On September 16, 2021, the U.S. Small Business Administration (“SBA”) issued an Interim Final Rule (the “Borrower Appeal Rule”) detailing the (largely technical) procedures for a Paycheck Protection Program (“PPP”) borrower to appeal certain final PPP loan review decisions to the SBA’s Officer of Hearings and Appeals (the “OHA”).[i]  The below summarizes the process for appealing a final SBA loan review decision.  For a more complete guide on PPP in general, please see our standing client alert Paycheck Protection Program – Where Are We Now, a leading resource on the Paycheck Protection Program.

Scope of Appeals.[ii]  A final SBA loan review decision that is appealable is an official written decision by the SBA, after the SBA completes a review of a PPP loan (whether a first draw PPP loan or second draw PPP loan), in which it finds a borrower: (1) was ineligible for a PPP loan; (2) was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses; (3) is ineligible for PPP loan forgiveness in the amount determined by the lender in its full or partial approval decision issued to the SBA; and/or (4) is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to the SBA.  A borrower cannot directly appeal to OHA a decision made by a lender concerning its PPP loan in respect of that borrower’s application for PPP loan forgiveness.  Such a borrower must first request an SBA review of a lender decision and then such final review by the SBA would be subject to an OHA appeal.  An appeal to OHA is an administrative remedy that must be exhausted before judicial review of a final SBA loan review decision may be sought in a federal district court.

Commencement of Appeals; Standing.[iii]  To be timely, an appeal petition must be filed with OHA within 30 days (or if the 30th day is a weekend or federal holiday, the next business day) after the appellant’s actual receipt of the final SBA loan review decision.  The appellant must file and manage its appeal on the OHA Case Portal which can be accessed at https://appeals.sba.gov.  Under the Interim Final Rule published on July 28, 2021, the SBA provided that if a borrower timely files an appeal petition, then the deferment period for the borrower’s PPP loan will be extended until OHA issues a final decision on the appeal.  The borrower is required to notify the PPP lender of the appeal (by providing a copy of such appeal) so that the lender can extend the deferment period.  Only the borrower itself, or its legal successor in interest, have standing to bring an OHA appeal (individual owners of a borrower entity and lenders do not have such standing).  A party may represent itself in an appeal or may (but need not be) represented by an attorney.[iv]

The Appeal Petition.[v]  The appeal petition must include the following information: (1) a copy of the final SBA loan review decision that is being appealed and the date it was received by the borrower; (2) a full and specific statement as to why the final SBA loan review decision is alleged to be erroneous, together with all factual information and legal arguments supporting the allegations; and (3) the name, address, telephone number, email address and signature of the appellant or its attorney.

An appeal petition that fails to contain all of the above-required information may be dismissed, with or without prejudice, or the SBA or Judge (i.e., an Administrative Law Judge or Administrative Judge) may make a motion for a more definitive statement.  The maximum permissible length of an appeal petition (not including attachments) is 20 pages.  A table of authorities is required only for petitions citing more than 20 cases, regulations or statutes. All exhibits and attachments must be clearly labeled.

Notice and Order.[vi]  Upon receipt of an appeal challenging a final SBA loan review decision, OHA will assign the matter to a Judge, who will issue a Notice and Order utilizing the OHA Case Portal, which will establish a deadline for the production of the administrative record (outlined below) and specify the date by which the SBA may respond to the appeal.

The Administrative Record; Evidence.[vii]  The administrative record will typically be due within 20 calendar days after issuance of the Notice and Order.  The administrative record will include all non-privileged, relevant documents that the SBA considered when making its final decision.[viii]  It does not, however, need to include all documents pertaining to the appellant.  The SBA will file the administrative record with OHA and serve it on the appellant using the OHA Case Portal.  The appellant may object to the administrative record (or any absence of any document from the administrative record). Such an objection must be filed with OHA (and served on SBA) via the OHA Case Portal not later than 30 days after the issuance of the Notice and Order.[ix]

A Judge is not permitted to admit evidence beyond the administrative record, and there is to be no discovery or oral hearings. An appeal is to be decided solely on the basis of the administrative record, the appeal petition, any SBA response, any reply or supplemental pleading and any objection filings related to the administrative record.

SBA Response.[x]  Only the SBA may respond to an appeal petition (and the SBA is not required to do so).  However, OHA can request the SBA to respond for good cause shown by OHA.  SBA’s response, if provided, is to set forth the relevant facts and legal arguments to the issues presented on appeal.  If the SBA determines not to respond to an appeal, such election is not construed as an admission or waiver of any allegation. An SBA response must be delivered within 45 calendar days of the Notice and Order.

Standard of Review.[xi]  In bringing an appeal, the borrower has the burden of proof to establish that the SBA loan review decision was based on a clear error of fact or law.

Attorney’s Fees.[xii]  A prevailing appellant is not entitled to recover attorney’s fees.

Decision on Appeal.[xiii]  The Judge will issue his or her initial decision within 45 calendar days after the close of record (which is 45 calendar days from the issuance of the Notice and Order unless otherwise determined by the Judge), and the decision will be served upon the appellant and the SBA utilizing the OHA Case Portal.  A decision must contain findings of fact and conclusions of law, the reason therefor and any relief ordered.  OHA may affirm, reverse or remand a final SBA loan review decision.[xiv]  If there is no request for reconsideration or administrator review within a 30 calendar day period after the Judge’s initial decision, such initial decision becomes final.

Reconsideration.[xv]  The Judge’s initial decision may be reconsidered if a request for reconsideration is filed by the appellant or the SBA within 10 days after service of the Judge’s initial decision.  Such a request must clearly show an error of fact or law material to the decision.  The Judge may also reconsider an initial decision on his or her own initiative within 20 calendar days after service of the decision.  Such reconsideration will be decided by OHA.  Such a reconsidered decision becomes final in 30 calendar days after its service unless the SBA Administrator decides to review and reverse OHA’s decision.

SBA Administrator Review.[xvi]  In addition to the appellant or the SBA having the ability to request a reconsideration, the SBA Administrator, solely within its discretion, may also choose to review and/or reverse an initial decision (or a decision that was issued after reconsideration) within 30 calendar days of service of each such decision.  The SBA Administrator’s decision will become the final decision of the SBA upon issuance.

All initial and final decisions are not precedential.  Final decisions may be appealed to an appropriate Federal district court only.

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[i] On May 22, 2020, the SBA and Treasury posted the Interim Final Rule on SBA Loan Review Procedures and Related Borrower and Lender Responsibilities (13 C.F.R. § 120), which was the first interim final rule pertaining to loan reviews; on June 22, 2020, the SBA and Treasury posted the Interim Final Rule on Revisions to Loan Forgiveness and SBA Loan Review Procedures Interim Final Rules (13 C.F.R. § 120), which was the second interim final rule pertaining to loan reviews; on October 8, 2020, the SBA and Treasury posted the Interim Final Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules (13 C.F.R. § 120), which was the third interim final rule governing loan reviews; and on January 19, 2021, the SBA and Treasury posted the Interim Final Rule on Loan Forgiveness Requirements and Loan Review Procedures as Amended by Economic Aid Act (13 C.F.R. § 120), which was the fourth interim final rule governing loan reviews.  Additionally, on August 11, 2020, the SBA and Treasury posted the Interim Final Rule on Appeals of SBA Loan Review Decisions Under the PPP (13 C.F.R. § 134), which was the first interim final rule pertaining to appeals of loan review decisions.  The interim final rule discussed in this article, posted by the SBA and Treasury on September 16, 2021, adopts with changes portions of the interim final rule that was previously posted on August 11, 2020.

[ii] 13 C.F.R. § 134.1201.  A borrower cannot appeal a determination by SBA’s Office of Inspector General concerning a PPP loan to OHA. 13 C.F.R. § 134.1201(e).  The Borrower Appeal Rule incorporates expressly specific Rules of Practice (13 C.F.R. 134 – Subpart B) governing matters in front of OHA:  §§ 134.207 (Amendments and supplemental pleadings); 134.208 (Representation in cases before OHA); 134.209 (Requirement of signature); 134.211 (Motions); 134.212 (Summary judgement); 134.217 (Settlement); 134.218 (Judges); 134.219 (Sanctions) and 134.220 (Prohibition on ex parte communications).  All other provisions of Subpart B expressly do not apply to Subpart L (134.1201 et seq).

[iii] 13 C.F.R. §§ 134.1202; 134.1203.

[iv] 13 C.F.R. § 134.208 (“A party may represent itself, or be represented by an attorney. A partner may represent a partnership; a member may represent a limited liability company; and an officer may represent a corporation, trust, association, or other entity.”).

[v] 13 C.F.R. § 134.1204.

[vi] 13 C.F.R. § 134.1206. A Judge may be an Administrative Law Judge or an Administrative Judge as determined pursuant to 13 C.F.R. § 134.218.

[vii] 13 C.F.R. §§ 134.1207; 134.1209.

[viii] In the event that the SBA discloses in the administrative record (i.e., in the OHA Case Portal) any privileged or confidential information, such disclosure is not a waiver of any claim of privilege or confidentiality by the SBA.  See 13 C.F.R. § 134.1207.

[ix] If additional time was requested by the SBA and granted by the Judge to file the administrative record, the appellant will have 10 calendar days to file an objection from the date the SBA is required to file the administrative record.  See 13 C.F.R. § 134.1207(e).

[x] 13 C.F.R. § 134.1208.  Generally, an appellant may not reply to the SBA’s response unless the Judge directs otherwise.  Upon a motion, a Judge may permit an appellant to file a supplemental pleading following its review of the SBA’s response or the administrative record.  See 13 C.F.R. § 134.1208(e).

[xi] 13 C.F.R. § 134.1210.

[xii] 13 C.F.R. § 134.1213.

[xiii] A Judge may also dismiss an appeal if (1) the appeal is beyond OHA’s jurisdiction under 134.1201; (2) the appeal is not timely made under 134.1202; (3) the appellant lacks standing under 134.1203 or (4) the appeal is premature because the SBA has not yet rendered a final decision.  See 13 C.F.R. § 134.1205.

[xiv] 13 C.F.R. § 134.1212.

[xv] 13 C.F.R. § 134.1211(c).

[xvi] 13 C.F.R. § 134.1211(d).

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns.  We will continue to evaluate the CARES Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act, related rules and regulations and any subsequent legislation to provide our clients guidance in real time.  Please visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Photo of Yuval Tal Yuval Tal

Yuval Tal is a partner in our Corporate Department where he co-heads our internationally recognized Hospitality, Gaming & Leisure Group. He also heads our Hong Kong and Beijing offices. He is a general corporate and securities lawyer with diverse experience in cross-border mergers…

Yuval Tal is a partner in our Corporate Department where he co-heads our internationally recognized Hospitality, Gaming & Leisure Group. He also heads our Hong Kong and Beijing offices. He is a general corporate and securities lawyer with diverse experience in cross-border mergers & acquisitions (public and private, debt and equity), long-term joint ventures, private equity real estate and corporate and real estate finance. He advises clients on the full range of their activities including any form of financing, operational matters and commercial transactions. He advises sponsors and funds on the structuring, execution, entering into, restructuring and exiting of investments. Yuval is co-chair of Proskauer’s CARES Act Team and a part of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Taskforce helping to shape the guidance and next steps for clients impacted by the pandemic.

Yuval has decades of experience representing clients on complex, first in kind transactions.  Yuval’s strength is providing original, workable and practical solutions that get the deal done. Qualified in New York, Hong Kong and Israel, Yuval has negotiated transactions in six continents and has particular experience representing Asian clients and clients based outside of Asia in inbound and outbound transactions. Yuval has worked in various industries including real estate, hospitality, entertainment, sports, financial services, technology and life sciences.

As an international M&A lawyer, Yuval has many years of experience dealing with complicated, non-customary transactions involving parties from different countries, cultures and legal systems.  He has represented private equity, family offices, corporations and individuals in structuring, restructuring, managing and disposing of investments in Asia, Europe and the United States.  He is typically called upon to strategize and structure complex transactions that do not follow a prescribed form or pattern. Yuval’s experience enables him to forsee future issues and clients have commented on his “ability to think seven moves ahead of the competition”. Yuval is also well known for his ability to broker deals between opposing parties in order to get the deal done, irrespective of the legal, business or practical obstacles. His efforts have earned him recognition by Legal 500Chambers Asia Pacific and IFLR1000, where clients have referred to his “ability to play the honest broker to all parties involved, and to bridge the different cultures, legal systems and language barriers and to continually solve the unsolvable, is what allowed us to get this difficult deal done” and another stated “he was completely invested in the deal in a way lawyers seldom are, and his creativity and efforts allowed us to bridge considerable gaps between the parties and find common ground”.

As co-head of our Hospitality, Gaming & Leisure Group, Yuval has worked on virtually any kind of transaction, including mixed-use development and construction, acquisition and sale, restructuring and public offerings of real estate, hotel and casino companies. He has completed numerous high profile transactions involving the buying, selling and combining Asian and Western based hotel operating companies, including AccorHotels’ [EPA:AC]  US$2.9 billion acquisition of Fairmont, Raffles and Swissôtel brands, its acquisition of Tribe, Australia’s first integrated modular hotel brand, Accor’s long-term alliance with Huazhu Hotels Group (also known as China Lodging Group [Nasdaq: HTHT]) and its strategic partnership with Singapore-based Banyan Tree Holdings [SGX:B58]. He also advised Formosa International Hotels’ sale and resulting joint venture with Intercontinental Hotels Group with respect to the Regent brand.  His real estate and hospitality work has included transactions for properties from China to India to the United States to Australia. He also has many years of experience with hotel licensing, franchising and management.

Yuval’s broader Private Equity Real Estate experience includes working on The Recording Academy’s (The Grammys) deal to develop Grammy Museums in China, a public/private deal to finance an office building in Delhi, India; the acquisition of hotels in Bangkok by a large Japanese institutional investor and a joint venture between a Hong Kong developer and an Asian based private equity fund for the acquisition and redevelopment of a property in Kowloon into a mixed use property including co-living and co-working properties.

Yuval is a member of the Steering Committee of the Asian Hospitality Development Council of the Urban Land Institute (ULI) and has recently been appointed to the Law 360 2020 Hospitality Editorial Board. He is a regular speaker at real estate and hospitality related conferences such as the Hotel Investment Conference Asia-Pacific in Hong Kong.

Prior to rejoining Proskauer in 1999, Yuval practiced law in Israel, representing Israeli clients in transactions in Europe and the United States and European and U.S.-based clients in transactions in Israel. He handled transactions for major publicly traded Israeli companies such as Clal (Israel) Ltd., LifeWatch, Kitan Consolidated Ltd., Orckit Communications Ltd., ECI Telecom Ltd., Scitex Corporation Ltd. and Tecnomatix Technologies Ltd. Since joining Proskauer, Yuval has continued to represent Israeli clients on a wide range of corporate and securities matters.

Photo of Jeffrey A. Horwitz Jeffrey A. Horwitz

Jeffrey A. Horwitz is a partner in Proskauer’s Corporate Department where he co-heads our Private Equity Real Estate practice and runs our internationally recognized Hospitality, Gaming & Leisure Group. He also has served as co-head of Mergers & Acquisitions and as a member

Jeffrey A. Horwitz is a partner in Proskauer’s Corporate Department where he co-heads our Private Equity Real Estate practice and runs our internationally recognized Hospitality, Gaming & Leisure Group. He also has served as co-head of Mergers & Acquisitions and as a member of our Executive Committee. Jeff is a general corporate and securities lawyer with broad-based experience in mergers and acquisitions, cross-border transactions, and long-term joint ventures. He is regularly engaged to advise boards, management teams and investors on strategic matters, from litigation to personnel to transactions. Jeff is also the head of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Taskforce helping to shape the guidance and next steps for clients impacted by the pandemic.

Jeff counsels clients on the full range of their activities, from seed capital to public offerings, acquisitions and operational matters, often acting as outside general counsel. He represents major financial institutions, sovereign wealth funds, private equity and family offices in sophisticated financial and other transactions. He represented Merrill Lynch Global Private Equity in connection with its equity participation in the $33 billion acquisition of HCA in what was then the largest LBO ever. He has handled deals aggregating nearly $200 billion in value, including tender offers, “going-private” transactions, IPOs, restructuring and structured finance transactions, and mergers and acquisitions in industries as diverse as biotechnology and aerospace, retail and cable television, and education and scrap metal. He regularly handles transactions outside the U.S., including Europe, the Middle East, Asia, Latin America, Australia, South Africa and India.

Leading our Private Equity Real Estate group, he works with a team of 75 lawyers from across the firm advising on complex transactions and disputes relating to real estate, and particularly hotels. Jeff has handled virtually every type of matter, and has worked with virtually every major player in these industries, including transactions for nearly 3,500 hotels comprising more than 275,000 rooms and involving more than $12 billion. His experience, both in and outside the U.S., extends to hotel and casino development and construction; portfolio and single-property acquisitions; sales and restructurings; financings; management; marketing; reservations systems; litigation counseling and strategic planning; and ancillary services. This breadth of work is key to executing complex and sophisticated transactions, such as the $2.9 billion acquisition of Fairmont Raffles by AccorHotels and its investments in Huazhu, Banyan Tree Hotels & Resorts, Brazil Hotel Group, sbe Entertainment and 21c Museum hotels, among others.

As a senior member of our Entertainment Group, Jeff represents The Broadway League (the national trade association for Broadway theatre), the Tony Awards®, and various other joint venture events and producers. In the media industry, Jeff has advised on the acquisition and sale of television, radio, newspaper and magazine properties, and the acquisition and sale of advertising, promotion and marketing agencies, and related joint ventures. He also advises rights holders, including our long-time clients The Leonard Bernstein Office and The Balanchine Trust. He leads our team representing TSG Entertainment in film-slate financing deals.

Jeff also frequently represents start-up and development-stage companies, as well as established “traditional” businesses, in online, Internet-related or technology businesses. He has handled organizational and structuring matters, venture capital and other equity placements, restructurings (from “down” rounds to recapitalizations to M&A solutions). He has both company-side and investor experience.

As a frequent speaker at real estate and hospitality events, Jeff regularly presents about hotel management agreements at The Hotel School at Cornell’s SC Johnson College of Business, NYU’s Jonathan M. Tisch Center of Hospitality, and on M&A and investment matters at lodging investment conferences around the world, including the NYU Hospitality Industry Investment Conference in New York, Americas Lodging Investment Summit in Los Angeles, the International Hotel Investment Forum in Berlin and the Hotel Investment Conference Asia-Pacific in Hong Kong.

Jeff is a member of the American Hotel & Lodging Association (AHLA) Hospitality Investment Roundtable, ULI (and its Hotel Development Council) and the Advisory Board of the Cornell Center for Real Estate and Finance and has served as a member of the Editorial Board of the Cornell Hotel and Restaurant Administration Quarterly and a member of the Advisory Board of the Cornell Center for Hospitality Research. He is a director of The New York Hospitality Council, Inc., a not-for-profit forum for hospitality industry leaders, and is a member of the Real Estate Capital Policy Advisory Committee of The Real Estate Roundtable. He also has served as a director of the America-Israel Chamber of Commerce, and as a member of the French-American Chamber of Commerce in the U.S. and the American Society of Corporate Secretaries. He was the Chairman of the Board of Labyrinth Theater Company and a director of The Jewish Community Center in Manhattan for more than 15 years, a member of the Executive Committee of the Lawyers’ Division of UJA-Federation for more than five years and an officer of the Henry Kaufmann Foundation for more than a dozen years. He currently serves as Chairman of the Board of The American Playwriting Foundation and Building for the Arts and is a member of the Board of Directors of StreetSquash and The George Balanchine Foundation. He also served as a Vice Chair of the Associates’ Campaign for The Legal Aid Society.

Jeff has been with the firm for his entire career and lives in Manhattan and Connecticut.

Photo of Andrew Bettwy Andrew Bettwy

Andrew Bettwy is a partner in the Corporate Department and co-head of the Finance Group. His principal focus is the representation of financial institutions, private equity sponsors, and public and privately held companies in leveraged finance and other financing transactions. Andrew represents both…

Andrew Bettwy is a partner in the Corporate Department and co-head of the Finance Group. His principal focus is the representation of financial institutions, private equity sponsors, and public and privately held companies in leveraged finance and other financing transactions. Andrew represents both lenders and borrowers in a wide range of transactions involving multiple industries and diverse debt capital structures, including acquisition financings, recapitalizations, multiple lien and subordinated debt financings, debtor-in-possession and exit financings, and private placements.

Andrew has represented several leading financial institutions while at Proskauer, including Bank of America, Citibank, CoBank, Credit Suisse, Imperial Capital, Jefferies Finance and Lazard Capital Markets.

Andrew is co-chair of Proskauer’s CARES Act Team and a part of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Taskforce helping to shape the guidance and next steps for clients impacted by the pandemic.

Photo of Grant R. Darwin Grant R. Darwin

Grant Darwin is an associate in the Corporate Department and a member of the Private Equity and Mergers & Acquisitions Group.  Grant counsels clients in connection with a variety of domestic and cross-border buyouts, mergers, acquisitions, divestitures, joint ventures, and recapitalizations, as well…

Grant Darwin is an associate in the Corporate Department and a member of the Private Equity and Mergers & Acquisitions Group.  Grant counsels clients in connection with a variety of domestic and cross-border buyouts, mergers, acquisitions, divestitures, joint ventures, and recapitalizations, as well as growth and venture-stage investments and general corporate governance matters.  Grant’s experience involves transactions in an array of industries, including manufacturing, gaming, retail and consumer products, technology and healthcare.

In addition to his corporate practice, Grant engages in a variety of pro bono efforts, including matters related to cash bail and prison reform, use of excessive force against minors and advising not-for-profit organizations on formation, corporate governance and related matters.  Grant has also spearheaded voter registration drives and joined in election protection initiatives.

Prior to Proskauer, Grant was an associate with Kirkland & Ellis LLP, where he was awarded the 2016 Kirkland & Ellis Pro Bono Leadership Award.

Perry A. Laub

Perry Laub is a law clerk in the Corporate Department.