WP Co. v. U.S. Small Bus. Admin.

• Decision Date: 05 November 2020
• Docket Number: Civil Action No. 20-1614 (JEB),Civil Action No. 20-1240 (JEB)
• Parties: WP COMPANY LLC d/b/a the Washington Post, et al., Plaintiffs, v. U.S. SMALL BUSINESS ADMINISTRATION, Defendant. Center for Public Integrity, Plaintiff, v. U.S. Small Business Administration, Defendant.
• Court: U.S. District Court — District of Columbia

502 F.Supp.3d 1

WP COMPANY LLC d/b/a the Washington Post, et al., Plaintiffs,

v.U.S. SMALL BUSINESS ADMINISTRATION, Defendant.

Center for Public Integrity, Plaintiff,

v.U.S. Small Business Administration, Defendant.

Civil Action No. 20-1240 (JEB)

Civil Action No. 20-1614 (JEB)

United States District Court, District of Columbia.

Signed November 5, 2020

Peter Newbatt Smith, Center for Public Integrity, Washington, DC, for Plaintiffs.

James O. Bickford, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

While the COVID-19 pandemic has upended daily life for all, its effects have proven particularly acute for the nation's small businesses, many of which found their continued operations suddenly threatened in the early weeks of a pandemic-induced recession. Attempting to keep those businesses afloat and provide other forms of much-needed economic assistance, the federal government on March 27, 2020, passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. A critical component of that law was the Paycheck Protection Program, which enabled the Small Business Administration to approve millions of loans on an expedited basis for qualifying individuals and small businesses. The next several months witnessed SBA process an unprecedented $717 billion in loans via the PPP and the separate Economic Injury Disaster Loans (EIDL) program.

Notwithstanding this colossal outlay of taxpayer funds, the government initially refrained from disclosing the identities of the millions of loan recipients under these programs, as well as the specific amounts they obtained and other loan-level details. Unhappy with this lack of transparency, a host of national-news organizations submitted Freedom of Information Act requests for such data, eventually filing the present action last May when their efforts proved fruitless. Prompted by this Court, SBA in July finally released select information regarding individual PPP and EIDL loans. Much to Plaintiffs’ continued disappointment, however, the data contained glaring gaps: the agency did not provide both dollar figures and borrower names and addresses for any of the PPP loans, but rather withheld the precise amounts of all loans of $150,000 or more, as well as recipients’ identities for loans under that figure. SBA likewise reserved the names and addresses of sole proprietorships and independent contractors receiving EIDL loans. In support of its withholding of these data, the agency invoked FOIA's exemptions for confidential and private information.

The parties now cross-move for summary judgment as to the propriety of SBA's withholdings. In addition, the parties in a largely identical case brought by the Center for Public Integrity move for judgment on the same issues. Finding that neither of the agency's claimed FOIA exemptions covers the requested information, the Court will grant Plaintiffs’ Cross-Motions in both actions and require SBA to supplement its prior disclosure with the names, addresses, and precise loan amounts of all PPP and EIDL borrowers.

I. Background

A. Factual Background

On January 31, 2020, the federal government declared a public-health emergency regarding the novel coronavirus, which causes the disease COVID-19. See U.S. Dep't of Health & Hum. Servs., Secretary Azar Declares Public Health Emergency for United States for 2019 Novel Coronavirus (Jan. 31, 2020), https://bit-ly.sw.library.ntpu.edu.tw:8443/3mP3551. The ensuing months saw the virus take its toll on nearly all walks of American life. To date, COVID-19 is believed to have killed over 233,000 people in the United States. See Johns Hopkins Univ. & Med., Coronavirus Resource Center, https://bit-ly.sw.library.ntpu.edu.tw:8443/31Y81fB (last visited Nov. 5, 2020). The economy has likewise suffered, with unemployment reaching a high of 14.7% in April 2020 before steadily declining to 7.9% as of September. See U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, https://bit-ly.sw.library.ntpu.edu.tw:8443/2Gd8eUB (last visited Oct. 28, 2020).

The CARES Act remains the federal government's primary legislative response to the economic crisis that the pandemic precipitated. See Pub. L. No. 116-136, 134 Stat. 281 (2020). As relevant here, that stimulus package created the PPP, which provided SBA funding and authority to operate — with support from the Treasury Department — a new loan program to assist small businesses adversely affected by the COVID-19 crisis. See id. § 1102; U.S. Dep't of Treasury, The CARES Act Provides Assistance to Small Businesses, https://bit-ly.sw.library.ntpu.edu.tw:8443/3ecUxlm (last visited Oct. 28, 2020). Specifically, the CARES Act amended Section 7(a) of the Small Business Act, 15 U.S.C. § 631 et seq. , under which SBA possesses general authority to issue loans to qualifying small businesses and sole proprietorships, including by guaranteeing loans made by private lenders. See 15 U.S.C. § 636(a) ; 13 C.F.R. § 120.2(a). The PPP temporarily expanded the types of entities to which SBA could make covered loans to include non-profit organizations, independent contractors, and self-employed individuals, and it permitted SBA to guarantee all such loans. See 15 U.S.C. § 636(a)(36)(D) ; No. 20-1240, ECF No. 14 (Def. MSJ), Exh. 1 (Declaration of William Manger), ¶¶ 7, 9.

In order to obtain PPP loans, potential borrowers applied to lending institutions and made good-faith self-certifications both that they were eligible and that current economic "uncertainty" rendered the loan request necessary "to support the [recipient's] ongoing operations." 15 U.S.C. § 636(a)(36)(G)(i) ; Business Loan Program Temporary Changes, Paycheck Protection Program, 85 Fed. Reg. 20,811, 20,814 (Apr. 15, 2020). Applicants also affirmed that loan funds would "be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments." 15 U.S.C. § 636(a)(36)(G)(i)(II). SBA has indicated that loans will be fully forgiven if they are in fact used for such costs and if at least 60 percent of the proceeds go toward payroll expenditures. See Business Loan Program Temporary Changes; Paycheck Protection Program — Revisions to First Interim Final Rule, 85 Fed. Reg. 36,308, 36,311 (June 16, 2020).

Potential borrowers specified the amount of their loan request on the PPP application form. See SBA, Paycheck Protection Program: Borrower Application Form, https://bit-ly.sw.library.ntpu.edu.tw:8443/3jF7tkR at 1 (PPP Application Form). SBA regulations established a four-step process by which businesses calculated the maximum dollar figure they could borrow, up to $10 million:

Step 1: "Aggregate payroll costs ... from the last twelve months," including "compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation."

Step 2: "Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year."

Step 3: "[D]ivide the amount from Step 2 by 12."

Step 4: "Multiply the [amount] from Step 3 by 2.5."

85 Fed. Reg. at 20,812 –13; see also 15 U.S.C. § 636(a)(36)(A)(viii)(I)(bb), (II)(aa), (E). The PPP application further advised that certain information would be "automatically released" upon a FOIA request, including "names of the borrowers" and "the amount of the loan." PPP Application Form at 4.

SBA also administers the Economic Injury Disaster Loans program, which offers long-term financial assistance to eligible entities — including small businesses, sole proprietorships, and independent contractors — affected by covered disasters such as COVID-19. See 15 U.S.C. § 636(b)(2) ; Manger Decl., ¶ 11; SBA, Economic Injury Disaster Loans, https://bit-ly.sw.library.ntpu.edu.tw:8443/2TAl3eS (last visited Oct. 28, 2020). While EIDL borrowers may also obtain a PPP loan, they must use the proceeds from each for different purposes. See Manger Decl., ¶ 12. The Court has already described the PPP purposes; conversely, borrowers may deploy EIDL loans to working capital, notes payable, accounts payable, and other expenses resulting from COVID-19's impact. Id.

By August 8, 2020, SBA had approved a whopping $525 billion by way of more than 5.2 million individual loans. See SBA, Paycheck Protection Program (PPP) Report at 2, https://bit-ly.sw.library.ntpu.edu.tw:8443/2HPJCla (8/8/20 PPP Report). The agency's most recent EIDL figures similarly reflect an additional $192 billion in approved COVID-related loans. See SBA, Disaster Assistance Update: Nationwide EIDL Loans at 2 (Oct. 19, 2020), https://bit-ly.sw.library.ntpu.edu.tw:8443/31Z6oON (10/19/20 EIDL Report). It is worth noting that this combined figure of $717 billion exceeds the government's Medicaid expenditures in Fiscal Year 2018, as well as the President's request for the Department of Defense's entire Fiscal Year 2021 budget. See Ctrs. For Medicare & Medicaid Servs., NHE Fact Sheet, https://go.cms.gov/35JBOd8 (last modified Mar. 24, 2020); Office of the Under Secretary of Def. (Comptroller), Defense Budget Overview at PDF p. 10 (May 13, 2020), https://bit-ly.sw.library.ntpu.edu.tw:8443/31Zuzwz.

B. Procedural History

Throughout April and May 2020, Pl...