July 20, 2020
Weil Appellate practice Co-Head Zack Tripp and Litigation associates Robert Niles-Weed and Lauren Morris (Not Yet Admitted in D.C.) won a significant victory in June 2020 against the Small Business Administration (SBA) in a high-profile pro bono matter. Working with a coalition that included the ACLU Racial Justice Program, the Washington Lawyers Committee for Civil Rights and Urban Affairs, the Public Interest Law Center and Jenner & Block, the Weil team helped to obtain loan forgiveness for myriad small business owners seeking to overcome prior criminal history while struggling with the impact of the COVID-19 crisis.
As part of the federal government’s response to COVID-19, Congress passed the Paycheck Protection Program to provide a direct incentive for small businesses to keep workers on payroll. The SBA, the agency charged with administering that program, decided to categorically exclude from participation a broad swath of business owners with prior criminal history. The effect of exclusion, which was adopted by the SBA without any explanation, was to deny emergency relief to a large and particularly vulnerable group of small-business owners and their employees during a time of crisis. The exclusion, moreover, disproportionately harmed individuals and communities of color, at the very same time those communities were already disproportionately suffering from the pandemic.
In June, the team filed a complaint and preliminary injunction motion against the SBA on behalf of two individuals, their businesses, and an organization, Defy Ventures, that uses entrepreneurship to help formerly incarcerated individuals improve their lives and strengthen their communities. A week later, the SBA responded to the lawsuit by revising their rule nationwide, significantly narrowing the scope of the criminal-record exclusions. The court thereafter granted the motion for a preliminary injunction in significant part, holding that the SBA acted unlawfully in adopting its initial exclusions and extending the June 30 deadline for our individual plaintiffs to secure funds. Robert Niles-Weed, an associate in CCL, successfully presented oral argument on that motion as part of a surprise hearing that was announced by the court only one hour in advance.
The largest impact of the litigation, however, was to improve the baseline for any future emergency relief, because the SBA’s new rule would still apply nationwide. And that is exactly what happened. On July 2, Congress enacted into law a month-long extension of the PPP program. Coupled with the SBA’s new rule, that extension effectively opens the window to thousands of wrongfully excluded small business owners to apply for and obtain needed relief for their businesses and their workers.