By Hailey Konnath

Law360 (January 6, 2021, 11:08 PM EST ) A California federal judge on Wednesday tossed a putative class action alleging that JPMorgan Chase Bank and First Republic Bank owe fees to agents that helped businesses file applications for the Paycheck Protection Program, ruling that the regulations "clearly do not guarantee payment or establish a right to payment."

Named plaintiff M&M Consulting Group LLC is one of many businesses working as "agents" helping applicants with the federal PPP loan program. The company sued the banks in July, arguing that its agents were entitled to fees from the banks. JPMorgan Chase, First Republic and other banks have fielded a number of similar suits in the last year.

But JPMorgan Chase and First Republic have argued that the PPP, part of the Coronavirus Aid, Relief and Economic Security Act, doesn't require banks to pay fees to agents without an agreement to do so.

U.S. District Judge James V. Selna granted the joint motion Wednesday, holding that without an express agreement between an agent and a lender, lenders are not required to pay the agent fees under the CARES Act or its implementing regulations. And M&M hasn't pointed to any agreement reached with the banks, according to the minute order.

"Moreover, nothing behind language in the CARES Act suggests that Congress intended to create an implied private right of action," Judge Selna said.

For the same reasons, M&M's unjust enrichment and conversion claims also fail, the judge held, adding that the M&M "cannot allege that fees JPMorgan has control over are M&M's property."

Michael Adler, counsel for M&M Consulting, told Law360 on Wednesday that it was a sad day for the accountants and others "who did all this work counting on this 1% fee, who allowed these small businesses to get these loans."

But the banks funneled money to lobbyists who fought the fee "tooth and nail based on greed," he said.

"When you have money, you get to play the game that way," Adler said.

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 JPMorgan Chase and First Republic argued in November that "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 banks said at the time.

Dozens of similar cases over agent fees have been heard around the country recently. In November, a California federal judge 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 has faced 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.

A First Republic representative declined to comment, and JPMorgan Chase representatives didn't immediately return requests for comment late Wednesday.

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 is represented by Robert J. Herrington and Karin L. Bohmholdt of Greenberg Traurig LLP.

First Republic Bank is represented by Sharon D. Mayo, David B. Bergman, Laura E. Watson and Patrick O. Dorsey of Arnold & Porter.

The case is M&M Consulting Group LLC v. JPMorgan Chase Bank NA et al., case number 8:20-cv-01318, in the U.S. District Court for the Central District of California.

--Additional reporting by Rachel O'Brien, Dorothy Atkins, Nathan Hale, Joyce Hanson and Grace Dixon. Editing by Breda Lund.

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