In four separate decisions issued on August 5, 2020, the U.S. Judicial Panel on Multidistrict Litigation declined to consolidate for pretrial purposes dozens of actions against national banks arising from their roles as participating lenders in the Paycheck Protection Program (PPP) that provides relief for small businesses affected by the COVID-19 pandemic. For background on this recent category of class action litigation, please see our earlier alerts Developments in Class Action Litigation Surrounding the Paycheck Protection Program and COVID-19 Payment Protection Program: Lender Guidelines Subject to Litigation Risks.

Certain plaintiffs sought to consolidate two separate categories of PPP-related class action suits against national banks: first, suits claiming that lenders allegedly failed to administer PPP loans on a “first-come, first-served” basis, and second, suits asserting that lenders allegedly failed to pay fees owed to “agents” of borrowers under the PPP. 

Concerning the first-come, first-served suits, the Panel ruled on three separate petitions that there would be no benefit to streamlining any of the cases because the facts of the underlying lawsuits in each proposed group were distinct.

In one petition, all plaintiffs supported centralization, and the defendant opposed. In the other two petitions, plaintiffs were divided on whether the cases should be centralized and the defendant opposed centralization. As a basis for the denial, the Panel reasoned: “We conclude that centralization will not serve the convenience of the parties and witnesses or further the just and efficient conduct of the litigation.” See MDL No. 2954, MDL No. 2952, MDL No. 2944.

The Panel also observed “that individualized factual issues concerning the circumstances of each loan application will significantly diminish the potential efficiencies from centralization,” and that the small number of actions involved created “a heavier burden to demonstrate that centralization is appropriate.” Having found that the petitioners failed to meet that bar, the cases will proceed as individual actions in the courts where they were filed.

As for the agent fee petition, the Panel declined to consolidate the 12 actions pending in 10 districts identified in the petition, noting the additional 50 related actions pending in an additional 16 districts. Of the more than 100 lender defendants, all but two opposed centralization as sought by the moving plaintiff. As a basis for its denial, the Panel observed: “the actions involve dozens of different lenders, and there is no common or predominant defendant across all actions.” See MDL No. 2950. Although the actions “undoubtedly allege similar policies and practices by the defendant banks, . . . the policies and practices for paying agent fees are unique to each lender which differ significantly across the actions.”

The Panel was also persuaded by the fact that the vast majority of defendants were named in only one action. The Panel also refused to consolidate actions on a lender-by-lender basis, noting that each lawsuit named multiple lenders as defendants and recognizing the inefficiencies that would occur from dividing the claims from each lawsuit into multiple actions. Pointing to alternatives to centralization that could “minimize duplicative pretrial proceedings,” including intra-district consolidation and inter-district coordination, the Panel directed the individual actions to proceed in the districts in which they were filed.

For both categories of PPP class actions, the individual cases will proceed before the courts in which each of the complaints were filed. However, even though the Panel denied consolidation on a nationwide basis, cases may be formally consolidated if they were filed within the same federal district and they may be informally coordinated among the parties and the involved judges. There are many options to increase efficiency available that may minimize the potential for duplicative discovery and inconsistent pretrial rulings. It is likely that, as a next step in many of these cases, the parties may propose such measures or the assigned judges may urge the parties to propose efficient procedures.

These class actions are in their early stages, and Pierce Atwood will continue to provide updates on class actions related to the PPP and the COVID-19 pandemic. A comprehensive list of these actions is available on our Filed and Anticipated Cases tracker.