Financial Services Litigation & Investigations Group
Financial Services Litigation & Investigations Group
In the face of turmoil and uncertainty, the world's major financial institutions continue to choose our team to help them manage their business, litigation and reputational risks and thrive in the new economic and regulatory climate. To our clients we are much more than litigators - we are business partners who have a stake in their success.
Signature Bank Wins Dismissal of Paycheck Protection Program Class Action
- Client News
- September 21, 2020
Paul, Weiss secured the dismissal with prejudice of a putative class action against Signature Bank seeking to recover “agent fees” for Paycheck Protection Program (PPP) loans under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The complaint was filed on behalf of accountants and other purported “agents” of PPP borrowers who claimed they assisted borrowers in preparing their PPP loan applications. The plaintiffs contended that Signature Bank violated the CARES Act, its implementing regulations, and state law by failing to share with agents a percentage of the fees Signature received from the federal government for extending PPP loans, even if Signature Bank had no agreement with the agents to pay them anything. Similar proposed class actions have been filed against hundreds of PPP lenders in federal courts all over the country.
In dismissing all claims against Signature Bank, Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York ruled that PPP lenders are not required to pay agent fees under the text of the CARES Act or its implementing regulations unless the lender has entered into a compensation agreement with the agent. Judge Rakoff also ruled that there is no private cause of action to enforce the PPP provisions of the CARES Act, and that the state law claims failed because they are predicated on a non-existent statutory entitlement to fees under the CARES Act. The court also dismissed similar claims against JP Morgan Chase, Citibank and Union Bank in related cases. Judge Rakoff’s ruling was only the second decision on a motion to dismiss in the hundreds of pending PPP agent fee cases and will doubtless be influential on the many other courts handling these matters.
The Paul, Weiss team included litigation partner Elizabeth Sacksteder.