District Court Finds No Private Right of Action under CARES Act

The United States District Court for the District of Maryland recently held that the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), does not provide a private right of action for those aggrieved by an alleged violation.  See Profiles, Inc. v. Bank of America Corp., 2020 WL 1849710 (D. Md., Apr. 13, 2020).  The CARES Act amended the Small Business Act (“SBA”) to create the Payroll Protection Program (“PPP”). The PPP authorized participating lenders to make small business loans to adversely affected firms during the ongoing pandemic.  See Pub. L. No. 116-136, § 1102.

Two small businesses applied for PPP loans with their depository bank that was also an SBA lender. The bank, however, denied their applications because they only had a “depository relationship” with the bank, rather than a “borrowing relationship.” The businesses then filed a putative class action against the bank contending that it impermissibly imposed additional restrictions on their participation in the PPP that were not authorized under the CARES Act.

In response to their motion for injunctive relief, the district court held that the small businesses had no private right of action against the bank.  The court held that there was no private cause of action under the SBA.  On its face, the court also found there was no “express” right of action under the CARES Act and no “implied” right of action could be inferred: “The plain language of the statute does not suggest an intent to confer the particular right alleged, nor a private remedy against participating SBA lenders.”

The CARES Act amended various federal statutes that expressly provide private rights of action, such as the Fair Credit Reporting Act.  Profiles would not appear to impact existing private rights of action under those statutes.  However, for claims based solely on the CARES Act and for which no other private right of action exists, Profiles suggests that neither aggrieved businesses nor consumers should be able to advance a successful private cause of action.

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