PPP Changes Weaken Lawsuits Over Felony Restrictions, DOJ Argues

Recent guidance concerning a federal pandemic relief program undercuts lawsuits against the Small Business Administration for barring loan seekers with criminal records, the Trump administration said in a court filing.

The memo, filed in the U.S. District Court for the District of Maryland, highlights Wednesday changes to the Paycheck Protection Program that limit a criminal justice restriction in the program to only apply to loan applicants whose parole terms begin within a year of their loan application.

The PPP, part of the government’s coronavirus response (Public Law 116-136), has facilitated hundreds of billions of dollars in government-backed, forgivable loans to small business owners. The lead lawsuit, filed by the New Civil Liberties Alliance on behalf of Maryland business owner Altimont Mark Wilks, alleged that the Small Business Administration exceeded its statutory authority by barring some business owners with criminal records from applying from loans.

“The individual Plaintiffs do not fall within the rule’s terms, as modified, and so the restriction no longer bars the Plaintiff businesses from applying for PPP loans,” the government said in the memo, filed Wednesday night.

Wilks has asked the court to issue an injunction that would set aside $31,500 in PPP funds for his business while the litigation plays out. The deadline to apply for PPP funding is June 30.

The Justice Department asked the court to deny that request and said the Small Business Administration is prepared to inform lenders that Wilks’ business is no longer restricted from applying for a loan.

The New Civil Liberties Alliance, representing Wilks, and the SBA didn’t immediately return requests for comment.

The case is Carmen’s Corner Store v. Small Bus. Admin, D. Md., No. 1:20-cv-01736, response filed 6/24/20.