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Law360 (November 17, 2020, 9:54 PM EST ) Pointing to dismissals of similar suits, JPMorgan Chase Bank and First Republic Bank asked a California federal judge Monday to toss a putative class action that alleges it owes fees to agents that helped businesses file applications for the Paycheck Protection Program.
Like many businesses working as "agents" helping applicants with the federal Paycheck Protection Program — or PPP — loan program, M&M Consulting Group LLC sued the banks in July, arguing its agents are entitled to fees from the banks.
But as they have argued in other cases, JPMorgan Chase Bank and First Republic Bank said the PPP under the Coronavirus Aid, Relief, and Economic Security — or CARES — Act, doesn't require banks to pay fees to agents without an agreement to do so.
"This putative class action recycles the same flawed claims asserted in actions around the country," the banks said in their Monday motion to dismiss.
Lawyers, accountants and other consultants have argued the CARES Act, which provides $659 billion in forgivable loans to businesses for their payroll and to cover other expenses during the COVID-19 pandemic, requires banks to pay fees to the agents.
Agents could get 1% for loans up to $350,000, 0.5% for loans between $350,000 and $2 million and 0.25% for loans of $2 million or more.
In its complaint, M&M said it helped one of its clients get a loan for about $700,000 from Chase and another $35,000 loan from First Republic Bank.
But citing one of the decided cases, JPMorgan Chase and First Republic said, "every court that has decided this issue has held that the CARES Act does not require lenders to pay agent fees absent an agreement to do so."
M&M conceded it didn't have an agreement and wasn't retained by the banks, "Yet, M&M is asking this court to be the first to create a statutory entitlement to 'agent fees' from lenders," the motion said.
The banks also argued that M&M's unjust enrichment claim fails because there is no cause of action for unjust enrichment in California.
M&M's claim that they're entitled to fees runs counter to the "unambiguous language" of the CARES Act, PPP regulations and the Small Business Administration loan program regulations, all of which place limits on possible agent fees and don't create an automatic right to them, the banks said.
"As a unanimous consensus of courts have now held, self-proclaimed agents like M&M have no entitlement to agent fees without a compensation agreement with the lenders providing for those fees," the banks said in the motion.
Longstanding SBA regulations require an agent to give the administration a compensation agreement signed by the lender, agent and applicant before it can collect a fee "in any matter involving SBA assistance," the motion said.
"This requirement promotes the SBA's twin objectives of allowing lenders to choose with whom they do business and preventing fraud and abuse by unscrupulous or unnecessary agents," the motion said.
Since M&M admits it has no such agreement, the suit should be dismissed, the banks argued.
The complaint should also be tossed because the CARES Act and the Small Business Act don't create a private right of action, the banks argued.
Agents claiming they're owed fees from PPP are the subject of dozens of other cases being heard about the country.
A different California federal judge on Monday tossed a similar lawsuit that was filed in April alleging that JPMorgan Chase Bank, Wells Fargo Bank, Bank of America, U.S. Bank National Association, Live Oak Banking Company and Harvest Small Business Finance owed agents fees.
In their September motion to dismiss, the banks pointed to an August decision from a Florida federal judge hearing similar claims from accounting firm Sport & Wheat CPA PA against Synovus Bank, ServisFirst Bank Inc., Truist Bank and The First. In the Florida case, the judge ruled that the CARES Act and rules enacted by the Small Business Administration to administer the PPP didn't require lenders to pay borrowers' agent fees.
JPMorgan Chase is facing other PPP-related suits alleging that it prioritized large commercial banking clients over small businesses, instead of processing loan applications on a first-come, first-served basis.
Counsel for the parties didn't immediately respond to requests for comment Tuesday.
M&M Consulting is represented by Michael E. Adler of Graylaw Group Inc., Harmeet K. Dhillon and Nitoj P. Singh of Dhillon Law Group Inc. and Mark J. Geragos, Ben J. Meiselas and Matthew M. Hoesly of Geragos & Geragos PC.
JPMorgan Chase Bank N.A. is represented by Robert J. Herrington and Karin L. Bohmholdt of Greenberg Traurig LLP.
First Republic Bank is represented by Sharon D. Mayo, Cassandra E. Havens, David B. Bergman and Patrick O. Dorsey of Arnold & Porter.
The case is M&M Consulting Group LLC v. JPMorgan Chase Bank, N.A. et al., case number 8:20-cv-01318, in U.S. District Court for the Central District of California.
--Additional reporting by Hailey Konnath, Dorothy Atkins, Nathan Hale, Joyce Hanson and Grace Dixon. Editing by Michael Watanabe.
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