Juan Antonio Sanchez, PC v. Bank of S. Tex.

• Decision Date: 14 October 2020
• Docket Number: Civil Action NO. 7:20-cv-00139
• Citation: 494 F.Supp.3d 421
• Parties: JUAN ANTONIO SANCHEZ, PC, on behalf of itself and a similarly situated class, Plaintiff, v. BANK OF SOUTH TEXAS; JPMorgan Chase Bank; and Frost Bank, Defendants.
• Court: U.S. District Court — Southern District of Texas

494 F.Supp.3d 421

JUAN ANTONIO SANCHEZ, PC, on behalf of itself and a similarly situated class, Plaintiff,

v.BANK OF SOUTH TEXAS; JPMorgan Chase Bank; and Frost Bank, Defendants.

Civil Action NO. 7:20-cv-00139

United States District Court, S.D. Texas, McAllen Division.

Signed October 14, 2020

Cory Steven Fein, Attorney at Law, Houston, TX, for Plaintiff.

Michael A. McGurk, Walsh McGurk Cordova Nixon, PLLC, McAllen, TX, for Defendant Bank of South Texas.

Catherine Tipper-McWhorter, Katherine Ginzburg Treistman, Greenberg Traurig, LLP, Houston, TX, for Defendant JPMorgan Chase Bank, NA.

Daniel M. McClure, Norton Rose Fulbright US LLP, Houston, TX, Ashley Senary Dahlberg, Norton Rose et al., San Antonio, TX, Ronald D. Smith, Norton Rose Fulbright US LLP, Dallas, TX, for Defendant Frost Bank.

OPINION AND ORDER

Micaela Alvarez, United States District Judge The Court now considers "Defendants’ Joint Motion to Dismiss for Failure to State a Claim and Lack of Subject-Matter Jurisdiction,"¹ Plaintiff's response,² and Defendants’ reply.³ The Court also considers "Plaintiff's Motion for Judicial Notice."⁴ After considering the motions, record, and relevant authorities, the Court GRANTS both motions.

I. BACKGROUND AND PROCEDURAL HISTORY

This is an action brought under the Paycheck Protection Program (PPP) recently established by Congress in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act),⁵ in addition to the Class Action Fairness Act.⁶ Plaintiff seeks to represent a class in order to recover agent fees Plaintiff alleges are owed to it and other similarly situated class members pursuant to the PPP and its implementing regulations, which create a federal loan program designed to financially assist small businesses during the COVID-19 pandemic.⁷

Mr. Juan Antonio Sanchez is an individual and licensed Certified Public Accountant who owns Plaintiff Juan Antonio Sanchez, PC, a professional corporation in the State of Texas.⁸ Plaintiff corporation "assists taxpayers and small business with taxes in McAllen, Texas and surrounding communities."⁹ Plaintiff alleges it "assisted its clients with preparing their application(s) for a PPP loan" from the Defendant banks,¹⁰ who act as PPP-approved lenders.¹¹ As the agent for Plaintiff's clients who applied for PPP loans, Plaintiff submitted one application to Defendant Bank of South Texas for $95,600; one application to Defendant JPMorgan Chase Bank, NA for $459,600; and three applications to Defendant Frost Bank totaling $74,000.¹² Plaintiff alleges that it is entitled to "regulatorily required Agent Fees" that the Defendants have wrongfully kept for themselves¹³ because Plaintiff allegedly complied with all applicable PPP regulations and is entitled to agent fees¹⁴ that are meant to incentivize agents to assist PPP loan applicants.¹⁵

Plaintiff's first and chief cause of action is its request for a "a declaration, in accordance with SBA Regulations and pursuant to the [federal] Declaratory Judgment Act that Defendants are obligated to set aside money to pay, and to pay the Agent Fees the PPP Agents have earned for the work performed on behalf of their clients that received a PPP loan from the Defendants."¹⁶ Plaintiff also brings claims for violation of state law, specifically unjust enrichment, conversion, and breach of implied contract,¹⁷ and class action allegations under Federal Rule of Civil Procedure 23¹⁸ for an allegedly owed amount over $5 million on behalf of a putative class.¹⁹ On July 22, 2020, prior to Plaintiff completing service on Defendants Chase Bank and Frost Bank, Defendant Bank of South Texas filed a motion to dismiss Plaintiff's original complaint.²⁰ Within 21 days, Plaintiff timely²¹ filed its first amended complaint, the live pleading.²² Accordingly, the Bank of South Texas's independent motion to dismiss²³ is DENIED AS MOOT . Within two weeks of Plaintiff's first amended complaint, Defendants filed the instant joint motion to dismiss Plaintiff's amended complaint.²⁴ Pending the Court's decision on the motion to dismiss, the Court stayed discovery until November 3, 2020.²⁵ Plaintiff responded to the motion to dismiss,²⁶ and Defendants replied,²⁷ and the motion is ripe for consideration.

The Court briefly pauses to note that this kind of litigation is springing up nationwide, consisting now of over fifty lawsuits alleging a failure to pay agent fees under the PPP.²⁸ The United States Judicial Panel on Multidistrict Litigation has declined to consolidate the cases.²⁹ On August 17, 2020, the first decision in this area was issued by the Northern District of Florida, holding that agents who assist applicants with a PPP are not entitled to agent fees in the absence of an agreement with the lenders.³⁰ On September 21, 2020, the Southern District of New York substantially agreed.³¹ This Court believes it is the third to address this issue, and substantively joins the emerging consensus described by the Northern District of Florida and Southern District of New York for the reasons elaborated below.

II. MOTION FOR JUDICIAL NOTICE

Before the Court assesses Defendants’ motion to dismiss, the Court acknowledges "Plaintiff's Motion for Judicial Notice" which requests the Court take judicial notice of various documents available on the United States Small Business Administration's and United States Treasury's respective websites pursuant to Federal Rule of Evidence 201(b).³² The Court first notes that Plaintiff's motion lacks the required averments for opposed motions³³ or a caption that the motion is unopposed.³⁴ Nevertheless, the Court now considers the motion.

It is well-established that a Court may consider matters of public record in assessing a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss.³⁵ Plaintiff's motion is superfluous. The Court will consider matters of public record as necessary in determining Defendants’ motion to dismiss. Accordingly, Plaintiff's motion for judicial notice³⁶ is GRANTED , but the Court admonishes Plaintiff that such a motion is inutile.

III. MOTION TO DISMISS

a. Preliminary Issue

As a threshold matter, the Court notes Plaintiff's response brief lacks numbered paragraphs entirely, hindering the Court's reference to Plaintiff's arguments. The Court cautions Plaintiff that all briefs should consistently number each paragraph to properly comply with the Federal Rules of Civil Procedure.³⁷

b. Jurisdiction

This Court has jurisdiction under 28 U.S.C. § 1331 because this action concerns the federal Declaratory Judgment Act and federal CARES Act and the latter's federal regulations.³⁸

c. Legal Standard

The Court uses federal pleading standards to determine the sufficiency of a complaint.³⁹ "A motion to dismiss an action for failure to state a claim admits the facts alleged in the complaint, but challenges plaintiff's right to relief based upon those facts."⁴⁰ Under Federal Rule of Civil Procedure 12(b)(6), to avoid dismissal, the complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ "⁴¹ The Court reads the complaint as a whole⁴² and accepts all well-pleaded facts as true (even if doubtful or suspect⁴³ ) and views those facts in the light most favorable to the plaintiff (because a Rule 12(b)(6) motion is viewed with disfavor⁴⁴ ), but will not strain to find inferences favorable to the plaintiff,⁴⁵ but also will not indulge competing reasonable inferences that favor the Defendant.⁴⁶ A plaintiff need not plead evidence⁴⁷ or even detailed factual allegations, especially when certain information is peculiarly within the defendant's possession,⁴⁸ but must plead more than " ‘naked assertion[s] devoid of ‘further factual enhancement’ " or "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements" to survive a motion to dismiss.⁴⁹

In evaluating a motion to dismiss, Courts first disregard any conclusory allegations or legal conclusions⁵⁰ as not entitled to the assumption of truth,⁵¹ and then undertake the "context-specific" task, drawing on judicial experience and common sense, of determining whether the remaining well-pled allegations give rise to entitlement to relief.⁵² "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."⁵³ Courts have "jettisoned the [earlier] minimum notice pleading requirement"⁵⁴ and the complaint must plead facts that "nudge" the claims "across the line from conceivable to plausible,"⁵⁵ because discovery is not a license to fish for a colorable claim.⁵⁶ The complaint must plead every material point necessary to sustain recovery; dismissal is proper if the complaint lacks a requisite allegation.⁵⁷ However, the standard is only "to determine whether the plaintiff has stated a legally cognizable claim that is plausible, not to evaluate the plaintiff's likelihood of success."⁵⁸

The Court is limited to assessing only the complaint, its proper attachments, documents incorporated into the complaint by reference, and matters of which the Court may take judicial notice.⁵⁹ Attachments to the complaint become part of the pleadings for all purposes,⁶⁰ but the Court is not required to accept any characterization of them because the exhibit controls over contradictory assertions,⁶¹ except in the case of affidavits.⁶² Because the focus is on the pleadings, "if, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56,"⁶³ but not if the material is a matter of public record⁶⁴ and not if a defendant attaches documents to a motion to dismiss that are "referred to in the plaintiff's complaint and are central to her claim."⁶⁵

d. Analysis

1. Whether There is any Private Right of Action Under the CARES Act

The threshold question is whether Plaintiff has any...