencing severe economic distress from the covid-related shutdowns. One of our graduates had to lay off half of his workers. Another graduate, who runs a tailoring business, was in arrears on payments related to his store. 23. Our first step was to try and understand the SBA’s rules and application form. I and Defy staff looked at an online version of the application form. We soon realized that, as soon as you hit “yes” to Question 5 or Question 6, each of which ask about criminal history, the answer on the form became grayed-out, meaning that an applicant could not proceed with the application. 24. As a result of this automatic exclusion, we quickly realized there was nothing Defy or our graduates could do to provide additional information or context to the SBA about an applicant’s criminal history. Three or four of our graduates were most obviously impacted by this exclusion because their felony convictions were within the last five years. 25. We also noticed that Questions 5 and 6 on the PPP application form were worded in a highly confusing manner. A few of Defy’s graduates turned to us for help because they did not understand exactly what the questions were asking. I found it very difficult and, frankly, scary to advise graduates regarding their answers on the application form, because an incorrect answer
5

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could potentially amount to a violation of the terms of probation or parole, or expose them to other liability. 26. As my staff and I continued to research and follow the evolution of the rules governing the PPP, we noticed that the SBA had changed its regulations a number of times. These changes added another layer of confusion for our graduates. For example, I learned only recently that the PPP had again changed its rule regarding individuals with records in June. None of my graduates, that I know of, were aware of this change. 27. I advised our graduates to take a conservative and careful approach to the application. However, some of our graduates were deterred from applying for PPP funding altogether due to the confusing nature of the questions, the changing rules, and the high stakes involved in answering correctly, in particular for them as formerly incarcerated individuals. 28. A few of my staff members, including the Senior Post-Release Manager, Director of Development and Marketing, and one of our graduates and I next turned to locating alternate funding sources for our graduates who were excluded from the PPP program and whose businesses were in distress. We researched, brainstormed, and discussed multiple options for such potential funding sources. 29. One funding option, which we ultimately had to rule out, was for Defy to create and administer a separate fund for our graduates. Three or four staff members and I looked into the logistics of this possibility; Defy’s Director of Development and Marketing and I called some of our contacts to discuss the potential logistics. We also held a phone conference with community lenders to see if they had input on the idea or could help us work on it. One or two of Defy’s graduates had phone conversations with funders. Unfortunately, after this research, we had to conclude that it was not feasible for Defy to serve a banking role that banks, lenders, and the government are supposed to fill (and were in fact filling for non-excluded small business owners).
6

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30. We moved on to other options for locating funding sources. We worked with graduates to start and publicize their GoFundMe pages. These GoFundMe efforts raised a few thousand dollars for a few of our graduates. One of our graduates runs a tailoring business, and we helped him raise $5,000 to launch a line of masks to help bring in business for him. 31. We spoke with our contacts in the donor community in an effort to direct our graduates to sources of funding. For example, I found out that Verizon had sponsored a fund to which graduates could apply. We also researched funding resources and gave our graduates referrals. These funding sources offered up to ten thousand dollars — not as much money as our graduates could potentially have been able to obtain through the PPP program. 32. In my estimation, our organization has spent approximately thirty hours minimum on the above activities since mid-April when we first learned of the PPP exclusions. The PPP exclusions caused a significant diversion of our resources: had the SBA not excluded our graduates, we would have instead devoted this time and energy to our previously-planned programming and training activities. 33. The PPP’s criminal-history related exclusions have impeded the ability of Defy Ventures to accomplish its mission. First, Defy cannot accomplish its goal of using entrepreneurship and employment as a tool to provide economic security and successful reentry for formerly incarcerated individuals if those individuals, and their employees, are shut out from financing for their businesses. Due to discrimination against formerly incarcerated individuals that is already present in many spheres including lending and employment, it is already difficult for Defy’s graduates to obtain the money they need to succeed. During a time of nationwide economic crisis, it is particularly critical for Defy’s graduates to have access to emergency financing to keep their businesses afloat. 34. Second, Defy Ventures believes that formerly incarcerated individuals are entitled to a real second chance – or, as the case may be, a legitimate first chance. By excluding our graduates from forgivable loans during a time of intense economic fragility, the SBA’s exclusions reinforce
7

Case 1:20-cv-01838-CCB Document 1-3 Filed 06/16/20 Page 9 of 9 the incorrect, dangerous, and recidivism-increasing idea that an individual’s criminal history should follow them for the rest of their life and hold them back from economic success. I, Andrew Glazier, pursuant to 28 U.S.C § 1746 and subject to the penalties of perjury, declare the following is true and correct. This Declaration was signed by me on June 15, 2020, at Los Angeles, CA.
______________________________ Andrew Glazier
8

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Exhibit B

Case 1:20-cv-01838-CCB Document 1-4 Filed 06/16/20 Page 2 of 7

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.
Defendants.

CASE NO.:

DECLARATION OF SEKWAN MERRITT IN SUPPORT OF PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
I, Sekwan Merritt, declare:
1. I am over the age of eighteen. I have personal knowledge of the facts stated herein and am competent to testify to them. 2. I am a Black man, a small business owner, and a restorative justice advocate. I am also a formerly incarcerated person. 3. I am a resident of Maryland. 4. In October 2017, I started my own electrical contracting business. It is a limited liability company named Prop Prep Properties LLC, doing business as Lightning Electric. It is duly organized under the laws of Maryland. The Articles of Organization are attached hereto as Exhibit B-1. The address of the office of Lightning Electric is 3520 Ailsa Avenue, Baltimore, Maryland, 21214. 5. I am an electrician and have obtained a Master Electrician License from the State of Maryland’s Department of Permitting Services. 6. I am one of the few Black owners of an electrical contracting business in my area. I am very proud of my success as a minority business owner in this field. My goal is to serve as an
1

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example for the next generation of minority contractors, and, in particular, to provide opportunity and hope for incarcerated individuals and citizens returning home from prison. I also want to provide electrical contracting services in underserved communities. 7. I am also a restorative justice advocate. In 2017, I testified on a panel on Capitol Hill regarding the Pretrial Integrity and Safety Act, whose goal was to encourage States to replace the use of money bail as a condition of pretrial release. I discussed how the jail and cash bail system impacts people of color, and how facilities can increase rehabilitative resources to stop the revolving door of local jails. I have spoken in front of the Baltimore City Council and at universities on topics related to the criminal legal system, including the importance of education for individuals who are incarcerated. 8. I returned home from prison in 2017 and am on parole until 2022. I had pleaded guilty to charges of possession and possession with intent to distribute narcotics in the Circuit Court for Baltimore County in 2012. I served five years at the Maryland Correctional Institution. 9. While in prison, I enrolled in the Goucher College Prison Education Partnership and earned 40 credits toward my Bachelor’s degree. I continued to learn about electrical work, to which I had first been exposed during an apprenticeship in 2005. I also worked as an electrician for the Maintenance Department of Maryland Correctional Institution while incarcerated. I also created business plans for starting my own company. My business - Lightning Electric: 10. Lightning Electric serves both residential and commercial clients, providing installation of low and high-voltage electrical wiring. We are licensed to serve clients in seven counties across Maryland. 11. As the owner of Lightning Electric, I am responsible for all of the company’s operations, finances (including payroll), client relations, and business development. 12. I have hired five contracted electricians to work for Lightning Electric. These electricians complete the majority of the client services. At times, I will join them in the field to speak with a
2

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customer or address a specific issue. Typically, however, I focus on running business operations and developing new clients. 13. I have used Lightning Electric as a way to create economic opportunities for members of my community who are facing barriers to employment. Four of the electricians who work for Lightning Electric are formerly incarcerated individuals. The fifth electrician was an at-risk youth living in Baltimore City when I met him; I have provided him with training on electrical work and he is now an integral member of our team. 14. I provide Lightning Electric’s workers with opportunities to learn about every aspect of the contracting business, including estimating costs for a project and material logistics. My goal is that those who work with me receive a holistic education about electrical contracting so that they, too, can become entrepreneurs. 15. In 2019, Lightning Electric had roughly $170,000 in revenue. The company was just barely starting to turn a profit. In early 2020, before coronavirus-related closures, we were able to secure two large contracts. I intended to keep growing the company. One of my main goals for the future was to join Associated Builders and Contractors, a national trade association, so that some of Lightning Electric’s electricians, who do not yet have their journeyman licenses, would be eligible for craft training and apprenticeship. Paycheck Protection Program Application: 16. On March 5, 2020, Maryland Governor Larry Hogan declared a state of emergency in response to the novel coronavirus. On March 23, Governor Hogan issued an order closing all non-essential business in the state. On March 30, he issued a stay-at-home order to stop the spread of coronavirus and directed Marylanders to leave their homes only for an essential reason. Businesses across the state closed their doors. 17. Lighting Electric was forced to shut down operations almost completely in March as a result of the coronavirus and Governor Hogan’s orders. During the time that the stay-at-home order was in place, I was unable to pay the electricians who work for Lightning Electric. While
3

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we sometimes received small jobs from clients, the amount of work we had was at maximum 1020% of our pre-coronavirus capacity. At least one of my workers had to apply for unemployment as a result. 18. I applied for a Small Business Administration (SBA) Paycheck Protection Program (PPP) loan on April 15, 2020. 19. I applied using the online portal of my bank, Wells Fargo. 20. On the application, I encountered two questions about my criminal history. I took a screen shot of these questions, which is attached hereto as Exhibit B-2. I answered “yes” to each of these questions, because I am currently on parole. 21. As soon as I hit “submit” on the PPP application, a screen popped up stating, “Based on the answers provided, your application cannot be processed at this time.” A screen shot of this message is attached hereto as Exhibit B-3. 22. Had I received the PPP loan, I intended to use it to pay the electricians working for Lightning Electric during the time period when business operations were shut down almost completely and the electricians were unable to work. I would have also used it to pay the costs necessary for the running of the business, including general liability insurance, which Lightning Electric is required to maintain in order to be eligible to apply for certain types of contracts. 23. At present, Maryland is in the first stages of re-opening. Lightning Electric is starting to have more work. However, we have still not reached anywhere near our pre-coronavirus capacity. The two contracts that we secured in early 2020 will proceed on a much longer time frame due to strict restrictions on how many people can be present at the job sites at one time. As a result, I expect that it will be a long time before Lightning Electric can expect payment for that work. 24. Despite the near-standstill in work, the company continues to have approximately $9,000 in payroll expenses every other week. It is very important to me to keep Lightning Electric’s electricians on payroll and I would not want to cut any electricians from my team. Maintaining
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our team of electricians is critical to the business’s mission and ongoing survival; were I unable to continue funding payroll, we risk losing the business’s reputation and customer relationships, which is its greatest asset. 25. Lightning Electric also has other overhead expenses, including insurance and advertising costs. 26. I have been pouring money – my own savings, as well as money from my family – into the company to keep it afloat. I estimate that I have cobbled together approximately $30,000 in savings and small familial gifts and loans to help the company survive on a short-term basis. 27. The Company’s finances continue to be precarious. I am constantly worried about funding. I know that there is a real risk that, without an influx of cash, Lightning Electric may not survive this economic crisis. 28. Some time after my application had been rejected, I learned that the SBA had put into place rules that prevent individuals with certain criminal records from being eligible for PPP loans. 29. I believe that the SBA’s rule is unfair and wrong. Even in the best economic times, it is difficult for formerly incarcerated individuals to obtain financing; in the present economic crisis, such financing has become critical. 30. I am the owner of a successful business that creates economic opportunities for others and works to lift up the next generation of minority entrepreneurs in the contracting business. My residential and commercial clients rely on our services. There is no reason why we should be shut out of getting the assistance we need to let Lightning Electric survive and thrive.
I declare under penalty of perjury of the laws of the United States and the state of Maryland that the foregoing is true and correct.
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Case 1:20-cv-01838-CCB Document 1-4 Filed 06/16/20 Page 7 of 7 This Declaration was signed by me on _____J_u_n_e_,_1_5___________ (month and day), 2020, at ______O_d_e_n_t_o_n_, _M__ar_y_l_a_n_d____________________ (city, state).
______________________________ Sekwan Merritt
6

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Exhibit B-1

Case 1:20-cv-01838-CCB Document 1-5 Filed 06/16/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 1-6 Filed 06/16/20 Page 1 of 2
Exhibit B-2

Case 1:20-cv-01838-CCB Document 1-6 Filed 06/16/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 1-7 Filed 06/16/20 Page 1 of 2
Exhibit B-3

Case 1:20-cv-01838-CCB Document 1-7 Filed 06/16/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 1-8 Filed 06/16/20 Page 1 of 7
Exhibit C

Case 1:20-cv-01838-CCB Document 1-8 Filed 06/16/20 Page 2 of 7

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.
Defendants.

CASE NO.:

DECLARATION OF JOHN D. GARLAND IN SUPPORT OF PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION
I, John D. Garland, declare:
1. I am over the age of eighteen. I have personal knowledge of the facts stated herein and am competent to testify to them. 2. I am a Black man, a small business owner, and an advocate for the formerly incarcerated, and for youth from a troubled background, like myself. 3. I am a resident of New York. 4. In 2007, I first entered the graphic design and commercial printing business, starting a small printing shop in the Bronx, New York. I had learned graphic design and commercial printing while incarcerated between 1987 (when I was 18 years old) and 2003. Because my employment opportunities were limited after my release, I decided to start my own business. 5. Since that time, I have been working hard to grow my business in order to provide for myself and my family (including my two young children), and to have an opportunity to help others. On August 4, 2014, I founded ClicClix Media Group, LLC, a holding company through which I would manage and operate my visual communications businesses. In 2018, I partnered
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with a franchise company called Sign Me Up Signs and Advertising, a business for designing, producing, and selling signs and visual communications products for our clients. In December of 2019, Sign Me Up was acquired by Fastsigns International Inc., one of the largest and best companies for signs, banners, and graphics. 6. I now proudly own and operate a Fast Signs location in Bethpage, NY. I am a majority owner of the company for that location, and my official title is President of Sign Me Up Bethpage, Inc. d/b/a Fastsigns 2323 (“Fastsigns Bethpage”). 7. As a business owner, I also take pride in my ability to advocate for people who, like me, had a difficult childhood and lacked a lot of opportunities. I recently started a partnership with the United Way in which we would train and eventually employ a group of youths from troubled backgrounds. I hope to expand this program to the formerly incarcerated and veterans. 8. I also contribute to the Bethpage, NY community. Although I reside elsewhere, I consider myself a member of that community through my business, and I have donated signs to their schools, and distributed supplies related to the COVID-19 pandemic to senior citizens. 9. Unfortunately, due to some recent domestic difficulties with my wife, in October 2019, I was charged with a domestic violence offence, the allegations of which I denied. In December 2019, the case was adjourned in contemplation of dismissal, and a limited order of protection remained entered against me. 10. That same month, I was charged with petit larceny, because I moved a bag belonging to my wife to somewhere else in the house, and with a violation of the order of protection due to that petit larceny charge. 11. In February 2020, I appeared in court for that charge and pleaded not guilty. The case was adjourned for me to find counsel. In the meantime, the courts closed as a result of the COVID-19 pandemic, and thus the charge remains pending. 12. As a result of this charge, I was unable to apply for the Paycheck Protection Program (PPP), which I need in order to keep my business afloat, as I will explain in more detail below.
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My Business - Sign Me Up/Fastsigns: 13. Fastsigns Bethpage serves both business and residential clients with their signs, letter, cards, and other graphic design needs. Prior to the COVID-19 pandemic, other businesses were our primary clients, but as a result of the pandemic our business clients have closed, and to try generate some revenue we have shifted our business more to a residential focus—though the volume of business is far less. 14. As the majority owner of Fastsigns Bethpage, I am responsible for all of the company’s operations, finances (including payroll), client relations, and business development. 15. Fastsigns Bethpage has three employees, including myself, who operate the business and manage sales and production. 16. I am also a 15% stake owner in a Fastsigns franchise in West Babylon, NY. That location is larger and has more fabrication responsibilities, and it employs six people. 17. I have always wanted to use my business as a way to help other people who have had to come up through a difficult background. I grew up in the South Bronx in the 1970’s and ‘80s, when drugs and violence plagued that neighborhood. Like many other people, both of my parents were addicted to drugs, and both died when I was young. I want to help young people in these types of situation to avoid what I had to go through, to have better opportunities, and to help the formerly incarcerated as well. 18. In 2019, I began partnering with United Way to train and employ thirteen youth from troubled backgrounds. I had an initial training session with them in 2020, but we had to discontinue the program as a result of the COVID-19 pandemic. I plan on resuming the program once everything is up and running again. 19. We have also partnered with New York State in a program designed to assist autistic youth, and provide them training in graphic design and commercial printing opportunities.
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20. In 2019, Fastsigns Bethpage had over $84,000 in revenue, and based on the growth of business we were set to expand further in 2020. We were just beginning to be able to pay myself and my business partner, who also works at that location, in full, and we are well-respected in the community. 21. I also assist with the West Babylon location, and I hope that if we have continued success in these locations, we can expand our business further. Paycheck Protection Program Application: 22. On March 7, 2020, New York Governor Andrew Cuomo declared a state of emergency in response to the novel coronavirus. On March 20, Governor Cuomo issued an order closing all non-essential businesses in the state and prohibited all non-essential gatherings of individuals of any size, effective March 22. Businesses across the state closed their doors. 23. Fastsigns Bethpage shut down as a result of the order for over one week. However, it was subsequently deemed an essential business, and we re-opened. 24. Despite re-opening, our business has drastically fallen. Our primary clients prior to the pandemic were other businesses. Because most of those businesses are closed or otherwise affected, they are not purchasing signs and other graphic design supplies. 25. We are working hard and doing as much as we can to stay afloat, including shifting our businesses to residences, and working on lawn signs for graduations and the like. But this business is a fraction of our previous business. 26. When we first found out about the PPP, we thought it was a godsend. We were so hopeful. From what we learned about the criteria, it seemed like it was broadly available to all businesses affected by this pandemic, and we thought it would help us stay afloat. My business partners and I had a long strategy session, in which we mapped out how we would use the funds. We intended to apply for $100,000, which we would apply to payroll, rent, utility, and other expenses.
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27. I began applying for a Small Business Administration (SBA) Paycheck Protection Program (PPP) loan on April 10, 2020. 28. I began filling out the application online with my business partner. On the application, I encountered two questions about my criminal history. Because I have misdemeanor charges pending against me, my answer to Question 5 would be “yes.” 29. Because the application states, “If questions (5) or (6) are answered ‘Yes,’ the loan will not be approved,” we did not continue with our application, because it would clearly be denied. 30. I was devastated. We are a business that has employees, we are an active business, we are active in the community, and we pay our taxes just like every other business. We should be eligible on the same terms as all other businesses. 31. After stopping this application, we tried again a few weeks later. We consulted with Chase bank, with which we have a small business account, and confirmed that their PPP application also had the same disqualifying question. I took a screen shot of these questions, which is attached hereto as Exhibit C-1. 32. Right now, New York is in the early stages of re-opening. Although we have been fighting to provide business to whoever still needed it throughout the pandemic, we expect that once more businesses re-open, we will get more business. However, that is not yet happening. 33. Without assistance from PPP, our business that we have worked so hard to build is at risk of collapse. We are currently thousands of dollars behind on rent and utility costs. We have negotiated with the landlord to defer payment of rent for March and April, but we have to pay this back soon. I have not been taking a paycheck for some time. It also meant that we could not go forward to hire youth as part of our partnership with United Way of Long Island. I am worried that Fastsigns Bethpage may not survive this economic crisis. 34. The SBA’s rule prohibiting people with pending charges is very upsetting to me. I have faced many obstacles in my life getting my business up and running, and have struggled with obtaining financing. Being a formerly incarcerated person and being Black has made obtaining
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Exhibit D

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.
Defendants.

CASE NO.:

DECLARATION OF DR. CHRISTOPHER WILDEMAN IN SUPPORT OF PLAINTIFF’S EMERGENCY MOTION FOR PRELIMINARY INJUNCTION

I, Christopher Wildeman, declare:
1. As I detail below, my analyses provide support for two conclusions. First, in the NLSY79, the longitudinal dataset best suited to estimating the share of business owners in a specific cohort1 who have ever been incarcerated, that roughly 2% of the White business owners, 15% of the Black business owners, and 10% of Latinx business owners in this cohort have ever been incarcerated. Second, that baseline conclusion increases the probability that the Small Business Administration (SBA)’s Interim Final Rule (IFR) making applicants with certain criminal justice system involvement ineligible for the Paycheck Protection Program (PPP) has made, and will continue to make, Black and Latinx small business owners disproportionately ineligible for PPP loans.
Relevant Qualifications and Experience 2. As outlined in my attached CV:
1 The NLSY79 cohort is now in their late 40s and early 50s, but there is no reason to expect that the racial/ethnic disparities I estimate for this specific cohort would not also be present in other cohorts of small business owners.
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a. Effective July 1, 2020, I will be a professor of sociology at Duke University. b. Previously, I was a Professor of Policy Analysis and Management and Sociology
(by courtesy) at Cornell University, where I was also the Associate Vice Provost for the Social Sciences, Director of the Bronfenbrenner Center for Translational Research, and Director of the National Data Archive on Child Abuse and Neglect. c. I received my PhD in sociology and demography from Princeton University in 2008 and MA in sociology and demography from Princeton University in 2006. 3. I am a demographer and, among other work using life table methods, I have generated estimates of the cumulative risk of imprisonment for adult males (Western & Wildeman, 2009) and the cumulative risk of parental imprisonment for children (Wildeman, 2009). 4. Through this work, as well as other work using life tables, some of which estimates the cumulative prevalence of other events (e.g., Wildeman & Emmanuel, 2014), I have become an expert on using these demographic methods to estimate cumulative risks of, among other things, being arrested, being convicted of a crime, and being incarcerated. 5. Because of my work as a Visiting Fellow at the Bureau of Justice Statistics, I am also an expert on criminal justice datasets and the ways those data can be used to estimate racial/ethnic disparities in the cumulative risk of experiencing criminal justice contact. Data Considered 6. I have been made aware of, although I have not reviewed in its entirety, the portion of interim Final Rule (IFR), in effect before June 12, 2020, that was promulgated by the Small Business Administration (SBA) to implement the Paycheck Protection Program (PPP) that bars PPP applicants who have “[a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal
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Case 1:20-cv-01838-CCB Document 1-9 Filed 06/16/20 Page 4 of 5
charges are brought in any jurisdiction; or has been convicted of a felony within the last five years[.]”2 7. I have also been made aware of, although I have not reviewed in its entirety, the public application form for the PPP loans, in effect before June 12, 2020, which broadened the pool of applicants ineligible for loans, namely, people who pleaded no contest and people who have been placed on pre-trial diversion.3 I am aware that this broadening indicates that many individuals who have been incarcerated but never convicted would also be ineligible for said loans. 8. Finally, I considered the National Longitudinal Survey, 1979 (NLYS79), which has collected, among other data, race, ethnicity, employment (including business ownership in some waves), and criminal justice contact data on survey participants since 1979.4 Methods Used to Interpret and Apply Data 9. I used the following methods to interpret the relevant NLYS79 data and to apply it to IFR’s ineligibility criteria cited above: birth cohort life tables estimating the cumulative probability of prison and jail incarceration for African American, Latinx, and White individuals who said that they had ever been or were currently business owners. 10. These methods are widely used in sociology and demography and can be verified against other published analyses of the NLYS79 data from earlier waves (e.g., Western, 2002). Conclusion Restated 11. To restate, as I detail above, my analyses provide support for two conclusions. First, in the NLSY79, the longitudinal dataset best suited to estimating the share of business owners in a specific cohort who have ever been incarcerated, that roughly 2% of the White business owners, 15% of the Black business owners, and 10% of Latinx business
2 Business Loan Program Temporary Changes; Paycheck Protection Program, 85 FR 20811-01. 3 SBA, Paycheck Protection Program: Borrower Application Form, OMB Control No.: 3245-0407 (Expiration Date: 09/30/2020). 4 See https://www.bls.gov/nls/nlsy79.htm (last visited on June 12, 2020); https://www.nlsinfo.org/content/cohorts/nlsy79 (last visited on June 12, 2020).
3

Case 1:20-cv-01838-CCB Document 1-9 Filed 06/16/20 Page 5 of 5 owners in this cohort have ever been incarcerated. Second, that baseline conclusion increases the probability that the Small Business Administration (SBA)’s Interim Final Rule (IFR) making applicants with certain criminal justice system involvement ineligible for the Paycheck Protection Program (PPP) has made, and will continue to make, Black and Latinx small business owners disproportionately ineligible for PPP loans. I declare pursuant to 28 U.S.C § 1746 and under penalty of perjury that the foregoing is true and correct. Executed on: June 13th, 2020
Dr. Christopher Wildeman
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Exhibit D-1

Case 1:20-cv-01838-CCB Document 1-10 Filed 06/16/20 Page 2 of 21
whitespace
Christopher Wildeman

Contact Information

Office:
Email: Phone:

Department of Sociology 327 Soc/Psych Building, 417 Chapel Drive, Durham, NC 27708 cjw93@duke.edu 609.462.6797

Employment and Affiliations

2020-

Duke University Professor of Sociology (2020-) Director. National Data Archive on Child Abuse and Neglect (NDACAN) (2020-)

2016-

University of Wisconsin, Madison Research Aﬃliate. Institute for Research on Poverty (IRP)

2015-

Rockwool Foundation Research Unit Professor (2019-) Senior Researcher (2015-2019)

2014-

Cornell University Associate (2014-2017) to Full Professor of Policy Analysis & Management (2017-2020) Associate (Courtesy, 2017) to Full Professor of Sociology (Courtesy, 2017-2020) Associate Director. Bronfenbrenner Center for Translational Research (BCTR) (2016-2018) Associate Vice Provost for the Social Sciences (2019-2020) Co-Director. National Data Archive on Child Abuse and Neglect (NDACAN) (2015-2018) Director. Bronfenbrenner Center for Translational Research (BCTR) (2018-2020) Director. Development Core. Cornell Population Center (CPC) (2016-2020) Director. National Data Archive on Child Abuse and Neglect (NDACAN) (2018-2020) Provost Fellow for the Social Sciences (2018-2019)

2012-2017 United States Department of Justice Visiting Fellow. Bureau of Justice Statistics

2010-2014 Yale University Assistant (2010-2013) to Associate (2013-2014) Professor of Sociology

2008-2010 University of Michigan Robert Wood Johnson Foundation Health & Society Scholar

Education

2008

Ph.D. in Sociology and Demography. Princeton University Parental Incarceration, the Prison Boom, and the Intergenerational Transmission of Stigma and Disadvantage (Committee: Sara McLanahan, Bruce Western, Devah Pager)

2006

M.A. in Sociology and Demography. Princeton University Examinations: Crime and Punishment, Demography, Family Demography, Religion

2002

B.A. in Philosophy, Sociology, and Spanish. Dickinson College Honors: Magna Cum Laude, Departmental Honors in Sociology, Phi Beta Kappa

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Books and Edited Volumes (∗ Indicates Refereed)

2017

Wildeman, Christopher, Anna R. Haskins, and Julie Poehlmann-Tynan, eds. When Parents Are Incarcerated: Interdisciplinary Research and Interventions to Support Children. Washington, DC: American Psychological Association Press.

2016

Wildeman, Christopher, Sara Wakeﬁeld, and Hedwig Lee, eds. Tough on Crime, Tough on Families? Criminal Justice and Family Life in America. Special Issue of ANNALS of the American Academy of Political and Social Science 665.

2014

Wildeman, Christopher, Vesla M. Weaver, and Jacob S. Hacker, eds. Detaining Democracy? Criminal Justice and American Civic Life. Special Issue of ANNALS of the American Academy of Political and Social Science. 651.

2013

*Wakeﬁeld, Sara, and Christopher Wildeman. Children of the Prison Boom: Mass Incarceration and the Future of American Inequality. New York: Oxford University Press.
2016 Outstanding Book Award. ASA Inequality, Poverty, and Mobility Section. Reviews: American Journal of Sociology. 115:1557-1559. Contemporary Sociology. 44:730-731. Law & Society Review. 49:282-284. Probation Journal. 62:187-189. Punishment & Society. 18:638-640. Sociological Review. 62:920-922. Theoretical Criminology. 19:436-438. Times Higher Education. July 3, 2014. Women’s Studies Quarterly. 43:299-303.

Articles (∗ Indicates Refereed; † Indicates Graduate/Undergraduate Advisee Coauthor)

Forth.

*Wildeman, Christopher, and Lars H. Andersen. “The Long-Term Consequences of Being Placed in Disciplinary Segregation.” Criminology.
*Anker, Anne Soﬁe Tegner,† Lars H. Andersen, and Christopher Wildeman. “Estimating and Explaining Ethnic Disparities in the Cumulative Risk of Paternal Incarceration in Denmark.” Demographic Research.

*Hawks, Laura, Candace M. Cosgrove, Matthew Neiman, Brita Roy, Christopher Wildeman, Sean Cody, and Emily A. Wang. “Five-year Mortality Among Americans Incarcerated in Privatized Versus Public Prisons: Data from the Mortality Disparities Among American Communities Project.” Journal of Generical Internal Medicine.

2020 *Wildeman, Christopher. “The Intergenerational Transmission of Criminal Justice Contact.” Annual Review of Criminology 3:217-244.

*Wildeman, Christopher, Frank R. Edwards, and Sara Wakeﬁeld. “The Cumulative Prevalence of Termination of Parental Rights for U.S. Children, 2000-2016.” Child Maltreatment 25:32-42.
*Yi, Youngmin,† Frank R. Edwards, and Christopher Wildeman. “Cumulative Prevalence of Conﬁrmed Maltreatment and Foster Care Placement for US Children, 2012-2016.” American Journal of Public Health 110:704-709.

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2019 2018

*Wildeman, Christopher, and Lars H. Andersen. “Solitary Conﬁnement Placement and Post-Release Mortality Risk Among Formerly Incarcerated Persons: A Population-Based Study.” Lancet Public Health 5:e107-e113.
*Sundaresh, Ram,† Youngmin Yi,† Brita Roy, Carley Riley, Christopher Wildeman, and Emily A. Wang. “Exposure to theUS Criminal Legal System and Well-Being: A 2018 Cross-Sectional Study.” American Journal of Public Health 110:S116-S122.
*Enns, Peter K., Youngmin Yi,† Megan Comfort, Alyssa Goldman,† Hedwig Lee, Christopher Muller, Sara Wakeﬁeld, Emily A. Wang, and Christopher Wildeman. “What Percentage of Americans Have Ever Had a Family Member Incarcerated? Evidence from the Family History of Incarceration Survey (FamHIS).” Socius 6.
*Wildeman, Christopher, Alyssa Goldman,† and Hedwig Lee. “Health Consequences of Family Member Incarceration for Adults in the Household.” Public Health Reports 134:15S21S.
*Wildeman, Christopher, Alyssa Goldman,† and Emily A. Wang. “Age-Standardized Mortality of Persons on Probation, in Jail, or in State Prison and the General Population, 15 US States, 2001-2012.” Public Health Reports 134:660-666.
*Wang, Emily A., Jessica B. Long, Kathleen A. McGinnis, Karen H. Wang, Christopher Wildeman, Clara Kim, Kristofer B. Bucklen, David Fiellin, Jonathan Bates, Cynthia Brandt, and Amy C. Justice. “Measuring Exposure to Incarceration Using the Electronic Health Record.” Medical Care 57:S157-S163.
Roehrkasse, Alexander F., and Christopher Wildeman. “Administrative Data and LongTerm Trends in Child Maltreatment: The Prospects and Pitfalls.” Lancet Public Health 4:e121-e122
Wildeman, Christopher. “How Badly Do We Undercount Chronic Maltreatment, and How Much Should Clinicians Care?” Journal of the American Academy of Child & Adolescent Psychiatry 58:1152-1153.
*Branigan, Amelia R., and Christopher Wildeman. “Parental Incarceration and Child Overweight: Results from a Sample of Disadvantaged Children in the United States.” Public Health Reports 134:363-370.
Yi, Youngmin,† and Christopher Wildeman. “Can Foster Care Interventions Diminish Justice System Inequality?” Future of Children 28:37-58.
*Wildeman, Christopher, Maria D. Fitzpatrick, and Alyssa Goldman.† “Conditions of Conﬁnement in American Prisons and Jails.” Annual Review of Law and Social Science 14:29-47.
*Wildeman, Christopher, Alyssa Goldman,† and Kristin Turney. “Parental Incarceration and Child Health in the United States.” Epidemiologic Reviews 40:146-156.
Wildeman, Christopher. “The Incredibly Credible Prevalence of Child Protective Services Contact in New Zealand and the United States.” American Journal of Public Health 108:438-439.
*Edwards, Frank R., and Christopher Wildeman. “Characteristics of the Front-Line Child Welfare Workforce.” Children and Youth Services Review 89:13-26.

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2017 2016

*Turney, Kristin, and Christopher Wildeman. “Maternal Incarceration and Family Functioning in Fragile Families.” Social Forces 96:1155-1182.
*Wildeman, Christopher and Emily A. Wang. “Mass Incarceration, Public Health, and Widening Inequality in the US.” The Lancet 389:1464-1474.
*Wildeman, Christopher, and Signe Hald Andersen. “Paternal Incarceration and Children’s Risk of Being Charged by Early Adulthood: Evidence from a Danish Policy Shock.” Criminology 55:32-58.
*Wildeman, Christopher, Kris Scardamalia, Elizabeth G. Walsh, Rourke L. O’Brien, and Bridget Brew.† “Paternal Incarceration and Teachers’ Expectations of Students.” Socius 3.
Wildeman, Christopher, and Peter Fallesen. “The Eﬀect of Lowering Welfare Payment Ceilings on Children’s Risk of Out-of-Home Placement.” Children and Youth Services Review 72:82-90.
*Kim, Hyunil, Christopher Wildeman, Melissa Jonson-Reid, and Brett Drake. “Lifetime Prevalence of Investigating Child Maltreatment Among US Children.” American Journal of Public Health. 107:274-280.
*Turney, Kristin, and Christopher Wildeman. “Adverse Childhood Experiences Among Children Placed in and Adopted from Foster Care: Evidence from a Nationally Representative Survey.” Child Abuse and Neglect 64:117-129.
*Branigan, Amelia R., Christopher Wildeman, Jeremy Freese, and Catarina I. Kiefe. “Complicating Colorism: Race, Skin Color, and the Likelihood of Arrest.” Socius 3.
*Eason, John M., Danielle Zucker,† and Christopher Wildeman. “Mass Imprisonment Across the Rural-Urban Continuum.” ANNALS of the American Academy of Political and Social Science 672:202-216.
*Winkelman, Tyler, Inginia Genao, Christopher Wildeman, and Emily A. Wang. “Emergency Department and Hospital Utilization Among Justice-Involved Adolescents.” Pediatrics 140:e20171144.
*Yi, Youngmin,† Kristin Turney, and Christopher Wildeman. “Mental Health Among Prison and Jail Inmates.” American Journal of Men’s Health 11:900-909.
*Wildeman, Christopher. “Incarceration and Population Health in Wealthy Democracies.” Criminology 54:360-382.
*Muller, Christopher, and Christopher Wildeman. “Geographic Variation in the Cumulative Risk of Imprisonment and Parental Imprisonment in the United States.” Demography 53:1499-1509.
*Turney, Kristin, and Christopher Wildeman. “Mental and Physical Health of Children in Foster Care.” Pediatrics 138:e20161118.
*Wildeman, Christopher, E. Ann Carson, Daniela Golinelli, Margaret E. Noonan, and Natalia Emanuel.† “Mortality Among White, Black, and Hispanic Male and Female State Prisoners, 2001-2009.” SSM – Population Health 2:10-13.

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2015 2014

*Wildeman, Christopher, Margaret E. Noonan, Daniela Golinelli, E. Ann Carson, and Natalia Emanuel.† “State-Level Variation in the Imprisonment-Mortality Relationship, 2001-2010.” Demographic Research 34:359-372.
Wildeman, Christopher. “Is It Better to Sit on Our Hands or Just Dive in? Cultivating Family-Friendly Criminal Justice Policy in the Contemporary Era.” Criminology and Public Policy 15:497-502.
*Wildeman, Christopher, Kristin Turney, and Youngmin Yi.† “Paternal Incarceration and Family Functioning: Variation Across Federal, State, and Local Facilities.” ANNALS of the American Academy of Political and Social Science 665:80-97.
Wakeﬁeld, Sara, Hedwig Lee, and Christopher Wildeman. “Tough on Crime, Tough on Families? Criminal Justice and Family Life in America.” ANNALS of the American Academy of Political and Social Science 665:8-21.
*Lee, Hedwig, Tyler McCormick, Margaret T. Hicken, and Christopher Wildeman. “Inequalities in Connectedness to Imprisoned Individuals in the United States.” Du Bois Review 12:269-282.
*Papachristos, Andrew V., Christopher Wildeman, and Elizabeth Roberto. “Tragic, but not Random: The Social Contagion of Non-Fatal Gunshot Injuries.” Social Science and Medicine 125:139-150.
*Fallesen, Peter,† and Christopher Wildeman. “The Eﬀect of Medical Treatment of Attention Deﬁcit Hyperactivity Disorder (ADHD) on Foster Care Caseloads: Evidence from Danish Registry Data.” Journal of Health and Social Behavior 56:398-414.
*Turney, Kristin, and Christopher Wildeman. “Self-Reported Health Among Recently Incarcerated Mothers.” American Journal of Public Health 105:2014-2020.
*Wildeman, Christopher, and Lars H. Andersen.† “Cumulative Risks of Paternal and Maternal Incarceration in Denmark and the United States.” Demographic Research 32:15671580.
*Andersen, Lars H.,† and Christopher Wildeman. “Measuring the Eﬀect of Probation and Parole Oﬃcers on Labor Market Outcomes and Recidivism.” Journal of Quantitative Criminology 31:629-652.
*Patterson, Evelyn J., and Christopher Wildeman. “Mass Imprisonment and the Life Course Revisited: Cumulative Years Spent Imprisoned and Marked for Working-Age Black and White Men.” Social Science Research 53:325-337.
*Turney, Kristin, and Christopher Wildeman. “Detrimental for Some? The Heterogeneous Eﬀects of Maternal Incarceration on Child Wellbeing.” Criminology and Public Policy 14:125-156.
*Bacak, Valerio,† and Christopher Wildeman. “An Empirical Assessment of the Healthy Prisoner Hypothesis.” Social Science and Medicine 138:187-191.
*Wildeman, Christopher, and Kristin Turney. “Positive, Negative, or Null? The Eﬀects of Maternal Incarceration on Children’s Behavioral Problems.” Demography 51:1041-1068.
*Wildeman, Christopher, and Jane Waldfogel. “Somebody’s Children or Nobody’s Children? How the Sociological Perspective Could Enliven Research on Foster Care.” Annual Review of Sociology 40:599-618.

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*Wildeman, Christopher, Natalia Emanuel,† John M. Leventhal, Emily PutnamHornstein, Jane Waldfogel, and Hedwig Lee. “The Prevalence of Conﬁrmed Maltreatment Among US Children, 2004-2011.” JAMA Pediatrics 168:706-713.
*Wildeman, Christopher, and Natalia Emanuel.† “Cumulative Risks of Foster Care Placement for American Children, 2000-2011.” PLOS ONE 9:e92785.
*Wildeman, Christopher, Signe Hald Anderson, Hedwig Lee, and Kristian Bernt Karlson. “Parental Incarceration and Child Mortality in Denmark.” American Journal of Public Health 104:428-433
*Fallesen, Pater,† Natalia Emanuel,† and Christopher Wildeman. “Cumulative Risks of Foster Care Placement for Danish Children.” PLOS ONE 9:e109207.
Wildeman, Christopher, and Sara Wakeﬁeld. “The Long Arm of the Law: The Concentration of Incarceration in Families in the Era of Mass Incarceration.” Journal of Gender, Race, and Justice. 17:367-389
*Lee, Hedwig, Christopher Wildeman, Emily A. Wang, Nikki Matusko, and James S. Jackson. “A Heavy Burden? The Cardiovascular Health Consequences of Having a Family Member Incarcerated.” American Journal of Public Health 104:421-427.
*Wildeman, Christopher, Kristin Turney, and Jason Schnittker. “The Hedonic Consequences of Punishment Revisited.” Journal of Criminal Law and Criminology 104:133-163.
Wildeman, Christopher. “Parental Incarceration, Child Homelessness, and the Invisible Consequences of Mass Imprisonment.” ANNALS of the American Academy of Political and Social Science 651:74-96
*Wang, Emily A., Jenerius A. Aminawung, Christopher Wildeman, Joseph S. Ross, and Harlan M. Krumholz. “High Incarceration Rates Among Black Men Enrolled in Clinical Studies May Compromise Ability to Identify Disparities.” Health Aﬀairs 33:848-855.
*Andersen, Signe Hald, and Christopher Wildeman. “The Eﬀect of Paternal Incarceration on Children’s Risk of Foster Care Placement.” Social Forces 93:269-298.
Weaver, Vesla M., Jacob S. Hacker, and Christopher Wildeman. “Detaining Democracy? Criminal Justice and American Civic Life.” ANNALS of the American Academy of Political and Social Science 651:6-21.
*Papachristos, Andrew V., and Christopher Wildeman. “Network Exposure and Homicide Victimization in an African-American Community.” American Journal of Public Health 104:143-150.
*Dumont, Dora, Christopher Wildeman, Hedwig Lee, Annie Gjelsvik, Pamela Valera, and Jennifer G. Clarke. “Incarceration, Maternal Hardship, and Perinatal Health Behaviors.” Maternal and Child Health Journal 18:2179-2187.
*Rich, Josiah D., Redonna Chandler, Brie Williams, Dora M. Dumont, Emily A. Wang, Faye Taxman, Scott Allen, Jennifer Clarke, Robert Greiﬁnger, Christopher Wildeman, Fred Osher, Steven Rosenberg, Craig Haney, and Bruce Western. “How Health Care Reform Can Transform the Health of Criminal Justice-Involved Individuals.” Health Aﬀairs 33:462-467.

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2013 2012
2011 2010

Birnbaum, Nathan, Melissa Lavoie, Nicole Redmond, Christopher Wildeman, and Emily A. Wang. “Termination of Medicaid Policies and Implications for the Aﬀordable Care Act.” American Journal of Public Health 108:e3-e4.
*Turney, Kristin, and Christopher Wildeman. “Redeﬁning Relationships: Explaining the Countervailing Consequences of Paternal Incarceration for Parenting Quality.” American Sociological Review 78:949-979.
*Wildeman, Christopher, Hedwig Lee, and Megan Comfort. “A New Vulnerable Population? The Health of Female Partners of Men Recently Released from Prison.” Women’s Health Issues 23:e335-e340.
*Wildeman, Christopher, Sara Wakeﬁeld, and Kristin Turney. “Misidentifying the Effects of Parental Incarceration? A Comment on Johnson and Easterling (2012).” Journal of Marriage and Family 75:252-258
*Lee, Hedwig, and Christopher Wildeman. “Things Fall Apart: Health Consequences of Mass Imprisonment for African American Women.” Review of Black Political Economy 40:39-52.
*Wildeman, Christopher, and Christopher Muller. “Mass Imprisonment and Inequality in Health and Family Life.”Annual Review of Law and Social Science 8:11-30.
*Turney, Kristin, Christopher Wildeman, and Jason Schnittker. “As Fathers and Felons: Explaining the Eﬀects of Current and Recent Incarceration on Major Depression.” Journal of Health and Social Behavior 53:467-483.
*Turney, Kristin, Jason Schnittker, and Christopher Wildeman. “Those They Leave Behind: Paternal Incarceration and Maternal Instrumental Support.” Journal of Marriage and Family 74:1149-1165.
*Wildeman, Christopher. “Imprisonment and Infant Mortality.”Social Problems 59:228257.
*Wildeman, Christopher, Jason Schnittker, and Kristin Turney. “Despair by Association? The Mental Health of Mothers with Children by Recently Incarcerated Fathers.” American Sociological Review 77:216-243.
*Wildeman, Christopher. “Imprisonment and (Inequality in) Population Health.” Social Science Research 41:74-91.
*Wakeﬁeld, Sara, and Christopher Wildeman. “Mass Imprisonment and Racial Disparities in Childhood Behavioral Problems.” Criminology and Public Policy 10:791-817.
*Wang, Emily A., and Christopher Wildeman. “Studying Health Disparities by Including Incarcerated and Formerly Incarcerated Individuals.” JAMA 305:1708-1709.
Wildeman, Christopher. “Invited Commentary: (Mass) Imprisonment and (Inequities in) Health.” American Journal of Epidemiology 173:488-491.
Wildeman, Christopher. “Commentary on Roettger et al. (2011): Confronting the Elephant in the Room.” Addiction 106:133-134.
*Wildeman, Christopher. “Paternal Incarceration and Children’s Physically Aggressive Behaviors: Evidence from the Fragile Families and Child Wellbeing Study.” Social Forces 89:285-310.

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2009 2008 2007

2008 Outstanding Graduate Student Paper. ASA Crime, Law, and Deviance Section.
Wildeman, Christopher, and Bruce Western. “Incarceration in Fragile Families.” Future of Children 20:157-177.
*Wildeman, Christopher, and Christine Percheski. “Associations of Childhood Religious Attendance, Family Structure, and Nonmarital Fertility Across Cohorts.” Journal of Marriage and Family 71:1294-1308.
*Wildeman, Christopher. “Parental Imprisonment, the Prison Boom, and the Concentration of Childhood Disadvantage.” Demography 46:265-280.
2008 Dorothy Thomas Award. Population Association of America. 2007 Outstanding Graduate Student Paper. ASA Children and Youth Section. 2007 Outstanding Graduate Student Paper. ASA Sociology of Family Section.
Western, Bruce, and Christopher Wildeman. “The Black Family and Mass Incarceration.” ANNALS of the American Academy of Political and Social Science 621:221-242.
Portions reprinted in: Western, Bruce, and Christopher Wildeman. “Punishment, Inequality, and the Future of Mass Incarceration.” Kansas Law Review 57:851-877.
*Wildeman, Christopher. “Soliciting Prayer for the Absent, Measuring Their Social Worth: Prayer Requests for the Deployed and the Incarcerated.” Poetics 36:421-434.
*Cadge, Wendy, and Christopher Wildeman. “Facilitators and Advocates: How Mainline Protestant Clergy Respond to Homosexuality.” Sociological Perspectives 51:587-603.
*Wildeman, Christopher. “Conservative Protestantism and Paternal Engagement in Fragile Families.” Sociological Forum 23:556-574.
*Cadge, Wendy, Laura Olson, and Christopher Wildeman. “How Denominational Context Inﬂuences Debate about Homosexuality in Mainline Protestant Congregations.” Sociology of Religion 69:187-207.
*Percheski, Christine, and Christopher Wildeman. “Becoming a Dad: Employment Trajectories of Married, Cohabiting, and Nonresidential Fathers.” Social Science Quarterly 26:482-501.
*Cadge, Wendy, Heather Day, and Christopher Wildeman. “Bridging the Denomination-Congregation Divide: Evangelical Lutheran Church in America Congregations Respond to Homosexuality.” Review of Religious Research 48:245-259.

Op-Eds, Book Reviews, and Other Writings

2020 Wildeman, Christopher, and Lars H. Andersen. “Even Better Data on Solitary Conﬁnement Are Needed.” Lancet Public Health.

2019

Goldman, Alyssa,† Lars H. Andersen, Signe H. Andersen, and Christopher Wildeman. “Can Alternatives to Incarceration Enhance Child Well-being?” Pp. 237-248 in Handbook on Children with Incarcerated Parents: Research, Policy, and Practice: Second Edition, Edited by J. Mark Eddy and Julie Poehlmann-Tynan.

2018

Wakeﬁeld, Sara, and Christopher Wildeman. “How Much Might Mass Imprisonment Aﬀect Inequality?” Pp. 58-72 in Prisons, Punishment, and Families: Towards a New Sociology of Punishment, Edited by Rachel Condry and Peter Scharﬀ Smith. New York, NY: Oxford University Press.

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2017
2016 2015 2013

*Wakeﬁeld, Sara, and Christopher Wildeman. “How Parental Incarceration Harms Children and What To Do About It.” National Council on Family Relations Policy Brief 3:1-6
Brew, Bridget,† Alyssa Goldman,† and Christopher Wildeman. “Eﬀects of Corrections on Families and Communities.” Pp. 443-454 in Routledge Handbook of Corrections in the United States, Edited by O. Hayden Griﬃn III and Vanessa H. Woodward. New York, NY: Routledge Press.
Wildeman, Christopher, Anna R. Haskins, and Julie Poehlmann-Tynan. “Invigorating Research and Practice on Children of Incarcerated Parents.” Pp. 3-8 in When Parents Are Incarcerated: Interdisciplinary Research and Interventions to Support Children, Edited by Christopher Wildeman, Anna R. Haskins, and Julie Poehlmann-Tynan. Washington, DC: American Psychological Association Press.
Wildeman, Christopher, Anna R. Haskins, and Julie Poehlmann-Tynan. “Steps for Future Interdisciplinary Research and Interventions for Children with Incarcerated Parents.” Pp. 195-200 in When Parents Are Incarcerated: Interdisciplinary Research and Interventions to Support Children, Edited by Christopher Wildeman, Anna R. Haskins, and Julie Poehlmann-Tynan. Washington, DC: American Psychological Association Press.
*Andersen, Signe Hald, Lars H. Andersen, Maria D. Fitzpatrick, and Christopher Wildeman. “How Alternatives to Imprisonment Could Aﬀect Child Well-Being.” Pp. 151-172 in When Parents Are Incarcerated: Interdisciplinary Research and Interventions to Support Children, Edited by Christopher Wildeman, Anna R. Haskins, and Julie PoehlmannTynan. Washington, DC: American Psychological Association Press.
Wildeman, Christopher. “Book Review of The Punishment Imperative: The Rise and Failure of Mass Incarceration in America by Todd R. Clear and Natasha A. Frost. New York, NY: New York University Press, 2013. 269 pp. $30 cloth. ISBN: 9780814717196.” Contemporary Sociology 45:33-35.
Wildeman, Christopher. “Incarceration and Health.” In Emerging Trends in the Social and Behavioral Sciences, Edited by Robert A. Scott and Stephen M. Kosslyn. John Wiley & Sons, Inc.
Wildeman, Christopher. “Book Review of Pulled Over: How Police Stops Deﬁne Race and Citizenship by Charles E. Epp, Steven Maynard-Moody, and Donald P. Haider-Markel. Chicago, IL: University of Chicago Press. Pp. xvii + 253. $25.00 (paper).” American Journal of Sociology 115:1555-1557.
Wildeman, Christopher. “Book Review of Invisible Men: Mass Incarceration and the Myth of Black Progress by Becky Pettit. Russell Sage Foundation, 2012, 141 Pages. $29.95 (paper).” Social Forces e89.
Wildeman, Christopher. “How Mass Imprisonment Has – and Has Not – Shaped Childhood Inequality.” Communities and Banking 25:7-9.
*Wildeman, Christopher, Anna R. Haskins, and Christopher Muller. “Implications of Mass Imprisonment for Inequality among American Children.” Pp. 177-191 in The Punitive Turn: New Approaches to Race and Incarceration, Edited by Deborah E. McDowell, Claudrena Harold, and Juan Battle. Charlottesville: University of Virginia Press.

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2012 2010 2008

Fallesen, Peter,† Natalia Emanuel,† and Christopher Wildeman. “Den Kumulative Risiko for Anbringelse Udenfor Hjemmet.” Pp. 31-44 in Nar Man Anbringer et Barn, del 2: Arsager, Eﬀekter og Konsekvenser, Edited by Signe Hald Andersen and Peter Fallesen. Odense: University Press of Southern Denmark.
Wildeman, Christopher, and Signe Hald Andersen. “Nar Dar Kommer i Fængsel.” Pp. 71-100 in Nar Man Anbringer et Barn, del 2: Arsager, Eﬀekter og Konsekvenser, Edited by Signe Hald Andersen and Peter Fallesen. Odense: University Press of Southern Denmark.
Muller, Christopher, and Christopher Wildeman. “Punishment and Inequality.” Pp. 169-185 in Handbook of Punishment and Society, Edited by Jonathan Simon and Richard Sparks. London: Sage Publications.
*Wildeman, Christopher. “Mass Parental Imprisonment, Social Policy, and the Future of Inequality in America.” Pp. 303-317 in Children of Incarcerated Parents: A Handbook for Researchers and Practitioners, Edited by J. Mark Eddy and Julie Poehlmann. Washington: Urban Institute Press.
Wildeman, Christopher, and Christopher Muller. “Incarceration, Adulthood.” Pp. 221-225 in Encyclopedia of the Life Course and Human Development: Volume 2, Edited by Deborah Carr. Detroit: MacMillan Reference USA.

Under Review and In Progress (R&R; UR [Under Review]; and IP [In Progress])

R&R

Wildeman, Christopher and Hedwig Lee. “How Are Women Faring in the Carceral State?” Invited contribution to Annual Review of Sociology.

UR Yi, Youngmin,† Joseph Kennedy, Cynthia Chazotte, Mary Huynh, Yang Jian, and Christopher Wildeman. “Paternal Incarceration and Birth Outcomes: Evidence from New York City, 2010-2016.”

Anker, Anne Soﬁe Tegner,† and Christopher Wildeman. “Identifying and Explaining Patterns in Family Visitation During Incarceration.”

Fitzpatrick, Maria D., Lars H. Andersen, and Christopher Wildeman. “How Does Visitation Aﬀect Incarcerated Persons and Their Families? Estimates Using Exogenous Variation in Visits Driven by Distance Between Home and Prison.”

Putnam-Hornstein, Emily, Eunhye Ahn, John Prindle, and Christopher Wildeman. “A Birth Cohort Study of Child Protection Involvement and Termination of Parental Rights Due to Child Abuse and Neglect.”

Yi, Youngmin,† and Christopher Wildeman. “How the AFCARS and NCANDS Can Provide Insight into Linked Administrative Data.”

Brew, Bridget,† Frances Alani,† Huixian Li,† and Christopher Wildeman. “Sticky Stigma: The Impact of Incarceration on Perceptions of Personality Traits and Deservingness.”

IP Yi, Youngmin,† Peter K. Enns, and Christopher Wildeman. “(How) Does Incarceration Shape Civic Participation, Community Engagement, and Trust in the State?”

Edwards, Frank R., Sara Wakeﬁeld, and Christopher Wildeman. “The Cumulative Risk of Child Welfare System Involvement in Large U.S. Counties.”

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Yi, Youngmin,†, Natalia Emanuel,† Jane Waldfogel, John M. Leventhal, Hedwig Lee, and Christopher Wildeman. “State-Level Variation in the Cumulative Prevalence of Conﬁrmed Maltreatment and Foster Care Placement Among US Children, 2004-2015.”
Roehrkasse, Alexander F., Christopher Muller, and Christopher Wildeman. “Moving Beyond Black and White: Estimating the Cumulative Prevalence of Imprisonment and Parental Imprisonment for Asian Americans and Native Americans, 1986-2004.”
Selected Grants, Awards, and Fellowships (Total Costs Listed for All Grants)
2020-2022 “Mass Incarceration and Violence in Families.” National Science Foundation. $138,000 (Role: Co-PI; Project to fund Tasseli McKay as a National Science Foundation Postdoc).
2019-2021 “Transitioning: An App-Based Pilot Study of Youth on the Cusp of Leaving Home.” Conrad N. Hilton Foundation. $250,000 (Role: PI).
2019-2020 “Demographic Projections of the Child Welfare Population.” Casey Family Programs. $198,00 (Role: PI).
2019 “Exploring the Causes of Native American Exceptionalism in the Child Welfare System.” Casey Family Programs. $50,00 (Role: PI).
2018-2020 “Measuring Familial History of Incarceration.” FWD.us. $472,500 (Role: PI).
2017-2022 National Data Archive on Child Abuse and Neglect. Administration for Children and Families. $5,260,782 (Role: PI 2017-2020; Co-PI 2020-2022).
2017-2018 “Linking NYC Administrative Data to Estimate Parental Incarceration’s Eﬀects on Children.” Center for the Study of Inequality at Cornell University. $68,825 (Role: PI).
2017-2018 “Linking NYC Administrative Data to Estimate Parental Incarceration’s Eﬀects on Children.” Russell Sage Foundation. $35,000 (Role: PI).
2017-2018 “Preliminary Analysis of Caseworkers in NCANDS/AFCARS.” Casey Family Programs. $125,00 (Role: PI).
2017 Cornell Graduate and Professional Students Association Faculty Award for Excellence in the Teaching, Advising, and Mentoring of Graduate and Professional Students.
2016-2018 “Geographic Variation in Child Maltreatment and Foster Care Placement.” National Institutes of Health. Eunice Kennedy Shriver National Institute of Child Health and Human Development. $176,789 (Role: PI).
2016 “Geographic Variation in Child Maltreatment and Foster Care Placement.” Casey Family Programs. $50,00 (Role: PI).
2016 Outstanding Book Award. ASA Inequality, Poverty, and Mobility Section.
2015-2018 Theme Project on the Causes, Consequences, and Future of Mass Incarceration. Institute for the Social Sciences. Cornell University. $150,000 (Role: Co-I).
2015-2017 National Data Archive on Child Abuse and Neglect. Administration for Children and Families. $1,813,289 (Role: Co-PI).
2015-2017 Faculty Fellow. Bronfenbrenner Center for Translational Research. Cornell University.

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2015-2016 Steering Committee Member. National Academy of Sciences Workshop on Collecting Indicators of Criminal Justice System Involvement on Population Health Data Surveys.
2015-2016 “The Physical and Mental Health of Women Attached to Incarcerated Men.” West Coast Poverty Center at the University of Washington. $20,000 (Role: Co-I).
2014-2015 “Paternal Incarceration and Teachers’ Expectations of Students.” Institute for the Social Sciences. Cornell University. $10,500 (Role: PI).
2013 Ruth Shonle Cavan Young Scholar Award from the American Society of Criminology.
2013 Distinguished New Scholar Award from the American Society of Criminology’s Division on Corrections and Sentencing.
2013-2014 “Using Social Network Analysis for Crime Prevention and Evaluation.” Department of Justice. Oﬃce of Justice Programs. $300,000 (Role: Co-I).
2012-2017 Bureau of Justice Statistics Visiting Fellows Program: Criminal Justice. Oﬃce of Justice Programs. Department of Justice. $322,201 ($112,504 for 2012-2014; $149,967 for 20142016; $60,000 in 2017). (Role: PI).
2012-2013 Junior Faculty Fellowship. Yale University.
2012 Summmer Research Institute (SRI). National Data Archive on Child Abuse and Neglect (NDACAN). Cornell University.
2011-2012 “Redeﬁning Relationships: Explaining the Countervailing Consequences of Paternal Incarceration for Parenting.” National Center for Family and Marriage Research External Grants Program. $20,000 (Role: PI).
2010-2011 “Children of the Prison Boom: Mass Incarceration and the Future of American Inequality.” Presidential Authority Award. Russell Sage Foundation. $34,633 (Role: Co-I).
2009-2010 Emerging Scholars. University of Kentucky Center for Povery Research (UKCPR).
2009-2010 “Imprisonment and (Inequality in) Population Health.” Young Investigator Development Grants Program. University of Kentucky Center for Poverty Research (UKCPR). $6,133 (Role: PI).
2009-2010 “Imprisonment and (Inequality in) Population Health.” Robert Wood Johnson Foundation Health & Society Scholars Small Grants Program. $15,424 (Role: PI).
2008 Outstanding Graduate Student Paper. ASA Crime, Law, and Deviance Section.
2008 Dorothy Thomas Award. Population Association of America.
2007-2008 Harry Frank Guggenheim Dissertation Fellowship. $20,000 (Role: PI).
2007 Finalist. Robert Wood Johnson Foundation Scholars in Health Policy Research Program. (Declined in order to interview for the Robert Wood Johnson Foundation Health & Society Scholars Program.)
2007 Outstanding Graduate Student Paper. ASA Children and Youth Section.
2007 Outstanding Graduate Student Paper. ASA Sociology of Family Section.

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2006 Marvin Bressler Graduate Student Teaching Award. Princeton University Department of Sociology.
Selected Presentations (* Indicates Invited; † Indicates Scheduled)
Life After Solitary Confinement: College of Human Ecology Employee Rejuvenation (CHEER) at Cornell University * (2019).
Indebted by Proxy: How Women and Children Are Faring Under the Carceral State: SUNYCortland * (2019).
What Percentage of Americans Have Ever Had a Family Member Incarcerated? Evidence from the Family History of Incarceration Survey (FamHIS): Vera Institute of Justice * (2019); and Universidad Carlos III de Madrid * (2019).
Why (and Maybe How) Foster Care Interventions Could Decrease Justice System Inequality: Conference on Multisystem Approaches to Help Keep Children Out of the Justice System at Princeton University * (2018).
How The AFCARS and NCANDS Can Provide Insight into Linked Administrative Data: Penn State Child Maltreatment Solutions Network Conference * (2018).
Childhood in an Era of Mass Forced Parental Absence: American Sociological Association * (2018).
Cumulative Prevalence of Child Protective Services Contact for American Children: Keynote at Children’s Data Network Convening on the Child Welfare System at the University of Southern California * (2018).
Using Linked Administrative Data to Estimate the Effects of Parental Incarceration on Birth Outcomes: Duke University Population Research Institute * (2020); University of North Carolina School of Medicine * (2018); and Population Association of America (2018).
Mass Incarceration, Public Health, and Widening Inequality in the US: Weill Cornell Medicine Clinical & Translational Science Center * (2019), Harvard Medical School * (2017), and Yale Medical School * (2017).
What Mass Incarceration Means for American Children: The Policy Lab at Yale University * (2017).
The Past, Present, and Future of the National Data Archive on Child Abuse and Neglect: North American Data Documentation Initiative Conference (2017).
(How) Can Foster Care Diminish Inequality in Children’s Justice System Contact?: Future of Children Conference at Princeton University * (2017).
The Long-Term Consequences of Solitary Confinement: Duke University Department of Sociology * (2019), University of California, Berkeley Demography Brown Bag Series * (2019), Northwestern University * (2019), University of North Carolina School of Social Work * (2018), Vanderbilt University Department of Sociology * (2018), Washington University St. Louis Department of Sociology * (2017), Population Research Center Brown Bag at the University of Texas at Austin * (2017), Notestein Seminar Series in the Oﬃce of Population Research at Princeton University * (2017), University of Chicago Population Research Center * (2017), and Center for the Study of Inequality at Cornell University (2017).
Cumulative Prevalence of Having a Child Protective Services Investigation by Age 8 for US Children: International Family Violence and Child Victimization Research Conference (2016).

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What Do We Want to Measure When We Measure Criminal Justice Contact?: National Academy of Sciences Workshop on Improving Collection of Indicators of Criminal Justice System Involvement in Population Health Data Programs * (2016).
Paternal Incarceration and Teacher Expectations of Students: Epidemiology Seminar Series at Brown University’s School of Public Health * (2016), Jensen Lecture Series at Duke University’s Department of Sociology * (2016), Institute on Health Economics, Health Behaviors and Disparities at Cornell University * (2016), American Sociological Association * (2016), Summer Lecture Series at the Silver Bay YMCA * (2016), Youth Development Research Update at the Bronfenbrenner Center for Translational Research at Cornell University * (2016), Rockwool Foundation Research Unit * (2016), Research for Reform Conference in the Malcolm Wiener Center for Social Policy at Harvard University * (2016), Institute of Human Development and Social Change at New York University * (2016), Institute for Research on Poverty at the University of Wisconsin * (2016), and Department of Human Development at Cornell University * (2016).
Paternal Incarceration and Children’s Risk of Being Charged by Early Adulthood: McCourt School of Public Policy at Georgetown University * (2017) and Population Association of America (2016).
Family Life in an Era of Mass Incarceration: College of Human Ecology Employee Rejuvenation at Cornell University * (2015) and Clarke Forum for Contemporary Issues at Dickinson College * (2015).
The Effect of Lowering Welfare Payment Ceilings on Children’s Risk of Out-of-Home Placement: Institute for Research on Poverty at the University of Wisconsin * (2015).
Variation in the Imprisonment-Mortality Relationship: Eastern Sociological Society * (2015).
Geographic Variation in the Cumulative Risk of Maltreatment and Foster Care Placement: Casey Family Programs * (2017), Duke University Population Research Institute * (2016), Center for Demography and Ecology at the University of Wisconsin * (2016), Stice Lecture Series, Department of Sociology, and Center for Statistics and the Social Sciences at the University of Washington * (2015), Rockwool Foundation Research Unit * (2015), Columbia University Department of Sociology * (2015), Oﬃce of Academic Diversity Initiatives at Cornell University * (2015), Emory University Department of Sociology * (2015), Loyola University * (2015), Inequality and Social Policy Seminar Series at Harvard University * (2014), and Center for the Study of Inequality at Cornell University (2014).
Collateral Consequences of Mass Incarceration for Children, Adult Women, and Communities: Congressional Brieﬁng on the Collateral Consequences of Mass Incarceration * (2014).
Implications of Sociology’s Methodological Breadth: Keynote Address at Kent State University’s Alpha Kappa Delta (AKD) Honors and Awards Banquet * (2014).
Growth and Inequality in the Cumulative Risk of Paternal and Maternal Imprisonment: Conference on Parental Incarceration in the United States: Bringing Together Research and Policy to Reduce Collateral Costs to Children at the White House * (2013).
Is Incarceration a Poverty Trap: Administration for Children and Families Welfare Research and Evaluation Conference * (2013).
Effects of Mass Imprisonment on Women and Children: Virginia Department of Probation and Parole Annual Conference * (2013).
Mortality and Morbidity in Recently Released Prisoners: Virginia Department of Probation and Parole Annual Conference * (2013).

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Using Mass Incarceration and the Affordable Care Act to Improve the Health of Those Who Aren’t Incarcerated: Institute of Medicine and National Academy of Sciences Workshop on Incarceration and Health * (2012).
Positive, Negative, or Null? The Effects of Maternal Incarceration on Children’s Behavioral Problems: Division of Prevention and Community Research at Yale University * (2013), Pennsylvania State University Department of Sociology * (2013), The Reentry Council Research Network, the Women and Reentry Steering Committee, and the Children of Incarcerated Parents Working Group of the Federal Interagency Reentry Council Staﬀ Working Group * (2013), American Sociological Association (2013), Population Association of America (2013), Rutgers University School of Criminal Justice * (2013), Fragile Families and Child Wellbeing Working Group * (2012), Jerry Lee Center of Criminology at the University of Pennsylvania * (2012), and Department of Policy Analysis and Management at Cornell University * (2012).
Children of the Prison Boom: Mass Incarceration and the Future of American Inequaliy: Cornell Cooperative Extension New York City * (2018), Summer Lecture Series at the Silver Bay YMCA * (2016), Foreverfamily Atlanta * (2015), Bronfenbrenner Center for Translational Research at Cornell University * (2015), Opening Keynote Address at Delaware Center for Justice’s Annual Meeting * (2014), Symposium on Squandered Resources: Incarceration’s Consequences, Costs, and Alternatives at Johns Hopkins University School of Public Health * (2014), Reversing Trajectories Conference at the University of Kentucky * (2014), Kent State University Department of Sociology * (2014), SUNY Albany Justice and Multiculturalism Project * (2014), Rutgers University Workshop on Quantitative Applications in Sociology * (2014), Family Centered Services of Connecticut * (2013), Edward Zigler Center in Child Development and Social Policy at Yale University * (2012), Social Welfare Series on Inequality and Dispossessed Lives Left Behind at the CUNY Graduate Center * (2012), Bucknell University Social Science Colloquium * (2012), Department of Sociology at the University of Oslo * (2012), Rockwool Foundation Research Unit * (2012), and Justice Policy Center at the Urban Institute * (2012).
Combining Descriptive and Causal Methods to Study Inequality (A Workshop): Social Science Research Center Berlin (WZB) * (2012).
Cumulative Risks of Foster Care Placement for U.S. Children, 2000-2011: Harvard School of Public Health’s Maternal and Child Health Seminar * (2014), McGill University Centre for Population Dynamics * (2014), Association for Public Policy Analysis and Management (2013), Population Association of America (2013), Population Studies Center at the University of Pennsylvania * (2013), Center for Research on Inequalities and the Life Course (CIQLE) at Yale University (2012), Population Studies Center (PSC) at the University of Michigan * (2012), Social Science Research Center Berlin (WZB) * (2012), Department of Education at Aarhus University * (2012), and Rockwool Foundation Research Unit * (2012).
Fathers and Fathering in the Era of Mass Incarceration: Fathers and Fathering in Contemporary Contexts at the National Center for Family and Marriage Research * (2012).
Despair by Association? The Mental Health of Mothers with Children by Recently Incarcerated Fathers: Eastern Sociological Society * (2012), Population Association of America (2011), and Yale Health Economics Workshop * (2011).
Parental Incarceration, Child Homelessness, and the Invisible Consequences of Mass Imprisonment: Detaining Democracy Conference at the Institution for Social and Policy Studies (ISPS) at Yale University * (2012), American Sociological Association (2012), American Society of Criminology (2011), Fragile Families and Child Wellbeing Working Group (2011), Population Association of America (2011), Center for Research on Inequalities and the Life Course (2011) at Yale University, Eastern Sociological Society (2011), Duke University Population Research Institute (DuPRI) * (2010), Yale Health Economics Workshop * (2010), American Bar Association Criminal Justice System Sentencing and Reentry Institute and Criminal Justice Legal Educators Colloquium * (2010), and Law and Society Association (2010).

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Imprisonment and (Inequality in) Population Health: University of Kentucky Center for Poverty Research Small Grants Conference * (2010), Robert Wood Johnson Foundation Health & Society Scholars Annual Meeting * (2010), Population Association of America (2010), and Center for Social Epidemiology and Population Health (CSEPH) at the University of Michigan * (2010).
Incarceration and Population Health in Wealthy Democracies: Department of Policy Analysis and Management and Cornell Population Center at Cornell University * (2014), Mailman School of Public Health at Columbia University * (2013), Robert Wood Johnson Foundation Health & Society Scholars Symposium on Mass Incarceration at the University of Michigan * (2013), American Society of Criminology (2012), Swedish Institute for Social Research (SOFI) at Stockholm University * (2012), Community Disruption and HIV Risk Conference at American University’s Center on Health, Risk, and Society * (2012), Neil A. Weiner Research Speaker Series at Vera Institute of Justice * (2012), Urban Social Processes Workshop at Harvard University * (2012), Incarceration Working Group at the Columbia Population Research Center (CPRC) at Columbia University * (2012), Population Association of America (2010), and Center for Research on Inequalities and the Life Course (CIQLE) at Yale University * (2010).
Imprisonment and Infant Mortality: Incarceration and Health Disparities Symposium at Harvard Medical School, Brigham and Women’s Hospital * (2011), University of Kentucky Center for Poverty Research * (2010), Child Psychiatric Epidemiology Group at Columbia University * (2009), University of Michigan Population Studies Center * (2009), Research Committee 28 (RC28) of the International Sociological Association (2009), Criminology and Population Dynamics Workshop (2009), Robert Wood Johnson Foundation Health & Society Scholars Annual Meeting * (2009), Population Association of America (2009), and Bowling Green State University Center for Family and Demographic Research * (2009).
Paternal Incarceration and Children’s Physically Aggressive Behaviors: Evidence from the Fragile Families and Child Wellbeing Study: American Sociological Association (2008), Population Association of America (2008), Aage Sorensen Memorial Conference at Harvard University (2008), and Fragile Families and Child Wellbeing Working Group (2007).
Parental Imprisonment, the Prison Boom, and the Concentration of Childhood Disadvantage: The Problem of Punishment Conference at the University of Virginia * (2009), University of North Carolina Department of Sociology * (2008), University of Minnesota Department of Sociology * (2008), University of Massachusetts Department of Sociology * (2008), Yale University Department of Sociology * (2008), Oﬃce of Population Research Notestein Seminar Series (2007), American Sociological Association (2007), Population Association of America (2007), Fragile Families and Child Wellbeing Working Group (2007), and Probing the Penal State Conference at the University of California-Berkeley * (2006).
Teaching and Advising (Pre-2020 activities at Cornell University/Yale University)
Incarceration and Inequality (F2020, Undergraduate).
Confinement! (S2016, S2017, S2018, Undergraduate).
Demographic Techniques (S2015, S2016, S2017, S2018, Graduate).
Mass Imprisonment and Urban Family Life (S2011, Undergraduate).
Orange Is the New Black (F2014, F2015, F2016, Undergraduate).
Punishment and Inequality (F2010, F2011, F2013, Undergraduate).
Senior Essay and Colloquium for Nonintensive Majors (S2011, Undergraduate).
Stats I (F2011, Graduate).
Stats II (S2012, Graduate).

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Views from the News (S2016, Undergraduate).
Workshop in Advanced Sociological Writing and Research I (F2013, Graduate).
Workshop in Advanced Sociological Writing and Research II (S2014, Graduate).
Senior Theses Advised: Shanica Baynes (2010-2011, Sociology), LaTisha Campbell (2011-2012, Sociology), Tony Cheng (2011-2012, Political Science, Thesis Awarded the Percival Wood Clement Prize), Paulo Coehlo Filho (2011-2012, Ethics, Politics, and Economics), Sabina Mehmedovic (2011-2012, Sociology), Olivia Schwob (2013-2014, Political Science), Angela Wang (2013-2014, Sociology, Thesis Awarded the Mildred Priest Frank Prize), and Akina Younge (2010-2011, Sociology).
Second Year Paper Committees: Sara Bastomski (2013), Inkwan Chung (2014), Kristin Plys (2011), Michael Sierra-Arevalo (2014), and Pianpian Xu (2012).
Field Exam Committees: Sara Bastomski (2014) and Marianne Wilson (2011).
Dissertation Committees: Erika Braithwaite (2017, McGill University Department of Epidemiology), Valerio Bacak (2015, University of Pennsylvania Department of Sociology), Bridget Brew (2019, Cornell University Department of Sociology), Caitlin Daniel (2017, Harvard University Department of Sociology), Allison Dwyer Emory (2017 [Co-Chair], Cornell University Department of Sociology), Frank Edwards (2017, University of Washington Department of Sociology), Matthew Lawrence (2014, Yale University Department of Sociology), Erin McCauley (Ongoing [Chair], Cornell University Department of Sociology), Kathleen Powell (2019, Rutgers University School of Criminal Justice), Celene Reynolds (2019, Yale University Department of Sociology), and Youngmin Yi (Ongoing [Co-Chair], Cornell University Department of Sociology).
Service and Other Professional Activities
Consulting Editor: American Journal of Sociology (2019-2021)
Deputy Editor: Demography (2017-2019, 2019-2021) Sociological Perspectives (2020-2022)
Editorial Board: Demography (2013-2016, 2016-2019) Law and Society Review (2014-2016) RSF: Russell Sage Foundation Journal of the Social Sciences (2020-2023) Social Forces (2014-2017, 2017-2020) Social Problems (2011-2014) Social Psychology Quarterly (2016-2018) Sociological Forum (2016-2018, 2019-2021)
Editorial Committee: Epidemiologic Reviews (2018 issue on Prisoners’ Health)

Last updated – June 9, 2020

17

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Reviewer (Abbreviated): American Journal of Epidemiology, American Journal of Public Health, American Journal of Sociology, American Political Science Review, American Sociological Review, ANNALS of the American Academy of Political and Social Sciences, Child Abuse and Neglect, Child Maltreatment, Children and Youth Services Review, Criminology, Criminology and Public Policy, Demography, Du Bois Review, Health Aﬀairs, JAMA Pediatrics, Journal of Economic Literature, Journal of Health and Social Behavior, Journal of Marriage and Family, Journal of Quantitative Criminology, Journal of Research in Crime and Delinquency, Lancet, Lancet Public Health, Law and Society Review, National Academy of Sciences, Engineering, and Medicine (Report on Community-Based Solutions to Promote Health Equity), National Science Foundation, New York University Press, National Institute of Justice, National Institutes of Health, Oxford University Press, Pediatrics, PNAS, Public Health Reports, Robert Wood Johnson Foundation, Russell Sage Foundation, Social Forces, Social Problems, Social Psychology Quarterly, Social Science and Medicine, Social Science History, Social Science Research, Social Service Review, Society and Mental Health, Sociological Forum, Sociological Science, Sociology of Education, University of California Press, and University of Chicago Press.

Member: American Society of Criminology (Division on Corrections and Sentencing); American Sociological Association (Sections: Children and Youth; Crime, Law, and Deviance; Family; Inequality, Poverty, and Mobility; and Population); and Population Association of America.

2019-2020

Member. ASA Crime, Law, and Deviance Section Nominations Committee.

2019- Faculty Advisory Board. Cornell University CIPA.

2018-2020

Co-Chair. Provost’s Review of the Social Sciences at Cornell University.

2018-2020

Member. PAA Dorothy S. Thomas Award Committee.

2018-2019

Member. ASA Children and Youth Section Distinguished Career Award Committee.

2018-2019

Chair. Cornell University PAM Faculty Recruitment Committee.

2018-2019

Member. Cornell University PAM Chair Recruitment Committee.

2018-2019

Core Faculty. Cornell University CIPA.

2018

Member. Cornell University Sociology Graduate Awards Committee.

2018

Scientiﬁc Review Panel. NIH (NICHD) CAPSTONE Centers for Multidisciplinary Research in Child Abuse and Neglect (P50).

2018

PAA Session Organizer. Mass Incarceration and Inequality in the U.S.

2017-2020

Member. Research Advisory Committee. Cornell University.

2017-2019

Member. National Science Foundation Sociology Dissertation Advisory Panel.

2017-2019

Member. Cornell University PAM Undergraduate Curriculum Committee.

2017-2018

Member. Cornell University PAM Faculty Recruitment Committee.

2017

Member. Organizational Structures Committee. Provost’s Review of the Social Sciences at Cornell University.

2017

Member. Search Committee. Senior Vice Provost for Research and Vice President for Technology Transfer, Intellectual Property, and Research Policy at Cornell University.

Last updated – June 9, 2020

18

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2017 20172016 2016
20162016 2016 2016 201520152015-2019 2015 2015 2015 2015 2014-2017 2014-2017 2014-2017 2014-2016 2014-2016 2014-2015 20142014 2014 2014 2013-2015 2013-2014 2013-2014

ASA Inequality, Poverty, and Mobility Session Organizer. Social Exclusion. Faculty Mentor. McNair Scholars Program. Scientiﬁc Review Panel. NIH (NICHD) Social Sciences and Population Studies A (SSPA). Scientiﬁc Review Panel. NIH (NICHD) CAPSTONE Centers for Multidisciplinary Research in Child Abuse and Neglect (P50). Crime and Justice Research Alliance. Member. Cornell University PAM Graduate Admissions Committee. Chair. Rhodes Postdoctoral Fellow Selection Committee. Cornell Population Center. Chair. Reception Committee. ASA Section on Children and Youth. Vera Institute of Justice Research Advisory Board. Cornell Population Center Advisory Committee. Cornell University PAM Executive Committee. Chair. Reception Committee. ASA Section on Children and Youth. Member. Cornell University PAM Graduate Admissions Committee. PAA Session Organizer. Demography of Crime and Punishment. Member. ASC Outstanding Article Committee. Secretary/Treasurer. ASA Section on Inequality, Poverty, and Mobility. Faculty Fellow. Court-Kay-Bauer Hall. Co-Director. Finger Lakes Regional Branch of the Scholars Strategy Network (SSN). Council Member. ASA Section on Children and Youth. Co-Chair. Cornell University PAM Faculty Recruitment Committee. Advisory Committee. National Data Archive on Child Abuse and Neglect. Aﬃliated Researcher. Children’s Data Network. Member. William Pickens Prize Committee. PAA Session Organizer. Incarceration and Labor Market Outcomes. PAA Discussant. Families Living Apart in the United States. Co-Director. Criminal Justice Working Group of the Scholars Strategy Network (SSN). ASC Division on Corrections and Sentencing Awards Committee. ASA Sociology of Population Section Committee on Nominations.

Last updated – June 9, 2020

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2013-2014 2013-2014
2013 2013 2013 2013 2012
2012 2012 2012 2012 201120112011-2014 2011-2014 2011-2012 2011-2012 2011 2011 2010-2014 2010-2012 2010-2012 2010-2011 2009 2006-2007

Yale University Sociology Department Graduate Student Admissions Committee. Organizer. Center for Research on Inequalities and the Life Course (CIQLE) Workshop. ASA Sociology of the Family Section Graduate Student Paper Award Committee. ASA Crime, Law, and Deviance Session Organizer. Social Consequences of Incarceration. ASA Crime, Law, and Deviance Program Committee. ASA Session Organizer. Punishment and Inequality. Invited Participant. Workshop on Health and Incarceration. Co-Sponsored by the Institute of Medicine’s Board on the Health of Select Populations and the National Academy of Sciences Committee on Law and Justice. ASC Session Organizer. Author Meets Critics for Becky Pettit’s Invisible Men. Commentator. Yale Symposium on Inequality. ASA Discussant. Stratiﬁcation. Member. Mildred Priest Frank Memorial Prize in Sociology (1984) Committee. Member. Scholars Strategy Research Network (SSN). Big Think Delphi Fellow (http://bigthink.com/). Co-Director. New Haven Regional Branch of the Scholars Strategy Network (SSN). Yale University Summer Undergraduate Research Fellowship (SURF) Program. Yale University Department of Sociology Faculty Recruitment Committee. Yale University CIPE Research Fellowships for Juniors Committee. ASC Discussant. New Longitudinal Data on Parental Incarceration and Child Wellbeing. PAA Session Organizer. Demography of Punishment and Demography of Crime. Faculty Fellow. Ezra Stiles Residential College. Yale University. Faculty Mentor. Mellon Mays Undergraduate Fellowship Program (MMUF). Yale University. Organizer. Center for Research on Inequalities and the Life Course (CIQLE) Workshop. Undergraduate Aﬀairs Committee. Yale University. ASA Sociology of the Family Section Graduate Student Paper Award Committee. Graduate Student Advisory Committee. Princeton University Department of Sociology.

Last updated – June 9, 2020

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Exhibit E

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Congress of the United States
Washington, D.C. 20515
April 6, 2020

The Honorable Steven Mnuchin Secretary U.S. Department of the Treasury 1500 Pennsylvania Avenue NW Washington, D.C. 20220

The Honorable Jovita Carranza Administrator Small Business Administration 409 3rd Street SW Washington, D.C. 20416

Dear Secretary Mnuchin and Administrator Carranza:
We are writing to express concern with the Business Loan Program Temporary Changes; Paycheck Protection Program Interim Final Rule, 13 CFR Part 120 (hereinafter, “Rule”). The Rule contains many restrictions that were not only not included in the CARES Act, they were not intended by Congress at all.
Specifically, Congress did not intend for people who have been released from prison and followed the law to start or help start a business to be prevented from getting the capital they need to save it. Congress certainly did not intend to doom the businesses of those who have not even been convicted at all. This rule does both those things. Specifically, section III(2)(b)(iii) states:
“An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years”
This provision is contrary to law, public policy, and common sense.
Congress and the Trump Administration have made criminal justice reform a national priority. Working together in a bipartisan fashion, the First Step Act was passed to allow people to be released from prison where appropriate, establish programs to reduce recidivism, and support the formerly incarcerated as they return to their communities. Now, the U.S. Department of the Treasury and the Small Business Administration seem to have designed, out of thin air, a rule that erases many of those gains and expands the collateral consequences of incarceration in the middle of a crisis.
Gainful employment and the ability to make ends meet are the foundation for reducing recidivism. Many of the formerly incarcerated receive training while serving their

Case 1:20-cv-01838-CCB Document 1-11 Filed 06/16/20 Page 3 of 3
sentence to become barbers, welders, plumbers, and automotive technicians. Still others enter into less skilled trades such as landscaping and housekeeping. Some even become the pastors of their own small churches. One thing these professions have in common is that they lend themselves to independent contracting and business ownership. We should be encouraging and supporting the efforts of people to start their own, lawful businesses, not leaving them exposed during a pandemic.
Excluding a class of business owners from the Paycheck Protection simply for their status is not only contrary to law, it is wrong. The rule is so far reaching that simply having a sibling in a family-owned business charged with an unrelated crime would sink the entire business. Surely, this is not the desired result of Treasury or the Small Business Administration?
The Paycheck Protection Program was designed by Congress to give all small businesses a lifeline. The employees of the formerly incarcerated are just as entitled to remaining on payroll as other Americans. The CARES Act was designed to take care of ALL Americans. We hope you will update the regulations to reflect that.
Sincerely,
_______________________ Cedric L. Richmond Member of Congress

Karen Bass Member of Congress
Hakeem Jeffries Member of Congress
Jan Schakowsky Member of Congress
Bonnie Watson Coleman Member of Congress

Sean Casten Member of Congress
Eleanor Holmes Norton Member of Congress
Darren Soto Member of Congress

Raùl M. Grijalva Member of Congress
Ayanna Pressley Member of Congress
David Trone Member of Congress

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Exhibit F

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April 8, 2020

The Honorable Steven Mnuchin Secretary U.S. Department of Treasury Washington, D.C. 20220

The Honorable Jovita Carranza Administrator U.S. Small Business Administration Washington, D.C. 20416

Dear Secretary Mnuchin and Administrator Carranza,
I have been hearing from small business owners across Oregon who have been hurt and frustrated by the problems surrounding the implementation of the Paycheck Protection Program (PPP) of the CARES Act. While I agree that we must continue to support this program through an increase of additional funds, we cannot do so in good conscience without addressing many of the issues that we’ve seen thus far. As we move forward with the PPP, I call on your agencies to address the following issues:
(1) Banks have been prioritizing bigger, more lucrative customers for priority access to the program, which was not the intent of this program. A portion of the funding should be set aside for Community Development Financial Institutions (CDFI); for businesses with fewer than 10 employees; for businesses with fewer than 50 employees; and for sole proprietors and independent contractors to ensure that smaller organizations are not being overlooked by banks.
(2) The Small Business Administration (SBA) must clarify that small, community hospitals with 501(c)(3) status are eligible for PPP loans. As non-profit district hospitals they adhere to federal and state requirements for all not-for-profit hospitals, including providing community benefit and charity care.
(3) The SBA has deemed ineligible any applicant if “[a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years[.]”1 The breadth of this provision is unconscionable, as it punishes individuals who should be innocent until proven guilty and those who have already served their time and, due to the well-known racial disparities in our justice system, disproportionately disqualifies minority-owned businesses.
1 13 CFR Part 120, Business Loan Program Temporary Changes; Paycheck Protection Program,
https://content.sba.gov/sites/default/files/2020-04/PPP--IFRN%20FINAL.pdf

1

Case 1:20-cv-01838-CCB Document 1-12 Filed 06/16/20 Page 3 of 3
(4) The SBA should clarify that business cooperatives under 500 employees are eligible for PPP loans.
(5) Small businesses that employ independent contractors should be allowed to apply those contracts to their monthly payroll totals, providing them support to keep these contracts active. In that correction, the SBA must clarify that these independent contractors, should they hold multiple contracts, would not be eligible to then apply for PPP for that contract, but could apply to compensate for the loss of other contracts.
(6) The SBA and Department of Treasury must provide support for lenders as well, providing authorization details, details for note, and details on the secondary market, so banks engaged in lending understand expectations from regulators.
(7) Lastly, the SBA must clarify that all applicants can benefit from these funds retroactively, even if their loan processing takes longer than the eight weeks designated by the SBA.
The shortcomings in the current implementation of PPP are all too evident. We have an opportunity to correct these shortcomings, and we must seize that opportunity.
Sincerely,
________________________
Jeffrey A. Merkley United States Senator
2

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Exhibit G

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April 30, 2020

The Honorable Steven Mnuchin Secretary U.S. Department of the Treasury 1500 Pennsylvania Avenue NW Washington, D.C. 20220

The Honorable Jovita Carranza Administrator Small Business Administration 409 3rd Street SW Washington, D.C. 20416

Dear Secretary Mnuchin and Administrator Carranza:
We write to request that the Small Business Administration (SBA) revise its Interim Final Rule for the Paycheck Protection Program (PPP) so that it properly reflects Congress and the Administration’s support for second chances following a record of bipartisan criminal justice reforms in Congress dating back more than a decade. The rule should not deny assistance to people with criminal records who have turned their lives around, started a small business, created jobs and contribute to their communities.
During the month of April, we celebrate Second Chance Month, which exists to raise awareness of the collateral consequences of a criminal conviction, and unlock second-chance opportunities for people who have paid their debt to society to become contributing citizens. The President and Congress have worked together in the past to support individuals who have paid their debt to society and are re-entering their communities.
We believe that policies should support second chances. This was most recently evident in the enactment of the Fair Chance Act in 2019, which opened federal government work to people with criminal records, and the overwhelming bipartisan vote in 2018 for the First Step Act, which provided for important correctional and sentencing reforms. Importantly, this legislation reauthorized the Second Chance Act, which provides funding to state and local reentry programs.
We applaud the SBA’s efforts to quickly provide small business owners across the country with relief so they can continue to pay their employees and combat the adverse economic effects of this pandemic. However, the new restrictions placed upon small businesses with partial owners who have been involved in the criminal justice system will only hurt the economy, and further diminish the workforce and the tax base they generate.
Specifically, we are concerned about the following restriction contained within 13 CFR Part 120 section III(2)(b)(iii):
“An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by

Case 1:20-cv-01838-CCB Document 1-13 Filed 06/16/20 Page 3 of 3
which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years.”
This rule departs from the SBA’s own pre-existing eligibility standards for loans, including its Economic Injury Disaster Loans (EIDLs), and deviates from the Administration’s support for second chances. It also deviates from Administrator Carranza’s prior expression of interest during her nomination process to widen SBA’s footprint in the returning citizen community. The language is overly broad, excluding millions of business owners and their employees from muchdeserved and much-needed emergency relief. Due to longstanding inequalities in the justice system, the restrictions will also have a disparate impact on communities of color, just as those communities are among the hardest hit by this health and economic crisis.
Through the CARES Act, and specifically the PPP, Congress sought to ensure that emergency relief is made available to small businesses that have been negatively impacted by this pandemic. This relief was not intended to exclude business owner who have made mistakes, paid their debt, and turned their lives around. Rather, it was intended to provide a bridge to hard-working American small business owners who are keeping people employed and supporting the essential services that benefit all of us during this unprecedented crisis.
We ask that you revise this harmful, exclusionary Interim Final Rule so that more businesses are eligible for emergency relief, and ensure that SBA rules support second chances, a stronger economy, and safer communities across all of its programs, including EIDL.
Sincerely,

Senator Rob Portman

Senator Benjamin L. Cardin

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Exhibit H

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Exhibit I

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April 20th, 2020

The Honorable Steven Mnuchin				 Secretary of Treasury					 1500 Pennsylvania Avenue, N.W. 			 Washington, D.C. 20220
The Honorable Jovita Carranza				 US Small Business Administration			 409 3rd St, S.W.						 Washington D.C. 20416					

The Honorable Mitch McConnell Majority Leader of the United States Senate Washington D.C. 20515
The Honorable Nancy Pelosi Speaker of the House U.S. House of Representatives Washington, D.C. 20510

Dear Secretary Mnuchin, Administrator Carranza, Leader McConnell and Speaker Pelosi:
The United States of America boasts more than 30.2 million small businesses that employ more than 47.5 percent of the private workforce. But as we embark on a second month of quarantine, America’s small businesses face unprecedented peril. Many have been forced to shutter their operations leaving them no choice but to lay off their workforce.
We are grateful for the work that has gone into the Paycheck Protection Program (“PPP”), which is serving as a lifeline for America’s entrepreneurs. Oversight, transparency, and safeguards must be put in place to ensure that every dollar directed to small business owners to make payroll is done so responsibly.
However, we are concerned that language incorporated into the Interim Final Rules governing how the PPP should operate creates a de facto exclusion for those entrepreneurs who have been justice-involved. These people have staked their own claim by creating businesses that deliver value, employ hundreds of thousands, and provide a pathway to re-entering society. By excluding people who have made mistakes unrelated to the SBA, and put their past behind them, we harm their businesses, employees and customers, while failing to recognize their successful rehabilitation. Specifically, Section III, 2(b), iii, of the Interim Final Rule excludes businesses if:
[a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years…
Such a restriction was not included in the statute authorizing the PPP and it need not be part of the Interim Final Rule.
We understand that people currently serving a period of incarceration have no need for assistance from the PPP. Beyond that, however, the regulation is overbroad. Applicants with criminal backgrounds should be considered on their merits and given individual consideration rather than precluded categorically. The disqualifiers become even more problematic when they are applied to those whose compensation is reported on an IRS Form-1099 rather than as a stand-alone business.
Questions 5 & 6 of the application itself compounds the problem even further. First, it appears to disqualify any owner (not just the owner with the criminal record) from receiving these benefits. Second, and most importantly, it re-defines conviction to include a pretrial diversion, or deferred adjudication.

Case 1:20-cv-01838-CCB Document 1-15 Filed 06/16/20 Page 3 of 3 Justice-involved people make up a higher percentage of independent contractors and small business owners, precisely because of their backgrounds. In short, many turn to entrepreneurship because traditional avenues of employment are foreclosed to them.
Given that 1 in 3 Americans have some criminal record, the PPP’s Interim Final Rule will unduly affect a significant percentage of small business owners and entrepreneurs, not to mention their employees and their families. Rather than penalize them, the Administration should take a position consistent with President Trump’s work to improve prospects for re-entry for those who have made mistakes and seek to rejoin society as contributing members.
Justice-involved people who have overcome the odds and successfully started businesses should be recognized as successes. But at a minimum, they should not continue to be penalized for having a criminal history, particularly when that history bears no relation to their business operations. In short, they should not be excluded from the PPP.
We ask that the Administration tailor the Final Interim Rule to reflect common-sense. Unless the criminal record at issue is directly related to fraud of federal programs or past violations of SBA rules and regulations, it should not be relevant to qualifying for assistance under the PPP. Abandonment of these small businesses – and their employees – in a time of national economic crisis is not an acceptable outcome for our entrepreneurs, their workers, or the economy as a whole.
Eighteen months ago, President Trump signed the FIRST STEP Act to provide for second chances and a pathway to economic success for those who have made mistakes and we hope that the Small Business Administration will take this into account.
Respectfully,
Mark V. Holden Americans for Prosperity
Ronald J. Lampard ALEC Action
Grover Norquist Americans for Tax Reform
David Safavian American Conservative Union
Timothy Head Faith & Freedom Coalition
Jason Pye Freedom Works
Heather Rice-Minus Prison Fellowship
Derek Cohen Right on Crime
Arthur Rizer R Street
CC: Members of Congress with Committees of Jurisdiction

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Exhibit J

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Exhibit K

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Submitted Via Regulations.gov
May 15, 2020
Jovita Carranza Administrator U.S. Small Business Administration 409 3rd St, SW Washington, DC 20416
Re: U.S. Small Business Administration Business Loan Program; Paycheck Protection Program Interim Final Rule, No. SBA-2020-0015, RIN 3245-AH34
Dear Administrator Carranza:
The undersigned organizations offer these comments on the Small Business Administration’s (“SBA”) interim final rule (the “Rule”) implementing the Paycheck Protection Program (“PPP”) authorized in the CARES act (Public Law 116-136). See 85 Fed. Reg. 20811.
The Rule improperly denies access to the PPP based on a loan applicant’s involvement with the criminal legal system. Any small business in which an owner or partial owner of an equity stake of 20 percent or greater has “been convicted of a felony within the last five years,” or “is incarcerated, or on probation or parole,” is automatically disqualified from SBA assistance. The Rule also excludes any business in which an owner or partial owner is “presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction,” -- even before any alleged crime has been adjudicated. The Rule’s exclusion of individuals who have been accused but not convicted not only unfairly denies businesses this critical lifeline, it also exacerbates our legal system's racial inequity.
The rule is inconsistent with provisions in both the CARES Act and the SBA enabling act. The CARES Act directs the SBA to “ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in underserved and rural markets, including… small business concerns owned and controlled by socially and economically disadvantaged individuals…”1 a mandate that is overtly flouted by the Rule. Similarly, the SBA’s enabling act permits (but does not require) the SBA to “verify the applicant’s criminal background, or lack thereof,”2 and it certainly does not impose the blanket exclusions contained the Rule. Elsewhere in the SBA enabling act, Congress recognized the importance of ensuring equal access to SBA assistance to socially and
1 Public Law 116-136, § 1102(a)(P)(iv). 2 15 U.S.C. § 636 (a)(1)(B).

Case 1:20-cv-01838-CCB Document 1-17 Filed 06/16/20 Page 3 of 5
economically disadvantaged individuals.3 Voluminous literature has documented the racially and ethnically discriminatory nature of the criminal justice system in the United States,4 and it is profoundly disappointing to see this unfair and punitive Rule negate the important goal of reversing this history of discrimination.
The Rule is also inconsistent with recent legislative achievements allowing persons with criminal records who have paid their debt to society to return to their communicates as contributing citizens, as in the Fair Chance Act of 2019, which opened federal government work to people with criminal records, and the First Step Act of 2018, which provided for important correctional and sentencing reforms.
To exclude a class of business owners or partial owners from the Paycheck Protection simply on the basis of their past involvement with the criminal justice system or unadjudicated allegations concerning their present involvement is not only contrary to law, it is wrong. The PPP was intended to give all small businesses a lifeline to allow them to maintain their employees, not to perpetuate long-standing forms of racial and ethnic discrimination against some of them. The blanket ban punishes employees who are the intended recipients of this relief, based on their employer's interactions with the legal system. We urge you to modify the Rule to reflect that purpose.
We specifically ask that the final rule expressly:  Eliminate the expanded disqualification of those with any felony conviction in the past five years (not just those serving sentences);  Remove any requirement to disclose non-conviction records of pre-trial diversion (an agreement between a prosecutor and defendant to meet certain conditions to avoid going to trial) or pre-trial probation;  Eliminate any requirement to disclose sealed and expunged records, to allow individuals to maintain the confidentiality of their records, as permitted under certain state laws;
 Allow for individualized determinations rather than mandatory disqualifications and allow
employers to provide a mitigating explanation if a background check is positive.
3 15 U.S.C. § 637(a)(5) defines “socially disadvantaged individuals” as “those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.” 15 U.S.C. § 637(a)(6)(A) defines “economically disadvantaged individuals” as “those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.”
4 See, e.g., Report to the United Nations on Racial Disparities in the U.S. Criminal Justice System. Report to the United Nations Special Rapporteur on Contemporary Forms of Racism, Racial Discrimination, Xenophobia, and Related Intolerance. The Sentencing Project, April 19, 2018. https://www.sentencingproject.org/publications/un-report-on-racial-disparities/

Case 1:20-cv-01838-CCB Document 1-17 Filed 06/16/20 Page 4 of 5
Thank you for considering our views.
Sincerely,
National Campaign for Youth Justice Fair and Just Prosecution Fairness, Dignity & Respect for Crime Victims and Survivors International Cure Juvenile Law Center Law Enforcement Action Partnership National Juvenile Justice Network
Illinois Chicago Community Bond Fund
Louisiana Louisiana Center for Children’s Rights
Massachusetts American Civil Liberties Union of Massachusetts Boston Release Network Boston University Coalition for Decarceration Charles Hamilton Houston Institute for Race and Justice Citizens for Juvenile Justice Coalition for Effective Public Safety Coalition for Social Justice Criminal Justice Policy Coalition The Criminal Justice Reform Task Force of Congregation Dorshei Tzedek Crystal Springs End Mass Incarceration Together (EMIT) Freitas & Freitas, LLP GLBTQ Legal Advocates and Defenders Greater Boston Legal Services CORI & Re-entry Project Jewish Alliance for Law and Social Action Jobs NOT Jails Justice Resource Institute Massachusetts Communities Action Network Massachusetts Law Reform Institute Mental Health Legal Advisors Committee

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More Than Words National Lawyers Guild, Massachusetts Chapter The Real Cost of Prisons Project Roxbury Youthworks Student Collection of Correctional Housing Advocates for Greater Boston
Pennsylvania Movement Alliance Project NAACP Pennsylvania State Conference
Washington Public Defender Association TeamChild

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Exhibit L

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May 15, 2020
The Honorable Jovita Carranza Administrator U.S. Small Business Administration Washington, DC 20416
Re: U.S. Small Business Administration Business Loan Program; Paycheck Protection Program Interim Final Rule, No. SBA-2020-0015, RIN 3245-AH34
Dear Administrator Carranza:
The undersigned organizations offer these comments on the Small Business Administration’s recently released Interim Final Rule for the Paycheck Protection Program (PPP) and the Business Loan Program. We urge the SBA to reconsider those provisions of the Rule that discriminate against individuals who have a record of arrest or conviction.
Specifically, we call upon the SBA to modify or rescind provisions of the Interim Final Rule that make individuals ineligible for PPP loans based upon current or prior criminal history, or ongoing criminal proceedings. Under the Rule, any individual who owns 20% or more of the equity of a business applying for a PPP loan is ineligible for that loan if they are presently incarcerated, or on probation or parole, or subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction. Additionally, per this Interim Final Rule as supplemented by the PPP application form, any owner of a business is ineligible for the loan if they have in the last 5 years 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment) in a felony case.
These requirements are needlessly restrictive and unfairly discriminatory and jeopardize thousands of local communities and employees who rely upon these businesses and their owners for employment and services. The intention of the emergency relief programs authorized by the CARES Act is to sustain small businesses that are trying to save the economy by keeping people employed. Eligibility requirements should be relaxed in these circumstances, not heightened as SBA proposes. SBA’s new restrictions on eligibility for its loan programs, which already operate to exclude many people with a record, contravene the intent of the CARES Act, and are inconsistent with SBA’s more general mandate of encouraging entrepreneurship and expanding access to employment.
A significant number of people with arrest or conviction history have established their own small businesses, since it is frequently difficult for them to secure employment with others. Moreover, these businesses also tend to be more willing to hire employees with a record. Driving them out of business will result in a severe impact on employment of a population that is already disadvantaged in the workplace. People with a record are subject to a myriad of disadvantages in seeking to reintegrate into society, notably in bank lending policies but also in housing, employment, licensing, education, voting, and other areas.

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The SBA’s restrictions will have an adverse impact on minority business owners and employees, who are arrested and convicted at disproportionately high rates due to institutional racism, ensuring that business owners of color will be disproportionately excluded from critical economic assistance.
The Interim Final Rule and PPP application form present a wholly unsubstantiated departure from prior SBA practice and are in tension with the statutory directives in the CARES Act, which provides that “any business concern … shall be eligible” for a loan guarantee if it has the requisite number of employees.1 Even the SBA’s pre-existing 7(a) regulations include criminal history disqualifications that, while still troubling, were more narrowly drawn.2 The SBA has issued no rationale for its expansion of these mandatory disqualifications to all recent felony convictions, criminal charges of any kind, and a variety of non-conviction dispositions. In summary, the agency’s choices are misaligned with Congressional intent regarding eligibility, inexplicably depart from prior practice, and are unsupported by any explanation.
While we call upon the SBA to modify or rescind all of the provisions relating to criminal history in the Interim Final Rule, we urge the SBA to immediately remove the provision disqualifying individuals who have merely been indicted or arraigned for a crime, or who have otherwise not been convicted. Punishing individuals who have not been convicted of wrongdoing in a court of law is fundamentally unfair and jeopardizes the economic well-being of thousands of employers and employees.
We also urge the SBA to rescind the 5-year ineligibility period for individuals convicted of a felony, or who have been placed on pretrial diversion/probation/parole for any crime. To the extent that the SBA has authority to promulgate eligibility requirements for the PPP that are related to a history of arrest or conviction,3 those requirements should be limited to felony convictions for financial fraud from the past 3 years, subject to an individualized assessment and waiver in appropriate cases. This narrowing of potential ineligibility to serious convictions that are directly related to qualification for financial assistance, along with a diminished window, ensures that individuals who were convicted of a crime but have worked to reintegrate into society are not unduly punished for a past offense.
Finally, we urge the SBA not to disqualify people who are currently serving a sentence of parole or probation in the community unless they are within the narrow category of felony financial fraud convictions within the past 3 years. Parolees and probationers should also have an
1 15 U.S.C. § 636(a)(36)(D)(i)(emphasis added). See, e.g., DV Diamond Club of Flint, LLC, et al. v. United States Small Business Administration, et al., No. 20-CV-10899, 2020 WL 2315880, at *1 (E.D. Mich. May 11, 2020) and In re: Roman Catholic Church of the Archdiocese of Santa Fe, No. 18-13027 T11, 2020 WL 2096113 (Bankr. D.N.M. May 1, 2020); In re Hidalgo County Emergency Service Foundation, Case no. 19-20497; Adv. pro. No. 202006, 2020 WL 2029252 (Bankr. S.D. Tex., Apr. 25, 2020). As the bankruptcy court stated in In re Roman Catholic Church, at *6, “While a borrower's bankruptcy status clearly is relevant for a normal loan program, the PPP is the opposite of that. It is not a loan program at all. It is a grant or support program. The statute's eligibility requirements do not include creditworthiness.” 2 13 C.F.R. § 120.110(n). 3 See cases cited in note 1, holding that other SBA exclusions from PPP eligibility were unlawful under the CARES Act.

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opportunity to obtain relief, to ensure that their employees will be able to retain their jobs during this ongoing crisis.
At the very least, the SBA should remove the unauthorized additional restrictions on its application form—restrictions not called for in the Interim Final Rule itself—that apply to any owners convicted in the last 5 years, not simply those who own 20% or more of the business, as well as those provisions on the application form that exclude people who were placed on pretrial diversion or probation before judgment in the past 5 years.
In summary, we urge the SBA to reconsider and modify discriminatory PPP eligibility rules, which jeopardize workers, local communities, and individuals who have come into contact with the criminal law system but are working to employ local workers and to reintegrate into society.
Sincerely,
American Civil Liberties Union Center for Law and Social Policy Church of Scientology, National Affairs Office Coalition for Juvenile Justice Collateral Consequences Resource Center College and Community Fellowship Community Legal Services #cut50 Drug Policy Alliance FreedomWorks Health in Justice Action Lab Jewish Council for Public Affairs Justice Action Network Justice & Accountability Center of Louisiana Justice Innovations LLC National Employment Law Project National Youth Employment Coalition NORML Operation Restoration Power Coalition for Equality and Justice PREACH/East Baton Rouge Parish Prison Reform Coalition Public Interest Law Center Root & Rebound Safer Foundation Treatment Communities of America Washington Lawyers’ Committee for Civil Rights and Urban Affairs

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Exhibit M

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Ms. Jovita Carranza United States Small Business Administration 409 3rd St., SW Washington, DC 20416

May 15, 2020

Re: U.S. Small Business Administration Business Loan Program; Paycheck Protection Program Interim Final Rule, No. SBA-2020-0019, RIN 3245-AH35

Dear Ms. Carranza:

I write to you today on behalf of the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School (“IJ Clinic”). The IJ Clinic is a legal clinic that provides free legal assistance, support, and advocacy for low-income entrepreneurs. We are an arm of the Institute for Justice—the national law firm for liberty. Since 1991, IJ has come to the aid of individuals who want to do the simple things every American has the right to do—including owning property, starting and growing a business, speaking freely about commerce or politics, and providing their children with a good education—but can’t because they find the government in their way. Every day at the IJ Clinic, we advocate for Americans who have big dreams and small budgets, people who are starting businesses so they can direct their own destinies, support their families, create jobs, and transform neighborhoods. We are thankful to have the opportunity to share our perspective on the Small Business Association’s (“SBA”) Payroll Protection Program (“PPP”) Interim Final Rule (85 Fed. Reg. 20811) with this comment letter.

Congress created the PPP within the CARES Act1 to make capital accessible to small businesses that are hemorrhaging money and jobs during the current pandemic. Governmental orders have shut down small businesses, and revenues have evaporated. Yet, the SBA’s Interim Final Rule arbitrarily cuts some American businesses off from emergency funding, leaving them to fail despite their importance to the economy. The Rule thwarts the intent and text of the PPP by (1) excluding businesses with an owner who has interacted with the criminal justice system and (2) limiting loan forgiveness based on an arbitrary requirement to use 75% of the loan amount on payroll. We urge the SBA to reverse these exclusionary provisions.

1 Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136 (2020).

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1. The Exclusion of Businesses with Owners Who Interacted with the Criminal Justice System Hurts Entrepreneurs, Contravenes the CARES Act, and Defies Criminal Justice Reform Policies.
Section 2(b)(iii) of the Interim Final Rule makes a business ineligible for PPP loans if an individual who owns 20% or more of the company is currently indicted on any criminal charges—felony or misdemeanor—or has been convicted of a felony in the last five years. These exclusions run contrary to the intent and text of the CARES Act, and they have a devastating effect on businesses, communities, and criminal justice reform efforts.
A. Real-world impact of excluding businesses based on an owner’s interaction with the criminal justice system
At the IJ Clinic, we have had the honor to work with entrepreneurs with criminal histories, who started businesses to turn their lives around. We have seen close-up that these entrepreneurs strive to build healthy businesses from scratch, so they can build opportunities in their own communities. Jimmie Williams is a terrific example. Jimmie had been in and out of jail since he was a kid. The last time he got out, he determined he had to set a new course for his life, for the sake of his family. He applied to hundreds of jobs but could not get a foothold on an opportunity. When he found out about a used pickup truck for sale in the neighborhood, Jimmie decided that was his chance to make his own job.2 “It was easier to start a company than to get a job,” he says. Jimmie and his wife Tiffany have been running Urban Roots Inc., providing snow removal and lawn care, for 12 years now. Their family dinner table became a board room where their kids learned business skills. Their neighbors, in a neighborhood with a high population of returning citizens, took notice and took pride in the growing business. Jimmie made it his mission to tell his old friends, neighborhood schoolchildren, and his employees that it is possible to become an entrepreneur, even if you made mistakes in the past. He hires and mentors other formerly incarcerated people. He also recently became a mentor in the Cook County Department of Corrections. Chicago needs Urban Roots, and other businesses like it, to survive this pandemic. So do the people who work there and the neighbors who utilize Urban Roots’ services and take inspiration from the story. The PPP should not leave businesses like Urban Roots behind.
Yohance Lacour is another admirable client of the IJ Clinic—one of our newest. Yohance learned leatherworking in a prison workshop. He started making leather greeting cards and handbags so that his fellow inmates could send something special to loved ones. When he got home, he was determined to start a new life and use his passion for leatherworking to build something that was entirely his own. He found the Chicago School of Shoemaking and started trading his labor for classes. Soon he became a teacher, and now he is starting his own business selling leather sneakers of his own design.3 He is currently researching the best practices for making masks so that he can provide something essential to his customers during the pandemic.
2 Maudlyne Ihejirika, “Entrepreneur of Color Fund Grows to $9.1 Million, Will Create Jobs on South, West Sides,” Chicago Sun Times, September 29, 2019, https://chicago.suntimes.com/2019/9/25/20880875/entrepreneurs-ofcolor-fund-grows-9-1-million-create-jobs-south-west-sides. 3 Angel Idowu, “Passion for Design Leads to Career in Handmade Leather Goods,” WTTW, January 15, 2020, https://news.wttw.com/2019/11/25/passion-design-leads-career-handmade-leather-goods.
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As a new business owner, he is starting to discuss possible partnerships with investors who admire his designs and his early success. But the current SBA rules tell those potential investors that SBA loans may not be available to the business and their investment might fail, for reasons completely unrelated to the prospects of the business or Yohance’s entrepreneurial potential.
The PPP loans are not just about the owners of small businesses. They are also about the employees, customers, neighborhoods, and business partners of each small business. If a company closes for good because a four-year old conviction for possession of marijuana or a current indictment for driving on a suspended license prevents a business from getting a PPP loan, what do we say to the employees who are left unemployed as a result? Or the customers that lost a favorite local business? Or business partners who invested in a great business, unconcerned about an irrelevant criminal history? Entire networks of people will feel the harm.
So many Americans have a story like Jimmie’s and Yohance’s.4 They are entrepreneurs who are employing workers, creating wealth, and providing goods and services to their communities. PPP loan exclusion could arbitrarily wipe out all that these entrepreneurs have built. The exclusion and its effects are contrary to what Congress intended when it enacted the CARES Act. It will hurt many small businesses that Congress intended to help.
B. Cutting businesses off from PPP loans based on an owner’s criminal background contravenes the CARES Act.
The CARES Act expanded eligibility for 7(a) loans and does not allow consideration of a business owner’s interaction with the criminal justice system. In a section called “Increased Eligibility for Certain Small Businesses and Organizations”, the Act says, “During the covered period, in addition to small business concerns, any business concern, nonprofit organization, veterans organization, or Tribal business concern described in section 31(b)(2)(C) shall be eligible to receive a covered loan if the business concern, nonprofit organization, veterans organization, or Tribal business concern employs not more than the greater of—(I) 500 employees; or (II) if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern, nonprofit organization, veteran’s organization, or Tribal business concern operates.”5
The law continues to say that a lender is deemed to have been delegated the authority of the SBA to make loans “subject to the provisions of this paragraph”. The provisions limiting the delegated authority are as follows: “In evaluating the eligibility of a borrower for a covered loan with the terms described in this paragraph, a lender shall consider whether the borrower—
(aa) was in operation on February 15, 2020; and (bb) (AA) had employees for whom the borrower paid salaries and payroll taxes; or
4 A large segment of the U.S. population interacts with the criminal justice system. About one in three Americans had a criminal record as of 2012. See U.S. Bureau of Justice Statistics, Survey of State Criminal History Information Systems, 2012 (Jan. 2014) at Table 1, available at https:// www.ncjrs.gov/pdffiles1/bjs/grants/244563.pdf. 8.1% of Americans had a felony conviction in 2010. Sarah Shannon et al., The Growth, Scope, and Spatial Distribution of People with Felony Records in the United States, 1948 to 2010, 54 Demography 1795, 1808 (2017). 5 Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 1102(a)(36)(D)(i)(2020).
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(BB) paid independent contractors, as reported on a Form 1099–MISC.”6
The CARES Act thus distinguishes PPP eligibility from other federal loan programs. Although the SBA has explicit authority to review criminal background history when considering making a typical 7(a) loan, the law does not include consideration of criminal background history in the delegation of authority to lenders making PPP loans. The law is also meant to provide relief to a greater array of small businesses than other programs. Yet, instead of hewing to the text of the CARES Act and expanding eligibility for PPP loans accordingly, the Interim Rule restricted eligibility even more than the SBA does in other loan programs.7
The Interim Final Rule not only requires banks to consider a factor that is not allowed by the CARES Act; it requires them to deny loans based on the impermissible consideration. It outright denies crucial funding for businesses to meet payroll based on (i) a single 20% owner’s felony conviction (regardless of relevance) or (ii) even a pending indictment on any criminal charges—felony or misdemeanor (regardless of a presumption of innocence).8 This is a blanket denial and is done without any consideration of the relevancy of the transgression (or alleged transgression) to receipt of funds.
Our system presumes a person is innocent until proven guilty, but the Interim Final Rule eviscerates that notion by barring people from loans based on unproven charges. The CARES Act forecloses consideration of either convictions or indictments and expands eligibility beyond eligibility for other federal loan programs. The SBA should remove harsh restrictions based on criminal background from the PPP rules, to keep faith with the text of the CARES Act.
C. The SBA’s rule cuts off people who are trying to earn an honest living, undermining the goals of the PPP and bi-partisan criminal justice reforms advanced by this administration.
Section 2(b)(iii)’s blanket prohibition on lending to businesses with owners who have a past felony conviction is unfair to entrepreneurs who have served their time and started a new life, and it is counterproductive to the justice system’s goal of limiting recidivism.9 It also contravenes the work of this Administration to address problematic collateral consequences and recidivism issues by breaking down barriers to economic liberty.
6 Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 1102(a)(36)(F)(ii)(I) – (II) (2020). 7 For example, the 7(m) microloan program looks at whether an applicant has engaged in a crime linked to fraud, directly relevant to a potential loan. In considering the rules and requirements for 7(m) loans, the SBA stated that lowering barriers to loans boosts “successful reentry of formerly incarcerated individuals, who often have difficulty finding steady employment.” 80 Fed. Reg. 34043. 8 85 Fed. Reg. 20812. 9 Moreover, because of existing racial disparities within the criminal justice system, these prohibitions could well fall heavier on black and Latino populations. For example, black and Latino men are more likely to face arrest, and 6 times and 3 times more likely to be incarcerated than white men. Gase, Lauren Nichol et al. “Understanding Racial and Ethnic Disparities in Arrest: The Role of Individual, Home, School, and Community Characteristics,” 8 Race Soc Probl. 296 (2016), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5509345/; The Sentencing Project, Fact Sheet: The Trends in US Corrections, p. 5, https://sentencingproject.org/wpcontent/uploads/2016/01/Trends-in-US-Corrections.pdf.
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Entrepreneurship is often the only or best chance someone has to earn an honest living after interacting with the justice system. People with felony records often face stigma with employers and find it difficult to obtain work, as Jimmie Williams experienced.10 Moreover, a myriad of occupational licensing laws unnecessarily prohibit Americans with criminal records from pursuing a variety of occupations.11 Given the barriers to working for companies or joining a trade, many people with criminal records turn to entrepreneurship as a way to earn a living and get their lives on track.12 By denying PPP loans to businesses owned by people with criminal records, the Interim Final Rule risks decimating companies built by people who have, in the process of building their companies, also rebuilt their own lives.
Entrepreneurship enables those with criminal records to engage in honest enterprise and pursue their dreams as free, law-abiding members of society instead of turning back to criminal enterprises. Indeed, employment and entrepreneurship are key to reducing the risk of recidivism.13 It is irresponsible to cut off avenues for success for those who worked hard to create their own jobs. This is especially important in the current economic crisis.14 We should be doing all we can during this time to increase economic freedom so people can sustain lawful employment for themselves and others.
President Trump’s administration, Congress, and most state governments have recognized that formerly incarcerated people’s freedom to find or create employment is critical to the nation’s economic and social well-being. President Trump created the Federal Interagency Council on Crime Prevention and Improving Reentry and ordered that it is the policy of the United States to prioritize efforts to reduce recidivism.15 The 2020 budget dedicated resources to programs for occupational training, ease of re-entry, and connection with employment for
10 See Devah Pager & Bruce Western, Investigating Prisoner Reentry: The Impact of Conviction Status on the Employment Prospects of Young Men, NCJRC (October 2009), https://www.ncjrs.gov/pdffiles1/nij/grants/228584.pdf. 11 See Michelle N. Rodriguez & Beth Avery, Unlicensed & Untapped: Removing Barriers to State Occupational Licenses for People with Records, NELP (April 2016), https://s27147.pcdn.co/wp-content/uploads/UnlicensedUntapped-Removing-Barriers-State-Occupational-Licenses.pdf. 12 See, for example, Kevin Davis, “Formerly incarcerated people are building their own businesses and giving others second chances,” ABA Journal, July 1, 2019, https://www.abajournal.com/magazine/article/resolved-to-rebuildformerly-incarcerated; Michael Zakaras, “Why Ex-Cons Make Great Entrepreneurs,” Forbes, November 5, 2012, https://www.forbes.com/sites/ashoka/2012/11/05/why-ex-cons-make-great-entrepreneurs/#59acac9f60b6. 13 See, for example, Impact Analysis of the Prison Entrepreneurship Program, Initiative for a Competitive Inner City (July 2018); John M. Nally et al., Post-Release Recidivism and Employment among Different Types of Released Offenders: A 5-Year follow-up Study in the United States, 9 Int'l J. of Crim. Just. Sci. 16 (2014), http://www.sascv.org/ijcjs/pdfs/nallyetalijcjs2014vol9issue1.pdf. 14 A rigorous 2017 study by Professor Crystal S. Yang found that during times of economic instability recidivism rates are significantly higher. See generally Crystal S. Yang, Local Labor Markets and Criminal Recidivism, 147 J Public Econ 16 (2017). 15 Donald J. Trump, Executive Order, “Federal Interagency Council on Crime Prevention and Improving Reentry,” March 7, 2018, https://www.whitehouse.gov/presidential-actions/federal-interagency-council-crime-preventionimproving-reentry/.
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formerly incarcerated people.16 The First Step Act prioritized programs to lower recidivism.17 States too have recognized the need to return economic liberty to those who have served their time for mistakes. Since 2015, 30 states have made it easier for those with criminal records to find work in licensed fields.18 The SBA should not undermine these vital national policies.
The SBA itself has recognized the importance of making loans available to entrepreneurs regardless of their criminal background. One example is the microloan program authorized under 7(m) of the Small Business Administration Act. This program looks at criminal background only to investigate whether an applicant has engaged in a crime linked to fraud that is directly relevant to a potential loan. In fact, during rulemaking for that program, the SBA directly acknowledged that lowering barriers to loans boosts “successful reentry of formerly incarcerated individuals, who often have difficulty finding steady employment.”19 Given the goals of the PPP and national policies to reduce recidivism, the SBA should echo its 7(m) approach in the PPP rules.
It is not time to reverse course on criminal justice reform. The current administration should maintain its commitment to giving those involved in the criminal justice system a second chance and making it easier for them to transition back into society. The push towards restoring economic liberty is bipartisan, and common sense. Great progress has been made. The SBA should not create rules that run contrary to long-fought advances. The Interim Final Rule risks sweeping that progress and understanding aside for a quick fix that wrongfully excludes thousands of American entrepreneurs.
2. The SBA’s “75% Rule” Harms Very Small Businesses and is Not Authorized by the CARES Act.
As the CARES Act recognized, small businesses have significant monthly expenses that they must meet to survive this pandemic and to preserve jobs—expenses that include rent, utilities, and debt servicing payments. Many of the smallest and most economically vulnerable businesses have to spend a significant percentage of their budget on meeting those monthly expenses to keep the business going. For a small business with a storefront and one location, the aggregate costs of rent and utilities alone can rival what the business spends on payroll. If they cannot spend PPP loan amounts on those expenses and receive forgiveness, the businesses might need to close.
Without reference to any statutory requirement, SBA has declared that, to be eligible for forgiveness, 75% of PPP loans under the CARES Act must be used for payroll costs. Section 2(r)
16 “President Donald J. Trump is Committed to Building on the Successes of the First Step Act,” White House, April 1, 2019, https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-committed-buildingsuccesses-first-step-act/. 17 See “An Overview of the First Step Act,” Federal Bureau of Prisons, https://www.bop.gov/inmates/fsa/overview.jsp#reduction_in_recidivism. 18 “State Occupational licensing Reforms for Workers with Criminal Records,” Institute for Justice, https://ij.org/activism/legislation/state-occupational-licensing-reforms-for-people-with-criminal-records/. 19 80 Fed. Reg. 34043.
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of the Interim Final Rule states that “at least 75 percent of the PPP loan proceeds shall be used for payroll costs.”20 Conversely, Section 2(o) of the Interim Final Rule states that “not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.”21 Together, Sections 2(r) and 2(o) form the so-called “75% Rule.” The 75% Rule is unauthorized by Congress and is therefore ultra vires; it extends beyond SBA’s authority under the CARES Act. It is also unduly burdensome to small businesses, like our clients.
A. Real-World Impact of the 75% Rule
Back of the Yards Coffeehouse is one of our most inspiring clients. Mayra Hernandez and Jesse Iniguez are longtime friends who grew up in the Back of the Yards neighborhood of Chicago, so named because it abutted the stockyards that once provided a lot of jobs in Chicago. When Mayra and Jesse went away to college, they discovered what an asset a coffee shop is for a close-knit community, and they wanted to bring that asset to their own neighborhood. They tried to convince big-name coffee companies to open a shop, presenting statistics about the coffee culture among Latino populations like that of Back of the Yards—but the big names would not come. Eventually, Jesse and Mayra built it themselves. They have created a coffee shop and roastery that anchors the neighborhood.22 With their shop, they have created six jobs for people in the neighborhood. However, rent and utilities for the coffee shop equal the amount they spend on payroll each month.
If they want to be granted loan forgiveness, Mayra and Jesse cannot deploy the PPP funds to cover their full rent and utilities because, if an entrepreneur wants to be eligible for forgiveness, the Interim Final Rule imposes a 25% cap on non-payroll uses of the funds. But, without the PPP funds, they do not have many other options to cover rent and utilities. Their business revenues are tightly constrained by state and city orders regarding restaurants. They also have limited access to other capital sources, as low-income entrepreneurs in a low-income community. If they cannot find the funding to fully cover their shop’s rent and utilities, they may have to close—leaving six people unemployed and another vacant storefront in Back of the Yards. Even though they received the PPP loan, and they are the quintessential business that the CARES Act was designed to help, the 75% rule might make it impossible for them to maintain the continuity of their payroll.
Our client Chicago School of Shoemaking (“CSS”) is another example. CSS is the school where Yohance Lacour refined his skills, and the school’s owner, Sara McIntosh, mentored Yohance as he launched his line of leather sneakers. It is the kind of entrepreneurial gem that makes Chicago a fascinating place to live and work. It creates jobs for artisans and opportunities
20 85 Fed. Reg. 20814. 21 85 Fed. Reg. 20814. 22 Mary Schmich, “Neighborhood Natives Launch Coffee Shop Where Starbucks Won’t—Back of the Yards,” Chicago Tribune, March 25, 2017, https://www.chicagotribune.com/columns/mary-schmich/ct-back-of-the-yardscoffee-shop-mary-schmich-0326-20170324-column.html.
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for Chicagoans to learn a craft.23 Like Back of the Yards Coffeehouse, CSS needs specialized space and equipment to operate. To achieve continuity of payroll, Sara needs to keep the doors open (even when they are closed due to city and state orders) and the lights on by paying rent and utility bills that roughly equal her business’s payroll costs.
Many small businesses like Back of the Yards Coffeehouse and the Chicago School of Shoemaking have employees that depend on the business staying afloat, but payroll does not constitute 75% of their core expenses.24 This is especially true for the small neighborhood businesses that occupy storefronts throughout our country—the typical Main Street businesses that are at the heart of our communities. In order for these businesses to survive these very difficult times and stay afloat as employers, they may need to spend more than 25% of their loan on expenses connected to their store, such as rent or a mortgage. This should not preclude them from receiving forgiveness. They are the businesses that are most in need of the forgiveness and capital infusion, and they will also face the greatest detriment if the funding converts to a loan. The imposition of the 75% Rule is detrimental to the Act’s goals of keeping workers paid and employed. 25
B. The 75% rule is unauthorized by the CARES Act.
The CARES Act does not authorize the SBA’s 75% Rule or direct the SBA to create such a rule. The CARES Act permits PPP loans to be made for specific categories of expenses— including payroll costs, mortgage payments, rent, and utilities—but does not impose any requirements regarding what percentage of the loan must be spent on any of these allowed expenses.26 Indeed, the Interim Final Rule acknowledges that the 75% Rule is found nowhere in the CARES Act, and was created out of whole cloth by the SBA: “While the Act provides that PPP loan proceeds may be used for the purposes listed above and for other allowable uses described in section 7(a) of the Small Business Act (15 U.S.C. 636(a)), the Administrator
23 Jamie Ramsay, “Sara McIntosh Teaches Shoemaking as a First Step Toward Self-Reliance,” Chicago Reader, July 25, 2018, https://www.chicagoreader.com/chicago/school-shoemaking-sara-mcintosh-craftcobbler/Content?oid=53761308. 24 In fact, 67% of the businesses in Chicago have 1-4 employees, and they account for 10% of the jobs in the city. See Initiative for a Competitive Inner City, Report, “The Big Impact of Small Businesses on Urban Job Creation: Evidence from 10 Cities,” 2019, https://icic.org/wpcontent/uploads/2019/08/JPMC_BigImpact_JUL2019_ada1.pdf. 25 See “Here's How The Small Business Loan Program Went Wrong In Just 4 Weeks,” NPR, May 4, 2020, https://www.npr.org/2020/05/04/848389343/how-did-the-small-business-loan-program-have-so-many-problemsin-just-4-weeks; “Small Businesses Say Rescue Loans Come With Too Many Strings Attached,” NPR, April 28, 2020, https://www.npr.org/2020/04/28/845930096/small-businesses-say-rescue-loans-come-with-too-many-stringsattached. 26 Section 1102(a) of the CARES Act amends Section 7(a) of the Small Business Act, 15 U.S.C. 636(a), to permit specified small businesses to receive loans to pay for a variety of expenses, including: payroll costs, mortgage payments, rent, utilities, and interest on any other debt obligations that were incurred before February 15, 2020. Section 1102(a) does not dictate what percentage of the loan may be spent on any particular category of expense, nor does it suggest that any limitation exists. Similarly, Section 1106(a) provides for loan forgiveness of such loans for costs incurred and payments made on payroll costs, mortgage payments, rent, and utilities. Again, Section 1106(a) does not require that a particular percentage of the loan be spent on any particular expense category, and does not provide any discretion to the SBA to impose such a requirement.
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believes that finite appropriations and the structure of the Act warrant a requirement that borrowers use a substantial portion of the loan proceeds for payroll costs. . . .”27
The Interim Final Rule also acknowledges that the imposition of the 75% Rule was a determination made by the SBA and not by Congress: “The Administrator has determined in consultation with the Secretary that 75 percent is an appropriate percentage. . . . ”28 But this is not a mere exercise of “gap filling” where Congress leaves a specific requirement to be determined by the agency in its discretion. To the contrary, there is no “gap” in the CARES Act for SBA to “fill,” because the Act does not suggest that there should be any limitation on the percentage of the loan that can be spent on an authorized category of expenses.
The SBA attempts to justify the rule by appealing to the “structure” of the Act, noting that, “the Administrator and the Secretary believe that applying this threshold to loan forgiveness is consistent with the structure of the Act” and that the Administrator believes the 75% Rule is “consistent with Congress’ overarching goal of keeping workers paid and employed.”29 But that determination is not the SBA’s to make because Congress never delegated such authority to the SBA.
Absent statutory authorization, SBA may not itself impose a new requirement for PPP loans. After all, “an administrative agency's power to regulate in the public interest must always be grounded in a valid grant of authority from Congress.”30 To do so is to usurp the power of Congress. “[A]n agency literally has no power to act . . . unless and until Congress confers power upon it… An agency may not confer power upon itself. To permit an agency to expand its power in the face of a congressional limitation on its jurisdiction would be to grant to the agency power to override Congress.”31 Accordingly, the 75% rule is ultra vires of the SBA’s statutory authority under the CARES Act and should be rescinded.
Conclusion
At the IJ Clinic, we work directly with low-income entrepreneurs like Jimmie, Yohance, Mayra, Jesse, and Sara every day. We have seen first-hand what entrepreneurship can do for a person, a community, and the people it touches. Small businesses create jobs and build wealth. They have customers who need goods and services in this crisis and beyond. Sometimes lowincome business owners may establish one of the few businesses providing much-needed goods and services in an underserved area.32 Now is not the time to deny aid to businesses that operate in the most distressed parts of our country or disadvantage them.
27 85 Fed. Reg. 20814. 28 85 Fed. Reg. 20814. 29 85 Fed. Reg. 20814. 30 FDA. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161 (2000). 31 Louisiana Pub. Serv. Comm'n v. F.C.C., 476 U.S. 355, 357 (1986). 32 Many inner cities are “retail deserts” or “food deserts,” meaning that large populations within cities must travel far distances for access to goods and services that many Americans have right around the corner. See Kimberly Durden, “Food Deserts Continue to Plague the Southside,” Chicago Defender, January 7, 2020, https://chicagodefender.com/food-deserts-continue-to-plague-the-southside/. See also Lolly Bowean, “’I Feel
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Entrepreneurs help solve problems for consumers and grow our economy, all while working hard to make their own dreams come true. The right to earn a living is the heart of the American Dream. This is what the CARES Act is focused on protecting. The government should not be in the business of picking winners and losers, but the SBA’s Interim Final Rule forces too many struggling entrepreneurs to lose out because they had fewer resources to begin with. Many businesses and jobs will be able to survive government shutdowns thanks to PPP lending. It is not fair that they receive this support while other businesses are forced to fold because of (1) an owner’s past crimes (or, in some cases, mere allegations of a crime) that are completely unrelated to the business or (2) the SBA’s attempt, contrary to legislative authorization, to limit what PPP funds can be used for. Small businesses around the country have had their liberty and economic freedom taken from them. The PPP is about helping them stay afloat, and saving the jobs and wealth they create for our country.
While many commentators have claimed that the American Dream is a thing of the past, entrepreneurs—especially those who have made mistakes in the past or are building a business with limited resources—are direct proof that it is alive and thriving. Entrepreneurship allows people with past involvement with the criminal justice system and low-income Americans to create prosperous lives for themselves. It gives them access to opportunity that is central to America’s commitment to liberty. The federal government should not trample on those dreams by picking winners and losers, arbitrarily doling out assistance to some and leaving others behind. We urge you to address the problems in the Interim Final Rule that we have laid out by eliminating the 75% Rule and Section 2(b)(iii). Now is the time to vindicate and validate the rights of all Americans to pursue an honest living.
Sincerely,
The Institute for Justice Clinic on Entrepreneurship
Cheated’: For Some South Side Chicago Residents, Losing 2 Target Stores Isn’t Just an Economic Blow,” Chicago Tribune, February 7, 2019, https://www.chicagotribune.com/news/ct-met-chicago-target-stores-close-south-side20190205-story.html.
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Exhibit N

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SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 [Docket No. SBA-2020-0036] RIN 3245-AH50 Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule AGENCY: U.S. Small Business Administration. ACTION: Interim final rule. SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) posted on its website an interim final rule relating to the implementation of sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act) (published in the Federal Register on April 15, 2020). Section 1102 of the Act temporarily adds a new product, titled the “Paycheck Protection Program,” to the U.S. Small Business Administration’s (SBA’s) 7(a) Loan Program. Subsequently, SBA issued a number of interim final rules implementing the Paycheck Protection Program. This interim final rule revises SBA’s interim final rule published in the Federal Register on April 15, 2020 by changing the eligibility requirement related to felony convictions of applicants or owners of the applicant. DATES: Effective Dates: The provisions in this interim final rule are effective [INSERT DATE OF FILING AT THE OFFICE OF THE FEDERAL REGISTER]. Comment Date: Comments must be received on or before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].

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ADDRESSES: You may submit comments, identified by number SBA-2020-0036, through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please send an email to ppp-ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination whether it will publish the information. FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-572-0502, or the local SBA Field Office; the list of offices can be found at https://www.sba.gov/tools/localassistance/districtoffices. SUPPLEMENTARY INFORMATION:
I. Background Information On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all states, territories, and the District of Columbia. With the COVID-19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, and local public health measures that are being taken to minimize the public’s exposure to the virus. These measures, some of which are government-mandated, have been implemented nationwide and include the closures of restaurants, bars, and gyms. In addition, based on the advice of public health officials, other measures, such as keeping a safe distance from others or even stay-at-home orders, have been implemented, resulting in a dramatic decrease in economic activity as the public avoids malls, retail stores, and other businesses.
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On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 116-136) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (SBA) received funding and authority through the Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency.
Section 1102 of the Act temporarily permits SBA to guarantee 100 percent of 7(a) loans under a new program titled the “Paycheck Protection Program.” Section 1106 of the Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program.
On April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116-139), which provided additional funding and authority for the PPP. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) (Pub. L. 116-142).
II. Comments and Immediate Effective Date This interim final rule is effective without advance notice and public comment because section 1114 of the CARES Act authorizes SBA to issue regulations to implement Title I of the Act without regard to notice requirements. In addition, SBA has determined that there is good cause for dispensing with advance public notice and comment on the grounds that that it would be contrary to the public interest. Specifically, advance public notice and comment would defeat the purpose of this interim final rule given that SBA’s authority to guarantee PPP loans expires on June 30, 2020. These same reasons provide good cause for SBA to dispense with the 30-day delayed effective date provided in the Administrative Procedure Act. Although this interim final
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rule is effective on or before date of filing, comments are solicited from interested members of the public on all aspects of the interim final rule, including section III below. These comments must be submitted on or before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. The SBA will consider these comments, comments received on the interim final rule posted on SBA’s website April 2, 2020 (the First Interim Final Rule) and published in the Federal Register on April 15, 2020, and the need for making any revisions as a result of these comments.
III. Paycheck Protection Program – Additional Revisions to First Interim Final Rule (85 FR 20811)
Overview The CARES Act was enacted to provide immediate assistance to individuals, families, and businesses affected by the COVID-19 emergency. Among the provisions contained in the CARES Act are provisions authorizing SBA to temporarily guarantee loans under a new 7(a) loan program titled the “Paycheck Protection Program.” Loans guaranteed under the Paycheck Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount of the loans may qualify for loan forgiveness. The purpose of this interim final rule is to make changes to the First Interim Final Rule, posted on SBA’s website on April 2, 2020, and published in the Federal Register on April 15, 2020 (85 FR 20811). The First Interim Final Rule, as amended, should be interpreted consistent with the frequently asked questions (FAQs) regarding the PPP that are posted on SBA’s website1 and the other interim final rules issued regarding the PPP.2 1. Changes to the First Interim Final Rule
1 See https://www.sba.gov/document/support--faq-lenders-borrowers. 2 See https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
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Eligibility Requirements The First Interim Final Rule provided, among other things, that a PPP loan will not be approved if an owner of 20 percent or more of the equity of the applicant has been convicted of a felony within the last five years. After further consideration, the Administrator, in consultation with the Secretary of the Treasury (the Secretary), has determined that a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391). Therefore, Part III.2.b.iii. of the First Interim Final Rule (85 FR 20811, 20812) is revised to read as follows:
b. Could I be ineligible even if I meet the eligibility requirements in (a) above? You are ineligible for a PPP loan if, for example: * * * iii. An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; or * * * 2. Additional Information
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SBA may provide further guidance, if needed, through SBA notices which will be posted on SBA’s website at www.sba.gov. Questions on the Paycheck Protection Program may be directed to the Lender Relations Specialist in the local SBA Field Office. The local SBA Field Office may be found at https://www.sba.gov/tools/local-assistance/districtoffices. Compliance with Executive Orders 12866, 12988, 13132, 13563, and 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612). Executive Orders 12866, 13563, and 13771
This interim final rule is economically significant for the purposes of Executive Orders 12866 and 13563, and is considered a major rule under the Congressional Review Act. SBA, however, is proceeding under the emergency provision at Executive Order 12866 Section 6(a)(3)(D) based on the need to move expeditiously to mitigate the current economic conditions arising from the COVID–19 emergency. This rule’s designation under Executive Order 13771 will be informed by public comment.
This rule is necessary to implement Sections 1102 and 1106 of the CARES Act and the Flexibility Act in order to provide economic relief to small businesses nationwide adversely impacted under the COVID-19 Emergency Declaration. We anticipate that this rule will result in substantial benefits to small businesses, their employees, and the communities they serve. However, we lack data to estimate the effects of this rule. Executive Order 12988
SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation, eliminate ambiguity, and reduce burden. The rule has no preemptive effect but does have a limited retroactive effect consistent with section 3(d) of the Flexibility Act.
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Executive Order 13132 SBA has determined that this rule will not have substantial direct effects on the States, on the
relationship between the National Government and the States, or on the distribution of power and responsibilities among the various layers of government. Therefore, SBA has determined that this rule has no federalism implications warranting preparation of a federalism assessment. Paperwork Reduction Act, 44 U.S.C. Chapter 35
SBA has determined that this rule will require modification to the existing PPP information collection that is approved under OMB Control Number 3245-0407 as an emergency request until October 31, 2020. As discussed above, this rule amends the PPP eligibility requirements regarding certain felony charges. As a result of these amendments, conforming changes will be made to Question 6 of Form 2483, Borrower Application Form, and Section H of Form 2484, Lender Application Form. SBA will submit the revisions to these forms to the Office of Management and Budget for approval. Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a proposed rule, or a final rule pursuant to section 553(b) of the APA or another law, the agency must prepare a regulatory flexibility analysis that meets the requirements of the RFA and publish such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, the RFA normally requires agencies to describe the impact of a rulemaking on small entities by providing a regulatory impact analysis. Such analysis must address the consideration of regulatory options that would lessen the economic effect of the rule on small entities. The RFA defines a “small entity” as (1) a proprietary firm meeting the size standards of the Small Business Administration (SBA); (2) a nonprofit organization that is not dominant in its field; or (3) a small government jurisdiction
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with a population of less than 50,000. 5 U.S.C. 601(3)–(6). Except for such small government jurisdictions, neither State nor local governments are ‘‘small entities.’’ Similarly, for purposes of the RFA, individual persons are not small entities.
The requirement to conduct a regulatory impact analysis does not apply if the head of the agency “certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” 5 U.S.C. 605(b). The agency must, however, publish the certification in the Federal Register at the time of publication of the rule, “along with a statement providing the factual basis for such certification.” If the agency head has not waived the requirements for a regulatory flexibility analysis in accordance with the RFA’s waiver provision, and no other RFA exception applies, the agency must prepare the regulatory flexibility analysis and publish it in the Federal Register at the time of promulgation or, if the rule is promulgated in response to an emergency that makes timely compliance impracticable, within 180 days of publication of the final rule. 5 U.S.C. 604(a), 608(b).
Rules that are exempt from notice and comment are also exempt from the RFA requirements, including conducting a regulatory flexibility analysis, when among other things the agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. Small Business Administration’s Office of Advocacy guide: How to Comply with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly, SBA is not required to conduct a regulatory flexibility analysis. Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, Section 1114.
Jovita Carranza, Administrator
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Exhibit O

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Paycheck Protection Program

OMB Control No.: 3245-0407

Borrower Application Form Revised June 12, 2020

Expiration Date: 10/31/2020

Check One:

(



 Sole proprietor  Partnership  C-Corp  S-Corp  LLC

 Independent contractor  Eligible self-employed individual

 501(c)(3) nonprofit  501(c)(19) veterans organization

 Tribal business (sec. 31(b)(2)(C) of Small Business Act)  Other

Business Legal Name

Business Address

DBA or Tradename if Applicable

Business TIN (EIN, SSN)

Business Phone

() -

Primary Contact

Email Address

Average Monthly Payroll:
Purpose of the loan (select more than one):

$

x 2.5 + EIDL, Net of

$

Number of Employees:

Advance (if Applicable)

Equals Loan Request:

☐ ☐ ☐ ☐ Payroll Lease / Mortgage Interest Utilities Other (explain): __________________

Applicant Ownership List all owners of 20% or more of the equity of the Applicant. Attach a separate sheet if necessary.

Owner Name

Title

Ownership % TIN (EIN, SSN)

Address

If questions (1) or (2) below are answered “Yes,” the loan will not be approved.
Question
1. Is the Applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible, voluntarily excluded from participation in this transaction by any Federal department or agency, or presently involved in any bankruptcy?
2. Has the Applicant, any owner of the Applicant, or any business owned or controlled by any of them, ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted in the last 7 years and caused a loss to the government?
3. Is the Applicant or any owner of the Applicant an owner of any other business, or have common management with any other business? If yes, list all such businesses and describe the relationship on a separate sheet identified as addendum A.
4. Has the Applicant received an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes, provide details on a separate sheet identified as addendum B.

Yes No
☐ ☐ ☐ ☐
☐ ☐ ☐ ☐

If questions (5) or (6) are answered “Yes,” the loan will not be approved.
Question
5. Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole? Initial here to confirm your response to question 5 →

Yes No
☐☐

6. Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, or within the last year, for any other felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) been placed on any form of parole or probation (including probation before judgment)?
Initial here to confirm your response to question 6 →

☐☐

7. Is the United States the principal place of residence for all employees of the Applicant included in the Applicant’s payroll calculation above?
8. Is the Applicant a franchise that is listed in the SBA’s Franchise Directory? 1
SBA Form 2483 (06/20)

☐☐ ☐☐

Case 1:20-cv-01838-CCB Document 1-21 Filed 06/16/20 Page 3 of 5
Paycheck Protection Program Borrower Application Form Revised June 12, 2020

By Signing Below, You Make the Following Representations, Authorizations, and Certifications

CERTIFICATIONS AND AUTHORIZATIONS
I certify that:
• I have read the statements included in this form, including the Statements Required by Law and Executive Orders, and I understand them. • The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the
Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
• The Applicant (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more than the
greater of 500 or employees or, if applicable, the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry.
• I will comply, whenever applicable, with the civil rights and other limitations in this form. • All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck
Protection Program Rule.
• To the extent feasible, I will purchase only American-made equipment and products. • The Applicant is not engaged in any activity that is illegal under federal, state or local law. • Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was for
a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.

For Applicants who are individuals: I authorize the SBA to request criminal record information about me from criminal justice agencies for the purpose of determining my eligibility for programs authorized by the Small Business Act, as amended.

CERTIFICATIONS The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:
The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.

Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.

The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.

The Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 24-week period following this loan.

I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 40% of the forgiven amount may be for non-payroll costs.

During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.

I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

I acknowledge that the lender will confirm the eligible loan amount using required documents submitted. I understand, acknowledge and agree that the Lender can share any tax information that I have provided with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

_________________________________________________________ Signature of Authorized Representative of Applicant

________________________ Date

Print Name

Title

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Borrower Application Form Revised June 12, 2020
Purpose of this form:
This form is to be completed by the authorized representative of the Applicant and submitted to your SBA Participating Lender. Submission of the requested information is required to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect that determination.
Instructions for completing this form:
With respect to “purpose of the loan,” payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
For purposes of calculating “Average Monthly Payroll,” most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee. For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019 or any 12-week period between May 1, 2019 and September 15, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.
If Applicant is refinancing an Economic Injury Disaster Loan (EIDL): Add the outstanding amount of an EIDL made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan, to Loan Request as indicated on the form.
All parties listed below are considered owners of the Applicant as defined in 13 CFR § 120.10, as well as “principals”:
• For a sole proprietorship, the sole proprietor;
• For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;
• For a corporation, all owners of 20% or more of the corporation;
• For limited liability companies, all members owning 20% or more of the company; and
• Any Trustor (if the Applicant is owned by a trust).
Paperwork Reduction Act – You are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated time for completing this application, including gathering data needed, is 8 minutes. Comments about this time or the information requested should be sent to: Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416, and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Washington DC 20503. PLEASE DO NOT SEND FORMS TO THESE ADDRESSES.
Privacy Act (5 U.S.C. 552a) – Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your social security number may not affect any right, benefit or privilege to which you are entitled. (But see Debt Collection Notice regarding taxpayer identification number below.) Disclosures of name and other personal identifiers are required to provide SBA with sufficient information to make a character determination. When evaluating character, SBA considers the person’s integrity, candor, and disposition toward criminal actions. Additionally, SBA is specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC Section 636(a)(1)(B) of the Small Business Act (the Act).
Disclosure of Information – Requests for information about another party may be denied unless SBA has the written permission of the individual to release the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act. The Privacy Act authorizes SBA to make certain “routine uses” of information protected by that Act. One such routine use is the disclosure of information maintained in SBA’s system of records when this information indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature. Specifically, SBA may refer the information to the appropriate agency, whether Federal, State, local or foreign, charged with responsibility for, or otherwise involved in investigation, prosecution, enforcement or prevention of such violations. Another routine use is disclosure to other Federal agencies conducting background checks but only to the extent the information is relevant to the requesting agencies' function. See, 74 F.R. 14890 (2009), and as amended from time to time for additional background and other routine uses. In addition, the CARES Act, requires SBA to register every loan made under the Paycheck Protection Act using the Taxpayer Identification Number (TIN) assigned to the borrower.
Debt Collection Act of 1982, Deficit Reduction Act of 1984 (31 U.S.C. 3701 et seq. and other titles) – SBA must obtain your taxpayer identification number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may: (1) report the status of your loan(s) to credit bureaus, (2) hire a collection agency to collect your loan, (3) offset your income tax refund or other amounts due to you from the Federal Government, (4) suspend or debar you or your company from doing business with the Federal Government, (5) refer your loan to the Department of Justice, or (6) foreclose on collateral or take other action permitted in the loan instruments.
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Case 1:20-cv-01838-CPCayBcheDckocPurmoteecntito1n-P21rogrFaimled 06/16/20 Page 5 of 5
Borrower Application Form Revised June 12, 2020
Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) – The Right to Financial Privacy Act of 1978, grants SBA access rights to financial records held by financial institutions that are or have been doing business with you or your business including any financial institutions participating in a loan or loan guaranty. SBA is only required provide a certificate of its compliance with the Act to a financial institution in connection with its first request for access to your financial records. SBA's access rights continue for the term of any approved loan guaranty agreement. SBA is also authorized to transfer to another Government authority any financial records concerning an approved loan or loan guarantee, as necessary to process, service or foreclose on a loan guaranty or collect on a defaulted loan guaranty. Freedom of Information Act (5 U.S.C. 552) – Subject to certain exceptions, SBA must supply information reflected in agency files and records to a person requesting it. Information about approved loans that will be automatically released includes, among other things, statistics on our loan programs (individual borrowers are not identified in the statistics) and other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity. Proprietary data on a borrower would not routinely be made available to third parties. All requests under this Act are to be addressed to the nearest SBA office and be identified as a Freedom of Information request. Occupational Safety and Health Act (15 U.S.C. 651 et seq.) – The Occupational Safety and Health Administration (OSHA) can require businesses to modify facilities and procedures to protect employees. Businesses that do not comply may be fined, forced to cease operations, or prevented from starting operations. Signing this form is certification that the applicant, to the best of its knowledge, is in compliance with the applicable OSHA requirements, and will remain in compliance during the life of the loan. Civil Rights (13 C.F.R. 112, 113, 117) – All businesses receiving SBA financial assistance must agree not to discriminate in any business practice, including employment practices and services to the public on the basis of categories cited in 13 C.F.R., Parts 112, 113, and 117 of SBA Regulations. All borrowers must display the "Equal Employment Opportunity Poster" prescribed by SBA. Equal Credit Opportunity Act (15 U.S.C. 1691) – Creditors are prohibited from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Debarment and Suspension Executive Order 12549; (2 CFR Part 180 and Part 2700) – By submitting this loan application, you certify that neither the Applicant or any owner of the Applicant have within the past three years been: (a) debarred, suspended, declared ineligible or voluntarily excluded from participation in a transaction by any Federal Agency; (b) formally proposed for debarment, with a final determination still pending; (c) indicted, convicted, or had a civil judgment rendered against you for any of the offenses listed in the regulations or (d) delinquent on any amounts owed to the U.S. Government or its instrumentalities as of the date of execution of this certification.
4 SBA Form 2483 (06/20)

Case 1:20-cv-01838-CCB Document 1-22 Filed 06/16/20 Page 1 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action
UNITED STATES DISTRICT COURT
for the
D__is_t_ri_c_t _o_f_M_ aDryisltarnicdt of __________

Defy Ventures, Inc., et al.
Plaintiff(s)
v. United States Small Busines Administration, et al.
Defendant(s)

)

)

)

)

)

) )

Civil Action No.

)

)

)

)

)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

Attorney General of the United States U.S. Department of Justice

950 Pennsylvania Avenue, NW

Washington, DC 20530-0001

A lawsuit has been filed against you.
Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Kali N. Bracey
Jenner & Block LLP 1099 New York Ave. NW 900 Washington, DC 20001 (202) 639-6000
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date:

CLERK OF COURT
Signature of Clerk or Deputy Clerk

Case 1:20-cv-01838-CCB Document 1-22 Filed 06/16/20 Page 2 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)
Civil Action No.

PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date)

.

’ I personally served the summons on the individual at (place)

on (date)

; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date)

, and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) designated by law to accept service of process on behalf of (name of organization)
on (date)

, who is ; or

’ I returned the summons unexecuted because

; or

’ Other (specify): .

My fees are $

for travel and $

for services, for a total of $

0.00

.

I declare under penalty of perjury that this information is true.

Date:

Server’s signature Printed name and title

Additional information regarding attempted service, etc:

Server’s address

Print

Save As...

Reset

Case 1:20-cv-01838-CCB Document 1-23 Filed 06/16/20 Page 1 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action
UNITED STATES DISTRICT COURT
for the
D__is_t_ri_c_t _o_f_M_ aDryisltarnicdt of __________

Defy Ventures, Inc., et al.
Plaintiff(s)
v. United States Small Busines Administration, et al.
Defendant(s)

)

)

)

)

)

) )

Civil Action No.

)

)

)

)

)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

Adminsitrator Jovita Carranza United States Small Business Administration

Office of General Counsel

409 3rd St. SW

Washington, D.C. 20416

A lawsuit has been filed against you.
Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Kali N. Bracey
Jenner & Block LLP 1099 New York Ave. NW 900 Washington, DC 20001 (202) 639-6000
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date:

CLERK OF COURT
Signature of Clerk or Deputy Clerk

Case 1:20-cv-01838-CCB Document 1-23 Filed 06/16/20 Page 2 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)
Civil Action No.

PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date)

.

’ I personally served the summons on the individual at (place)

on (date)

; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date)

, and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) designated by law to accept service of process on behalf of (name of organization)
on (date)

, who is ; or

’ I returned the summons unexecuted because

; or

’ Other (specify): .

My fees are $

for travel and $

for services, for a total of $

0.00

.

I declare under penalty of perjury that this information is true.

Date:

Server’s signature Printed name and title

Additional information regarding attempted service, etc:

Server’s address

Print

Save As...

Reset

Case 1:20-cv-01838-CCB Document 1-24 Filed 06/16/20 Page 1 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action
UNITED STATES DISTRICT COURT
for the
D__is_t_ri_c_t _o_f_M_ aDryisltarnicdt of __________

Defy Ventures, Inc., et al.
Plaintiff(s)
v. United States Small Busines Administration, et al.
Defendant(s)

)

)

)

)

)

) )

Civil Action No.

)

)

)

)

)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

U.S. District Attorney for the District of Maryland 36 S. Charles Street, 4th Fl.

Baltimore, MD 21201

A lawsuit has been filed against you.
Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Kali N. Bracey
Jenner & Block LLP 1099 New York Ave. NW 900 Washington, DC 20001 (202) 639-6000
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date:

CLERK OF COURT
Signature of Clerk or Deputy Clerk

Case 1:20-cv-01838-CCB Document 1-24 Filed 06/16/20 Page 2 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)
Civil Action No.

PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date)

.

’ I personally served the summons on the individual at (place)

on (date)

; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date)

, and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) designated by law to accept service of process on behalf of (name of organization)
on (date)

, who is ; or

’ I returned the summons unexecuted because

; or

’ Other (specify): .

My fees are $

for travel and $

for services, for a total of $

0.00

.

I declare under penalty of perjury that this information is true.

Date:

Server’s signature Printed name and title

Additional information regarding attempted service, etc:

Server’s address

Print

Save As...

Reset

Case 1:20-cv-01838-CCB Document 1-25 Filed 06/16/20 Page 1 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action
UNITED STATES DISTRICT COURT
for the
D__is_t_ri_c_t _o_f_M_ aDryisltarnicdt of __________

Defy Ventures, Inc., et al.
Plaintiff(s)
v. United States Small Busines Administration, et al.
Defendant(s)

)

)

)

)

)

) )

Civil Action No.

)

)

)

)

)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

Secretary Steven Mnuchin U.S. Department of Treasury

1500 Pennsylvania Ave NW

Washington, D.C. 20220

A lawsuit has been filed against you.
Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Kali N. Bracey
Jenner & Block LLP 1099 New York Ave. NW 900 Washington, DC 20001 (202) 639-6000
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date:

CLERK OF COURT
Signature of Clerk or Deputy Clerk

Case 1:20-cv-01838-CCB Document 1-25 Filed 06/16/20 Page 2 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)
Civil Action No.

PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date)

.

’ I personally served the summons on the individual at (place)

on (date)

; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date)

, and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) designated by law to accept service of process on behalf of (name of organization)
on (date)

, who is ; or

’ I returned the summons unexecuted because

; or

’ Other (specify): .

My fees are $

for travel and $

for services, for a total of $

0.00

.

I declare under penalty of perjury that this information is true.

Date:

Server’s signature Printed name and title

Additional information regarding attempted service, etc:

Server’s address

Print

Save As...

Reset

Case 1:20-cv-01838-CCB Document 1-26 Filed 06/16/20 Page 1 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action
UNITED STATES DISTRICT COURT
for the
D__is_t_ri_c_t _o_f_M_ aDryisltarnicdt of __________

Defy Ventures, Inc., et al.
Plaintiff(s)
v. United States Small Busines Administration, et al.
Defendant(s)

)

)

)

)

)

) )

Civil Action No.

)

)

)

)

)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

United States Small Business Administration Office of General Counsel

409 3rd St. SW

Washington, D.C. 20416

A lawsuit has been filed against you.
Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Kali N. Bracey
Jenner & Block LLP 1099 New York Ave. NW 900 Washington, DC 20001 (202) 639-6000
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date:

CLERK OF COURT
Signature of Clerk or Deputy Clerk

Case 1:20-cv-01838-CCB Document 1-26 Filed 06/16/20 Page 2 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)
Civil Action No.

PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date)

.

’ I personally served the summons on the individual at (place)

on (date)

; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date)

, and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) designated by law to accept service of process on behalf of (name of organization)
on (date)

, who is ; or

’ I returned the summons unexecuted because

; or

’ Other (specify): .

My fees are $

for travel and $

for services, for a total of $

0.00

.

I declare under penalty of perjury that this information is true.

Date:

Server’s signature Printed name and title

Additional information regarding attempted service, etc:

Server’s address

Print

Save As...

Reset

Case 1:20-cv-01838-CCB Document 1-27 Filed 06/16/20 Page 1 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action
UNITED STATES DISTRICT COURT
for the
D__is_t_ri_c_t _o_f_M_ aDryisltarnicdt of __________

Defy Ventures, Inc., et al.
Plaintiff(s)
v. United States Small Busines Administration, et al.
Defendant(s)

)

)

)

)

)

) )

Civil Action No.

)

)

)

)

)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

U.S. Department of Treasury 1500 Pennsylvania Ave NW

Washington, D.C. 20220

A lawsuit has been filed against you.
Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if you are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney, whose name and address are: Kali N. Bracey
Jenner & Block LLP 1099 New York Ave. NW 900 Washington, DC 20001 (202) 639-6000
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date:

CLERK OF COURT
Signature of Clerk or Deputy Clerk

Case 1:20-cv-01838-CCB Document 1-27 Filed 06/16/20 Page 2 of 2
AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)
Civil Action No.

PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date)

.

’ I personally served the summons on the individual at (place)

on (date)

; or

’ I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date)

, and mailed a copy to the individual’s last known address; or

’ I served the summons on (name of individual) designated by law to accept service of process on behalf of (name of organization)
on (date)

, who is ; or

’ I returned the summons unexecuted because

; or

’ Other (specify): .

My fees are $

for travel and $

for services, for a total of $

0.00

.

I declare under penalty of perjury that this information is true.

Date:

Server’s signature Printed name and title

Additional information regarding attempted service, etc:

Server’s address

Print

Save As...

Reset

 
 Case 1:20-cv-01838-CCB Document 2 Filed 06/16/20 Page 1 of 3

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

CASE NO.:

PLAINTIFFS’ EMERGENCY MOTION FOR PRELIMINARY INJUNCTION
Plaintiffs, through their undersigned counsel and pursuant to Federal Rule 65, hereby move this Court for a preliminary injunction, and state as follows:
The grounds for this Motion are set forth in the Memorandum of Law simultaneously filed herewith, as well as the Verified Complaint filed in this matter.
WHEREFORE, Plaintiffs respectfully request that this Court:
A. Preliminarily enjoin the challenged criminal-record exclusion provisions of the interim final rule (“IFR”), as modified on June 12, 2020, and the application form, republished on June 12, 2020, enjoin Defendants from enforcing such provisions, and extend the application deadline 21 days, to July 21, 2020, for applicants wrongfully excluded under the Small Business Administration’s and the U.S. Department of the Treasury’s unlawful implementation of the CARES Act.

Case 1:20-cv-01838-CCB Document 2 Filed 06/16/20 Page 2 of 3

B. Direct that Defendants not authorize, guaranty, or disburse funds appropriated for loans under the Paycheck Protection Program without reserving sufficient funds to cover applicants wrongfully excluded under the challenged terms of the IFR and the application form, in an amount to be determined based on SBA data and submitted by the SBA to this Court for approval.

Dated: June 16, 2020

Respectfully submitted,
/s/ Kali N. Bracey Kali Bracey (Federal Bar No. 20752) Jenner & Block 1099 New York Avenue, NW Washington, D.C. 20001-4412 202 639-6000 kbracey@jenner.com
Attorney for Plaintiffs

2

Case 1:20-cv-01838-CCB Document 2 Filed 06/16/20 Page 3 of 3 CERTIFICATE OF SERVICE
I HEREBY CERTIFY that, on this 16th day of June 2020, Motion for Emergency Preliminary Injunction, Memorandum in Support, and Proposed Order were served via the Court’s CM/ECF system on all counsel of record in accordance with the Federal Rules of Civil Procedure and the Local Rules of the United States District Court for the District of Maryland.
/s/ Kali N. Bracey Kali Bracey (Bar No. 20752)
3

Case 1:20-cv-01838-CCB Document 2-1 Filed 06/16/20 Page 1 of 42

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.
Defendants.

CASE NO.:

MEMORANDUM IN SUPPORT OF EMERGENCY MOTION FOR PRELIMINARY INJUNCTION

Case 1:20-cv-01838-CCB Document 2-1 Filed 06/16/20 Page 2 of 42

TABLE OF CONTENTS

Page

Preliminary Statement .................................................................................................. 1
Statement of Facts......................................................................................................... 4 A. Congress Enacts the Paycheck Protection Program. .............................. 4 B. The SBA Imposes Criminal-Record Exclusions on PPP Eligibility. ................................................................................................. 6 C. Plaintiffs Are Denied Vital Assistance During the COVID-19 Pandemic. ................................................................................................. 9
Argument ..................................................................................................................... 12
I. Plaintiffs are likely to succeed on the merits because the SBA’s blanket criminal-record exclusions are contrary to the CARES Act and arbitrary and capricious. .................................................................................. 12 A. The text of the CARES Act unambiguously requires that “any” small business “shall” be eligible for the PPP....................................... 12 1. The text of the CARES Act mandates that all businesses that satisfy the stated size and timing criteria are eligible for relief—leaving no room for the SBA’s criminal-record exclusions. .................................................................................... 13 2. This interpretation of the CARES Act’s text is consistent with the purpose of the PPP........................................................ 19 3. Courts have found that the text of the CARES Act unambiguously bars analogous SBA exclusions from the PPP............................................................................................... 22 B. The SBA’s criminal-record exclusions are arbitrary and capricious. ............................................................................................... 25
II. Plaintiffs will suffer irreparable harm in the absence of an injunction, and granting an injunction is in the public interest........................................ 29
III. This Court can and should enjoin enforcement of the challenged SBA criminal-record exclusions. ............................................................................... 33
Conclusion .................................................................................................................... 35

i

Case 1:20-cv-01838-CCB Document 2-1 Filed 06/16/20 Page 3 of 42
TABLE OF AUTHORITIES
Page(s)
Cases
Ali v. Fed. Bureau of Prisons, 552 U.S. 214 (2008) ................................................................................................ 14
Allentown Mack Sales & Service, Inc. v. NLRB, 522 U.S. 359 (1998) ................................................................................................ 29
Am. Acad. of Pediatrics v. Food & Drug Admin., 399 F. Supp. 3d 479 (D. Md. 2019), appeal dismissed sub nom. In re Cigar Ass’n of Am., No. 19-2130, 2020 WL 2116554 (4th Cir. May 4, 2020) ........................................ 35
Bostock v. Clayton Cty., Georgia, No. 17-1618, 590 U.S. __ (U.S. June 15, 2020)...................................................... 19
Bowman Transp. Inc. v. Ark.-Best Freight System, 419 U.S. 281 (1974) ................................................................................................ 25
Burlington Truck Lines v. United States, 371 U.S. 156 (1962) ................................................................................................ 25
In re Calais Regional Hospital, No. 19-10486, 2020 WL 2201947 (Bankr. D. Me. May 1, 2020) ........................... 35
Camelot Banquet Rooms, Inc. v. Carranza, No. 20-1729 (7th Cir. May 20, 2020)...................................................................... 23
Camelot Banquet Rooms v. U.S. Small Bus. Admin., Nos. 20-C-601, 2020 WL 2088637 (E.D. Wis. May 1, 2020)...........................passim
Casa De Maryland v. Dep’t of Homeland Sec., 924 F.3d 684 (4th Cir. 2019) .................................................................................. 29
Chevron, U.S.A., Inc. v Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) ................................................................................................ 12
Children’s Hosp. of the King's Daughters, Inc. v. Azar, 896 F.3d 615 (4th Cir. 2018)......................................................................................................... 28
Dewhurst v. Century Aluminum Co., 649 F.3d 287 (4th Cir. 2011) .................................................................................. 12
ii

Case 1:20-cv-01838-CCB Document 2-1 Filed 06/16/20 Page 4 of 42
Diocese of Rochester v. U.S. Small Bus. Admin., No. 6:20-CV-06243 EAW, 2020 WL 3071603 (W.D.N.Y. June 10, 2020)....................................................................................... 24
DV Diamond Club of Flint, LLC v. Small Bus. Admin., No. 20-1437, 2020 WL 2988528 (6th Cir. May 15, 2020) ............................ 5, 23, 31
DV Diamond Club of Flint, LLC v. U.S. Small Bus. Admin., No. 20-cv-10899, 2020 WL 2315880 (E.D. Mich. May 11, 2020) ...................passim
Fed. Leasing, Inc. v. Underwriters at Lloyd’s, 650 F.2d 495 (4th Cir. 1981) .................................................................................. 31
FHA v. Burr, 309 U.S. 242 (1940) ................................................................................................ 34
In re Gateway Radiology Consultants, P.A., No. 8:19-BK-04971-MGW, 2020 WL 3048197 (Bankr. M.D. Fla. June 8, 2020) ............................................................................ 34
Guilford Coll. v. McAleenan, 389 F. Supp. 3d 377 (M.D.N.C. 2019) .................................................................... 28
In re Hidalgo County Emergency Serv. Found., No. 19-20497, 2020 WL 2029252 (Bankr. S.D. Tex. Apr. 25, 2020) ..................... 24
Hughes Network Sys., Inc. v. InterDigital Commc’ns Corp., 17 F.3d 691 (4th Cir. 1994) .................................................................................... 31
Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969 (2016) ...................................................................................... 15, 16
League of Women Voters of N.C. v. North Carolina, 769 F.3d 224 (4th Cir. 2014) .................................................................................. 30
Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) .................................................................................................. 15
Mendoza v. Perez, 754 F.3d 1002 (D.C. Cir. 2014) .............................................................................. 28
Michigan v. E.P.A., 135 S. Ct. 2699 (2015) ............................................................................................ 29
Motor Vehicle Mfrs. Ass’n. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) .................................................................................................. 25
iii

Case 1:20-cv-01838-CCB Document 2-1 Filed 06/16/20 Page 5 of 42
Owner-Operator Indep. Drivers Ass’n, Inc. v. Fed. Motor Carrier Safety Admin., 494 F.3d 188 (D.C. Cir. 2007) ................................................................................ 28
People for the Ethical Treatment of Animals v. U.S. Dep’t of Agric., 861 F.3d 502 (4th Cir. 2017) .................................................................................. 12
In re Roman Catholic Church of Archdiocese of Santa Fe, No. 18-13027 T11, 2020 WL 2096113 (Bankr. D.N.M. May 1, 2020) ......... 5, 23, 27
SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018) ................................................................................ 14, 16, 17
Sierra Club v. U.S. Army Corps of Eng’rs., 909 F.3d 635 (4th Cir. 2018) ............................................................................ 12, 13
Sierra Club v. U.S. Dep’t of the Interior, 899 F.3d 260 (4th Cir. 2018) .................................................................................. 26
In re Skefos, No. 19-29718-L, 2020 WL 2893413 (Bankr. W.D. Tenn. June 2, 2020) ................................................................... 24, 26
In re: Springfield Med. Care Sys., Inc., No. 19-10285, 2020 WL 2311881 (Bankr. D. Vt. May 8, 2020)............................. 33
United States v. Gonzales, 520 U.S. 1 (1997) .................................................................................................... 15
Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008) .................................................................................................... 12
Woodall v. Fed. Bureau of Prisons, 432 F.3d 235, 247 (3d Cir. 2005) ........................................................................... 25
Statutes 5 U.S.C. § 553............................................................................................................... 28 5 U.S.C. § 706(2)(C) ..................................................................................................... 12 7 U.S.C. § 1506(d) ........................................................................................................ 34 15 U.S.C. § 633(d) ........................................................................................................ 13 15 U.S.C. § 634(b)(1) .............................................................................................. 33, 34
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15 U.S.C. § 636(a) .................................................................................................passim 15 U.S.C. § 714b(c)....................................................................................................... 34 15 U.S.C. § 9005(b) ...................................................................................................... 14 35 U.S.C. § 318(a) ........................................................................................................ 17 38 U.S.C. § 8127(d) ...................................................................................................... 16 42 U.S.C. § 3211(a)(13) ................................................................................................ 34 132 Stat. 5194 (2018) ............................................................................................... 8, 21 134 Stat. 281 (2020)..............................................................................................passim 134 Stat. 620 (2020) ....................................................................................................... 6 Other Authorities 13 C.F.R. § 120.110 .................................................................................................. 7, 22 85 Fed. Reg. 20,811 (2020) ...................................................................................passim 85 Fed. Reg. 23,451 (2020) .......................................................................................... 23 Bureau of Justice Statistics, Correctional Populations in the United
States, 2016 (2018) ................................................................................................. 22 Bureau of Justice Statistics, Prisoners in 2018 (Apr. 2020) ...................................... 32 Bureau of Justice Statistics, Probation and Parole in the United
States, 2016 (2018) ................................................................................................. 22 Business Loan Program Temporary Changes; Paycheck Protection
Program – Additional Revisions to First Interim Final Rule (June 12, 2020).............................................................................................................. 7, 27 Meredith Cohn et al., Black Marylanders Make Up Largest Group of Coronavirus Cases as State Releases Racial Breakdown for First Time, Baltimore Sun, Apr. 09, 2020 ...................................................................... 32 Michael Pinard, Reflections and Perspectives on Reentry and Collateral Consequences, 100 J. Crim. L. & Criminology 1213 (2010) .................................. 32 Oxford English Dictionary (3d ed., Mar. 2016) .......................................................... 14 Webster’s Third New Int’l Dictionary (1976).............................................................. 15
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PRELIMINARY STATEMENT This action challenges the Small Business Administration’s (“SBA”) and Department of the Treasury’s unlawful and irrational decision to categorically deny access to the Paycheck Protection Program (the “PPP”) to small businesses owned by individuals with criminal histories. The SBA’s actions run directly contrary to the statutory text, which requires that “all” small businesses “shall” be eligible for the PPP, Congress’s emergency lifeline to small business during the COVID-19 pandemic. Rather than aiding people and businesses in need—the entire purpose of the PPP—these restrictions do the opposite: they cause irreparable harm to business owners who are disproportionately Black and Latinx and live in communities disproportionately suffering from the COVID-19 pandemic and harmed by the criminal-legal system. In this time of unprecedented crisis, the SBA is imposing an unfair and unlawful barrier for business owners striving to maintain economic security and overcome the severe challenges faced by individuals with criminal histories. This Court should grant a preliminary injunction to ensure that these especially vulnerable American small businesses and their workers are able to benefit from the government’s emergency relief program, or else the SBA will continue to redline them out of it. COVID-19 has devastated the American economy. The spread of the virus— which has infected over 2 million Americans and killed over 100,000—led cities and states to implement stay-at-home orders requiring the shuttering of numerous businesses and decimating those that remained open. Among those hardest hit by the economic fallout from the pandemic are the owners and employees of small

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businesses—an engine of the American economy responsible for half of all privatesector employment. Many small businesses, unable to maintain payroll with little to no revenue coming in the door, were forced to cut hours and pay and to implement layoffs. As a result of the pandemic, the unemployment rate reached levels not seen since the Great Depression.
In March 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the largest stimulus program in U.S. history, to provide financial relief to ease the economic suffering caused by the pandemic, including through direct Economic Impact Payments of up to $1,200 per adult. Congress showed particular concern for small businesses and those who work for them through the PPP, which Congress funded with nearly $650 billion. Congress provided that “any” small business “shall” be eligible to receive an immediate loan guaranteed by the SBA, and that the loan is forgiven in full if the funds are used for payroll or certain other expenses. 15 U.S.C. § 636(a)(36)(D). That is, although called a “loan” program, the PPP is in effect a grant from the federal government to small businesses to enable them to protect the livelihood of their employees. Congress’s purpose is clear: to provide immediate economic relief to all American small businesses so that they can continue to pay their workers (and, in many cases, guarantee continued health insurance) during the ongoing COVID-19 crisis.
Notwithstanding Congress’s command that “any” small business “shall” be eligible to receive these critical funds, the SBA has intervened to categorically bar certain small businesses and their employees from obtaining aid. In a series of
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Interim Final Rules (“IFR”) and bewildering, repeatedly revised application forms, the SBA added unnecessary, confusing, and internally inconsistent eligibility criteria that barred businesses owned (even in part) by individuals with any of a wide variety of past interactions with the criminal-legal system—including individuals under indictment or information, on parole or probation, or with felony convictions—from accessing PPP funds. These restrictions conflict with Congress’s unambiguous mandate in the CARES Act. Furthermore, the SBA has failed to explain its decision to categorically exclude these businesses from Congress’s broad relief program. The flurry of last-minute changes to the restrictions in conflicting IFRs and application forms—the latest change appeared on the SBA’s website late on Friday, June 12, 2020, only days before the June 30 application deadline—suggest that the SBA does not know and cannot decide whether and which criminal history is relevant or why.
The harm from these exclusions is clear: They deny funded payroll to every small business—and therefore the wages of every person who happens to work for them—whose owner has a covered criminal record. The effect is to punish rather than support these individuals’ efforts to move beyond their criminal records and achieve financial security and contribute to the economic vitality of their communities. And the exclusions extend even to business owners with unproven, but still pending, criminal charges—denying them their presumption of innocence. (The SBA’s ever-changing criteria have exacerbated the problem, leaving small businesses and their workers uncertain about their eligibility as the application period closes.) The SBA’s denial of PPP funds compromises the very survival of those businesses—
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like Lightning Electric, the business owned by Plaintiff Sekwan Merritt, who was denied PPP funds on the basis of his parole status, and Plaintiff John Garland, who was denied PPP funds on the basis of a pending charge. These small businesses face bankruptcy and dissolution without the immediate funding Congress deemed necessary for them to survive the pandemic.
The SBA’s denial of PPP funds to these small businesses also disproportionately harms individuals and communities of color. Reflecting systemic racism in the criminal-legal system, members of those communities are many times more likely to have disqualifying criminal histories than white people. And it is many of these very same communities that are being hit hardest by the coronavirus pandemic. The SBA is thus denying relief where it is most needed.
The SBA’s blanket exclusion of businesses owned by individuals with criminal records from the PPP is unlawful because it is contrary to the unambiguous text of the CARES Act and is otherwise arbitrary and capricious. It has caused irreparable harm to Plaintiffs and many others like them. And it flouts the public interest in broadly encouraging the survival of all American small businesses and the financial security of all their employees, which Congress urgently pursued through the PPP. The SBA’s unlawful and harmful exclusions cannot stand.
STATEMENT OF FACTS A. Congress Enacts the Paycheck Protection Program. Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or “the Act”), Pub. L. No. 116-136, 134 Stat. 281 (2020), signed into law on March 27, 2020, to provide immediate financial relief from the economic
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devastation resulting from the COVID-19 pandemic. In Title I of the CARES Act, designated “Keeping American Workers Paid and Employed,” Congress created the PPP. See generally DV Diamond Club of Flint, LLC v. Small Bus. Admin., No. 201437, 2020 WL 2988528, at *1 (6th Cir. May 15, 2020) (describing the PPP). Congress designed the PPP to deliver one of the Act’s central promises: providing emergency relief to small businesses affected by the COVID-19 pandemic, and protecting the employment, income—and, in many cases, health insurance—of the small-business workforce. Id.
Although, formally, PPP funds are distributed to small businesses in the form of loans guaranteed by the SBA, “the PPP is not a loan program” but rather “is a grant or support program” aimed at “small businesses in financial distress.” In re Roman Catholic Church of Archdiocese of Santa Fe, No. 18-13027 T11, 2020 WL 2096113, at *8 (Bankr. D.N.M. May 1, 2020). This is because the CARES Act provides that PPP “loans” will be forgiven to the extent the funds are used for certain purposes, such as for payroll costs, including costs for the provision of group health care benefits and insurance premiums, during a short period following the loan’s origination. 15 U.S.C. § 636(a)(36)(A)(viii). The CARES Act provides that the PPP is administered by the SBA under Section 7(a) of the Small Business Act, id. § 636(a), and the loans are made by the SBA’s participating banks. Congress initially appropriated $349 billion for the program’s federally guaranteed forgivable loans. Immediate high demand for the forgivable loans quickly exhausted the initial funding, and Congress thereafter appropriated an additional $310 billion. See Paycheck Protection and
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Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020). The provision of the CARES Act that defines eligibility for the PPP, at the
heart of this dispute, is codified at 15 U.S.C. § 636(a)(36)(D). Titled Increased Eligibility for Certain Small Businesses and Organizations, it provides: “During the covered period”—that is, from February 15 through June 30, 2020—“any business concern ... shall be eligible to receive a covered loan if the business concern … employs not more than the greater of—(I) 500 employees; or (II) if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern ... operates.” 15 U.S.C. § 636(a)(36)(D)(i) (emphasis added).
B. The SBA Imposes Criminal-Record Exclusions on PPP Eligibility.
Shortly after Congress passed the CARES Act, the SBA adopted an Interim Final Rule (the “April IFR”) governing the implementation of the PPP. See Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20,811 (Apr. 15, 2020). In order to “provide relief to America’s small businesses expeditiously” and in light of “the dramatic decrease in economic activity nationwide,” the rule took immediate effect. Id.
In the April IFR, the SBA introduced a set of eligibility criteria for the PPP beyond those enumerated in the text of the CARES Act. Relevant here, the SBA decreed: “You are ineligible for a PPP loan if … [a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony
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within the last five years.” 85 Fed. Reg. at 20,812. The April IFR also invoked
eligibility criteria from an earlier rule and agency publication—criteria that the
agency promulgated to apply to a different SBA loan program. (Those rules differ
from the April IFR’s statement on the scope of the criminal-record exclusions.1) In a
subsequent IFR, issued on the afternoon of Friday, June 12, 2020—with the PPP
application period set to end on June 30—the SBA again changed its PPP criminal-
record eligibility criteria, revising the April IFR to read:
You are ineligible for a PPP loan if, for example: * * * iii. An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; Business Loan Program Temporary Changes; Paycheck Protection Program –
Additional Revisions to First Interim Final Rule (June 12, 2020) (“June IFR”).
1 In the April IFR, the SBA invoked eligibility criteria from 13 C.F.R. § 120.110, which the SBA first issued in 1996, and the SBA’s interpreting Standard Operating Procedure (SOP) 50 10, which both specified businesses ineligible to receive loans under different SBA programs distinct from the PPP. The scope of the earlier rule differs from the April IFR’s criminal-record exclusions, most notably by not categorically excluding business owners based on conviction record. See 13 C.F.R. § 120.110(n). Though the SOP purports merely to interpret the earlier rule, it excludes a broader class of individuals, stating that the SBA “cannot provide financial assistance to businesses with Associates who are” subject to any criminal charges, instead of only felonies and crimes of moral turpitude. SOP 50 10, at 110.
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The SBA explained its change by noting that “a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391),” id., a statute designed to “reform[ ] sentencing laws that have wrongly and disproportionately harmed the African-American community” and give individuals with criminal history “the chance to re-enter society as productive, law-abiding citizens,” President Donald J. Trump, State of the Union (Feb. 5, 2019). But the June IFR left in place the SBA’s categorical ban on business owners based on any kind of probation or parole, no matter how old or irrelevant their conviction, and on business owners facing charges for any offense, no matter how minor or unfounded.
Alongside the shifting and inconsistent eligibility criteria announced in the SBA’s rules, the agency also published—without opportunity for notice and comment—a flurry of PPP application forms. Each form contained its own criminalrecord exclusions, often different from those provided by the various rules. See Compl. ¶ 40 (March 31 application form excluded business owners with felony or misdemeanor convictions, pleas of nolo contendere, or pretrial diversion going back seven years); id. ¶ 46–50 (April 3 application form eliminated misdemeanors and altered lookback period); id. ¶ 63 (most recent application form published on June 12, 2020).
Elected officials and advocates from across the political spectrum opposed the
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SBA’s criminal-record exclusions as soon as they were announced. Senators from both parties asked the SBA to revise its exclusions. See, e.g., Compl. ¶ 54 (excerpting and attaching a letter from Senators Rob Portman (R-OH) and Ben Cardin (D-MD) explaining that the PPP “was not intended to exclude business owner[s] who have made mistakes, paid their debt, and turned their lives around”); see also id. ¶¶ 52– 55 (collecting legislator criticism). In the IFR comment period—which occurred after the April IFR had taken immediate effect—comments from a diverse set of organizations questioned the legality and logic of the restrictions. For example, Right on Crime—a “national campaign to promote successful, conservative solutions on American criminal justice policy”—joined seven other conservative groups to encourage the SBA to “tailor the Final Interim Rule to reflect common-sense.” Id. ¶ 56; see also id. ¶¶ 56–57 (collecting criticism from advocacy organizations). Yet the SBA offered no explanation of the basis for the exclusions, even as the SBA continued to revise them in conflicting publications.
C. Plaintiffs Are Denied Vital Assistance During the COVID-19 Pandemic.
One Plaintiff in this case, Sekwan Merritt, is a Black American small-business owner who has rebuilt his life after interactions with the criminal-legal system when he was a younger man. In 2012, Merritt pleaded guilty to possession and possession with intent to distribute narcotics in Maryland; he served five years at the Maryland Correctional Institution—where he worked diligently to ensure that he would be able to become self-sufficient upon reentry—and remains on parole through 2022. Merritt Decl. ¶ 9. After he was released, in October 2017, Merritt started Plaintiff Lightning
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Electric, an electrical contracting business in Baltimore, Maryland, with a mission of serving as an example for the next generation of minority contractors and providing opportunity and hope for formerly incarcerated individuals. Id. ¶¶ 4–6. Lightning Electric provides work for five contracted electricians—four were formerly incarcerated—all of whom Merritt endeavors to educate about the contracting business with the hopes that they, too, can sbecome entrepreneurs. Id. ¶¶ 13–15.
In the spring of 2020, Lightning Electric’s business ground to a halt as a result of the COVID-19 pandemic. Lightning Electric was forced to shut operations almost completely, and Merritt was unable to pay the electricians who worked for the company. Id. ¶ 19. Despite its current lack of work, Lightning Electric still has approximately $9,000 in biweekly payroll expenses, along with other overhead costs. Id. ¶¶ 25–26. Without an influx of cash, Lightning Electric may be forced to fold. Id. ¶ 28. Merritt, seeking to benefit from Congress’s promise of emergency aid, applied for PPP funds on April 15, 2020, through his bank, Wells Fargo. Id. ¶¶ 20–21. On the application, he encountered questions about his criminal history, to which he answered “yes” in light of his current parole status. Id. ¶ 22. Upon submitting his application, Merritt was immediately rejected. Id. ¶ 23. Had Merritt received PPP funds, he would have been able to pay his workers during the time when business operations were shut. Id. ¶ 26. Instead, Merritt has been pouring his own and his family’s savings into the business to keep the company going. Id. ¶ 27.
A second Plaintiff, John Garland, owns and operates a graphic design franchise, Plaintiff Fastsigns Bethpage (“Fastsigns”), in Bethpage, New York.
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Garland Decl. ¶ 26. As a result of the pandemic, Fastsigns’ business has plummeted, as many of its primary business clients face economic distress. Id. ¶ 24. Garland began applying for PPP funds on April 10, 2020. Id. ¶ 27–28. The application form stated that his loan would not be approved if he had a pending misdemeanor charge, which he does. Id. ¶ 27–28. (In December 2019, Garland was charged with petit larceny and a violation of an order of protection relating to a prior domestic violence offense. Id. ¶¶ 9–10. Garland pleaded not guilty in February 2020, but because of limited court access resulting from the COVID-19 pandemic, the charge remains pending. Id. ¶ 11.) Because of the certain denial of his loan, Garland discontinued his application. He consulted with the business’s bank, which confirmed that its PPP application also contains this disqualifying question. Id. ¶ 29.
A third Plaintiff, Defy Ventures, Inc. (“Defy”), is a nationwide nonprofit organization with chapters in New York, California, Connecticut, and Illinois (along with licensed affiliates in Colorado and Washington). Defy provides training, funding, and continued support to entrepreneurs with a history of incarceration. See Glazier Decl. ¶¶ 4–5, 6–15. Since its founding in 2010, Defy has worked with 5,200 entrepreneurs-in-training, the vast majority of whom are people of color. Id. ¶ 16. As a result of the COVID-19 pandemic, many of the businesses run by Defy program participants have faced existential financial distress. Id. ¶¶ 21–22. After a program graduate brought the SBA’s criminal-record exclusions to Defy’s attention, Defy devoted itself to understanding the SBA’s rules and application form, researching and following the SBA’s constantly changing restrictions, advising Defy graduates on
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applying for PPP funds, and locating alternative funding sources for graduates excluded from the PPP (including looking into the possibility of Defy providing funding itself). Id. ¶¶ 20–31. The SBA’s exclusions frustrate Defy’s mission and force it to divert critical resources, while threatening the security and livelihood of the people it serves. Id. ¶¶ 32–34.
ARGUMENT A party seeking a preliminary injunction must “establish that [1] he is likely to succeed on the merits, [2] he is likely to suffer irreparable harm in the absence of preliminary relief, [3] the balance of equities tips in his favor, and [4] an injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); see Dewhurst v. Century Aluminum Co., 649 F.3d 287, 290 (4th Cir. 2011). Plaintiffs satisfy each element. I. Plaintiffs are likely to succeed on the merits because the SBA’s blanket criminal-record exclusions are contrary to the CARES Act and arbitrary and capricious.
A. The text of the CARES Act unambiguously requires that “any” small business “shall” be eligible for the PPP.
The Administrative Procedure Act (“APA”) bars agencies, like the SBA, from taking action “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C. § 706(2)(C). Where, as here, “a challenger asserts that an agency action conflicts with the language of a statute,” this Court applies the familiar analytical framework set forth in Chevron, U.S.A., Inc. v Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984). Sierra Club v. U.S. Army Corps of Eng’rs., 909 F.3d 635, 643 (4th Cir. 2018). This framework requires the Court to “give plain and
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unambiguous statutes their full effect.” People for the Ethical Treatment of Animals v. U.S. Dep’t of Agric., 861 F.3d 502, 506 (4th Cir. 2017). Only “if the statute is ambiguous, courts then move … to Chevron’s second step and defer to the agency’s interpretation so long as it is based on a permissible construction of the statute.” Sierra Club, 909 F.3d at 643 (citation and alterations omitted). Here Chevron’s first step is also its last: the CARES Act unambiguously forecloses the SBA’s attempt to exclude businesses from participating in the PPP based on their owners’ interactions with the criminal-legal system.
1. The text of the CARES Act mandates that all businesses that satisfy the stated size and timing criteria are eligible for relief— leaving no room for the SBA’s criminal-record exclusions. Congress inserted the PPP into the existing SBA 7(a) loan program but made clear its intent that the PPP’s forgivable loans are strikingly different. In particular, the PPP’s so-called “loans” are not ordinary SBA loans; they are in effect conditional grants designed to ensure continued employment for employees of American small businesses. See supra at 5. The Act makes this distinction expressly, explaining that the SBA “may guarantee [PPP] loans under the same terms, conditions, and processes” as other SBA loans, “[e]xcept as otherwise provided in this paragraph.” 15 U.S.C. § 636(a)(36)(B) (emphasis added). This provision means that the SBA’s ordinary regulatory authority under the Small Business Act, allowing it to “establish general policies” governing the “granting and denial” of loans, applies to the PPP but may be (and in many cases was) superseded by other provisions of the CARES Act. 15 U.S.C. § 633(d). Most notably, the PPP promises full loan forgiveness so long as the recipient
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uses the funds for payroll costs and certain other enumerated purposes. 15 U.S.C. § 9005(b). That marks a sharp departure from the SBA’s ordinary lending practices. Thus, although the PPP was to be administered by the SBA, Congress ensured that its unique emergency grant program was far from business as usual.
The provision at issue here represents another such departure, reflecting who is eligible to receive the promised funds in the first place. Section 636(a)(36)(D), titled “Increased Eligibility for Certain Small Businesses and Organizations,” dictates mandatory and comprehensive PPP eligibility. According to the Increased Eligibility Provision, “During the covered period … any business concern … shall be eligible to receive a covered loan if the business concern … employs not more than the greater of— (I) 500 employees; or (II) [applicable industry size standards].” 15 U.S.C. § 636(a)(36)(D)(i) (emphasis added). This provision unambiguously provides that any business concern is eligible for the PPP so long as it (1) during the covered period (2) satisfies either of the two applicable size requirements.
The key words are “any” and “shall.” The Supreme Court has repeatedly interpreted those words to mean what they say. Starting with “any,” the Supreme Court has explained that “[w]hen used (as here) with a ‘singular noun in affirmative contexts,’ the word ‘any’ ordinarily ‘refer[s] to a member of a particular group or class without distinction or limitation’ and in this way ‘impl[ies] every member of the class or group.’” SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1354 (2018) (alteration in original) (quoting Oxford English Dictionary (3d ed., Mar. 2016)); see also Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 220 (2008) (“Congress’ use of ‘any’ to modify ‘other
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law enforcement officer’ is most naturally read to mean law enforcement officers of whatever kind.”); United States v. Gonzales, 520 U.S. 1, 5 (1997) (“Read naturally, the word ‘any’ has an expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’” (quoting Webster’s Third New Int’l Dictionary 97 (1976))). Here, that means that the Increased Eligibility criteria applies to every business concern that satisfies the stated criteria.
Moving to “shall,” or what the Supreme Court has called “the mandatory ‘shall,’” that term, the Court has explained, “creates an obligation impervious to … discretion.” Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998); see also Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969, 1977 (2016) (“Unlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes a requirement.”). This means that if the preconditions to “shall” are satisfied—here, the timing and size requirements—the result must necessarily follow—here, PPP eligibility. Accordingly, when the Increased Eligibility Provision says that “any business concern shall be eligible to receive a covered loan if” it satisfies the specified timing and size criteria, it means that every business concern that satisfies those criteria must be eligible.
The enumeration of specified eligibility criteria—here, that during the covered period a business concern employ not more than a certain number employees— confirms that no further exclusions may apply to eligibility. Whether it is called expressio unius or just plain common sense, Congress’s express listing of eligibility criteria confirms that it did not authorize any additional restrictions on eligibility.
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Two recent Supreme Court cases considering similar statutes confirm that the eligibility criteria enumerated in section 636(a)(36)(D)(i) are mandatory and comprehensive, leaving no room for the SBA to engraft its own eligibility criteria onto the statute’s unambiguous text. In Kingdomware Technologies, 136 S. Ct. 1969, the Supreme Court addressed a provision of the Veterans Benefits, Health and Information Technology Act of 2006, a targeted intervention into the statutory scheme governing agency contracting, aimed at encouraging contracting with veteran-owned small businesses. Id. at 1973. The provision at issue required that, “[e]xcept as provided” in two enumerated subsections, the Department of Veterans Affairs “shall award contracts” through a bidding process known as the “Rule of Two” that restricted competition to veteran-owned small businesses. 38 U.S.C. § 8127(d) (emphasis added). The government nonetheless argued that the Department retained its discretion under preexisting regulations to use a different process for entering into certain kinds of contracts, without limiting competition to veteranowned small businesses. See Kingdomware Techs., 136 S. Ct., at 1976–77. The Supreme Court unanimously disagreed, concluding that “Congress’ use of the word ‘shall’ demonstrates that [the statute] mandates the use of Rule of Two in all contracting.” Id. (emphasis added). As in Kingdomware Technologies, here the mandatory “shall” along with specifically enumerated criteria plainly override the preexisting framework, and thus leave no room for the government to rely on prior rules or regulations that impose different criteria.
The statutory language addressed in SAS Institute, 138 S. Ct. 1348, is also
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closely analogous. There, the Supreme Court considered a statute defining the scope of inter partes review in the U.S. Patent Office: “If an inter partes review is instituted and not dismissed the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner….” Id. at 1354 (emphasis in original) (quoting 35 U.S.C. § 318(a)). Notwithstanding Congress’s use of “any” and “shall,” the government contended that the agency was not required to decide the patentability of every claim. Id. Again, the Supreme Court had none of it. The Court determined that the “plain text of [the statute] supplies a ready answer,” as the “shall” “any” “directive is both mandatory and comprehensive” and “[i]n this context, as in so many others, ‘any’ means ‘every.’” Id. at 1353–1355. “[W]hen [the statute] says the Board’s final written decision ‘shall’ resolve the patentability of ‘any patent claim challenged by the petitioner,’” the Court concluded, “it means the Board must address every claim,” “mak[ing] this an easy case.” Id. at 1354–55 (emphasis in original). The Court’s straightforward statutory interpretation in SAS Institute is similarly applicable here: When the CARES Act says that “any business concern” of a certain size “shall be eligible” to receive a PPP loan, it means that every such business concern is eligible and accordingly forecloses the government from declaring some such businesses categorically ineligible.
Had Congress intended for the SBA to apply preexisting additional eligibility criteria to the PPP, it would have drafted the CARES Act to do so. For example, Congress could have said that “any otherwise eligible business concern” is eligible if it satisfies the broader size requirements set forth in the PPP. Such language would
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have established that, in the PPP, Congress was merely changing the size requirements, but otherwise leaving intact the SBA’s background regulations governing loan eligibility. But Congress did not do that. Instead, Congress provided that “any” business “shall” be eligible so long as it satisfies the enumerated criteria, and thus unambiguously foreclosed the SBA’s effort to add additional, unwritten eligibility criteria above and beyond those that Congress specified.
The government has elsewhere unsuccessfully argued that Congress preserved the SBA’s authority to apply its preexisting eligibility criteria by specifying that, “[e]xcept as otherwise provided in this paragraph, the [SBA] may guarantee covered loans under the same terms, conditions, and processes as a loan made under this subsection.” See DV Diamond Club of Flint, LLC v. U.S. Small Bus. Admin., No. 20cv-10899, 2020 WL 2315880, at *12 (E.D. Mich. May 11, 2020) (quoting 15 U.S.C. § 636(a)(36)(B)). But that grant of discretion to the SBA applies only “except as otherwise provided” in the CARES Act. And Congress has, unambiguously, “otherwise provided” what the eligibility requirements are to participate in the PPP: “any” business that satisfies the stated size criteria “shall” be eligible. See id. at *13 (“The flaw in this argument is that another provision of the PPP does ‘otherwise provide[ ]’ that the SBA may not import its historical eligibility limitations into the PPP. … [T]he provision of the PPP that specifically addresses eligibility bars the SBA from doing so.”).2
2 As to several preexisting statutory requirements, Congress made doubly clear that the stated criteria were the only PPP eligibility criteria. For example, the CARES Act provides that PPP applicants are not required to demonstrate they are unable
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Any claim that Congress ought to have spoken more directly to the PPP eligibility of business owners with criminal records must therefore fail.3 As the Supreme Court said just yesterday, there is no such thing as “a ‘canon of donut holes,’ in which Congress’s failure to speak directly to a specific case that falls within a more general statutory rule creates a tacit exception.” Bostock v. Clayton Cty., Georgia, No. 17-1618, 590 U.S. __, __ (U.S. June 15, 2020) (slip op. at 19). “Instead,” the Court went on, “when Congress chooses not to include any exceptions to a broad rule, courts apply the broad rule.” Id. That is the beginning and end of this case.
2. This interpretation of the CARES Act’s text is consistent with the purpose of the PPP. Interpreting the CARES Act to extend relief to any small business that satisfies Congress’s stated eligibility criteria (and not merely a redlined subset of those small businesses) is consistent with Congress’s basic purposes of rescuing the national economy and getting money into the hands of vulnerable small businesses and workers. As one district court put it, “when the COVID-19 pandemic destroyed the economy and threw tens of millions of Americans out of work … Congress did not pick winners and losers.” DV Diamond Club, 2020 WL 2315880, at *1. “Instead,
to obtain credit elsewhere, as is ordinarily required by statute for SBA loans. 15 U.S.C. § 636(a)(36)(I). And the Act likewise expressly includes nonprofits, veterans organizations, and Tribal business concerns as eligible, in addition to “business concerns.” Id. § 636(a)(36)(D)(i). 3 To the extent Congress has previously spoken to criminal history it is only to authorize the SBA to perform criminal background checks, 15 U.S.C. § 636(a)(1)(B), but any eligibility restriction that the government might attempt to infer from this provision is overridden by the CARES Act’s express eligibility requirements.
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through the PPP, Congress provided temporary paycheck support to all Americans employed by all small businesses….” Id.
The employee-focused nature of the PPP—evident from the very title of the portion of the CARES Act in which it is included, “Keeping American Workers Paid and Employed”—explains Congress’s decision to prevent the SBA from applying additional employer eligibility restrictions. From the perspective of a Congress focused on providing salary and basic benefits to American employees affected by the COVID-19 pandemic, what matters is simply that the small business exists and has stepped forward to ask for relief for its workers. The goal of the PPP is to prevent or reverse employee layoffs by any small business employer. It is thus immaterial whether the business satisfies additional eligibility requirements that the SBA unilaterally imposes.
More still, the structure of the “loans” made under the program illustrates further why there is no basis for the SBA to impose additional eligibility criteria. Congress appropriated $349 billion and then an additional $310 billion to guarantee fully forgivable PPP funding, provided the funds were used for dedicated purposes. Given the guarantee of federally funded repayment, there is no sound basis for the SBA to impose additional restrictions on loan eligibility or to treat the PPP like an ordinary SBA loan program where the government has an interest in being repaid. Creditworthiness and ability to repay are simply not concerns for the PPP. Nor is there a concern about creating a perception or implication of endorsement, i.e., that the government has some ongoing involvement in a particular business. This is one-
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way, one-time relief funding. In contravention of this clear statutory purpose to provide aid to any small
business, the SBA’s criminal-record restrictions would pick winners—or at least losers—by categorically precluding many American small businesses from receiving PPP funds without any individualized consideration of their applications. In particular, a business would be categorically ineligible if one of its owners is incarcerated, on probation, or parole in connection with any crime, however minor and however far in the past, or has a recent felony conviction. The SBA thus denies Congress’s promise of economic relief, and the opportunity for a second-chance, to small-business owners, like Sekwan Merritt, who are on parole and actively working to rebuild their lives and to contribute to the economic vitality of their communities after a period of incarceration, the very rationale that spurred passage of the First Step Act of 2018, Pub. L. No. 115-391, 132 Stat. 5194 (2018). And the SBA also denies relief to business owners who have only been charged with a crime—and thus are presumed innocent—like small-business owner John Garland. The SBA’s criminalrecord exclusions in turn flatly preclude all of the employees of any such business from receiving the federal grant of payroll and health-insurance expenses provided by the CARES Act.
The SBA did not bother estimating the number of businesses and individuals precluded from PPP relief by any of the several iterations of its blanket criminalrecord exclusions, but the number is surely substantial. In 2016, 6.6 million individuals were incarcerated and another 4.5 million were on parole or probation.
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See Bureau of Justice Statistics, Correctional Populations in the United States, 2016 (2018); Bureau of Justice Statistics, Probation and Parole in the United States, 2016 (2018). And excluding individuals with criminal history has a disparate impact on communities of color: 2% of white business owners have been incarcerated, but the proportion is 15% for Black business owners and 10% for Latinx business owners. See Wildeman Decl. ¶¶ 1, 11. This means that the program designed to help communities stabilize during the COVID-19 pandemic is being disproportionately (and arbitrarily) denied to the very communities that have been hardest hit by the virus. See infra at 32–33. Simply put, the SBA is barring the emergency room door to those businesses who most need the urgent care Congress guaranteed to all small businesses.
3. Courts have found that the text of the CARES Act unambiguously bars analogous SBA exclusions from the PPP. Multiple courts—including the two appellate courts to consider the issue— have found that the text of the CARES Act unambiguously bars the SBA from engrafting additional eligibility restrictions onto the program. The Sixth Circuit considered this issue in the context of rejecting the SBA’s extra-statutory exclusion of sexually oriented businesses from receiving relief under the PPP. (In addition to the criminal-record related exclusions, the SBA’s IFR also excluded businesses that “[p]resent live performances of a prurient sexual nature” from accessing PPP loans. 13 C.F.R. § 120.110(p); see April IFR (incorporating 13 C.F.R. § 120.110(p)).) In DV Diamond Club of Flint, LLC v. Small Business Administration, several businesses challenged that exclusion and were granted a
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preliminary injunction by the district court, which concluded that the plaintiffs had “shown a strong likelihood that they will prevail on the merits of their claim that the [IFR] is invalid” because “it directly conflicts with the PPP.” DV Diamond Club, 2020 WL 2315880, at *9. “[T]he text of the PPP makes clear,” the district court explained, “that every business concern meeting the statutory criteria is eligible for a PPP loan during the covered period,” as “Congress’s express listing of these two eligibility criteria indicates that Congress did not intend there to be any other criteria for loan guarantee eligibility.” Id. at *10. In denying the SBA’s request for a stay of the injunction, the Sixth Circuit agreed: “[B]y specifying ‘any business concern,’ Congress made clear that the SBA’s longstanding ineligibility rules are inapplicable given the current circumstances.” DV Diamond Club, 2020 WL 2988528, at *2. “That broad interpretation,” the Sixth Circuit reasoned, “comports with Congress’s intent to provide support to as many displaced American workers as possible….” Id.
The Seventh Circuit likewise denied a similar motion by the SBA seeking to stay another district-court injunction against the SBA’s exclusion of sexually oriented businesses from the PPP. See Order, Camelot Banquet Rooms, Inc. v. Carranza, No. 20-1729 (7th Cir. May 20, 2020), ECF No. 17 (denying without explanation the SBA’s motion for a preliminary injunction); see also Camelot Banquet Rooms v. U.S. Small Bus. Admin., No. 20-C-601, 2020 WL 2088637, at *7 (E.D. Wis. May 1, 2020) (concluding that the restriction “serves no statutory purpose and exceeds the scope of the regulatory authority Congress granted the SBA”).
This issue has also been addressed in challenges to the SBA’s exclusion of firms
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in bankruptcy from the PPP. See 85 Fed. Reg. at 23,451. Several courts have concluded that the text of the CARES Act bars the SBA from applying additional nonstatutory eligibility criteria to exclude bankrupt debtors from the PPP. See, e.g., In re Roman Catholic Church of Archdiocese of Santa Fe, 2020 WL 2096113, at *7 (finding that because “the CARES Act directly addresses the PPP eligibility requirements,” the SBA “had no authority … to change the eligibility requirements”); In re Hidalgo County Emergency Serv. Found., No. 19-20497, 2020 WL 2029252, at *2 (Bankr. S.D. Tex. Apr. 25, 2020) (granting a temporary restraining order). For example, in In re Skefos, No. 19-29718-L, 2020 WL 2893413 (Bankr. W.D. Tenn. June 2, 2020), the court quoted at length from the textual analysis of the district court and Sixth Circuit in DV Diamond Club to find that “Congress expressed its intent through the CARES Act and the PPP that emergency support be provided to American workers facing the loss of income and, in many cases, health insurance, in the face of the worst global pandemic in more than 100 years.” Id. at *10. Accordingly, the court concluded, “the Administrator was not authorized to exclude American workers on the basis that they happened to be employed by a debtor in bankruptcy or even more remotely … by an entity whose owner is a debtor in bankruptcy.” Id.4
In light of the CARES Act’s unambiguous text and its purpose, the SBA’s
4 Although one district court and several bankruptcy courts have disagreed and found the act “silent” on the eligibility of debtors in bankruptcy, see, e.g., Diocese of Rochester v. U.S. Small Bus. Admin., No. 6:20-CV-06243 EAW, 2020 WL 3071603, at *8 (W.D.N.Y. June 10, 2020), the plain statutory text is to the contrary: It provides that “any” business that satisfies the stated size requirements “shall” be eligible, and the natural meaning of “any” is “any.”
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attempt to introduce additional criminal-record restrictions on eligibility for the PPP exceeds the agency’s statutory authority.
B. The SBA’s criminal-record exclusions are arbitrary and capricious.
Even if the CARES Act’s plain text allowed the SBA to impose additional restrictions on PPP eligibility—which, as explained above, it unambiguously does not—the SBA nonetheless disregarded its most basic obligations under the APA. The SBA failed to promulgate rules and policy “based on a consideration of the relevant [statutory] factors” and to “articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962); Bowman Transp. Inc. v. Ark.-Best Freight System, 419 U.S. 281, 285 (1974)). Instead it issued a series of changing and inconsistent (and, as explained above, unlawful) restrictions on PPP eligibility entirely without explanation.
The SBA’s decision to flatly bar applicants based on their criminal records was not “based on a consideration of the relevant [statutory] factors.” Id. (citation omitted); see Woodall v. Fed. Bureau of Prisons, 432 F.3d 235, 247, 249 (3d Cir. 2005) (holding regulations unlawful and explaining “whether the [agency] may consider additional factors is separate” from “whether it can ignore altogether the very factors delineated by Congress in the governing statute itself”). As explained above, and as the SBA’s April IFR recognizes, Congress designed the CARES Act and the PPP to “provide immediate assistance to individuals, families, and businesses affected by the
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COVID-19 emergency.” See 85 Fed. Reg. at 20,811–12. The SBA ignored the PPP’s central promise of funded loan forgiveness and access for those most in need. It treated the PPP like any ordinary SBA loan program and interposed many of the same barriers as the SBA’s 7(a) program, which has an altogether different purpose.
To the contrary, “[t]he broad purposes of both the CARES Act and the Small Business Act would be served by allowing the plaintiffs to participate in the program on the same terms as any other small business.” Camelot Banquet Rooms, Inc., 2020 WL 2088637, at *5. Categorically excluding small-business owners—like Sekwan Merritt—for their probation or parole status for offenses potentially in the distant past, and business owners—like John Garland—with only pending charges, and in turn denying continued pay to their businesses’ workforce during a pandemic and economic crisis cannot be squared with the capital-access and relief-driven aims of the CARES Act. As one court recently put it, “[p]erhaps nothing illustrates the arbitrariness and caprice of the [SBA’s] exclusion rule better than” its perverse effect: “[T]o implement a Congressional program intended to protect American workers from unemployment and loss of health insurance, SBA arbitrarily eliminated all workers employed by” myriad excluded applicants, without considering the harm to excluded small businesses and their employees. In re Skefos, 2020 WL 2893413 at *12.
It should come as no surprise, then, that the SBA’s could not furnish “any explanation” for its decision, “let alone a satisfactory one.” Sierra Club v. Dep’t of the Interior, 899 F.3d 260, 293 (4th Cir. 2018). In its April IFR, the agency said precisely nothing about why it imposed criminal-history eligibility exclusions. It merely
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described the restrictions without justification, noting that it was importing criminalrecord restrictions established by regulation and guidance that govern the SBA’s separate 7(a) loan program. See 85 Fed. Reg. at 20,812. But, as courts have recognized, the conditions that apply to traditional 7(a) loans cannot logically be imported to the PPP’s conditional grants, given the different purposes and structures of these programs. See In re Roman Catholic Church of Archdiocese of Santa Fe, 2020 WL 2096113, at *6 (explaining that the PPP is “not a loan program at all” but rather “is a grant or support program.”). And even if those conditions could be imported wholesale, the restrictions set out in the April and June IFRs and associated application forms, in fact, diverge from the 7(a) conditions—without acknowledgment or explanation—to exclude yet more small-business owners. See supra at 8.
The only thing the SBA has said about the criminal-record exclusions underscores their irrationality. In its June 12 revision to the IFR, the SBA narrowed the scope of disqualifying past felony convictions: “After further consideration,” the revised IFR explains, “the Administrator, in consultation with the Secretary of the Treasury (the Secretary), has determined that a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses.” Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Revisions to First Interim Final Rule (June 12, 2020) (emphasis added). But the SBA’s analysis skips a critical step: establishing and explaining, as it must, that any of the restrictions are
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at all consistent with congressional intent in the first place. “This complete lack of explanation for an important step in the agency’s analysis [i]s arbitrary and capricious.” Owner-Operator Indep. Drivers Ass’n, Inc. v. Fed. Motor Carrier Safety Admin., 494 F.3d 188, 204 (D.C. Cir. 2007). It also underscores that the SBA’s prior criteria—which the agency used to reject numerous applicants—were arbitrary and capricious at the time.
Making matters worse, the SBA has been markedly inconsistent across its various and changing articulations of the criminal-record exclusions. The SBA’s April IFR restricted a broader category of individuals than the incorporated regulation and guidance governing 7(a) loans to exclude all applicants with felony convictions of any kind within the last five years, regardless of whether on probation or parole. See 85 Fed. Reg. at 20,811–12. The SBA’s April application form was broader still, establishing additional hurdles to eligibility based on an applicant’s arrest and including misdemeanor charges.5 Then, on June 11, 2020—with the PPP application period set to close on June 30—the SBA changed the game again, releasing a revised form removing a question regarding pretrial diversion. Then, again, late on June 12, 2020, the SBA released a new Interim Final Rule revising the April 15 IFR—still
5 All of the additional restrictions imposed by the SBA’s application form that do not appear in the IFR are likewise defective due to the agency’s failure to engage in notice and comment, under 5 U.S.C. § 553. See Children’s Hosp. of the King's Daughters, Inc. v. Azar, 896 F.3d 615, 620 (4th Cir. 2018) (holding agency pronouncements legislative because they “adopt[] a new position inconsistent with existing regulations, or otherwise effect[] a substantive change in existing law or policy” (quoting Mendoza v. Perez, 754 F.3d 1002, 1021 (D.C. Cir. 2014)); Guilford Coll. v. McAleenan, 389 F. Supp. 3d 377, 392 (M.D.N.C. 2019) (same).
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without explanation—and yet another revised application form. The SBA’s flurry of eleventh-hour changes are independently fatal. “Not only
must an agency’s decreed result be within the scope of its lawful authority, but the process by which it reaches that result must be logical and rational.” Michigan v. E.P.A., 135 S. Ct. 2699, 2706 (2015) (quoting Allentown Mack Sales & Service, Inc. v. NLRB, 522 U.S. 359, 374 (1998)). Based on these “‘unexplained inconsistenc[ies]” and sudden alterations, the SBA apparently does not know and cannot decide whether and which criminal history is relevant, or why. See Casa De Maryland v. Dep't of Homeland Sec., 924 F.3d 684, 704 (4th Cir. 2019). The SBA’s incoherent actions are “arbitrary and capricious, and therefore unlawful.” Id.
While the SBA continues to change its mind, the agency’s whims impact the lives and livelihoods of real people—people striving to overcome the many economic challenges that already attach to a criminal record and trying to run a business during a time of crisis—whose eligibility for loans are changing on a daily basis as the program’s application period draws to a close. Even small-business owners who might now be eligible for the PPP but were previously excluded risk being denied access to essential funds if they (reasonably) do not hourly monitor the SBA’s website to track its rapidly evolving treatment of criminal history across interim regulation, guidance, and forms. This arbitrary and irrational behavior is precisely what the APA guards against. II. Plaintiffs will suffer irreparable harm in the absence of an
injunction, and granting an injunction is in the public interest. The PPP is a “first-come, first-served” limited pool of funds with an application
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deadline of June 30, 2020. Camelot Banquet Rooms, 2020 WL 2088637, at *11. Without immediate relief, Plaintiffs may be forever barred from accessing the funds Congress offered to any business concern that satisfy the statutory size and timing requirements.
This harm is irreparable because Plaintiffs will lose any access to funds with no alternative damages remedy available. See Camelot Banquet Rooms, 2020 WL 2088637, at *11 (“[T]he inability to obtain damages implies that any harm the plaintiffs suffer between now and the end of the case will be irreparable.”). Once the June 30 deadline passes, “there can be no do-over and no redress.” League of Women Voters of N.C. v. North Carolina, 769 F.3d 224, 247 (4th Cir. 2014). The inability of business owners with criminal history to access PPP funds thus cannot be remedied without immediate injunctive relief.
The harm is especially severe in this case. As set forth in Sekwan Merritt’s appended declaration, in the absence of PPP funds, he has been unable to pay his workers and risks losing the business’s reputation and customer relationships. Merritt Decl. ¶¶ 17, 24, 26. Instead, he has been putting his and his family’s savings into Lightning Electric just to keep it afloat. Id. So too for John Garland’s business, Fastsigns, which Garland fears may not survive this crisis. See Garland Decl. ¶ 32.
Like so many small businesses, for Lightning Electric and Fastsigns and many of the companies Defy Ventures pours its resources into advising, the only options are PPP or likely closure. See Camelot Banquet Rooms, 2020 WL 2088637, at *12 (“[A]s a general matter, it is reasonable to infer that any small business, regardless
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of the services and/or products it provides, would have trouble surviving if forced to close its doors for two months followed by a limited, piecemeal reopening.”). This harm is irreparable. See Hughes Network Sys., Inc. v. InterDigital Commc’ns Corp., 17 F.3d 691, 694 (4th Cir. 1994) (recognizing that irreparable harm exists where “the moving party’s business cannot survive absent a preliminary injunction”); Fed. Leasing, Inc. v. Underwriters at Lloyd’s, 650 F.2d 495, 500 (4th Cir. 1981) (“[T]he right to continue a business is not measurable entirely in monetary terms.” (citation omitted)).
The public interest further supports allowing Plaintiffs to access the PPP. The Sixth Circuit put it clearly: “The stated purpose of the PPP is to protect the employment and livelihood of employees. Thus, the public interest is served in guaranteeing that any business, including plaintiffs’, receive loans to protect and support their employees during the pandemic which, we can all agree, constitutes extraordinary circumstances.” DV Diamond Club, 2020 WL 2988528, at *3. In the wake of the most severe global pandemic in a century and in light of government restrictions on business and travel that dramatically impair the ability of small businesses to compensate their employees, Congress acted swiftly and expansively to provide emergency support for all employees of any small business through the creation of the PPP. To deny this funded promise of employment and pay (and in many cases health insurance) to countless small-business workers during this national crisis, based solely on a business owner’s criminal record, flouts the public interest and the text of the CARES Act. And the confusion caused by the SBA’s
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inconsistent and changing articulation of its invented restrictions only broadened the scope of businesses wrongfully excluded from the PPP.
The harm to the public interest caused by the SBA’s criminal-record exclusions is yet more severe because the exclusions work to disproportionately harm already vulnerable populations—in particular, Black and Latinx small-business owners. The barriers facing individuals with criminal records—in particular in the form of the denial of employment opportunities—are well known. See generally Michael Pinard, Reflections and Perspectives on Reentry and Collateral Consequences, 100 J. Crim. L. & Criminology 1213, 1218–19 (2010) (“Given the breadth and permanence of collateral consequences, [ex-offenders] are perhaps more burdened and marginalized by a criminal record today than at any point in U.S. history.”). And the likelihood of past incarceration is many times greater for Black and Latinx business owners than it is for their White counterparts. See Wildeman Decl. ¶¶ 1, 11. Moreover, the SBA’s exclusion comes as Americans nationwide protest the systemic effects of the criminallegal system on Black communities. See, e.g., Bureau of Justice Statistics, Prisoners in 2018, at 9 (Apr. 2020) (showing that Black Americans are incarcerated at a rate five times that of White Americans).
Still more emerging data has shown that, in Maryland as elsewhere, “[t]he rate of coronavirus infections and related deaths is higher among African American[s] than whites or other groups.” Meredith Cohn et al., Black Marylanders Make Up Largest Group of Coronavirus Cases as State Releases Racial Breakdown for First Time, Baltimore Sun (Apr. 09, 2020), https://www.baltimoresun.com/coronavirus/bs-
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md-coronavirus-race-data-20200409-ffim7y4bljcz3hjk4dmt773mp4-story.html. The SBA’s criminal-record restrictions thus work to exclude disproportionately minorityowned businesses from relief at a time when Black communities are disproportionately impacted by the COVID-19 pandemic. The public interest demands immediate relief. III. This Court can and should enjoin enforcement of the challenged SBA
criminal-record exclusions. For the reasons set forth above, this Court should preliminarily enjoin the enforcement of challenged provisions of the IFR and application form, and should extend the application deadline 21 days, to July 21, 2020, for applicants wrongfully excluded under the challenged criminal-record exclusions. To effect this relief, this Court should require the SBA to reserve PPP funds for such applicants. As federal courts have uniformly recognized, injunctive relief is available against the SBA, as with other federal agencies, in its policymaking capacity. See, e.g., DV Diamond Club, 2020 WL 2315880, at *7–8; In re: Springfield Med. Care Sys., Inc., No. 19-10285, 2020 WL 2311881, at *4 (Bankr. D. Vt. May 8, 2020). Thus 15 U.S.C. § 634(b)(1), which bars “attachment, injunction, garnishment, or other similar process … against the Administrator or his property” when the SBA participates in commercial activity, imposes no barrier to granting the requested relief. See generally DV Diamond Club, 2020 WL 2315880, at *7 (rejecting the SBA’s argument to the contrary). As an initial matter, that provision applies only to the SBA and its Administrator, so does not address relief where, as here, “plaintiffs have also sued … Steven Mnuchin in his official capacity as Secretary of the Treasury” and the
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Department of the Treasury. Camelot Banquet Rooms, Inc., 2020 WL 2088637, at *3–*4. And, in any event, the provision does not address this kind of suit or relief— one seeking to enjoin the SBA its policymaking capacity. See id. Section 634(b)(1) parallels the sue-and-be-sued clauses in many federal statutes creating agencies that, like the SBA, sometimes participate in commercial activity. See, e.g., 42 U.S.C. § 3211(a)(13) (Secretary of Commerce); 15 U.S.C. § 714b(c) (Commodity Credit Corporation); 7 U.S.C. § 1506(d) (Federal Crop Insurance Corporation). These provisions are designed to inoculate those agencies from state-law garnishment and similar actions when they engage in commercial activity; they are “not intended to render the agency immune from injunctive relief in situations where the agency has exceeded its statutory authority and where an injunction would not interfere with the agency’s internal operations.” Camelot Banquet Rooms, Inc., 2020 WL 2088637, at *3–4 (citing FHA v. Burr, 309 U.S. 242 (1940)); see also In re Gateway Radiology Consultants, P.A., No. 8:19-BK-04971-MGW, 2020 WL 3048197, at *8 (Bankr. M.D. Fla. June 8, 2020) (explaining the legislative history of the SBA’s sue-and-be-sued clause).
In the present case, as in other recent challenges to the SBA’s implementation of the CARES Act, “the plaintiffs only seek to set aside unlawful agency action,” not “to attach the SBA’s assets or otherwise interfere with its internal operations,” so Section 634(b)(1) does not apply. Camelot Banquet Rooms, Inc., 2020 WL 2088637, at *3–4; In re Gateway Radiology Consultants, P.A., 2020 WL 3048197, at *9. No court considering an injunction against the SBA under the CARES Act has held to
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the contrary. As another district court warned, before issuing a preliminary injunction against the SBA: “If § 634(b)(1) means that the SBA may never be enjoined, then a court could not enjoin” a “policy stating that it will extend small business loans only to companies owned by white men . . . even though it would be blatantly unconstitutional.” Camelot Banquet Rooms, Inc., 2020 WL 2088637, at *3–4.
In addition to enjoining the challenged conditions, this Court should order the SBA to extend the PPP application deadline, which is currently set to close on June 30, 2020, for 21 days as to those applicants unlawfully excluded under the challenged criminal-record exclusions. See Am. Acad. of Pediatrics v. Food & Drug Admin., 399 F. Supp. 3d 479, 483 (D. Md. 2019) (collecting cases extending deadlines set by federal statute), appeal dismissed sub nom. In re Cigar Ass’n of Am., No. 19-2130, 2020 WL 2116554 (4th Cir. May 4, 2020).
To effectuate this relief, this Court should further direct that the SBA Administrator not authorize, guaranty, or disburse funds appropriated for loans under the PPP without reserving sufficient funds to cover applicants wrongfully excluded under the challenged terms of the IFR and the application form, in an amount to be determined based on SBA data and submitted by the SBA to this Court for approval. See, e.g., In re Calais Regional Hospital, No. 19-10486, 2020 WL 2201947, at *6 (Bankr. D. Me. May 1, 2020) (requiring the SBA to reserve funds for unlawfully excluded PPP applicants).
CONCLUSION For the reasons set forth above, the Court should grant the motion.
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Dated:

June 16 , 2020

Respectfully submitted,

/s/ Kali N. Bracey

ReNika C. Moore (PHV pending) Alejandro A. Ortiz (PHV pending) Jennesa Calvo-Friedman (PHV pending) AMERICAN CIVIL LIBERTIES UNION FOUNDATION 125 Broad St., 18th Floor New York, NY 10004 Tel: (212) 549-2500 Fax: (212) 549-2654 RMoore@ACLU.org OrtizA@ACLU.org JCalvo-Friedman@ACLU.org
Joanna K. Wasik (Federal Bar No. 21063) Hannah E. M. Lieberman (Federal Bar No. 05456) WASHINGTON LAWYERS’ COMMITTEE FOR CIVIL RIGHTS AND URBAN AFFAIRS 700 14th St. NW, Ste 400 Washington, DC 20005 Tel.: (202) 319-1000 Fax: (202) 319-1010 Joanna_Wasik@washlaw.org Hannah_Lieberman@washlaw.org
Claudia De Palma (PHV pending) PUBLIC INTEREST LAW CENTER 1500 JFK Blvd., Suite 802 Philadelphia, PA 19102 Tel: (215) 627-7100 cdepalma@pubintlaw.org

Kali N. Bracey (Federal Bar No. 20752) Elizabeth B. Deutsch (PHV pending) JENNER & BLOCK LLP 1099 New York Avenue NW, Suite 900 Washington, DC 20001 Tel.: (202) 639-6000 Fax: (202) 639-6066 KBracey@Jenner.com EDeutsch@Jenner.com
Jacob D. Alderdice (PHV pending) JENNER & BLOCK LLP 919 Third Avenue New York, NY 10022 Tel.: (212) 891-1625 Fax: (212) 891-1699 JAlderdice@Jenner.com
Zachary D. Tripp (PHV pending) WEIL, GOTSHAL & MANGES LLP 2001 M Street, NW, Suite 600 Washington, DC 20036 Tel.: (202) 682-7000 Zack.Tripp@Weil.com
Robert B. Niles-Weed (PHV pending) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Tel.:(212) 310-8000 Robert.Niles-Weed@Weil.com

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Case 1:20-cv-01838-CCB Document 2-2 Filed 06/16/20 Page 1 of 2

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

CASE NO.:

[PROPOSED] ORDER Upon consideration of Plaintiffs’ Motion for Preliminary Injunction, and upon consideration of the record herein, it is, by this Court, on this ___ day of _________, 2020, ORDERED that said Motion is GRANTED; and it is further

ORDERED that Defendants are hereby enjoined from enforcing the challenged criminal-record exclusion provisions of the interim final rule (“IFR”), as modified on June 12, 2020, and the application form, republished on June 12, 2020, and shall extend the application deadline 21 days, to July 21, 2020, for applicants wrongfully excluded under the Small Business Administration’s and the U.S. Department of the Treasury’s unlawful implementation of the CARES Act.

ORDERED that Defendants are hereby enjoined from authorizing, guarantying, or disbursing funds appropriated for loans under the Paycheck Protection Program without reserving sufficient funds to cover applicants wrongfully

Case 1:20-cv-01838-CCB Document 2-2 Filed 06/16/20 Page 2 of 2 excluded under the challenged terms of the IFR and the application form, in an amount to be determined based on SBA data and submitted by the SBA to this Court for approval.
_______________________ United States District Judge
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 Case 1:20-cv-01838-CCB Document 29 Filed 06/24/20 Page 1 of 47

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
DEFY VENTURES, INC., , et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) ) ) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DEFENDANTS’ MEMORANDUM IN OPPOSITION TO PLAINTIFFS’ MOTIONS FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTIONS

Dated: June 24, 2020

JOSEPH H. HUNT Assistant Attorney General

JAMES J. GILLIGAN Special Litigation Counsel

DAVID M. MORRELL Deputy Assistant Attorney General

INDRANEEL SUR Trial Attorney

JOHN R. GRIFFITHS Director
ERIC WOMACK Assistant Director

Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 514-3358 E-mail: james.gilligan@usdoj.gov

Counsel for Defendants

Case 1:20-cv-01838-CCB Document 29 Filed 06/24/20 Page 2 of 47
TABLE OF CONTENTS INTRODUCTION ........................................................................................................................................... 1 BACKGROUND .............................................................................................................................................. 5 LEGAL STANDARD....................................................................................................................................16 ARGUMENT................................................................................................................................................... 17
I. PLANTIFFS LACK ARTICLE III STANDING .......................................................................17 II. SBA IS LIKELY TO SUCCEED ON THE MERITS. ..............................................................21
A. The Challenged Requirements In The Interim Final Rule Are Consistent With Statutory Authority...............................................................................................................21
B. The Criminal Justice Exclusion Is the Product of Reasoned Agency Decisionmaking and Is Not Arbitrary and Capricious....................................................28
C. The Agency Has Not Unlawfully Withheld Required Action, And Interpretation Of The CARES Act Is Not A Ministerial Duty.....................................................................36
III. PLAINTIFFS WILL NOT SUFFER IRREPARABLE HARM IN THE ABSENCE OF AN INJUNCTION ...........................................................................................................................37
IV. A PRELIMINARY INJUNCTION WOULD BE CONTRARY TO THE PUBLIC INTEREST .........................................................................................................................................39
V. THE INJUNCTION DEMANDED IS UNAVAILABLE.......................................................41 A. Section 634(b)(1) Forecloses The Injunction Demanded Against SBA.......................41 B. An Order Purporting To Extend The Deadline For PPP Loans Would Disrespect Limits On Spending Imposed By Congress And Thereby Violate The Separation Of Powers ....................................................................................................................................42 C. An Order Requiring SBA To Award Relief To Unidentified Loan Applicants Would Be Impossible For The Agency To Implement ...............................................................43
CONCLUSION ............................................................................................................................................... 44
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INTRODUCTION What reason there once may have been to bring these cases no longer remains. The individual Plaintiffs and Plaintiff businesses in these cases sought to obtain Paycheck Protection Program (“PPP”) loans authorized by the Coronavirus Aid, Relief, and Economic Stimulus (“CARES”) Act. But they were denied eligibility under a Small Business Administration (“SBA”) rule intended to assure that PPP loans are sound, and that the proceeds are expended for the purposes authorized by Congress. That rule, however, was revised on June 24, 2020. It no longer applies to the Plaintiffs, and no longer stands as an obstacle to the PPP financial assistance they desire. Accordingly, Plaintiffs’ request for preliminary relief should be denied for the simple reason, even if none other, that Plaintiffs no longer need it. Plaintiffs are three small business owners and their businesses, and a social welfare organization whose mission is to assist formerly incarcerated individuals achieve economic independence. They contest the validity of an SBA regulation which, at the time Plaintiffs applied for PPP loans, restricted eligibility for businesses whose owners, such as the individual Plaintiffs here, are on parole, or facing pending criminal charges. The SBA applied this rule to the PPP to provide assurance that borrowers with criminal histories are trustworthy, and creditworthy, so as to minimize risks that loans will not be repaid, and to ensure that loan proceeds intended for the benefit of small business employees are not misspent. Plaintiffs nevertheless challenge this criminal justice restriction as unauthorized by the CARES Act, and as arbitrary and capricious within the meaning of the Administrative Procedure Act (the “APA”). On June 24, however, the SBA revised the criminal justice restriction so that, as relevant here, it applies only to persons whose terms of parole (for crimes not involving fraud, bribery, embezzlement, or false applications for financial assistance) began within a year of their application for PPP assistance, and to persons charged with felonies. The individual Plaintiffs do not fall within

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the rule’s terms, as modified, and so the restriction no longer bars the Plaintiff businesses from applying for PPP loans. Under the terms of the CARES Act, the APA, and the circumstances as they now stand, Plaintiffs’ request for preliminary relief should be denied.
First, no Plaintiff has Article III standing. No individual Plaintiff or Plaintiff business faces continuing or future injury from the challenged criminal justice restriction as revised, because the revised restriction does not prevent them from applying for PPP loans.. That leaves only Defy Ventures, an organization that lacks Article III standing because the mere diversion of resources it purports to have suffered resulted from its own unilateral decision to advise non-parties regarding the restriction, not actions taken by SBA. Moreover, Defy Ventures fails to show that the sweeping injunction it seeks, which would significantly upset Executive Branch expectations about how the PPP loan program functions, would redress the organization’s claimed injury-in-fact.
Second, Plaintiffs’ contention that the criminal justice restriction exceeds the SBA’s authority under the CARES Act has no likelihood of success on the merits, because it hinges on an incorrectly narrow view of the authority conferred by the CARES Act’s plain text. Congress explicitly placed the PPP under the SBA’s existing Section 7(a) loan program, and stated that PPP loans are to be provided “under the same terms, conditions, and processes” as other Section 7(a) loans unless otherwise specified. CARES Act, § 1102(a), 134 Stat. at 287 (codified at 15 U.S.C. § 636(a)(36)(B)). That provision authorized the SBA to adhere to its longstanding “criminal justice” ineligibility rule codified at 13 C.F.R. § 120.110(n), which, as relevant here, bars loans to “[b]usinesses with an Associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude.” Id. ¶ 120.110(n). And Congress likewise authorized the SBA to adhere to its preexisting standards of creditworthiness at 13 C.F.R. § 120.150, under which SBA’s evaluation of a borrower’s creditworthiness begins with assessing the “[c]haracter, reputation and credit history of the applicant . . ., its Associates, and guarantors.” Id. § 120.150(a). Both provisions give effect to the SBA’s statutory
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mandate under the Section 7(a) program, of which the PPP is a part, that all Section 7(a) loans be of “sound value.” The challenged criminal justice restriction is drawn from that mandate and those preexisting and longstanding regulations, and tailored by SBA to the particular needs of PPP loan administration.
Plaintiffs’ contrary argument is that § 636(a)(36)(D)(i)(I), by providing that “in addition to small business concerns, any business concern . . . shall be eligible to receive a covered loan” if it meets specified size standards, makes loans available to all applicants regardless of pre-existing limitations for the Section 7(a) program. But Plaintiffs take that isolated size-focused provision out of context and incorrectly make it the driving engine of the entire PPP. The statutory text plainly supports the SBA’s adherence to its prior regulations (albeit in modified form to address current emergency conditions of the PPP). Even if the statute were unclear, the SBA’s interpretation would at the very least be a reasonable one. As one District Court in the Western District of New York has recently concluded, the Congressional relaxation of size restrictions for PPP loans in the provision on which Plaintiffs focus does not mean that Congress intended for size to be the only restriction on eligibility for the loans. See Diocese of Rochester v. SBA, No. 20-cv-4243, 2020 WL 3071603, at *6-7 (W.D.N.Y. June 10, 2020) (rejecting contention that “in expanding the size restrictions, Congress unambiguously provided that there could be no other eligibility criteria”).
Third, Plaintiffs’ arbitrary and capricious claims also lack merit. The SBA operates under a statutory mandate to ensure that the small business loans it guarantees with taxpayer funds are of “sound value,” and to that end it applies rules meant to ensure that borrowers, including borrowers with criminal histories, are trustworthy and creditworthy. In implementing the PPP, the SBA determined that a criminal justice restriction, similar to that applied under the agency’s general business loan program, is necessary and appropriate to avoid the risks of default that arise when small business owners face potential incarceration; the risks of fraud in a streamlined application process that relies
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heavily on borrower good faith; and the risk that PPP loan proceeds, funds intended by Congress for the relief of small business employees, may be misappropriated. Plaintiffs’ policy arguments to the contrary notwithstanding, that choice was the product of reasoned agency decisionmaking, and as such it meets all that is required of the agency under the arbitrary and capricious test.
Fourth, Plaintiffs have not shown that they will suffer irreparable harm in the absence of preliminary injunctive relief. Because the criminal justice restriction no longer applies to the individual Plaintiffs, the Plaintiff businesses are no longer prevented by the rule from applying for PPP loans. The SBA, moreover, is prepared to so inform Plaintiffs’ lenders, so that Plaintiffs encounter no more difficulties on the rule’s account. For its part, Plaintiff Defy Ventures has neither applied for nor been denied a PPP loan, and makes no showing of ongoing, concrete injury that could support preliminary relief. Plaintiffs also have not shown that the injunctive relief they seek would be in the public interest. Congress did not deem it in the public interest to require that the SBA make PPP loans available to prisoners still serving their sentences, or to felons who, though released, have yet to establish a track record as trustworthy and creditworthy borrowers. Plaintiffs offer no justification for disregarding that legislative judgment, or for programmatic intervention by the judiciary in a government initiative so large, complex, and urgent as the PPP.
Fifth, the requested injunction is overbroad and invalid. Plaintiffs have brought claims under the APA, and the ordinary remedy for a violation of the APA is a remand for further proceedings before the agency. Plaintiffs err in demanding an injunction that would not only exceed the ordinaryremand rule, but that would violate existing law in its own right. Any injunction against SBA is prohibited by 15 U.S.C. § 634(b)(1), a statute whose plain language the Fourth Circuit has repeatedly applied. Furthermore, Plaintiffs’ demand to extend the duration of the PPP loan program would contradict both the CARES Act, which grants no authority to make PPP loans after June 30, 2020, and the separation of powers, which grants Congress alone the power to appropriate federal funds.
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In addition, it is impossible or at least infeasible for SBA to set aside loan guarantee authority for unknown and unknowable nonparties whom Plaintiffs define as “applicants wrongfully excluded” under the challenged restriction.
BACKGROUND The Small Business Administration and the Section 7(a) Loan Program The declared policy of the Small Business Act, 15 U.S.C. § 631 et seq., is to “aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns,” in order to preserve the system of free competitive enterprise that is “essential” to the economic well-being and security of the Nation. 15 U.S.C. § 631(a). To promote that important national objective, Congress created the Small Business Administration (“SBA”), under the management of a single Administrator, id. § 633(a), (b)(1), who is given “extraordinarily broad powers” under section 7(a) of the Act, 15 U.S.C. § 636(a), to provide a wide variety of technical, managerial, and financial assistance to small-business concerns. See SBA v. McClellan, 364 U.S. 446, 447 (1960); see generally 15 U.S.C. § 636(a) (describing numerous varieties of general small-business loans the Administrator is “authorized” and “empowered” to make); 13 C.F.R. § 120.1. In the performance of these authorized functions the Administrator is further empowered to “make such rules and regulations as [she] deems necessary to carry out the authority vested in [her],” and in addition to “take any and all actions … [that] [she] determines … are necessary or desirable in making … loans.” 15 U.S.C. § 634(b)(6), (7). The Act also empowers the Administrator to “establish general policies” in the public interest governing the “granting and denial” of SBA financial assistance. 15 U.S.C. § 633(d).1
1 The Administrator’s authority under 15 U.S.C.§ 633(d) was originally vested in a Loan Policy Board consisting of the Administrator and the Secretaries of the Treasury and Commerce, see id., but that authority was transferred to the Administrator alone by Reorganization Plan No. 4 of 1965, see 5 U.S.C. App., Reorg Plan No. 4 of 1965, §§ 11(b), 13(a), under the Reorganization Act of 1949, 5 U.S.C. § 901 et seq.
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SBA financial assistance to a small business under section 7(a) of the Act may take the form of a direct loan, an immediate participation (joint) loan with a lender, or a deferred participation (guaranteed) loan initiated by a lender but a portion of which the SBA will purchase from the lender in the event of a borrower default. 13 C.F.R. § 120.2(a); see Valley Nat’l Bank v. Abdnor, 918 F.2d 128, 129 (10th Cir. 1990); California Pac. Bank v. SBA, 557 F.2d 218, 219 (9th Cir. 1977). In practice, however, the SBA ordinarily guarantees loans made by private lenders rather than disbursing funds directly to borrowers, see United States v. Kimbell Foods, Inc., 440 U.S. 715, 719 (1979), thus “reduc[ing] risk for lenders … mak[ing] it easier for them to access capital,” and thereby “mak[ing] it easier for small business to get loans.” See https://www.sba.gov/funding-programs/loans. See also Decl. of John A. Miller ¶¶ 3-4 (filed herewith) (“Miller Decl.”). Accordingly, a small business seeking a Section 7(a) loan typically submits its application to an authorized SBA lender, and if the lender concludes that the applicant meets SBA program requirements, and the lender wishes to make the loan, then the lender initiates the loan, submits a guarantee application to SBA, and, upon approval of that application, funds and services the loan. Miller Decl. ¶ 4.
Ordinarily, to qualify for an SBA general business loan an applicant must be an operating business organized for profit that is located in the United States, 13 C.F.R. § 120.100(a)-(c); meet the size standards for a “small” business set forth under the statute and SBA rules (usually stated in terms of number of employees, or average annual receipts), see 15 U.S.C. § 632(a)(2); 13 C.F.R. § 120.100(d); 13 C.F.R. Part 121; and demonstrate that the desired credit is not available elsewhere on reasonable terms, 15 U.S.C. § 632(h); 13 C.F.R. §§ 120.100(e), 120.101.
In addition, the Small Business Act requires that “[a]ll loans made under [Section 7(a)] shall be of such sound value or so secured as reasonably to assure repayment.” To give effect to this mandate, SBA requires that applicants meet standards of creditworthiness set forth at 13 C.F.R. § 120.150. These requirements were adopted to provide reasonable assurance that loans are repaid, and that
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taxpayer funds are not expended unnecessarily to honor SBA guarantees on defaulted loans. See Miller Decl. ¶ 5. First among the factors that the SBA takes into account in evaluating a borrower’s creditworthiness is the “[c]haracter, reputation and credit history of the applicant . . ., its Associates, and guarantors.” Id. § 120.150(a). An “Associate” of a small business is defined under SBA regulations to include an officer, director, or more-than-20-percent owner of the business, or a key employee, among other individuals and entities. Id. § 120.10(2); see also Miller Decl. ¶ 5.
Furthermore, pursuant to the broad powers conferred on the Administrator by the Small Business Act to make rules and regulations, establish general policies, and take other actions deemed necessary or desirable in making SBA loans to small-business concerns, 15 U.S.C. §§ 633(d), 634(b)(6), (7); supra at 5, the SBA over time has determined as a matter of policy and experience that SBA business loans should not be made available to certain types of businesses, such as, for example, nonprofit businesses, other lenders, businesses in which the lender owns an equity interest, and businesses that have previously defaulted on federal or federally assisted loans resulting in a loss to the Government. The types of business concerns deemed ineligible for SBA section 7(a) loans (18 in all) are listed at 13 C.F.R. § 120.110, and include, as relevant here, “[b]usinesses with an Associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude.” Id. ¶ 120.110(n).
Although the SBA first issued this rule in January 1996, see 61 Fed. Reg. 3226 (Jan. 31, 1996), the policy against making (or guaranteeing) loans to businesses whose owners (or other Associates) are incarcerated, on probation or parole, or indicted for felonies extends back even farther, to the 1980s. Miller Decl. ¶ 7. Both the policy and the ensuing regulation are based on the concern that small businesses frequently decline when their owners are incarcerated, and as a result these businesses have difficulty repaying their loans. Id. Similarly, owners or other Associates who are on parole or probation, or who face felony charges, also present risks of incarceration that could lead to an
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impairment of business operations and reduced ability to repay SBA-backed loans. Id. SBA therefore
adopted the “criminal justice” restriction codified at 13 C.F.R. § 120.110(n), to safeguard against these
risks, which are closely aligned with the creditworthiness and character concerns set forth in 13 C.F.R. § 120.150(a). Miller Decl. ¶ 7.2
The Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and
Economic Stimulus (“CARES”) Act, Pub. L. No. 116-136, 134 Stat. 281, passed by Congress to
provide an unprecedented package of emergency economic assistance and other support to help
individuals, families, businesses, and health-care providers cope with the enormous economic and
public health crises triggered by the worldwide coronavirus (COVID-19) pandemic. See SBA, Interim
Final Rule, Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20811,
20811-12 (Apr. 15, 2020) (“First PPP Interim Final Rule”) (Exh. 2, hereto); see also, e.g., 166 Cong. Rec.
H1732-01, 1820-24 (Mar. 27, 2020) (statements of Reps. Neal, Davis, and Mitchell); 166 Cong. Rec.
S2059-01 (Mar. 25, 2020) (statement of Sen. Schumer); 166 Cong. Rec. S1862-02 (Mar. 20, 2020)
(statement of Sen. McConnell). Among the numerous measures taken by the CARES Act to address
the COVID-19 crisis, of principal concern here is the Paycheck Protection Program (“PPP”), CARES
2 In accordance with 13 C.F.R. §§ 120.110(n) and 120.150(a), the SBA’s Standard Operating Procedure 50 10 5(K), Lender & Dev. Co. Loan Programs (“SOP 50 10 5(K)”) (relevant excerpts at Miller Decl., Exh. A), instructs lenders that “every proprietor, general partner, officer, director,” or other Associate of a business “must be of good character” for the business to qualify for a Section 7(a) loan. SOP 50 10 5(K) at 109. Lenders are further instructed that SBA financial assistance is unavailable to businesses with Associates who are (a) “[i]ncarcerated, on probation, or on parole”; or (b) “[c]urrently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction.” Id. at 110; see Miller Decl. ¶ 9. If an Associate has been arrested within six months prior to the application for any criminal offense, or for any offense has ever been convicted, pleaded guilty or nolo contendere, or been placed on probation, parole, or pretrial diversion, then a character determination for the Associate is required to determine the business’s eligibility for a Section 7(a) loan. SOP 50 10 5(K) at 110; Miller Decl. ¶¶ 9-10 & Exh. B. Depending on the circumstances, a character determination can involve an FBI fingerprint background investigation, and take several weeks to complete. See id. ¶¶ 11-12 & Exh. C.
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Act. § 1102, enacted to extend relief to small businesses experiencing economic hardship as a result of the public-health measures being taken to minimize the public’s exposure to the COVID-19 virus. See First PPP Interim Final Rule, 85 Fed. Reg. at 20811.
In particular, section 1102(a)(2) of the CARES Act adds a new paragraph (36) to section 7(a) of the Small Business Act, 15 U.S.C. § 636(a)(36), which provides that “[e]xcept as otherwise provided in this paragraph, the [SBA] may guarantee [PPP] covered loans under the same terms, conditions, and processes as a loan made under this subsection,” i.e., Section 7(a). 15 U.S.C. § 636(a)(36)(B) (emphasis added). The PPP then sets forth the precise ways in which PPP covered loans differ from other section 7(a) loans. Id. § 636(a)(36)(D)-(R). Among these differences, the PPP authorizes the SBA to make covered loans to various non-profit organizations, independent contractors, and self-employed individuals, as well as to small business concerns, id. § 636(a)(36)(D)(i), (ii); relaxes size limitations to allow businesses with as many as 500 employees (or more, depending on the industry in which they operate) to receive assistance, id. § 636(a)(36)(D)(i)(I); and selectively waives certain of the SBA’s affiliation rules used to make small business “size” determinations, id. § 636(a)(36)(D)(iv); see 13 C.F.R. Part 121. The PPP also expressly caps the chargeable rate of interest of a covered loan at four percent (SBA has further limited the rate to one percent), id. § 636(a)(36)(L); First PPP Interim Final Rule, 85 Fed. Reg. at 20813; and waives the “no credit elsewhere,” personal guarantee, collateral, and guaranteed loan fee requirements imposed under Section 7(a), SBA regulations, and SBA standard operating procedures. 15 U.S.C. § 636(a)(36)(h)-(J), (L).
The maximum amount of a PPP covered loan is the lesser of $10,000,000 or an amount calculated as a multiple of the applicant’s average total monthly “payroll costs,” to which the balance of any outstanding disaster loans under 15 U.S.C. § 636(b)(2) may be added. Id. § 636(a)(36)(E); § 636(a)(36)(A)(viii)(I); see First PPP Interim Final Rule, 85 Fed. Reg. at 20812-13. The CARES Act requires that PPP loan proceeds be used for employee compensation, mortgage interest and/or rent,
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utility costs, and interest on certain other debt obligations. 15 U.S.C. § 636(a)(36)(F). Section 1106 of the CARES Act provides for forgiveness of up to the full principal amount borrowed. CARES Act § 1106(b); First PPP Interim Final Rule, 85 Fed. Reg. at 20811, 20813. The actual amount forgiven will depend on a borrower’s payroll costs and payments for rent, utilities, and mortgage interest. CARES Act § 1106(b) (1)-(4), (d); First PPP Interim Final Rule, 85 Fed. Reg. at 20813. No later than 90 days after the date on which the amount of forgiveness is determined, the SBA must remit to the lender the amount forgiven plus interest. CARES Act § 1106(c)(3).
Congress initially authorized the SBA to guarantee up to $349 billion in PPP loans “[d]uring the period beginning on February 15, 2020 and ending on June 30, 2020[.]” CARES Act § 1102(b)(1). The Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620, § 101(a)(1), enacted on April 24, 2020, added another $310 billion to the program on April 24, 2020, but did not extend the program’s June 30, 2020, termination. The Paycheck Protection Program Flexibility Act of 2020, Pub. L. 116-142, 134 Stat. 641, enacted on June 5, 2020, makes certain amendments to the PPP’s loan-forgiveness provisions, but also does not extend the June 30, 2020 PPP deadline. See 166 Cong. Rec. S2690, S2691 (letter for the record by Sens. Lee, Rubio, Johnson, and Cardin, and Reps. Phillips and Roy).
To expedite implementation of the PPP, the SBA significantly streamlined the loan application process ordinarily followed under the Section 7(a) program, allowing lenders to rely on borrower certifications of eligibility with only minimal documentary verification. First PPP Interim Final Rule, 85 Fed. Reg. at 20812, 20814, 20815; see Miller Decl. ¶ 15. Otherwise the PPP loan application process resembles the Section 7(a) process, supra at 6-8. A small business seeking a PPP loan submits an application to an authorized lender, which then determines the borrower’s eligibility. If the lender wishes to make the loan, it submits a guarantee application to the SBA, and then disburses the loan proceeds if the guarantee application is approved. Miller Decl. ¶ 16.
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To provide for immediate assistance to small businesses adversely affected by the COVID-19 crisis, the CARES Act directed the SBA to issue regulations implementing the PPP within 15 days of its enactment, without regard to the notice-and-comment requirements of the APA. CARES Act § 1114. Because the CARES Act authorizes the SBA to guarantee PPP loans under the same terms, conditions, and processes as Section 7(a) loans (except as otherwise provided by the CARES Act), 15 U.S.C. § 636(a)(36)(B), the SBA had to determine which terms, conditions, and procedures applied under the Section 7(a) program should be applied by regulation to the PPP. See Miller Decl. ¶¶ 17-18.
As relevant here, the SBA determined that a restriction for businesses with owners who are incarcerated, on probation, or parole, or charged with a crime, similar to the Section 7(a) restriction under 13 C.F.R. § 120.110(n), was also appropriate under the PPP, and for similar reasons, supra at 6-8. When one or more owners of a small business are incarcerated, frequently the operation of the business becomes impaired and it has difficulty repaying its loans, risking default. Business owners on parole or probation or facing criminal charges present a similar risk. Miller Decl. ¶¶ 18-19. SBA similarly determined that a reasonable assurance of applicants’ good character, as required under Section7(a) regulations, also remained necessary under the PPP to safeguard against the risk of fraud in the streamlined PPP application process, and misuse of PPP loan proceeds. Id. ¶ 20. SBA anticipated, however, that the expected huge volume of PPP loan applications could prolong the usual time required for individual character determinations by additional weeks or months. Because delays of that length would be incompatible with the need to make PPP loan eligibility determinations as expeditiously as possible, SBA adopted a bright-line rule under which an applicant would be ineligible for a loan if a 20-percent-or-more owner were convicted of a felony in the last five years. Id. ¶ 21.3
3 In reaching these conclusions, the SBA recognized that concerns about creditworthiness and repayment of PPP loans are less acute where borrowers can obtain loan forgiveness under CARES Act § 1106. But PPP loans may only be forgiven to the extent that borrowers expend the loan proceeds for payroll costs, mortgage interest and/or rent, and utilities in accordance with the
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In accordance with these conclusions and policy determinations, SBA’s First PPP Interim Final Rule provides that a business applying for a PPP loan is ineligible if
[a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years[.] 85 Fed. Reg. at 20812; see Miller Decl. ¶ 22.4 Because the terms of the CARES Act and the COVID-19 crisis both compelled immediate implementation of the PPP, SBA issued the First PPP Interim Final Rule in a matter of days, and solicited public comment on all aspects of the rule following its publication, with a commitment to considering “the need for making any revisions [to the rule] as a result of [the] comments” received. 85 Fed. Reg. at 20811; see Miller Decl. ¶ 23. SBA received a number of comments urging it to rescind or narrow the scope of the criminal justice restriction contained in the First PPP Interim Final Rule. Id. ¶¶ 25-26. Commenters proposed, for example, that the disqualification for businesses with owners convicted for a felony within the last five years be limited to convictions for fraud or other crimes directly related to trustworthiness for financial assistance. Id. ¶ 26. After consideration of these comments, the agency decided “that a shorter [restriction] for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act[.]” See Business Loan Program Temporary Changes: Paycheck Protection Program, Additional Revisions to First
requirements of section 1106. In cases where the proceeds have not been used as section 1106 specifies, the loans cannot be forgiven, id., and borrowers’ ability to repay the loans remains a matter of concern. See Miller Decl. ¶ 19.
4 The day following the publication of the First PPP Interim Final Rule on the SBA’s website on April 2, 2020, SBA issued a PPP Borrower Application Form, SBA Form 2483 (4/20), that included two questions regarding the criminal histories of an applicant business’s owners, to implement the criminal justice restriction contained in the Rule. Miller Decl. ¶ 24 & Exh. D.
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[PPP] Interim Final Rule, 85 Fed. Reg. 36717, 36718 (June 18, 2020). SBA revised the criminal justice restriction contained in the First PPP Interim Final Rule accordingly, to provide that an applicant business is ineligible if
An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year[.] See id. (emphasis added); Miller Decl. ¶ 27.5 After giving still further consideration to these issues, the SBA determined that two additional modifications to the criminal justice exclusion were appropriate. Miller Decl. ¶ 29. First, SBA concluded that the restriction for business owners subject to criminal charges should be limited to charges for felony offenses, to align it with the restriction for prior convictions, which is also limited to convictions for felony offenses. See Business Loan Program Temporary Changes: Paycheck Protection Program, Additional Revisions to First [PPP] Interim Final Rule, https://www.sba.gov/document/policy-guidance-ppp-interim-final-rule-additional-eligibilityrevisions-first-interim-final-rule, at 5 (posted June 24, 2020) (Miller Decl. Exh. F). Second, the agency concluded that the restriction for business owners on probation or parole should be limited to individuals whose term of probation or parole commenced within the last five years for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, and within the last one year for other felonies, to align with the identical time restrictions applied to prior felony convictions. Id. at 6.6
5 A revised SBA Borrower Application Form, SBA Form 2483 (6/20) (revised June 11, 2020), was issued concurrently to reflect this change to the criminal justice restriction. Miller Decl. ¶ 28 & Exh. E.
6 To implement the June 24, 2020, revisions to the criminal justice exclusion, the SBA issued a revised SBA Borrower Application Form, SBA Form 2483, with corresponding revisions to question nos. 5 and 6. Miller Decl. ¶ 30 & Exh. G.
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Plaintiffs and Their Claims Plaintiff Altimont Mark Wilks is owner and operator of two sole proprietorship Plaintiffs, Carmen’s Corner Store, which serves a low-income neighborhood in Hagerstown, Maryland, and Retail4Retail, a logistics business that delivers automotive products. See Wilks Decl. ¶¶ 1, 3, 5 (No. 20-cv-1736, Doc. 7-1, June 17, 2020). Mr. Wilks was placed on federal supervised release and parole with the State of Maryland on June 14, 2018; he completed his federal supervision on June 14, 2020, and his State parole ends in 2021. Id. ¶ 11. Mr. Wilks applied for a PPP loan (on behalf of Retail4Real) from AmeriServ Bank in Hagerstown, but on April 13 AmeriServ Bank denied the loan because he answered “yes” to the application’s questions (5) and (6). Id. ¶¶ 9-11. Plaintiff Sekwan Merritt is a State licensed electrician who started Prop Prep Properties LLC, doing business as Lightning Electric in Baltimore. See Merritt Decl. ¶¶ 4-5 (No. 20-cv-1838, Doc. 14, June 16, 2020). Mr. Merritt served five years in prison (2012 to 2017), and is on parole until 2022, based on a 2012 plea of guilty on charges of possession and possession with intent to distribute narcotics in Circuit Court for Baltimore County. Id. ¶ 8. After Lightning Electric suffered COVIDrelated losses (id. ¶ 17), Mr. Merritt applied on April 15, 2020 for a PPP loan through a bank, Wells Fargo, and the application software program informed him that his “application cannot be processed at this time” after he answered yes to questions about his criminal history (id. ¶¶ 18-21). Plaintiff John D. Garland is a graphic designer who owns and operates Sign Me Up Bethpage, Inc. d/b/a Fastsigns 2323 (“Fastsigns Bethpage”). See Garland Decl. ¶¶ 4-6 (No. 20-cv-1838, Doc. 1-8, June 16, 2020). Mr. Garland was incarcerated between 1987 and 2003. Id. ¶ 4. In October 2019 he was charged with a domestic violence offense, and the case was adjourned in contemplation of dismissal in December 2019, with entry of a limited order of protection against him. Id. ¶ 9. Also in December 2019, he was charged with petit larceny, a misdemeanor offense, and Mr. Garland pleaded not guilty. Id. ¶¶ 10-11. After Fastsigns Bethpage suffered COVID-related losses (id. ¶¶ 22-24), Mr.
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Garland applied on April 10, 2020 for a PPP loan, but did not complete the application “because it would clearly be denied” given that the application states that if two questions about criminal history are answered “yes,” “the loan will not be approved” (id. ¶ 29).
Although the Plaintiff businesses owned by Messrs. Merritt, Garland, and Wilks each were denied PPP loans based on their criminal justice histories, under then-existing rules governing the applications, the SBA has recently amended those rules. The restriction for business owners on parole applies only to persons whose terms of parole began within the last five years for felonies involving fraud, bribery, embezzlement, or false statements in loan applications or an applications for federal financial assistance, and within one year for other felonies. See Miller Decl. Exh F. at 6-7. The restriction for business owners facing charges now applies only to felonies, not to misdemeanors. If the individual Plaintiffs’ businesses were therefore to apply now for PPP loans, they would not be denied based on the criminal justice restriction as it now exists. Moreover, to ensure that the individual Plaintiffs and Plaintiff businesses encounter no further difficulties on account of the criminal justice restriction, the SBA has offered to contact their lenders and advise them that the Plaintiff businesses should not be denied PPP loans on the basis of the restriction. See Decl. of James J. Gilligan (“Gilligan Decl.”) (filed herewith) ¶ ¶ 2-3 & Exhs. 1-2.
Other than the individual Plaintiffs and the businesses they operate, the sole remaining Plaintiff is Defy Ventures, Inc. (“Defy”)—a non-profit organization that alleges its “mission is to use entrepreneurship and employment as tools for currently and formerly incarcerated individuals to address the social problems of mass incarceration and recidivism” (Defy Compl. ¶ 21). Defy does not allege that it applied for or was denied a PPP loan. Defy instead claims that responding to questions about the criminal justice restriction by graduates of its entrepreneurial training programs resulted in a diversion of its resources. (Id. ¶¶ 119-23.)
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Plaintiffs’ complaints allege that the SBA’s criminal history restriction in the First PPP Interim Final Rule is invalid under various theories. In particular, the Defy Ventures Complaint alleges that the criminal history restriction is (1) in excess of statutory authority and not in accordance with law under 5 U.S.C. § 706(2)(A), (C) (Count I, Defy Compl. ¶¶ 125-30); (2) arbitrary and capricious under 5 U.S.C. § 706(2)(A) (Count II, Defy Compl. ¶¶ 131-37); and (3) without observance of procedure under 5 U.S.C. § 706(2)(D) (Count III, Defy Compl. ¶¶ 138-45).
The first two counts of the Carmen’s Corner Store Complaint resemble those of the Defy Ventures Complaint: Count I (Carmen’s Corner Store Compl. ¶¶ 116-30) alleges a violation of § 706(2)(C), and Count II (Carmen’s Corner Store Compl. ¶¶ 131-42) alleges the challenged restriction is arbitrary and capricious. The Carmen’s Corner Store Complaint adds two additional theories, alleging a claim that SBA has unlawfully withheld agency action under 5 U.S.C. § 706(1) (Count III, Carmen’s Corner Store Compl. ¶¶ 143-49), and a claim seeking a writ of mandamus (Count IV, Carmen’s Corner Store Compl. ¶¶ 150-56).
LEGAL STANDARD A temporary or preliminary injunction is an “extraordinary and drastic remedy” that is “never awarded as of right,” Munaf v. Geren, 553 U.S. 674, 689-90 (2008), and “may only be awarded upon a clear showing that the plaintiff is entitled to such relief,” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008); see also DiBiase v. SPX Corp., 872 F.3d 224, 230 (4th Cir. 2017) (“A preliminary injunction is an extraordinary remedy” that “shall be granted only if the moving party clearly establishes entitlement to relief.”). A plaintiff seeking a temporary or preliminary injunction must show that (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) an injunction is in the public interest. Winter, 555 U.S. at 20; DiBiase, 872 F.3d at 230. The last two factors “merge when the Government is the opposing party.” Nken v. Holder, 556 U.S. 418, 435 (2009).
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While a plaintiff need not establish a ‘certainty of success,’ [he] must make a clear showing that he is likely to succeed at trial.” DiBiase, 872 F.3d at 230 (quoting Pashby v. Delia, 709 F.3d 307, 321 (4th Cir. 2013)). “Similarly, a plaintiff must demonstrate more than just a ‘possibility’ of irreparable harm” to obtain a temporary or preliminary injunction. Id. “Issuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent” with the requirement that such extraordinary relief “be awarded [only] upon a ‘clear showing’” of entitlement. Winter, 555 U.S. at 22. Rather, the movant must establish that irreparable harm is “likely in the absence of an injunction.” Id.
For the reasons that follow, the Plaintiffs, who no longer face denial of PPP financing because of the criminal justice restriction, have not carried these heavy burdens.
ARGUMENT I. PLANTIFFS LACK ARTICLE III STANDING
Plaintiffs’ claims are unlikely to succeed for the threshold reason that none of the Plaintiffs has standing to seek injunctive relief against the revised criminal justice restriction.
To establish Article III standing, a plaintiff must establish (1) that he has “suffered an injury in fact . . . which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical”; (2) a sufficient “causal connection between the injury and the conduct complained of”; and (3) a “likel[ihood]” that “the injury will be redressed by a favorable decision.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quotation marks and citations omitted). The plaintiff must “demonstrate standing separately for each form of relief sought.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006) (citation omitted). Furthermore, to seek injunctive relief, the plaintiff must establish a present injury or an “actual and imminent”— not “conjectural”—threat of future injury. Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009); see also City of Los Angeles v. Lyons, 461 U.S. 95, 102 (1983). To assess the Article III standing of an organizational plaintiff, the Court “must conduct
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the same inquiry as in the case of an individual.” Lane v. Holder, 703 F.3d 668, 674 (4th Cir. 2012) (citing Havens Realty Corp. v. Coleman, 455 U.S. 363, 378 (1982)).
A. The Individual Plaintiffs and Plaintiff Businesses Are Not Injured by the Revised Criminal Justice Restriction.
No individual Plaintiff faces continuing or future injury from the challenged criminal justice restriction because, as revised through the amendments to the First PPP Interim Final Rule of June 24, 2020, the restriction does not bar PPP loans to the individual Plaintiffs given how long ago Plaintiffs Wilks and Merritt were placed on parole, and given that Mr. Garland faces only misdemeanor charges. Accordingly, the individual Plaintiffs and the businesses they own or operate lack Article III standing to litigate the alleged claims in the Complaints. “A case becomes moot—and therefore no longer a ‘Case’ or ‘Controversy’ for purposes of Article III—when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Already, LLC v. Nike, Inc., 568 U.S. 85, 91 (2013) (internal quotation marks omitted); see also Williams v. Griffin, 952 F.2d 820, 823 (4th Cir. 1991) (prisoner transfer mooted Eighth Amendment claims for injunctive and declaratory relief).
B. Defy Ventures Lacks Injury-In-Fact Because The Challenged Conduct Does Not Harm Its Activities.
Defy Ventures, Inc. (“Defy”)—a non-profit organization that alleges its “mission is to use entrepreneurship and employment as tools for currently and formerly incarcerated individuals to address the social problems of mass incarceration and recidivism” (Defy Compl. ¶ 21)—has failed to sufficiently show an injury-in-fact to itself. Defy’s CEO, Andrew Glazier, describes the organization’s responses to the effects of the pandemic and the challenged PPP rules on the graduates of Defy’s programs. See Defy Mem. 11-12; Glazier Decl. ¶¶ 20-34. In particular, Glazier states that Defy staff spent “thirty hours minimum” (Glazier Decl. ¶ 32) on studying the pertinent PPP application forms to advise the graduates about them (id. ¶¶ 23-27) and on seeking alternative funding sources for the graduates (id. ¶¶ 28-31). The challenged rules “caused a significant diversion of [Defy’s] resources,”
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Glazier asserts, because “had the SBA not excluded [Defy’s] graduates” from participation in the PPP, the organization “would have instead devoted this time and energy to our previously-planned programming and training activities.” Id. ¶ 32. Furthermore, Glazier asserts that the challenged PPP rules “impede[] the ability of Defy . . . to accomplish its mission” by reducing graduate access to funding and by “reinforc[ing]” the notion, which Defy opposes, “that an individual’s criminal history should . . . hold them back from economic success.” Id. ¶¶ 33-34.
Those assertions do not describe an injury-in-fact because they do not show that the challenged PPP rules “perceptibly impaired [the organization’s] ability to provide” services to its graduates. See Lane, 703 F.3d at 674 (quoting Havens, 455 U.S. at 379). Rather, Defy’s decisions to provide advice to its graduates about the PPP and to seek alternate funding sources for the graduates were voluntary choices about how to spend its time and money. Such a “diversion of resources,” the Fourth Circuit has held, is not an injury-in-fact to the organization because “it results not from any actions taken by [the defendant], but rather from the [organization’s] own budgetary choices.” Lane, 703 F.3d at 675 (internal quotation marks omitted). So holding, the Fourth Circuit has rejected the contention, akin to Defy’s, that an “organization that decides to spend its money on educating members, responding to member inquiries, or undertaking litigation in response to legislation suffers a cognizable injury,” because that would confer standing on “organizations with merely ‘abstract concern[s] with a subject that could be affected by an adjudication.’” Id., 703 F.3d at 675 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 (1976)); cf. Pennsylvania v. New Jersey, 426 U.S. 660, 664 (1976) (per curiam) (no litigant “can be heard to complain about damage inflicted by its own hand”). Nor can Defy establish an injury-in-fact to the organization from the alleged conflict between SBA’s acts and Defy’s broad purposes of increasing access to funding for its graduates and of combatting the effects of criminal history on post-incarceration income. See Md. Highways Contractors Ass’n, Inc. v.
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Maryland, 933 F.2d 1246, 1250-51 (4th Cir.1991) (“non-economic injury” to entity’s “‘organizational purpose’” produced by challenged statute is insufficient to confer Article III standing).
C. All Defy Ventures Plaintiffs Lack Redressability Because Their Requested Injunction Seeks Impermissible Structural Relief
The Defy Plaintiffs also lack standing because the equitable relief they seek would not redress their alleged injuries. Because a federal court “is not the proper forum to press general complaints about the way in which government goes about its business,” the “[c]ase-or-controversy considerations . . . ‘obviously shade into those determining whether the complaint states a sound basis for equitable relief,’” so those equitable relief requirements “should therefore inform our judgment about whether [challengers] have standing.” Allen v. Wright, 468 U.S. 737, 760-61 (1984) (quoting Lyons, 461 U.S. at 112, and O’Shea v. Littleton, 414 U. S. 488, 499 (1974)). In particular, the “pervasive and fundamental” doctrine of separation of powers “counsels against recognizing standing in a case brought, not to enforce specific legal obligations whose violation works a direct harm, but to seek a restructuring of the apparatus established by the Executive Branch to fulfill its legal duties.” Allen, 468 U.S. at 752, 761 (emphasis added). The Defy Plaintiffs seek an injunction that would not confine relief to the grievance of any particular, identified loan applicant before the Court, but rather would “restructur[e]” the “apparatus established by the Executive Branch to fulfill its legal duties” under the CARES Act in implementing PPP loans—in particular, by extending the June 30, 2020, termination date that Congress specified for the PPP, and by requiring the Government to ensure the availability of funds for PPP loans beyond that Congressionally-prescribed deadline. Defy Compl. at 36 ¶¶ C, D (Prayer for Relief).
Because granting such relief would sweep beyond the particular dispute presented by the individuals before the Court, it would not redress any injury-in-fact to Plaintiffs. Instead, the Defy Plaintiffs’ conception of redressability defies the established principles that the Article III judicial power does not include the “amorphous general supervision of the operations of government” (Raines
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v. Byrd, 521 U.S. 811, 829 (1997)) and does not contemplate courts serving as “virtually continuing monitors of the wisdom and soundness of Executive action” (Laird v. Tatum, 408 U.S. 1, 15 (1972)). II. SBA IS LIKELY TO SUCCEED ON THE MERITS.
A. The Challenged Requirements In The Interim Final Rule Are Consistent With Statutory Authority
Even if this case still presented a justiciable Article III case or controversy, Plaintiffs still would lack a likelihood of success on the merits. Their principal claim (Carmen’s Corner Mem. at 14-20; Defy Mem. at 12-25), which challenges the SBA’s statutory authority to issue the criminal justice restriction on PPP loan applications (most recently revised on June 24, 2020) under the “deferential review” framework of Chevron, USA, Inc. v. NRDC, 467 U.S. 837 (1984). See Montgomery Cty., Md. v. F.C.C., 811 F.3d 121, 129 (4th Cir. 2015). When applying that framework, the reviewing court “initially examine[s] the statute’s plain language; if Congress has spoken clearly on the precise question at issue, the statutory language controls. If, however, the statute is silent or ambiguous,” then the reviewing court “defer[s] to the agency’s interpretation if it is reasonable.” Barahona v. Holder, 691 F.3d 349, 354 (4th Cir. 2012) (internal quotation marks omitted). Here, the SBA prevails at either step: First, the text of the CARES Act fully supports the agency’s position. And, second, even if the statutory text were ambiguous, the SBA’s construction is reasonable.
1. Congress explicitly placed the PPP under the SBA’s existing Section 7(a) loan program, and stated that PPP loans are to be provided “under the same terms, conditions, and processes” as other Section 7(a) loans unless otherwise specified. CARES Act, § 1102(a), 134 Stat. at 287 (codified at 15 U.S.C. § 636(a)(36)(B)). Congress enumerated several restrictions in the CARES Act that, although applicable to ordinary Section 7(a) loans, shall not apply to Paycheck Protection Program loans. See, e.g., id. § 1102(a), 134 Stat. at 288 (codified at 15 U.S.C. § 636(a)(36)(D)). For example, “non-profits” are excluded from Section 7(a) loans under 13 C.F.R. § 120.110(a), but Congress expressly allowed certain non-profits to receive PPP loans, see 15 U.S.C. § 636(a)(36)(D)(i). In addition, the SBA may
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not offer “financial assistance” under the Section 7(a) program “if the applicant can obtain credit elsewhere” (15 U.S.C. § 636(a)(1)(A)(i)), but Congress expressly lifted that restriction for PPP purposes (see id. § 636(a)(36)(I)). Congress also expressly lifted the application of affiliation rules which ordinarily apply to determine eligibility for Section 7(a) loans, see id. § 636(a)(36)(D)(iv); and the collateral and personal guarantee requirements on which Section 7(a) loan assistance is typically conditioned, id. § 636(a)(36)(J).
Congress did not, however, waive or condition SBA’s obligation under Section 7(a) to assure that “[a]ll loans made under [Section 7(a)],” of which the PPP is a part, “shall be of such sound value or so secured as reasonably to assure repayment.” 15 U.S.C. § 636(a)(6). Nor did Congress bar application of longstanding SBA rules giving effect to this statutory requirement. Congress did not bar reliance on the criminal justice restriction codified at 13 C.F.R. § 120.110(n), which, as relevant here, bars loans to “[b]usinesses with an Associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude.” Id. ¶ 120.110(n). And Congress likewise did not prohibit application of the SBA’s standards of creditworthiness at 13 C.F.R. § 120.150, under which SBA’s evaluation of a borrower’s creditworthiness begins with assessing the “[c]haracter, reputation and credit history of the applicant . . ., its Associates, and guarantors.” Id. § 120.150(a). The SBA accordingly has express statutory authority to apply those pre-existing limitations (not altered by Congress) to the PPP, consistent with the plain text of the CARES Act, in which Congress stated that, “[e]xcept as otherwise provided,” “the [SBA] Administrator may guarantee” PPP loans “under the same terms, conditions, and processes” as other Section 7(a) loans. See CARES Act, § 1102, 134 Stat. at 287 (codified at § 636(a)(36)(B)) (emphases added)).
Given that Congress expressly lifted particular Section 7(a) limitations for PPP purposes, but did not lift the “sound value” requirement of Section 7(a), the SBA’s Section 7(a) criminal justice restriction, or its creditworthiness standards, and given also Congress’s grant of authority to SBA to
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adhere to Section 7(a) “terms, conditions, and processes” except where the CARES Act itself “provided,” it follows that under the PPP the SBA retained authority to impose “criminal justice” and creditworthiness “terms, conditions, and processes” similar to those that govern Section 7(a) loans. See Russello v. United States, 464 U.S. 16, 23 (1983) (“[I]t is generally presumed that Congress acts intentionally and purposefully in the disparate inclusion or exclusion” of statutory provisions, particularly in the same Act) (quotation marks omitted). Thus, it was well within the rulemaking authority conferred on the SBA by section 1114 of the CARES Act to craft a tailored version of those limitations to ensure the soundness of loans issued under the PPP. Miller Decl. ¶ 5.
Plaintiffs’ contrary contention (Carmen’s Corner Mem. at 14-17; Defy Mem. 14-15) revolves around an “isolated provision[]” of the CARES Act—namely, the provision of the CARES Act, § 1102(a), 134 Stat. at 288, codified at 15 U.S.C. § 636(a)(36)(D)(i)(I)—and therefore would contravene the “‘duty to construe statutes, not isolated provisions.’” Graham Cty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 290 (2010) (quoting Gustafson v. Alloyd Co., 513 U.S. 561, 568 (1995)). Plaintiffs’ arguments track DV Diamond Club of Flint, LLC v. U.S. Small Bus. Admin., No. 20-cv-10899, 2020 WL 2315880, at *10-11 (E.D. Mich. May 11, 2020) (Diamond Club), appeal filed, No. 20-1437, 2020 WL 2988528 (6th Cir. May 15, 2020), but as more recently explained in Diocese of Rochester v. SBA, No. 20-cv-4243, 2020 WL 3071603, at *6-7 (W.D.N.Y. June 10, 2020), the Diamond Club rationale is wrong.
Section 636(a)(36)(D)(i) provides that “[d]uring the covered period [February 15 to June 30, 2020], in addition to small business concerns, any business concern, nonprofit organization, veterans organization, or tribal business concern . . . shall be eligible to receive a covered loan” if the business employs fewer than 500 employees, or otherwise meets alternative size standards established by the SBA for a particular industry. According to Plaintiffs, because, under § 636(a)(36)(D)(i)(I), “in addition to small business concerns, any business concern . . . shall be eligible to receive a covered
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loan” if they meet the size standards specified in that provision, “Congress did not intend there to be any other criteria for loan guarantee eligibility” under the CARES Act. Defy Mem. 23 (quoting Diamond Club, 2020 WL 2315880, at *10). But as explained above, the SBA under the Small Business Act may ordinarily provide Section 7(a) loans only to “small business concerns.” See 15 U.S.C. 636(a) (“The [SBA] is empowered … to make loans to any small business concern”). The term “small business concerns” is defined by reference to size restrictions. See 15 U.S.C. § 632(a)(1)-(2) (defining “small business concerns”); 13 C.F.R. § 121.101(a) (“SBA’s size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for ‘small business’ concerns.”); 13 C.F.R. Part 121 (establishing size standards). Congress sought to ease those size restrictions in the CARES Act, and thus provided in § 636(a)(36)(D)(i) that, “in addition to small business concerns, any business concern . . . shall be eligible to receive a covered loan” if the business has fewer than 500 employees, or qualifies under industry-specific rules. See 15 U.S.C. § 636(a)(36)(D)(i). In short, Congress in § 636(a)(36)(D)(i) explicitly lifted certain size restrictions that ordinarily constrain the SBA from lending to larger businesses, allowing such businesses to qualify for PPP loans. See Diocese of Rochester, 2020 WL 3071603, at *6.
But the Congressional relaxation of size restrictions for PPP loans in a provision of the CARES Act does not suggest that Congress intended for size to be the only restriction on eligibility for those loans. See id. (rejecting contention that “in expanding the size restrictions, Congress unambiguously provided that there could be no other eligibility criteria”). To the contrary, § 636(a)(36)(D)(i) is just one of several provisions that adjust requirements that ordinarily apply to determine eligibility for Section 7(a) loans, as discussed. See, e.g., id. § 636(a)(36)(ii) (permitting sole proprietors and independent contractors to receive PPP loans); id. § 636(a)(36)(I) (waiving the no “credit elsewhere” requirement); id. § 636(a)(36)(J) (waiving collateral and personal guarantee requirements). Those additional provisions “clearly anticipate the existence of additional eligibility
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criteria” beyond the size requirement. Diocese of Rochester, 2020 WL 3071603, at *7. If Plaintiffs were correct, those other provisions would be superfluous because Congress would have already made clear that the SBA may not impose any eligibility requirements other than § 636(a)(36)(D)(i)’s size requirements. See Barahona, 691 F.3d at 355 (applying “canon against interpreting any statutory provision in a manner that would render another provision superfluous”) (quoting Bilski v. Kappos, 561 U.S. 593, 607-08 (2010)); see also Diocese of Rochester, 2020 WL 3071603, at *7. And, again, the CARES Act provides that, except for enumerated adjustments, PPP loans may be guaranteed “under the same terms, conditions, and processes as” an ordinary Section 7(a) loan. See 15 U.S.C. § 636(a)(36)(B).
Nor does the phrase “any business concern” in § 636(a)(36)(D)(i) dictate the outcome urged by Plaintiffs. Defy Mem. 14, 16-18; Diamond Club, 2020 WL 2315880, at *10-11. Plaintiffs fail to respect the Supreme Court’s admonition that “any” means “different things depending upon the setting.” Nixon v. Mo. Mun. League, 541 U.S. 125, 132 (2004). As set forth above, Congress used the phrase “any business concern” in § 636(a)(36)(D)(i) to modify the defined term “small business concerns,” thereby relaxing the business size restrictions that would ordinarily prohibit the SBA from lending to larger institutions. The phrase “any business concern” in that context cannot be understood to mean that the SBA must lend to all businesses so long as they meet the size requirement, thereby transforming size into the only relevant consideration for PPP eligibility. “[E]ven though the word ‘any’ demands a broad interpretation, we must look beyond that word itself” to its context, and Plaintiffs therefore err “in placing dispositive weight on the broad statutory reference to ‘any’” business concern “without considering the rest of the statute.” Small v. United States, 544 U.S. 385, 388 (2005) (quoting United States v. Alvarez-Sanchez, 511 U.S. 350, 357 (1994)); cf. Freeman v. Quicken Loans, Inc., 566 U.S. 624, 635 (2012) (meaning of “any” is “expansive” but not “transformative”).
Plaintiffs’ approach would also yield “strange and indeterminate results” characteristic of a mistakenly broad application of the term “any.” See Nixon, 541 U.S. at 132-33; see also Small, 544 U.S.
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at 388-94 (term “any court” in 18 U.S.C. § 922(g)(1) was limited to domestic courts because, inter alia, including foreign courts would create anomalies that Congress could not have intended). Congress and the SBA have placed several restrictions on eligibility for Section 7(a) loans. For example, Congress has expressly prohibited SBA loans to businesses that are “engaged in the production or distribution of any product or service that has been determined to be obscene by a court of competent jurisdiction.” 15 U.S.C. § 633(e). The SBA has by regulation prohibited its loans to businesses primarily engaged in political and lobbying activities (see 13 C.F.R. § 120.200(r)), consistent with “Government-wide Federal policy that Federal funds not be used for lobbying or political activities because to do so would not be an appropriate or cost-effective use of Federal tax dollars” (51 Fed. Reg. 37,580, 37,589 (Oct. 23, 1986)). The SBA has similarly determined that its funds should not go to private clubs that restrict membership (13 C.F.R. § 120.200(i)); or “[p]yramid sale distribution plans” (13 C.F.R. § 120.200(f)). Under Plaintiffs’ approach, those and other restrictions cannot apply to PPP loans because Congress made size the only pertinent limitation. But there is no basis for concluding that Congress found it necessary or appropriate in the public interest to compel the SBA to make such dramatic departures from the Government’s longstanding policies against financial assistance to businesses falling into these categories. See Whitman v. Am. Trucking Assocs., 531 U.S. 457, 468 (2001) (“Congress . . . does not . . . hide elephants in mouseholes.”); Jones v. United States, 526 U.S. 227, 234 (1999) (“Congress is unlikely to intend radical departures from past practice without making a point of saying so.”). “The Court [should] not presume that simply by using the phrase ‘any business’ concern in one part of the CARES Act, Congress meant to implicitly eliminate the long-standing . . . requirements for Section 7(a) loans.” Diocese of Rochester, 2020 WL 3071603, at *7 (citing Jones). 7
7 Contrary to Plaintiffs’ contention (Defy Mem. 14, 16-17), neither the treatment of the word “any” in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), nor the treatment of the word “shall” in Kingdomware Technologies, Inc. v. United States, 136 S. Ct. 1969 (2016), could justify ignoring the “strange results” that would follow from Plaintiffs’ interpretation of the CARES Act. Nixon, 541 U.S. at 132-
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For those reasons, the Court need not go beyond Chevron’s first step, because the text of the
CARES Act unambiguously confers discretion on the SBA to impose the criminal justice restriction
in the Interim Final Rules, which is derived from the pre-existing limitations on Section 7(a) loans in
13 C.F.R. § 120.110(n) and 13 C.F.R. § 120.150.
2. In any event, even if the CARES Act were silent or ambiguous on the SBA’s authority to
impose the criminal justice restriction, the reasons discussed above are more than sufficient for the
Court to uphold the Agency at Chevron’s second step—so Plaintiffs again lack success on the merits.
For the reasons set forth above, the Agency’s application of a variation of its longstanding criminal
justice restriction and character requirements to the PPP is, at a minimum, a “permissible construction
of the statute” (Montgomery Cty., 811 F.3d at 130 (internal quotation marks omitted)), which the
reviewing court will “uphold . . . even if it is not the interpretation [the court] would have given to the
same statute” (Kofa v. INS, 60 F.3d 1084, 1088 (4th Cir. 1995) (en banc) (citing Chevron, 467 U.S. at 843
n.11)); see also Diocese of Rochester, 2020 WL 3071603, at *8-9 (upholding SBA bankruptcy exclusion for
PPP loans at Chevron Step Two). 8
33. SAS Institute involved a procedure for U.S. Patent Office review of the patentability of certain claims under the Patent Act; the Court concluded that the direction in 35 U.S.C. 318(a) to the Patent Office to decide “the patentability of any patent claim challenged by the petitioner” means that the Patent Office lacks discretion to decide “every claim the petitioner has challenged.” See 138 S. Ct. at 1354-56. Kingdomware involved a statutory preference for awarding contracts based on competition restricted to veteran-owned small businesses (called the Rule of Two), 38 U.S.C. § 8127(d). That provision requires that “a contracting officer . . . shall award contracts” to veteran-owned small businesses using restricted competition whenever the Rule of Two is satisfied, “[e]xcept as provided in subsections (b) and (c).” The Government argued that it was permissible for the Veterans Administration to place orders under preexisting Federal Supply Schedule contracts without first applying the Rule of Two, but the Court held instead that “Section 8127(d)’s text unambiguously requires . . . use [of] the Rule of Two before contracting under the competitive procedures.” 136 S. Ct. at 1976-77. In drawing “the usual inference” that the statute’s distinction between “shall” and “may” meant that the Rule of Two was nondiscretionary, the Court noted that the Federal Circuit’s contrary approach below “would produce an anomaly.” Id. at 1978. Here, as explained, it is Plaintiffs’ argument that would produce multiple anomalies that neither SAS Institute nor Kingdomware involved.
8 In Diamond Club, a divided panel of the Sixth Circuit denied the SBA a stay pending its appeal from the District Court’s preliminary injunction, under a standard of review “highly deferential” to the District Court. DV Diamond Club of Flint, LLC v. U.S. Small Bus. Admin., 2020 WL 2988528, at *2
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Although Plaintiffs couch their contentions as addressing only Chevron’s first step (Defy Mem. 13), insofar as they allege that certain individual legislators have set forth “criticism” of the SBA’s approach to the criminal justice restriction (Mem. 9 (citing Compl. ¶¶ 52-55), such “criticism” cannot undermine the reasonableness of the Agency’s interpretation at Chevron’s second step. “We give ‘little weight,’” the Fourth Circuit has explained, “to such post-enactment statements by legislators.” Mylan Pharms., Inc. v. U.S. FDA, 454 F.3d 270, 275 (4th Cir. 2006) (quoting Kofa, 60 F.3d at 1089); see 2B Norman J. Singer, Sutherland Statutory Construction § 49.06, at 59 (5th ed. 1992) (“Little weight is given to postenactment statements by members of Congress.”). In any event, the SBA’s refinements of the criminal justice restriction over several amendments to the First PPP Interim Final Rule, as described in the Miller Declaration, has aimed to meet the concerns of commenters while preserving the soundness of PPP loans.. See, e.g., Miller Decl. ¶¶ 25-30. SBA’s willingness to refine its approach in response to these public expressions of concern certainly does not supply a basis for holding that the Agency’s solution to the practical problem presented when applicants with criminal charges or convictions seek PPP loans was an unreasonable interpretation of the CARES Act.
B. The Criminal Justice Exclusion Is the Product of Reasoned Agency Decisionmaking and Is Not Arbitrary and Capricious.
Plaintiffs next maintain that the inclusion of the criminal justice restriction in the First PPP Interim Final Rule was arbitrary and capricious within the meaning of the APA. Carmen’s Corner Mem. at 20-26; Defy Ventures Mem. at 25-29. This claim also lacks merit and is unlikely to succeed on the merits.
(6th Cir. May 15, 2020) (quoting, inter alia, Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000)). The panel majority remarked that “[t]he Act’s specification that ‘any business concern’ is eligible, so long as it meets the size criteria, is a reasonable interpretation.” Id. (emphasis added) But even if the district court’s interpretation was a reasonable one, that does not mean that the SBA’s is unreasonable, nor did the panel majority say so. Hence, the Sixth Circuit’s stay ruling cannot be taken to have rejected the SBA’s interpretation under Chevron’s second step. See, e.g., Montgomery Cty., 811 F.3d at 133 (challengers failed to meet their burden at Chevron Step Two of showing agency interpretation was “an unreasonable interpretation of the Spectrum Act”).
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When a court reviews agency action under the arbitrary and capricious standard, “the scope of [the court’s] review is a narrow one.” Hughes River Watershed Conservancy v. Johnson, 165 F.3d 282, 287 (4th Cir. 1999); see also Appalachian Voices v. State Water Control Board, 912 F.3d 746, 753 (4th Cir. 2019); Ohio Valley Environmental Coalition v. Aracoma Coal Co., 556 F.3d 177 (2009). The agency must show that it “examined ‘the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.’” Appalachian Voices, 912 F.3d at 753 (quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983)). “Agency action is arbitrary and capricious if the agency relies on factors that Congress did not intend for it to consider, entirely ignores important aspects of the problem, explains its decision in a manner contrary to the evidence before it, or reaches a decision that is so implausible that it cannot be ascribed to a difference in view.” Id.
The standard of review, however, “is highly deferential, with a presumption in favor of finding the agency action valid[ ]” so long as the agency “has examined the relevant data and provided an explanation of its decision that includes a rational connection between the facts found and the choice made.” Id.; see also Aracoma Coal, 556 F.3d at 192. Although a reviewing court must engage “in a searching and careful inquiry of the record” to “educate” itself about the problem confronting the agency, the evidence before it, the questions it did and did not address, and the choices open to it, Aracoma Coal, 556 F.3d at 192-93; AES Sparrows Point LNG v. Wilson, 589 F.3d 721, 733 (4th Cir. 2009), the court “is not empowered to substitute its judgment for that of the agency,” Hughes River Watershed Conservancy, 165 F.3d at 287; see also Appalachian Voices, 912 F.3d at 753; Aracoma Coal, 556 F.3d at 192. The court “look[s] only to see if [the agency has made] a “‘clear error of judgment.’” Hughes River Watershed Conservancy, 165 F.3d at 287 (quoting Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 378 (1989)); Aracoma Coal, 556 F.3d at 192.
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Plaintiffs are not likely to succeed in demonstrating that the SBA’s decision to include a criminal justice restriction in the First PPP Interim Final Rule was arbitrary and capricious under these standards. As discussed above, the PPP is an extension of the SBA’s Section 7(a) loan authority, under which the SBA is statutorily obligated to ensure that the loans it guarantees are of “sound value.” 15 U.S.C. § 636(a)(6). To carry out that legislative mandate, it adopted a criminal justice restriction against Section 7(a) financial assistance for businesses with owners or Associates who are incarcerated, on probation or parole, or indicted for felonies, because of the greater credit risk those businesses represent. Supra at 6-8; Miller Decl. ¶¶ 6-7. It also adopted policies and procedures to ensure that owners and Associates of Section 7(a) loan applicants who have ever been convicted (or placed on parole, probation, or pretrial diversion) for a criminal offense are of good character. Supra at 6-8; Miller Decl. ¶ 8; see also id. ¶ 5.
The CARES Act, which authorizes the SBA to guarantee PPP loans under the same terms, conditions, and procedures as Section 7(a) unless the Act states otherwise, 15 U.S.C. § 636(a)(36)(B), does not direct the SBA to ignore its statutory mandate to guarantee only sound loans, or to disregard the policies and procedures it has developed over time to achieve that legislative objective. In exercise of the discretion the SBA is thus granted under the Act, SBA determined, in consultation with the Department of the Treasury, that it remained necessary to include a criminal justice restriction under the PPP, similar to the restriction under the Section 7(a) program, both to avoid the risk of default that arises when businesses’ owners are incarcerated (or face a threat of incarceration), and to direct PPP loan funds to businesses that are most able to support jobs. Supra at 11-14; Miller Decl. ¶¶ 1821. In reaching these conclusions, the SBA recognized that the possibility of loan forgiveness may reduce concerns about repayment and creditworthiness to some extent, but because loan forgiveness is unavailable to businesses that do not spend loan proceeds to pay their employees (or other expenses
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authorized under CARES Act § 1106), the agency concluded that borrowers’ ability to repay their loans remained an important concern. Supra at 11-12; Miller Decl. ¶ 19.
The SBA also determined that a means of assuring good character was needed when business owners seeking PPP assistance have criminal histories. Supra at 11-12; Miller Decl. ¶ 20. It reasoned that an assurance of good character was necessary to reduce the risk of fraud in the streamlined PPP application process, and the risk that borrowers would not expend PPP loan proceeds to meet payroll costs, as Congress intended under the CARES Act. Supra at 11-12; Miller Decl. ¶ 20.
Therefore, to achieve these objectives the SBA, in consultation with the Department of the Treasury, decided that inclusion of the criminal justice exclusion in the First PPP Interim Final Rule was warranted. See Miller Decl. ¶ 22. This was a reasonable and legitimate choice for the agency to make in furtherance of both its statutory mandate under Section 7(a) to make sound lending decisions, and its responsibility to ensure that PPP loan funds are expended for the important purposes that Congress intended. It cannot be dismissed as “a clear error in judgment,” Hughes River Watershed Conservancy, 165 F.3d at 287, but is instead a reasoned decision to which “[d]eference is due.” Appalachia Voices, 912 F.3d at 753.9
Plaintiffs advance no persuasive arguments to the contrary. The Carmen’s Corner Plaintiffs principally argue that when the SBA decided to include a criminal justice restriction under the PPP it relied on factors that Congress did not intend it to consider by disregarding the only two
9 The Carmen’s Corner Plaintiffs suggest that no deference is owed here to the SBA’s many decades of experience and expertise as a government lender to small businesses, contra the Circuit authority cited above, on the stated grounds that Congress did not mean to rely on the SBA’s expertise to implement the PPP, and that the SBA’s decision to include a criminal justice restriction under the PPP was not based on that expertise. Carmen’s Corner Mem. at 23. The first of these propositions is refuted by Congress’s delegation of broad discretion to the SBA to make decisions regarding which features of the Section 7(a) program should be incorporated into the PPP, 15 U.S.C. § 636(a)(36)(B), and its delegation of rulemaking authority to the agency to effectuate those decisions, CARES Act § 1114. The second of those propositions is refuted by the Miller Declaration, as discussed herein.
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considerations on which Congress, according to Plaintiffs, intended eligibility to be based. Carmen’s Corner Mem. at 21-22. But that is no more than a restatement of the failed statutory authority argument on which the Carmen’s Corner Plaintiffs principally rely. Supra at 21-29. It is no more valid when repurposed as putative support for Plaintiffs’ arbitrary and capricious claim.
Nevertheless, in attempt to bolster this argument the Carmen’s Corner Plaintiffs cite April 2020 correspondence from two Senators and 11 Representatives, prepared after the CARES Act had already been enacted, stating that the CARES Act “was not intended to exclude business owner[s] who have made mistakes, paid their debt, and turned their lives around,” and that the criminal justice restriction (among others) was “not intended by Congress at all.” Carmen’s Corner Mem. at 22 (quoting Compl. Exhs. 9 and 8, respectively). As evidence of legislative intent, however, this correspondence is entitled to little weight, if any. Barber v. Thomas, 560 U.S. 474, 486 (2010) (statements by individual legislators made after a law’s enactment are normally given “little weight”); N. Car. St. Conference of NAACP v. McCrory, 831 F.3d 204, 229 (4th Cir. 2016) (statements made by legislators after the fact of enactment “are of limited value”); Veasey v. Abbott, 830 F.3d 216, 234 (5th Cir. 2016) (“inappropriate” to rely on “stray statements” made after the fact by individual legislators). They furnish no basis on which to conclude that the SBA acted in disregard of Congress’s intentions.10
For their part, the Defy Ventures Plaintiffs principally rest their arbitrary and capricious claim on the argument that the First PPP Interim Final Rule does not include an explanation of SBA’s reasons for including a criminal justice restriction. Defy Ventures Mem. at 25, 26-27 (citing, inter alia, State Farm, 463 U.S. at 43). This argument, too, is unlikely to succeed. Ordinarily, when an agency
10 The Carmen’s Corner Plaintiffs also argue that the criminal justice restriction does not “‘properly reflect[ ] Congress’s . . . support for second chances” as shown in “‘a record of bipartisan criminal justice reforms dating back more than a decade.’” Carmen’s Corner Mem. at 22 (quoting Compl. Exh. 9). The CARES Acts contains no provisions indicating that Congress intended the SBA to take such considerations into account when implementing and administering the PPP. Therefore the criminal justice restriction cannot be faulted on this basis.
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takes regulatory action, it must provide a contemporaneous explanation of the basis for its decision. Bowen v. Am. Hosp. Ass’n, 476 U.S. 610, 626 (1986). In this case, however, working under a statutory mandate to issue regulations implementing the PPP within 15 days, see CARES Act § 1114; Miller Decl. ¶ 17, the SBA did not include an explanation for each of the numerous policy decisions reflected in the provisions of the First PPP Interim Final Rule. In circumstances such as this, where the agency’s explanation for its action is not reflected in the record of its action, the agency may instead submit a declaration by a responsible official stating the grounds and rationale on which the agency relied. See Roe v. Dep’t of Defense, 947 F.3d 207, 220 (4th Cir. 2020) (citing Camp v. Pitts, 411 U.S. 138, 142 (1973)); see also Va. Agr. Growers Ass’n, Inc. v. Donovan, 774 F.2d 89, 92 (4th Cir. 1985).
In this case, the Miller declaration provides relevant background information on the Section 7(a) program and sets forth the contemporaneous explanation of the considerations that the SBA took into account at the time it decided to include the criminal justice restriction in the First PPP Interim Final Rule. The Court is therefore permitted to consider Mr. Miller’s declaration in evaluating the SBA’s decision. See Roe, 947 F.3d at 220-21; see also Envt’l Def. Fund, Inc. v. Costle, 657 F.2d 275, 285 (D.C. Cir. 1981). As discussed above, the Miller declaration furnishes the requisite connection between the facts before the SBA and the choice it made to include a criminal justice restriction. Appalachian Voices, 912 F.3d at 753.11
Plaintiffs’ remaining arguments in support of their arbitrary and capricious claims require only brief attention. First, Plaintiffs maintain that the SBA failed to take into account the interests of small business employees, whose economic well-being was a principal concern of Congress in passing the CARES Act. Carmen’s Corner Mem. at 24; Defy Ventures Mem. at 25-26. But that is manifestly not
11 Because the Miller declaration provides an explanation of the contemporaneous reasons for the SBA’s decision to include a criminal justice restriction under the PPP, the declaration is not an impermissible “post hoc rationalization.” See Roe, 947 F.3d at 220; Olivares v. Transp. Sec. Admin., 819 F.3d 454, 463-64 (D.C. Cir. 2016).
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the case. The SBA decided to include a criminal justice exclusion under the PPP in significant part to ensure that PPP loan funds are directed to healthy businesses capable of supporting jobs, and that PPP loan proceeds are used to meet small businesses’ payroll costs and not diverted to unauthorized purposes. Supra at 11-12; Miller Decl. ¶¶ 18-22.
Plaintiffs also maintain that changes the SBA has made to the criminal justice restriction since the initial publication of the First PPP Interim Final Rule “reinforce just how arbitrarily and capriciously the agency has acted.” Carmen’s Corner Mem. at 24-25; Defy Ventures Mem. at 28-29 (citing SBA’s “various and changing articulations” of the restriction). This argument proves only that no good deed goes unpunished. The SBA issued the First PPP Interim Final Rule in a matter of days and without prior public comment, as the CARES Act mandated. Nevertheless, recognizing the value of public input, the agency invited comment on the Rule’s provisions. Supra at 11-14; Miller Decl. ¶¶ 17, 23. Among the issues raised by commenters was a concern that the criminal justice exclusion denied PPP assistance to deserving individuals with criminal records who, lacking other job opportunities, started their own businesses. See Miller Decl. ¶ 26. These are the very interests that Plaintiffs seek to address in this litigation. See, e.g., Defy Ventures Compl. ¶¶ 50-56. The SBA took these comments and concerns into account and revised the criminal justice restriction (for example, in the June 12, 2020 amendment) to make it more targeted in scope, and did so as quickly as possible for the benefit of applicants. Supra at 12-14; Miller Decl. ¶ 27-30. This is not a record of arbitrary and capricious decisionmaking, but of responsive government acting in accordance with the goals of public participation in the administrative process that the APA is designed to promote.
Next, the Carmen’s Corner Plaintiffs also fault the criminal justice rule because it excludes all businesses whose owners have been convicted or placed on probation or parole for felonies within certain time frames, without conducting individualized assessments of owners’ character, as is done under the Section 7(a) program. Carmen’s Corner Mem. at 23. As the Miller declaration explains,
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however, the SBA concluded that a bright-line rule was required under the PPP, because lengthy character determinations on a case-by-case basis would be incompatible with the expedited PPP application process and the imperative to get PPP loans into the hands of businesses affected by the COVID-19 crisis as quickly as possible. Supra at 11-12; Miller Decl. ¶ 21. The decision to adopt such a reasonable, bright-line rule was one the agency was entitled to make. See Keating v. F.E.R.C., 569 F.3d 427, 433 (D.C. Cir. 2009); Health & Med. Policy Research Grp. v. F.C.C., 807 F.2d 1038, 1045 n. 10 (D.C. Cir. 1986); Kamargo Corp. v. F.E.R.C., 852 F.2d 1392, 1398 n. 7 (D.C. Cir. 1988).
Finally, the Carmen’s Corner Plaintiffs point to the SBA’s decision to exempt faith-based organizations seeking PPP financial assistance from SBA affiliation rules that would ordinarily disqualify them from eligibility. Carmen’s Corner Mem. at 25 (citing 85 Fed. Reg. 20817, 20819 (Apr. 15, 2020)). That exemption, the SBA concluded, was compelled by the Religious Freedom Restoration Act, 42 U.S.C. 20000bb-1 (“RFRA”), which provides that the “Government shall not substantially burden a person’s exercise of religion” unless doing so is the “least restrictive means of furthering [a] compelling governmental interest.” 85 Fed. Reg. at 20819. The affiliation rules, the SBA found, imposed burdens on the exercise of sincere religious beliefs held by certain faith-based organizations, without a compelling Government reason for doing so. Id. The Carmen’s Corner Plaintiffs argue that likewise “no compelling interest exists to treat differently businesses owned by persons with criminal records.” Carmen’s Corner Mem. at 25. But to state the obvious, RFRA does not apply here, the APA does, and the SBA does not have to point to a “compelling” justification for the criminal justice restriction, only a reasonable one, as it has done. For this reason and those discussed above, Plaintiffs’ attack on the criminal justice restriction as arbitrary and capricious is not likely to succeed. 12
12 Plaintiffs further err in contending (Defy Mem. 28 n.5) that the SBA failed to adopt the criminal justice restriction through notice-and-comment rulemaking. Plaintiffs fail to address § 1114 of the CARES Act, 134 Stat. at 312 (codified at 15 U.S.C. § 9012), which authorizes SBA to issue regulations to implement Title I of the CARES Act without regard to the notice-and-comment requirements of 5 U.S.C. § 553(b).
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C. The Agency Has Not Unlawfully Withheld Required Action, And Interpretation Of The CARES Act Is Not A Ministerial Duty
Carmen’s Corner is unlikely to succeed on the merits of its claim that the criminal justice restriction violates 5 U.S.C. § 706(1). Carmen’s Corner divides that claim into an “unlawfully withheld” branch (Mem. 26 (citing Norton v. S. Utah Wilderness Alliance, 542 U.S. 55, 64 (2004)) and a mandamus branch (Mem. 27-28 (citing Mississippi v. Johnson, 71 U.S. 475, 498 (1866)). Each branch is misconceived.
First, the “APA’s use of the term ‘agency action’ in § 706(1) limits judicial review to discrete determinations of rights and obligations” (Vill. of Bald Head Island v. U.S. Army Corps of Engineers, 714 F.3d 186, 195 (4th Cir. 2013) (citing Norton, 542 U.S. at 62-63)), but Carmen’s Corner fails to identify an SBA “action”—namely, an SBA “rule, order, license, sanction, relief, or the equivalent” (5 U.S.C. § 551(13))—that SBA has “unlawfully withheld” from Carmen’s Corner. Furthermore, “a claim under § 706(1) can proceed only where a plaintiff asserts that an agency failed to take a discrete agency action that it [was] required to take” (Bald Head Island, 714 F.3d at 195 (quoting Norton, 542 U.S. at 63)), but Carmen’s Corner does not allege such a legally-compelled, discrete action. The action in question cannot be deemed the grant of a PPP loan. It is lenders, not the SBA, that decide whether they wish to make PPP loans to borrowers, and the SBA has no legal authority to compel them to do so. See Miller Decl. ¶ 4. Iinsofar as Plaintiffs’ are challenging SBA’s administration of the PPP loan program as a whole, that sort of blanket “programmatic” challenge is unavailable under the APA. Bald Head Island, 714 F.3d at 194 (quoting Norton, 542 U.S. at 64).
Second, in a similar vein, Carmen’s Corner has not identified a ministerial duty that the court could compel the SBA to carry out under the extraordinary writ of mandamus. “Mandamus” is available “only to compel the fulfillment of a duty which is ministerial, plainly and positively ascertained, and free of doubt.” Grice v. Colvin, 97 F. Supp. 3d 684, 705 (D. Md. 2015) (quoting Morris
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v. Weinberger, 401 F. Supp. 1071, 1077 (D. Md. 1975)). An act is “ministerial” if “the law direct[s] [the officer] to perform an act in regard to which no discretion is committed to [her], and which, upon the facts existing, [s]he is bound to perform.” City of Columbus v. Trump, 2020 WL 1820074, at *22 (D. Md. April 10, 2020) (quoting NTEU v. Nixon, 492 F.2d 587, 602 (D.C. Cir. 1974)) (further citations omitted). That is, the duty must be “so plainly prescribed as to be free from doubt and equivalent to a positive command.” Wilbur v. U.S. ex rel. Kadrie, 281 U.S. 206, 218 (1930); see also U.S. ex rel. McLennan v. Wilbur, 283 U.S. 414, 420 (1931) (“The law must not only authorize the demanded action, but require it; the duty must be clear and indisputable.”). Just as Carmen’s Corner fails to allege a “discrete” agency action the SBA was “required to take,” it has failed to allege a nondiscretionary act the SBA “is bound to perform,” and SBA’s administration of PPP loans plainly cannot qualify, because interpreting the CARES Act and implementing it calls for a wide variety of discretionary decisions. There is no basis here for a writ of mandamus. III. PLAINTIFFS WILL NOT SUFFER IRREPARABLE HARM IN THE ABSENCE
OF AN INJUNCTION In addition to the fact that Plaintiffs’ claims have no likelihood of success on the merits, their requests for preliminary relief must also be denied because, on the facts as they now stand, Plaintiff will not suffer irreparable harm, or injury of any kind, if an injunction is denied. See DiBiase , 872 F.3d at 230 (“A plaintiff seeking a preliminary injunction must demonstrate,” inter alia, “that he is likely to suffer irreparable harm in the absence of an injunction.”). Plaintiffs assert that absent immediate injunctive relief the individual Plaintiffs and their businesses will suffer irreparable injury because the plaintiff businesses “will be forever excluded from the PPP loan process[.]” Carmen’s Corner Mem. at 29; Defy Ventures Mem. at 30 (“Plaintiffs will lose any access to [PPP] funds.”). Even assuming that the individual Plaintiffs and their businesses would suffer irreparable injury without access to PPP financing, they no longer face that peril. As
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discussed above, at Point I.A, the criminal justice restriction, as amended on June 24, no longer applies to them and no longer prevents them from obtaining PPP loans.
As recently amended, the restriction for business owners on parole applies only to persons whose terms of parole began within the last five years for felonies involving fraud, bribery, embezzlement, or false statements in a loan application or an application for federal financial assistance, and within one year for other felonies. Miller Decl. Exh F. at 6. Plaintiffs Wilks and Merritt were placed on parole in 2018 and 2017, respectively, for felony drug and weapons offenses (Mr. Wilks) and felony narcotics possession (Mr. Merritt), see Carmen’s Corner Store, Verified Compl. ¶ 8; id., Wilks Decl. (ECF No. 7-1) ¶ 11; Merritt Decl., Defy Ventures Compl. Exh. B (ECF No. 1-4), ¶-6, crimes that do not involve fraud, bribery, embezzlement, or false statements. Because their terms of parole began more than one year ago, the criminal justice restriction no longer prevents their businesses from applying for PPP loans.
The situation is the same for plaintiff Garland and his small business. As recently amended, the criminal justice restriction for borrowers subject to pending criminal charges applies only to charges for felony offenses. Miller Decl. Exh. F at 6. Mr. Garland is charged only with misdemeanors. Garland Decl., Defy Ventures Compl. Exh. C. ¶ 28. Therefore, the amended criminal justice restriction does not prevent his business from seeking a PPP loan.
Furthermore, to ensure that the individual Plaintiffs and Plaintiff businesses encounter no further difficulties on account of the criminal justice restriction, the SBA has offered to contact their lenders and advise them that the Plaintiff businesses should not be denied PPP loans on the basis of the restriction. See Gilligan Decl. ¶¶ 2-3 & Exhs. 1-2. Thus, preliminary injunctive relief is no longer required (if it ever were) to protect the individual Plaintiffs and their businesses from irreparable harm. It is therefore unavailable to them. DiBiase, 872 F.3d at 230.
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For its part, the remaining Plaintiff, Defy Ventures, does not assert that it applied for a PPP loan or that it was denied a loan because of the criminal justice restriction. Rather, Defy Ventures asserts that its staff had to spend approximately 30 hours’ time to respond to inquiries from graduates of its entrepreneurial training programs regarding their eligibility, under the criminal justice exclusion, for PPP loans. Glazer Decl., Defy Ventures Compl. Exh. A, ¶ 32. Even if this claimed injury were attributable to the criminal justice restriction rather than Defy Ventures’ own unilateral choices— which as discussed in Point I.B above it is not—a claim of past injury such as this is insufficient, as a matter of law, to obtain injunctive relief. See, e.g., Dyer v. Md. St. Bd. of Educ., 187 F. Supp. 3d 599, 609 (D. Md. 2016), aff'd, 685 F. App'x 261 (4th Cir. 2017); Martin v. Brewer, 2015 WL 4393810, at *3 (W.D. Va. July 16, 2015).
Defy Ventures also asserts that the criminal justice restriction has “impeded the ability of Defy Ventures to accomplish its mission” by “shut[ting] out” formerly incarcerated individuals from financing for their businesses. Garland Decl. ¶ 33. As discussed in Point I.B., this claim of injury does not suffice even to establish Article III injury in fact, much less concrete irreparable harm justifying preliminary injunctive relief.
Because none of the Plaintiffs has made the requisite showing of irreparable harm absent injunctive relief, their motions for preliminary injunctions must be denied. IV. A PRELIMINARY INJUNCTION WOULD BE CONTRARY TO THE PUBLIC
INTEREST To obtain preliminary relief against the Government, Plaintiffs also must show that the injunctions they seek would be in the public interest. Nken, 556 U.S. at 435. Plaintiffs cannot make that showing, because Congress already determined that it was not in the public interest to require that the SBA make PPP loans available to prison inmates, or to persons, who though released, have yet to demonstrate their trustworthiness, and creditworthiness, as borrowers.
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As discussed above, when Congress passed the CARES Act, it decided that PPP loans should be made under the same terms and conditions as other Section 7(a) loans, “[e]xcept as otherwise provided” in the CARES Act. 15 U.S.C. § 636(a)(36)(B). The CARES Act sets forth in careful detail which provisions of Section 7(a), and the SBA’s regulations, are waived or modified for purposes of the PPP. Id. § 636(a)(36)(D)-(R). Section 7(a)’s mandate that SBA-backed loans be of “sound value” is not among them. Nor is the SBA’s Section 7(a) creditworthiness rule, 13 C.F.R. § 120.150, or criminal justice restriction, id. § 120.110(n). Thus, Congress already decided to reserve discretion to the SBA to apply rules of character, and creditworthiness, to assure that PPP loans, too, will be of “sound value.”
Plaintiffs offer no justification for disturbing that legislative judgment. They argue that the public interest “supports allowing Plaintiffs access to the PPP” so they may “support their employees,” Defy Ventures Mem. at 31, and their communities, Carmen’s Corner Mem. at 30. But now that the criminal justice restriction has again been revised, and further targeted, and no longer applies to the individual Plaintiffs, it no longer stands as an obstacle to the achievement of these objectives. The Defy Ventures Plaintiffs argue that injunctive relief would serve the public interest because “the exclusion[ ] work[s] to disproportionately harm already vulnerable populations[.]” Defy Ventures Mem. at 32. Presumably that is the justification, in their eyes, for the programmatic injunctive relief they seek. Supra, Point I.C. But not only is the programmatic relief they seek unavailable, as discussed herein; it would also disserve the public interest for the courts to intervene in such fashion in a program so immense and complex as the PPP, striving to meet critical national needs in a time of crisis. See Am. Ass’n of Political Consultants v. U.S. SBA, 2020 WL 1935525, at *7 (D.D.C. Apr. 21, 2020) (“For the Judicial Branch to intervene now and issue the requested injunction under these circumstances would not be in the public interest.”).
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V. THE INJUNCTION DEMANDED IS UNAVAILABLE If Plaintiffs were somehow (contrary to law) to prevail on any of their APA contentions, then
the proper remedy would not be to issue the sweeping injunction they demand to restructure PPP loan administration, but instead to remand to the SBA for further proceedings at the Agency. Indeed, the “ordinary remand rule,” which teaches that, “[g]enerally speaking,” a reviewing court “should remand a case to an agency for decision of a matter that statutes place primarily in agency hands” (I.N.S. v. Orlando Ventura, 537 U.S. 12, 16 (2002) (per curiam)), applies with special force here, given that Plaintiffs have rushed to court without presenting their legal and factual contentions to the Agency. The availability of remand obviates the need to consider any other extraordinary equitable relief. See, e.g., Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985) (where “the record before the agency does not support the agency action, ... the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.”) (emphasis added). The injunction they demand is improper not only because it defies the “ordinary remand rule,” but also because of many other problems, including the three identified below.
A. Section 634(b)(1) Forecloses The Injunction Demanded Against SBA First, the injunction sought against the SBA would defy the explicit statutory restriction on the availability of injunctive relief against the SBA. The Small Business Act provides that the SBA may “sue and be sued . . . in any United States District Court, and jurisdiction is conferred upon such district court to determine such controversies . . . ; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the [agency] or [its] property[.]” 15 U.S.C. § 634(b)(1) (emphasis added). The Fourth Circuit has repeatedly enforced his statutory restriction in suits involving SBA based on the Court of Appeals’ conclusion that “courts have no jurisdiction to award injunctive relief against the SBA.” J.C. Driskill, Inc. v. Abdnor, 901 F.2d 383, 386 (4th Cir. 1990); see id. (“Congress apparently included this limitation to avoid potential interference with and
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obstruction of the SBA’s operations, and the prohibition extends not only to attachment, injunction, and garnishment, but also to ‘other similar process.’”); see also Duncan v. Furrow Auction Co., 564 F.2d 1107, 1109 (4th Cir. 1977) (634(b)(1) “prohibits an injunction, which was all the relief asked for, against the SBA”); Vincent v. SBA, 402 F.2d 769, 770-71 (4th Cir. 1968) (per curiam) (affirming district court dissolution of injunction operating against SBA). Those repeated holdings of the Fourth Circuit are binding here. See also In re Hidalgo Cty. Emer. Serv. Found., 2020 WL 3411190, at *1-2 & n.2 (5th Cir. June 22, 2020) (vacating lower court injunction against SBA’s PPP regulation restricting loans to debtors in bankruptcy, where Fifth Circuit had previously “concluded that all injunctive relief directed at the SBA is absolutely prohibited,” because issue “at hand” was “the ability of a court to enjoin the Administrator, whether in regard to the PPP or any other circumstance”). The Fourth Circuit precedents similarly require rejecting Plaintiffs’ contrary contentions based on out-of-Circuit lower court decisions. See Defy Mem. 33-34 (relying on lower court decisions within the First, Sixth, and Seventh Circuits).
B. An Order Purporting To Extend The Deadline For PPP Loans Would Disrespect Limits On Spending Imposed By Congress And Thereby Violate The Separation Of Powers
Second, the injunction demanded cannot be granted because it would impermissibly contradict the plain text of Section 1102(b) of the CARES Act, which authorizes the obligation of Government funds for PPP only for “the period beginning on February 15, 2020 and ending on June 30, 2020,” and on that basis would also impermissibly impinges Congress’s constitutional authority to specify limitations on federal spending. Plaintiffs seek an injunction “extend[ing] the PPP application deadline, which is currently set to close on June 30, 2020, by 21 days, to July 21, 2020, for those applicants unlawfully excluded under the challenged criminal-record exclusions” by requiring the Executive Branch to “reserve[e] sufficient funds to cover” a set of applicants Plaintiffs define— applicants who are not parties to these cases. Defy Compl. at 36 ¶¶ C, D (Prayer for Relief). But the
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Appropriations Clause of the Constitution provides, “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” U.S. Const. Art. I, § 9, cl. 7. So no loan may be made or claim paid unless authorized by statute. See United States v. Testan, 424 U.S. 392, 398-400 (1976); OPM v. Richmond, 496 U.S. 414, 424 (1990).
A fundamental purpose of the Appropriations Clause is to ensure that federal funds are spent only “according to the letter of the difficult judgments reached by Congress . . . .” Richmond, 496 U.S. at 428; see Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937) (“no money can be paid out of the Treasury unless it has been appropriated by an act of Congress”); Reeside v. Walker, 52 U.S. (11 How.) 272, 291 (1851) (“not a dollar” of funds in the Treasury may be “used in the payment of any thing not thus previously sanctioned” by Congress). Thus, as the Court of Federal Claims has explained, “in the absence of clear Congressional authority, the other branches of government cannot effect payment of Treasury funds.” Speers v. United States, 38 Fed. Cl. 197, 202 (1997) (citing Richmond). Indeed, Executive Branch actors are not free to ignore statutory limitations on the payment of funds, and to do so knowingly is a federal crime. See Richmond, 496 U.S. at 430 (citing 31 U.S.C. §§ 1341, 1350, the Anti-Deficiency Act). Because the demanded injunction would therefore violate federal statutes and trench on Congress’s Spending Clause authority, it must be denied.
C. An Order Requiring SBA To Award Relief To Unidentified Loan Applicants Would Be Impossible For The Agency To Implement
Third, the injunction demanded would impose obligations on the SBA that are impossible to carry out. Plaintiffs seek an order directing the SBA to “reserve[e] sufficient funds to cover applicants wrongfully excluded under the challenged terms of the [Interim Final Rule] and the application form.” Defy Compl. at 36 ¶ D (Prayer for Relief) (emphasis added). But, again, those applicants are nonparties here, and the SBA’s PPP loan administration procedures do not include steps identifying applicants that were denied PPP loans by lenders. To the contrary: A PPP loan applicant submits an
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application to an authorized lender, which then determines whether the applicant is eligible and whether the lender wishes to make the loan. If so, the lender submits a guarantee application to the SBA, and upon issuance of an SBA loan number the lender may disburse the loan proceeds to the borrower. It is the lenders, not the SBA, that implement the PPP loan application process (as they implement the Section 7(a) process), so “SBA has no records of PPP loan applications rejected by lenders, whether on grounds of program eligibility or otherwise.” See Miller Decl. ¶ 16. (Nationwide, there are more than 5,400 participating PPP lenders. Id.)
The record before the Court therefore establishes that the injunction demanded is impossible because the SBA cannot identify “applicants wrongfully excluded” by lenders, as Plaintiffs would require. An injunction requiring impossible acts is invalid, because the “sound discretion of an equity court does not embrace enforcement through contempt of a party’s duty to comply with an order that calls him ‘to do an impossibility.’” NRDC v. Train, 510 F.2d 692, 705 (D.C. Cir. 1974) (quoting Maggio v. Zeitz, 333 U.S. 56, 59 (1948)); see also Maryland v. Pruitt, 20 F. Supp. 3d 722, 728 (D. Md. 2018) (“Put simply, the Court should not and will not order Defendants to do that which is impossible or infeasible”).
CONCLUSION For the reasons stated above, each application for a temporary restraining order and a preliminary injunction should be denied. Dated: June 24, 2020
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JOSEPH H. HUNT Assistant Attorney General
DAVID M. MORRELL Deputy Assistant Attorney General
JOHN R. GRIFFITHS Director
ERIC WOMACK Assistant Director

Respectfully submitted,
/s/ James J. Gilligan JAMES J. GILLIGAN Special Litigation Counsel
INDRANEEL SUR Trial Attorney
Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 514-3358 E-mail: james.gilligan@usdoj.gov
Counsel for Defendants

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Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 1 of 61

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
DEFY VENTURES, INC., , et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) ) ) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DECLARATION OF JOHN A. MILLER

I, John A. Miller, for my declaration pursuant to 28 U.S.C. § 1746, depose and say as

follows:

1. I have worked at the United States Small Business Administration (“SBA”) for over twenty years. I currently hold the position of Deputy Associate Administrator for Capital Access. The Office of Capital Access is responsible for the operation of and development of policy for the SBA’s business loan programs authorized under Section 7(a) of the Small Business Act, and the Paycheck Protection Program (“PPP”) authorized under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. I am the highest-ranking career official in the Office of Capital Access and am knowledgeable about the Section 7(a) and PPP programs.

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2. I submit this declaration in support of the Defendants’ opposition to the Plaintiffs’ motions for temporary restraining orders and preliminary injunctions in the above-captioned actions. The statements contained in this declaration are based on my personal knowledge and information made available to me in the course of carrying out my duties and responsibilities as SBA Deputy Associate Administrator for Capital Access.
The SBA Section 7(a) Loan Program 3. Section 7(a) of the Small Business Act, codified at 15 U.S.C. § 636(a), authorizes the SBA to provide a wide variety of technical, managerial, and financial assistance to smallbusiness concerns. Under the terms of the statute, SBA financial assistance can take the form of direct loans, joint loans with lenders, or guaranteed loans issued by private lenders but a portion of which the SBA will purchase from the lenders in the event of borrower defaults. 4. In practice, however, the SBA ordinarily guarantees loans made by private lenders, rather than disbursing funds directly to borrowers. Under the Section 7(a) program a small business seeking an SBA-guaranteed loan submits its application to an authorized SBA lender, not the SBA itself. If the lender concludes that the applicant meets applicable statutory and regulatory requirements for SBA financial assistance, and also wishes to make the loan (SBA has no authority to require lenders to make SBA-backed loans), then the lender initiates the loan, and submits a guarantee application to SBA. If the SBA agrees to guarantee the loan in accordance with applicable statutory and regulatory requirements, the lender funds and services the loan. Because the loan-application process is administered by lenders and not the SBA, SBA has no records of Section 7(a) loan applications rejected by lenders, whether on grounds of program eligibility or otherwise, and keeps no permanent records of guarantee applications rejected on the basis of eligibility issues.
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5. To qualify for a Section 7(a) loan, an applicant must meet a number of criteria specified by the Small Business Act and SBA regulations. As pertinent here, the SBA requires that applicants meet specified standards of creditworthiness, set forth at 13 C.F.R. § 120.150, so as to provide reasonable assurance that loans are repaid, and that taxpayer funds are not expended unnecessarily to honor SBA guarantees on defaulted loans. This requirement gives effect to the mandate of Section 7(a) that “[a]ll loans made under [Section 7(a)] shall be of such sound value or so secured as reasonably to assure repayment[.]” 15 U.S.C. § 636(a)(6). First among the factors considered by the SBA in assessing a borrower’s creditworthiness is the “[c]haracter, reputation and credit history of the applicant . . ., its Associates, and guarantors.” Id. § 120.150(a). An “Associate” of a small business is defined under SBA regulations to include an officer, director, or more-than-20-percent owner of the business, or a key employee of the business, among other individuals and entities. Id. § 120.10(2).
6. Over time, on the basis of the agency’s experience, the SBA has determined as a matter of policy that SBA loans should not be made available to certain types of businesses, such as, for example, non-profit businesses, other lenders, businesses in which the lenders own an equity interest, and businesses that have previously defaulted on federal or federally assisted loans resulting in losses to the Government. The types of business concerns deemed ineligible for SBA section 7(a) loans (18 in all) are listed at 13 C.F.R. § 120.110, and as relevant here they include “[b]usinesses with an Associate who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude.” Id. ¶ 120.110(n).
7. The SBA first issued this rule almost a quarter century ago, in January 1996, in connection with a consolidation, clarification, and simplification of its general business loan regulations. See 61 Fed. Reg. 3226 (Jan. 31, 1996). However, the policy against making (or
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guaranteeing) loans to businesses whose owners (or other Associates) are incarcerated, on probation or parole, or indicted for felonies extends as far back as the 1980s. The policy, and the rule, arise from the concern that the operations of small businesses frequently become impaired when their owners are incarcerated. As a result these businesses have difficulty repaying their loans, and are not reliable credit risks. Similarly, owners or other Associates who are on parole or probation, or who face felony charges, also present risks of incarceration (or re-incarceration) that could lead to an impairment of business operations and reduced ability to repay SBA-backed loans. SBA adopted this “criminal justice” restriction, as codified at 13 C.F.R. § 120.110(n), to safeguard against these risks, which are closely aligned with the creditworthiness and character concerns set forth in 13 C.F.R. § 120.150(a).
8. SBA’s Standard Operating Procedure (“SOP”) 50 10 5(K), provides guidance to SBA lenders regarding the policies and procedures governing the Section 7(a) business loan program. (Relevant excerpts of SOP 50 10 5(K) are attached as Exhibit A to this declaration. The full SOP is available at the SBA website, https://www.sba.gov/sites/default/files/201902/SOP%2050%2010%205%28K%29%20FINAL%202.15.19%20SECURED%20copy%20past e.pdf.) In accordance with the requirements of 13 C.F.R. § 120.150(a), the SOP instructs lenders that “every proprietor, general partner, officer, director,” or other Associate of an applicant business “must be of good character” to be eligible for a Section 7(a) loan. SOP 50 10 5(K) at 109. Lenders are further instructed that SBA financial assistance is unavailable to businesses with Associates who are (a) “[i]ncarcerated, on probation, or on parole”; or (b) “[c]urrently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction.” Id. at 110. The first of these two disqualifications is based on the criminal justice restriction codified at 13 C.F.R. § 120.110(n).
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The second is based on the general requirement of good character incorporated into 13 C.F.R. § 120.150(a).
9. The character evaluation process to determine an applicant’s program eligibility begins with each Associate of the business submitting a completed SBA Form 1919 to the lender. SOP 50 10 5(K) at 110. (A copy of SBA Form 1919 is attached as Exhibit B to this declaration.) SBA Form 1919 calls for a variety of information concerning the character and creditworthiness of the business’s Associates, and in particular asks three questions concerning Associates’ criminal history:
17. Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction?
18. Have you been arrested in the last 6 months for any criminal offense? 19. For any criminal offense – other than a minor vehicle violation – have you ever:
1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)? SBA Form 1919 at 4. 10. If an Associate answers “yes” to question no. 17, then the lender is instructed, in accordance with SBA policy under 13 C.F.R. § 120.150(a), that the applicant business is ineligible for a Section 7(a) loan. SOP 50 10 5(K) at 110. If no Associate answers “yes” to question no. 17, but one or more Associates answer “yes” to question nos. 18 or 19, then a character determination for the Associate(s) who so responded is required to establish the business’s eligibility for a Section 7(a) loan. Id. 11. To begin the character determination process for an Associate, the Associate must complete within 90 days an SBA Form 912. (A copy of SBA Form 912 is attached to this declaration as Exhibit C.) For each offense with which the Associate is currently charged, for
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which he or she has been arrested in the last six months, or for which he or she has been convicted, or placed on probation or parole, SBA Form 912 requires the Associate to furnish details including (i) the date and location of each offense; (ii) a specification of the nature and level (misdemeanor or felony) of the offense; and (iii) the disposition of the charge or conviction, including sentencing, and conditions (such as conditions on parole) which if not complied with can result in (re-)incarceration. The Associate must also furnish supporting court documentation. See SBA Form 912 at 1; SOP 50 10 5(K) at 110.
12. If an Associate’s completed SBA Form 912 package reveals that any of the charges against him or her resulted in (i) a felony conviction, (ii) a misdemeanor conviction within six months of the date of the application, or (iii) a misdemeanor conviction for a crime against a minor; or that charges were filed against the Associate and finally disposed of within six months of the business’s loan application, then the lender is required to forward the Associate’s SBA Form 912 package to the SBA for a background investigation. SOP 50 10 5(K) at 112. The investigation entails an FBI fingerprint background check. Id. at 112-13. Based on information received from the FBI (and the SBA Form 912 package) the SBA will determine either that the Associate has good character, or, if not, that the applicant business is ineligible for SBA Section 7(a) financial assistance. Id. at 113. Altogether this process typically takes several weeks.
The CARES Act and the PPP 13. President Trump signed the CARES Act into law in March 27, 2020, to provide an unprecedented package of emergency economic assistance and other support to help individuals, families, businesses, and health-care providers cope with the enormous economic and public health crises triggered by the worldwide coronavirus (COVID-19) pandemic. Among the measures taken by the CARES Act to address the COVID-19 crisis, the PPP was enacted as an
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extension of the SBA’s Section 7(a) loan authority to provide relief to small businesses and their employees experiencing economic hardship as a result of the public-health measures being taken to minimize the public’s exposure to the COVID-19 virus. As of June 23, 2020, almost 4.7 million PPP loans have been issued to small businesses totaling more than $515 billion. See Paycheck Protection Program, Additional Program Information, https://www.sba.gov/fundingprograms/loans/coronavirus-relief-options/paycheck-protection-program.
14. PPP loans are heavily subsidized and are made available on much more generous terms than ordinary Section 7(a) loans. For example, the interest rate on PPP loans is capped at one percent (1%), and various fees, collateral requirements, and personal guarantee requirements are waived. See 85 Fed. Reg. 20811, 20815 (Apr. 15, 2020). The loans are also 100% guaranteed by the SBA. Id. at 20812, 20816; see 15 U.S.C. § 636(a)(2)(F). In addition, section 1106 of the CARES Act provides for forgiveness of PPP loans to the extent the proceeds are used to cover payroll costs, mortgage interest payments, rent, and/or utility costs. The PPP is a temporary program, however; under section 1102 of the CARES Act the appropriation authorizing expenditures for the PPP expires on June 30, 2020.
15. Because Congress intended that the PPP provide relief to America’s small businesses as expeditiously as possible, for purposes of the PPP the SBA significantly streamlined the loan application process ordinarily followed under the Section 7(a) program. Instead of the usual borrower documentation and lender underwriting requirements, the SBA allows PPP lenders to rely on borrower certifications of eligibility under the terms of the CARES Act, with minimal requirements for documentation verifying the borrower’s payroll costs, mortgage interest and/or rent payments, and utility costs. 85 Fed. Reg. at 20812, 20814, 20815.
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16. Otherwise the application process for PPP loans is similar to the process for Section 7(a) loans, discussed in paragraph 4, above. A small business seeking a PPP loan submits an application to an authorized lender, which then determines whether the borrower is eligible and whether it wishes to make the loan. If so, the lender submits a guarantee application to the SBA, and upon issuance of an SBA loan number the lender may disburse the loan proceeds to the borrower. Because the PPP loan application process, like the Section 7(a) process, is administered by lenders and not the SBA, SBA has no records of PPP loan applications rejected by lenders, whether on grounds of program eligibility or otherwise, and keeps no permanent records of guarantee applications rejected on the basis of eligibility issues. As of June 23, 2020, more than 5,400 lenders nationwide had issued PPP loans. See Paycheck Protection Program, Additional Program Information, https://www.sba.gov/funding-programs/loans/coronavirusrelief-options/paycheck-protection-program.
17. Consistent with Congress’s intent to provide immediate assistance to small businesses adversely affected by the COVID-19 crisis, section 1114 of the CARES Act directed the SBA to issue regulations implementing the PPP within 15 days of enactment, without regard to the notice-and-comment requirements of the Administrative Procedure Act. Consistent with this legislative mandate, the SBA issued its first interim final rule to carry out the provisions of the PPP on April 2, 2020. (The rule was initially posted on the SBA website, and on April 15, 2020, published in the Federal Register. See Business Loan Program Temporary Changes: Paycheck Protection Program, Interim Final Rule, 85 Fed. Reg. 20811 (Apr. 15, 2020) (“First PPP Interim Final Rule”)).
18. Because the CARES Act authorizes the SBA to guarantee PPP loans under the same terms, conditions, and processes as Section 7(a) loans (except as otherwise provided by the
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CARES Act), in drafting the First PPP Interim Rule the SBA had to determine which terms, conditions, and procedures applied under the Section 7(a) program should be applied to the PPP. As relevant here, the SBA, in consultation with the Department of the Treasury, determined that a restriction for businesses with owners who are incarcerated, on probation, or parole, or charged with a crime, similar to the Section 7(a) restriction under 13 C.F.R. § 120.110(n), was also appropriate under the PPP, based on the same concerns underlying the restriction codified at section 120.110(n). See paragraph 7, above. When one or more owners of a small business are incarcerated, frequently the operation of the business becomes impaired and it has difficulty repaying its loans, risking default. Similarly, business owners on parole or probation or facing criminal charges are at greater risk of incarceration (or re-incarceration) than other applicants, presenting a greater risk that the health of the business will deteriorate, rendering it incapable of meeting its debt obligations.
19. In reaching these conclusions, the SBA recognized that concerns about creditworthiness and repayment of PPP loans are less acute where borrowers can obtain loan forgiveness under section 1106 of the CARES Act. But PPP loans may only be forgiven in the event (and to the extent) that borrowers expend the loan proceeds for payroll costs, mortgage interest and/or rent, and utilities in accordance with the requirements of section 1106. In cases where the proceeds have not been used as section 1106 specifies, the loans cannot be forgiven, and borrowers’ ability to repay the loans remains a matter of concern.
20. The SBA, in consultation with the Department of the Treasury, similarly determined that some eligibility criteria remained necessary under the PPP, as under Section 7(a), to provide reasonable assurance of applicants’ good character. An assurance of good character was deemed necessary to safeguard against the risk of fraud in the streamlined PPP application process
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(which, as discussed above, is based largely on borrower self-certifications of eligibility), and also the risk that borrowers would not use their PPP loans to pay their employees or to meet other expenses authorized by Congress under the CARES Act. See 15 U.S.C. § 636(a)(36)(F).
21. Ordinarily, as discussed above, the SBA’s character evaluation process involves an inquiry into whether any Associate of the applicant business has ever been convicted of or pleaded guilty (or nolo contendere) to any criminal offense, or ever been placed on parole or probation. See paragraphs 8-10, above. A “yes” answer to this question triggers a character determination process involving the submission of an SBA Form 912 package, possibly followed by an FBI fingerprint background investigation and a determination of the Associate’s character by the SBA. SBA anticipated, given the enormous volume of PPP loans to be processed, that the usual time required for individualized SBA character determinations could be prolonged by weeks or months. SBA recognized that delays of that length would be incompatible with the need to make PPP loan eligibility determinations as expeditiously as possible. Therefore, in lieu of the usual Section 7(a) character evaluation process, for purposes of the PPP the SBA, in consultation with the Department of the Treasury, concluded that it would adopt a bright line rule, quickly and easily administered by lenders, under which an applicant would be ineligible for a PPP loan if a 20-percent-or-more owner were convicted of a felony in the last five years. SBA reasoned that owners convicted of felonies more than five years in the past (assuming they were no longer incarcerated or on probation or parole) present less of a credit risk (and risk of fraud) than owners with more recent convictions.
22. In accordance with these conclusions and policy determinations, the First PPP Interim Final Rule provides that a business applying for a PPP loan is ineligible if
10

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[a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years[.] 85 Fed. Reg. at 20812. 23. Because both the terms of the CARES Act and the economic crisis created by the COVID-19 pandemic compelled immediate implementation of the PPP, SBA prepared and issued the First PPP Interim Final Rule in a matter of days, without the benefit of public comment beforehand. The agency therefore solicited public comment on all aspects of the rule following its publication, and advised that it would consider any comments submitted and “the need for making any revisions [to the rule] as a result of these comments.” 85 Fed. Reg. at 20811. 24. On April 3, 2020, the day following the publication of the First PPP Interim Final Rule on the SBA’s website, SBA issued a PPP Borrower Application Form, SBA Form 2483 (4/20), that included two questions intended to implement the criminal justice restriction contained in the Rule: 5. Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole? 6. Within the last 5 years, for any felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)? (A copy of SBA Form 2483 (4/20) is attached as Exhibit D to this declaration.) As stated on the form, if either question is answered “yes,” then the applicant’s request for a PPP loan would not be approved.
11

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25. In response to the First PPP Interim Final Rule and the publication of the PPP Borrower Application Form, the SBA received a number of comments from the public. As the agency had committed to do, see 85 Fed. Reg. at 20811, the SBA considered these comments and whether the First PPP Interim Final Rule should be revised on the basis of what the commenters had to say.
26. With regard to the Rule’s criminal justice restriction, a number of commenters observed that many previously incarcerated individuals turn to entrepreneurship to earn their living because of a lack of employment opportunities elsewhere. These commenters argued that the Rule inappropriately denied PPP financial assistance to individuals with criminal records who had paid their debts to society, started small businesses to give themselves a second chance, created job opportunities for others, and contributed to the vitality of their communities. Other commenters argued that the criminal justice restriction is inconsistent with the policies underlying the correctional and sentencing reforms implemented by the First Step Act of 2018, Pub. L. No. 115-391. It was also proposed by some commenters that the disqualification of persons with felony convictions within the last five years be narrowed to convictions for fraud or other crimes related to trustworthiness for financial assistance.
27. After consideration of the comments received in response to the First PPP Interim Final Rule, the SBA, in consultation with the Department of the Treasury, determined “that a shorter [restriction] for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act[.]” See Business Loan Program Temporary Changes: Paycheck Protection Program, Additional Revisions to First [PPP] Interim Final
12

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Rule, 85 Fed. Reg. 36717, 36718 (June 18, 2020). The SBA revised the criminal justice
restriction contained in the First PPP Interim Final Rule accordingly, to provide that an applicant
business is ineligible if
An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year[.]
See id. (emphasis added).
28. Concurrently, the SBA issued a revised SBA Borrower Application Form, SBA
Form 2483 (6/20), with a revision to question no. 6, to implement this revision to the criminal
justice restriction:
6. Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, or within the last year, for any other felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) been placed on any form of parole or probation (including probation before judgment)?
(A copy of SBA Form 2483 (6/20) is attached as Exhibit E to this declaration.) As stated on the
form, if either question 5 or 6 is answered “yes,” then the applicant’s request for a PPP loan will
not be approved.
29. After giving further consideration to these issues, the SBA, in consultation with the
Department of the Treasury, determined that two additional modifications to the criminal justice
restriction were appropriate to ensure consistency in its approach to applicants with criminal
histories. See SBA, Business Loan Program Temporary Changes: Paycheck Protection
Program—Additional Eligibility Revisions to First [PPP] Interim Final Rule,
https://www.sba.gov/document/policy-guidance-ppp-interim-final-rule-additional-eligibility-
13

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revisions-first-interim-final-rule, at 5 (posted June 24, 2020) (copy attached as Exhibit F to this declaration). First, SBA, in consultation with the Department of the Treasury, concluded that the restriction for business owners subject to criminal charges should be limited to charges for felony offenses, to align it with the restriction for prior convictions, which is also limited to convictions for felony offenses. Id. at 5-6. Second, the agency concluded, in consultation with the Department of the Treasury, that the restriction for business owners on probation or parole should be limited to individuals whose term of probation or parole commenced within the last five years for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, and within the last one year for other felonies. Id. at 6. The purpose of this modification is to align with the identical time restrictions applied to prior felony convictions in the June 18, 2020, modification to the Rule. Id. In addition, the SBA also explained its reasons for retaining the criminal justice restriction as a whole in this revised form. Id. at 7-9.
30. To implement the June 24, 2020, revisions to the criminal justice exclusion, the SBA issued a revised SBA Borrower Application, SBA Form 2483 (06/20), with corresponding revisions to question nos. 5 and 6. (A copy of the updated SBA Form 2483 (06/20)) is attached to this declaration as Exhibit G.)
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct, to the best of my knowledge and belief.
Executed this 24th day of June, 2020.
_____________________________________ JOHN A. MILLER
14

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EXHIBIT A

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Effective April 1, 2019

Page 109

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Effective April 1, 2019

Page 110

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Effective April 1, 2019

Page 111

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Effective

, 2019

Page 112

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Effective

, 2019

Page 113

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Effective

, 2019

Page 114

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EXHIBIT B

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SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

For use with all 7(a) Programs

Expiration Date: 07/31/2020

Purpose of this form: The purpose of this form is to collect information about the Small Business Applicant (“Applicant”) and its principals, the loan request, indebtedness, information about current or previous government financing, and certain other topics. The information also facilitates background checks as authorized by section 7(a)(1)(B) of the Small Business Act, 15 U.S.C. 636(a)(1)(B). This form is to be completed by the Applicant and all individuals identified below and submitted to your SBA Participating Lender. Submission of the requested information is required for SBA or the Lender to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect that determination.
Instructions for completing this form: This form is divided into two sections. Section I requests information about the Small Business Applicant and must be completed in its entirety, signed and dated by an authorized representative of the Small Business Applicant that is requesting a business loan. A separate Section I is required to be completed and signed for each co-applicant (e.g. “Eligible Passive Company (EPC)”or “Operating Company (OC)”).
Section II of this form requests information about each of the Small Business Applicant’s principals. This section must be completed in its entirety, signed and dated by the following:
• For a sole proprietorship, the sole proprietor; • For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm; or any partner that is
involved in management of the applicant business;
• For a corporation, all owners of 20% or more of the corporation, and each officer and director; • For limited liability companies, all members owning 20% or more of the company, each officer, director, and managing member; • Any Person hired by the business to manage day-to-day operations (“key employee”); and • Any Trustor (if the Small Business Applicant is owned by a trust).
All parties listed above are considered “Associates” of the Small Business Applicant as defined in 13 CFR § 120.10, as well as “principals.” A separate Section II is required to be completed and signed by each principal of the Small Business Applicant.
For clarification regarding any of the questions, please contact your Lender.
Definitions:
1. Affiliation – Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party (or parties) controls or has power to control both. For example, affiliation may arise through ownership, common management (including through a management agreement), or when there is an identity of interest between close relatives with identical, or substantially identical, business interests. The complete definition of “affiliation” is found at 13 CFR § 121.301(f).
2. Close Relative - Close Relative is a spouse; a parent; or a child or sibling, or the spouse of any such person.
3. Eligible Passive Company (“EPC”) – is a small entity or trust which does not engage in regular and continuous business activity which leases real or personal property to an Operating Company for use in the Operating Company’s business, and which complies with the conditions set forth in 13 CFR § 120.111.
4. Household Member – A “household member” of an SBA employee includes: a) the spouse of the SBA employee; b) the minor children of said individual; and c) the blood relatives of the employee, and the blood relatives of the employee’s spouse who reside in the same place of abode as the employee. [13 CFR § 105.201(d)]
5. Operating Company (“OC”) – is an eligible small business actively involved in conducting business operations now or about to be located on real property owned by an Eligible Passive Company, or using or about to use in its business operations personal property owned by an Eligible Passive Company.

SBA Form 1919 (01/18)

1

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SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

(Section I: Applicant Business Information)

Expiration Date: 07/31/2020

Applicant Business Legal Name ( OC /  EPC)

DBA or Tradename if applicable

Applicant Business Primary Business Address Project Address (if other than primary business address)

Applicant Business Tax ID Primary Contact

Applicant Business Phone
() -
Email Address

Amount of Loan Request: $

# of existing employees employed by business? (including owners): # of jobs to be created as a result of the loan? (including owners):

# of jobs that will be retained as a result of the loan that otherwise would have been lost? (including owners):

Purpose of the loan:

Small Business Applicant Ownership List all proprietors, partners, officers, directors, and holders of outstanding stock. 100% of ownership must be reflected. Attach a separate sheet if necessary. Based on this form’s instructions not all owners will need to complete the Principal Information section of this form.

Owner Name

Title

Ownership %

Address

Unless stated otherwise, if any of the questions below are answered “Yes,” please provide details on a separate sheet.

#

Question

1 Are there co-applicants? (If “Yes,” please complete a separate Section I: Applicant Business Information for each.)

Yes No
 

2 Has an application for the requested loan ever been submitted to the SBA, a lender, or a Certified Development Company, in connection with any SBA program? (If “Yes,” provide details on a separate sheet.)

 

3 Is the Small Business Applicant presently suspended, debarred, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by any Federal department or agency?

 

4 Does the Small Business Applicant operate under a Franchise/License/Distributor/Membership/Dealer/ Jobber or other type of Agreement? (If “Yes,” provide copies of your agreement(s) and any other relevant documents.)
5 Does the Small Business Applicant have any Affiliates? (If “Yes,” please attach a listing of all Affiliates.)
6 Has the Small Business Applicant and/or its Affiliates ever filed for bankruptcy protection?
7 Is the Small Business Applicant and/or its Affiliates presently involved in any pending legal action?

 
     

  8 Has the Small Business Applicant and/or its Affiliates ever obtained a direct or guaranteed loan from SBA or any other Federal agency or been a guarantor on such a loan?

a) If you answered “Yes” to Question 8, is any of the financing currently delinquent?

 

b) If you answered “Yes” to Question 8, did any of this financing ever default and cause a loss to the Government?

 

9 Are any of the Small Business Applicant’s products and/or services exported or is there a plan to begin exporting as a result of this loan?
If ”Yes,” provide the estimated total export sales this loan will support: $

 

  10 Is the Small Business Applicant using (or intending to use) a packager, broker, accountant, lawyer, etc. to assist in (a) preparing the loan application or any related materials and/or (b) referring the loan to the lender?

11 Are any of the Small Business Applicant’s revenues derived from gambling, loan packaging, or from the sale of products or services, or the presentation of any depiction, displays or live performances, of a prurient sexual nature?



SBA Form 1919 (01/18)

2

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SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

(Section I: Applicant Business Information)

Expiration Date: 07/31/2020

#

True False

SBA may not provide financial assistance to an applicant where there is any appearance of a conflict of interest with an SBA or other governmental employee. With the exception of question 15, if any of the questions below are answered “False,” this application may not be submitted under any delegated processing method, but must be submitted to the LGPC for non-delegated processing. Note: This does not mean that your loan will be denied, only that your lender will need to use different SBA procedures to process this loan. If the answer to question 15 is “no,” the application may be processed under a lender’s delegated authority only after the lender received clearance from SBA.

12 No SBA employee, or the household member (see definition on page 1) of an SBA employee, is a sole proprietor, partner, officer, director, or stockholder with a 10 percent or more interest, of the Applicant. [13 CFR 105.204]

 

  13 No former SBA employee, who has been separated from SBA for less than one year prior to the request for financial assistance, is an employee, owner, partner, attorney, agent, owner of stock, officer, director, creditor or debtor of the Applicant. [13 CFR 105.203]

  14 No member of Congress, or an appointed official or employee of the legislative or judicial branch of the Federal Government, is a sole proprietor, general partner, officer, director, or stockholder with a 10 percent or more interest, or household member of such individual, of the Applicant. [13 CFR 105.301(c)]

15 No Government employee having a grade of at least GS-13 or higher is a sole proprietor, general partner, officer, director, or stockholder with a 10 percent or more interest, or a household member of such individual, of the Applicant. [13 CFR
105.301(a)]

 

16 No member or employee of a Small Business Advisory Council or a SCORE volunteer is a sole proprietor, general partner, officer, director, or stockholder with a 10 percent or more interest, or a household member of such individual, of the Applicant.
[13 CFR 105.302(a)]

 

By Signing Below, You Make the Following Representations and Certifications
REPRESENTATIONS
I represent that:
• I have read the Statements Required by Law and Executive Order included in this form, and I understand them. • I will comply, whenever applicable, with the hazard insurance, lead-based paint, civil rights and other limitations in this
form. • All SBA loan proceeds will be used only for business related purposes as specified in the loan application. • To the extent feasible, I will purchase only American-made equipment and products.

ACCURACY CERTIFICATION
I certify that the information provided in this application and the information that I have provided in all supporting documents and forms is true and accurate. I realize that the penalty for knowingly making a false statement to obtain a guaranteed loan from SBA is that I may be fined up to $250,000 and/or be put in jail for up to 5 years under 18 USC § 1001 and if false statements are submitted to a Federally insured institution, I may be fined up to $1,000,000 and/or be put in jail for up to 30 years under 18 USC § 1014.

___________________________________________________ Signature of Authorized Representative of Applicant Business
_____________________________________________________ Print Name

______________________ Date
_______________________ Title

SBA Form 1919 (01/18)

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SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

(Section II: Principal Information)

Expiration Date: 07/31/2020

Applicant Business:

Principal Name

Social Security Number or Tax ID if an Entity

Date of Birth

Place of Birth (City & State or Foreign Country)

/

/

Home Address

Home Phone

% of Ownership in the Small Business Applicant

() -

Veteran/Gender/Race/Ethnicity data is collected for program reporting purposes only. Disclosure is voluntary and has no bearing on the credit decision.

Veteran

1=Non-Veteran; 2=Veteran; 3=Service-Disabled Veteran; 4=Spouse of Veteran; X=Not Disclosed

Enter Response Below

Gender

M=Male; F=Female; X=Not Disclosed

Race (more than 1 1=American Indian or Alaska Native; 2=Asian; 3=Black or African-American; 4=Native Hawaiian or may be selected) Pacific Islander; 5=White; X=Not Disclosed

Ethnicity

H=Hispanic or Latino; N=Not Hispanic or Latino; X=Not Disclosed

Unless stated otherwise, if any of the questions below are answered “Yes,” please provide details on a separate sheet.

#

Question

Yes No

17 Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction? (If “Yes,” the loan request is not eligible for SBA assistance.)

 

Initial here to confirm your response to question 17 

_____

18 Have you been arrested in the last 6 months for any criminal offense?

 

Initial here to confirm your response to question 18 

_____

19 For any criminal offense – other than a minor vehicle violation – have you ever: 1) been convicted; 2) pleaded guilty;

 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation



(including probation before judgment)?

Initial here to confirm your response to question 19 

_____

If you answer “Yes” to questions 18 or 19, you must complete SBA Form 912, “Statement of Personal History.” You will need to furnish details, including dates, location, fines, sentences, level of charge (whether misdemeanor or felony), dates of parole/probation, unpaid fines or penalties, name(s) under which charged, and any other pertinent information. If you answer “Yes” to question 19 and are currently on parole or probation, the loan request is not eligible for SBA assistance.

20 Are you presently suspended, debarred, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by any Federal department or agency?

 

21 If you are a 50% or more owner of the Small Business Applicant, are you more than 60 days delinquent on any

obligation to pay child support arising under an administrative order, court order, repayment agreement between the holder and a custodial parent, or repayment agreement between the holder and a state agency providing child support





enforcement services.

22  I am a U.S. Citizen OR  I have Lawful Permanent Resident status

Registration Number:

 I am not a U.S. Citizen or Lawful Permanent Resident

Country of Citizenship:

Initial here to confirm your responses to question 22 

_____

 23 Do you have any ownership in other businesses which would be defined as an Affiliate in the definition found on page 1? (If “Yes,” attach a listing of all businesses and your ownership percentage or position in the business.)



24 Have you, or any business you controlled, ever filed for bankruptcy protection?

 

25 Are you, or any business you control, presently involved in any legal action (including divorce)?

 

 26 Have you or any business owned or controlled by you ever obtained a direct or guaranteed loan from SBA or any other Federal agency or been a guarantor on such a loan? (This includes student loans.)



(a) If you answered “Yes” to Question 26, is any of the financing currently delinquent?

 

(b) If you answered “Yes” to Question 26, did any of this financing ever default and cause a loss to the Government? (If Yes to (a) or (b) above, please provide Lender with a written explanation.)





SBA Form 1919 (01/18)

4

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SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

(Section II: Principal Information)

Expiration Date: 07/31/2020

By Signing Below, You Make the Following Representations, Authorizations, and Certifications

REPRESENTATIONS AND AUTHORIZATIONS
I represent that:
• I have read the Statements Required by Law and Executive Order and I understand them. • I will comply, whenever applicable, with the hazard insurance, lead-based paint, civil rights or other limitations in this form. • All SBA loan proceeds will be used only for business related purposes as specified in the loan application. • To the extent feasible, I will purchase only American-made equipment and products.
I authorize the SBA to request criminal record information about me from criminal justice agencies for the purpose of determining my eligibility for programs authorized by the Small Business Act, as amended.
ACCURACY CERTIFICATION
I certify that the information provided in this application and the information that I have provided in all supporting documents and forms is true and accurate. I realize that the penalty for knowingly making a false statement to obtain a guaranteed loan from SBA is that I may be fined up to $250,000 and/or be put in jail for up to 5 years under 18 USC § 1001 and if false statements are submitted to a Federally insured institution, I may be fined up to $1,000,000 and/or be put in jail for up to 30 years under 18 USC § 1014.

_______________________________________ Signature

__________________ Date

__________________________________________ Print Name/Title

SBA Form 1919 (01/18)

5

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SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

Statements Required by Law and Executive Order

Expiration Date: 07/31/2020

Please read the following notices regarding use of federal financial assistance programs and then sign and date the certification.
SBA is required to withhold or limit financial assistance, to impose special conditions on approved loans, to provide special notices to applicants or borrowers and to require special reports and data from borrowers in order to comply with legislation passed by the Congress and Executive Orders issued by the President and by the provisions of various inter-agency agreements. SBA has issued regulations and procedures that implement these laws and executive orders. These are contained in Parts 112, 113, and 117 of Title 13 of the Code of Federal Regulations and in Standard Operating Procedures.
Privacy Act (5 U.S.C. 552a) -- Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your social security number may not affect any right, benefit or privilege to which you are entitled. Disclosures of name and other personal identifiers are, however, required for a benefit, as SBA requires an individual seeking assistance from SBA to provide it with sufficient information for it to make a character determination. In determining whether an individual is of good character, SBA considers the person’s integrity, candor, and disposition toward criminal actions. Additionally, SBA is specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC Section 636(a)(1)(B) of the Small Business Act ( the Act). Further, for all forms of assistance, SBA is authorized to make all investigations necessary to ensure that a person has not engaged in acts that violate or will violate the Act or the Small Business Investment Act, 15 USC Sections 634(b)(11) and 687(b)(a), respectively. For these purposes, you are asked to voluntarily provide your social security number to assist SBA in making a character determination and to distinguish you from other individuals with the same or similar name or other personal identifier.
Any person can request to see or get copies of any personal information that SBA has in his or her file when that file is retrieved by individual identifiers such as name or social security numbers. Requests for information about another party may be denied unless SBA has the written permission of the individual to release the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act.
The Privacy Act authorizes SBA to make certain “routine uses” of information protected by that Act. One such routine use is the disclosure of information maintained in SBA’s system of records when this information indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature. Specifically, SBA may refer the information to the appropriate agency, whether Federal, State, local or foreign, charged with responsibility for, or otherwise involved in investigation, prosecution, enforcement or prevention of such violations. Another routine use is disclosure to other Federal agencies conducting background checks; only to the extent the information is relevant to the requesting agencies' function. See, 74 F.R. 14890 (2009), and as amended from time to time for additional background and other routine uses.
Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) -- This is notice to you as required by the Right to Financial Privacy Act of 1978, of SBA's access rights to financial records held by financial institutions that are or have been doing business with you or your business, including any financial institutions participating in a loan or loan guaranty. The law provides that SBA shall have a right of access to your financial records in connection with its consideration or administration of assistance to you in the form of a Government guaranteed loan. SBA is required to provide a certificate of its compliance with the Act to a financial institution in connection with its first request for access to your financial records, after which no further certification is required for subsequent accesses. The law also provides that SBA's access rights continue for the term of any approved loan guaranty agreement. No further notice to you of SBA's access rights is required during the term of any such agreement. The law also authorizes SBA to transfer to another Government authority any financial records included in an application for a loan, or concerning an approved loan or loan guarantee, as necessary to process, service or foreclose on a loan guaranty or collect on a defaulted loan guaranty.
Freedom of Information Act (5 U.S.C. 552) -- This law provides, with some exceptions, that SBA must supply information reflected in agency files and records to a person requesting it. Information about approved loans that will be automatically released includes, among other things, statistics on our loan programs (individual borrowers are not identified in the statistics) and other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity. Proprietary data on a borrower would not routinely be made available to third parties. All requests under this Act are to be addressed to the nearest SBA office and be identified as a Freedom of Information request.
Flood Disaster Protection Act (42 U.S.C. 4011) -- Regulations have been issued by the Federal Insurance Administration (FIA) and by SBA implementing this Act and its amendments. These regulations prohibit SBA from making certain loans in an FIA designated floodplain unless Federal Flood insurance is purchased as a condition of the loan. Failure to maintain the required level of flood insurance makes the applicant ineligible for any financial assistance from SBA, including disaster assistance.
Executive Orders -- Floodplain Management and Wetland Protection (42 F.R. 26951 and 42 F.R. 26961) -- SBA discourages settlement in or development of a floodplain or a wetland. This statement is to notify all SBA loan applicants that such actions are hazardous to both life and property and should be avoided. The additional cost of flood preventive construction must be considered in addition to the possible loss of all assets and investments due to a future flood.
Occupational Safety and Health Act (15 U.S.C. 651 et seq.) -- This legislation authorizes the Occupational Safety and Health Administration in the Department of Labor to require businesses to modify facilities and procedures to protect employees or pay penalty fees. Businesses can be forced to cease operations or be prevented from starting operations in a new facility. Therefore, SBA may require additional information from an applicant to determine whether the business will be in compliance with OSHA regulations and allowed to operate its facility after the loan is approved and disbursed. Signing this form as an applicant is certification that the OSHA requirements that apply to the applicant business have been determined and that the applicant, to the best of its knowledge, is in compliance. Furthermore, applicant certifies that it will remain in compliance during the life of the loan.

SBA Form 1919 (01/18)

6

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 30 of 61

SBA 7(a) Borrower Information Form

OMB Control No.: 3245-0348

Statements Required by Law and Executive Order

Expiration Date: 07/31/2020

Civil Rights Legislation (13 C.F.R. 112, 113, 117) -- All businesses receiving SBA financial assistance must agree not to discriminate in any business practice, including employment practices and services to the public on the basis of categories cited in 13 C.F.R., Parts 112, 113, and 117 of SBA Regulations. This includes making their goods and services available to handicapped clients or customers. All business borrowers will be required to display the "Equal Employment Opportunity Poster" prescribed by SBA.
Equal Credit Opportunity Act (15 U.S.C. 1691) -- The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.
Executive Order 11738 -- Environmental Protection (38 F.R. 251621) -- The Executive Order charges SBA with administering its loan programs in a manner that will result in effective enforcement of the Clean Air Act, the Federal Water Pollution Act and other environment protection legislation.
Debt Collection Act of 1982, Deficit Reduction Act of 1984 (31 U.S.C. 3701 et seq. and other titles) -- These laws require SBA to collect aggressively any loan payments which become delinquent. SBA must obtain your taxpayer identification number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may take one or more of the following actions: (1) report the status of your loan(s) to credit bureaus, (2) hire a collection agency to collect your loan, (3) offset your income tax refund or other amounts due to you from the Federal Government, (4) suspend or debar you or your company from doing business with the Federal Government, (5) refer your loan to the Department of Justice or other attorneys for litigation, or (6) foreclose on collateral or take other action permitted in the loan instruments.
Immigration Reform and Control Act of 1986 (Pub. L. 99-603) -- If you are an alien who was in this country illegally since before January 1, 1982, you may have been granted lawful temporary resident status by the United States Immigration and Naturalization Service pursuant to the Immigration Reform and Control Act of 1986. For five years from the date you are granted such status, you are not eligible for financial assistance from the SBA in the form of a loan guaranty under Section 7(a) of the Small Business Act unless you are disabled or a Cuban or Haitian entrant. When you sign this document, you are making the certification that the Immigration Reform and Control Act of 1986 does not apply to you, or if it does apply, more than five years have elapsed since you have been granted lawful temporary resident status pursuant to such 1986 legislation.
Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821 et seq.) -- Borrowers using SBA funds for the construction or rehabilitation of a residential structure are prohibited from using lead-based paint (as defined in SBA regulations) on all interior surfaces, whether accessible or not, and exterior surfaces, such as stairs, decks, porches, railings, windows and doors, which are readily accessible to children under 7 years of age. A "residential structure" is any home, apartment, hotel, motel, orphanage, boarding school, dormitory, day care center, extended care facility, college or other school housing, hospital, group practice or community facility and all other residential or institutional structures where persons reside.
Executive Order 12549, Debarment and Suspension (2 CFR 180, adopted by reference in 2 CFR Part 2700 (SBA Debarment Regulations)) -- By submission of this loan application, you certify and acknowledge that neither you nor any Principals have within the past three years been: (a) debarred, suspended, declared ineligible from participating in, or voluntarily excluded from participation in a transaction by any Federal department or agency; (b) formally proposed for debarment, with a final determination still pending; (c) indicted, convicted, or had a civil judgment rendered against you for any of the offenses listed in the Regulations; or (d) delinquent on any amounts due and owing to the U.S. Government or its agencies or instrumentalities as of the date of execution of this certification.
If you are unable to certify and acknowledge (a) through (d), you must obtain and attach a written statement of exception from SBA permitting participation in this loan. You further certify that you have not and will not knowingly enter into any agreement in connection with the goods and/or services purchased with the proceeds of this loan with any individual or entity that has been debarred, suspended, declared ineligible from participating in, or voluntarily excluded from participation in a Transaction. All capitalized terms have the meanings set forth in 2 C.F.R. Part 180.

NOTE: According to the Paperwork Reduction Act, you are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated burden for completing this form, including time for reviewing instructions, gathering data needed, and completing and reviewing the form is 8 minutes per response. Comments or questions on the burden estimates should be sent to U.S. Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416, and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Rm. 10202, Washington DC 20503. PLEASE DO NOT SEND FORMS TO THESE ADDRESSES.

SBA Form 1919 (01/18)

7

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 31 of 61
EXHIBIT C

Case 1:20-cv-01838-CCB

Document 29-1

Filed 06/24/20

Page 32 of 61 OMB APPROVAL NO.3245-0178 Expiration Date:

Please Read Carefully: SBA uses Form 912 as one part of its

United States of America

assessment of program eligibility. Please reference SBA Regulations and Standard Operating Procedures if you have any questions about who must

SMALL BUSINESS ADMINISTRATION submit this form and where to submit it. For further information, please call
SBA's Answer Desk at 1-800-U-ASK-SBA (1-800-827-5722), or check SBA's
STATEMENT OF PERSONAL HISTORY website at www.sba.gov. DO NOT SEND COMPLETED FORMS TO OMB as

this will delay the processing of your application; send forms to the address

Name and Address of Applicant (Firm Name)(Street, City, State, and ZIP Code)

provided by your lender or SBA representative.
SBA District/Disaster Area Office

Amount Applied for (when applicable) File No. (if known)

1. Personal Statement of: (State name in full, if no middle name, state (NMN), or if initial 2. Give the percentage of ownership or stock owned Social Security No.

only, indicate initial.) List all former names used, and dates each name was used.

or to be owned in the small business or the

Use separate sheet if necessary.

development company

First

Middle

Last

3. Date of Birth (Month, day, and year)

4. Place of Birth: (City & State or Foreign Country)

Name and Address of participating lender or surety co. (when applicable and known)
6. Present residence address: From: To: Address:

5. U.S. Citizen?

YES

NO

If No, are you a Lawful Permanent resident alien:

YES

NO

If non- U.S. citizen provide alien registration number:

Most recent prior address (omit if over 10 years ago):

From:

To: Address:

Home Telephone No. (Include Area Code): Business Telephone No. (Include Area Code):
PLEASE SEE REVERSE SIDE FOR EXPLANATION REGARDING DISCLOSURE OF INFORMATION AND THE USES OF SUCH INFORMATION.
YOU MUST INITIAL YOUR RESPONSES TO QUESTIONS 5,7,8 AND 9.
IF YOU ANSWER "YES" TO 7, 8, OR 9, FURNISH DETAILS ON A SEPARATE SHEET. INCLUDE DATES, LOCATION, FINES, SENTENCES, WHETHER MISDEMEANOR OR FELONY, DATES OF PAROLE/PROBATION, UNPAID FINES OR PENALTIES, NAME(S) UNDER WHICH CHARGED, AND ANY OTHER PERTINENT INFORMATION. AN ARREST OR CONVICTION RECORD WILL NOT NECESSARILY DISQUALIFY YOU; HOWEVER, AN UNTRUTHFUL ANSWER WILL CAUSE YOUR APPLICATION TO BE DENIED AND SUBJECT YOU TO OTHER PENALTIES AS NOTED BELOW.

7. Are you presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction?

Yes

No

8. Have you been arrested in the past six months for any criminal offense?

Yes

No

9. For any criminal offense – other than a minor vehicle violation – have you ever: 1) been convicted; 2) plead guilty; 3) plead nolo contendere; 4) been placed on pretrial diversion;

or 5) been placed on any form of parole or probation (including probation before judgment).

Yes

No

10. I authorize the Small Business Administration Office of Inspector General to request criminal record information about me from criminal justice agencies for the purpose of determining my eligibility for programs authorized by the Small Business Act, and the Small Business Investment Act.

CAUTION - PENALTIES FOR FALSE STATEMENTS: Knowingly making a false statement on this form is a violation of Federal law and could result in criminal prosecution, significant civil penalties, and a denial of your loan, surety bond, or other program participation. A false statement is punishable under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

Signature

Title

Date

Agency Use Only

11.

Fingerprints Waived

Fingerprints Required Date Sent to OIG

Date Date

Approving Authority Approving Authority

12. Cleared for Processing

Date

Approving Authority

13. Request a Character Evaluation Date

Approving Authority

(Required whenever 7, 8 or 9 are answered "yes" even if cleared for processing.)

PLEASE NOTE: The estimated burden for completing this form is 15 minutes per response. You are not required to respond to any collection of information unless it displays a currently valid OMB approval number. If you wish to submit comments on the burden for completing this form, direct these comments to U.S. Small Business Administration, Chief, AIB, 409 3rd St., S.W., Washington D.C. 20416 and Desk Officer for the Small Business Administration, Office of Management and Budget, New Executive Office Building, Room 10202, Washington, D.C. 20503. OMB Approval 3245-0178.
DO NOT SEND COMPLETED FORMS TO OMB as this will delay the processing of your application; send forms to the address provided by your lender or SBA representative.

SBA 912 (2-2013) SOP 5010.4 Previous Edition Obsolete

Case 1:20-cv-01838N-COCTIBCESDoRcEuQmUeIRntE2D9B-1Y LFAilWed 06/24/20 Page 33 of 61
The following is a brief summary of the laws applicable to this solicitation of information.
Paperwork Reduction Act (44 U.S.C. Chapter 35)
SBA is collecting the information on this form to make a character and credit eligibility decision to fund or deny you a loan or other form of assistance. The information is required in order for SBA to have sufficient information to determine whether to provide you with the requested assistance. The information collected may be checked against criminal history indices of the Federal Bureau of Investigation.
Privacy Act (5 U.S.C. § 552a)
Any person can request to see or get copies of any personal information that SBA has in his or her file, when that file is retrieved by individual identifiers, such as name or social security numbers. Requests for information about another party may be denied unless SBA has the written permission of the individual to release the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act.
Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your social security number may not affect any right, benefit or privilege to which you are entitled. Disclosures of name and other personal identifiers are, however, required for a benefit, as SBA requires an individual seeking assistance from SBA to provide it with sufficient information for it to make a character determination. In determining whether an individual is of good character, SBA considers the person's integrity, candor, and disposition toward criminal actions. In making loans pursuant to section 7(a)(6) the Small Business Act (the Act), 15 USC § 636 (a)(6), SBA is required to have reasonable assurance that the loan is of sound value and will be repaid or that it is in the best interest of the Government to grant the assistance requested. Additionally, SBA is specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC § 636(a)(1)(B). Further, for all forms of assistance, SBA is authorized to make all investigations necessary to ensure that a person has not engaged in acts that violate or will violate the Act or the Small Business Investment Act,15 USC §§ 634(b)(11) and 687b(a). For these purposes, you are asked to voluntarily provide your social security number to assist SBA in making a character determination and to distinguish you from other individuals with the same or similar name or other personal identifier.
When the information collected on this form indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature, SBA may refer it to the appropriate agency, whether Federal, State, local, or foreign, charged with responsibility for or otherwise involved in investigation, prosecution, enforcement or prevention of such violations. See 74 Fed. Reg. 14890 (2009) for other published routine uses.

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 34 of 61
EXHIBIT D

Case 1:20-cv-01838-CCBPayDchoeccukmPreontet c2ti9o-n1PrFogileradm06/24/20

Page 35 of 61
OMB Control No.: 3245-0407

Borrower Application Form

Expiration Date: 09/30/2020

Check One:

 

SInodleeppernodperniettcoor ntracPtoarrtn(ersEhliipgiblesCe-lCf-oermpployeSd-CinodripviduaLl LC

 501(c)(3) nonprofit  501(c)(19) veterans organization

 Tribal business (sec. 31(b)(2)(C) of Small Business Act)  Other

DBA or Tradename if Applicable

Business Legal Name

Business Address

Business TIN (EIN, SSN)

Business Phone

() -

Primary Contact

Email Address

Average Monthly Payroll:
Purpose of the loan (select more than one):

$

x 2.5 + EIDL, Net of

$

Number of Employees:

Advance (if Applicable)

Equals Loan Request:

☐Payroll ☐Lease / Mortgage Interest ☐Utilities ☐Other (explain):__________________

Applicant Ownership List all owners of 20% or more of the equity of the Applicant. Attach a separate sheet if necessary.

Owner Name

Title

Ownership % TIN (EIN, SSN)

Address

If questions (1) or (2) below are answered “Yes,” the loan will not be approved.

Question

Yes No

1. Is the Applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible,
  voluntarily excluded from participation in this transaction by any Federal department or agency, or presently involved in any ☐☐ bankruptcy?

2. Has the Applicant, any owner of the Applicant, or any business owned or controlled by any of them, ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted in the last 7 years and caused a loss to the government?

☐☐

☐☐ 3. Is the Applicant or any owner of the Applicant an owner of any other business, or have common management with, any other
business? If yes, list all such businesses and describe the relationship on a separate sheet identified as addendum A.

4. Has the Applicant received an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes, provide details on a separate sheet identified as addendum B.

☐☐

If questions (5) or (6) are answered “Yes,” the loan will not be approved.
Question 5. Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject
to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole? Initial here to confirm your response to question 5 →

Yes No
☐ ☐

6. Within the last 5 years, for any felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)?
Initial here to confirm your response to question 6 →

☐ ☐

7. Is the United States the principal place of residence for all employees of the Applicant included in the Applicant’s payroll calculation above?
8. Is the Applicant a franchise that is listed in the SBA’s Franchise Directory?

☐ ☐ ☐ ☐

1 SBA Form 2483 (04/20)

Case 1:20-cv-01838-CCBPayDchoeccukmPreontet c2ti9o-n1PrFogileradm06/24/20 Page 36 of 61
Borrower Application Form

By Signing Below, You Make the Following Representations, Authorizations, and Certifications

CERTIFICATIONS AND AUTHORIZATIONS
I certify that:
 I have read the statements included in this form, including the Statements Required by Law and Executive Orders, and I understand them.  The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the
Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
 The Applicant (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more
than the greater of 500 or employees or, if applicable, the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry.
 I will comply, whenever applicable, with the civil rights and other limitations in this form.  All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the
Paycheck Protection Program Rule.
 To the extent feasible, I will purchase only American-made equipment and products.  The Applicant is not engaged in any activity that is illegal under federal, state or local law.  Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was
for a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.

For Applicants who are individuals: I authorize the SBA to request criminal record information about me from criminal justice agencies for the purpose of determining my eligibility for programs authorized by the Small Business Act, as amended.

CERTIFICATIONS The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:

_____

The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.

_____ Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.

_____

The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.

_____

The Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following this loan.

_____

I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 25% of the forgiven amount may be for non-payroll costs.

_____

During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.

_____

I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

_____

I acknowledge that the lender will confirm the eligible loan amount using required documents submitted. I understand, acknowledge and agree that the Lender can share any tax information that I have provided with SBA's authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

_________________________________________________________ Signature of Authorized Representative of Applicant

________________________ Date

Print Name SBA Form 2483 (04/20)

Title 2

Case 1:20-cv-01838-CCBPayDchoeccukmPreontet c2ti9o-n1PrFogileradm06/24/20 Page 37 of 61
Borrower Application Form
Purpose of this form:
This form is to be completed by the authorized representative of the Applicant and submitted to your SBA Participating Lender. Submission of the requested information is required to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect thatdetermination.
Instructions for completing this form:
With respect to “purpose of the loan,” payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
For purposes of calculating “Average Monthly Payroll,” most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee. For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.
If Applicant is refinancing an Economic Injury Disaster Loan (EIDL): Add the outstanding amount of an EIDL made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan, to Loan Request as indicated on the form.
All parties listed below are considered owners of the Applicant as defined in 13 CFR § 120.10, as well as “principals”:
 For a sole proprietorship, the sole proprietor;
 For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;
 For a corporation, all owners of 20% or more of the corporation;
 For limited liability companies, all members owning 20% or more of the company; and
 Any Trustor (if the Applicant is owned by a trust).
Paperwork Reduction Act – You are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated time for completing this application, including gathering data needed, is 8 minutes. Comments about this time or the information requested should be sent to : Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416., and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Washington DC 20503.
Privacy Act (5 U.S.C. 552a) – Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your social security number may not affect any right, benefit or privilege to which you are entitled. (But see Debt Collection Notice regarding taxpayer identification number below.) Disclosures of name and other personal identifiers are required to provide SBA with sufficient information to make a character determination. When evaluating character, SBA considers the person’s integrity, candor, and disposition toward criminal actions. Additionally, SBA is specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC Section 636(a)(1)(B) of the Small Business Act (the Act).
Disclosure of Information – Requests for information about another party may be denied unless SBA has the written permission of the individual to release the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act. The Privacy Act authorizes SBA to make certain “routine uses” of information protected by that Act. One such routine use is the disclosure of information maintained in SBA’s system of records when this information indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature. Specifically, SBA may refer the information to the appropriate agency, whether Federal, State, local or foreign, charged with responsibility for, or otherwise involved in investigation, prosecution, enforcement or prevention of such violations. Another routine use is disclosure to other Federal agencies conducting background checks but only to the extent the information is relevant to the requesting agencies' function. See, 74 F.R. 14890 (2009), and as amended from time to time for additional background and other routine uses. In addition, the CARES Act, requires SBA to register every loan made under the Paycheck Protection Act using the Taxpayer Identification Number (TIN) assigned to the borrower.
Debt Collection Act of 1982, Deficit Reduction Act of 1984 (31 U.S.C. 3701 et seq. and other titles) – SBA must obtain your taxpayer identification number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may: (1) report the status of your loan(s) to credit bureaus, (2) hire a collection agency to collect your loan, (3) offset your income tax refund or other amounts due to you from the Federal Government, (4) suspend or debar you or your company from doing business with the Federal Government, (5) refer your loan to the Department of Justice, or (6) foreclose on collateral or take other action permitted in the loan instruments.
Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) – The Right to Financial Privacy Act of 1978, grants SBA access rights to financial records held by financial institutions that are or have been doing business with you or your business including any financial
3 SBA Form 2483 (04/20)

Case 1:20-cv-01838-CCBPayDchoeccukmPreontet c2ti9o-n1PrFogileradm06/24/20 Page 38 of 61
Borrower Application Form
institutions participating in a loan or loan guaranty. SBA is only required provide a certificate of its compliance with the Act to a financial institution in connection with its first request for access to your financial records. SBA's access rights continue for the term of any approved loan guaranty agreement. SBA is also authorized to transfer to another Government authority any financial records concerning an approved loan or loan guarantee, as necessary to process, service or foreclose on a loan guaranty or collect on a defaulted loan guaranty. Freedom of Information Act (5 U.S.C. 552) – Subject to certain exceptions, SBA must supply information reflected in agency files and records to a person requesting it. Information about approved loans that will be automatically released includes, among other things, statistics on our loan programs (individual borrowers are not identified in the statistics) and other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity. Proprietary data on a borrower would not routinely be made available to third parties. All requests under this Act are to be addressed to the nearest SBA office and be identified as a Freedom of Information request. Occupational Safety and Health Act (15 U.S.C. 651 et seq.) – The Occupational Safety and Health Administration (OSHA) can require businesses to modify facilities and procedures to protect employees. Businesses that do not comply may be fined, forced to cease operations, or prevented from starting operations. Signing this form is certification that the applicant, to the best of its knowledge, is in compliance with the applicable OSHA requirements, and will remain in compliance during the life of the loan. Civil Rights (13 C.F.R. 112, 113, 117) – All businesses receiving SBA financial assistance must agree not to discriminate in any business practice, including employment practices and services to the public on the basis of categories cited in 13 C.F.R., Parts 112, 113, and 117 of SBA Regulations. All borrowers must display the "Equal Employment Opportunity Poster" prescribed by SBA. Equal Credit Opportunity Act (15 U.S.C. 1691) – Creditors are prohibited from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Debarment and Suspension Executive Order 12549; (2 CFR Part 180 and Part 2700) – By submitting this loan application, you certify that neither the Applicant or any owner of the Applicant have within the past three years been: (a) debarred, suspended, declared ineligible or voluntarily excluded from participation in a transaction by any Federal Agency; (b) formally proposed for debarment, with a final determination still pending; (c) indicted, convicted, or had a civil judgment rendered against you for any of the offenses listed in the regulations or (d) delinquent on any amounts owed to the U.S. Government or its instrumentalities as of the date of execution of this certification.
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EXHIBIT E

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Paycheck Protection Program

OMB Control No.: 3245-0407

Borrower Application Form Revised June 12, 2020

Expiration Date: 10/31/2020

Check One:



Sole

proprietor



(
Partnership


 C-Corp



S-Corp



LLC

 Independent contractor  Eligible self-employed individual

 501(c)(3) nonprofit  501(c)(19) veterans organization

 Tribal business (sec. 31(b)(2)(C) of Small Business Act)  Other

Business Legal Name

DBA or Tradename if Applicable

Business Address

Business TIN (EIN, SSN)

Business Phone

() -

Primary Contact

Email Address

Average Monthly Payroll:
Purpose of the loan (select more than one):

$

x 2.5 + EIDL, Net of

$

Number of Employees:

Advance (if Applicable)

Equals Loan Request:

☐ ☐ ☐ ☐ Payroll Lease / Mortgage Interest Utilities Other (explain): __________________

Applicant Ownership List all owners of 20% or more of the equity of the Applicant. Attach a separate sheet if necessary.

Owner Name

Title

Ownership % TIN (EIN, SSN)

Address

If questions (1) or (2) below are answered “Yes,” the loan will not be approved.
Question 1. Is the Applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible,
voluntarily excluded from participation in this transaction by any Federal department or agency, or presently involved in any bankruptcy?
2. Has the Applicant, any owner of the Applicant, or any business owned or controlled by any of them, ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted in the last 7 years and caused a loss to the government?
3. Is the Applicant or any owner of the Applicant an owner of any other business, or have common management with any other business? If yes, list all such businesses and describe the relationship on a separate sheet identified as addendum A.
4. Has the Applicant received an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes, provide details on a separate sheet identified as addendum B.

Yes No
☐ ☐ ☐ ☐
☐ ☐ ☐ ☐

If questions (5) or (6) are answered “Yes,” the loan will not be approved.
Question 5. Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant
subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole? Initial here to confirm your response to question 5 →

Yes No
☐ ☐

6. Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, or within the last year, for any other felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) been placed on any form of parole or probation (including probation before judgment)?
Initial here to confirm your response to question 6 →

☐ ☐

7. Is the United States the principal place of residence for all employees of the Applicant included in the Applicant’s payroll calculation above?
8. Is the Applicant a franchise that is listed in the SBA’s Franchise Directory? 1
SBA Form 2483 (06/20)

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Paycheck Protection Program Borrower Application Form Revised June 12, 2020

By Signing Below, You Make the Following Representations, Authorizations, and Certifications

CERTIFICATIONS AND AUTHORIZATIONS
I certify that:
• I have read the statements included in this form, including the Statements Required by Law and Executive Orders, and I understand them. • The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the
Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
• The Applicant (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more than the
greater of 500 or employees or, if applicable, the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry.
• I will comply, whenever applicable, with the civil rights and other limitations in this form. • All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck
Protection Program Rule.
• To the extent feasible, I will purchase only American-made equipment and products. • The Applicant is not engaged in any activity that is illegal under federal, state or local law. • Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was for
a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.

For Applicants who are individuals: I authorize the SBA to request criminal record information about me from criminal justice agencies for the purpose of determining my eligibility for programs authorized by the Small Business Act, as amended.

CERTIFICATIONS The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:

The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.

Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.

The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.

The Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 24-week period following this loan.

I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 40% of the forgiven amount may be for non-payroll costs.

During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.

I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

I acknowledge that the lender will confirm the eligible loan amount using required documents submitted. I understand, acknowledge and agree that the Lender can share any tax information that I have provided with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

_________________________________________________________ Signature of Authorized Representative of Applicant

________________________ Date

Print Name

Title

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Borrower Application Form Revised June 12, 2020
Purpose of this form:
This form is to be completed by the authorized representative of the Applicant and submitted to your SBA Participating Lender. Submission of the requested information is required to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect that determination.
Instructions for completing this form:
With respect to “purpose of the loan,” payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
For purposes of calculating “Average Monthly Payroll,” most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee. For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019 or any 12-week period between May 1, 2019 and September 15, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.
If Applicant is refinancing an Economic Injury Disaster Loan (EIDL): Add the outstanding amount of an EIDL made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan, to Loan Request as indicated on the form.
All parties listed below are considered owners of the Applicant as defined in 13 CFR § 120.10, as well as “principals”:
• For a sole proprietorship, the sole proprietor;
• For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;
• For a corporation, all owners of 20% or more of the corporation;
• For limited liability companies, all members owning 20% or more of the company; and
• Any Trustor (if the Applicant is owned by a trust).
Paperwork Reduction Act – You are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated time for completing this application, including gathering data needed, is 8 minutes. Comments about this time or the information requested should be sent to: Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416, and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Washington DC 20503. PLEASE DO NOT SEND FORMS TO THESE ADDRESSES.
Privacy Act (5 U.S.C. 552a) – Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your social security number may not affect any right, benefit or privilege to which you are entitled. (But see Debt Collection Notice regarding taxpayer identification number below.) Disclosures of name and other personal identifiers are required to provide SBA with sufficient information to make a character determination. When evaluating character, SBA considers the person’s integrity, candor, and disposition toward criminal actions. Additionally, SBA is specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC Section 636(a)(1)(B) of the Small Business Act (the Act).
Disclosure of Information – Requests for information about another party may be denied unless SBA has the written permission of the individual to release the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act. The Privacy Act authorizes SBA to make certain “routine uses” of information protected by that Act. One such routine use is the disclosure of information maintained in SBA’s system of records when this information indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature. Specifically, SBA may refer the information to the appropriate agency, whether Federal, State, local or foreign, charged with responsibility for, or otherwise involved in investigation, prosecution, enforcement or prevention of such violations. Another routine use is disclosure to other Federal agencies conducting background checks but only to the extent the information is relevant to the requesting agencies' function. See, 74 F.R. 14890 (2009), and as amended from time to time for additional background and other routine uses. In addition, the CARES Act, requires SBA to register every loan made under the Paycheck Protection Act using the Taxpayer Identification Number (TIN) assigned to the borrower.
Debt Collection Act of 1982, Deficit Reduction Act of 1984 (31 U.S.C. 3701 et seq. and other titles) – SBA must obtain your taxpayer identification number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may: (1) report the status of your loan(s) to credit bureaus, (2) hire a collection agency to collect your loan, (3) offset your income tax refund or other amounts due to you from the Federal Government, (4) suspend or debar you or your company from doing business with the Federal Government, (5) refer your loan to the Department of Justice, or (6) foreclose on collateral or take other action permitted in the loan instruments.
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Borrower Application Form Revised June 12, 2020
Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) – The Right to Financial Privacy Act of 1978, grants SBA access rights to financial records held by financial institutions that are or have been doing business with you or your business including any financial institutions participating in a loan or loan guaranty. SBA is only required provide a certificate of its compliance with the Act to a financial institution in connection with its first request for access to your financial records. SBA's access rights continue for the term of any approved loan guaranty agreement. SBA is also authorized to transfer to another Government authority any financial records concerning an approved loan or loan guarantee, as necessary to process, service or foreclose on a loan guaranty or collect on a defaulted loan guaranty. Freedom of Information Act (5 U.S.C. 552) – Subject to certain exceptions, SBA must supply information reflected in agency files and records to a person requesting it. Information about approved loans that will be automatically released includes, among other things, statistics on our loan programs (individual borrowers are not identified in the statistics) and other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity. Proprietary data on a borrower would not routinely be made available to third parties. All requests under this Act are to be addressed to the nearest SBA office and be identified as a Freedom of Information request. Occupational Safety and Health Act (15 U.S.C. 651 et seq.) – The Occupational Safety and Health Administration (OSHA) can require businesses to modify facilities and procedures to protect employees. Businesses that do not comply may be fined, forced to cease operations, or prevented from starting operations. Signing this form is certification that the applicant, to the best of its knowledge, is in compliance with the applicable OSHA requirements, and will remain in compliance during the life of the loan. Civil Rights (13 C.F.R. 112, 113, 117) – All businesses receiving SBA financial assistance must agree not to discriminate in any business practice, including employment practices and services to the public on the basis of categories cited in 13 C.F.R., Parts 112, 113, and 117 of SBA Regulations. All borrowers must display the "Equal Employment Opportunity Poster" prescribed by SBA. Equal Credit Opportunity Act (15 U.S.C. 1691) – Creditors are prohibited from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Debarment and Suspension Executive Order 12549; (2 CFR Part 180 and Part 2700) – By submitting this loan application, you certify that neither the Applicant or any owner of the Applicant have within the past three years been: (a) debarred, suspended, declared ineligible or voluntarily excluded from participation in a transaction by any Federal Agency; (b) formally proposed for debarment, with a final determination still pending; (c) indicted, convicted, or had a civil judgment rendered against you for any of the offenses listed in the regulations or (d) delinquent on any amounts owed to the U.S. Government or its instrumentalities as of the date of execution of this certification.
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EXHIBIT F

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SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 Docket No. SBA-2020-0039 RIN 3245-AH53 Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Eligibility Revisions to First Interim Final Rule AGENCY: U.S. Small Business Administration. ACTION: Interim final rule. SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) posted on its website an interim final rule relating to the implementation of sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act) (published in the Federal Register on April 15, 2020). Section 1102 of the Act temporarily adds a new product, titled the “Paycheck Protection Program,” to the U.S. Small Business Administration’s (SBA’s) 7(a) Loan Program. Subsequently, SBA issued a number of interim final rules implementing the Paycheck Protection Program. On June 12, 2020, SBA posted on its website an interim final rule revising the interim final rule published in the Federal Register on April 15, 2020 by changing the eligibility requirement related to felony convictions of applicants or owners of the applicant. This interim final rule further revises SBA’s interim final rule published in the Federal Register on April 15, 2020 by further changing that eligibility requirement. DATES: Effective Dates: The provisions in this interim final rule are effective [INSERT DATE OF FILING AT THE OFFICE OF THE FEDERAL REGISTER]. Comment Date: Comments must be received on or before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].

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ADDRESSES: You may submit comments, identified by number SBA-2020-0039, through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please send an email to ppp-ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination whether it will publish the information. FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-572-0502, or the local SBA Field Office; the list of offices can be found at https://www.sba.gov/tools/localassistance/districtoffices. SUPPLEMENTARY INFORMATION:
I. Background Information On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all states, territories, and the District of Columbia. With the COVID-19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, and local public health measures that are being taken to minimize the public’s exposure to the virus. These measures, some of which are government-mandated, have been implemented nationwide and include the closures of restaurants, bars, and gyms. In addition, based on the advice of public health officials, other measures, such as keeping a safe distance from others or even stay-at-home orders, have been implemented, resulting in a dramatic decrease in economic activity as the public avoids malls, retail stores, and other businesses.
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On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 116-136) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (SBA) received funding and authority through the Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency.
Section 1102 of the Act temporarily permits SBA to guarantee 100 percent of 7(a) loans under a new program titled the “Paycheck Protection Program.” Section 1106 of the Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program.
On April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116-139), which provided additional funding and authority for the PPP. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) (Pub. L. 116-142), which changed provisions of the PPP relating to the maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness of PPP loans.
II. Comments and Immediate Effective Date This interim final rule is effective without advance notice and public comment because section 1114 of the CARES Act authorizes SBA to issue regulations to implement Title I of the Act without regard to notice requirements. In addition, SBA has determined that there is good cause for dispensing with advance public notice and comment on the grounds that that it would be contrary to the public interest. Specifically, advance public notice and comment would defeat the purpose of this interim final rule given that SBA’s authority to guarantee PPP loans expires on June 30, 2020. These same reasons provide good cause for SBA to dispense with the 30-day
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delayed effective date provided in the Administrative Procedure Act (APA). Although this interim final rule is effective on or before date of filing, comments are solicited from interested members of the public on all aspects of the interim final rule, including section III below. These comments must be submitted on or before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. The SBA will consider these comments, comments received on the interim final rule posted on SBA’s website April 2, 2020 (the First Interim Final Rule) and published in the Federal Register on April 15, 2020, comments received on the interim final rule posted on SBA’s website June 12, 2020 and published in the Federal Register on June 18, 2010, and the need for making any revisions as a result of these comments.
III. Paycheck Protection Program – Additional Eligibility Revisions to First Interim Final Rule (85 FR 20811)
Overview The CARES Act was enacted to provide immediate assistance to individuals, families, and businesses affected by the COVID-19 emergency. Among the provisions contained in the CARES Act are provisions authorizing SBA to temporarily guarantee loans under a new 7(a) loan program titled the “Paycheck Protection Program.” Loans guaranteed under the Paycheck Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount of the loans may qualify for loan forgiveness. The purpose of this interim final rule is to make further changes to the First Interim Final Rule, posted on SBA’s website on April 2, 2020, and published in the Federal Register on April 15, 2020 (85 FR 20811), as amended by the interim final rule posted on SBA’s website on June 12, 2020 and published in the Federal Register on June 18, 2020 (85 FR 36717). The First Interim Final Rule, as amended, should be interpreted
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consistent with the frequently asked questions (FAQs) regarding the PPP that are posted on SBA’s website1 and the other interim final rules issued regarding the PPP.2
1. Changes to the First Interim Final Rule Eligibility Requirements The First Interim Final Rule provided, among other things, that a PPP loan will not be approved if an owner of 20 percent or more of the equity of the applicant has been convicted of a felony within the last five years. On June 12, 2020, the First Interim Final Rule was amended after the Administrator, in consultation with the Secretary of the Treasury (the Secretary), determined that a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391). Upon further consideration, and in consultation with the Secretary, the Administrator has determined that two additional modifications to the First Interim Final Rule are appropriate to ensure a consistent approach to applicants with criminal histories. First, the First Interim Final Rule provided that an applicant is ineligible for a PPP loan if an owner of 20 percent or more of the equity of the applicant is presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction. The Administrator has determined that this restriction should be limited to pending criminal charges for felony offenses, which aligns with the Administrator’s prior determination that only felony convictions (but not convictions for other types of offenses)
1 See https://www.sba.gov/document/support--faq-lenders-borrowers. 2 See https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
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will limit an applicant’s eligibility for the PPP, subject to the time periods specified above. Second, the First Interim Final Rule provided that an applicant was ineligible for a PPP loan if an owner of 20 percent or more of the equity of the applicant is on probation or on parole. The Administrator has determined that this restriction should be limited to individuals whose probation or parole commenced within the time periods specified above—i.e., within the last five years for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, and within the last one year for other felonies. Applying these time limitations to the probation and parole restriction aligns with the Administrator’s prior determination to apply the identical time limitations to felony convictions. Moreover, aligning the time limitations applicable to these restrictions is consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391). This amendment does not affect the rule regarding applicants that are presently suspended, debarred, or proposed for debarment, which remains effective. Therefore, Part III.2.b.iii. of the First Interim Final Rule (85 FR 20811, 20812) is revised to read as follows:
b. Could I be ineligible even if I meet the eligibility requirements in (a) above? You are ineligible for a PPP loan if, for example: * * * * * iii. An owner of 20 percent or more of the equity of the applicant is presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation (including
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probation before judgment) for, a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; or * * * * * Under the First Interim Final Rule, as amended, an applicant is ineligible if an owner of 20 percent or more of its equity is presently incarcerated. In considering this amended Interim Final Rule the Administrator, in consultation with the Secretary, has determined that this restriction on eligibility remains appropriate because the operations of small business concerns present a greater danger of becoming impaired when their owners are incarcerated. As a result, they may have greater difficulty repaying their loans and present a greater credit risk. Although PPP loans may be forgiven under section 1106 of the CARES Act, PPP loans may only be forgiven in cases where borrowers can document that the proceeds were expended in accordance with the requirements of section 1106. In situations where the proceeds have not been used appropriately, and the loans, accordingly, cannot be forgiven, the borrowers’ ability to repay the loans remains an important consideration. In addition, ineligibility for businesses whose owners are currently incarcerated will help prevent misuse of PPP loan funds, irrespective of loan forgiveness considerations. Under the First Interim Final Rule, as amended, an applicant is also ineligible if an owner of 20 percent or more of its equity is, for any felony, subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction. Individuals charged with felonies are at risk of imprisonment, which, as discussed above, could place the creditworthiness of their businesses in question. Therefore, the Administrator, in consultation with the Secretary, has determined that this limitation also
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remains appropriate to ensure that PPP funds are not allocated to an applicant for which a recent felony charge may impair its ongoing business operations and therefore its ability to repay a PPP loan for reasons unrelated to the COVID-19 pandemic. Finally, under the First Interim Final Rule, as amended, an applicant is ineligible if an owner of 20 percent or more of its equity has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation (including probation before judgment) for, a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year. The Administrator, in consultation with the Secretary, has determined that, in order to ensure program integrity and safeguard against misuse of PPP funds, it remains appropriate to require that applicants whose owners previously were convicted of or pleaded guilty or nolo contendere to a felony offense have avoided a further felony charge following conviction or incarceration for a period of at least one year before obtaining a PPP loan. This interval provides a reasonable level of assurance that such applicants do not present unacceptable risks of re-incarceration that could, as discussed above, undermine the ability of their businesses to repay their PPP loans. The Administrator, in consultation with the Secretary, has determined that a longer five-year limitation is appropriate for felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance because such felonies are most relevant to the applicant’s business integrity and responsibility, and may indicate a greater risk of potential misuse of PPP loan funds. Each of the ineligible applicant categories described above has been formulated to reduce the risk of default and fraud in the PPP and to ensure that PPP loan funds are provided for small
8

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 53 of 61
businesses that will be able to support jobs, consistent with Congressional intent in the CARES Act. These measures are particularly necessary in light of the structure of the PPP, in which lenders are subject to relatively few underwriting obligations before issuing loans that are 100 percent guaranteed by SBA and that may be subject to full forgiveness based on documentation provided by the borrower. While neither lenders nor SBA are conducting typical analysis of the characteristics of PPP applicants, the measures described above are intended to mitigate the risk of default, fraud, or misuse of PPP loan funds intended to benefit small business employees and at the same time balance that need with the need to assist in the rehabilitation of felons, who are working to become responsible and productive members of society. 2. Additional Information SBA may provide further guidance, if needed, through SBA notices which will be posted on SBA’s website at www.sba.gov. Questions on the Paycheck Protection Program may be directed to the Lender Relations Specialist in the local SBA Field Office. The local SBA Field Office may be found at https://www.sba.gov/tools/local-assistance/districtoffices. Compliance with Executive Orders 12866, 12988, 13132, 13563, and 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612). Executive Orders 12866, 13563, and 13771 This interim final rule is economically significant for the purposes of Executive Orders 12866 and 13563, and is considered a major rule under the Congressional Review Act. SBA, however, is proceeding under the emergency provision at Executive Order 12866 Section 6(a)(3)(D) based on the need to move expeditiously to mitigate the current economic conditions
9

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 54 of 61
arising from the COVID–19 emergency. This rule’s designation under Executive Order 13771 will be informed by public comment.
This rule is necessary to implement Sections 1102 and 1106 of the CARES Act and the Flexibility Act in order to provide economic relief to small businesses nationwide adversely impacted under the COVID-19 Emergency Declaration. We anticipate that this rule will result in substantial benefits to small businesses, their employees, and the communities they serve. However, we lack data to estimate the effects of this rule. Executive Order 12988
SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation, eliminate ambiguity, and reduce burden. The rule has no preemptive effect but does have a limited retroactive effect consistent with section 3(d) of the Flexibility Act. Executive Order 13132
SBA has determined that this rule will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various layers of government. Therefore, SBA has determined that this rule has no federalism implications warranting preparation of a federalism assessment. Paperwork Reduction Act, 44 U.S.C. Chapter 35
SBA has determined that this rule will require modification to the existing PPP information collection that is approved under OMB Control Number 3245-0407 as an emergency request until October 31, 2020. As discussed above, this rule amends the PPP eligibility requirements regarding certain criminal activity. As a result of these amendments, conforming changes will be made to Questions 5 and 6 of Form 2483, Borrower Application Form, and
10

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 55 of 61
Section H of Form 2484, Lender Application Form. SBA will submit the revisions to these forms to the Office of Management and Budget for approval. Regulatory Flexibility Act (RFA)
The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a proposed rule, or a final rule pursuant to section 553(b) of the APA or another law, the agency must prepare a regulatory flexibility analysis that meets the requirements of the RFA and publish such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, the RFA normally requires agencies to describe the impact of a rulemaking on small entities by providing a regulatory impact analysis. Such analysis must address the consideration of regulatory options that would lessen the economic effect of the rule on small entities. The RFA defines a “small entity” as (1) a proprietary firm meeting the size standards of the Small Business Administration (SBA); (2) a nonprofit organization that is not dominant in its field; or (3) a small government jurisdiction with a population of less than 50,000. 5 U.S.C. 601(3)–(6). Except for such small government jurisdictions, neither State nor local governments are ‘‘small entities.’’ Similarly, for purposes of the RFA, individual persons are not small entities.
The requirement to conduct a regulatory impact analysis does not apply if the head of the agency “certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” 5 U.S.C. 605(b). The agency must, however, publish the certification in the Federal Register at the time of publication of the rule, “along with a statement providing the factual basis for such certification.” If the agency head has not waived the requirements for a regulatory flexibility analysis in accordance with the RFA’s waiver provision, and no other RFA exception applies, the agency must prepare the regulatory flexibility analysis and publish it in the Federal Register at the time of promulgation or, if the rule is promulgated in
11

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 56 of 61 response to an emergency that makes timely compliance impracticable, within 180 days of publication of the final rule. 5 U.S.C. 604(a), 608(b).
Rules that are exempt from notice and comment are also exempt from the RFA requirements, including conducting a regulatory flexibility analysis, when among other things the agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. Small Business Administration’s Office of Advocacy guide: How to Comply with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly, SBA is not required to conduct a regulatory flexibility analysis. Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, Section 1114. Jovita Carranza, Administrator
12

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 57 of 61
EXHIBIT G

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 58 of 61

Paycheck Protection Program

OMB Control No.: 3245-0407

Borrower Application Form Revised June 24, 2020

Expiration Date: 10/31/2020

Check One:

 

ISnodleeppernodperniettocor ntraPcatortrne(rsEhilpigibleC-sCelof-repmplSo-yCedoripndivLidLuCal

 501(c)(3) nonprofit  501(c)(19) veterans organization

 Tribal business (sec. 31(b)(2)(C) of Small Business Act)  Other

DBA or Tradename if Applicable

Business Legal Name

Business Address

Business TIN (EIN, SSN)

Business Phone

() -

Primary Contact

Email Address

Average Monthly Payroll:
Purpose of the loan (select more than one):

$

x 2.5 + EIDL, Net of

$

Number of Employees:

Advance (if Applicable)

Equals Loan Request:

☐ ☐ ☐ ☐ Payroll Lease / Mortgage Interest Utilities Other (explain): __________________

Applicant Ownership List all owners of 20% or more of the equity of the Applicant. Attach a separate sheet if necessary.

Owner Name

Title

Ownership % TIN (EIN, SSN)

Address

If questions (1) or (2) below are answered “Yes,” the loan will not be approved.
Question 1. Is the Applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible,
voluntarily excluded from participation in this transaction by any Federal department or agency, or presently involved in any bankruptcy?
2. Has the Applicant, any owner of the Applicant, or any business owned or controlled by any of them, ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted in the last 7 years and caused a loss to the government?
3. Is the Applicant or any owner of the Applicant an owner of any other business, or have common management with any other business? If yes, list all such businesses and describe the relationship on a separate sheet identified as addendum A.
4. Has the Applicant received an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes, provide details on a separate sheet identified as addendum B.

Yes No
☐ ☐ ☐ ☐
☐ ☐ ☐ ☐

If questions (5) or (6) are answered “Yes,” the loan will not be approved.
Question 5. Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant
presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction? Initial here to confirm your response to question 5 →

Yes No
☐ ☐

6. Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, or within the last year, for any other felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) commenced any form of parole or probation (including probation before judgment)?
Initial here to confirm your response to question 6 →

☐ ☐

7. Is the United States the principal place of residence for all employees of the Applicant included in the Applicant’s payroll calculation above?
8. Is the Applicant a franchise that is listed in the SBA’s Franchise Directory?

☐ ☐ ☐ ☐

1 SBA Form 2483 (06/20)

Case 1:20-cv-01838-CCB Document 29-1 Filed 06/24/20 Page 59 of 61
Paycheck Protection Program Borrower Application Form Revised June 24, 2020

By Signing Below, You Make the Following Representations, Authorizations, and Certifications

CERTIFICATIONS AND AUTHORIZATIONS
I certify that:
• I have read the statements included in this form, including the Statements Required by Law and Executive Orders, and I understand them. • The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the
Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
• The Applicant (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more than the
greater of 500 or employees or, if applicable, the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry.
• I will comply, whenever applicable, with the civil rights and other limitations in this form. • All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck
Protection Program Rule.
• To the extent feasible, I will purchase only American-made equipment and products. • The Applicant is not engaged in any activity that is illegal under federal, state or local law. • Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was for
a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.

For Applicants who are individuals: I authorize the SBA to request criminal record information about me from criminal justice agencies for the purpose of determining my eligibility for programs authorized by the Small Business Act, as amended.

CERTIFICATIONS The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:

The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.

Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.

The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.

The Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 24-week period following this loan.

I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 40% of the forgiven amount may be for non-payroll costs.

During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.

I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.

I acknowledge that the lender will confirm the eligible loan amount using required documents submitted. I understand, acknowledge and agree that the Lender can share any tax information that I have provided with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

_________________________________________________________ Signature of Authorized Representative of Applicant

________________________ Date

Print Name

Title

2 SBA Form 2483 (06/20)

Case 1:20-cv-01838-CCPBaychDeockcuPmroetenctti2o9n-P1roFgrilaemd 06/24/20 Page 60 of 61
Borrower Application Form Revised June 24, 2020
Purpose of this form:
This form is to be completed by the authorized representative of the Applicant and submitted to your SBA Participating Lender. Submission of the requested information is required to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect that determination.
Instructions for completing this form:
With respect to “purpose of the loan,” payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
For purposes of calculating “Average Monthly Payroll,” most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee. For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019 or any 12-week period between May 1, 2019 and September 15, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.
If Applicant is refinancing an Economic Injury Disaster Loan (EIDL): Add the outstanding amount of an EIDL made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan, to Loan Request as indicated on the form.
All parties listed below are considered owners of the Applicant as defined in 13 CFR § 120.10, as well as “principals”:
• For a sole proprietorship, the sole proprietor;
• For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;
• For a corporation, all owners of 20% or more of the corporation;
• For limited liability companies, all members owning 20% or more of the company; and
• Any Trustor (if the Applicant is owned by a trust).
Paperwork Reduction Act – You are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated time for completing this application, including gathering data needed, is 8 minutes. Comments about this time or the information requested should be sent to: Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416, and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Washington DC 20503. PLEASE DO NOT SEND FORMS TO THESE ADDRESSES.
Privacy Act (5 U.S.C. 552a) – Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your social security number may not affect any right, benefit or privilege to which you are entitled. (But see Debt Collection Notice regarding taxpayer identification number below.) Disclosures of name and other personal identifiers are required to provide SBA with sufficient information to make a character determination. When evaluating character, SBA considers the person’s integrity, candor, and disposition toward criminal actions. Additionally, SBA is specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC Section 636(a)(1)(B) of the Small Business Act (the Act).
Disclosure of Information – Requests for information about another party may be denied unless SBA has the written permission of the individual to release the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act. The Privacy Act authorizes SBA to make certain “routine uses” of information protected by that Act. One such routine use is the disclosure of information maintained in SBA’s system of records when this information indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature. Specifically, SBA may refer the information to the appropriate agency, whether Federal, State, local or foreign, charged with responsibility for, or otherwise involved in investigation, prosecution, enforcement or prevention of such violations. Another routine use is disclosure to other Federal agencies conducting background checks but only to the extent the information is relevant to the requesting agencies' function. See, 74 F.R. 14890 (2009), and as amended from time to time for additional background and other routine uses. In addition, the CARES Act, requires SBA to register every loan made under the Paycheck Protection Act using the Taxpayer Identification Number (TIN) assigned to the borrower.
Debt Collection Act of 1982, Deficit Reduction Act of 1984 (31 U.S.C. 3701 et seq. and other titles) – SBA must obtain your taxpayer identification number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may: (1) report the status of your loan(s) to credit bureaus, (2) hire a collection agency to collect your loan, (3) offset your income tax refund or other amounts due to you from the Federal Government, (4) suspend or debar you or your company from doing business with the Federal Government, (5) refer your loan to the Department of Justice, or (6) foreclose on collateral or take other action permitted in the loan instruments.
3 SBA Form 2483 (06/20)

Case 1:20-cv-01838-CCPBaychDeockcuPmroetenctti2o9n-1ProFgrilaemd 06/24/20 Page 61 of 61
Borrower Application Form Revised June 24, 2020
Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) – The Right to Financial Privacy Act of 1978, grants SBA access rights to financial records held by financial institutions that are or have been doing business with you or your business including any financial institutions participating in a loan or loan guaranty. SBA is only required provide a certificate of its compliance with the Act to a financial institution in connection with its first request for access to your financial records. SBA's access rights continue for the term of any approved loan guaranty agreement. SBA is also authorized to transfer to another Government authority any financial records concerning an approved loan or loan guarantee, as necessary to process, service or foreclose on a loan guaranty or collect on a defaulted loan guaranty. Freedom of Information Act (5 U.S.C. 552) – Subject to certain exceptions, SBA must supply information reflected in agency files and records to a person requesting it. Information about approved loans that will be automatically released includes, among other things, statistics on our loan programs (individual borrowers are not identified in the statistics) and other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity. Proprietary data on a borrower would not routinely be made available to third parties. All requests under this Act are to be addressed to the nearest SBA office and be identified as a Freedom of Information request. Occupational Safety and Health Act (15 U.S.C. 651 et seq.) – The Occupational Safety and Health Administration (OSHA) can require businesses to modify facilities and procedures to protect employees. Businesses that do not comply may be fined, forced to cease operations, or prevented from starting operations. Signing this form is certification that the applicant, to the best of its knowledge, is in compliance with the applicable OSHA requirements, and will remain in compliance during the life of the loan. Civil Rights (13 C.F.R. 112, 113, 117) – All businesses receiving SBA financial assistance must agree not to discriminate in any business practice, including employment practices and services to the public on the basis of categories cited in 13 C.F.R., Parts 112, 113, and 117 of SBA Regulations. All borrowers must display the "Equal Employment Opportunity Poster" prescribed by SBA. Equal Credit Opportunity Act (15 U.S.C. 1691) – Creditors are prohibited from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Debarment and Suspension Executive Order 12549; (2 CFR Part 180 and Part 2700) – By submitting this loan application, you certify that neither the Applicant or any owner of the Applicant have within the past three years been: (a) debarred, suspended, declared ineligible or voluntarily excluded from participation in a transaction by any Federal Agency; (b) formally proposed for debarment, with a final determination still pending; (c) indicted, convicted, or had a civil judgment rendered against you for any of the offenses listed in the regulations or (d) delinquent on any amounts owed to the U.S. Government or its instrumentalities as of the date of execution of this certification.
4 SBA Form 2483 (06/20)

Case 1:20-cv-01838-CCB Document 29-2 Filed 06/24/20 Page 1 of 6

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
DEFY VENTURES, INC., , et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) ) ) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DECLARATION OF JAMES J. GILLIGAN

I, James J. Gilligan, for my declaration pursuant to 28 U.S.C. § 1746, depose and say as

follows:

1. I am a Special Litigation Counsel in the Civil Division, Federal Programs Branch, of the United States Department of Justice. I am counsel of record for the Defendants in this action. I submit this declaration in support of the Defendants’ opposition to the Plaintiffs’ motions for temporary restraining order and preliminary injunctions in the above-captioned actions. The statements contained in this declaration are based on my personal knowledge.

Case 1:20-cv-01838-CCB Document 29-2 Filed 06/24/20 Page 2 of 6 2. Attached as Exhibit 1 to this declaration is a true and correct copy of an e-mail message that I sent to counsel for Plaintiffs in Carmen’s Corner Store v. United States Small Business Administration, No. 1:20-cv-1736-CCB on the evening of Monday, June 22, 2020. 3. Attached as Exhibit 2 to this declaration is a true and correct copy of an e-mail message that I sent to counsel for Plaintiffs in Defy Ventures, Inc. v. United States Small Business Administration, No. 1:20-cv-1838-CCB on the evening of Monday, June 22, 2020. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct, to the best of my knowledge and belief. Executed this 23rd day of June, 2020.
_____________________________________ JAMES J. GILLIGAN
2

Case 1:20-cv-01838-CCB Document 29-2 Filed 06/24/20 Page 3 of 6
EXHIBIT 1

Case 1:20-cv-01838-CCB Document 29-2 Filed 06/24/20 Page 4 of 6

From: To: Cc: Subject: Date:

Gilligan, Jim (CIV) Jared McClain; John Vecchione Lazerow, Alan (USAMD); Sur, Indraneel (CIV) Carmen"s Corner Store et al. v. U.S. Small Business Administration, et al., No. 1:20-cv-1736-CCB Monday, June 22, 2020 6:27:00 PM

Dear Counsel,

I am writing to inform you that later this evening, or perhaps tomorrow morning, the SBA will be posting a further revision to the criminal justice restriction contained in the First PPP Interim Final Rule. If, as we understand the facts, Mr. Wilks was placed on parole in 2018, then he would not come within the scope of the revised restriction, and it would not present an obstacle to Carmen’s Corner Store or Retail4Real obtaining a PPP loan.

If you can confirm that Mr. Wilks’ parole began in 2018, and provide us with the name and e-mail address of Mr. Wilks’ point of contact at his lender, the SBA will contact his lender and advise them that his businesses should no longer be deemed ineligible for PPP financing on the basis of the criminal justice restriction.

We hope that these developments will allow us to resolve this matter without further need of litigation.

Regards,

Jim Gilligan

James J. Gilligan Special Litigation Counsel Civil Division, Federal Programs Branch U.S. Department of Justice P.O. Box 883 Washington, D.C. 20044
Tel: 202-514-3358
The information in this transmittal (including attachments, if any) is intended only for the recipient(s) listed above and may contain information that is privileged and confidential. Any review, use, disclosure, distribution, or copying of this transmittal is prohibited except by or on behalf of the intended recipient. If you have received this transmittal in error, please notify me immediately and destroy all copies of the transmittal. Your cooperation is appreciated.

Case 1:20-cv-01838-CCB Document 29-2 Filed 06/24/20 Page 5 of 6
EXHIBIT 2

Case 1:20-cv-01838-CCB Document 29-2 Filed 06/24/20 Page 6 of 6

From: To:
Subject: Date:

Gilligan, Jim (CIV)
Bracey, Kali N.; RMoore@ACLU.org; Alejandro Ortiz; JCalvo-Friedman@ACLU.org; Deutsch, Elizabeth B.; Tripp, Zack; Alderdice, Jacob D.; Joanna_Wasik@washlaw.org; Hannah Lieberman; Claudia De Palma; Niles-Weed, Robert
Defy Ventures, et al. v. U.S. Small Business Administration, et al., No. 1:20-cv-1838-CCB (D. Md.)
Monday, June 22, 2020 6:41:00 PM

Dear Counsel,

I am writing to inform you that later this evening, or perhaps tomorrow morning, the SBA will be posting a further revision to the criminal justice restriction contained in the First PPP Interim Final Rule. If, as we understand the facts, Mr. Merritt was placed on parole in 2017, then he would not come within the scope of the revised restriction, and it would not present an obstacle to his business obtaining a PPP loan. And if, as we also understand from your pleadings, the offenses with which Mr. Garland is currently charged are misdemeanors, then the revised restriction would not present an obstacle to his business obtaining a PPP loan either.

If you can confirm that Mr. Merritt’s parole began in 2017, confirm that the pending charges against Mr. Garland involve only misdemeanor offenses, and provide us with the names and e-mail addresses of their lenders’ points of contact, the SBA will contact Mr. Merritt’s and Mr. Garland’s lenders and advise them that their businesses should not be deemed ineligible for PPP financing on the basis of the criminal justice restriction.

We hope that these developments will allow us to resolve the claims of Mr. Merritt, Mr. Garland, and their businesses, without further need of litigation.

Regards,

Jim Gilligan

James J. Gilligan Special Litigation Counsel Civil Division, Federal Programs Branch U.S. Department of Justice P.O. Box 883 Washington, D.C. 20044
Tel: 202-514-3358
The information in this transmittal (including attachments, if any) is intended only for the recipient(s) listed above and may contain information that is privileged and confidential. Any review, use, disclosure, distribution, or copying of this transmittal is prohibited except by or on behalf of the intended recipient. If you have received this transmittal in error, please notify me immediately and destroy all copies of the transmittal. Your cooperation is appreciated.

 
 Case 1:20-cv-01838-CCB Document 39 Filed 06/29/20 Page 1 of 28

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

Defy Ventures, Inc., et al.

*

*

v.

*

*

U.S. Small Business Administration, et al. *

* * * * * * * * * * * * * ***

Carmen’s Corner Store, et al.

*

*

v.

*

*

U.S. Small Business Administration, et al. *

* * * * * * * * * * * * * ***

Civil Action No. CCB-20-1838 Civil Action No. CCB-20-1736

MEMORANDUM

The COVID-19 pandemic has affected many small businesses, causing them to lose

revenue or even shut down completely. In order to help these businesses and their employees,

Congress created the Paycheck Protection Program (“PPP”), which provides for business loans

that are fully forgivable if used for certain purposes, such as payroll expenses. The Small

Business Administration (“SBA”) has issued certain eligibility restrictions for participating in the

PPP. At issue here is a rule restricting businesses from receiving PPP funds if they have a

greater than 20% owner with a certain criminal history. The rule has gone through several

iterations, which will be explained below. Most importantly, under the current iteration, the

individual plaintiffs are eligible to apply for PPP funding.

The plaintiffs in Defy Ventures, Inc. v. Small Business Administration and Carmen’s Corner Store v. Small Business Administration challenge this criminal history exclusion,1 and

both have filed motions for a preliminary injunction. Although the cases are not consolidated,

1 Both sets of plaintiffs have filed their lawsuit against the SBA; Jovia Carranza, the Administrator of the SBA; and Steven Mnuchin, Secretary of the Department of Treasury. The Defy plaintiffs also filed their lawsuit against the U.S. Department of Treasury, and the Carmen’s Corner Store plaintiffs also filed their lawsuit against the United States of America.

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because they bring similar claims, the court will address the motions together. Given that the application deadline for the PPP is June 30, 2020, the plaintiffs requested expedited briefing, which the court granted. Briefing was completed on June 26, 2020. No hearing is necessary. For the reasons explained below, both motions will be granted in part and denied in part.
FACTS AND PROCEDURAL HISTORY I. The CARES Act and Section 7(a) Loans The SBA was created by the Small Business Act, 15 U.S.C. § 631 et seq. Section 7(a) of the Act, which is codified at 15 U.S.C. § 636, authorizes the SBA to provide financial assistance to small business concerns. Under Section 7(a), the SBA generally guarantees loans from private lenders rather than disbursing funds directly to borrowers. (ECF 29-1, Decl. of John A. Miller, Deputy Associate Administrator for Capital Access, SBA ¶¶ 3-4). In response to the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), Pub. L. No. 116-136, 134 Stat. 281 (2020), which was signed into law on March 27, 2020. Title I of the CARES Act created the PPP. The PPP, codified at 15 U.S.C. § 636(a)(36), is a “new loan program to be administered by the SBA under Section 7(a) of the Small Business Act.” Camelot Banquet Rooms, Inc. v. United States Small Bus. Admin., --- F. Supp. 3d ----, No. 20-C-0601, 2020 WL 2088637, at *2 (E.D. Wis. May 1, 2020). “The loans are made by the SBA’s participating banks and guaranteed by the SBA itself.” Id. Section 1106 of the CARES Act, however, provides that the PPP loans will be forgiven, and the SBA will pay the lender the amount forgiven, to the extent the borrower uses the funds for certain purposes, including for payroll expenses. 15 U.S.C. § 9005. Congress initially appropriated $349 billion for the PPP program, and then an additional $310 billion in April 2020. Paycheck Protection and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020).
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The provision at issue in this case is titled “Increased eligibility for certain small businesses and organizations” and is codified at 15 U.S.C. § 636(a)(36)(D)(i). It states that:
During the covered period, in addition to small business concerns, any business concern, nonprofit organization, veterans organization, or Tribal business concern described in section 657a(b)(2)(C) of this title shall be eligible to receive a covered loan if the business concern, nonprofit organization, veterans organization, or Tribal business concern employs not more than the greater of— (I) 500 employees; or (II) if applicable, the size standard in number of employees established by the
Administration for the industry in which the business concern, nonprofit organization, veterans organization, or Tribal business concern operates.
15 U.S.C. § 636(a)(36)(D)(i). II. Criminal History Exclusion The CARES Act granted the SBA emergency rulemaking powers to administer the PPP.
CARES Act, Section 1114 (codified at 15 U.S.C. § 9012). On April 15, 2020, the SBA published an interim final rule (IFR) that provided additional restrictions on who could apply for PPP loans. It stated that “[y]ou are ineligible for a PPP loan if . . . An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years.” Business Loan Program Temporary Changes; Paycheck Protection Program, 85 FR 20811-01 (“April IFR”).
This rule was revised on June 18, 2020, to shorten the time period for felony convictions. The revision changed “convicted of a felony within the last five years” to “convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within
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the last year.” Business Loan Program Temporary Changes; Paycheck Protection Program— Additional Revisions to First Interim Final Rule, 85 FR 36717-01 (“June IFR”). The other parts of the rule (ineligibility if an owner is incarcerated, on probation, on parole or presently subject to criminal charges) were not changed.
The rule was again revised on June 24, 2020, after the plaintiffs had filed their motions and on the day the defendants filed their oppositions. See Business Loan Program Temporary Changes: Paycheck Protection Program, Additional Revisions to First Interim Final Rule, https://www.sba.gov/document/policy-guidance-ppp-interim-final-rule-additional-eligibilityrevisions-first-interim-final-rule (posted June 24, 2020) (“June 24 IFR”). The June 24 revision changed the rule in two ways. First, instead of a business being excluded because a greater than 20% owner is facing any criminal charges, the business will only be excluded if the owner is facing felony charges. Id. at 5. Second, as to the parole/probation exclusion, it is now “limited to individuals whose probation or parole commenced . . . within the last five years for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, and within the last one year for other felonies.” Id. at 6.
The SBA similarly restricts eligibility for those that have certain criminal histories as to its pre-existing Section 7(a) loan program, which the SBA has administered for many years. See 13 C.F.R. § 120.110(n). That regulation provides that “[b]usinesses with an Associate2 who is incarcerated, on probation, on parole, or has been indicted for a felony or a crime of moral turpitude” are ineligible for SBA business loans. Id. Another regulation also states that to ensure creditworthiness, the SBA will consider the “[c]haracter [and] reputation” of the
2 An “Associate” includes an “officer, director, owner of more than 20 percent of the equity, or key employee of the small business,” among other individuals and entities. 13 C.F.R. § 120.10(2).
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applicant. 13 C.F.R. § 120.150(a). Therefore, businesses with associates “[c]urrently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction” are also ineligible for financial assistance. SBA, SOP 50 10 5(K), Lender and Development Company Loan Programs, at 110 (Jan. 1, 2019). For associates with other types of criminal history, including those who have been convicted of a felony, the SBA requires an individualized character determination, which may involve an FBI fingerprint background check. Id. at 110–13; ECF 29-1, John Miller Decl., ¶¶ 9–12.
III. The Plaintiffs A. Defy Ventures, Inc. v. Small Business Administration, No. 20-1838 The plaintiffs are Defy Ventures, Inc.; Sekwan Merritt; Prop Prep Properties, LLC d/b/a/ Lightning Electric; John D. Garland; and Sign Me Up Bethpage, Inc. d/b/a Fastsigns 2323. Merritt is a resident of Maryland and the sole owner of Prop Prep Properties LLC. (Compl. ¶¶ 17, 18). Under the prior iteration of the rule, and because Merritt is currently on parole, he could not obtain PPP funding for his business, which he intended to use to pay his employees and pay for essential business costs, such as general liability insurance. (Id. ¶¶ 71, 82–85). Garland is a resident of New York and the majority owner of Sign Me Up Bethpage, Inc. (Id. ¶ 19). Garland has been charged with petit larceny and violation of an order of protection in regards to a dispute with his wife, to which he has pleaded not guilty. (Id. ¶¶ 96, 97). Because of this, and under the prior iteration of the rule, Garland and his business partners could not get PPP funding that they intended to use for payroll costs, rent, utilities, and other essential expenses. (Id. ¶¶ 101, 102). Under the June 24 revised version of the rule, Prop Prep Properties and Sign Me Up Bethpage are both eligible to apply for PPP funding. Still, they have continued to experience difficulties in obtaining a loan. For example, Sekwan Merritt attempted to apply at his local Wells Fargo branch and was told to apply online, but when he tried, the online portal was no longer accepting
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applications. He also attempted to obtain a point of contact for the SBA (which has agreed to help Merritt obtain a loan), but when he finally was able to reach a Wells Fargo representative, he was informed that the bank is no longer accepting applications, and he would need to go to SBA’s website to find a lender still accepting applications. (ECF 34-10, Merritt Suppl. Decl. ¶¶ 9–23). It is not clear how many lenders are still accepting applications. John Garland attempted to apply online at both JP Morgan Chase and Square Capital, but no applications were available on the sites. He then tried to apply at www.lendio.com, but that site still had the previous forms, advising that if the applicant had any pending charges the application would not be approved. (ECF 34-12, Garland Suppl. Decl. ¶¶ 6–9).
Defy Ventures, Inc. is a non profit organization whose “mission is to use entrepreneurship and employment as tools for currently and formerly incarcerated individuals to address the social problems of mass incarceration and recidivism. Defy has chapters in New York, Northern California, Southern California, Connecticut, and Illinois, and licensed affiliates in Colorado and Washington.” (Compl. ¶ 21). Defy has helped formerly incarcerated individuals launch over 140 small businesses, and also runs the “Defy Entrepreneurship Network,” which is a long-term supportive network for those who have successfully launched businesses. (Id. ¶¶ 111, 112). Because small-business owners (graduates of Defy programs and non-graduates) have turned to Defy for help with regards to the criminal history rule, Defy has had to divert its resources from previously planned programming and training activities in order to understand the rule, provide answers to the small business owners, and help them find alternative funding. (Id. ¶¶ 116, 119, 120–123).
They allege that: 1) in violation of the Administrative Procedure Act (“APA”), the criminal record exclusions exceed statutory authority and are not in accordance with law; 2) in violation of the APA, the criminal record exclusions are arbitrary and capricious and an abuse of
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discretion; and 3) in violation of the APA, the criminal record exclusions were adopted without observance of procedure required by law. It appears, though, that the motion for preliminary injunction is based only on counts 1 and 2. In their motion for preliminary injunction, they request that the court “[p]reliminarily enjoin the challenged criminal-record exclusion provisions of the interim final rule,” “enjoin Defendants from enforcing such provisions, and extend the application deadline 21 days, to July 21, 2020, for applicants wrongfully excluded,” and “[d]irect that Defendants not authorize, guaranty, or disburse funds appropriated for loans under the Paycheck Protection Program without reserving sufficient funds to cover applicants wrongfully excluded under the challenged terms of the IFR and the application form, in an amount to be determined based on SBA data and submitted by the SBA to this Court for approval.” (ECF 2, Mot. for Preliminary Injunction at 1–2).3
B. Carmen’s Corner Store v Small Business Administration, No. 20-1736 The plaintiffs are Carmen’s Corner Store, Retail4Real, and Altimont Mark Wilks. Wilks is a resident of Maryland and owns and operates Carmen’s Corner Store and Retail4Real. (ECF 1, Compl. ¶ 8). He is currently on state parole stemming from offenses in 2004.4 (Id.). Wilks applied for a $10,000 PPP loan for Retail4Real, (id. ¶ 81), but the loan was denied and/or not processed due to Wilks’s criminal record, (id. ¶¶ 85–90). Because of this, Wilks did not apply for a PPP loan on behalf of Carmen’s Corner Store, as it would also be denied. (Id. ¶¶ 93, 96). Wilks’s businesses, however, are now eligible for PPP funding under the June 24 revised version of the rule.
3 The Defy Ventures plaintiffs note in their reply that “[g]iven that over $125 billion in PPP funds remain available, there is a less urgent need for the Court to enjoin the agency to set aside funds for these wrongfully excluded applicants[.]” (ECF 34, Reply at 12 n.4). 4 According to the complaint filed June 10, 2020, Wilks also was on federal supervised release, but that was set to expire on June 14, 2020. (Compl. ¶ 8).
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The plaintiffs allege that 1) the criminal history rule contravenes the CARES Act; 2) the criminal history rule is arbitrary and capricious; and 3) the defendants failed to carry out a ministerial duty. In the motion for a preliminary injunction, the plaintiffs request that the court enjoin the defendants from denying loans to Wilks’s businesses, and “require the Defendants to set aside the $31,500 in PPP loans for which the Plaintiffs’ businesses would apply until this Court can resolve this case on the merits.” (ECF 7, Mot. for Preliminary Injunction at 32). The court notes that, in the plaintiffs’ reply, they now ask the court to enjoin the defendants’ enforcement of the criminal history exclusion. (ECF 15, Reply at 24). 5
STANDARD OF REVIEW “A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). A preliminary injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Id. at 22.
DISCUSSION I. Mootness
“[A] case is moot when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Porter v. Clarke, 852 F.3d 358, 363 (4th Cir. 2017) (citation omitted). “There is, however, a well-recognized exception to the mootness doctrine holding that ‘a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.’” Id. (citations omitted). “To
5 The court spoke with counsel on June 29, 2020. Counsel for the plaintiffs informed the court that the individual plaintiffs have not yet been able to receive loan approval, despite attempting to find lenders still accepting applications and working with potential lenders to provide requested documentation.
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that end, ‘a defendant claiming that its voluntary compliance moots a case bears the formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.’” Id. at 364 (citation omitted).
The court declines to find the case moot as to the individual plaintiffs and their businesses, even though they are now eligible to apply for PPP loans. As discussed above, the individual plaintiffs still face difficulties in applying at the last minute either because banks are no longer accepting applications or because banks are still using old forms with the prior criminal history exclusion. Therefore, the plaintiffs continue to face ongoing harm because of the allegedly unlawful prior iterations of the rule. Further, one part of their requested relief, that the deadline be extended to July 21 so they have adequate time to apply, has not yet been met.7
II. Organizational Standing as to Defy Ventures “[T]o satisfy Article III's standing requirements, a plaintiff must show (1) it has suffered
an ‘injury in fact’ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and 3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180–81 (2000) (citation omitted). The same inquiry applies to organizations.8 Lane v. Holder, 703 F.3d 668, 674 (4th Cir. 2012). “An organization may suffer an injury in fact when a defendant's actions impede its efforts to carry out its mission.” Id.. For example, this may occur
7 The defendants discuss the alleged mootness in regards to standing, but these are two different inquiries. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 174 (2000) (distinguishing between the “initial standing to bring suit” and “postcommencement mootness”). There does not appear to be any contention that the individual plaintiffs did not have initial standing to bring this suit. 8 “An association [also] has standing to bring suit on behalf of its members when its members would otherwise have standing to sue in their own right, the interests at stake are germane to the organization's purpose, and neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Friends of the Earth, Inc., 528 U.S. at 181. Because Defy Ventures does not discuss its members or whether they have standing, it does not appear to assert standing on this basis.
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when the challenged action has “perceptibly impaired” the organization’s ability to provide services, “with the consequent drain on the organization's resources.” Havens Realty Corp. v. Coleman, 455 U.S. 363, 379 (1982); see also S. Walk at Broadlands Homeowner's Ass'n, Inc. v. OpenBand at Broadlands, LLC, 713 F.3d 175, 183 (4th Cir. 2013) (characterizing Havens Realty as “finding standing when ‘broadly alleged’ impairment of an organization's ability to advance its purposes combined with an alleged ‘consequent drain on the organization's resources’”). Havens is in contrast to Lane v. Holder, where the Fourth Circuit found that an organization dedicated to promoting the right to keep and bear arms did not have standing to challenge laws restricting the interstate transfer of handguns, because “[t]o determine that an organization that decides to spend its money on educating members, responding to member inquiries, or undertaking litigation in response to legislation suffers a cognizable injury would be to imply standing for organizations with merely abstract concerns with a subject that could be affected by an adjudication.” Lane, 703 F.3d at 675 (citation, quotation marks, and alteration omitted).
The situation here is more akin to that in Havens Realty than in Lane. Defy Ventures provides supportive services to formerly incarcerated individuals that have started small businesses. The challenged rule “perceptibly impair[s]” that goal by denying those individuals PPP funding. This has caused a “consequent drain on the organization’s resources” in helping those individuals understand the rule and obtain alternative funding. This is not a case where the organization’s only harm is money spent “on educating members, responding to member inquiries, or undertaking litigation.” Rather, Defy Ventures provides services to help formerly incarcerated individuals run their small businesses during the COVID-19 crisis and has had to expend more resources to provide those services because of the challenged rule. Further, since the June 24 rule was issued, Defy Ventures has advised newly eligible members and helped them
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in dealing with lenders who still use the old forms or are no longer accepting applications. (ECF 34-8, Andrew Glazier, Suppl. Decl. ¶ 10).
The defendants also argue that Defy Ventures has not shown redressability because its requested relief is not available, namely the request that this court enjoin the defendants “by extending the June 30, 2020, termination date that Congress specified for the PPP, and by requiring the Government to ensure the availability of funds for PPP loans beyond that Congressionally-prescribed deadline.” (ECF 29, Opp’n at 22). But regardless of whether the requested relief is available (which will be discussed infra), this is only part of the relief that Defy Ventures seeks (and it appears Defy Ventures no longer seeks to ensure the availability of funds); Defy Ventures also requests that the court enjoin enforcement of the challenged rule.
III. Injunctive Relief Against the Small Business Administration The Small Business Act provides that “no attachment, injunction, garnishment, or other
similar process, mesne or final, shall be issued against the Administrator or his property.” 15 U.S.C. § 634(b)(1). Camelot Banquet Rooms, Inc. persuasively explains that this provision was meant to protect the SBA from state law garnishment or other like actions, but not “to render the agency immune from injunctive relief in situations where the agency has exceeded its statutory authority and where an injunction would not interfere with the agency’s internal operations.” 2020 WL 2088637, at *3–4. Further, the defendants’ reading means the SBA “could adopt unconstitutional policies and continue to follow them even after a court declared them unconstitutional” – an absurd result. See id. at *4; cf. Tradeways, Ltd. v. United States Dep't of Treasury, No. CV ELH-20-1324, 2020 WL 3447767, at *9–11 (D. Md. June 24, 2020) (noting that the use of “attachment” and “garnishment” indicate that § 634(b)(1) was meant to prohibit courts from interfering with “SBA’s commercial operations or property” but declining to conclusively determine its scope).
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The cases that the defendants cite do not compel a different conclusion.9 The defendants cite to J.C. Driskill, Inc. v. Abdnor, 901 F.2d 383, 386 (4th Cir. 1990) which found that “section 634(b)(1) precludes the imposition of an equitable lien on any funds belonging to the SBA[.]” An equitable lien is far different than the injunction sought here, and the Fourth Circuit’s decision prohibiting such a lien tracks the purposes of the section as described by Camelot Banquet Rooms. Similarly, Duncan v. Furrow Auction Co., 564 F.2d 1107, 1108–09 (4th Cir. 1977) and Vincent v. Small Bus. Admin., 402 F.2d 769, 770 (4th Cir. 1968) involved requests to enjoin the SBA or a trustee from foreclosing a deed of trust securing notes held by the SBA. Neither involved an injunction related to the SBA in its rulemaking capacity. The Fifth Circuit did recently hold that an injunction against the SBA related to the exclusion of bankruptcy debtors from receiving PPP funds was improper, but that was based on Fifth Circuit precedent holding that all injunctive relief against the SBA was absolutely prohibited. In re Hidalgo Cty. Emergency Serv. Found., --- F.3d ----, No. 20-40368, 2020 WL 3411190, at *1–2 (5th Cir. June 22, 2020). The plaintiffs have pointed to no such precedent in this circuit requiring such a result.
Therefore, the court finds that injunctive relief in this case is available against the SBA. IV. Likelihood of Success on the Merits
a. Not in Accordance with the Law The APA provides that courts shall “hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law[.]” 5 U.S.C. § 706(2)(A). “When a challenger asserts that an agency action conflicts with the language of a statute, [the court should] generally apply the two-step analytical framework set forth in Chevron, U.S.A., Inc. v Nat. Res. Def. Council, Inc., [467 U.S. 837
9 The defendants also argue that the proper relief would be a remand to the agency, rather than an injunction, citing to I.N.S. v. Orlando Ventura, 537 U.S. 12 (2002) and Fla. Power & Light Co. v. Lorion, 470 U.S. 729 (1985). These cases concern agency adjudications, however, not formal rulemaking. In any event, because the PPP expires on June 30, 2020, there is not time for a remand to the agency.
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(1984)].” Sierra Club v. United States Army Corps of Engineers, 909 F.3d 635, 643 (4th Cir. 2018). First, the court determines “whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 842–43. In the first step, the court should “use the ‘traditional tools of statutory construction’ to ascertain congressional intent,” including looking to the text of the statute and the overall statutory scheme. Chamber of Commerce of U.S. v. N.L.R.B., 721 F.3d 152, 160 (4th Cir. 2013) (citation omitted). If the statute is ambiguous, the court proceeds to the second step, in which it determines whether the agency’s construction is permissible. Chevron, 467 U.S. at 843.
Step 1 The plaintiffs argue that the text of the CARES Act, which states that “any business concern . . . shall be eligible to receive a covered loan” if the business concern meets the size requirement, 15 U.S.C. § 636(a)(36)(D)(i) (emphasis added), indicates Congressional intent that all businesses be eligible to apply for PPP funding. Relying on other cases that have similarly held, particularly DV Diamond Club of Flint, LLC v. United States Small Bus. Admin., --- F. Supp. 3d ----, No. 20-CV-10899, 2020 WL 2315880 (E.D. Mich. May 11, 2020)10, the plaintiffs argue that this provision is a clear mandate prohibiting the SBA from imposing any additional restrictions. The court disagrees, for many of the reasons explained in Diocese of Rochester v. U.S. Small Bus. Admin., --- F. Supp. 3d ----, No. 6:20-CV-06243 EAW, 2020 WL 3071603
10 In a divided decision, the Sixth Circuit denied the request to stay the injunction imposed by DV Diamond Club, stating that “by specifying ‘any business concern,’ Congress made clear that the SBA’s longstanding ineligibility rules are inapplicable given the current circumstances.” DV Diamond Club of Flint, LLC v. Small Bus. Admin., 960 F.3d 743, 747 (6th Cir. 2020).
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(W.D.N.Y. June 10, 2020) and Tradeways, Ltd., 2020 WL 3447767.11 First, while the word “any” generally carries an expansive meaning, SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1354 (2018), “‘any’ can and does mean different things depending upon the setting,” Nixon v. Missouri Mun. League, 541 U.S. 125, 132 (2004), and it is an error to place dispositive weight on “any” “without considering the rest of the statute.” Small v. United States, 544 U.S. 385, 388 (2005) (quoting United States v. Alvarez–Sanchez, 511 U.S. 350, 357 (1994). The CARES Act states that “[d]uring the covered period, in addition to small business concerns, any business concern” is eligible if it meets certain size restrictions.12 The preceding reference to “small business concerns” and the subsequent reference to size restrictions indicate that “any” is meant to indicate that SBA financial assistance is not limited in the PPP just to small business concerns. But “the Court disagrees with Plaintiffs that in expanding the size restrictions, Congress unambiguously provided that there could be no other eligibility criteria.” Diocese of Rochester, 2020 WL 3071603, at *6.
Additionally, while the court agrees with the plaintiffs that the PPP differs significantly from the SBA’s ordinary loan program, Congress still placed the PPP within Section 7(a). “Therefore, had Congress intended the CARES Act to eliminate all eligibility criteria governing SBA loans administered under § 7(a) of the Small Business Act, one would expect Congress to have spoken clearly.” Tradeways, Ltd., 2020 WL 3447767, at *13.
11 Those cases, both involving the exclusion of bankruptcy debtors from applying for PPP funding, analyzed the same argument that the plaintiffs make here. 12 Generally, the SBA may only make Section 7(a) loans to “small business concerns.” 15 U.S.C. § 636(a). A “small business concern” is one “which is independently owned and operated and which is not dominant in its field of operation,” but the SBA can, and has, limited “small business concerns” to entities that meet certain size standards. 15 U.S.C. § 632(a). Federal regulations provide that “SBA's size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for ‘small business’ concerns. Size standards have been established for types of economic activity, or industry, generally under the North American Industry Classification System (NAICS).” 13 C.F.R. § 121.101.
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The statutory context also supports that Congress presumed other restrictions would apply. Other parts of the CARES Act expressly lift normally applicable restrictions on loan eligibility, which would have been unnecessary if Congress had intended that no other restriction except the size restrictions apply. See Diocese of Rochester, 2020 WL 3071603, at *7 (“[t]hese waivers of otherwise applicable eligibility requirements would be superfluous if, in fact, § 1102(a)(36)(D)(i) unambiguously eliminated any requirement beyond size.”). Particularly, the provision permitting sole proprietors and independent contractors to receive PPP loans (15 U.S.C. § 636(a)(36)(ii)); the provision waiving the no “credit elsewhere” requirement (id. § 636(a)(36)(I)); and the provision waiving collateral and personal guarantee requirements (id. § 636(a)(36)(J)) would be superfluous if Congress had intended that the only eligibility requirements for businesses were the size restrictions in 15 U.S.C. § 636(a)(36)(D)(i).
Therefore, the court finds that at step 1 of Chevron, Congress has not clearly spoken as to whether the SBA may impose additional restrictions on eligibility, including the criminal history exclusion.
Step 2 As discussed above, at Step 2, the court should defer to the agency’s construction as long as it is reasonable.13 The court will defer to the agency “so long as the interpretation is not ‘arbitrary, capricious, or manifestly contrary to the statute’” and “[a] construction meets this standard if it ‘represents a reasonable accommodation of conflicting policies that were committed to the agency's care by the statute.’” Philip Morris USA, Inc. v. Vilsack, 736 F.3d 284, 290 (4th Cir. 2013) (quoting Chevron, 467 U.S. at 844–45).
13 The Carmen’s Corner Store plaintiffs appear to argue in their reply that Chevron deference is unconstitutional. This court, however, is bound by Supreme Court precedent.
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The Carmen’s Corner Store plaintiffs first argue that Congress has not delegated authority to the SBA to issue regulations to implement the PPP. This is incorrect. Section 1114 of the CARES Act provides emergency rulemaking authority to the SBA and states that “the Administrator shall issue regulations to carry out this title and the amendments made by this title.” 15 U.S.C. § 9012. Section 1102(a) of the CARES Act further provides that “[e]xcept as otherwise provided in this paragraph, the Administrator may guarantee covered loans under the same terms, conditions, and processes as a loan made under [Section 7(a)].” 15 U.S.C. § 636(a)(36)(B). Therefore, Congress has expressly delegated authority to the SBA to implement the PPP.
The court finds that the agency’s June 24 IFR14 is based on a permissible construction of the statute. As discussed above, it appears that Congress presumed that other eligibility restrictions would apply, and the SBA normally restricts Section 7(a) eligibility based on criminal history. The Carmen’s Corner Store plaintiffs argue that the rule is unreasonable because the SBA is more akin to a grant program, not a loan program, so ability to repay is not important. While the court agrees that the PPP functions differently than the SBA’s other loan programs, it is not unreasonable to consider ability to repay, because if the loans are not used for specified purposes, than they are not forgivable. The Carmen’s Corner Store plaintiffs also argue that the criminal history exclusion is not reasonable because it excludes more businesses than the SBA’s normal Section 7(a) restrictions. This appears to refer to the fact that for associates who have prior convictions, the criminal history exclusion institutes a bright-line rule, instead of the individualized character determinations that SBA guidance normally calls for. But it was reasonable for the SBA to choose “to adopt a bright-line rule in order to expedite the
14 Because the court finds the prior iterations of the rule were arbitrary and capricious, see infra, the court does not address whether the prior iterations of the rule are based on reasonable constructions of the statute.
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underwriting process and facilitate the hasty distribution of PPP funds, instead of issuing a flexible standard that would require lenders to scrutinize each PPP application on a case-by-case basis.” Tradeways, Ltd., 2020 WL 3447767, at *14 (D. Md. June 24, 2020).
Therefore, the plaintiffs are not likely to succeed on the merits as to their claim that the criminal history exclusion is contrary to the CARES Act.
b. Arbitrary and Capricious As discussed above, under the APA, a court shall “hold unlawful and set aside agency action, findings, and conclusions found to be,” inter alia, “arbitrary, [and] capricious[.]” 5 U.S.C. § 706(2)(A). “Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one.” Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177, 192 (4th Cir. 2009). “Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). “To comply with § 706(2)(A), an agency ‘must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.’” Casa De Maryland v. U.S. Dep’t of Homeland Security, 924 F.3d 684, 703 (4th Cir. 2019) (quoting State Farm, 463 U.S. at 43). “One of the basic procedural requirements of administrative rulemaking is that an agency must give adequate reasons for its decisions.” Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016). April IFR and First June IFR15
15 The court addresses the arbitrary and capricious claim as to the April and June IFR because, although the rules are no longer operative, they are still causing ongoing harm to the plaintiffs for the reasons described supra.
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The plaintiffs are likely to show that the SBA acted arbitrarily and capriciously in promulgating the April IFR and first June IFR because those rules contain no explanation for the criminal history exclusion. In the June IFR, which eased the exclusion, the Administrator explained “[a]fter further consideration, the Administrator, in consultation with the Secretary of the Treasury (the Secretary), has determined that a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391).” June IFR, 85 FR 36717-01. But the June IFR still did not explain the initial purpose of the criminal history exclusion, rather offering only a reason to ease it.
The defendants argues that the court can rely on the declaration of John A. Miller, Deputy Associate Administrator for Capital Access, Small Business Administration, (attached to the defendants’ opposition at ECF 29-1), because “[i]n circumstances such as this, where the agency’s explanation for its action is not reflected in the record of its action, the agency may instead submit a declaration by a responsible official stating the grounds and rationale on which the agency relied.” (Opp’n at 35). The cases the defendants cite, however, do not support the proposition that the agency need not give any contemporaneous explanation when promulgating a rule. Although Roe v. Dep't of Def. provides that courts may consider affidavits when there was a failure to explain agency action, “such post-hoc materials must only provide ‘background information or evidence of whether all relevant factors were examined by an agency,’ or be ‘merely explanatory of the original record and ... contain no new rationalizations.’” 947 F.3d 207, 221 (4th Cir. 2020), as amended (Jan. 14, 2020) (citation omitted); see also Camp v. Pitts, 411 U.S. 138, 143 (1973) (identifying contemporaneous explanation, although curt, of agency decision); Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 285 (D.C. Cir. 1981) (“The new
18

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materials should be merely explanatory of the original record and should contain no new rationalizations.”). Similarly, while Virginia Agr. Growers Ass'n, Inc. v. Donovan, 774 F.2d 89, 92 (4th Cir. 1985) suggests that the court may obtain “supplementation of the administrative record,” nothing in the opinion allows an agency to promulgate a rule without any explanation whatsoever, as was the case here. As the Supreme Court has recently stated, “[a]n agency must defend its actions based on the reasons it gave when it acted.” Dep't of Homeland Sec. Regents of the Univ. of California, No. 18-587, 2020 WL 3271746, at *11 (U.S. June 18, 2020). Further, although the CARES Act granted SBA emergency rulemaking powers without the need to follow the applicable “notice requirements,” 15 U.S.C. § 9012, it does not appear that this relieves the defendants of the requirement to provide a reasoned explanation, nor do the defendants provide any support for that proposition.16
June 24 IFR The plaintiffs have not demonstrated that they are likely to succeed on the merits of their arbitrary and capricious claims as to the June 24 IFR, which provides a reasoned explanation for a more limited criminal history exclusion. The SBA explained that the criminal history exclusions were based on ability to repay (which the business may have to do if PPP funds are not used for certain purposes) and potential for misuse of funds. Having an owner incarcerated facing felony charges, or having a higher likelihood of reincarceration (e.g. if recently placed on probation or parole), the rule explains, could place the creditworthiness of the business in question. June 24 IFR at 7–8. Additionally, criminal history, especially with regard to felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an
16 Additionally, the agency affidavit considered in Olivares v. Transportation Sec. Admin., 819 F.3d 454, 464 (D.C. Cir. 2016), which the defendants cite to, illuminated the reasons for agency action contained in internal and contemporaneous agency materials that were also provided to the court. No such internal materials were provided here.
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application for federal financial assistance, might indicate a greater potential for the misuse of PPP funds. Id. at 8. This is an adequate and reasonable explanation for the purposes of arbitrary and capricious review.
The plaintiffs also argue that the rule is contrary to the purposes of the PPP. The court agrees with the plaintiffs that the primary purpose of the PPP appears to be to ensure that workers remain paid, and that because the loans actually function as grants to the extent they are used for specified purposes, the ability to repay is less important. But, given that the PPP requires businesses to repay the loans if they are not used for certain purposes, the court cannot find that it was arbitrary and capricious for the SBA to consider ability to repay when issuing its rule. The Carmen’s Corner Store plaintiffs cite to In re Gateway Radiology Consultants, P.A., which stated that “[b]ecause PPP Loans are designed to be forgiven, Congress did not intend for the SBA Administrator to focus on collectability.” No. 8:19-BK-04971-MGW, 2020 WL 3048197, at *14 (Bankr. M.D. Fla. June 8, 2020). But although PPP loans may be “designed to be forgiven,” the structure of the PPP program shows that they will not always be forgiven. Additionally, the June 24 revised rule is much less restrictive than previous iterations, and the SBA has balanced its original criminal history exclusion (drawn from the normally applicable Section 7(a) eligibility rules)17 with the goals of the PPP Program to help businesses and workers in need.
The SBA also explained that the criminal history exclusion is meant to reduce the potential misuse of funds. While there appears to be no specific evidence cited by the SBA that individuals convicted of crimes or facing felony charges, especially non-financial crimes or charges, are more likely to misuse SBA funds, the court must give some deference to the SBA’s
17 See 13 C.F.R. § 120.110(n) and SBA, SOP 50 10 5(K), Lender and Development Company Loan Programs, at 110 (Jan. 1, 2019), discussed supra.
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determinations, based on its lengthy history of administering the program. See F.C.C. v. Nat’l Citizens Comm. for Broad., 436 U.S. 775, 814 (1978)). And here, the plaintiffs have supplied no contrary evidence that the agency disregarded.
The Carmen’s Corner Store plaintiffs make other arguments, but they do not suffice to show that the rule is arbitrary and capricious. First, as to the multiple revisions, the rule was promulgated quickly pursuant to emergency rulemaking powers granted by the CARES Act, it appears the changes were based on comments received and, in any event, the most recent revisions are aimed at narrowing the criminal history exclusion and have helped the individual plaintiffs in these cases. And while the SBA normally provides for individualized determinations instead of categorical denials when an associate of a business has prior criminal convictions, SOP 50 10 5(K) at 109–11, the SBA could reasonably find that such individualized determinations would take too long and that a bright-line rule was better. See Tradeways, 2020 WL 3447767, at *14. The plaintiffs also argue that it was arbitrary to make faith-based organizations eligible (as they are generally ineligible for SBA loans), without extending eligibility to all individuals with criminal histories. But faith-based organizations were deemed eligible in order to comply with the Religious Freedom Restoration Act, which does not apply to the plaintiffs. See Business Loan Program Temporary Changes; Paycheck Protection Program, 85 FR 20817-01, 20819. The plaintiffs also rely on letters from legislators after the CARES Act was passed regarding the criminal history exclusion, but courts should “normally give[] little weight to statements, such as those of the individual legislators, made after the bill in question has become law.” Barber v. Thomas, 560 U.S. 474, 486 (2010) (emphasis in original).
c. Unlawfully Withheld Agency Action/Failure to Carry Out Ministerial Duty The APA provides that a court may “compel agency action unlawfully withheld or
21

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unreasonably delayed.” 5 U.S.C. § 706(1). Section 706(1) “empowers a court only to compel an agency ‘to perform a ministerial or non-discretionary act,’ or ‘to take action upon a matter, without directing how it shall act.’” Norton v. S. Utah Wilderness All., 542 U.S. 55, 64 (2004) (citation omitted). It requires a “discrete agency action that [the agency] is required to take.” Id. (emphasis in original).
The Carmen’s Corner Store plaintiffs’ argument for this claim18 is that under the CARES Act the SBA must administer PPP funds only considering the criteria (the size restrictions) set out in the Act. For the reasons stated above, the court disagrees. Therefore, the plaintiffs have not shown a likelihood of success on this claim.
V. Requested Injunction As discussed above, the plaintiffs have shown a likelihood of success on the merits as to
their arbitrary and capricious claims related to the first two iterations of the rule. The plaintiffs request that the deadline for PPP applications be extended from June 30, 2020, until July 21, 2020, to account for the fact that owners of many now-eligible businesses do not know they are eligible; the SBA has not publicized the new June 24 rule;19 many lenders are no longer accepting applications in anticipation of the June 30 deadline; and many lenders are still using old forms. The court notes that the late revision of the rule on June 24, 2020, has put the plaintiffs in a difficult situation and based on the record before the court, is likely to cause the
18 The Defy Ventures plaintiffs do not bring a claim under § 706(1). 19 The defendants dispute this, stating that they have sent a notification of the updated rule to “18 national trade associations for all types of lenders, large individual lenders, and most new non-bank lenders; SBA field staff and senior headquarters staff; external affairs officials at the Federal Reserve, FDIC, OCC, NCUA, Treasury, the SEC, and USDA, who actively engage with multiple lender communities; the Minority Business Development Agency at the Department of Commerce; State bank supervisors; and major business groups, religious organizations and nonprofit council groups.” (ECF 17, William J. Briggs, Deputy Associate Administrator for the Office of Capital Access, SBA ¶ 4).
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individual plaintiffs irreparable harm since they may not be able to obtain PPP funding. Extending the deadline would also serve the public interest.20
The parties disagree as to whether the court has the authority to extend the deadline to
apply for PPP funds, but this court agrees with the plaintiffs that it does have such authority. The
plaintiffs cite to a line of cases in which courts have held that they have the power “to order that
funds be held available beyond their statutory lapse date” (the deadline by which the agency
must obligate the appropriated funds, before they revert back to the Treasury) “if equity so
requires.” State of Conn. v. Schweiker, 684 F.2d 979, 997 (D.C. Cir. 1982) (citation omitted).
Ordinarily, for the court to have this power, the plaintiff must have filed suit prior to the statutory
lapse date; “[d]ecisions that a court may act to prevent the expiration of budget authority which
has not terminated at the time suit is filed are completely consistent with the accepted principle
that the equity powers of the courts allow them to take action to preserve the status quo of a
dispute and to protect their ability to decide a case properly before them.” Nat'l Ass'n of Reg'l
Councils v. Costle, 564 F.2d 583, 588 (D.C. Cir. 1977); see also Andrulis Research Corp. v. U.S.
Small Bus. Admin., No. CIV. A. 90-2569(CRR), 1990 WL 169318, at *2 (D.D.C. Oct. 19, 1990)
(extending the plaintiff’s eligibility under an SBA program, and noting that various appellate
courts have affirmed a “district court's power to extend statutory deadlines to remedy improper agency delay,” and citing cases).21 And in fashioning appropriate relief, “[i]n some
20 As the Sixth Circuit has stated, “[t]he stated purpose of the PPP is to protect the employment and livelihood of employees. Thus, the public interest is served in guaranteeing that any business, including plaintiffs’, receive loans to protect and support their employees during the pandemic which, we can all agree, constitutes extraordinary circumstances.” DV Diamond Club of Flint, LLC, 2020 WL 2988528, at *3. Here, the harm to the SBA is negligible because it has promulgated the June 24 rule, which states that these previously excluded businesses should be able to get funding. And the public has an interest in helping those businesses obtain funding when the only reason they have had to wait until the last minute is because the SBA has only now changed the rule. 21 Additionally, in imposing a deadline for new tobacco products to submit marketing order applications, a court in this district relied on its power to fashion equitable remedies especially in extraordinary circumstances. Am. Acad. of Pediatrics v. Food & Drug Admin., 399 F. Supp. 3d 479, 486–87 (D. Md. 2019), appeal dismissed sub nom. In re Cigar Ass'n of Am., No. 19-2130, 2020 WL 2116554 (4th Cir. May 4, 2020). Extraordinary circumstances (the COVID-19 pandemic) also exist here.
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circumstances, the scope of the remedy can extend beyond the scope of the original right.” Burr by Burr v. Ambach, 863 F.2d 1071, 1078 (2d Cir. 1988), cert. granted, judgment vacated sub nom. Sobol v. Burr, 492 U.S. 902, 109 S. Ct. 3209, 106 L. Ed. 2d 560 (1989), and on reconsideration sub nom. Burr by Burr v. Sobol, 888 F.2d 258 (2d Cir. 1989) (finding remedy of compensatory education past the statutory maximum age of 21 appropriate where, if the court were “not [to] allow an award of compensatory education, then Clifford's right to an education between the ages of three and twenty-one is illusory. Clifford cannot go back to his previous birthdays to recover and obtain the free education to which he was entitled when he was younger.”).
Here, the individual plaintiffs filed suit before the deadline, are now eligible to apply for PPP funds, and are at risk of losing a benefit for which they are eligible because of arbitrary and capricious agency action. The court is not intruding on Congress’s appropriations power because Congress has already appropriated PPP funding for businesses like the plaintiff businesses, and there are PPP funds remaining so no additional appropriation is needed. Cf. Speers v. United States, 38 Fed. Cl. 197, 202 (1997) (“Thus, in the absence of clear Congressional authority, the other branches of government cannot effect payment of Treasury funds.”). To give the plaintiffs the chance to apply would further, rather than contravene, Congress’s will that eligible businesses be able to apply for PPP funds.
This is not like Office of Pers. Mgmt. v. Richmond, 496 U.S. 414 (1990), which the defendants cite to. The plaintiff in that case received disability annuity under a federal statute. Id. at 416. After receiving erroneous advice from a government employee relations specialist, the plaintiff took on extra work, which caused him to exceed the statutory earning limit and lose his disability benefits for a six-month period. Id. at 418. He appealed, arguing that the government should be equitably estopped from denying him benefits. Id. The Supreme Court
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held that the award the plaintiff sought – the disability benefits for the six-month period – was in contravention of the statute authorizing the benefits and that to award it would be in violation of the Appropriations Clause.22 Id. at 424 (“It follows that Congress has appropriated no money for the payment of the benefits respondent seeks, and the Constitution prohibits that any money ‘be drawn from the Treasury’ to pay them.”). But the plaintiffs here, unlike in Richmond, meet the substantive criteria for PPP funds, and were only unable to apply earlier because of an SBA rule that the court has found to be arbitrary and capricious. Nor are the plaintiffs attempting to obtain money damages that Congress has not authorized, unlike in United States v. Testan, which the defendants also cite to. 424 U.S. 392, 400 (1976) (regarding a claim for backpay for improper government classification, and stating “[i]t follows that the asserted entitlement to money damages depends upon whether any federal statute ‘can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained.’” (citation omitted)).
Accordingly the court will extend the deadline to apply for the individual plaintiffs and their businesses until July 21, 2020. 23
VI. Scope of Injunction Defy Ventures requests that the court extend the PPP application deadline for all newly
eligible individuals that were previously wrongfully excluded under the old iterations of the criminal history exclusion. “It is well established that ‘injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs.’” Kentuckians for Commonwealth Inc. v. Rivenburgh, 317 F.3d 425, 436 (4th Cir. 2003) (quoting
22 The Appropriations Clause provides that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” U.S. Const. art. I, § 9, cl. 7 23 The court understand from the June 29, 2020, call with counsel that some of the individual plaintiffs are still working to provide the appropriate paperwork to show that they have covered expenses for the purposes of the PPP. This opinion does not affect that requirement except to give the individual plaintiffs a fair and reasonable time to work with a lender to supply the necessary paperwork.
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Califano v. Yamasaki, 442 U.S. 682, 702 (1979)). Defy Ventures must make a “clear showing that [it]they will likely suffer irreparable harm in the absence of an injunction.” Action NC v. Strach, 216 F. Supp. 3d 597, 642 (M.D.N.C. 2016). The harm must be “certain and great,” “actual and not theoretical,” and “so ‘imminen[t] that there is a clear and present need for equitable relief to prevent irreparable harm.’ Second, the harm ‘must be beyond remediation.’” League of Women Voters of United States v. Newby, 838 F.3d 1, 7–8 (D.C. Cir. 2016) (citation omitted).
Past harm, without more, cannot form the basis for injunctive relief. Dyer v. Maryland State Bd. of Educ., 187 F. Supp. 3d 599, 609 (D. Md. 2016), aff'd, 685 F. App'x 261 (4th Cir. 2017). Here, any ongoing harm that Defy Ventures will continue to face, especially after June 30, is not clear. Much of the harm that Defy Ventures has pointed to is past harm. For example, Defy Ventures states that it has had to devote resources to inform newly eligible Defy graduates that they can now apply for PPP funding and advise them as to how to apply for the loans when banks are no longer accepting applications or are using old forms. (ECF 34-8, Glazier Suppl. Decl. ¶¶ 5–10). But such past harm cannot justify an injunction extending the application deadline, and it is not clear what harm to Defy Ventures resulting from the prior iterations of the criminal history exclusion will continue past June 30. 24 See Action NC v. Strach, 216 F. Supp. 3d 597, 644 (M.D.N.C. 2016) (“Thus, past harms suffered by Organizational Plaintiffs' diversion of resources cannot be prevented at this point through the issuance of an injunction”).
The court must also consider practicality when fashioning injunctive relief. See id. at 643–44. It appears to be difficult – if not impossible – to identify who falls within the scope of
24 It appears that Defy Ventures has also advised its graduates of alternative funding sources. (ECF 1-3, Glazier Decl. ¶¶ 30–31). It is not clear if this will continue past the June 30 deadline, the identities of the persons whom Defy Ventures has advised, and whether they are newly eligible and have been able to apply for PPP funding.
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Defy Ventures’ alleged harm.25 Perhaps because of this, the Defy Ventures plaintiffs’ requested relief is overbroad and not sufficiently tailored to its harm. The plaintiffs first requested an injunction that extends the deadline as to all individuals regardless of what contact they had with Defy Ventures. This goes far beyond remedying Defy Ventures’ specific harm from having to expend resources to help individuals apply for loans, get alternative funding, or notify them of the June 24 revised criminal history rule. In response to a conference call this court had with counsel on June 29, 2020, the plaintiffs filed a proposed order requesting the court to extend the deadline only in the geographical areas in which the individual plaintiffs and Defy Ventures operates. (ECF 38).26 But this is still overbroad, because it would extend relief to individuals that have never contacted Defy Ventures or whose only connection to this case is that they happen to live where Defy Ventures operates or where one of the individual plaintiffs lives. Accordingly, the court will not extend the application deadline to any individuals other than the individual plaintiffs.
VII. Bond Federal Rule of Civil Procedure 65 provides “[t]he court may issue a preliminary
injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” “[T]he district court retains the discretion to set the bond amount as it sees fit or waive the security requirement.” Pashby v. Delia, 709 F.3d 307, 332 (4th Cir. 2013). Here, any harm to the defendants is remote, given that the June 24 rule
25 Another issue is who would determine whether an applicant falls within the scope of Defy Ventures’ alleged harm. For example, the lenders who make the loans or the SBA who guarantees them may have to decide whether the applicant is someone on whom Defy has spent resources and who should be able to apply past the deadline, an inquiry that would be difficult to administer and fraught with line-drawing issues. 26 Defy Ventures cites to Cook Cty., Illinois Wolf, --- F.3d ----, No. 19-3169, 2020 WL 3072046 (7th Cir. June 10, 2020), in which the Seventh Circuit affirmed the district court’s granting of a preliminary injunction enjoining enforcement of a challenged immigration rule in Illinois. While that case supports granting an injunction limited to a geographical area, the injunction still must be appropriate for the circumstances of the case.
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indicates that these businesses are eligible for PPP funding, and this injunction would only extend the deadline to allow them more time to apply. And “[f]orcing Plaintiffs to post a bond would frustrate the purpose of the PPP and the purpose of the injunction – to get essential PPP loans to struggling small businesses as soon as possible so that the businesses may use the funds to pay displaced employees. If the Court forced the Plaintiffs to expend funds by posting a bond, that would divert money that could be used to pay employees and that are needed to help secure Plaintiffs' financial survival.” DV Diamond Club of Flint, LLC, 2020 WL 2315880, at *17. Further, access to the court is limited by the coronavirus pandemic and posting of a bond may cause unreasonable delay. Therefore, the court will waive the bond requirement.
CONCLUSION For the reasons stated above, the court will grant in part and deny in part the plaintiffs’ motions for preliminary injunctions. A separate order will be issued in each case.

___6_/_2_9_/2_0_______ Date

/S/ __________________ Catherine C. Blake United States District Judge

28

Case 1:20-cv-01838-CCB Document 40 Filed 06/29/20 Page 1 of 1

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

Defy Ventures, Inc., et al.

*

*

v.

*

*

U.S. Small Business Administration, et al. *

Civil Action No. CCB-20-1838

ORDER

For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that:

1. The motion for preliminary injunction (ECF 2) is GRANTED in part and DENIED in part;

2. The defendants shall EXTEND the application deadline until July 21, 2020, for the

individual plaintiffs and their businesses;

3. The defendants shall RESERVE and PREAUTHORIZE funds to guarantee loans in the

following amounts:

a. Sekwan Merritt and Prop Prep Properties LLC d/b/a Lightning Electric, up to

$100,000 (one hundred thousand dollars), and

b. John Garland and Sign Me Up Bethpage, Inc. d/b/a Fastsigns 2323, up to $100,000

(one hundred thousand dollars),

provided lenders are obtained and eligibility criteria are met by July 21, 2020;

4. The additional injunctive relief requested by the plaintiffs is DENIED;

5. The defendants’ motion for leave to file excess pages (ECF 30) is GRANTED; and

6. The Clerk shall SEND copies of this Order and the accompanying Memorandum to counsel

of record.

___6_/_2_9_/_2_0______ Date

/S/ __________________ Catherine C. Blake United States District Judge

1

 
 Case 1:20-cv-01838-CCB Document 34 Filed 06/25/20 Page 1 of 27
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,

CASE NO.: 20-cv-1838

v.

U.S. SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

REPLY MEMORANDUM IN SUPPORT OF EMERGENCY MOTION FOR PRELIMINARY INJUNCTION

Case 1:20-cv-01838-CCB Document 34 Filed 06/25/20 Page 2 of 27

TABLE OF CONTENTS

Page

Preliminary Statement .................................................................................................. 1
Argument ....................................................................................................................... 3
I. The Court Must Give Effect to the SBA’s Eleventh-Hour Rule Change to Prevent Ongoing and Irreparable Harm to Plaintiffs. .................................. 3
II. Defendants Fail To Show Any Genuine Barriers To This Court Awarding The Requested Relief. ........................................................................ 8 A. Plaintiffs Have Standing To Seek The Requested Relief And This Court Has The Authority To Award It............................................ 8 B. The SBA’s “Sue-Or-Be-Sued” Clause Does Not Insulate the Agency from Judicial Review of Its Policymaking. ............................... 13 C. The Separation of Powers Is No Bar To Staying the PPP Application Deadline. ............................................................................. 15
III. The Remaining Criminal-Record Exclusions Still Fail To Pass Muster Under The CARES Act Or The APA. ............................................................... 16 A. The CARES Act Forbids SBA-imposed Barriers to PPP Access. ......... 16 B. The Remaining Exclusions Still Run Afoul of the APA. ....................... 19
Conclusion .................................................................................................................... 20

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TABLE OF AUTHORITIES
Page(s)
Cases
Am. Acad. of Pediatrics v. FDA, 399 F. Supp. 3d 479 (D. Md. 2019), appeal dismissed sub nom. In re Cigar Ass’n of Am., 2020 WL 2116554 (4th Cir. May 4, 2020) ...................... 6
Bostock v. Clayton Cty., Georgia, No. 17-1618, 2020 WL 3146686 (U.S. June 15, 2020)........................................... 18
Califano v. Yamasaki, 442 U.S. 682 (1979) .................................................................................................. 8
Camelot Banquet Rooms v. Small Bus. Admin., No. 20-c-0601, 2020 WL 2088637 (E.D. Wisc. May 1, 2020)........................... 13, 15
Dep’t of Homeland Sec. v. Regents of the Univ. of California, No. 18-587, 2020 WL 3271746 (U.S. June 18, 2020)....................................... 19, 20
Diocese of Rochester v. Small Bus. Admin., No. 6:20-CV-06243, 2020 WL 3071603 (W.D.N.Y. June 10, 2020) ................. 16, 17
Duncan v. Furrow Auction Co., 564 F.2d 1107 (4th Cir. 1977) ................................................................................ 13
DV Diamond Club of Flint v. U.S. Small Bus. Admin., No. 20-cv-10899, 2020 WL 2315880 (E.D. Mich. May 11, 2020), aff’d, 960 F.3d 743 (6th Cir. 2020) ............................................................................ 13, 18
Fed. Housing Admin. v. Burr, 309 U.S. 242 (1940) .......................................................................................... 14, 15
Harrison v. Spencer, No. 118-CV-641, 2020 WL 1493557 (E.D. Va. Mar. 27, 2020) .............................. 10
In re Hidalgo Cty. Emerg. Serv. Found., No. 20-40368, 2020 WL 3411190 (5th Cir. June 22, 2020) ................................... 13
J.C. Driskill, Inc. v. Abdnor, 901 F.2d 383 (4th Cir. 1990) .................................................................................. 13
J.O.P. v. U.S. Dep’t of Homeland Sec., 409 F. Supp. 3d 367 (D. Md. 2019) ........................................................................ 11
ii

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League of Women Voters v. Newby, 838 F.3d 1 (D.C. Cir. 2016) ...................................................................................... 8
Michigan v. E.P.A., 135 S. Ct. 2699 (2015) ............................................................................................ 20
Motor Vehicle Mfrs. Assn. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) .................................................................................................. 20
Nat’l Fair Hous. All. v. Bank of Am., N.A., 401 F. Supp. 3d 619 (D. Md. 2019) .................................................................... 9, 10
Roe v. Dep’t of Defense, 947 F.3d 207 (4th Cir. 2020) ........................................................................ 8, 11, 20
Connecticut v. Schweiker, 684 F.2d 979 (D.C. Cir. 1982) ............................................................................... 15
Thacker v. Tenn. Valley Auth., 139 S. Ct. 1435 (2019) ............................................................................................ 14
Tradeways, Ltd. v. Dep’t of the Treasury, No. ELH-20-1324, 2020 WL 3447767 (D. Md. June 24, 2020).................. 14, 15, 17
Ulstein Mar., Ltd. v. United States, 833 F.2d 1052 (1st Cir. 1987) ................................................................................. 14
Vincent v. Small Bus. Admin., 402 F.2d 769 (4th Cir. 1968) .................................................................................. 13
Warth v. Seldin, 422 U.S. 490 (1975) .................................................................................................. 8
Statutes 15 U.S.C. § 634(b)(1) ........................................................................................ 12, 13, 14 15 U.S.C. § 636(a)(36) ............................................................................................ 16, 17 Other Authorities @SBAgov, Twitter, https://twitter.com/SBAgov/status/
1276115423419752450 ............................................................................................. 5
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Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Eligibility Revisions, Small Bus. Admin., https://www.federalregister.gov/documents/2020/06/26/202013942/business-loan-program-temporary-changes-paycheckprotection-program-additional-eligibility-revisions ................................................ 3
Keith Finlay et al., Criminal Disqualifications in the Paycheck Protection Program, Inst. For Social Research, Univ. of Mich. (June 2020), https://cjars.isr.umich.edu/wp-content/uploads/ CJARS_PPP_Statistical_Brief.pdf......................................................................... 11
Paycheck Protection Program Loans: Frequently asked Questions (as of May 27, 2020), Small Bus. Admin., https://home.treasury.gov/system/files/136/Paycheck-ProtectionProgram-Frequently-Asked-Questions.pdf ............................................................. 5
Paycheck Protection Program, Small Bus. Admin. https://www.sba.gov/funding-programs/loans/coronavirus-reliefoptions/paycheck-protection-program ..................................................................... 5
Paycheck Protection Program (PPP) Report –Through June 20, 2020, Small Bus. Admin., https://www.sba.gov/sites/default/files/202006/PPP_Report_200620-508.pdf............................................................................... 6
Press Releases & Media Advisories, Small Bus. Admin., https://www.sba.gov/about-sba/sba-newsroom/press-releases-mediaadvisories) ................................................................................................................. 5
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PRELIMINARY STATEMENT On June 24, 2020—that is, yesterday—less than a week before the expiration of the deadline for small businesses to apply for Paycheck Protection Program (“PPP”) funds, the Small Business Administration (“SBA”) issued a new rule that significantly narrowed the scope of its criminal-record exclusions. Apparently issued in response to this litigation, the new rule is a significant step in the right direction and could provide critical relief to many vulnerable businesses during this difficult time. It eliminates unlawful barriers to eligibility that the SBA imposed without justification, excluding countless small businesses and their workers—the SBA admits it cannot count how many—from Congress’s promised lifeline during the COVID-19 pandemic. Without this Court’s intervention, however, Defendants’ eleventh-hour rule change will be too little, too late for small-business owners and their workers. The SBA’s now-repealed rule unlawfully denied eligibility to those businesses for all but five business days of the months-long application period Congress contemplated. And Defendants offer no basis for the Court to conclude that five business days is enough for this relief to be anything but an empty gesture. Defendants cannot identify (or even count) the many businesses that were improperly denied relief, and they provide no explanation of the steps they are taking to ensure that newly eligible businesses are aware of or can benefit from this correction in the limited time remaining. In reality, even with the government’s last-minute effort, the new rule is not yet being meaningfully implemented: The Individual Plaintiffs and their businesses

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have been unable to benefit from the rule change, and one of Plaintiff Defy Ventures’ advisees encountered numerous lenders whose application forms fail to reflect the new rule. Defendants have helpfully offered to reach out to the Individual Plaintiffs’ banks to ensure they obtain the SBA’s direct endorsement so they might receive PPP funds in the quickly closing window. But the fact that the SBA recognizes its handholding may be necessary to obtain relief is a telling sign that the rule change itself is insufficient. What is really needed is time. This Court’s intervention is urgently required to stay the application deadline so that all wrongfully excluded businesses can access the PPP.
Defendants’ opposition primarily points to threshold defenses like standing. But Plaintiffs here—including Defy Ventures—continue to suffer ongoing harm as a result of the SBA’s criminal-record exclusions, and in particular the last-minute shift. Plaintiffs’ concrete injury can be remedied only with an order by this Court. Nor does the SBA’s “sue-and-be-sued” clause bar relief here. Defendants’ contrary position that no injunction whatsoever can be issued against the SBA (a position they have elsewhere disavowed), is not required by statutory text or precedent and would have the perverse result of insulating the agency’s regulations from judicial oversight.
Whether under its new rule or as a result of confusion and delay caused by its eleventh-hour revision, Defendants’ continued exclusion of small businesses from PPP funds based on their owners’ criminal history runs contrary to the text of the Coronavirus Aid, Relief, and Economic Stimulus (“CARES”) Act and violates the Administrative Procedure Act’s (“APA”) most basic requirement of reasoned decision-
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making. Indeed, the SBA never explained its now-repealed former rules, and its newly identified rationale (even if accepted) indicates that the old rules were overbroad and unnecessary. Defendants thus flouted Congress’s clear goal of providing emergency relief to small business in a time of crisis. Defendants continue to harm countless, disproportionately Black and Latinx, small-business owners and their workers. This Court must act to ensure that Defendants’ last-minute rule change and Congress’s relief funding are more than empty promises.
ARGUMENT I. The Court Must Give Effect to the SBA’s Eleventh-Hour Rule Change to Prevent Ongoing and Irreparable Harm to Plaintiffs.
For most of the PPP application period, the SBA, without explanation, barred a huge swath of business owners from receiving PPP funds based on their criminal history or pending charges. See Opening Br. at 6–9. Then, on June 24, 2020, the SBA significantly altered the scope of these criminal-record exclusions through a new (their third) Interim Final Rule. See Opp. at 13; Business Loan Program Temporary Changes; Paycheck Protection Program – Additional Eligibility Revisions to First Interim Final Rule (posted June 24, 2020) (“Yesterday’s IFR”).
First, Yesterday’s IFR narrowed the category of presumptively innocent individuals excluded from PPP funds from those who have any pending charge to those who have only pending felony charges. Id. at 5–6. Second, Yesterday’s IFR narrowed the category of business owners excluded based on probation or parole status from those under any parole or probation to those whose term of probation or parole was for a felony and commenced within the last year (or last five years for
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felonies involving fraud, bribery, embezzlement, or false statements in loan or federal-assistance applications). Id. Yesterday’s IFR also, for the first time, offered some explanation of the basis for the remaining restrictions—purporting to ground the remaining exclusions in risk of future incarceration and “credit risk.” Id. at 7. The IFR is scheduled to publish in the Federal Register on June 26, 2020. That is mere days (including a weekend) before the June 30 close of the PPP’s three-month application period.
Yesterday’s IFR is an unequivocal acknowledgment by Defendants that countless small-business owners and their workers have been wrongfully excluded— without any justification—from the PPP for all but a few days of the period Congress contemplated. Until yesterday, the SBA denied PPP access to any business owner with a pending misdemeanor charge; today, those individuals are newly eligible. So, too, for any business owner placed on misdemeanor probation or parole, or an owner placed on felony probation or parole any time before the last year.
The SBA’s last-minute change-of-heart is an important step in the right direction, but without more time many eligible small businesses and their employees will be forever shut out of Congress’s promised funds and may even fold as a result. The SBA has left illegally excluded businesses just six calendar days to find a bank, apply for PPP funds, and get approved. But many commercial banks continue to use the SBA’s prior application forms and thus continue to deny newly eligible applicants. See Glazier Supp. Decl. ¶¶ 7–9; Khan Decl. Ex. 1 (JPMorgan Chase). Many other banks have already stopped accepting new applications on account of the impending
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June 30 deadline. See Khan Decl. Ex 2 (Citi), Ex. 3 (U.S. Bank), Ex. 4 (PNC), Ex. 5 (TD Bank), Ex. 6 (HSBC). Newly eligible business owners—who Defendants have effectively acknowledged should have been eligible all along—may search in vain for funding. Individual Plaintiffs and their businesses have been unable to apply for or secure PPP funding even though they are eligible under Yesterday’s IFR. See Merritt Supp. Decl. ¶¶ 9, 21–22; Garland Supp. Decl. ¶¶ 6–9. Plaintiff Defy Ventures, which advises business owners, will be forced to continue diverting resources to help loan applicants determine not only whether they are eligible, but also how they can surmount the obstacles Defendants have imposed in the limited time remaining. See Glazier Supp. Decl. ¶¶ 10–11.
The burden on Plaintiffs is all the greater because Defendants have not done enough to give Yesterday’s IFR any practical effect. As of the time of this filing, they have not published a press release to inform lenders or the public of this rule change.1 Moreover, the “Frequently Asked Questions for Lenders and Borrowers,” on the SBA’s PPP website (dated May 27, 2020), continues to advise that people like Plaintiffs Merritt and Garland are not eligible for PPP funds. The site directs borrowers: “If you wish to begin preparing your application, you can download a copy of the PPP borrower application form (revised June 12, 2020) to see the information that will be requested from you when you apply with a lender.”2 So the SBA
1 See Press Releases & Media Advisories, SBA https://www.sba.gov/about-sba/sbanewsroom/press-releases-media-advisories (last visited June 25, 2020). 2 Paycheck Protection Program, SBA (emphasis added) https://www.sba.gov/funding-
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apparently expects newly eligible small business owners to be following in real-time its veritable Twitter feed of IFR updates (though not its actual Twitter feed, which has not mentioned the rule change despite a tweet today emphasizing the June 30 PPP deadline).3 The result is more people who are confused or misinformed, and thus more time and effort that Defy Ventures will need to expend to advise entrepreneurs around the country to disregard contrary messaging on the agency’s own website.
To the extent Defendants have made any attempt to ease the difficulty of obtaining funds for Plaintiffs Merritt and Garland, those efforts only underscore the substantial barriers in the real world. Defendants state that “to ensure that the individual Plaintiffs and Plaintiff businesses encounter no further difficulties on account of the criminal justice restriction, the SBA has offered to contact their lenders and advise them that the Plaintiff businesses should not be denied PPP loans on the basis of the restriction.” Opp. at 38. Plaintiffs greatly appreciate the SBA’s offer and are working with Defendants so that Mr. Merritt and Mr. Garland can obtain approval of their applications. But the SBA’s individualized offer to the Plaintiffs appears to recognize that there remain many “further difficulties” for newly eligible applicants seeking to access PPP funds in the fast-closing window. Id. As Defendants have all but admitted, leaving just six calendar days of a three-month application period to allow previously excluded small-business owners to apply for PPP funds is
programs/loans/coronavirus-relief-options/paycheck-protection-program (last visited June 25, 2020). 3 See @SBAgov, Twitter (June 25, 2020, 7:30 AM), https://twitter.com/SBAgov/status/1276115423419752450.
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itself arbitrary and capricious. See Am. Acad. of Pediatrics v. FDA, 399 F. Supp. 3d 479, 486 (D. Md. 2019) (“Pursuant to the APA, a federal district court may ‘compel agency action unlawfully withheld or unreasonably delayed…’” (citation omitted)), appeal dismissed sub nom. In re Cigar Ass’n of Am., 2020 WL 2116554 (4th Cir. May 4, 2020).
This Court accordingly should grant a preliminary injunction to stay the PPP application deadline. Plaintiffs Merritt and Garland, their businesses, and their workers have not yet been able to secure PPP funds. Plaintiff Defy Ventures continues to work with business owners who report that they continue to be refused by banks using the SBA’s forms that, until yesterday, were current. An extension of the application window is needed to mitigate Defendants’ prior arbitrary exclusions that they never even tried to defend and prevent this ongoing and irreparable harm. Intervention from this Court is the only way to give those whom Defendants have wrongfully excluded from relief—as well as the banks that stopped accepting applications solely because of the impending deadline—an interval even remotely close to the three-month window Congress promised all eligible applicants.4
4 Given that over $125 billion in PPP funds remain available, there is a less urgent need for the Court to enjoin the agency to set aside funds for these wrongfully excluded applicants, as the Defendants explained at the scheduling hearing in this matter on June 18, 2020. See Paycheck Protection Program (PPP) Report, at 9 (June 20, 2020) (showing $128.4 billion in funding remaining), https://www.sba.gov/sites/default/files/2020-06/PPP_Report_200620-508.pdf.
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II. Defendants Fail To Show Any Genuine Barriers To This Court Awarding The Requested Relief.
Rather than argue the merits, much of the Opposition attempts to persuade this Court that it simply lacks authority to provide any relief—including striking the remaining criminal-record exclusions. None of Defendants’ arguments is right.
A. Plaintiffs Have Standing To Seek The Requested Relief And This Court Has The Authority To Award It. Defendants’ contentions that Plaintiffs lack standing and that this Court cannot enjoin the exclusions because it would “restructure” the PPP and “sweep beyond [this] particular dispute” are contrary to fundamental principles of law and equity. Opp. at 20. In fashioning preliminary injunctive relief, the Court must “provide complete relief to the plaintiffs.” Califano v. Yamasaki, 442 U.S. 682, 702 (1979). And in so doing, the Court “mold[s] its decree to meet the exigencies of the particular case.” Roe v. Dep’t of Defense, 947 F.3d 207, 231 (4th Cir. 2020) (citation omitted). As just described, all of the Plaintiffs continue to suffer injury as a result of the SBA’s actions. As to the Individual Plaintiffs and their businesses, none has yet received (or even been able to apply for) the PPP funds for which they are now eligible. Merritt Supp. Decl. ¶¶ 9, 21–22; Garland Supp. Decl. ¶¶ 6–8. For the reasons discussed—especially in light of Defendants’ tacit acknowledgment that the agency’s direct intervention may be needed to help Plaintiffs secure that relief, see Opp. at 38—Plaintiffs may continue to be unable to do so before the application period ends. (Mr. Merritt and Mr. Garland are working diligently to ensure they are able to apply and obtain the funds before the time expires, but that has not happened yet.)
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Defy Ventures’ mission has been and continues to be harmed and its resources diverted as a result of the challenged policies. See, e.g., League of Women Voters v. Newby, 838 F.3d 1, 9 (DC Cir. 2016) (holding that an FEC decision impeding voter registration “provide[s] injury for purposes of both standing and irreparable harm”). Contrary to Defendants’ characterization, Defy Ventures does not raise “general complaints” about the functioning of the government. Rather, it seeks to prevent ongoing harm to the organization itself. Glazier Supp. Decl. ¶¶ 6, 11.
This form of organizational standing is well recognized. See Warth v. Seldin, 422 U.S. 490, 511 (1975) (“There is no question that an association may have standing in its own right to seek judicial relief from injury to itself and to vindicate whatever rights and immunities the association itself may enjoy.”); Nat’l Fair Hous. All. v. Bank of Am., N.A., 401 F. Supp. 3d 619, 625 (D. Md. 2019) (“An organization can establish standing … on its own behalf.”). Where an organization “contend[s] that [it has] direct standing in [its] own right … the test to be applied is ‘the same inquiry as in the case of an individual,’” requiring the organizational to present “(1) an injuryin-fact, (2) causation …, and (3) the likelihood of redress in federal court.” Id.
Defy Ventures satisfies this standard. As explained above, the SBA’s criminalrecord exclusions continue to frustrate its mission and force it to divert resources to advising individuals and businesses with criminal history how to fund their businesses in the absence of PPP funds. Because of Defy Ventures' mission to use entrepreneurship to empower formerly incarcerated individuals, the SBA’s criminalrecord exclusions require Defy Ventures to spend time and energy communicating
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with program graduates and other formerly incarcerated business owners—including the 5,200 entrepreneurs-in-training who Defy Ventures has helped to launch over 140 small businesses through offices and affiliates in seven states—to advise them on the PPP and help them locate alternative funding sources. Glazier Decl. ¶¶ 3, 4, 16–17, 20–32. Simply put, “[t]he PPP’s criminal-history related exclusions have impeded the ability of Defy Ventures to accomplish its mission.” Id. ¶ 33. Confusion following Yesterday’s IFR—and the SBA’s conflicting messaging—has added to Defy’s workload given the impending application deadline. Glazier Supp. Dec. ¶ 10– 11. The continuing harm to each of the Plaintiffs belies Defendants’ argument that Yesterday’s IFR might have mooted this case. See Opp. at 18.
The only way to fully redress Plaintiffs’ ongoing injury is to ensure that wrongfully excluded individuals can benefit from the PPP. Merely granting relief to Plaintiffs Merritt and Garland and their businesses will not relieve Defy Ventures of the need to invest resources in advising its graduates and others of possible alternative funding sources to compensate for their inability to receive PPP funds (not to mention advising those who are eligible yet confused by the SBA’s unclear and constantly changing mandate). To the contrary, it would serve only to further frustrate Defy Ventures’ mission and force continued diversion of its resources. As set forth in Mr. Glazier’s Supplemental Declaration, injury continues, as the organization attempts to guide its graduates with the latest changes to SBA eligibility rules. To fully remedy the harm caused by the SBA’s exclusions to the parties before it, the Court must block any application of the unlawful exclusions and allow wrongly
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excluded individuals time to avail themselves of Congress’s promised benefit. Defendants’ arguments to the contrary lack merit. First, Defendants contend
that the harm to Defy Ventures was a result of its own budgetary choices. Opp. at 19. But that argument is “undercut by the Fourth Circuit and several district courts within the Fourth Circuit … that an institutional plaintiff has direct standing to sue if the challenged policies or practices both frustrated its purpose and caused a drain on its resources.” Harrison v. Spencer, No. 118-CV-641, 2020 WL 1493557, at *6–7 (E.D. Va. Mar. 27, 2020) (collecting cases); see also Nat’l Fair Hous. All., 401 F. Supp. 3d at 627 (rejecting the argument “that the plaintiffs were not conscripted” to perform their activities responding to the defendant’s unlawful conduct).
Second, Defendants suggest that Plaintiffs seek to “restructure the apparatus established by the Executive Branch to fulfill its legal duties.” Opp. at 20 (quotation omitted). That is hardly the case, as Plaintiffs seek a remedy well within the Court’s equitable powers and contemplated by the APA. See, e.g., J.O.P. v. Dep't of Homeland Sec., 409 F. Supp. 3d 367, 376 (D. Md. 2019) (“[T]he remedy Congress provides for unlawful agency action is setting aside that agency action, not simply prohibiting the application of that action to individuals.”). Defy Ventures is a multi-state organization advising entrepreneurs with varied criminal records. Denying those small-business owners PPP funds—then hamstringing them from receiving PPP funds through confusion or delay—costs Defy Ventures time and money and compromises its mission. Only by giving Defy Ventures’ advisees a full and fair opportunity to access PPP funds can that harm be remedied this late in the day.
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At bottom, the “exigencies of [this] particular case” require this Court to “fashion appropriate injunctive relief” to prevent the wrongful exclusion of all businesses owned by individuals with criminal records from the PPP. Roe, 947 F.3d at 231 (citation omitted). If this Court does not grant preliminary relief and, at a minimum, extend the application deadline, many small businesses and their workers will never see a penny of the emergency relief Congress promised, as the program’s application deadline is less than a week away.
Without an order from this Court staying the deadline, many small businesses will suffer and some may fail. While Defendants concede their inability to determine how many businesses are affected by the exclusions, Opp. at 44, research has shown that at least 250,000 business owners were denied relief under one of the SBA’s various iterations of the exclusions in just seven states for which data was available. See Keith Finlay et al., Criminal Disqualifications in the Paycheck Protection Program, at 2 (June 2020).5 As already explained, the harm of the exclusions disproportionately harms Black and Latinx business owners. See Opening Br. at 22.
Accordingly, this Court has the authority and the basis to grant the relief Plaintiffs seek. The Court should enjoin Defendants from enforcing any criminalrecord exclusions on PPP eligibility and, at a minimum, should stay the application deadline for 21 days.
5 https://cjars.isr.umich.edu/wp-content/uploads/CJARS_PPP_Statistical_Brief.pdf 12

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B. The SBA’s “Sue-Or-Be-Sued” Clause Does Not Insulate the Agency from Judicial Review of Its Policymaking. Defendants also attempt to totally insulate the SBA from judicial review of its policies by arguing that the SBA’s sue-and-be-sued clause, 15 U.S.C. § 634(b)(1), prevents any injunction whatsoever against the agency. See Opp. at 41–42. As a threshold matter, Defendants here include not just the SBA and its Administrator but also the Department of the Treasury and its Secretary. Other courts confronting Defendants’ same argument have recently explained that “those Defendants ‘do not claim to be immune from injunctive relief; nor do they claim that they could not grant the plaintiffs access to the PPP unless the SBA were also enjoined.’” DV Diamond Club of Flint v. U.S. Small Bus. Admin., No. 20-CV-10899, 2020 WL 2315880, at *8 (E.D. Mich. May 11, 2020) (quoting Camelot Banquet Rooms v. U.S. Small Bus. Admin, No. 20-C-0601, 2020 WL 2088637, at *3 (E.D. Wisc. May 1, 2020)), aff’d, 2020 WL 2988528 (6th Cir. May 15, 2020). That alone disposes of Defendants’ argument. But even taking Defendants’ argument on its own terms, Defendants provide no sound basis for concluding that injunctive relief is never available against the SBA acting in its policymaking capacity. Defendants have elsewhere taken a conflicting position, conceding that “courts ‘have held that [section 634(b)(1)] does not necessarily bar injunctions against the SBA in all circumstances.’” Id. (quoting Defendants’ brief in that case). And none of the Fourth Circuit cases Defendants cite discusses whether an injunction is available against the SBA in its policymaking capacity; they address only the very different context where a party seeks to attach, foreclose on, or
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otherwise restrain SBA property. See J.C. Driskill, Inc. v. Abdnor, 901 F.2d 383, 386 (4th Cir. 1990) (“section 634(b)(1) precludes the imposition of an equitable lien”); see also Duncan v. Furrow Auction Co., 564 F.2d 1107, 1109 (4th Cir. 1977) (dissolving an injunction restraining the SBA’s sale of collateral); Vincent v. Small Bus. Admin., 402 F.2d 769, 770 (4th Cir. 1968) (dissolving an injunction restraining the foreclosure of real property).6 As a Court in this District explained just yesterday: “Significantly, none of these cases concerns the scope of § 634(b)(1),” and “these decisions are materially distinguishable from the one sub judice,” which “concerns the SBA in its capacity as a regulatory agency.” Tradeways, Ltd. v. Dep’t of Treasury, No. ELH 201324, 2020 WL 3447767, at *10 (D. Md. June 24, 2020).
Accordingly, courts have recognized that section 634(b)(1) “protects the agency from interference with its internal workings by judicial orders attaching agency funds, etc., but … it should not be interpreted as a bar to judicial review of agency actions that exceed agency authority where the remedies would not interfere with internal agency operations.” Ulstein Mar., Ltd. v. United States, 833 F.2d 1052, 1057 (1st Cir. 1987); see Opening Br. 33–35. This interpretation is consistent with the presumption that “[s]ue-and-be-sued clauses … ‘should be liberally construed.’” Thacker v. Tenn. Valley Auth., 139 S. Ct. 1435, 1441 (2019) (quoting Fed. Housing
6 Defendants also cite a more recent Fifth Circuit case, In re Hidalgo County Emergency Service Foundation, No. 20-40368, 2020 WL 3411190 (5th Cir. June 22, 2020). But the question was not presented because the plaintiff conceded that “all injunctive relief directed at the SBA is absolutely prohibited” and sought only “an exception to that absolute prohibition under [the case’s] extreme facts and highly compressed time frame.” Id. at *1 (citation omitted).
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Admin. v. Burr, 309 U.S. 242, 245 (1940)). And it is consistent with the text of section 634(b)(1), whose prohibition on injunctions must be read in context with the terms that surround it—“attachment, injunction, garnishment, or other similar process”— making clear that the provision is not intended to be a blanket ban on any injunction, but only on injunctions in the nature of attachment or garnishment, i.e., those that attach agency funds or otherwise interfere with the agency’s internal workings. See Burr, 309 U.S. at 245–46 (“Garnishment and attachment commonly are part and parcel of the process, provided by statute, for the collection of debts.”); see also Tradeways, 2020 WL 3447767, at *11 (finding it reasonable that “the term ‘injunction’ in § 634(b)(1) should be read to prohibit courts from interfering with the SBA’s commercial operations or property, but not to bar all relief”). To hold otherwise would mean that “a court could not enjoin” a “policy stating that [the SBA] will extend small business loans only to companies owned by white men ... even though it would be blatantly unconstitutional.” Camelot Banquet Rooms, Inc., 2020 WL 2088637, at *4. Put another way, the SBA is not immune from the APA.
C. The Separation of Powers Is No Bar To Staying the PPP Application Deadline. Finally, Defendants claim that extending the PPP application deadline by a few weeks would violate the CARES Act and somehow erode the separation of powers by commandeering Congress’s appropriation authority. Opp. at 42–43. But staying the PPP application deadline is well within this Court’s established equitable powers. See Connecticut v. Schweiker, 684 F.2d 979, 997 (D.C. Cir. 1982) (“This court has repeatedly ‘reaffirmed the power of the courts to order that funds be held
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available beyond their statutory lapse date if equity so requires’ … [T]he power to prevent the statutory lapse or reversion of an agency’s budget authority does not conflict with Congress’ exclusive power to appropriate funds.” (citation omitted)).
More still, there is no need to force any appropriation from Congress, as Congress already appropriated $650 million to fund the SBA’s obligations under the PPP, $128 billion of which remains unclaimed. And Congress expressly provided a multiple-month application window to ensure this relief was meaningfully available. The SBA, however, unjustifiably kept that window closed for almost the entire application period. Merely giving wrongfully excluded applicants additional time to apply would thus advance, not thwart, Congress’s will. See Opp. at 43. III. The Remaining Criminal-Record Exclusions Still Fail To Pass Muster Under The CARES Act Or The APA.
A. The CARES Act Forbids SBA-imposed Barriers to PPP Access. Defendants fail to show why the criminal-record exclusions that continue to apply after Yesterday’s IFR do not run afoul of the CARES Act’s plain text. That statute’s text provides that “any business concern … shall be eligible” for PPP funds provided it satisfies the enumerated size requirements. 15 U.S.C. § 636(a)(36)(D)(i) (emphasis added). It does not allow the SBA to impose its own invented limitations on eligibility and thereby flout Congress’s mandate to provide broad emergency relief to the entire American small-business workforce. See Opening Br. at 13–22. Defendants’ argument proceeds from the assumption that the PPP is intended to be just like the SBA’s existing 7(a) loan program, subject only to several minor tweaks. Opp. at 21–25. Defendants’ argument closely follows the analysis in a recent
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district court opinion, which concluded that the CARES Act does not unambiguously bar the SBA from imposing bankruptcy-related PPP eligibility restrictions. Id. at 23– 25 (citing Diocese of Rochester v. Small Bus. Admin., No. 20-CV-6243, 2020 WL 3071603 (W.D.N.Y. June 10, 2020)).7 That argument relies on an inference from provisions in the CARES Act “expressly lift[ing] particular Section 7(a) limitations for PPP purposes” to argue that limitations not so lifted may still apply. Opp. at 22; see, e.g., 15 U.S.C. § 636(a)(36)(I) (lifting “credit elsewhere” requirement). As to the statute’s “shall” “any” language, Defendants claim that the provision, read in context, serves only to relax “certain size restrictions.” Opp. at 24.
But Defendants start from a faulty premise that leads to a wrong result. Congress has given every indication that the PPP serves an entirely different purpose so is subject to different rules than the SBA’s ordinary 7(a) loan program. See Opening Br. at 19–22. (For starters, PPP funds function as grants, not loans. Id.) While the SBA “may guarantee covered loans under the same terms, conditions, and processes” as non-PPP loans, it may do so “[e]xcept as otherwise provided.” 15 U.S.C. § 636(a)(36)(B). And section 636(a)(36)(D)(i) otherwise provides by mandatorily (“shall”) expanding eligibility to all (“any”) businesses that satisfy the stated size requirement. True, as Defendants note, this has the effect of lifting SBA’s ordinary size restriction, but it also—unambiguously—makes its newly announced size
7 A decision issued in this District yesterday reached the same result for similar reasons. See Tradeways, Ltd., 2020 WL 347767, at *14 (citing Diocese of Rochester to conclude that “nothing in the CARES Act unambiguously addresses whether the bankruptcy debtors are eligible to participate in the PPP”).
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restriction the only eligibility restriction the SBA may apply. Opening Br. at 13–18. Defendants read statutory provisions isolated from context when they claim
that Congress’s stated abrogation of certain SBA restrictions means that all restrictions not so enumerated are preserved.8 As another court rejecting this argument explained, this “stretch[es] the expression unius canon too far.” DV Diamond Club, 2020 WL 2315880, at *12. “Congress’s statement in one provision that [certain requirements] do not apply to PPP loan guarantees does not—by virtue of the expression unius canon—overcome Congress’s unambiguous statement in another provision that the sole requirements for PPP loan guarantee eligibility are that (1) during the covered period (2) a business concern has less than the specified number of employees.” Id. at *13.
Finally, Defendants worry that Plaintiffs are looking for an elephant in a mousehole. Opp. at 26. But as the Supreme Court explained in interpreting Title VII, in language that applies no less to the CARES Act: “[W]here’s the mousehole? [The CARES Act] is a major piece of federal [funding] legislation. It is written in starkly broad terms. ... This elephant has never hidden in a mousehole; it has been standing before us all along.” Bostock v. Clayton Cty., Georgia, No. 17-1618, 2020 WL 3146686, at *17 (U.S. June 15, 2020). It is unremarkable that Congress, when enacting unprecedented emergency stimulus legislation, would draft language broad
8 Defendants’ reference to the waiver of a regulation relating to determining affiliate relationships is a non sequitur. See Opp. at 22. That requirement would otherwise still apply notwithstanding the CARES Act’s broadening of eligibility, as it relates to how to determine whether a business meets the Act’s size requirement.
18

Case 1:20-cv-01838-CCB Document 34 Filed 06/25/20 Page 24 of 27
enough to guarantee pay through a pandemic to Americans who work for businesses that might not ordinarily be eligible for certain other SBA-guaranteed loans.
B. The Remaining Exclusions Still Run Afoul of the APA. Just last week, the Supreme Court very clearly stated the fundamental standard of reasoned decision-making an agency must meet: Justice Holmes famously wrote that men must turn square corners when they deal with the Government. But it is also true, particularly when so much is at stake, that the Government should turn square corners in dealing with the people. The basic rule here is clear: An agency must defend its actions based on the reasons it gave when it acted. Dep’t of Homeland Sec. v. Regents of the Univ. of California, 2020 WL 3271746, at *11 (U.S. June 18, 2020) (citations and alterations omitted). Yet here, where so much is at stake, the SBA violated this “foundational principle of administrative law.” Id. at *9 (internal quotation omitted). When the SBA announced the criminal-record exclusions on the PPP, it did so without any explanation, much less the reasoned explanation that the APA requires. See Opening Br. at 25–29. Nor does Yesterday’s IFR change any of that. Not only do the reasons given fail to address the exclusions’ impact, the SBA expressly acknowledges it cannot even measure the reach of its actions. See Opp. at 44. But the SBA’s stated concern for PPP applicants’ creditworthiness and risk of future incarceration—which purportedly justified the wholesale importation of the SBA’s existing criteria to PPP loans, see id. at 30–34—cannot be squared with the PPP’s entirely unique purpose and funding structure.9 By importing existing restrictions onto a new program
9 Nor can this Court even consider those reasons, as they are offered only in the
19

Case 1:20-cv-01838-CCB Document 34 Filed 06/25/20 Page 25 of 27
without accounting for the differences between the two, the SBA “failed to consider … important aspect[s] of the problem.” Regents, 2020 WL 3271746, at *11 (quoting Motor Vehicle Mfrs. Assn. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).
The haste with which Yesterday’s IFR was announced only illustrates the SBA’s haphazard approach to this issue of tremendous importance to the lives and livelihoods of the countless small-business owners with criminal records and those who work for them. With mere days to go before the June 30 application deadline, the SBA changed the scope of the criminal-record exclusions—this after inconsistent pronouncements across rules and forms over the past two-and-a-half months. As discussed above, the confusion and uncertainty this creates virtually guarantees that any increased eligibility will be rendered meaningless. The agency’s “[il]logical and [ir]rational” process is alone disqualifying and this Court must step in to ensure that all small business owners and their workers may benefit from Congress’s promised relief. Michigan v. E.P.A., 135 S. Ct. 2699, 2706 (2015) (citation omitted).
CONCLUSION For the reasons set forth above, the Court should grant the motion. It should stay the PPP application deadline for 21 days, up to and including July 21, 2020. And it should strike the remaining criminal-record exclusions.
form of impermissible post-hoc rationalization by way of a declaration attached to Defendants’ opposition. See Opp. at 33. They find no purchase in the original record before the SBA when it acted. Roe, 947 F.2d at 221 (“[P]ost-hoc materials must … be merely explanatory of the original record and … contain no new rationalizations” (quotation omitted)).
20

Case 1:20-cv-01838-CCB Document 34 Filed 06/25/20 Page 26 of 27

Dated:

June 25, 2020

Respectfully submitted,

/s/ Kali N. Bracey

ReNika C. Moore (Admitted PHV) Alejandro A. Ortiz (Admitted PHV) Jennesa Calvo-Friedman (Admitted PHV) AMERICAN CIVIL LIBERTIES UNION FOUNDATION 125 Broad St., 18th Floor New York, NY 10004 Tel: (212) 549-2500 Fax: (212) 549-2654 RMoore@ACLU.org OrtizA@ACLU.org JCalvo-Friedman@ACLU.org
Joanna K. Wasik (Federal Bar No. 21063) Hannah E. M. Lieberman (Federal Bar No. 05456) WASHINGTON LAWYERS’ COMMITTEE FOR CIVIL RIGHTS AND URBAN AFFAIRS 700 14th St. NW, Ste 400 Washington, DC 20005 Tel.: (202) 319-1000 Fax: (202) 319-1010 Joanna_Wasik@washlaw.org Hannah_Lieberman@washlaw.org

Kali N. Bracey (Federal Bar No. 20752) Elizabeth B. Deutsch (Admitted PHV) JENNER & BLOCK LLP 1099 New York Avenue NW, Suite 900 Washington, DC 20001 Tel.: (202) 639-6000 Fax: (202) 639-6066 KBracey@Jenner.com EDeutsch@Jenner.com
Jacob D. Alderdice (Admitted PHV) JENNER & BLOCK LLP 919 Third Avenue New York, NY 10022 Tel.: (212) 891-1625 Fax: (212) 891-1699 JAlderdice@Jenner.com
Zachary D. Tripp (Admitted PHV) Lauren E. Morris (Admitted PHV) WEIL, GOTSHAL & MANGES LLP 2001 M Street, NW, Suite 600 Washington, DC 20036 Tel.: (202) 682-7000 Zack.Tripp@Weil.com Lauren.Morris@Weil.com

Claudia De Palma (Admitted PHV) PUBLIC INTEREST LAW CENTER 1500 JFK Blvd., Suite 802 Philadelphia, PA 19102 Tel: (215) 627-7100 cdepalma@pubintlaw.org

Robert B. Niles-Weed (Admitted PHV) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Tel.:(212) 310-8000 Robert.Niles-Weed@Weil.com

21

Case 1:20-cv-01838-CCB Document 34 Filed 06/25/20 Page 27 of 27
CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on this 25th day of June 2020, Plaintiffs’ Reply Memorandum in Support of Emergency Motion for Preliminary Injunction (including exhibits) was served via the Court’s CM/ECF system on all counsel of record in accordance with the Federal Rules of Civil Procedure and the Local Rules of the United States District Court for the District of Maryland.
/s/ Kali Bracey Kali Bracey (Bar No. 20752)

Case 1:20-cv-01838-CCB Document 34-1 Filed 06/25/20 Page 1 of 2

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.
Defendants.

CASE NO.: 20-cv-01838-CCB

DECLARATION OF AFRAZ KHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION I, Afraz Khan, declare:
1. I submit this declaration in support of Plaintiffs’ Motion for a Preliminary Injunction. 2. I am a Legal Assistant with the American Civil Liberties Union Foundation Racial Justice Program, and counsel to Plaintiffs in the above-captioned case. I submit this declaration in support of Plaintiff’s Reply Brief. Based upon my work in this case, I have become familiar with and obtained knowledge of the documents attached to this affidavit. The following facts are within my personal knowledge, and, if called and sworn as a witness, I could and would testify competently to them. 3. Exhibit 1 is a true and correct copy of JPMorgan Chase Bank’s Paycheck Protection Program (PPP) loan application. 4. Exhibit 2 is a true and correct copy of Citibank’s PPP information webpage. 5. Exhibit 3 is a true and correct copy of U.S. Bank’s PPP information webpage. 6. Exhibit 4 is a true and correct copy of PNC Bank’s PPP information webpage. 7. Exhibit 5 is a true and correct copy of TD Bank’s PPP information webpage. 8. Exhibit 6 is a true and correct copy of HSBC Bank USA’s PPP information webpage.
1

Case 1:20-cv-01838-CCB Document 34-1 Filed 06/25/20 Page 2 of 2

I, Afraz Khan, pursuant to 28 U.S.C § 1746 and subject to the penalties of perjury, declare the Foregoing is true and correct.

Dated: June 25, 2020

______________________________ Afraz Ahmed Khan

2

Case 1:20-cv-01838-CCB Document 34-2 Filed 06/25/20 Page 1 of 2
EXHIBIT 1

Case 1:20-cv-01838-CCB Document 34-2 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-3 Filed 06/25/20 Page 1 of 2
EXHIBIT 2

Case 1:20-cv-01838-CCB Document 34-3 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-4 Filed 06/25/20 Page 1 of 2
EXHIBIT 3

Case 1:20-cv-01838-CCB Document 34-4 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-5 Filed 06/25/20 Page 1 of 2
EXHIBIT 4

Case 1:20-cv-01838-CCB Document 34-5 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-6 Filed 06/25/20 Page 1 of 2
EXHIBIT 5

Case 1:20-cv-01838-CCB Document 34-6 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-7 Filed 06/25/20 Page 1 of 2
EXHIBIT 6

Case 1:20-cv-01838-CCB Document 34-7 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-8 Filed 06/25/20 Page 1 of 3

UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND

DEFY VENTURES Inc. et al,

Plaintiffs,
v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

No. 20-cv-01838-CCB

SUPPLEMENTAL DECLARATION OF ANDREW GLAZIER IN SUPPORT OF PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
I, Andrew Glazier, declare:
1. I am over the age of eighteen. I have personal knowledge of the facts stated herein and am competent to testify to them. 2. I am the President and CEO of Defy Ventures (“Defy”). 3. I learned on June 24, 2020, that the Small Business Administration (“SBA”) had issued a new rule narrowing the categories of small business owners who were excluded from eligibility for Paycheck Protection Program (“PPP”) loans based on their criminal history. 4. Since I learned of the June 24 rule, I have made efforts to make newly eligible business owners, including Defy graduates, aware of it. This is a very urgent situation because I understand that the current application deadline for PPP loans is June 30, 2020. 5. I and my team have begun the process of contacting all of the graduates of Defy’s programs who were previously ineligible to apply for PPP loans, but who are eligible under the new rule, to let them know of the change.

1

Case 1:20-cv-01838-CCB Document 34-8 Filed 06/25/20 Page 2 of 3
6. We are also in the process of posting links to the new rule and application form on the Defy website, and drafted a message sharing information and encouraging other organizations to spread the word as well. Defy has also drafted an alert sharing details of the new rule, which we intend to send to our contacts today. Due to the urgency of this situation, I have been forced to focus on these outreach efforts instead of working on Defy’s other, regularly-scheduled programming. 7. It is my understanding that, despite the issuance of the new rule, newly-eligible business owners are still encountering problems in the PPP application process — sometimes preventing their ability to apply altogether — due to the fact that the rule was only very recently changed. 8. For example, I learned from a Defy graduate that, when he sought to apply for a PPP loan on June 24, 2020 and June 25, 2020, he found that the online application forms of various lenders still contained the same questions about criminal record (Questions 5 and 6) that were operative under the previous version of SBA’s rule. The websites of other lenders had only partially updated their application forms to conform to the June 24 rule. 9. That graduate tried numerous lender websites to apply for the PPP in light of the rule change —including fundingcircle.com; bluevine.com; paypal.com; mbecp.com; and loanbuilder.com. For all of these sites, the criminal history questions were either not updated to reflect the rule change or had been only partially updated. A screen shot for one of these sites, fundingcircle.com, which I obtained from this Defy graduate via email, is attached hereto as Exhibit 1. 10. This latest, last-minute change leaves newly-eligible business owners in a quandary and leaves me unsure as to how I should advise Defy’s graduates. I have discussed a few theoretical options, including an instruction that graduates call lenders and ask to speak with the loan officers to inform them of SBA’s new rule; or that graduates should use lenders’ online portals and simply answer “no” to the now-defunct, but still-listed, Questions 5 and 6. I have also spent
2

Case 1:20-cv-01838-CCB Document 34-8 Filed 06/25/20 Page 3 of 3
time brainstorming whether there is another method by which Defy graduates could apply for PPP loans. 11. It is clear that, although SBA has changed its rule to narrow the categories of exclusions, SBA must do much more to implement the new rule so that newly-eligible business owners can actually apply for PPP loans. My staff and I are continuing to devote time and resources to guiding our graduates in response to the SBA’s latest rule change, at the expense of our ongoing work. Further, we are being contacted by affected individuals who are not part of our program but seeking guidance from us.
I declare under penalty of perjury of the laws of the United States and the state of California that the foregoing is true and correct. This Declaration was signed by me on June 25, 2020, at Los Angeles, CA.
______________________________ Andrew Glazier
3

Case 1:20-cv-01838-CCB Document 34-9 Filed 06/25/20 Page 1 of 2
Exhibit 1

Case 1:20-cv-01838-CCB Document 34-9 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-10 Filed 06/25/20 Page 1 of 4

UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND

DEFY VENTURES Inc. et al,

Plaintiffs,
v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

No. 20-cv-01838-CCB

SUPPLEMENTAL DECLARATION OF SEKWAN MERRITT IN SUPPORT OF PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
I, Sekwan Merritt, declare:
1. I am over the age of eighteen. I have personal knowledge of the facts stated herein and am competent to testify to them. 2. I am the owner of Prop Prep Properties LLC, d/b/a Lightning Electric, a small electrical contracting business. 3. I learned on June 24, 2020, that the Small Business Administration (“SBA”) had issued a new rule narrowing the categories of small business owners who were excluded from eligibility for Paycheck Protection Program (“PPP”) loans based on their criminal history. 4. As a result of this new rule, I am now eligible for a PPP loan. 5. Since learning of this rule, I have made efforts to apply for a PPP loan so that Lightning Electric can obtain crucial assistance during the COVID-19 pandemic. 6. On June 24, 2020, I was told to provide the SBA with contact information for my bank lender, so that the SBA could advise them that my business should not be found ineligible for PPP financing on the basis of the old criminal record exclusion.
1

Case 1:20-cv-01838-CCB Document 34-10 Filed 06/25/20 Page 2 of 4
7. I immediately provided the contact information for my local Wells Fargo branch where I have a business account, 2012 E. Joppa Rd, Parkville, Maryland, 21234, (410) 663-6268. 8. I also called my local branch and left a message for the bank business manager. 9. I then tried to submit a new PPP application through Wells Fargo’s online portal, but discovered an alert on the home page that says “We’re currently not accepting new Paycheck Protection Program applications.” A screenshot of this alert is attached hereto as Exhibit 1. 10. On June 25, 2020, I was told that the SBA needed a specific point of contact at my bank and his or her email address in order to help me apply for a PPP loan. 11. I called my local Wells Fargo branch again and asked the bank representative to transfer me to the bank business manager. I was put on hold for almost 30 minutes. When the bank representative came back to the phone, she told me that PPP loans are only processed online, not through the local branch. 12. When I explained that Wells Fargo’s online portal was not accepting new PPP applications, the bank representative provided me with a toll-free number for Wells Fargo customer service, but said that there probably wasn’t any point in calling if the online portal said it was closed to new applications. 13. Later the same day, I called my local branch again and specifically explained that I needed to provide the SBA with a point of contact at Wells Fargo so that I could apply for a PPP loan. 14. The bank representative told me there was no one at the branch that could help me and told me to call Wells Fargo’s business loan program. He provided me with another toll-free number and told me to press “2”. 15. I asked if this would allow me to get the name and email address for a point of contact to give the SBA. The bank representative said that someone in the business loan program would assign me a point of contact.
2

Case 1:20-cv-01838-CCB Document 34-10 Filed 06/25/20 Page 3 of 4
16. I called the toll-free number for the Wells Fargo business loan program and explained to the phone representative that because of the SBA’s rule change, I was now eligible for a PPP loan and needed assistance. 17. The representative told me to call Wells Fargo’s PPP line and gave me another toll-free number. 18. I called that number, which led to the “Wells Fargo PPP Assistance Line.” 19. I waited on hold for almost 40 minutes. 20. I finally reached a phone representative and explained that because of the SBA’s rule change, I was now eligible to apply for a PPP loan and needed assistance. 21. The representative confirmed that Wells Fargo was no longer accepting new PPP applications, because they are “trying to finish out the last batch we have.” 22. She also told me there was no way to modify or reopen my declined application, which I submitted on April 15, 2020. 23. She told me that my only option was to go to the SBA’s website and find a lender that is still accepting applications. 24. At this time, I am uncertain whether I will be able to obtain the PPP funding for which I am now otherwise eligible. 25. As set forth in my prior Declaration dated June 15, 2020, I need this funding to pay the electricians working for Lightning Electric and to cover the costs necessary for running the business, including general liability insurance. Without this funding, there is a real risk that my business may not survive.
I declare under penalty of perjury of the laws of the United States and the state of Maryland that the foregoing is true and correct.
3

Case 1:20-cv-01838-CCB Document 34-10 Filed 06/25/20 Page 4 of 4 This Declaration was signed by me on __J_u_n_e__2_5______________ (month and day), 2020, at __O__d_e_n_t_o_n_, _M_a_r_y_la_n_d________________________ (city, state).
______________________________ Sekwan Merritt
4

Case 1:20-cv-01838-CCB Document 34-11 Filed 06/25/20 Page 1 of 2
Exhibit 1

Case 1:20-cv-01838-CCB Document 34-11 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-12 Filed 06/25/20 Page 1 of 2

UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al.

Plaintiffs,
v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

No. 20-cv-01838-CCB

SUPPLEMENTAL DECLARATION OF JOHN D. GARLAND IN SUPPORT OF PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
I, John D. Garland, declare:
1. I am over the age of eighteen. I have personal knowledge of the facts stated herein and am competent to testify to them. 2. I am the majority owner and President of Sign Me Up Bethpage, Inc. d/b/a Fastsigns 2323 (“Fastsigns Bethpage”). 3. I learned on June 24, 2020, that the Small Business Administration (“SBA”) had issued a new rule narrowing the categories of small business owners who were excluded from eligibility for Paycheck Protection Program (“PPP”) loans based on their criminal history. 4. I am now eligible to apply for a PPP loan for Fastsigns Bethpage because the June 24 rule no longer excludes individuals like myself who have pending misdemeanor charges. 5. Since learning of this rule, I have made efforts to apply for a PPP loan so that Fastsigns Bethpage and its employees can obtain this crucial assistance during the COVID-19 pandemic.

1

Case 1:20-cv-01838-CCB Document 34-12 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-13 Filed 06/25/20 Page 1 of 2
Exhibit 1

Case 1:20-cv-01838-CCB Document 34-13 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-14 Filed 06/25/20 Page 1 of 2
Exhibit 2

Case 1:20-cv-01838-CCB Document 34-14 Filed 06/25/20 Page 2 of 2

Case 1:20-cv-01838-CCB Document 34-15 Filed 06/25/20 Page 1 of 2
Exhibit 3

6/25/2020

Borrower Portal - Powered by Lendio
Case 1:20-cv-0L1e8a3s8e-C/ MCBortgDaogceuImnteenret s3t4-15 Filed 06/25/20 Page 2 of 2 Utilities Other
Loan Purpose Other Reason
Inventory

General Questions

If questions (1), (2), (5), or (6) below are answered "Yes" or question (7) below is answered "No", the loan will not be approved.

. Is the Applicant or any owner of the Applicant presently Yes

suspended, debarred, proposed for debarment,

declared ineligible, voluntarily excluded from

participation in this transaction by any Federal

No

department or agency, or presently involved in any

bankruptcy?

. Has the Applicant, any owner of the Applicant, or any

Yes

business owned or controlled by any of them, ever

obtained a direct or guaranteed loan from SBA or any

other Federal agency that is currently delinquent or has No

defaulted in the last 7 years and caused a loss to the

government?

. Is the Applicant or any owner of the Applicant an

Yes

owner of any other business, or have common

management with, any other business?

No

List all such businesses and describe the relationships
FASTSIGNS in Babylon

. Has the Applicant received an SBA Economic Injury

Yes

Disaster Loan between January 31, 2020 and April 3,

2020?

No

. Is the Applicant (if an individual) or any individual

Yes

owning 20% or more of the equity of the Applicant

subject to an indictment, criminal information,

arraignment, or other means by which formal criminal

No

charges are brought in any jurisdiction, or presently

incarcerated, or on probation or parole?

. Within the last 5 years, for any felony involving fraud,

bribery, embezzlement, or a false statement in a loan

application or an application for federal ﬁnancial

Yes

assistance, or within the last year, for any other felony,

has the Applicant (if an individual) or any owner of the No
Applicant 1) been convicted; 2) pleaded guilty; 3)

pleaded nolo contendere; or 4) been placed on any

form of parole or probation (including probation before

judgment)?

. Is the United States the principal place of residence for

Yes

all employees of the Applicant included in the

Applicant’s payroll calculation above?

No

. Is the Applicant a franchise that is listed in the SBA’s

Yes

Franchise Directory?

No

We collect data to improve your browsing experience and to recommend valuable services. By continuing to use this website you consent to our privacy
Question?
policy.

SBA Franchise Identiﬁer Code

https://www.lendio.com/bp/covid-relief/business-info?tier=5&mineral=coal

2/3

 
 Case 1:20-cv-01838-CCB Document 38 Filed 06/29/20 Page 1 of 4
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,

CASE NO.: 20-cv-1838

v.

U.S. SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

UPDATE IN RESPONSE TO COURT’S REQUEST FOR CLARIFICATION AT JUNE 29, 2020 CONFERENCE CALL

Case 1:20-cv-01838-CCB Document 38 Filed 06/29/20 Page 2 of 4
In response to the Court’s request at today’s conference call, Plaintiffs submit the attached proposed order governing the scope of relief as to a stay of the CARES Act’s June 30, 2020, deadline for application to and approval for funding under the Paycheck Protection Program (“PPP”).1
Plaintiffs respectfully request that the Court’s order apply only in the locations that Individual Plaintiffs and Plaintiffs Defy Ventures, Inc., operate: Maryland, New York, Connecticut, California, Illinois, Colorado, and Washington. The U.S. Court of Appeals for the Seventh Circuit affirmed just this month two important principles that justify this narrowed relief: (1) an organization such as Defy Ventures may suffer “cognizable injuries” due to harm to its organizational mission and diversion of resources by operation of a federal rule sufficient to establish standing; and (2) relief in such cases is appropriate at least covering the states or jurisdictions in which plaintiffs operate. See Cook Cty., Ill. v. Wolf, No. 19-3169, 2020 WL 3072046, at *3, 5, 17 (7th Cir. June 10, 2020). This relief is available and justified under traditional equitable principles. The court should tailor preliminary relief to afford “complete relief to Plaintiffs.” Califano v. Yamasaki, 442 U.S. 682, 702 (1979). As a result, a stay of the statutory PPP deadline is required in the jurisdictions where all plaintiffs reside.
A proposed order is attached.
1 Plaintiffs continue to believe that the relief requested in their moving papers is justified and that this Court is authorized to award it for the reasons given therein. Plaintiffs respond only to the Court’s question of the appropriate narrowing of relief assuming the June 24 Interim Final Rule is valid.

Case 1:20-cv-01838-CCB Document 38 Filed 06/29/20 Page 3 of 4

Dated:

June 29, 2020

Respectfully submitted,

/s/ Kali N. Bracey

ReNika C. Moore (Admitted PHV) Alejandro A. Ortiz (Admitted PHV) Jennesa Calvo-Friedman (Admitted PHV) AMERICAN CIVIL LIBERTIES UNION FOUNDATION 125 Broad St., 18th Floor New York, NY 10004 Tel: (212) 549-2500 Fax: (212) 549-2654 RMoore@ACLU.org OrtizA@ACLU.org JCalvo-Friedman@ACLU.org
Joanna K. Wasik (Federal Bar No. 21063) Hannah E. M. Lieberman (Federal Bar No. 05456) WASHINGTON LAWYERS’ COMMITTEE FOR CIVIL RIGHTS AND URBAN AFFAIRS 700 14th St. NW, Ste 400 Washington, DC 20005 Tel.: (202) 319-1000 Fax: (202) 319-1010 Joanna_Wasik@washlaw.org Hannah_Lieberman@washlaw.org

Kali N. Bracey (Federal Bar No. 20752) Elizabeth B. Deutsch (Admitted PHV) JENNER & BLOCK LLP 1099 New York Avenue NW, Suite 900 Washington, DC 20001 Tel.: (202) 639-6000 Fax: (202) 639-6066 KBracey@Jenner.com EDeutsch@Jenner.com
Jacob D. Alderdice (Admitted PHV) JENNER & BLOCK LLP 919 Third Avenue New York, NY 10022 Tel.: (212) 891-1625 Fax: (212) 891-1699 JAlderdice@Jenner.com
Zachary D. Tripp (Admitted PHV) Lauren E. Morris (Admitted PHV) WEIL, GOTSHAL & MANGES LLP 2001 M Street, NW, Suite 600 Washington, DC 20036 Tel.: (202) 682-7000 Zack.Tripp@Weil.com Lauren.Morris@Weil.com

Claudia De Palma (Admitted PHV) PUBLIC INTEREST LAW CENTER 1500 JFK Blvd., Suite 802 Philadelphia, PA 19102 Tel: (215) 627-7100 cdepalma@pubintlaw.org

Robert B. Niles-Weed (Admitted PHV) WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Tel.:(212) 310-8000 Robert.Niles-Weed@Weil.com

2

Case 1:20-cv-01838-CCB Document 38 Filed 06/29/20 Page 4 of 4
CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on this 29th day of June 2020, Plaintiffs’ Response (with attached Proposed Order) was served via the Court’s CM/ECF system on all counsel of record in accordance with the Federal Rules of Civil Procedure and the Local Rules of the United States District Court for the District of Maryland.
/s/ Kali Bracey Kali Bracey (Bar No. 20752)

Case 1:20-cv-01838-CCB Document 38-1 Filed 06/29/20 Page 1 of 1

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

DEFY VENTURES, INC., et al., Plaintiffs,
v. U.S. SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

CASE NO.: 20-cv-1838

[PROPOSED] ORDER Upon consideration of Plaintiffs’ Motion for Preliminary Injunction, and upon consideration of the record herein, it is, by this Court, on this ___ day of _________, 2020, ORDERED that said Motion is GRANTED in PART and DENIED in PART; and it is further ORDERED that the Paycheck Protection Program (“PPP”) application and approval deadline shall hereby be extended 21 days, to July 21, 2020, for applicants ineligible under Defendants’ now withdrawn criminal-record exclusions of the June 12 Interim Final Rule. To afford Plaintiffs complete relief, the PPP deadline shall be stayed and extended only in the states in which the Individual Plaintiffs are located or where Plaintiff Defy Ventures has chapters and affiliates: Maryland, California, Colorado, Connecticut, Illinois, New York, and Washington.

_______________________ Judge Catherine C. Blake United States District Judge

 
 Case 1:20-cv-01838-CCB Document 32 Filed 06/25/20 Page 1 of 2

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al., Plaintiffs,
v. UNITED STATES SMALL BUSINESS
ADMINISTRATION, et al., Defendants.
DEFY VENTURES, INC., , et al., Plaintiffs,
v. UNITED STATES SMALL BUSINESS
ADMINISTRATION, et al., Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) ) ) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DEFENDANTS’ NOTICE OF SUPPLEMENTAL AUTHORITY IN SUPPORT OF THEIR OPPOSITION TO PLAINTIFFS’ MOTIONS FOR
TEMPORARY RESTRAINING ORDERS OR PRELIMINARY INJUNCTIONS

Dated: June 25, 2020

JOSEPH H. HUNT Assistant Attorney General

JAMES J. GILLIGAN Special Litigation Counsel

DAVID M. MORRELL Deputy Assistant Attorney General

INDRANEEL SUR Trial Attorney

JOHN R. GRIFFITHS Director
ERIC WOMACK Assistant Director

Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 514-3358 E-mail: james.gilligan@usdoj.gov

Counsel for Defendants

Case 1:20-cv-01838-CCB Document 32 Filed 06/25/20 Page 2 of 2

The United States Small Business Administration, et al. (“Defendants”) respectfully submit

as supplemental authority the recent decision in Tradeways, Ltd. v. U.S. Dep’t of the Treasury, Civil

Action No. ELH-20-1324, 2020 WL 3447767 (D. Md. June 24, 2020) (attached). The decision did

not come to the attention of the undersigned counsel until after the filing of Defendants’ opposition

to Plaintiffs’ motions for temporary restraining orders or preliminary injunctions.* In Tradeways, the

District Court denied the plaintiff’s motion for a preliminary injunction, and rejected the plaintiff’s

contentions that “it is likely to show that the SBA’s decision,” in an Interim Final Rule, “to

disqualify bankruptcy debtors from the PPP contravenes the CARES Act” or “is arbitrary and

capricious.” 2020 WL 3447767 at *7. The District Court’s rejection of the plaintiff’s contentions

under the Administrative Procedure Act provide further support for Defendants’ opposition here.

See id. at *11-16.

Dated: June 25, 2020

Respectfully submitted,

JOSEPH H. HUNT Assistant Attorney General

JAMES J. GILLIGAN Special Litigation Counsel

DAVID M. MORRELL Deputy Assistant Attorney General
JOHN R. GRIFFITHS Director
ERIC WOMACK Assistant Director

/s/ Indraneel Sur INDRANEEL SUR Trial Attorney
Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 514-3358 E-mail: james.gilligan@usdoj.gov

Counsel for Defendants

* Defendants’ counsel notified Plaintiffs’ counsel this morning of the decision in Tradeways and Defendants’ intention to file this notice of supplemental authority.

 
 Case 1:20-cv-01838-CCB Document 36 Filed 06/26/20 Page 1 of 2

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al., Plaintiffs,
v. UNITED STATES SMALL BUSINESS
ADMINISTRATION, et al., Defendants.
DEFY VENTURES, INC., , et al., Plaintiffs,
v. UNITED STATES SMALL BUSINESS
ADMINISTRATION, et al., Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) ) ) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DEFENDANTS’ SECOND NOTICE OF SUPPLEMENTAL AUTHORITY IN SUPPORT OF THEIR OPPOSITION TO PLAINTIFFS’ MOTIONS FOR
TEMPORARY RESTRAINING ORDERS OR PRELIMINARY INJUNCTIONS

Dated: June 26, 2020

JOSEPH H. HUNT Assistant Attorney General

JAMES J. GILLIGAN Special Litigation Counsel

DAVID M. MORRELL Deputy Assistant Attorney General

INDRANEEL SUR Trial Attorney

JOHN R. GRIFFITHS Director
ERIC WOMACK Assistant Director

Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 616-8448 E-mail: indraneel.sur@usdoj.gov

Counsel for Defendants

Case 1:20-cv-01838-CCB Document 36 Filed 06/26/20 Page 2 of 2

The United States Small Business Administration, et al. (“Defendants”) respectfully submit

as supplemental authority the decision released today in Pharaohs GC, Inc. v. U.S. SBA, No. 20-cv-

665 (W.D.N.Y. June 26, 2020) (Doc. 18) (attached). In Pharaohs, U.S. District Judge Lawrence J.

Vilardo denied the plaintiff’s motion for a preliminary injunction, which sought to restrain the SBA

from denying eligibility for a PPP loan on the ground that the plaintiff was a business that

“[p]resent[ed] live performances of a prurient sexual nature.” 13 C.F.R. § 120.110(p); slip op. 1.

Instead, the District Court concluded that “SBA’s application of 13 C.F.R. 120.110 to the PPP is not

arbitrary, capricious, or manifestly contrary to the CARES Act.” Slip op. 13. The District Court’s

rejection of the plaintiff’s contentions under the Administrative Procedure Act provide further

support for Defendants’ opposition here. See id., slip op. at 6-13.

Dated: June 26, 2020

Respectfully submitted,

JOSEPH H. HUNT Assistant Attorney General

JAMES J. GILLIGAN Special Litigation Counsel

DAVID M. MORRELL Deputy Assistant Attorney General
JOHN R. GRIFFITHS Director
ERIC WOMACK Assistant Director

/s/ Indraneel Sur INDRANEEL SUR Trial Attorney
Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 616-8448 E-mail: indraneel.sur@usdoj.gov

Counsel for Defendants

 
 Case 1:20-cv-01838-CCB Document 37 Filed 06/27/20 Page 1 of 5

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
DEFY VENTURES, INC., , et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) )
) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DEFENDANTS’ NOTICE OF FILING

The United States Small Business Administration, et al. (“Defendants”) file herewith the

attached Declaration of William J. Briggs, regarding questions Plaintiffs raise in reply concerning

Defendants’ efforts “to ensure that newly eligible businesses are aware of or can benefit from” the

June 24, 2020, revisions to the First PPP Interim Final Rule. See, e.g., Defy Ventures Pls.’ Mem. in

Reply to Defs.’ Opp’n to Injunctive Relief, ECF No. 34, at 1.

Dated: June 26, 2020

Respectfully submitted,
JOSEPH H. HUNT Assistant Attorney General
DAVID M. MORRELL Deputy Assistant Attorney General

Case 1:20-cv-01838-CCB Document 37 Filed 06/27/20 Page 2 of 5
JOHN R. GRIFFITHS Director ERIC WOMACK Assistant Director /s/ James J. Gilligan JAMES J. GILLIGAN Special Litigation Counsel INDRANEEL SUR Trial Attorney Federal Programs Branch, Civil Division United States Department of Justice P.O. Box 883 Washington, D.C. 20044 Telephone: (202) 616-8448 E-mail: indraneel.sur@usdoj.gov Counsel for Defendants
2

Case 1:20-cv-01838-CCB Document 37 Filed 06/27/20 Page 3 of 5

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CARMEN’S CORNER STORE, et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
DEFY VENTURES, INC., , et al.,
Plaintiffs, v.
UNITED STATES SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.

) ) ) ) ) ) No. 1:20-cv-1736-CCB ) ) ) ) ) ) ) ) ) ) ) No. 1:20-cv-1838-CCB ) ) ) ) )

DECLARATION OF WILLIAM J. BRIGGS

I, William J. Briggs, for my declaration pursuant to 28 U.S.C. § 1746, depose and say as

follows:

1. I am a Deputy Associate Administrator for the Office of Capital Access of the United

States Small Business Administration (“SBA”). The Office of Capital Access is responsible for

the operation of and development of policy for the SBA’s business loan programs authorized

under Section 7(a) of the Small Business Act, and the Paycheck Protection Program (“PPP”)

authorized under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. I am

knowledgeable about the Section 7(a) and PPP programs.

2. I submit this declaration in support of the Defendants’ opposition to the Plaintiffs’

motions for temporary restraining orders and preliminary injunctions in the above-captioned

Case 1:20-cv-01838-CCB Document 37 Filed 06/27/20 Page 4 of 5
actions. The statements contained in this declaration are based on my personal knowledge and information made available to me in the course of carrying out my duties and responsibilities as SBA Deputy Associate Administrator for the Office of Capital Access.
3. Attached to this declaration is a true and correct copy of the Paycheck Protection Program (PPP) Policy Update issued by the SBA on Wednesday, June 24, 2020. The update notifies recipients that there have been eligibility revisions to the PPP First Interim Final Rule (85 Fed. Reg. 20811 (Apr. 15, 2020)), and provides a link to the rule amendment concerning the eligibility of applicants and applicant owners with criminal justice histories.
4. In accordance with SBA practice concerning policy updates of this nature, on June 24, 2020, at 10:45 a.m. eastern time, I e-mailed the attached update to a distribution list that includes 18 national trade associations for all types of lenders, large individual lenders, and most new non-bank lenders; SBA field staff and senior headquarters staff; external affairs officials at the Federal Reserve, FDIC, OCC, NCUA, Treasury, the SEC, and USDA, who actively engage with multiple lender communities; the Minority Business Development Agency at the Department of Commerce; State bank supervisors; and major business groups, religious organizations and non-profit council groups.
5. The update asks that each recipient “[p]lease distribute this message throughout your PPP lending community.”
Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief.
Executed this 27th day of June, 2020.
William J. Briggs WILLIAM J. BRIGGS
2

Case 1:20-cv-01838-CCB Document 37 Filed 06/27/20 Page 5 of 5

From: To: Subject: Date:

Briggs, William J. Briggs, William J. PPP Policy Update – Wednesday, June 24, 2020 Wednesday, June 24, 2020 10:45:19 AM

Please distribute this message throughout your PPP lending community
Paycheck Protection Program (PPP) Policy Update – Wednesday, June 24, 2020

SBA & Treasury have recently released additional guidance:

Interim Final Rule - Additional Eligibility Revisions to First Interim Final Rule (Released June 24, 2020)
Note: This IFR is being posted in advance of publication in the Federal Register. The official version will appear in the Federal Register.
For more information and updates, visit SBA.gov/PaycheckProtection or Treasury.gov/CARES

Bill Briggs Deputy Associate Administrator, Office of Capital Access U.S. Small Business Administration
SBA-Hor-2

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