June 29, 2020 – Today, a federal court ruled that the Small Business Administration’s (SBA) broad restrictions on COVID-19 relief to small businesses owned by people with criminal histories—restrictions that were in place during the majority of the application period until the SBA changed their rules on June 24—were illegal, not authorized by Congress, and arbitrary, in violation of the Administrative Procedure Act.
This ruling from the United States District Court for the District of Maryland came in response to a lawsuit challenging the restrictions filed by the Public Interest Law Center, the ACLU, and the Washington Lawyers’ Committee for Civil Rights and Urban Affairs, representing two small business owners, Sekwan Merritt and John Garland, and Defy Ventures, a nonprofit that helps formerly incarcerated people start businesses. They were joined by pro bono counsel from Jenner & Block and Weil, Gotshal & Manges.
The ruling also granted plaintiffs an extension to the June 30 application deadline for forgivable loans from the Paycheck Protection Program (PPP). They will now have until July 21 to apply for relief.
“I am grateful for a legal outcome that gives me a chance to apply for this loan instead of excluding me unfairly because of my former incarceration,” said Sekwan Merritt, owner of Lightning Electric. “It is critical for business owners like myself to have the same opportunity to get this crucial funding.”
“Today’s decision confirms that SBA’s old rules that blocked business owners from much-needed aid during an economic crisis, simply because of unrelated criminal history, were unlawful,” said Claudia De Palma, staff attorney at the Public Interest Law Center. “Our clients will now have the chance to apply for aid they always should have been eligible for. But thousands of businesses owned by people with criminal histories were illegally blocked from receiving aid through the PPP program, and Black and Latinx communities faced the deepest impact of this restriction. The SBA must not repeat this injustice in any future aid programs, and we hope that the clear message sent by today’s ruling will insure that they won’t.”
On June 30, the United States Senate passed a bill extending the PPP program through August 8. This extension, if signed into law, would give business owners who were unlawfully excluded from the program for the majority of its duration the opportunity to apply for aid.