In record time, the Fifth Circuit granted a direct appeal and reversed the bankruptcy court on June 22, ruling that the Small Business Act bars the bankruptcy court from entering an injunction that requires the Small Business Administration to grant a so-called PPP loan to a company in bankruptcy.
On April 25, a bankruptcy court in Houston preliminarily enjoined the SBA from barring the chapter 11 debtor from receiving a loan under the Paycheck Protection Program, or PPP. Enacted on March 27 as part of the Coronavirus Aid, Relief and Economic Security Act, the PPP program allows the SBA to make loans that will be forgiven if at least 60% is spent for payroll.
To read ABI’s report on the bankruptcy court opinion, click here.
The SBA appealed. The district court stayed the preliminary injunction pending appeal and certified the case for direct appeal. The Fifth Circuit accepted the appeal and accelerated briefing. The last brief in the circuit was filed on June 19. The appeals court issued its three-page opinion three days later.
As it had done in bankruptcy court, the SBA argued in the circuit that 15 U.S.C. § 158(d) prohibits courts from entering injunctions against the SBA. In that regard, the bankruptcy court had found that the SBA’s rules prohibiting debtors from receiving PPP loans was an impermissible discrimination against companies in bankruptcy under Section 525(a).
With regard to prohibiting injunctions, the bankruptcy judge said he did “not accept that when I have evidence of bankruptcy discrimination that I can do nothing about it.”
The Fifth Circuit dealt with the power to enjoin the SBA in less than one page. In his opinion for the appeals court, Circuit Judge Jerry E. Smith cited Fifth Circuit authority, which “absolutely” prohibits injunctions directed at the SBA.
Bound by circuit precedent, Judge Smith vacated the injunction. He said that the “issue at hand is not the validity or wisdom of the PPP regulations . . . , but the ability of a court to enjoin the [SBA].”
In record time, the Fifth Circuit granted a direct appeal and reversed the bankruptcy court on June 22, ruling that the Small Business Act bars the bankruptcy court from entering an injunction that requires the Small Business Administration to grant a so-called PPP loan to a company in bankruptcy.
On April 25, a bankruptcy court in Houston preliminarily enjoined the SBA from barring the chapter 11 debtor from receiving a loan under the Paycheck Protection Program, or PPP. Enacted on March 27 as part of the Coronavirus Aid, Relief and Economic Security Act, the PPP program allows the SBA to make loans that will be forgiven if at least 60% is spent for payroll.
To read ABI’s report on the bankruptcy court opinion, click here.
The SBA appealed. The district court stayed the preliminary injunction pending appeal and certified the case for direct appeal. The Fifth Circuit accepted the appeal and accelerated briefing. The last brief in the circuit was filed on June 19. The appeals court issued its three-page opinion three days later.
As it had done in bankruptcy court, the SBA argued in the circuit that 15 U.S.C. § 158(d) prohibits courts from entering injunctions against the SBA. In that regard, the bankruptcy court had found that the SBA’s rules prohibiting debtors from receiving PPP loans was an impermissible discrimination against companies in bankruptcy under Section 525(a).
With regard to prohibiting injunctions, the bankruptcy judge said he did “not accept that when I have evidence of bankruptcy discrimination that I can do nothing about it.”