Prestige Transportation, Inc. v. U.S. Small Business Admin. ( 2023 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS FEB 17 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PRESTIGE TRANSPORTATION, INC.; et No. 21-56129
al.,
D.C. No.
Plaintiffs-Appellants, 2:20-cv-08963-SB-RAO
v.
MEMORANDUM*
U.S. SMALL BUSINESS
ADMINISTRATION; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Stanley Blumenfeld, Jr., District Judge, Presiding
Argued and Submitted October 20, 2022
Pasadena, California
Before: HIGGINSON,** CHRISTEN, and BUMATAY, Circuit Judges.
Plaintiffs challenge the Small Business Administration’s (“SBA”) responses
to their applications for emergency disaster loans under the CARES Act. The
district court dismissed plaintiff STAM Properties LLC’s (“STAM”) claims for
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Stephen A. Higginson, United States Circuit Judge for
the U.S. Court of Appeals for the Fifth Circuit, sitting by designation.
lack of standing under Rule 12(b)(1) and dismissed plaintiff corporations Prestige
Transportation Inc., Superior Overnight Services Inc., and Amerilogistics Group
Inc.’s (“Corporate Plaintiffs”) claims under Rule 12(c). We have jurisdiction under
28 U.S.C. § 1291. We review de novo. Diaz v. First Am. Home Buyers Protection
Corp., 732 F.3d 948, 951 (9th Cir. 2013) (12(b)(1) standard); Fleming v. Pickard,
581 F.3d 922, 925 (9th Cir. 2009) (12(c) standard). We vacate and remand for
further proceedings.
1. STAM. In this facial attack on subject matter jurisdiction, we must accept
all allegations in STAM’s complaint as true and draw all reasonable inferences in
STAM’s favor. Mecinas v. Hobbs, 30 F.4th 890, 896 (9th Cir. 2022); Leite v.
Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). STAM’s complaint alleges it
applied to the SBA for an Economic Injury Disaster Loan (“EIDL”) after the
CARES Act was signed into law in March of 2020. It soon realized it needed to
amend its application to receive a more favorable loan and a higher nonrepayable
advance. But STAM alleges that it was unable to amend its application despite
many attempts over a four-month period. STAM further alleges that it received
conflicting information regarding the status of its loan application and attempts to
amend it, including a denial letter.
On July 16, 2020, while the news of the denial was in the mail, STAM spoke
with an SBA agent who emailed instructions on how to request an increased loan
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amount. But STAM did not pursue those instructions because it received the
SBA’s denial letter (dated July 15) the next day, on July 17. On July 31, STAM
reached an SBA agent who “confirmed that its application had been withdrawn
because the company ‘failed to proceed’ and that no option to reopen or reactivate
exists.”
STAM then filed suit alleging that the SBA denied its application, and never
provided the loan offer or advance to which STAM was entitled, because the SBA
applied an illegal “de facto policy prohibiting amendments to filed applications,”
which STAM dubs the “no amendment policy.” STAM deduces the existence of
this policy from (1) its inability to file an amended application online or over the
phone; (2) the automatic withdrawal of its second application; (3) the failed
attempts of multiple SBA agents to make amendments to STAM’s application
despite one agent’s claim to have inputted the amendments and a second agent’s
confirmation that they had been updated in the SBA’s system; (4) the denial of
STAM’s application without consideration of the amendments; and (5) the SBA
agent’s July 31 statement that there is no option to reopen an application.
Defendants moved for dismissal under Rule 12(b)(1), which the district
court granted. The district court suggested that STAM’s complaint repeatedly
contradicts its allegation that the SBA had a no amendments policy because the
complaint recounts instances in which SBA representatives “inputted the requested
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changes” to the application and “confirmed” information “had been updated.” But
the complaint also recounts, immediately after, that those changes were never
reflected on STAM’s application, that the application was denied and never
evaluated as amended, and that the SBA told STAM, in its final communication
before STAM filed suit, that “no option to reopen or reactivate exists.” STAM’s
complaint is difficult to parse and subject to different plausible interpretations.
Construed in STAM’s favor, the complaint alleges the existence of a no
amendments policy. We nevertheless remand to the district court to determine if
STAM sufficiently alleged an injury traceable to that policy. On appeal, the SBA
argues that any allegation of injury traceable to the policy is conclusory and
implausible or that STAM’s injury was “self-inflicted” due to its failure to follow
the instructions provided by the SBA’s July 16 email. In considering whether any
injury was “self-inflicted,” the district court should apply the Supreme Court’s
recent decision in Federal Election Commission v. Cruz, 142 S. Ct. 1638, 1647
(2022). We thus take no position on STAM’s standing at this time and remand for
consideration by the district court in the first instance.
2. Corporate Plaintiffs. Corporate Plaintiffs’ applications for EIDLs were
denied in 2020 based on the SBA’s so-called “immigration status policy.” For the
Corporate Plaintiffs to be eligible for EIDLs under this policy, their shareholders
must be “qualified aliens” under the Immigration and Nationality Act, see 8 U.S.C.
4
§ 1641(b), and it is uncontested that Corporate Plaintiffs’ shareholders are not
“qualified aliens.”
In their complaint, Corporate Plaintiffs allege that this immigration status
policy is ultra vires, inconsistent with the CARES Act, and constitutes an illegal
policy change implemented sub silentio. In its motion to dismiss under Rule 12(c),
the SBA points out that its 2018 Standard Operating Procedure (“SOP”) already
contained the policy and argues the policy is longstanding and traceable to the
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(“PRWORA”).1 See 8 U.S.C § 1611(a) (“Notwithstanding any other provision of
law . . . , an alien who is not a qualified alien . . . is not eligible for any Federal
public benefit.”). In response and on appeal, Corporate Plaintiffs argue that
PRWORA’s prohibition applies to aliens—that is, individuals, not corporations—
and that the SBA’s argument ignores that Corporate Plaintiffs and their
shareholders are distinct entities.
The district court granted the SBA’s 12(c) motion. It found that the CARES
Act did not displace PRWORA, and it reasoned that “unless the CARES Act
displace[d] PRWORA, Plaintiffs were statutorily ineligible to receive EIDL loans
1
Corporate Plaintiffs claim that prior versions of the SBA’s SOP did not
include this PRWORA requirement. We leave it to the district court to consider
whether these alleged changes in policy bear on the instant case.
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under PRWORA, and the SBA was not only authorized but required to deny their
applications.”
The district court assumed that PRWORA prohibits federal aid to Corporate
Plaintiffs but did not explain its reasoning. Because this is a significant issue of
first impression, we remand to the district court to analyze it in the first instance.
3. We VACATE the portion of the district court’s July 26, 2021 order
dismissing STAM’s claims, the September 9, 2021 order dismissing Corporate
Plaintiffs’ claims, and the September 9, 2021 final judgment. We REMAND for
consideration consistent with this memorandum.2
VACATED and REMANDED. The parties shall each bear their own costs.
2
Plaintiffs filed a “Motion for Judicial Notice” before this court. We grant it
to the extent it asks us to notice the existence of public documents on official
websites. City & County of San Francisco v. Garland, 42 F.4th 1078, 1083 (9th
Cir. 2022). We do not endorse Plaintiffs’ characterization of these documents or
any claims they make in that filing.
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