618 B.R. 109
Bankr. D. Vt.2020Background:
- Springfield Hospital, Inc. and Springfield Medical Care Systems, Inc. (the Plaintiffs) applied for Paycheck Protection Program (PPP) funds; the SBA denied access based on the Plaintiffs’ status as bankruptcy debtors.
- Plaintiffs sued the SBA asserting the denial violated 11 U.S.C. § 525(a) (anti‑discrimination provision) and sought an injunction compelling the SBA to process their PPP applications.
- The bankruptcy court (Colleen A. Brown, J.) granted summary judgment and a permanent injunction in Plaintiffs’ favor on the § 525 claim (Decision entered June 22, 2020).
- The SBA filed a notice of appeal; Plaintiffs timely moved the bankruptcy court to certify the Decision for direct appeal to the Second Circuit under 28 U.S.C. § 158(d)(2).
- The bankruptcy court found the Rule 8006 procedural prerequisites satisfied and concluded the Decision met multiple statutory criteria for direct appeal (no controlling precedent, public importance, and conflicting decisions); it declined that the appeal would be certified under the ‘‘materially advance’’ prong.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness / procedural prerequisites for direct certification under Fed. R. Bankr. P. 8006 | Request filed within 60 days of the Decision and in the court where the matter remained pending | SBA did not contest timeliness | Court: Request was timely and filed in the correct court (Rule 8006 satisfied) |
| Sovereign immunity waiver / ability to enjoin SBA (interaction of §§ 105, 106, 525 with 15 U.S.C. § 634(b)(1)) | Plaintiffs: Bankruptcy Code provisions abrogate sovereign immunity and authorize injunctions to remedy § 525 violations; no controlling Second Circuit authority on scope | SBA: Supreme Court precedents require clear, express waivers of sovereign immunity and bars equitable relief absent explicit waiver | Court: Question lacks controlling Second Circuit/Supreme Court decision; certifies issue for direct review (bankruptcy Decision relied on Ulstein) |
| Whether § 525(a) applies to PPP (is PPP an "other similar grant" or discriminatory denial) | Plaintiffs: PPP is akin to public benefits/other similar grants covered by § 525(a); denial based on debtor status is prohibited | SBA: PPP exclusion is not a § 525(a) property/benefit; other courts have found PPP exclusion permissible (Diocese of Rochester) | Court: Its Decision held PPP falls within § 525(a); there is a direct conflict with Diocese of Rochester — thus conflict exists for Second Circuit resolution |
| Direct‑appeal certification criteria (public importance; conflicting decisions; materially advance) | Plaintiffs: Questions are of broad public importance (healthcare providers, jobs, CARES Act implementation) and conflicting decisions exist; direct appeal would aid uniformity | SBA: Issues should percolate through district court for fuller briefing; direct appeal not necessary and may not aid expediency | Court: Certified under § 158(d)(2)(A)(i) (no controlling law and matter of public importance) and (ii) (conflicting decisions). Did not find (iii) materially advances the case satisfied |
Key Cases Cited
- Ulstein Maritime, Ltd. v. United States, 833 F.2d 1052 (1st Cir. 1987) (supports entry of injunctions against federal agencies under certain statutory frameworks)
- Weber v. United States Tr., 484 F.3d 154 (2d Cir. 2007) (guidance on when direct circuit review is appropriate; caution against leapfrogging district court)
- Stoltz v. Brattleboro Hous. Auth., 315 F.3d 80 (2d Cir. 2002) (interprets scope of § 525 and rejects a narrow construction applied in earlier Second Circuit precedent)
- Goldrich v. FDIC (In re Goldrich), 771 F.2d 28 (2d Cir. 1985) (earlier, narrower view of § 525 considered by later Second Circuit panels)
- United States v. Sherwood, 312 U.S. 584 (1941) (principles on waiver of sovereign immunity)
- United States v. Nordic Vill., Inc., 503 U.S. 30 (1992) (statutory waiver of sovereign immunity must be unequivocal)
- Lane v. Pena, 518 U.S. 187 (1996) (requirements for waivers of sovereign immunity)
- United States v. White Mountain Apache Tribe, 537 U.S. 465 (2003) (limitations on implied waivers and relief against the sovereign)
- In re Sabine Oil & Gas Corp., 551 B.R. 132 (Bankr. S.D.N.Y. 2016) (discussion of § 158(d) public‑importance standard and percolation concerns)
- In re Millennium Lab Holdings II, LLC, 543 B.R. 703 (Bankr. D. Del. 2016) (analysis of what constitutes controlling law and direct‑appeal certification)