Case Information
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA IN RE VESTAVIA HILLS, LTD, dba Case No.: 20-cv-01824-GPC-LL MOUNT ROYAL TOWERS, Adv. No. 20-90073-LA
Debtor, ORDER:
(1) VACATING BANKRUPTCY COURT’S ORDER GRANTING APPELLEE’S MOTION FOR A PRELIMINARY INJUNCTION; AND VESTAVIA HILLS, LTD. DBA MOUNT (2) GRANTING THE SBA’S
ROYAL TOWERS, MOTION FOR WITHDRAWAL OF Plaintiff, THE REFERENCE v.
THE U.S. SMALL BUSINESS ADMINISTRATION, et al.,
Defendants.
Before the Court are (1) the appeal of Appellants U.S. Small Business Administration (“SBA”) and Jovita Corranza, the SBA Administrator, of the June 26, 2020 bankruptcy court order granting the motion for a preliminary injunction filed by Appellee Vestavia Hills, Ltd. (“Vestavia”), in Case No. 20-cv-01308-GPC-LL; and (2) the motion for withdrawal of the reference to the bankruptcy court filed by the SBA and the SBA Administrator, in Case No. 20-cv-1824-GPC-LL.
For the reasons set forth below, the Court (1) VACATES the bankruptcy court’s order granting Vestavia’s motion for a preliminary injunction and (2) GRANTS the SBA’s motion for withdrawal of the reference.
Background
I. The CARES Act
On March 27, 2020, in response to the rapidly worsening coronavirus pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Stimulus Act (“CARES Act”), which created the Paycheck Protection Program (“PPP”) to be administered by the SBA. Pub. L. 116-136, 134 Stat. 281 (2020). Congress placed the PPP within 15 U.S.C. § 636(a), the codification of Section 7(a) of the Small Business Act, which provides the SBA’s existing authority to issue loans to small businesses. However, the CARES Act modified certain requirements of Section 636(a) and greatly expanded eligibility beyond the types of entities that would ordinarily be able to receive a small business loan. See CARES Act § 1102, codified at 15 U.S.C. § 636(a)(36). The PPP enables the SBA to guarantee loans to small businesses, non-profits, and other entities to allow them to keep employees on their payroll and continue operations during the pandemic. The CARES Act provides that a borrower can receive a covered loan in an amount not exceeding two and a half times its average monthly payroll costs up to ten million dollars. 15 U.S.C. § 636(a)(36)(E). Subject to certain limitations, borrowers are eligible to have their PPP loans forgiven to the extent they are used loans for payroll costs or covered mortgage interest payments, rent, and utilities. 15 U.S.C. § 9005(b).
After the adoption of the CARES Act on March 27, 2020, the SBA adopted several interim final rules (“IFRs”) in quick succession related to the administration of the PPP, pursuant the emergency rulemaking authority granted by the CARES Act. 15 U.S.C. § 9012 (requiring SBA to issue regulations within 15 days without regard to the notice requirements of the APA). On April 3, 2020, the SBA posted its First IFR to the SBA website, which was published in the Federal Register on April 15, 2020. Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20811 (Apr. 15, 2020). The First IFR “outline[d] the key provisions of SBA’s implementation of sections 1102 and 1106 of the Act in formal guidance and request[ed] public comment.” Id. The First IFR directed applicants to submit the PPP borrower application form (Form 2483). Id. Form 2483 requires the applicant to state, among other things, whether the applicant or its owner is presently involved in bankruptcy, and provides that the loan will not be approved if the answer is “yes.” See SBA Form 2483: PPP First Draw Borrower Application Form (Version 1), https://www.sba.gov/document/sba-form-2483-ppp-first- draw-borrower-application-form.
The SBA thereafter issued two subsequent IFRs, neither of which had any reference to the bankruptcy exclusion. See Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20817 (Apr. 15, 2020); Business Loan Program Temporary Changes; Paycheck Protection Program—Additional Eligibility Criteria and Requirements for Certain Pledges of Loans, 85 Fed. Reg. 21747 (Apr. 20, 2020). The Third IFR notes that “the standard underwriting process does not apply because no creditworthiness assessment is required for PPP Loans.” Id. On April 24, 2020, the SBA posted the Fourth IFR to its website, which was published in the Federal Register on April 28, 2020. Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements—Promissory Notes, Authorizations, Affiliation, and Eligibility, 85 Fed. Reg. 23450 (Apr. 28, 2020). The Fourth IFR explicitly states that businesses presently involved in bankruptcy proceedings are not eligible for PPP loans. Id. The Fourth IFR further explains that:
The Administrator, in consultation with the Secretary, determined that providing PPP loans to debtors in bankruptcy would present an unacceptably high risk of an unauthorized use of funds or non-repayment of unforgiven loans. In addition, the Bankruptcy Code does not require any person to make a loan or a financial accommodation to a debtor in bankruptcy. The Borrower Application Form for PPP loans (SBA Form 2483), which reflects this restriction in the form of a borrower certification, is a loan program requirement. Lenders may rely on an applicant’s representation concerning the applicant’s or an owner of the applicant's involvement in a bankruptcy proceeding.
Id.
Through subsequent legislation, the PPP has been extended and altered several times. E.g. , Extending Authority for Commitments for the Paycheck Protection Program & Separating Amounts Authorized, Pub. L. No. 116-147, 134 Stat. 660 (2020); Paycheck Program Flexibility Act of 2020, Pub. L. No. 116-142, 134 Stat. 641 (2020); Paycheck Protection Program & Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020); Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182 (2020).
II. Appellant’s Bankruptcy Case and Adversary Proceeding Appellee Vestavia owns and operates Mount Royal Towers, a senior housing community located at 300 Royal Tower Drive, Vestavia Hills, Alabama. Adv. No. 20- 90073-LA, ECF No. 1 (“Adv. Complaint”) ¶ 6. On January 3, 2020, Vestavia filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of California. Bk. No. 20-00018-LA11. Vestavia continued to operate its business while in bankruptcy. Adv. Complaint ¶ 7. In April or May of 2020, Vestavia applied through a federally insured participating lender for a loan through the PPP. Id. ¶¶ 21–22. On May 6, 2020, the lender declined to submit Vestavia’s PPP application to the SBA because Vestavia did not meet the “SBA eligibility criteria.” Id. ¶ 22. Vestavia asserts the sole reason it did not meet the “SBA eligibility criteria” was its status as a Chapter 11 bankruptcy debtor. Id. ¶ 23. On May 27, 2020, Vestavia initiated an adversary proceeding against Appellants SBA and the SBA Administrator (hereafter collectively referred to as “the SBA”). See Adv. No. 20- 90073-LA. In its adversary complaint, Vestavia alleged that the SBA violated the Administrative Procedures Act (“APA”) and the non-discrimination provision of 11 U.S.C. § 525(a) by prohibiting current bankruptcy debtors from being considered for PPP loans. Adv. Complaint ¶¶ 33–45.
On May 29, 2020, Vestavia filed an emergency application for a temporary restraining order and injunctive relief with the bankruptcy court, seeking to require the SBA to consider Vestavia’s PPP loan application. Adv. No. 20-90073-LA, ECF No. 5. The parties eventually stipulated to have the emergency application treated as a motion for a preliminary injunction. Adv. No. 20-90073-LA, ECF No. 17. On June 26, 2020, after a hearing and over the opposition of the SBA, the bankruptcy court granted Vestavia’s motion and entered a preliminary injunction barring the SBA from disqualifying or denying Vestavia’s PPP application on the basis of Vestavia’s status as a bankruptcy debtor or refusing to guaranty a PPP loan sought by Vestavia on that basis. Adv. No. 20-90073-LA, ECF No. 26. The bankruptcy court subsequently issued a Memorandum of Decision. Adv. No. 20-90073-LA, ECF No. 27. On July 10, 2020, the SBA appealed. ECF No. 1. On July 29, 2020, the SBA filed a motion for mandatory withdrawal of the reference, which was transmitted to the district court on September 16, 2020. Case No. 20-cv-1824-GPC-LL, ECF No. 1; Adv. No. 20-90073-LA, ECF No. 45.
Appeal of Bankruptcy Court’s Preliminary Injunction Order The Court will first consider the bankruptcy court’s order granting Vestavia’s motion for a preliminary injunction before turning to the SBA’s motion to withdraw the reference to the bankruptcy court.
I. Legal Standard
The Court has jurisdiction to review a bankruptcy court’s final orders pursuant to
28 U.S.C. § 158(a). “[W]here the bankruptcy court issues a ‘preliminary’ injunction, but
contemplates no further hearings on the merits of the injunction . . . the injunction is a
final, appealable order.”
In re Excel Innovations, Inc.
,
On appeal, the district court reviews the bankruptcy court’s findings of fact for
clear error and its conclusions of law de novo.
Havelock v. Taxel
,
“[A] plaintiff seeking a preliminary injunction must establish [(1)] that he is likely
to succeed on the merits, [(2)] that he is likely to suffer irreparable harm in the absence of
preliminary relief, [(3)] that the balance of equities tips in his favor, and [(4)] that an
injunction is in the public interest.”
Coffman v. Queen of Valley Med. Ctr.
,
II. Discussion
In this appeal, the SBA challenges the bankruptcy court’s authority to issue a preliminary injunction and the bankruptcy court’s finding that Vestavia was likely to succeed on the merits of its APA claims. Vestavia claims that the appeal is moot and that the bankruptcy court did not err in entering the preliminary injunction on the basis that the SBA violated the APA, and that in the alternative the Court should affirm the preliminary injunction on the basis that the SBA violated the non-discrimination provision in 15 U.S.C. § 525(a).
\ \ \
\ \ \
A. Mootness
As a preliminary matter, Vestavia argues that the appeal is moot because the SBA has disbursed the PPP funds in line with program requirements, and thus the Court cannot grant effective relief. The SBA contends that the appeal is not mooted by its compliance with the preliminary injunction order because resolution of the appeal would affect whether Vestavia may qualify for forgiveness of the PPP loan.
Article III of the U.S. Constitution limits the jurisdiction of federal courts to actual
cases and controversies. U.S. Const., Art. III § 2, cl. 1. Federal courts cannot exercise
jurisdiction over a case if it is moot, but “[t]he burden of demonstrating mootness is a
heavy one.”
West v. Sec’y of Dep't of Transp.
,
Vestavia has not demonstrated that the Court “can no longer grant ‘any effectual
relief whatever’” to the SBA.
Shell Offshore
,
In the bankruptcy context, an appeal may also be equitably moot even if a case or
controversy continues to exist for the purposes of Article III. An appeal of a bankruptcy
court order may be equitably moot if there has been a “comprehensive change of
circumstances . . . so as to render it inequitable for [the] court to consider the merits of
the appeal.”
In re Thorpe Insulation Co.
,
Vestavia provides no authority supporting extension of the equitable mootness
doctrine to the present case. The reorganization process may be underway, but no
consummated reorganization plan is implicated here. Although third parties received the
PPP funds at issue and the SBA did not seek a stay, Vestavia has not explained how “the
case presents transactions that are so complex or difficult to unwind that the doctrine of
equitable mootness would apply.”
Thorpe
,
Even if equitable mootness did apply, the Court would find that Vestavia has not
borne its “heavy burden” in demonstrating the appeal is equitably moot.
Id.
(quoting
Jacobus v. Alaska
,
The Court agrees that, at least in this case, the SBA’s failure to seek a stay alone
cannot render the appeal equitably moot. The preliminary injunction in this case was not
part of a reorganization plan, and it would be possible to fashion relief without throwing
Vestavia’s reorganization into turmoil. If Vestavia were required to repay the PPP loan,
it is likely that the SBA would merely become another creditor in Vestavia’s bankruptcy
case. And although the Court recognizes that third parties would be affected by a
1
reversal of the bankruptcy court’s decision in this case, many of these effects—such as
reduced wages for employees, layoffs, or lower capacity for nursing home residents—
would not stem so much from the unwinding of complex transactions, but from the mere
fact of an adverse ruling; in other words, these externalities would exist even if the
bankruptcy court had denied the preliminary injunction outright. Such contemplated
negative effects on third parties are therefore not clearly related to their reliance on the
preliminary injunction order.
Cf. Thorpe
,
Accordingly, the Court finds the appeal is not moot. [3]
B. Sovereign Immunity The SBA contends that the bankruptcy court lacked jurisdiction to enter a preliminary injunction against it because the Administrator and the agency is entitled to sovereign immunity under Section 634(b)(1) of the Small Business Act. Vestavia urges the Court that a proper interpretation of Section 634(b)(1) does not prohibit all injunctive relief against the agency.
“The United States, as sovereign, is immune from suit in state or federal court
except to the extent that Congress has expressly waived such sovereign immunity.”
Tritz
v. U.S. Postal Serv.
,
In the performance of, and with respect to, the functions, powers, and duties vested in him by this chapter the Administrator may sue and be sued in any court of record of a State having general jurisdiction, or in any United States district court, and jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Administrator or his property.
15 U.S.C. § 634(b)(1).
Several Courts of Appeals have held that Section 634(b)(1) operates as an absolute
bar on courts’ jurisdiction to enter any injunctive relief against the SBA, relying on the
plain language of the provision.
See Mar v. Kleppe
,
Several district courts have followed
Ulstein
in fielding challenges to the SBA’s
implementation of the PPP.
E.g.
,
Camelot Banquet Rooms, Inc. v. U.S. Small Bus.
Admin.
,
The Ninth Circuit has not squarely addressed the proper interpretation of the “no . .
. injunction” language in Section 634 or identically worded statutes.
But see Am. Ass’n of
Cosmetology Sch. v. Riley
,
Without any binding authority on the issue, the Court therefore turns to general principles of statutory interpretation. The SBA contends that Ninth Circuit and Supreme Court decisions prevent the Court from looking beyond the statutory text to broadly construe a waiver of sovereign immunity. Vestavia argues that the bankruptcy court correctly followed Ulstein in considering the legislative history and purpose of the statute to determine the meaning of the “no . . . injunction” language.
The Court must “apply traditional tools of statutory construction to determine
whether the scope of Congress’ waiver is ‘clearly discernable from the statutory text.’”
Ordonez v. United States
,
However, implementation of these canons of construction likely renders the
language of the sovereign immunity waiver, at best, ambiguous. It is also not clear that
the Court can look to the legislative history of the provision, as the First Circuit did in
Ulstein
.
See Ulstein
,
Therefore, the Court finds it likely that Section 634(b)(1) does not unambiguously waive the SBA’s sovereign immunity for injunctive relief. However, because the Court finds that Vestavia has not shown it is likely to succeed on the merits, the Court need not definitively resolve the question of the SBA’s immunity. [4]
C. Likelihood of Success on the Merits of the APA Claims
In its preliminary injunction order, the bankruptcy court held that Vestavia was
likely to succeed on the merits of its claims under Sections 706(2)(C) and 706(2)(A) of
the APA. Both types of APA claims “provide for related but distinct standards for
reviewing rules promulgated by administrative agencies,” and the Court accordingly
considers them in turn.
Altera Corp. & Subsidiaries v. Comm’r of Internal Revenue
, 926
F.3d 1061, 1075 (9th Cir. 2019),
cert. denied
,
1. Exceeding statutory authority granted by the CARES Act The APA provides that a court may invalidate agency action if it exceeds the
statutory authority under which it was promulgated. 5 U.S.C. § 706(2)(C). To determine
whether the challenged agency action is consistent with Congress’s directive, courts
employ the familiar
Chevron
framework.
See Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc.
,
There is no question that Congress delegated authority to the SBA to make rules in
implementing the CARES Act.
See
15 U.S.C. § 9012 (directing the administrator to
“issue regulations to carry out this title and the amendments made by this title without
regard to the notice requirements under [the APA]”). However, the Parties dispute
whether the statute was unambiguous with respect to whether debtors in bankruptcy
proceedings are eligible for the PPP, and whether the SBA had the authority to
promulgate rules excluding them. Vestavia argues that the CARES Act unambiguously
did not exclude debtors in bankruptcy, and that the court cannot imply a delegation of
authority on an issue of such “deep economic and political significance.”
King v.
Burwell
,
i. Text of the CARES Act
There is no provision in the CARES Act that explicitly provides that debtors in bankruptcy are eligible for the PPP, or that explicitly bars the SBA from imposing eligibility requirements. Instead, Vestavia points to several provisions in the statute that it argues clearly evince Congress’s intent to preclude the SBA from excluding bankruptcy debtors. First, Vestavia highlights Section 636(a)(36)(D)(i), which provides:
During the covered period, in addition to small business concerns, any business concern, nonprofit organization, housing cooperative, veterans organization, or Tribal business concern described in section 657a(b)(2)(C) of this title shall be eligible to receive a covered loan if the business concern, nonprofit organization, housing cooperative, veterans organization, or Tribal business concern employs not more than the greater of-- (I) 500 employees; or
(II) if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern, nonprofit organization, housing cooperative, veterans organization, or Tribal business concern operates.
15 U.S.C. § 636(a)(36)(D)(i). Vestavia argues that Congress’s statement that “any
business concern . . . shall be eligible to receive a covered loan” if it meets the stated size
requirements means that the SBA was not delegated the authority to impose eligibility
requirements of its own. The Court recognizes that “any” typically is accorded an
“expansive meaning,” equivalent to the terms “all” or “every.”
See United States v.
Gonzales
,
If Congress’s inclusion of the language “any business concern” nullified all
preexisting requirements and eliminated the SBA’s ability to set other eligibility rules, a
number of more specific provisions in the CARES Act would be redundant. As the SBA
argues, the immediately following provision of the statute, which grants eligibility to
“sole proprietors” would be superfluous if the only contemplated eligibility requirement
for business concerns was the size requirement, as individual proprietors are already
included in the definition of “business concern.” 15 U.S.C. § 636(a)(36)(D)(i); 13 C.F.R.
§ 121.105. Further, other parts of the statute explicitly waive certain preexisting rules
and statutory requirements in Section 636(a), which would be unnecessary if the “any
business concern” language was intended to be read as broadly as urged by Vestavia.
E.g.
, 15 U.S.C. §§ 636(a)(36)(D)(iii) (waiving affiliation rules); 636(a)(36)(I) (waiving
requirement that business is unable to obtain credit elsewhere); 636(a)(36)(J) (waiving
requirement of personal guarantee and collateral). “In general, a statute should ‘be
construed so that effect is given to all its provisions, so that no part will be inoperative or
superfluous, void or insignificant.’”
Stand Up for California! v. U.S. Dep’t of the
Interior
,
Vestavia also argues that the explicit exclusion of bankruptcy debtors elsewhere in
the CARES Act indicates that the absence of any reference to bankruptcy debtors in
provisions related to the PPP reflects an intention not to exclude them from participation
in the PPP. Section 4003(c)(3)(D)(i) of the CARES Act, which relates to a loan program
for mid-sized businesses, provides that “[a]ny eligible borrower applying for a direct loan
under this program shall make a good-faith certification that,” among other things, “the
recipient is not a debtor in a bankruptcy proceeding.” 15 U.S.C. § 9042(c)(3)(D)(i).
Indeed, a principle of statutory construction known as the
Russello
presumption provides
“that where ‘Congress includes particular language in one section of a statute but omits it
in another section of the same Act, it is generally presumed that Congress acts
intentionally and purposefully in the disparate inclusion or exclusion.’”
United States v.
Reed
,
The Court finds that the
Russello
presumption is not dispositive in this case, as
both interpretations of the statute are plausible. On the one hand, as Vestavia suggests,
Congress may have included a bankruptcy certification requirement for the mid-sized
business loan program, and not for the PPP, because the former is a “true” loan program
that anticipates repayment, whereas the latter anticipates loans used for specified
purposes will be forgiven. 15 U.S.C. § 9005(b); 15 U.S.C. § 9042(c)(3)(i). On the other
hand, Congress did recognize that it was situating the PPP within an existing statutory
scheme for loan issuance by the SBA, at points explicitly providing that other subsections
of Section 636 did not apply.
E.g.
, 15 U.S.C. § 636(a)(36)(I) (“[T]he requirement that a
small business concern is unable to obtain credit elsewhere, as defined in section 632(h)
of this title, shall not apply to a covered loan.”). Congress therefore may have declined to
impose additional requirements, like a bankruptcy certification, because the statute
already contemplates that the SBA will impose its existing loan requirements to the
extent not modified by the CARES Act, whereas the mid-sized loan program was written
on a relative blank slate.
Cf. Burns v. United States
,
Lastly, Vestavia urges that Congress’s silence with respect to the exclusion of
bankruptcy debtors, taken alongside the CARES Act’s overarching purpose to help
struggling businesses during the pandemic, indicates that Congress did not intend for the
SBA to promulgate regulations barring bankruptcy debtors from participating in PPP.
Vestavia relies on
King v. Burwell
for the proposition that if Congress wishes to delegate
questions “of deep economic and political significance” to an agency, it does so
expressly.
King
,
While the Court recognizes that the broad purpose of the CARES Act and the PPP
was to quickly deliver funds to businesses struggling as a result of the pandemic so that
they could continue to operate and pay their employees, it does not follow that Congress
intended to implicitly nullify other parts of Section 636(a) and thus deprive the SBA of
the authority to set certain eligibility requirements as it does for other loans under Section
7(a). The PPP loan may be intended to be mostly forgiven, but forgiveness is not
automatic.
See
15 U.S.C. § 9005(b). Thus, some borrowers will have to repay the funds,
just as they would for other loans guaranteed by the SBA. As noted above, the statutory
text does not reveal an intent to do away with all eligibility requirements, as evidenced by
Congress’s choice to explicitly eliminate specific ones. Congress recognized that the
sound value requirement existed, but it appears to have chosen not to prevent its
application to the PPP.
Cf. Organic Cannabis Found., LLC v. Comm’r of Internal
Revenue
,
1
The Supreme Court’s decision in
King
does not compel a contrary conclusion.
The Court found that
King
presented an “extraordinary case” justifying departure from
the typical
Chevron
framework.
King
,
Although not specifically raised by Vestavia, the Court likewise finds the other
statutory provisions mentioned in the Florida bankruptcy court’s decision in
Gateway
Radiology
(“
Gateway I
”), upon which the bankruptcy court relied, unilluminating as to
whether or not the statute permits the SBA to impose additional eligibility requirements.
Adv. No. 20-90073-LA, ECF No. 27 at 12 (citing
In re Gateway Radiology Consultants,
P.A.
,
i. Subsequent Enactments
Both Vestavia and the SBA argue that developments after the bankruptcy court’s entry of a preliminary injunction support their position. Congress recently enacted the Consolidated Appropriations Act, 2021 (“Appropriations Act”), Pub. L. No. 116-260, 134 Stat. 1182 (2020), which established a third phase of the PPP. In relevant part, that act amended the Bankruptcy Code to provide:
The [bankruptcy] court, after notice and a hearing, may authorize a debtor in possession or a trustee that is authorized to operate the business of the debtor under section 1183, 1184, 1203, 1204, or 1304 of this title to obtain a loan under paragraph (36) or (37) of section 7(a) of the Small Business Act (15 U.S.C. 636(a)).
134 Stat. 1182, 2015. The debtors or trustees referred to in the provision are those in the streamlined bankruptcy process under subchapter V of Chapter 11 (11 U.S.C. §§ 1183, 1184); those in proceedings under Chapter 12, for “family farmers” and “family 1 fisherman” (11 U.S.C. §§ 1203, 1204); and individuals in proceedings under Chapter 13 (11 U.S.C. § 1304). The Appropriations Act further provides that the above provision shall:
take effect on the date on which the [SBA] Administrator submits to the Director of the Executive Office for United States Trustees a written determination that, subject to satisfying any other eligibility requirements, any debtor in possession or trustee that is authorized to operate the business of the debtor under section 1183, 1184, 1203, 1204, or 1304 of title 11, United States Code, would be eligible for a loan under paragraphs (36) and (37) of section 7(a) of the Small Business Act (15 U.S.C. 636(a))[.]
134 Stat. 1182, 2016. Vestavia contends that the provision’s language, included in an act that narrowed eligibility for the third round of PPP loans, demonstrates that Congress never intended to exclude bankruptcy debtors in the previous rounds of the program. The SBA argues that Congress recognized the SBA previously determined all debtors in bankruptcy to be ineligible for PPP loan guarantees, and in adopting this section in the Appropriations Act, decided to render certain categories of debtors potentially eligible for the PPP subject to the SBA’s written determination. The SBA also notes that in each of the three previous amendments to the PPP, [6] Congress declined to mandate eligibility for debtors in bankruptcy proceedings despite the SBA’s rules excluding them.
The SBA presents the more logical interpretation of this provision of the Appropriations Act. A condition precedent to the provision going into effect is the SBA’s written determination that the debtors in bankruptcy or bankruptcy trustees under the specified sections would be eligible to receive a PPP loan. The provision merely permits the bankruptcy court to authorize such a debtor or trustee to obtain a loan, should the SBA open up eligibility to them. As it is not directed at the SBA, it does not require the SBA to expand or narrow PPP eligibility requirements with respect to debtors in bankruptcy; at most, it acknowledges that the SBA is permitted to determine certain categories of debtors in bankruptcy are eligible for the PPP. Had Congress presumed that all debtors in bankruptcy were already eligible and intended only to limit the availability of PPP loans to a smaller subset of debtors in bankruptcy for the third round of the program, as Vestavia argues, there would have been no need to condition the effective date of the provision on the SBA’s determination of their eligibility. Thus, the Court finds that this provision of the Appropriations Act does not demonstrate that Congress unambiguously intended to deprive the SBA of the authority to exclude debtors in bankruptcy from receiving PPP loans.
iii. Chevron Step Two
Having found that Congress did not clearly answer the question of whether debtors
in bankruptcy could be excluded from the PPP, the Court turns to step two of the
Chevron
framework: determining “whether the agency’s answer is based on a permissible
construction of the statute.”
Chevron
,
For similar reasons as those explained above, the Court finds that the agency’s
interpretation of Section 636(a)(36)—that it permits the agency to impose eligibility
requirements in line with Section 636(a)(6)’s “sound value” requirement—is a
permissible construction of the statute. Although the PPP is an emergency relief measure
for businesses struggling as a result of the COVID-19 pandemic, the CARES Act can be
reasonably interpreted to eliminate some, but not all, of the eligibility requirements that
typically accompany a loan under Section 7(a). It was reasonable to interpret Congress’s
silence with respect to the sound value requirement as permitting the agency to exclude
businesses that would be potentially be unable to repay the loan should they not meet the
requirements for forgiveness. Based on that interpretation, the SBA adopted eligibility
requirements that, it contends, seek to ensure the collectability of the loan while
recognizing Congress’s intent to have the funds disbursed quickly. Further, as the SBA
had previously taken applicants’ bankruptcy history into account in determining
eligibility for a loan under Section 7(a), it was not unreasonable, as a matter of legal
interpretation, for the SBA to condition eligibility for PPP loans on not being in
bankruptcy.
Cf
. Gateway II,
The Court therefore concludes that the bankruptcy court erred in finding that Vestavia is likely to succeed in showing that the SBA acted outside its authority in promulgating the regulations at issue.
2. Arbitrary and capricious under Section 706(2)(A)
The APA requires agencies to engage in “reasoned decisionmaking.”
Michigan v.
E.P.A.
,
Although a court may not substitute its own judgment for that of the agency, it
should “consider whether the decision was based on a consideration of the relevant
factors and whether there has been a clear error of judgment.”
Motor Vehicle Mfrs. Ass’n
of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.
,
Vestavia argues that the First and Fourth IFR excluding debtors in bankruptcy proceedings from participating in the PPP are arbitrary and capricious because the rules were hastily made, do not actually further the SBA’s purported goal because businesses can apply for bankruptcy immediately after receiving a PPP loan, and failed to take into account the protections of the bankruptcy process. In response, the SBA argues that its rules properly balanced the need to ensure expeditious processing of loans with the sound value requirement, resulting in a process that streamlined its typical Section 7(a) loan program requirements but still allowed the agency to ensure collectability and the authorized use of funds. The bankruptcy court ultimately found that the SBA’s decision to exclude debtors in bankruptcy proceedings was arbitrary and capricious because the SBA considered a factor that Congress did not intend it to consider—the collectability of the loan—and failed to consider a factor it should have considered—the protections of the Chapter 11 bankruptcy process. Adv. No. 20-90073-LA, ECF No. 27. The court also noted that the SBA’s argument that its exclusion of bankruptcy debtors was premised on 15 U.S.C. § 636(a)(6)’s sound value requirement appeared to be a post hoc justification, as the SBA’s First IFR eliminated typical underwriting requirements under Section 7(a). Id. at 14–16.
i. Timing of Agency Explanations
As a preliminary matter, the Court must address whether it can consider (1) the explanation in the Fourth IFR in considering the agency’s decisionmaking process for the First IFR and application form containing the bankruptcy certification; and (2) the Declaration of John A. Miller, an SBA official, that the SBA presented with its administrative record, ECF No. 7-4 at 126 (“Miller Decl.”). The First IFR and application form were released on April 3, 2020, less than a week after the CARES Act was signed into law, and effective April 16, 2020, while the Fourth IFR was released on April 24, 2020 and became effective on April 28, 2020. See 85 Fed. Reg. 20811; 85 Fed. Reg. 23450. The Miller Declaration was not before the bankruptcy court when it ruled on Vestavia’s motion for a preliminary injunction. ECF No. 9 at 36 n.9. Vestavia argues that the Fourth IFR and the Miller Declaration provide post hoc justifications for the SBA’s decision to exclude debtors in bankruptcy proceedings and are not properly considered.
“An agency must defend its actions based on the reasons it gave when it acted.”
Dep’t of Homeland Sec. v. Regents of the Univ. of California
,
The Court finds that the gap in time between the First IFR accompanying Form
2483 and the Fourth IFR’s specific explanation of the bankruptcy exclusion to be
relatively immaterial. Although the administrative record is admittedly sparse, the Fourth
IFR’s explanation—that “debtors in bankruptcy would present an unacceptably high risk
of an unauthorized use of funds or non-repayment of unforgiven loans” and continued
recognition of the need to provide relief expeditiously—is consistent with the more
general explanation of the process in the First IFR, even if the First IFR does not
explicitly mention the bankruptcy exclusion. 85 Fed. Reg. 20811. Given that the First
IFR explained how it viewed the CARES Act as “streamlining of the regular 7(a) loan
requirements” and the preexisting Section 7(a) loan application form included questions
related to bankruptcy,
see
Form 1919, the Court does not conclude that the explanation
for the bankruptcy exclusion detailed in the Fourth IFR, released a few weeks later, was a
post-hoc rationalization.
[7]
Cf. In re Penobscot Valley Hosp.
, No. 19-10034, 2021 WL
150412, at *7 (Bankr. D. Me. Jan. 12, 2021) (“In the extraordinary circumstances
surrounding the passage of the CARES Act, and the congressional directive that the
Administrator get the PPP off the ground immediately to provide economic relief to
struggling businesses and their employees, the lack of a perfectly contemporaneous
explanation is far from troubling.”). The information in the Fourth IFR is therefore
properly regarded as an “amplified articulation” of the First IFR’s reasoning, however
sparse or conclusory,
Alpharma
,
“Judicial review of an agency decision typically focuses on the administrative
record in existence at the time of the decision and does not encompass any part of the
record that is made initially in the reviewing court.”
Sw. Ctr. for Biological Diversity v.
U.S. Forest Serv.
,
Here, the Miller Declaration provides an explanation for the bankruptcy exclusion
in Form 2483. Miller Decl. ¶ 17. The explanation highlights several reasons for the
exclusion, including the need to provide loan assistance expeditiously with as little as
possible underwriting; the issues involved in approving companies in bankruptcy for
loans that would slow the administration of the PPP; and the potential risk for
interference with the authorized use of PPP funds caused by bankruptcy.
Id.
The Court
finds that the declaration merely provides “a fuller explanation of the agency’s reasoning
at the time of the agency action[s],”
Regents
,
Accordingly, the Court finds it can consider the Miller Declaration, although given the limited additional information provided in the declaration, it is not dispositive to the Court’s conclusion.
ii. Arbitrary and Capricious Review
The Court first considers Vestavia’s arguments relating to the decisionmaking
process. Vestavia appears to take issue with the SBA’s procedure for adopting the rules,
noting that they were “hastily made up” without a notice and comment period. However,
Congress explicitly instructed the SBA to forgo the standard notice and comment
rulemaking process provided in the APA and to issue the first regulations within 15 days.
15 U.S.C. § 9012. Although this fact does not absolve the agency of its responsibility to
consider relevant factors and make sound judgments, the expedited rulemaking process in
this case does not, on its own, suggest that the SBA’s decision was arbitrary or
capricious.
Cf. Penobscot Valley Hosp.
,
Next, the Court turns to whether the SBA considered a factor Congress did not
intend it to consider. The agency’s decision must be tied to the purposes of the law it
seeks to implement.
See Judulang v. Holder
,
However, that does not end the analysis of the first
State Farm
factor. The
bankruptcy court’s opinion suggests that based on the SBA’s own statements in the First
IFR, the SBA did not appear to genuinely consider collectability at all, making its
explanation for the decision to exclude bankruptcy debtors unconvincing. Adv. No. 20-
90073-LA, ECF No. 27 at 15. As the bankruptcy court explained, the SBA eliminated
typical underwriting requirements by excusing lenders from complying with 13 C.F.R. §
120.150, which requires the loan applicant to be creditworthy and sets out a number of
qualitative factors that the SBA will consider, and instead allowed lenders to rely on
certifications of the borrower. 85 FR 20811-01. The Court does not interpret the SBA’s
decision to forgo its typical lending criteria as inconsistent with its assertion that it
continued to consider collectability in promulgating rules for the PPP. As the First IFR
recognized, the intent of the CARES Act was to provide relief expeditiously. 85 FR
20811-01. The considerations in 13 C.F.R. § 120.150 require a detailed individualized
evaluation of the applicant’s business and finances. 13 C.F.R. § 120.150. That the SBA
allowed lenders to rely on the applicants’ certifications and made the eligibility
requirements less stringent than they would be for typical SBA loans does not suggest
that the SBA viewed collectability as irrelevant, but rather reflects an accommodation of
competing policy concerns.
See Ass’n of Am. Railroads v. Surface Transp. Bd.
, 161 F.3d
58, 66 (D.C. Cir. 1998) (citing
FCC v. WNCN Listeners Guild
,
Vestavia also contends that the SBA did not consider the protections provided by bankruptcy proceedings, and thus failed to consider an important aspect of the problem. The SBA counters that it did take bankruptcy protections into consideration in promulgating its rules and simply determined that the risks of non-repayment and unauthorized use of funds outweighed those protections. Given that the SBA decided to exclude bankruptcy debtors because of concerns about the potential misuse of funds and inability to repay, the protections of the bankruptcy process were undoubtedly important; after all, if these protections eliminated the risks of lending to debtors in bankruptcy, the SBA’s exclusion would be illogical. However, the administrative record does not reflect that the SBA failed to consider bankruptcy procedures. For other Section 7(a) loans, the SBA intends lenders to consider a borrower’s bankruptcy history in determining whether to extend an SBA loan, but lenders have discretion over what weight to give that factor, presumably based on the particular risks presented by each case. See Form 1919; Miller Decl. ¶ 11–13. In adopting the bankruptcy exclusion for the PPP, the SBA eliminated much of the nuance from its normal process, which would have allowed the SBA or lenders to balance risks posed by bankruptcy generally against procedural protections of the bankruptcy case. That the SBA ultimately chose to prioritize processing applications quickly over a more accurate accounting of the risks presented by particular bankruptcy cases does not mean that the SBA did not consider the protections of the bankruptcy process.
That said, even if the SBA considered the factors Congress intended, the
bankruptcy exclusion rules must be invalidated if the agency’s explanation is inconsistent
with the evidence before it or otherwise “so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.”
State Farm
,
Vestavia makes compelling points as to the shortcomings of the SBA’s rules, but the Court cannot “substitute its judgment for that of the agency.” State Farm , 463 U.S. at 43. The SBA, in administering other loans under Section 7(a), has lenders consider an applicant’s creditworthiness, including by requesting information related to an applicant’s bankruptcy history. See Form 1919. This reflects the SBA’s position that extending loans to some debtors in bankruptcy proceedings would run counter to the requirement that all loans be of sound value as to reasonably assure repayment. 85 Fed. Reg. 23450; Miller Decl. ¶¶ 11–13. In implementing the PPP, the SBA considered the need to disburse loans quickly to a much larger group of applicants, all of which faced financial difficulties as a result of the coronavirus pandemic. 85 Fed. Reg. 20811; 85 Fed. Reg. 23450. The SBA also took into account the baseline sound value requirement and the fact that although the loans were intended to be forgiven, not all would be, given that businesses may end up using for unauthorized purposes or allowable, but not forgivable, uses. Id. The SBA therefore considered the risks companies in bankruptcy would pose to the authorized use of PPP loans and collectability, including the fact that some creditors in bankruptcy may be able to assert claims to PPP loan funds, and the challenges of inquiring into the state of individual bankruptcy proceedings in a timely manner. Miller Decl. ¶ 17. The result—an easing of some creditworthiness requirements but adoption of a bright-line rule excluding bankruptcy debtors—was, according to the SBA, an accommodation of these competing considerations.
The Court cannot conclude that the SBA made a “clear error of judgment” in
adopting the bankruptcy exclusion.
Judulang
,
1 Accordingly, the Court finds that the bankruptcy court erred in determining that Vestavia was likely to succeed on its claim that the SBA’s decisions were arbitrary or capricious under Section 706(2)(A).
D. Likelihood of Success on the Merits of the 11 U.S.C. § 525(a) Claim Vestavia argues that in the alternative, the Court should uphold the bankruptcy court’s preliminary injunction order on the grounds that the bankruptcy exclusion violates the non-discrimination provision in 11 U.S.C. § 525(a). In relevant part, Section 525(a) provides:
[A] governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against . . . a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act . . . solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act[.]
11 U.S.C. § 525(a).
Vestavia contends that the PPP loans should be considered a “grant” under this section, and therefore that the SBA violated the non-discrimination provision by denying such a grant to Vestavia on account of its bankruptcy status. The SBA argues that a PPP loan is not a “grant” under the provision. The SBA asserts that its position is confirmed by the Appropriation Act’s inclusion of a new subsection that extends the non- discrimination rule to certain portions of the CARES Act, but not the PPP. 11 U.S.C. § 525(d). The bankruptcy court concluded that the SBA did not violate Section 525(a), finding that the word “grant” in Section 525(a) did not encompass economic grants like PPP loans.
The Court agrees with the bankruptcy court’s reasoning. Even if the Court agreed
with Vestavia’s characterization of the PPP funds as a grant rather than a loan,
[10]
the
language “other similar grant” requires that the term “grant’ be limited only to grants that
are similar to licenses, permits, charters, or franchises. 11 U.S.C. § 525(a). A license,
permit, charter, or franchise generally enables the grantee to conduct or engage in a
certain type of business.
See Ayes v. U.S. Department of Veterans Affairs
,
The Court thus finds that the bankruptcy court did not err in determining that Vestavia was unlikely to succeed on the merits of its claim under 11 U.S.C § 525(a).
E. Resolution of Appeal The Court therefore finds that Vestavia has not shown it is likely to succeed on the merits of its claims under the APA or 11 U.S.C. § 525(a). Accordingly the Court finds that the bankruptcy court erred in entering the preliminary injunction against the SBA. The Court accordingly VACATES the preliminary injunction order.
Withdrawal of the Reference
Having resolved the appeal, the Court considers the SBA’s motion to withdraw the reference to the bankruptcy court.
III. Legal Standard
District courts have original jurisdiction over “all civil proceedings arising under
title 11,” which is the Bankruptcy Code, as well as over cases “arising in or related to
cases under title 11.” 28 U.S.C. § 1334(a)–(b). However, a district court may refer such
proceedings to a bankruptcy judge. 28 U.S.C. § 157(a);
see also Sec. Farms v. Int’l Bhd.
of Teamsters, Chauffers, Warehousemen & Helpers
,
The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
28 U.S.C. § 157(d).
The second sentence of Section 157 “
mandates
withdrawal in cases requiring
material consideration of non-bankruptcy federal law.”
Sec. Farms
,
IV. Discussion
The SBA argues that withdrawal of the reference of the adversary proceeding is mandatory under 28 U.S.C. § 157(d), and that withdrawal of the reference is also required because the bankruptcy court exceeded its constitutional authority. Vestavia opposes, and counters that the SBA’s motion for withdrawal of reference is untimely.
A. Timeliness of Filing
As a preliminary matter, the Court considers whether the motion for mandatory withdrawal of the reference was timely filed. Vestavia argues that the motion is untimely and that withdrawal of the reference is improper because the preliminary injunction order was appealed. The SBA argues that there was no material delay before its filing of the motion for withdrawal of the reference, and that the filing of this appeal does not affect the motion.
Section 157(d) requires that motions to withdraw be “timely.” 28 U.S.C. § 157(d).
“A motion to withdraw is timely if it was made as promptly as possible in light of the
developments in the bankruptcy proceeding.”
Sec. Farms
, at 1007 n.3. As one court has
put it, “[t]he fair intendment of the statute in question is to insure that the request for
withdrawal be filed as soon as practicable after it has become clear that ‘other laws’ of
the genre described in 28 U.S.C. § 157(d) are implicated, so as to protect the court and
the parties in interest from useless costs and disarrangement of the calendar, and to
prevent unnecessary delay and the use of stalling tactics. Once it becomes apparent, such
an issue is in the case, a party has a plain duty to act diligently—or else, to forever hold
his peace.”
In re Gen. Teamsters Warehousemen & Helpers Union Local 890
, No. 5-90-
03823 ASW,
In interpreting the timeliness requirement, courts have focused not just on the
absolute amount of time that has passed, but the extent of the proceedings that have
already occurred in the case.
See In re Grace Miles
, No. C 10-0940 SBA, 2010 WL
3719174, at *2 (N.D. Cal. Sept. 17, 2010) (finding delay of “close to a year” before filing
motion to withdraw not timely because “withdrawing the reference at this juncture, after
extensive proceedings already have taken place, would likely have an adverse [effect] on
judicial economy and the administration of justice”);
In re Woodside Grp.
, LLC, No. CV
10-222-VBF(X),
Here, the complaint was filed on May 27, 2020, and the motion for withdrawal of
reference was filed in the bankruptcy court on July 29, 2020. Adv. Case No. 20-90073,
ECF Nos. 1, 45. The non-bankruptcy issues were apparent from the face of the
complaint. The SBA’s delay was therefore at most two months, which is not a
particularly long period of time. This Court has identified only one case in which a
similar delay rendered a motion to withdraw the reference untimely.
See In re Great N.
Paper, Inc.
,
The Court notes Vestavia’s argument that a court cannot serve as both the trial
court and appellate court in the same case. However, the Court disagrees that the
authorities cited by Vestavia stand for a categorical rule that the reference cannot be
withdrawn once appeal of an order for interim relief has been taken.
In re Powelson
, 878
F.2d 976 (7th Cir. 1989), dealt with the permissive withdrawal standard, which has the
same timeliness standard, but also commits to the district court more discretion in
determining whether withdrawal of the reference is appropriate.
Powelson
,
The Court therefore concludes that the motion for withdrawal of the reference is timely.
B. Mandatory Withdrawal
The SBA argues that the reference must be withdrawn because the case requires material consideration of non-bankruptcy law, given the complex issues of statutory interpretation involved. Vestavia argues that the APA analysis is straightforward and thus mandatory withdrawal of the reference not required. [11]
As the forgoing discussion of the issues on appeal demonstrates, the adversary
proceeding arising in part under the APA does, by necessity, call for interpretation of the
non-bankruptcy law—most significantly, the CARES Act. Vestavia’s argument, that the
CARES Act “requires no interpretation,” Case No. 20-cv-1824-GPC-LL, ECF No. 1-2 at
14, is not particularly convincing because APA analysis always requires the court to
consider Congressional intent by interpreting the statute. 5 U.S.C. §§ 706(2)(A)(i),
706(2)(C). Additionally, Vestavia’s argument that the case centers on the rules passed by
the SBA, rather than the CARES Act, does not square with the fact that the Court must
determine whether the CARES Act authorizes the rules at issue. This is not a case
involving the application of settled law to new facts, but rather the application of the
APA to the interpretation of a new law. It would artificially confine the statutory
language of Section 157(d) to build in a requirement that the proceedings involve not
only substantial and material federal law issues and interpretation of non-title 11 statutes,
Vicars
,
Vestavia cites one bankruptcy court decision that suggested mandatory withdrawal
of the reference is not appropriate in this context. In
In re Body Renew
, the bankruptcy
court noted that “the court is merely applying the APA to the PPP,” that there are a
“considerable number [of] decisions on the subject,” and that the proceeding “also
includes a claim that the SBA’s administration of the PPP violates 11 U.S.C. § 525,” and
thus the court was “skeptical whether this case must be withdrawn.”
In re Body Renew
Alaska, LLC
, Nos. 20-00075 GS, 20-90005 GS,
Accordingly, the Court GRANTS the motion to withdraw the reference.
Conclusion
For the reasoning set forth above, the Court hereby:
1. VACATES the bankruptcy court’s order granting the motion for a preliminary injunction;
2. GRANTS the motion for withdrawal of the reference.
IT IS SO ORDERED.
Dated: March 26, 2021
Notes
[1] Because the Court would exercise its discretion to permit appeal of the preliminary injunction, the Court therefore need not decide whether the preliminary injunction is a final order pursuant to 28 U.S.C. § 158(a).
[6]
[2] Additionally, Vestavia’s reliance on
In re Adams Apple
,
[3] For the same reasons, the Court finds the motion for withdrawal of the reference is likewise not mooted by the SBA’s compliance with the preliminary injunction.
[10]
[4] Although the parties also dispute whether the adversary was a “core” or “non-core” proceeding and 26 thus whether the bankruptcy court had jurisdiction to enter the preliminary injunction order, the Court finds it unnecessary to reach this issue because it finds Vestavia was not entitled to a preliminary 27 injunction based on the merits of its APA and 15 U.S.C. § 525(a) claims. Likewise, because the parties only briefly address the question of whether 11 U.S.C. § 106(a) abrogates sovereign immunity with respect to Vestavia’s claims under 15 U.S.C. § 525(a), the Court does not reach this issue.
[15]
[5] Although the question of whether debtors in bankruptcy are eligible for PPP loans has “economic and
27
political significance” in a general sense,
King
,
[22]
[6]
See
Extending Authority for Commitments for the Paycheck Protection Program & Separating
Amounts Authorized, Pub. L. No. 116-147, 134 Stat. 660 (2020); Paycheck Program Flexibility Act of
25
2020, Pub. L. No. 116-142, 134 Stat. 641 (2020); Paycheck Protection Program & Health Care
26
Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020). The fact that Congress did not make any
effort to ‘correct’ the agency’s bankruptcy exclusion provides support for the SBA’s argument.
See
27
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.
,
[24]
[7] Other courts have taken issue with the fact that the First IFR does not explicitly reference the
bankruptcy exclusion.
See, e.g.
,
Alaska Urological
,
[8] Although the Court may consider post-rulemaking developments, “[a] reviewing court must tread
27
cautiously in considering events occurring subsequent to promulgation of a rule” because such events
could not have directly informed the decisionmaking process.
Amoco Oil Co. v. Envtl. Prot. Agency
,
[34]
[9] Although interpreting an emergency rulemaking provision in the context of the Endangered Species
Act, admittedly a very different statutory context, the Court finds apt the D.C. Circuit’s observation that
“scrutiny of such emergency regulations is . . . less exacting on the Secretary than it would be if he
enacted precisely the same regulation and gave the same explanation after normal rulemaking.”
City of
Las Vegas v. Lujan
,
[35]
[10] But as the court in
Tradeways
explains, “the mere existence of favorable forgiveness terms in the
CARES Act does not transform a PPP loan into a grant.”
Tradeways
,
[36]
[11] Vestavia presents a number of other arguments that pertain to the permissive withdrawal of the reference standard. The Court does not find these arguments relevant to its adjudication of the motion for mandatory withdrawal of the reference.
[42]
[12] Additionally, Vestavia’s suggestion that a bankruptcy court is better equipped to evaluate whether the
SBA’s rulemaking was arbitrary and capricious runs counter to
State Farm
’s mandate that courts not
substitute their own policy judgment for that of the agency.
State Farm
,
[43]