By Nathan Hale

Law360 (April 27, 2020, 7:42 PM EDT ) A Florida accounting firm has brought a proposed class action in federal court alleging two banks — and possibly others — have violated the federal government's intent by refusing to pay agents such as itself for helping small businesses apply for loans under the Paycheck Protection Program out of fees the government paid the banks.

Pace-based Sport & Wheat CPA PA, which filed its suit Sunday in federal court against Alabama-based ServisFirst Bank Inc. and Georgia-based Synovus Trust Co. NA, says Congress made clear when it passed the PPP as part of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, that it intended for lenders to compensate agents from the fees they receive from the federal Small Business Administration according to fee-capping rules.

"We believe that the issues presented by Sport & Wheat's complaint are vital to the American economy and our national interest," the firm's counsel, John Wirt of Wirt & Wirt PA, told Law360. "CPAs and other financial advisers are working around the clock assisting their small clients and their banks to provide supporting tax and financial information that is necessary to obtain a PPP loan, which in turn will protect American workers' paychecks.

"It is simply un-American to not compensate them for their work, particularly when that work is what results in the PPP loan being issued and the banks then earning a processing fee. The law clearly provides that a CPA's 'fees will be paid out of lender fees' and prohibits CPAs from collecting 'any fees from the applicant.' We intend to vigorously pursue this matter on behalf of Sport & Wheat and all those similarly situated."

While the suit lists just ServisFirst and Synovus as defendants, Sport & Wheat reserved the right to name other lenders that, though they have not yet refused to pay, it suspects will avoid compensating agents based on restrictions they placed on PPP loan applications.

Sport & Wheat also reserved the right to modify its proposed class definition, which currently would cover PPP agents in Florida who have been refused payment of their fees by a lender for helping the bank's customer obtain a PPP loan, including to possibly convert the case into a national class action or multidistrict litigation.

Congress established the PPP in late March as part of the CARES Act, which is valued at $2.1 trillion. The PPP, which started with a pot of $349 billion and has since been increased by another $300 billion, is intended to provide small businesses with eight weeks of cash to cover payroll through 100% federally backed loans administered by private banks. If a recipient continues to pay its employees through the two-month period, the loans would be either entirely or mostly forgiven, according to the complaint.

To incentivize lenders to administer the loans, the PPP allows them to receive a processing fee based on a percentage of each loan's amount, the complaint said.

Sport & Wheat says the banks should cover its customary and reasonable fees is supported by PPP rules established by the SBA that said "agent fees will be paid by the lender out of the fees the lender receives from SBA," and that "agents may not collect fees from the borrower or be paid out of the PPP loan proceeds."

Under the SBA's rules, a PPP agent can be an accountant, an attorney, a consultant, someone who prepares an business' application and is employed and compensated by the applicant, someone who assists a lender with administering or litigating SBA loans, a loan broker, or "any other individual or entity representing an applicant by conducting business with the SBA," the complaint said.

Sport & Wheat provided examples of work it has done for two unnamed clients — an engineering firm that banks primarily with ServisFirst and a medical group that banks with Synovus — claiming that to date it has not been compensated by either bank for its services. ServisFirst, it says, advised its client that "the SBA guidance on charging the client fees changed late in the game. The bank has made a decision to not pay agents."

Of its 200 to 250 clients that are small businesses, the firm estimates it has assisted about 50 in applying for PPP loans.

The firm also believes that some lenders have attempted to avoid legal exposure by refusing to process any PPP loan application that is signed by or makes reference to Sport & Wheat as an agent of the bank's customer, or by requiring the customer to file its application through the bank's online PPP application portal, which is intentionally designed to prevent the designation of an agent.

"Because such PPP lenders have not affirmatively refused to pay S&W, they are not now being named as defendants herein, but S&W reserves the right to do so if S&W later ascertains that such PPP lenders refuse to pay S&W's reasonable and customary fees (not to exceed the PPP agent fees cap)," the complaint said.

Sport & Wheat also says that the alleged policies discriminate against the smallest of the nation's small businesses, in contrast to Congressional intent, because such businesses are likely less sophisticated and more likely to need to rely on outside agents to assist them in applying for a PPP loan.

The suit seeks a declaration that PPP lenders must pay PPP agents from their fees, an injunction to prevent PPP lenders from discriminating against applications involving agents, and an award of damages to compensate class members for the fees they are supposedly entitled to receive.

Synovus declined to comment on pending litigation. A representative for ServisFirst did not immediately respond to a request for comment Monday.

Sport & Wheat is represented by John S. Wirt of Wirt & Wirt PA.

Counsel information for the banks was not immediately available.

The case is Sport & Wheat CPA PA v. ServisFirst Bank Inc. et al., case number 3:20-cv-05425, in the U.S. District Court for the Northern District of Florida.

--Editing by Adam LoBelia.

For a reprint of this article, please contact reprints@law360.com.