983 F.3d 1239
11th Cir.2020Background
- Gateway Radiology, a Chapter 11 debtor, applied for a $527,710 PPP loan; the SBA had issued an interim rule disqualifying debtors in bankruptcy from PPP loans.
- Gateway’s online PPP Form 2483 reported (or was transmitted showing) that it was not in bankruptcy; USF Federal Credit Union approved and funded the loan but froze proceeds when bankruptcy status surfaced.
- Gateway sought bankruptcy-court approval under 11 U.S.C. § 364 to borrow the PPP funds and sued the SBA for declaratory and injunctive relief, arguing the SBA rule was unlawful.
- The bankruptcy court held the SBA exceeded its authority and acted arbitrarily and capriciously, enjoined enforcement of the non-bankruptcy rule as to Gateway, and approved the loan; the SBA and USF appealed.
- The Eleventh Circuit dismissed the appeal from the bankruptcy court’s memorandum opinion for lack of jurisdiction, but accepted review of the approval order and preliminary injunction and vacated both, holding the SBA acted within its authority and did not act arbitrarily and capriciously.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Congress unambiguously permitted bankruptcy debtors to be PPP "eligible recipients" (Chevron step 1) | CARES Act eligibility text and borrower certifications show Congress intended to include bankruptcy debtors; Congress omitted any disqualification. | PPP was grafted onto §7(a), Congress left sound-value requirement intact and delegated rulemaking to SBA, so Congress did not speak clearly. | Chevron applies; statute ambiguous on bankruptcy status; delegation to SBA implied. |
| Whether the SBA’s exclusion of bankruptcy debtors is a permissible interpretation of the statute (Chevron step 2) | SBA’s bright-line ban is not a reasonable reading and conflicts with CARES Act purpose of rapid relief. | SBA’s rule reasonably reconciles competing aims (speed, misuse risk, repayment) and is within agency expertise. | SBA’s interpretation is reasonable and entitled to deference. |
| Whether the SBA rule is arbitrary and capricious under the APA | SBA ignored bankruptcy protections, failed to consider important aspects, and provided an explanation contrary to evidence. | SBA reasonably relied on risk of unauthorized use and non-repayment; had Treasury consultation; rushed rule justified by emergency. | Rule not arbitrary and capricious; agency provided a rational basis given urgency and expertise. |
| Appellate jurisdiction over bankruptcy court orders (approval order & preliminary injunction) | Gateway sought final relief; bankruptcy court’s orders are appealable and reviewable. | SBA/USF challenged scope; memorandum opinion not an appealable final judgment. | Memorandum opinion appeal dismissed for lack of jurisdiction; approval order and preliminary injunction were final/appealable because non-core injunction was "inseparably related" to core §364 approval. |
Key Cases Cited
- Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (establishes two-step framework for judicial review of agency statutory interpretation)
- Stern v. Marshall, 564 U.S. 462 (2011) (limits bankruptcy courts’ ability to enter final orders on non-core matters unless necessarily resolved in a core proceeding)
- King v. Burwell, 576 U.S. 473 (2015) (major-questions principle; courts may hesitate to find implicit delegations on issues of deep economic and political significance)
- United States v. Mead Corp., 533 U.S. 218 (2001) (explains when agency interpretations merit Chevron deference)
- Sullivan v. Everhart, 494 U.S. 83 (1990) (a permissible agency interpretation need not be the court’s preferred reading)
- United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979) (discusses SBA’s role and preference for guarantying private loans over direct disbursements)