Bruckner Truck Sales, Inc. v. Guzman

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

AMARILLO DIVISION

BRUCKNER TRUCK SALES, INC.,

Plaintiff,

2:23-CV-097-Z

ISABEL GUZMAN, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff's Motion for Summary Judgment (“Motion”) (ECF No. 4),

filed June 8, 2023, and Defendants’ Cross-Motion for Summary Judgment (“Cross-Motion”)

(ECF No. 27) filed October 10, 2023. Having reviewed the motions, briefing, and relevant law,

the Court DENIES Plaintiff's Motion and GRANTS Defendants’ Cross-Motion.

BACKGROUND

The Small Business Administration (“SBA”) provides financing to small businesses

through private “Section 7(a) loans” under the Small Business Act. Springfield Hosp., Inc. v.

Guzman, 28 F.4th 403, 408-09 (2d Cir. 2022). In March of 2020, Congress passed the Coronavirus

Aid, Relief, and Economic Security Act (“CARES Act”), “a provision of which — known as the

Paycheck Protection Program (‘PPP’) — authorized the SBA to guarantee loans to businesses with

fewer than 500 employees.”! OTO Analytics, Inc. v. Cap. Plus Fin., LLC, No. 3:21-CV-2636-B,

2022 WL 1488441, at *1 (N.D. Tex. May 11, 2022); see also 15 U.S.C. § 636(a)(36). That PPP

loan program fell under the SBA’s Section 7(a) loan program. This case concerns one such loan.

' “This extraordinary act required a comprehensive plan to disburse billions of dollars to countless businesses in a

very short window of time.” Greathouse v. Cap. Plus Fin. LLC, No. 4:22-CV-0686-P, 2023 WL 5759250, at *1

(N.D. Tex. Sept. 6, 2023). “Because of the logistical challenges that approving loans for millions of American

businesses presented, the government worked with private lenders to streamline the approval process.” /d

Plaintiff is a retail truck dealer in Amarillo. ECF No. 5 at 7. Like many other businesses,

it participated in the PPP during the COVID-19 pandemic. /d. In early 2020, Plaintiff “applied for

a loan from Amarillo National Bank, which determined that Bruckner was eligible and issued

an SBA-guaranteed loan.” /d. at 6. Plaintiff used that loan to cover business expenses, and —

after having spent it in its entirety — submitted a loan forgiveness application. /d. at 6-7.

But Plaintiff's application was denied.

In denying Plaintiff forgiveness, the SBA relied on an interim final rule (“Loan Review

IFR”) that allows it to “assess whether a borrower was eligible for the PPP” as part of the

determination whether to forgive the loan. ECF No. 28 at 8. If the borrower is found ineligible,

loan forgiveness can be denied “even if the borrower had . . . obtained a loan from a private lender,”

“applied for guarantee to SBA,” and “received a loan number.” /d.; see also 85 Fed. Reg. 33010.

That is what happened here: “[the] SBA denied forgiveness of Bruckner’s PPP loan

because the agency concluded that Bruckner, with 942 employees,” was “not eligible for such a

loan, given that the CARES Act allows PPP loans only for business entities with fewer than 500

employees.” ECF No. 28 at 28. Plaintiff now sues under the Administrative Procedure Act

(“APA”) arguing that the SBA entirely lacked authority to consider — at the loan forgiveness stage

— its eligibility for the loan. Plaintiff contends (1) that the SBA’s forgiveness-stage assessment of

eligibility violates the CARES Act, and (2) that such an assessment constitutes an impermissibly

retroactive application of the Loan Review IFR to Plaintiffs loan. ECF Nos. 5 at 7; 28 at 9.

LEGAL STANDARDS

Summary judgment is appropriate if the movant shows there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law. FED. R. Civ. P. 56(a).

Per the Fifth Circuit, summary judgment “‘is particularly appropriate in cases in which the court is

asked to review or enforce a decision of a federal administrative agency.” Girling Health Care,

Inc. v. Shalala, 85 F.3d 211, 214-15 (Sth Cir. 1996). To prevail, the moving party bears the initial

burden of demonstrating “there is no genuine issue as to any material fact” and that it “is entitled

to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Facts are

considered “material” only if they “might affect the outcome of the suit under the governing law.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Judicial review under the APA is limited to the administrative record. 5 U.S.C. § 706.

Courts are compelled to “hold unlawful and set aside agency action[s]” that are “arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2).

While a reviewing court must apply this standard deferentially, the agency action must

“be reasonable and reasonably explained.” Fed. Commc’ns Comm'n v. Prometheus Radio Project,

141 S. Ct. 1150, 1158 (2021). To assess whether an agency has acted arbitrarily or capriciously,

a court should consider whether the agency “has relied on factors which Congress has not intended

it to consider, entirely failed to consider an important aspect of the problem, offered an explanation

for its decision that runs counter to the evidence[,]” or is “so implausible that it could not be

ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass'n v.

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

ANALYSIS

1. The SBA’s forgiveness-stage assessment was not “arbitrary and capricious.”

A. Defendants’ statutory construction is reasonable and warrants deference.

Plaintiff claims the SBA’s Loan Review IFR “contravenes the CARES Act” because

Congress already decided that “eligibility for loan forgiveness depends on whether the applicant

in fact received an SBA-guaranteed loan, not whether the applicant should have received an

SBA-guaranteed loan.” ECF No. 5 at 6—7 (emphasis in original). Hence, Plaintiff concludes that

the SBA “revisit[ing] loan issuance eligibility when determining loan forgiveness eligibility .. .

flouts Congress’s decision and exceeds its statutory authority.” /d. at 7.

Defendants respond that the CARES Act’s text establishing the PPP’s provisions,

when “considered together as a whole and viewed in combination with subsequent legislation,”

shows that the SBA “has ample authority at the forgiveness stage to assess a borrower’s eligibility

for a PPP loan.” ECF No. 28 at 9. Hence, Defendants maintain that “[a] lender’s decision to

approve a PPP loan, relying on the borrower’s self-certification that it was eligible for PPP relief,

does not preclude [the] SBA at the forgiveness stage from reviewing the borrower’s eligibility.”

Id. Plaintiff's position, they argue, “contradicts provisions of the CARES Act and subsequent

legislation concerning PPP loans.” Jd.

As this is a question of statutory interpretation, the Court begins with the text of

the statute. United States v. Lauderdale Cnty., Miss., 914 F.3d 960, 961 (Sth Cir. 2019).

If the text is unambiguous, the analysis ends there as well. See BedRoc Ltd., LLC v. United States,

541 U.S. 176, 183 (2004); United States v. Ary, 892 F.3d 787, 789 (Sth Cir. 2018). The “cardinal

canon” of statutory interpretation requires courts to “presume . . . a legislature says in a statute

what it means and means in a statute what it says there.” Connecticut Nat. Bank v. Germain, 503

U.S. 249, 253-254 (1992). Here, the relevant text is found in the CARES Act’s Section 1106 on

“Loan Forgiveness”:

In this section — (1) the term ‘‘covered loan’’ means a loan guaranteed under paragraph

(36) of Section 7(a) of the Small Business Act (15 U.S.C. 636(a)), as added by section

1102; ... (6) the term ‘‘eligible recipient’’ means the recipient of a covered loan....

CARES Act § 1106(a)(1), (6); see also 15 U.S.C. § 636m.?

2 The CARES Act established the PPP loan program by amending Section 7(a) of the Small Business Act.

These provisions can also be found at 15 U.S.C. § 636m.

Plaintiff focuses its argument almost exclusively on the definition of “eligible recipient.”

In its view, “Bruckner’s eligibility for loan forgiveness is indisputable” because it has a PPP loan,

and an “eligible recipient” is merely “the recipient of a covered loan.” ECF No. 5 at 20. “In effect,”

Plaintiff concludes, “the [Loan Review IFR] replaces the definition of ‘eligible recipient’ in

Section 636m (‘the recipient of a covered loan’) with the separate definition of that term in Section

636(a)(36) (a business with a certain number of employees).” ECF No. 5 at 21.

But this Court has a “duty to construe statutes, not isolated provisions.” Graham Cnty.

Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 559 U.S. 280, 290 (2010).

Accordingly, provisions “must be read in their context and with a view to their place in the overall

statutory scheme.” Davis v. Michigan Dep’t of Treasury, 489 U.S. 803, 809 (1989); Turkiye Halk

Bankasi A.S. v. United States, 598 U.S. 264, 275 (2023). “We seek to interpret a statutory provision

as part of a symmetrical and coherent regulatory scheme.” JetPay Corp. v. United States Internal

Revenue Serv., 26 F.4th 239, 242 (Sth Cir. 2022) (internal marks omitted). “The most grammatical

reading of a sentence in a vacuum does not always produce the best reading in context.” Yellen v.

Confederated Tribes of Chehalis Rsrv., 141 S. Ct. 2434, 2448 (2021).

CARES Act Section 1106(a)(6) states that “the term ‘eligible recipient’ means the

recipient of a covered loan.” Section 1106(a)(1), in turn, defines a “covered loan” as “a loan

guaranteed under paragraph (36) of Section 7(a) of the Small Business Act[.]” (emphasis added).

Hence, understanding what the term “covered loan” means — and the authority and terms to which

it is subject — requires understanding what the phrase “guaranteed under” means. Plaintiff reads

“guaranteed under” to mean “by reason of the authority of.” ECF No. 33 at 13. But Defendants

contend that the “more natural reading” of the phrase is “subject to” or “inferior or subordinate to”

the provisions of Section 636(a)(36), which “include the provision that limits PPP program

eligibility to ‘small businesses’ defined as organizations that employ fewer than ‘500 employees.’”

ECF No. 34 at 7-8 (quoting 15 U.S.C. § 636(a)(36)(D)).

The Supreme Court interpreted similar language in Pereira v. Sessions. 138 S. Ct. 2105

(2018). There, the Court confronted a statutory rule (the “stop-time” rule) used for calculating

a non-citizen’s “continuous physical presence” in the United States. /d. at 2110. The relevant

statute — there, the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 —

states that “any period of .. . continuous physical presence” is “deemed to end .. . when the alien

is served a notice to appear under section 1229(a),” where the notice-to-appear provision required

specification of, inter alia, “[t]he time and place at which the [removal] proceedings will be held.”

Pereira, 138 S. Ct. at 2107 (emphasis added).

Defendants note that, in rejecting the position that a notice to appear lacking the “time and

place” of a removal proceeding counted as a “notice to appear under” Section 1229(a) for purposes

of the “‘stop-time” rule, the Court concluded that “the word ‘under,’ as used in the stop-time rule,

clearly means ‘in accordance with’ or ‘according to’ because it connects the stop-time trigger in

§ 1229b(d)(1) to a ‘notice to appear’ that specifies the enumerated time-and-place information.”

Id. at 2109. Said differently, “the word ‘under’ provides the glue that bonds the stop-time rule to

the substantive .. . requirements mandated by § 1229(a).” Jd. at 2117; see also ECF No. 28 at 24.

So too here. For purposes of loan forgiveness, “the word ‘under’ provides the glue” that

“connects” the loan forgiveness requirements in CARES Act Section 1106 with the loan

origination provisions in CARES Act Section 1102 (15 U.S.C. § 636(a)). See ECF No. 28 at 24.

Accordingly, if a PPP loan is granted to an ineligible borrower, that loan is not “guaranteed under”

15 U.S.C. § 636(a) because an ineligible borrower’s loan is not “in accordance with” or “according

to” the governing statutes and the SBA’s authoritative regulations interpreting those statutes. Jd.

(quoting Pereira, 138 S. Ct. at 2117). And that is true regardless of whether the ineligibility stems

from a violation of a statutory eligibility requirement (e.g., an applicant business employing more

than 500 employees, see 15 U.S.C. § 636(a)(36)(D)) or a regulatory one.

Plaintiff's statutory analysis fails to adequately address this “guaranteed under” language

— to the extent it addresses it at all. Rather, Plaintiff effectively assumes that all loans made —

regardless of the borrower’s actual eligibility — are “covered loans” that immediately qualify the

borrower for forgiveness. See ECF No. 5 at 20 (“Bruckner is an ‘eligible recipient’ because it is

‘the recipient of a covered loan.’”). In other words, Plaintiffs position would preclude the SBA

from denying forgiveness even to borrowers who obtained their loans via intentional

misrepresentations and omissions, so long as those borrowers fulfilled the other statutory

requirements. That interpretation runs contrary to the statutory text and the logic that supports it.

Moreover, Plaintiffs position is incompatible with the fact that Congress located the PPP

in Section 7(a) — within the SBA’s pre-existing loan authority —- thereby making the SBA

responsible for investigating, reviewing, maintaining, and creating rules protecting the program’s

integrity. See A. Scalia & B. Garner, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 167

(2012) (“[T]he whole-text canon . . . calls on the judicial interpreter to consider the entire text, in

view of its structure and of the physical and logical relation of its many parts,” as “[t]he entirety

of the document thus provides the context for each of its parts.”) (emphasis added); K Mart Corp.

v. Cartier, Inc., 486 U.S. 281, 291 (1988) (courts must look to “the language and design of the

statute as a whole”) (emphasis added); see also 15 U.S.C. § 634(b)(6) (the SBA is authorized to

“make such rules and regulations as” the agency “deems necessary” to implement the PPP);

15 U.S.C. § 634(b)(7) (the SBA may create rules and “take any and all actions” when it

“determines such actions are necessary or desirable” in “dealing with” loans); 15 U.S.C.

§ 634(b)(11) (the SBA must “make such investigations as [the agency] deems necessary to

determine whether a recipient” of “any assistance under this chapter... . has engaged . . . in any

acts” constituting a “violation of. . . this chapter” or of “‘any order issued under this chapter.”).

Hence, accepting Plaintiff's argument would require this Court to “attribute to Congress

an intention to render a statute . . . internally inconsistent.” Jones v. Hendrix, 599 U.S. 465, 479

(2023); see also Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 622 (Sth Cir. 2013) (“[W]e

interpret provisions of a statute in a manner that renders them compatible, not contradictory.”);

FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (“A court must... interpret

the statute as a symmetrical and coherent regulatory scheme, and fit, if possible, all parts into □□□

harmonious whole.”) (citations and internal marks omitted).

Subsequent legislation further undermines Plaintiffs proffered interpretation. After the

SBA announced, via its Loan Review IFR, that it would examine borrower eligibility at the loan

forgiveness stage, “the same Congress that passed the CARES Act passed the Consolidated

Appropriations Act of 2021.” U.S. Small Bus. Admin. v. Weather King Heating & Air, Inc., 648

B.R. 200, 209 (N.D. Ohio 2023); see also Consolidated Appropriations Act of 2021, Pub. L. No.

116-260, 134 Stat. 1182 (2020) (“CAA”). That statute forbade the SBA from requiring certain

forgiveness applicants (those seeking $150,000 or less) to submit documentation beyond one page

containing specified certifications, but did not even purport to restrict SBA’s authority to review,

audit, or modify forgiveness of loans over $150,000 — the SBA’s approach was left completely

untouched. See CAA 2021, Div. N, § 307(a)(3) (adding 15 U.S.C. § 636m(/)(1)(A), (B)).

3 To be clear, there is a difference between arguments based on subsequent /egis/ation and subsequent legislative

history. The former is readily accepted by originalist and textualist judges. See Food & Drug Admin. v. Brown &

Williamson Tobacco Corp., 529 U.S. 120, 161 (2000) (“Reading the FDCA as a whole, as well as in conjunction with

Congress’ subsequent tobacco-specific legislation, it is plain that Congress has not given the FDA the authority that

it seeks to exercise here.”) (emphasis added). Subsequent legislative history, however, does not enjoy this support.

See Sullivan v. Finkelstein, 496 U.S. 617, 632 (1990) (Scalia, J., concurring in part) (“Arguments based on subsequent

legislative history, like arguments based on antecedent futurity, should not be taken seriously, not even in a footnote.”).

It is well established that “Congress can be presumed to be aware of relevant administrative

interpretations when enacting or amending a statute,” Duarte v. Mayorkas, 27 F.4th 1044, 1059

(Sth Cir. 2022); see also Lorillard v. Pons, 434 U.S. 575, 581 (1978) (“Congress is presumed to

be aware of an administrative or judicial interpretation of a statute and to adopt that interpretation

when it re-enacts a statute without change.”) and that “[w]hen Congress provides exceptions in a

statute... [t]he proper inference . . . is that Congress considered the issue of exceptions” and

“limited the statute to the ones set forth,” United States v. Johnson, 529 U.S. 53, 58 (2000);

see also Parada v. Garland, 48 F.4th 374, 377 (Sth Cir. 2022). Hence, the CAA represents

Congress’s affirmative decision to ratify the SBA’s conclusion that it had statutory authority to

assess borrower eligibility at the loan forgiveness stage. See Abbott v. United States, 562 U.S. 8,

21 (2010) (“We are disinclined to say that what Congress imposed with one hand .. . it withdrew

with the other... .”) (quoting Logan v. United States, 552 U.S. 23, 24 (2007)).

Lastly, Plaintiff's argument treats the PPP as if it were really a grant program. It is not.

See Springfield Hosp., Inc. v. Guzman, 28 F.4th 403, 423 (2d Cir. 2022) (‘“‘[T]he substance of the

PPP conclusively demonstrates that it is, as described, a loan guaranty program, not a grant

program.”). In Springfield, the Second Circuit addressed the CARES Act and debtors who were

denied PPP funds due to their bankruptcy status. /d. at 408. And it held, inter alia, that loan

forgiveness “is neither automatic nor guaranteed,” and that forgiveness is only granted “if specified

criteria are met” — criteria with “several additional conditions.” /d. at 424 (“For example, funds

are not forgivable if the employer does not spend a minimum amount” directly “on payroll

expenses” and the forgivable amount is reduced if “salaries are decreased by more than 25%.”).

At least one of those “conditions” is met here. See 15 U.S.C. § 636(a)(36)(D) (“[A]ny

business concern . . . shall be eligible to receive a covered loan if the business concern... employs

not more than .. . 500 employees.”); see also ECF No. 28 at 28 (“[The] SBA denied forgiveness

of Bruckner’s PPP loan because the agency concluded that Bruckner, with 942 employees, is not

eligible for such a loan, given that the CARES Act allows PPP loans only for business entities with

fewer than 500 employees.”). And while the Second Circuit’s precedent is non-binding, it is

persuasive — and it supports concluding that Defendants’ statutory construction is reasonable.

At the least, Defendants’ interpretation is clearly far from “arbitrary and capricious,” and therefore

warrants deference under Chevron, U.S.A., Inc. v. Nat. Res. Def Council, Inc., 467 U.S. 837

(1984). No other arguments advanced by Plaintiff convinces the Court otherwise.

B. Defendants’ Loan Review IFR does not impermissibly “re-delegate” authority

to the SBA’s non-lender agents.

Plaintiff next argues that “[f]or purposes of making covered loans,” it is “/ender[s],” not

SBA employees, who are “delegated authority by the Administrator.” ECF No. 5 at 22 (citing

CARES Act § 1102(F)(ii)(1)) (emphasis in original). And indeed, that provision reads:

(I) GENERAL. — For purposes of making covered loans for the purposes described in

clause (i), a lender approved to make loans under this subsection shall be deemed to have

been delegated authority by the Administrator to make and approve covered loans, subject

to the provisions of this paragraph.

CARES Act § 1102(F)(ii)(1); see also 15 U.S.C. § 636(a)(36)(F)(ii)(1). Hence, “SBA’s new rules,”

Plaintiff argues, “contradict that provision by purporting to re-delegate the authority to determine

eligibility for an SBA-guaranteed loan to SBA’s non-lender agents.” Jd.

In response, Defendants acknowledge that, “[a]s is often true with other forms of Section

7(a) lending,” eligible borrowers “obtained PPP loans by filing applications with private lending

institutions,” which “lend their own funds to qualifying borrowers, subject to an SBA guarantee.”

ECF No. 28 at 25. But Defendants contend that Plaintiff “identifies no authority or textual hook

for the notion that once a lender decided to approve a PPP loan (relying on a self-certification of

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eligibility)” such a decision “precluded [the] SBA from reaching a different conclusion at the

forgiveness stage.” Jd. And they contend that Plaintiff's argument “is incompatible with Section

634(b)(11), which charges SBA with the responsibility to conduct investigations and audits —

statutes Congress left in place as to PPP loans.” Jd. Hence, in Defendants’ view, the challenged

delegation neither “purport[s] to override” — nor contradicts — “any of those statutes.” /d.

The Court agrees with Defendants’ analysis. Moreover, Plaintiff's argument clashes with

long-held background principles of administrative law — principles that concern governmental

delegations of authority to subordinated agency personnel. This Circuit has repeatedly

acknowledged the “general proposition” that, where government agencies are concerned, “the head

of an administrative agency has the power to review and revise acts of subordinates where,”

as here, “the powers in question are vested in the subordinate under the supervision and direction

of the superior or the power to administer is vested in the superior.” Chevron Oil Co. v. Andrus,

588 F.2d 1383, 1388 (Sth Cir. 1979); see also Morrow v. Clayton, 326 F.2d 36, 45-46 (10th Cir.

1963) (citing Knight v. United Land Association, 142 U.S. 161 (1891)).

The mere fact that the CARES Act delegated loan origination decisions to private lenders

does not suggest the SBA lacks authority to review those decisions. On the contrary, the “head of

an agency retains the authority to make final decisions for the agency even if he or she delegates

the authority to make these decisions to his or her subordinates.” Heggestad v. U.S. Dep't of

Justice, 182 F. Supp. 2d 1, 9-10 (D.D.C. 2000) (emphasis added); see id. at 10 (concluding

authorization of subordinate “to take certain actions does not deprive his superiors of their

authority to make final decisions for the agency in certain cases”). And at no point here did

Congress or the SBA confer “sole decisional authority” on private lenders. Chevron Oil Co., 588

F.2d at 1388. “To hold otherwise would create havoc in the administration of our laws.” Jd.

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2. The SBA’s forgiveness-stage assessment of Plaintiff's eligibility via its Loan

Review IFR was not impermissibly retroactive.

Plaintiff next claims that, “even assuming [the] SBA has the authority to deny loan

forgiveness based on a finding of ineligibility, it had no power to apply that rule retroactively to

Bruckner.” ECF No. 5 at 19. “Because the retroactive application of regulations can produce harsh

and unfair results,” Plaintiff argues, “agencies may apply their rules retroactively only when

Congress has clearly permitted them to do so.” /d. And Plaintiff claims that “[r]etroactively

applying” the SBA’s Loan Review IFR “violated the Due Process Clause because it was ‘harsh,’

‘oppressive,’ ‘arbitrary,’ and ‘irrational.’” Jd. at 27 (citing United States v. Carlton, 114 S. Ct.

2018, 2022 (1994)).

Defendants respond that Plaintiffs retroactivity claims are meritless because “[t]he Loan

Review IFR simply explained what the CARES Act and the Small Business Act already provided”

— namely, “that to obtain loan forgiveness applicants had to be eligible for their PPP loans in the

first place,” and “that SBA had authority to conduct necessary and appropriate inquiries to ensure

recipients’ compliance with that requirement.” ECF No. 28 at 36. Hence, Defendants conclude

that “the Loan Review IFR had no retroactive effect when applied to Bruckner’s PPP loan” because

it merely stated “what pre-existing law already provided.” /d.

Plaintiff's arguments fall short. First, Plaintiff cites Bowen v. Georgetown Univ. Hosp. for

the proposition that “[rJetroactivity is not favored in the law.” 488 U.S. 204, 208 (1988);

ECF No. 5 at 24. And Plaintiff notes, correctly, that courts “mitigate the unfairness of retroactive

regulation by applying a clear-statement rule: ‘a statutory grant of legislative rulemaking authority

will not [generally] be understood to encompass the power to promulgate retroactive rules unless

that power is conveyed by Congress in express terms.’” ECF No 5 at 24; Bowen, 488 U'S. at 208.

But the question here is whether the SBA’s Loan Review IFR is retroactive to begin with. It is not.

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The Fifth Circuit has recognized that “[i]f an interpretative regulation merely clarifies what

the language of the statute was intended to convey, it is ultimately misleading to term it

retroactive.” Anderson, Clayton & Co. v. United States, 562 F.2d 972, 985 n.30 (5th Cir. 1977).

Such a regulation “constitutes only a step in the administrative process” and “is no more retroactive

in its operation than is a judicial determination construing and applying a statute to a case in hand.”

Manhattan Gen. Equip. Co. v. Comm’r of Internal Revenue, 297 U.S. 129, 135 (1936). That is the

case here: the Loan Review IFR merely informed borrowers of the SBA’s understanding that

“eligible recipient” under 15 U.S.C. § 636m(a)(10) means a recipient that was eligible for its loan

under 15 U.S.C. § 636(a)(36)(A)(iv). It did not constitute “new law.” Anderson, Clayton & Co.,

562 F.2d at 985 n.30 (“Whenever interpretative rules . . . make new law, retroactive law making

should be .. . unprejudiced by the false notion that results never flow from the interpreter.”).

Furthermore, the Loan Review IFR relied on — and advised borrowers of — the SBA’s

pre-existing statutory authority: “The Small Business Act authorizes the Administrator to conduct

investigations to determine whether a recipient or participant in any assistance under a [Section]

7(a) program, including the PPP, is ineligible for a loan[,]” and to “take any and all actions...

with respect to [Section 7(a)] loans.” 85 Fed. Reg. 33010, 33011-12 (June 1, 2020) (internal

citations omitted). As discussed supra, that pre-existing statutory authority permits the SBA to

“make such investigations as [the agency] deems necessary to determine whether a recipient” of

“any assistance under this chapter” has engaged “‘in any acts or practices” constituting “a violation

of any provision of this chapter, or of any rule or regulation under this chapter.”). 15 U.S.C.

§ 634(b)(11). It also permits the taking of “any and all actions” when the agency “determines such

actions are necessary or desirable in making, servicing, compromising, modifying,” or “dealing

with or realizing on loans made under the provisions of this chapter.” 15 U.S.C. § 634(b)(7).

13

And because “this chapter” in the foregoing provisions refers to Chapter 14A of the

Small Business Act, borrowers received PPP loans subject to that authority — authority to

investigate and determine eligibility and take actions to ensure statutory compliance. See Pharaohs

GC, Inc. v. United States Small Bus. Admin., 990 F.3d 217, 227 (2d Cir. 2021) (“[T]he PPP

was not created as a standalone program but was added into the existing § 7(a) program,”

subjecting it to existing “regulations, as well as existing SBA authority.””). As Defendants put it,

“t]he Loan Review IFR made no new law simply by reminding borrowers of that consequence.”

ECF No. 28 at 37; see also ECF No. 34 at 20. This Court agrees.

Lastly, Plaintiff argues that “‘[r]etroactively applying [the] SBA’s rule to Bruckner’s loan

violated the Due Process Clause because it was ‘harsh,’ ‘oppressive,’ ‘arbitrary,’ and ‘irrational.’”

ECF No. 5 at 27 (citing Carlton, 1148S. Ct. at 2022). In its view, the government “induced Bruckner

to participate in the [PPP] by offering favorable terms, including the availability of loan

forgiveness for borrowers who spent the loan proceeds on payroll.” /d. “By changing positions,”

Plaintiff argues, “SBA undermined Bruckner’s legitimate and settled financial planning.” /d.

“Bruckner reasonably understood that it would not have to repay its PPP loan so long as it spent

the money on payroll (which it did)” and “would not have accepted the loan” otherwise. Jd.

However, Plaintiffs sole authority for its Due Process claims is United States v. Carlton,

a case that concerned a statute that was retroactive in application and effect. 114 S. Ct. 2018, 2020

(“Congress provided that the amendment would apply retroactively .... The question presented

... 1S whether the retroactive application of the amendment violates the Due Process Clause.”).

Carlton is therefore inapplicable because this Court has already held — for the reasons supra —

that the Loan Review IFR is not retroactive. See Landgrafv. USI Film Prod., 511 U.S. 244, 269

(1994) (“A statute does not operate ‘retrospectively’ merely because it is applied in a case arising

14

from conduct antedating the statute’s enactment . . . or upsets expectations based in prior law.”)

(citing Republic Nat. Bank of Miami v. United States, 506 U.S. 80, 100 (1992) (Thomas, J.,

concurring in part and concurring in judgment)).

Moreover, to the extent that Carlton does apply, it helps Defendants’ case. Carlton held,

inter alia, that “a tax statute’s retroactive application must be supported by a legitimate legislative

purpose furthered by rational means.” /d. One such “legitimate legislative purpose” is “to prevent

.. . unanticipated revenue loss.” Jd. So too here. The Loan Review IFR sought to prevent the

“unanticipated revenue loss” of forgiving ineligible borrowers’ improperly issued PPP loans.

That is “neither illegitimate nor arbitrary.” ECF No. 28 at 39 (quoting Carlton, 114 S. Ct. at 2023).

And this Court ultimately agrees with Defendants that “[a]pplying routine administrative tools that

have long been at the agency’s disposal, to ensure that the benefits of a federally funded program

‘are directed to the entities Congress intended,’ . . . is not so ‘harsh and oppressive as to transgress

[any] constitutional limitation.’” /d. (quoting 85 Fed. Reg. at 33012; Carlton, 114 S. Ct. at 2022).

None of Plaintiffs other arguments convinces the Court otherwise.

CONCLUSION

Neither the SBA’s actions regarding Plaintiff nor its Loan Review IFR is unlawful,

arbitrary, capricious, in excess of statutory authority, retroactive, or violative of Due Process.

Because Plaintiff is not entitled to the relief it seeks, the Court DENIES Plaintiff's Motion and

GRANTS Defendants’ Cross-Motion.

SO ORDERED. Lguwcad

December 123023

MAATHEW J. KACSMARYK

ITED STATES DISTRICT JUDGE

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