Jenner & Block

Firm Sues SBA for Excluding Business Owners with Criminal Records from COVID-19 Relief Loans

The firm has sought an emergency injunction against a Small Business Administration interim final rule that excludes business owners with criminal records from securing loans from the Paycheck Protection Program, which Congress passed to help small businesses and their employees struggling with the impact of the ongoing coronavirus pandemic.  According to a press release on the lawsuit, “the SBA’s exclusionary rules shut out many tax-paying small business owners with past criminal records, a group that is disproportionately Black and Latinx.”  A week after the lawsuit was filed, the SBA changed the challenged policy to make more people with criminal records and pending charges eligible to receive PPP funding.

Jenner & Block joined the ACLU, the Public Interest Law Center, and Washington Lawyers’ Committee for Civil Rights and Urban Affairs in filing suit in the US District Court, District of Maryland.  The plaintiffs include a nonprofit organization that works with formerly incarcerated people to provide them entrepreneurial training and support; a Black majority owner of graphic design business and advocate for the formerly incarcerated; and a Black small business owner who owns and operates a small electrical contracting business. The individual clients, their businesses, and their employees, should, under the new policy,have federal relief available to them, consistent with Congress’s promised economic lifeline, the CARES Act.  Read more about the SBA’s change in policy here.

Given that PPP loan applications are due by June 30, the lawsuit continues to seek emergency relief—including the extension of the application deadline--to ensure funding access for applicants who have been illegally excluded under the SBA’s policies.

“Small businesses provide an important opportunity for people of color, who are disproportionately criminalized and incarcerated, to rebuild their lives following contact with the criminal justice system,” said Partner Kali Bracey. “The SBA’s implementation of the CARES Act unlawfully prevents small business owners who have had felony convictions from receiving funds. These restrictions undermine the entire purpose of the CARES Act and PPP loan program — which Congress designed to get loans to those who need it most.  This lawsuit seeks to make good on Congress’s promise: That PPP funds reach all eligible small businesses to help their employees and to end the discrimination against small business owners of color.”

Along with Ms. Bracey, the firm team includes Associates Elizabeth B. Deutsch and Jacob D. Alderdice, Senior Paralegal Cheryl Olson and Associate Manager of Docketing Services Tyler Edwards.  The team was supported by Partners Damon Y. Smith, Devi M. Rao and Matthew E. Price, Associates Juan Ruiz ToroIsabel F. Farhi and Andrew Whinery, and Law Clerk Grace Wallack.