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Small Businesses Denied MDL For Chase Virus Loans Suits

Tiomkin Law Offices of Elliott Tiomkin > Legal News  > Small Businesses Denied MDL For Chase Virus Loans Suits

Small Businesses Denied MDL For Chase Virus Loans Suits

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Law360 (August 5, 2020, 6:37 PM EDT) — The U.S. Judicial Panel on Multidistrict Litigation said Wednesday that it will not combine a collection of lawsuits accusing JPMorgan Chase Bankof mishandling small businesses’ applications for federal coronavirus relief loans, concluding that there’s not enough to be gained by such a move.

The JPML said in an order that while there is some overlap in the small-business plaintiffs’ cases against Chase, the individualized nature of the factual issues surrounding their respective loan applications will take away from the potential efficiency benefits of centralizing them in an MDL.

The panel also noted that the number of cases against Chase is “limited and appears unlikely to grow,” counting just seven remaining lawsuits up for centralization.

“In the present circumstances, voluntary coordination among the parties and the involved judges is preferable to centralization,” the panel said. “We encourage the parties to employ various alternatives to transfer which may minimize the potential for duplicative discovery and inconsistent pretrial rulings.”

The MDL denial comes as a win for Chase, which had opposed the centralization motion filed by California-based plaintiff Hyde-Edwards Salon & Spa, which sued the bank in April for allegedly giving improper preferential treatment to larger and more lucrative businesses applying for Paycheck Protection Program loans.

PPP loans were designed to help cover payroll and other overhead costs for small businesses struggling during the COVID-19 crisis, and according to Hyde-Edwards, banks acting as PPP lenders are supposed to process loan applications on a first-come, first-served basis.

But the salon alleges that Chase ignored this mandate and instead prioritized applications from bigger borrowers, positioning itself to earn larger origination fees while leaving smaller borrowers to potentially miss out on much-needed funding.

Other small businesses from around the country have made similar allegations against Chase in a series of proposed class actions, which Hyde-Edwards and several of its fellow plaintiffs supported consolidating and centralizing in California or Illinois federal court.

Addressing the JPML at a hearing last week, for example, attorneys for some of these plaintiffs emphasized the factual and legal commonalities between the cases and argued that consolidation would promote efficiency in the litigation and help ensure “quick and consistent rulings.”

Chase, however, resisted their request for an MDL on grounds that the cases are actually too varied in substance and scope to merge effectively. The bank also argued that the need for an MDL was undercut by the relatively small and declining number of cases up for consolidation, pointing to the voluntary dismissals of at least two suits and the lack of new filings since May in the face of continued PPP loan availability.

In Wednesday’s order, the JPML agreed with the bank that an MDL wasn’t warranted, finding that “centralization will not serve the convenience of the parties and witnesses or further the just and efficient conduct of the litigation.”

Informal coordination between the various plaintiffs and the bank is the better bet, the panel wrote.

“Such coordination appears practicable in this litigation, considering the limited number of actions and districts,” the panel said. “Additionally, common defendant Chase is represented by the same counsel in all actions, and represents in the panel briefing it will support informal coordination of any overlapping discovery and other pretrial activities.”

JPMorgan Chase is the largest bank in the U.S. and also the largest PPP lender, but it’s just one of a slew of banks that has been hit with lawsuits alleging misconduct related to the small-business loan program.

The lawsuits have spanned a range of issues related to the program’s implementation, including whether banks unfairly and improperly prioritized some borrower applications over others, whether banks were allowed to craft more stringent eligibility criteria to manage application flow and whether third-party “agents” that helped borrowers apply are entitled to cuts of the loan origination fees that banks earn from the government.

In separate orders issued Wednesday, the JPML also declined to create MDLs out of cases like these that have been brought against Bank of Americaand Wells Fargo. The panel further declined to consolidate and centralize an array of agent-fee suits that have collectively targeted more than 100 PPP lenders, including Chase, Bank of America and Wells Fargo.

A Chase spokesperson declined to comment, and counsel for Hyde-Edwards did not immediately return a request for comment Wednesday.

The Hyde-Edwards Salon & Spa is represented by Rebecca A. Peterson and Robert K. Shelquist of Lockridge Grindal Nauen PLLP, Benjamin Galdston of Berger Montague, Gregory F. Coleman and Alex R. Straus of Greg Coleman Law PCand Daniel K. Bryson, Scott C. Harris and Patrick M. Wallace of Whitfield Bryson LLP.

Chase is represented by Gregory E. Ostfeld of Greenberg Traurig LLP.

The case is In re: JPMorgan Chase Paycheck Protection Program Litigation, MDL number 2944, before the U.S. Judicial Panel on Multidistrict Litigation.

–Editing by Orlando Lorenzo.

For a reprint of this article, please contact reprints@law360.com.

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