In a case brought by Michigan home builders and the National Association of Home Builders, the federal court for Eastern Michigan ruled that the Small Business Administration (SBA)wrongly applied eligibility criteria to the Paycheck Protection Program (PPP).
Although the intent of Congress in passing PPP was to offer the protection to a wide range of businesses, the SBA applied pre-existing regulations that essentially excluded a broad swath of the residential construction industry.
The victory in this case accomplishes two main goals. First, it ensures that NAHB members who received PPP loans will have their loans forgiven. The judge agreed with NAHB’s position that the plain language of the statute creating the PPP prevented SBA from applying eligibility regulations that sought to exclude NAHB members who build homes “on spec,” multifamily property owners, and land developers from receiving PPP loans and loan forgiveness during the height of the pandemic.
While PPP funding is no longer available, the forgiveness process is ongoing, and the court’s opinion will have a direct and tangible benefit for builders, developers, and property owners who are awaiting loan forgiveness.
Second, the court’s opinion provides important procedural wins. These include the court’s ruling that it will not defer to an agency’s interpretation of a statute unless the statute is truly ambiguous. This will limit the ability of federal agencies to offer new, expansive interpretations of existing statutes.
The judge also ruled against the government’s procedural claims that NAHB lacked “standing” – the individual interest necessary to have a complaint heard in federal court – and that the case was moot because the PPP is no longer an active program.