Litigation between the Associated General Contractors of America (AGC) and the Small Business Administration (SBA) may be nearing an end (The Associated General Contractors of America, Inc. vs. United States Small Business Administration, et al.,United States District Court for the District of Columbia). AGC initially filed a lawsuit against SBA in December 2020, challenging the introductions of Form 3509 and Form 3510 (Loan Necessity Questionnaires) in October 2020. AGC recognizes that SBA has the right to ensure borrowers were eligible for the loans they received, but seeks to compel SBA to remove and revise the Loan Necessity Questionnaires that have been going to borrowers seeking forgiveness for Payment Protection Program (PPP) loans more than $2 million.

AGC challenged the Loan Necessity Questionnaires because it believes that SBA is no longer evaluating PPP loan borrowers fairly, and contends that the questionnaires have illegally added new requirements to the pre-existing application certifications, without receiving the prerequisite public input. SBA responded to the lawsuit by filing and receiving four court orders extending the time that it has to respond to the lawsuit, giving SBA until July 14, 2021, to officially answer. However, recent reports show that SBA has been using this time to address settlement negotiations with AGC over the dispute.

On June 23, 2021, AGC reported that it has learned in its settlement negotiations that SBA intends on withdrawing Forms 3509/3510 completely and has already begun the process. Though borrowers have still recently received requests to complete the form, these requests appear to pre-date the announcement.

There is no additional information about the potential withdrawal currently available. In the interim, borrowers of loans greater than $2 million that received a Form 3509/3510 request should contact their lenders for any updates on the status of the possible withdrawal of the forms. Borrowers with loans greater than $2 million who have not yet submitted their forgiveness applications may consider delaying the filing of their loan forgiveness applications to avoid receiving a request from their lender to complete Forms 3509/3510, although borrowers likely will not want to delay that filing past the point when their PPP loans payments will start if they have not filed for forgiveness.

Please contact Alexis Schostak (248-203-0598), Tom Vaughn (313-568-6524), or your regular Dykema attorney with any questions.

Stay ahead of emerging issues with Dykema's Coronavirus (COVID-19) Resource Center and subscribe to all relevant publications so you can easily leverage information, stay up to date on evolving developments, and better position yourself for success.