The Seventh Circuit affirmed the Small Business Administration's use of a $20 million corporate-group cap to limit loan forgiveness for commonly controlled nursing homes that received pandemic-era PPP funds.
What happened
The Seventh Circuit on Tuesday backed the Small Business Administration's use of a $20 million corporate-group cap to limit PPP forgiveness for Oak Lawn and related nursing homes, affirming a win for the agency in a dispute over pandemic-era loan relief.
Oak Lawn was one of 203 nursing homes under common control, many of which sought loans under the CARES Act's Paycheck Protection Program. According to the opinion, 61 of the businesses received more than $41 million in PPP loans, but when they later sought forgiveness, the SBA limited that benefit to $20 million across the group and left the remainder owed to lending banks.
Writing for a Seventh Circuit panel, Judge Frank Easterbrook rejected Oak Lawn's argument that each separately organized LLC had to be treated as its own small business for purposes of the loan-guarantee and forgiveness limits. The court said the CARES Act allowed, but did not compel, the SBA to guarantee loans up to specified amounts and that emergency rulemaking authority supplied the foundation for the Corporate Group Rule.
The panel also rejected Oak Lawn's arbitrary-and-capricious attack on the rule. The SBA had a cogent reason for limiting affiliated borrowers, the court said: making scarce PPP funds available to more applicants during the pandemic. The opinion noted the agency asserted that by 2021 it had guaranteed almost 12 million PPP loans totaling almost $800 billion, and that Oak Lawn did not deny those figures.
On Oak Lawn's case-specific arguments, the court upheld the administrative finding that a Gubin-Blisko partnership controlled the 203 nursing homes through investment and voting interests, making them a single corporate group under the SBA rule. The court also rejected the retroactivity challenge, reasoning that Oak Lawn drew the loan after the rule appeared and that forgiveness remained a future benefit rather than a vested entitlement. As the panel put it, "Nothing in federal law entitles it to more."
The ruling leaves intact the district court's summary judgment for the SBA and confirms, at least on this record, the agency's ability to aggregate commonly controlled businesses when applying PPP forgiveness limits. Further source review is needed before adding counsel reaction, publication status or any assessment of whether the decision affects related PPP challenges.