Judge Rules That Sba Has the Right to Deny Emergency Pandemic Loans to Catholic Dioceses

By Gary Craig
Rochester Democrat and Chronicle
June 11, 2020

https://www.democratandchronicle.com/story/news/2020/06/11/judge-rules-sba-has-right-deny-pandemic-loans-dioceses/5341729002/

A federal judge has ruled that the federal Small Business Administration was in its rights to refuse pandemic-related loans to the Catholic Dioceses of Rochester and Buffalo.

The two dioceses wanted $2.8 million in emergency Paycheck Protection Program, or PPP, loans. The Rochester diocese planned to request $1.1 million and Buffalo $1.7 million.

However, federal officials said the dioceses did not qualify for the emergency pandemic loans because both are seeking bankruptcy protection. Both are confronting numerous lawsuits against former Catholic priests, nuns and teachers accused of sexual abuse.

The dioceses claimed in a joint lawsuit that the Small Business Administration, or SBA, could not deny the loans to businesses or not-for-profits in bankruptcy proceedings, and that the initial PPP rules did not include such a prohibition while later iterations did. Religious institutions are eligible for PPP loans.

In a ruling released Thursday, U.S. District Judge Elizabeth Wolford rejected many of the arguments from the dioceses. She ruled that:

• The SBA did not overstep its bounds in blocking entities in bankruptcy proceedings from receiving PPP loans.

• The SBA has proven that it tries to ensure the creditworthiness of loan recipients, and that would typically preclude entities seeking bankruptcy protection.

• While, as the dioceses argued, there may be "inconsistencies" in some SBA lending rules, they are not so significant "to warrant setting aside the agency’s actions, particularly in light of the necessarily expedited

manner in which SBA was operating."

• The dioceses noted how they lost significant revenue by closing church services during the pandemic — especially during the Easter season — but gave little specificity about the financial damage. In their papers, "there is no indication ... that they have not paid their employees’ salaries or that failure to obtain PPP funds would somehow cause (the dioceses) to cease to operate."

Wolford's ruling in favor of the SBA — in what is known as a "summary judgment" — essentially rebuffs most of the diocese arguments.

It is not a complete dismissal of the case because there is one outstanding legal issue, related to the bankruptcy protection proceedings, not resolved by the summary judgment. The dioceses could push forward on that front or appeal Wolford's ruling to a federal appellate court.

The SBA had earlier said it had set aside the $2.8 million as the litigation is resolved.

Contact Gary Craig at gcraig@gannett.com or at 585-258-2479. Follow him on Twitter at gcraig1. This coverage is only possible with support from readers. Sign up today for a digital subscription.