In a Florida case that could have broader implications, a federal appeals court has upheld a U.S. Small Business Administration decision that prevents businesses from receiving Paycheck Protection Program loans if they are in bankruptcy proceedings, the Orlando Sentinel reported. A three-judge panel of the U.S. Court of Appeals for the 11th Circuit yesterday overturned a decision by Bankruptcy Judge Michael Williamson, who sided with Gateway Radiology Consultants, a Pinellas County medical practice that filed for chapter 11 bankruptcy in 2019 and sought a $527,710 loan under PPP, part of the CARES Act approved by Congress in response to the coronavirus pandemic. Judge Williamson ruled this summer that the Small Business Administration had exceeded its authority under federal law when it disqualified businesses in bankruptcy proceedings from the loan program. Also, he ruled that the SBA’s decision was “arbitrary and capricious.” Nevertheless, Judge Williamson on July 1 asked the Atlanta-based appeals court to take up the issue, in part saying the SBA’s stance on the issue has “spawned litigation around the country.” The judge wrote that one court had tallied more than 30 lawsuits challenging the SBA’s position. In a 44-page opinion Tuesday, the appellate court panel concluded that Congress delegated to the SBA the question of whether businesses in bankruptcy proceedings are eligible for the loans. Also, the court rejected the argument that the SBA’s handling of the issue was arbitrary and capricious. “The SBA did not exceed its authority in adopting the non-bankruptcy rule for PPP eligibility,” said the opinion, written by Chief Judge Ed Carnes and joined by Judges Robin Rosenbaum and R. Lanier Anderson III. “That rule does not violate the CARES Act, is based on a reasonable interpretation of the Act, and the SBA did not act arbitrarily and capriciously in adopting the rule.”
