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Law360 (December 22, 2020, 2:39 PM EST ) An Arizona federal judge has dismissed a law firm's suit claiming JPMorgan Chase improperly withheld borrower's agent fees for its work on Paycheck Protection Program loans, saying the firm failed to fill out the proper paperwork to obtain the payout.
Judge Susan R. Bolton said Monday that Radix Law PLC never filled out the Small Business Administration's Form 159, which is a written contract between the agent and lender that would determine any fees the firm was entitled to, and as a result it had no physical proof Chase was required to pay anything.
"Had Form 159 been completed here, enforcement of the agreement it memorializes could have required such a payment," Judge Bolton said in her order. "The court joins the increasing number of courts across the country, including this court, that have addressed this issue and unanimously held the same."
Jonathan Frutkin of Radix told Law360 on Tuesday that despite the unfavorable result for his firm, the many lawsuits filed against lenders would soon be made moot, as the new stimulus bill passed Monday night by Congress includes a retroactive provision that would pass the responsibility for paying agent fees to borrowers.
"This will be a surprise to borrowers who relied on the SBA guidance that said they would not be responsible or even permitted to pay their agent, so it may be a bit upsetting," Frutkin said.
Radix initially sued Chase in an Arizona county court in August, citing a fact sheet issued in March and a final rule issued in April by the U.S. Treasury Department for the PPP saying that lenders — not borrowers — would pay agent fees, including attorney fees. The case was removed to federal court in September.
The law firm said in its complaint it was the agent for 10 Chase clients who got PPP loans totaling over $700,000, accusing the banking giant of pocketing the 5% fee from the borrowers that was meant for agents. Congress established the program in March as part of the Coronavirus Aid, Relief and Economic Security Act.
In October, Chase cited the lack of paperwork as a reason why the suit should be dismissed, while Radix responded by saying "such paperwork is at most procedural" because the information sheet specifically said lenders will pay agents and agents can't collect fees on their own.
Monday's ruling was the latest in a series of favorable decisions for banks, with dismissals in recent months absolving major players such as Wells Fargo, Bank of America and Citibank of responsibility for allegedly unpaid PPP agent loans.
Counsel for JPMorgan Chase didn't immediately respond to a request for comment Tuesday.
Radix Law is represented by its own Jonathan B. Frutkin and Robert Neil Mann.
JPMorgan Chase is represented by Nicole M. Goodwin and Adrianna Griego Gorton of Greenberg Traurig LLP.
The case is Radix Law PLC v. JPMorgan Chase Bank NA, case number 2:20-cv-01810, in the U.S. District Court for the District of Arizona.
--Additional reporting by J. Edward Moreno. Editing by Marygrace Murphy.
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