Tidewater Finance Company v. United States Small Business Administration

Filing 30

OPINION: The court hereby OVERRULES Petitioner's Objections, ECF No. 28, and ADOPTS AND APPROVES IN FULL the findings and recommendations set forth in the Magistrate Judge's thorough and well-reasoned R&R, filed on August 9, 2024, ECF No. 2 5. Petitioner's Motion for Summary Judgment, ECF 21 No. 14, is DENIED, Respondent's Motion for Summary Judgment, ECF No. 16, is GRANTED, and this matter is DISMISSED. The Clerk is DIRECTED to enter judgment in favor of Respondent, close the case on this court's docket, and send a copy of this Opinion to counsel for the parties. Copies sent as DIRECTED on 3.11.25. Signed by District Judge Rebecca Beach Smith and filed on 3/11/25. (epri, )

UNITED

STATES DISTRICT COURT

EASTERN DISTRICT OF VIRGINIA
Norfolk Division

TIDEWATER FINANCE COMPANY,

Petitioner,
CIVIL NO.

V.

UNITED

STATES

2:23-cv-609

SMALL

BUSINESS ADMINISTRATION,

Respondent.

OPINION

which created

This case involves a complex web of statutes,
the

Paycheck

Protection

Coronavirus, Aid,

statutes,

certain

Relief,

small

("PPP")

Programs

under

Congress's
Under

and Economic Security Act.

businesses

were

eligible

for

these

paycheck

loans, which would allow businesses to continue paying employees
during the COVID-19 pandemic and 2020
used their

loans

loan forgiveness.
would

w

properly,

shutdowns.

they could ultimately

If

businesses

apply for

PPP

To facilitate rapid release of funds, businesses

self-certify" that they were eligible for a PPP loan, rather

than wait for approval.

Petitioner Tidewater Finance Company was

one such business that applied for a PPP loan.

Petitioner received

funds and ultimately applied for loan forgiveness from Respondent
United

States

Small

Business

Administration.

forgiveness application was denied.

Petitioner's

This dispute followed.

loan

This

matter

now

before

comes

the

court

Petitioner's

on

Objections, filed August 30, 2024, EOF No. 28, to Magistrate Judge
25

Douglas E. Miller's Report and Recommendation, EOF No.

("R&R").

The R&R recommended that the court grant Respondent's Motion for
Summary

Judgment

and

deny

R&R

2.

For

Judgment.

at

Petitioner's
the

reasons

Motion

stated

for

Summary

the

below.

court

OVERRULES Petitioner's Objections and ADOPTS AND APPROVES IN FULL
R&R.

Accordingly,

Respondent's Motion for Summary Judgment,

EOF No. 16,

is GRANTED,

Petitioner's

EOF No.

is

the

findings

and this

and

Motion

action

is

for

enacted

on

The

DENIED,

CARES Act

Aid, Relief, and Economic Security

March

27,

2020,

in

response

to

the

("CARES")
COVID-19

Pub. L. No. 116-136; see R&R at

pandemic's impact on the economy.
2 .

14,

DISMISSED.

The Coronavirus,

was

the

Summary Judgment,

I.

Act

in

recommendations

Congress enacted the First Paycheck Protection Program ("First

PPP")

on March 27,

§ 1102
First

2020,

(codified at
PPP

was

Division A,

Prior
Business

assistance

to

U.S.C.

Keep[]

to

Title

15

Business Act.

the

CARES Act.

Paid

L.

116-136,

The purpose of

§ 636 (a) (36)).

Workers

Pub.

and

Employed.

ft

Id.

the
at

I.

the

pandemic.

Administration

to

under

small

("Respondent")

businesses

15 U.S.C.

Respondent

§ 631,

under

et seq.
2

United

States

administered

Section

7 (a)

of

Small

financial

the

Small

("Small Business Act");

15

U.S.C.

§ 636(a)

("Section 7(a)")/

required

were

eligible

for

§ 120.110

Section

to

a

meet

loan

("Section

(b)

of

15

regulation

U.S.C.
w

made

businesses

criteria

regulation

Respondent's

120.110").

that

borrower

Respondent's

under

Small

see R&R at 3.

§

636(a);

and

be

13

C.F.R.

R&R

at

3.

businesses

[ f]inancial

primarily engaged in the business of lending" ineligible for small
business

13

loans.

C.F.R.

§

120.110(b).

In enacting the CARES Act, Congress amended the Small Business
Pub.

Act and placed the First PPP under Section 7(a).
§

1102;

the

PPP

and

granted

authority regarding the
116-136,

§§ 1102,

1114

First

Respondent

(Apr.

("IFR")

(codified at 15 U.S.C.

Respondent issued an

2020).

[bjusinesses

13

CFR

identified

in

Standard

Operating

organizations
Reg.

at

Rule.

//

See

not

eligible

120.110

and

described

Procedures

.

.

.

authorized under the Act

20811.
R&R

This
at

language

Pub.

is

85

Fed.

First

Reg.

at

Interim Final Rule

for

are

PPP

loans

further

in

that

except

called

The

L.

2020, which stated in

are

that

rulemaking

§ 9012).

2020.

regarding the First PPP on April 15,
\\

part:

15,

emergency

PPP and any amendments.

PPP loan application launched on April 3,
20811

116-136,

Congress tasked Respondent with implementing

see R&R at 4.

First

L.

w

PPP

SBA's

nonprofit

eligible.

the

are

rr

85

Fed.

Ineligibility

6-7.^

^ Respondent's first IFR was followed by a second IFR, enacted
on April 28,

2020.

R&R

at

7.

The
3

second

IFR

added

two

PPP

loan

Under

guarantee

the

First

covered
a

as

otherwise

provided.

statute

loans

loan

processes

provided

PPP,

15

\\

the

terms,

under

§

concerns,

to

conditions,

and

//

\\

for

[ejxcept

The

636(a) (36) (B) .

in

addition

to

any

business

concern,

housing

organization,

or

in

Respondent

First

certain

small

nonprofit

business

657a (b) (2) (C)

section

PPP

business

small

cooperative,

Tribal

as

stating:

during the covered period.

organization,
described

subsection.

eligibility

[i]ncreased

.

same

this

U.S.C.

businesses and organizations
(i)

permitted

under

made

rr

Congress

veterans

concern

of

this

title shall be eligible to receive a covered
loan
if
the
organization,
organization,

business
concern,
nonprofit
housing cooperative,
veterans
or

Tribal

business

concern

employs not more than the greater of
(I)

500 employees;

or

(II) if applicable, the size standard in
number of employees established by the
Administration for the industry in which
[it]
Id.

§

.

.

.

operates.

636 (a) (36) (D) (i) .

On December 27, 2020, Congress amended the Small Business Act
second

time.

placing

("Second

PPP")

under

a

2001 § 311

the

Second

Section

7 (a) .

(codified at 15 U.S.C. §

Paycheck
Pub.

L.

636 (a) (37)) .

Protection
116-260,
The

Program

134

Stat.

statute reads

in pertinent part:

exceptions to Section 120.110
and gambling organizations.

for otherwise-ineligible hospitals

Id.
4

(iv)

the

eligible entity

term

rr

(I) means any business concern, nonprofit
cooperative.
housing
organization,
Tribal
business
veterans organization,
self-employed
concern.
eligible

individual,

sole proprietor,

contractor,

independent
agricultural

small

or

cooperative that —

employs

(aa)

employees;

not

more

300

than

and

(bb)

(AA)
.

.

.

.

.

.

in

not

had gross

2020

less

that

than

a

25

percent

the

from

reduction

receipts

demonstrate
gross

receipts of the entity during
the

same

includes

(II)

a

quarter

business

2019

in

concern

or

organization made eligible for a loan
(36)
under
subclause
under
paragraph
(III), or (IV) of clause
(iii) ,
(II) ,
subclause
(IV)
or
(V) of clause (iv) ,
clause

(vii),

subparagraph

or

(D)

clause

of paragraph

(ix)

of

(36)

and

that meets the requirements described in
items (aa) and (bb) of subclause (I); and
(III)

does

not

include—

(aa)

any

entity

that

business

concern

(or

is

a

type

of

be,

if

would

such entity were a business concern)
described

in

13,
Regulations

(a)

subsection
section

15

U.S.C.

§

.

.

.

concern

business
.

.

636 (a) (37) (iv) ,

5

120.110

section

Code

title

or

of
other

than

described

(k)

of

Federal

of

a

in

such

Finally, Congress provided that eligible PPP loan recipients
for forgiveness of indebtedness on a covered

shall be eligible
loan.

15

ff

U.S.C.

§

636m{b).

II.

April

On

3,

Procedural History

2020,

Petitioner

Tidewater

ECF

applied for a First PPP loan of $3,245,500.

and Petitioner received
1

Nos .

at

2

No.

Company

13

at

3-6

The lender approved the loan on April 6,

(Admin. R.) ; see R&R at 8 .

2020,

Finance

(Petition),

8

funding shortly thereafter.

at

1

On

(Answer).

June

25,

ECF

2021,

Petitioner applied for PPP loan forgiveness under 15 U.S.C. § 636m.
ECF

No.

13

at

The

17-25.

lender

recommended

loan forgiveness application be approved.
On

February

forgiveness
that

2022,

28,

Respondent
Id.

application.

Petitioner

should

not

at

have

that

Id.

at

denied

41-42.

received

Petitioner's

26.

Petitioner's

Respondent
a

First

loan

determined

PPP

loan,

as

Petitioner "is a financial business primarily engaged in lending.
investments

factoring.

or

is

Id.

tt

an

ineligible business engaged in financing or

at

41.

In

other

words.

Respondent

found

that

Petitioner was not eligible for either the First PPP loan or for
later

to

the

2022.

loan

Office

Id.

affirmed,
Id.

at

Petitioner appealed Respondent's denial

forgiveness.

of

Hearings

45-58.
as

82.

it

was

On

July

not

Petitioner

and

Appeals

18,

("the

OHA")

2023,

Respondent's

a

error

based

on

sought

reconsideration
6

clear

of

on

March

31,

decision

was

fact

or

through

the

law.

ft

OHA,

which was denied on July 31,
On

2023,

September 20,

court.

EOF

No.

2023.

EOF No.

at

Petitioner filed for review in this

On March 5,

Petitioner filed a Motion for

2024,

Summary Judgment and Memorandum in Support.
15

(Pet'r Mem.).

Summary

Judgment

(Motion),

17

and

Memorandum

(Resp't Mem.).

Judge

EOF Nos.

14

(Motion),

On April 1, 2024, Respondent filed a Motion for

EOF Nos.

respective Motions.

Magistrate

84-114,

Respondent filed an Answer on November 21,

1.

8.

Id.

2023.

Douglas

E.

in

EOF

Opposition.

Nos.

Both parties filed Replies to their
20,

21.

Miller,

The matter was

who

directed

referred

No.

144

S.

Ct.

2244,

2273

(2024),

to

this

to

supplemental

briefing regarding the application of Loper Bright Enterprises
Raimondo,

16

matter.

V .

EOF

22.2

No hearing was held, as oral argument was not requested, and
the court determined that no hearing was
matter.

R&R

at

2,

n . 1.

After

necessary to resolve the

reviewing

the

documents

and

supplemental briefing, the Magistrate Judge Miller issued his R&R
on August 9,

2024,

which recommended denying Petitioner's Motion

for Summary Judgment and granting Respondent's Motion for Summary
Judgment.

Id.

at

Objections

to the

40.

R&R.

On August 30,
EOF

No.

28 .

2024,

Petitioner filed five

Respondent

filed a Response

2 The parties agree that Loper has only incidental impact on
this matter; both argue that 15 U.S.C. § 636(a) (36) is unambiguous
EOF Nos. 23, 24
(the
and supports their respective positions,
parties' supplemental Loper Briefs).
7

on

September

2024.

16,

as

recited

ECF No.

in

the

29.

The parties do not dispute

See

the

facts

2-3;

infra n.3 and accompanying text.

III.

reviewing

Courts

Procedures

law,

interpret

ECF Nos.

28

at

3-5,

29

at

Legal Standards

agency

decisions

shall

("APA")

Act

R&R.

decide

constitutional

the

under
all

relevant

statutory

and

Administrative

questions

provisions,

of

and

determine the meaning or applicability of the terms of an agency
action.

5

n

aside

law.

§

A

706.

actions

agency

court

and

Id.

ff

§

shall

w

findings

an abuse of discretion,

capricious,
with

U.S.C.

that

unlawful

reviewing

R&R,

an

set

arbitrary,

are

the court shall review

the whole record or those parts of it cited by a party.
When

and

or otherwise not in accordance

Additionally,

706 (2) (A) .

hold

the

court

must

make

Id.

rr

a

^

novo

determination of the portions of the R&R to which the parties have
Fed.

specifically objected.

R.

See

the record in its entirety.
the

R&R,

clear

the

error

the

face

of

416

315

n

Diamond

(4th

instructions.

the

the

v.

Cir.

advisory committee's note).
recommit

For unchallenged portions of

'only satisfy itself that

/

or

id.

The court considers

72(b).

"must

on

310,

P.

court

recommendation.

F.3d

Civ.

Colonial

2005)

§

in

order

Life

&

(quoting

Judge's

636(b)(1);
8

Fed.

to

Accident

Fed.

The court may accept,

Magistrate

28 U.S.C.

record

there

R.

accept

the

Ins.

Co.,

Civ.

Civ.

P.

72

reject, modify.

recommendation

R.

is no

P.

72(b).

with

Finally,

\\

objections to the R&R must be made

with

sufficient

specificity so as reasonably to alert the district court of the
true ground for the objection.
460

(4th

Cir.

sufficiently
party's]
errors

rt

proper"

Auth.,
J.)

they

specific";

\\

Petitioner

at

3.

Act.

//

687 F.2d 44,

five

Second,

Id.

novel
all

\\

454,

to

of

be
[the

Scott

ft

27,
47

V.

2018)

Va.

\\

not

Port

(Jackson,

(4th Cir.

1982)).

Analysis

objections

to the R&R's

that the application of
CARES

F.4th

respond to specific

(E.D. Va. Mar.

Johnson,

raises

Petitioner objects

be

restate []

are the equivalent of a waiver.

IV.

the

not

66

as general or conclusory objections are

(citing Orpiano v.

28

need

may merely

2018 WL 1508592, at *2

ECF No.

Dunbar,

But objections must

Id.

It

in the R&R,
and

[OJbjections

2023) .

claims.

Elijah V.

ff

\\

Statement

the

to
of

First,

R&R.

Undisputed Facts.

ft

Petitioner objects to the R&R's finding

Section 120.110 to the PPP did not violate

at 5.

Third,

Petitioner objects to the R&R's

finding that Respondent provided sufficient explanation for its
adoption of the PPP Ineligibility Rule with respect to financial
businesses.

Id.

at

10.

Fourth,

Petitioner objects to the R&R's

finding that Respondent did not act arbitrarily and capriciously
when

[ejnforcing the PPP Ineligibility Rule.

//

Id.

at

15.

Fifth,

Petitioner objects to the R&R's finding that Petitioner failed to
offer

\\

evidence that it is sufficiently similarly situated to other

business entities

that received loan forgiveness.
9

n

Id.

at

18.

After considering the record in its entirety and conducting
a de novo review of the objections to the R&R, the court determines

that Petitioner's Objections are without merit.
A.
First,

Petitioner

Petitioner's

w

First Objection
that

objects

the

R&R

does

not

business evidence,

similarly situated

include

contained in

in the statement of undisputed facts in paragraphs 29 through 36
of

Petitioner's Memorandum in Support of
("Petitioner's

Judgment

(Objections) ,

15

at

Memorandum").
(Pet'r

8-9

its Motion

for

Summary

EOF

28

at

Nos.

Respondent

Mem.).

3-5

disagrees.

asserting in its Response that the R&R accurately represents the
parties'
in

as set forth in Respondent's Memorandum

undisputed facts,

Support

of

its

Motion

EOF Nos.

Memorandum").

for

29 at

Summary
2-3

("Respondent's

Judgment

(Response),

17

at

11

(Resp't

paragraphs

29

to

36

Mem.).

Review

of

the

record

shows

that

Petitioner's Memorandum are disputed by Respondent,

these

paragraphs

interpretations

contain

[which]

of

to the extent
conflict

with

the statement of applicable law set forth in the preceding Section
II

[of Respondent's Memorandum],

at 11

(Resp't Mem.) .

argument,
ECF

No.

and the law itself.

ft

ECF

No.

Indeed, paragraphs 29 to 36 primarily contain

interspersed with citations to the factual record.
15

Petitioner's

at

8-9

17

(Pet'r

Memorandum

Mem.).

are

Because

actually
10

these

disputed,

paragraphs

the

See

of

Magistrate

Judge did not err in omitting them from the R&R's recitation of
undisputed facts.^

Petitioner's first objection is OVERRULED.
B.

Second,

Petitioner

Respondent's
to

the

law.

PPP

\\

objects

the

to

R&R's

finding

that

decision to apply the exclusions in Section 120.110

did not

ECF

n

Second Objection

No.

violate
28

at

the

CARES

Act,

Petitioner

5.

and is not

contrary

that

argues

the

to
PPP

Ineligibility Rule was not lawfully incorporated based on the plain
meaning

of

the

statutory

business

concern.

//

Id.

at

particularly

text.
5-8.

the

phrase

w

any

Petitioner also argues that this

finding is contrary to law based on the narrower language contained
in

the

later-enacted

Second

Id.

PPP.

In other words.

Petitioner

argues that if Congress intended the eligibility requirements of
13 CFR § 120.110 to apply to the First PPP statute, Congress would

have explicitly limited the First PPP with Section 120.110,
it

did with

the

Second

PPP

statute.

Respondent asserts that
within

the

delegated

existing

to

\\

regarding the First PPP,

at

8.

Congress deliberately placed the PPP

Section

[Respondent's]

Id.

like

1 (a)

program[,]

emergency

.

.

rulemaking

.

expressly

authority

//

and did not intend to make size the only

^ These disputed paragraphs from Petitioner's Memorandum do
not create a material

factual dispute that would preclude summary

judgment.
The parties dispute only the argumentative wording of
these paragraphs, not the underlying cited facts.
See ECF Nos. 15
at 8-9 (Pet'r Mem.), 17 at 11 (Resp't Mem.), 29 at 2-3 (Response).
11

ECF No. 29 at 4-5

requirement.

(emphasis in original); see id. at

Respondent argues that Petitioner's interpretation would be

6-8.

absurd,
all

because

manner

of

\\

it

would compel

for

policy

reasons

have

been

and

would

render

the

that

the

program,

from

business

descriptions

Id.

8

6,

SBA to guarantee loans to

business[es]

excluded

at

[the]

7 (a)

loan

in

15

U.S.C.

//

it

§ 636 (a) (36) (D)

superfluous.

Again, the court may set aside an agency action only if it is
>\

arbitrary,

in

capricious,

accordance

with

an abuse of discretion.

law.

5

ft

U.S.C.

§

Respondent's actions,

this court must

judgment

whether

in

deciding

statutory authority,

\\

or

otherwise

In

706 (2) (A) .

exercise

[Respondent]

as the APA requires.

has

[its]

reviewing

independent

acted within

Loper,

n

not

144

S.

its

Ct.

at

The court must respect Congress's delegation of authority

2273.

to Respondent, provided the delegation was constitutional and the
Id.

Respondent acted within it.
canon

be

Finally,

\\

[ijt

is a

fundamental

of statutory construction that the words of a statute must

read

in

their

context

overall

statutory scheme.

Admin.,

990

F.3d 217,

Pep't of Treasury,

and
ir

226

489 U.S.

with

a

Pharaohs

(2d Cir.
803,

809

12

view
GC,

2021)

to
Inc,

their place
v.

U.S.

in

the

Small

Bus.

(citing Davis

(1989)).

v.

Mich.

Here,

the

Small

§

U.S.C.

Gateway

Business

Radiology
see

Pub.

the

First

PPP

statute

116-136,

§ 1102

990

F.3d

at

Consultants,

P.A. ,

983

F.3d

1239,

R&R

The

First

PPP

statute

Act.

L.

Pharaohs,

636 (a) (36) ) /

2020));

Cir.

that

agrees

is

Congress placed the First PPP under Section 7(a) of

unambiguous.^
the

court

at

3-4.

(codified at

227

(citing

15

In

1256

re

(11th

expressly
15

delegates authority to Respondent to administer the program.
U.S.C.

§

636(a) (36) (B) ;

states

that

[ejxcept

>\

[Respondent]

Specifically,

see R&R at 3-4.

the statute

as otherwise provided in this paragraph.

may guarantee covered loans

under

the

same

terms.

conditions,

and processes as a loan made under this subsection.

15

636 (a) (36) (B) .

U.S.C.

§

ff

It is undisputed that small business loans under Section 7(a)
have

historically
§

C.F.R.

been

subject

R&R

120.110.

at

to

the

We

3-4.

presume

legislates against the backdrop of existing law.
F.3d

at

Although

227.

§ 636(a)(36)(B)
Section

7 (a)

does

Petitioner

not permit

eligibility

contends

Respondent to

requirements

ft

listed

limitations

to

PPP

w

that

//

Pharaohs,

that

conditions,

(Objections).

and

Instead,

processes

//

may

refer.

13

Congress

15

990

U.S.C.

apply preexisting
loans.

Petitioner

does not identify any other regulation or rule to which
terms,

in

ECF

No.

\N

the

same

28

at

7

Petitioner simply provides the dictionary

The parties agree, and the R&R found, that the statute
ECF Nos. 23, 24 (Loper Briefs); R&R at 16-17.
unambiguous.
tr

13

is

definitions
Id.

of

the

words

ff

"terms,

\\

conditions,

and

ff

"processes.

/t

The court agrees with the Magistrate Judge and Respondent.
same terms,

By permitting Respondent to apply the
processes

from

ff

prior

small

loans

business

to

conditions,

and

PPP

the

loans,

statute's plain language grants Respondent discretion to apply 13
C.F.R.

§

120.110

to

Additionally,

PPP

loans.

R&R

at

15-17.

it is clear that Congress
Pub.

PPP rulemaking authority to Respondent.
(codified at 15 U.S.C.
statute within
226

(citation

Respondent

this

§

9012) .

rulemaking

L.

116-136,

§

1114

The court must view the First

statutory context.

See

Congress's

omitted).

sought to delegate

authority

clear

further

intent

supports
As

reading of the statute's plain language,

990

Pharaohs,

such,

F.3d

to

the

PPP
at

grant
court's

both the plain

language and context of the PPP scheme support the R&R's findings.^
Petitioner's

other

argument.

that

the

inclusion

of

the

Section 120.110 regulations in the Second PPP implies the omission
of those regulations from the First PPP,

Again,
.

statutes

must be

is similarly unavailing.

read as a whole,

and

\\

in

their

context

. with a view to their place in the overall statutory scheme.

Pharaohs,

990 F.3d at

226

(citing Davis,

489

U.S.

at

809).

ff

The

First PPP gives Respondent discretion to apply the same historical

5 Because the plain language of the statute supports the R&R's
the
court need not
reach Petitioner's objection
ECF No. 28 at 8.
regarding superfluity.

conclusion,

14

terms,
C.F.R.

conditions,
§

120.110,

and processes,

to

PPP

such as those contained in 13

//

15

loans.

U.S.C.

§

636 (a) (36) (B) .

By

explicitly stating that Section 120.110 limits eligibility for the
Second

PPP,

15

see

U.S.C.

merely removed Respondent's

§

Congress

636(a) (37) (A) (iv) (III),
In

discretion.

other

words,

while

Congress allowed Respondent to choose whether to apply the Section
120.110

ineligibilities

to

First

PPP

loans,

Congress

required

Respondent to apply the Section 120.110 ineligibilities to Second
PPP

For these

loans.

the R&R

is

without

reasons.

merit

and

C.
Third,

Petitioner

Petitioner's

second objection

is OVERRULED.

Third Objection
objects

the

to

R&R's

Respondent provided sufficient explanation

finding

at

Specifically,

10-15.

violated

the

explanation,

APA

by

Petitioner

failing

to

by

argues

provide

that

a

ECF

No.

Respondent

contemporaneous

the court cannot rely on an affidavit by an employee
and the employee affidavit

of Respondent to cure this deficiency,
provided

that

for adopting its PPP

Ineligibility Rule with respect to financial businesses.
28

to

Respondent

explanation for

does

[Respondent's]

Under the APA,

not

w

action.

articulate

a

Id.

11-13.

n

at

Respondent must show that it

\N

satisfactory

examine[d]

the

relevant data and articulate[d] a satisfactory explanation for its

action [s]
the

choice

including a
made.

t

n

'rational

R&R at 23

connection between the

facts and

(quoting Motor Vehicle Mfrs.
15

Ass'n

V.

State

court

Farm

Mut.

considers

w

Auto.

Ins.

whether

the

consideration

of

the

a

of

judgment.

clear

Overton

error

relevant
ff

Inc. V. Volpe,

Park,

Co.,

463 U.S.

[agency]
factors

43

decision

The

(1983)).

was

based

on

a

and whether there has been

(quoting

Id.

29,

401 U.S. 402,

Citizens

416

to

Preserve
While

(1971)).

the

court generally looks to an agency's contemporaneous explanation.
id.

(citing Dow AqroSciences LLC v.

Nat'l

Marine

Fisheries

Serv.,

(4th Cir. 2013)), it should "uphold a decision

707 F.3d 462, 467-68

of less than ideal clarity if the agency's path may be reasonably
discerned.
220

id. at 24

/f

(4th Cir.

(quoting Roe v. Pep't of Def.,

2020)) .

Finally, the court may consider an agency's

clarify

the

affidavit

to

Id.

(citing Camp v.

at 25

947 F.3d 207,

reasoning behind
Pitts,

411 U.S.

an

agency's

138,

142-43

an agency fails to explain its administrative action,
[is]

not

agency,

to

hold

either

explanation

novo hearing but

through affidavits

...

Because

deficient,

a de

.

.

to

testimony,

(1973)

the remedy

\\

obtain

such

(if

from

the

additional

as may prove necessary")).

Respondent's

see

or

.

actions.

id.

at

26,

explanation

contemporaneous

the Magistrate

was

permitted to

Judge was

look to an employee affidavit for additional explanation, see Camp,
411

U.S.

at

Seaborn,

Assistance
1

the
at

142-43.

Respondent provided an

Director
the

time

of
the

("Seaborn Declaration") .

Respondent's
PPP was

affidavit

Office

implemented.

of
ECF

by

Diana

Financial
No.

17-2

at

In her affidavit, Ms. Seaborn explained
16

that she had relevant personal knowledge concerning why Respondent
Id.

adopted the PPP Ineligibility Rule.
was

at

Her explanation

1-2.

consistent with Respondent's IFR on April 15,

R&R

at

Furthermore,

27.

outlined

Declaration

the

as

noted

the

in

relevant

R&R,

factors

See

2020.
the

that

id.;

Seaborn

Respondent

considered when making its decision to adopt the PPP Ineligibility
R&R

Rule.

at

28-30.

the court agrees with the R&R that the

Upon ^ novo review,
Seaborn

Declaration

Respondent's
the

facts

clear

a

satisfactory

including

a

'rational

actions,

and

error

without

articulated

the

of

merit

choice

made.

is

did

favor[ed]

one

w

Other

types.

r/

not

and does

third

to

the

arbitrarily

and

objects

act

type of

entity

without

explanation.

Petitioner

Specifically,

23,

connection between
not

objection

show

a

is

thus

finding

that

Fourth Objection

Petitioner

Respondent

at

for

OVERRULED.

D.
Fourth,

id.

"

Petitioner's

judgment.

and

r

explanation

R&R's

capriciously

covered by Section
ECF

ff

challenges

the

120.110

No.

it

when

28

over

at

conclusion

17.
that

Respondent was not required to explain its disparate treatment
of

financial

argues that

Id.

businesses.

15

U.S.C.

at

16.

§ 636 (a) (36) (B)

^PPly pre-existing eligibility
loan program to PPP loans.

rr

In

response.

grants

requirements

of

it
the

//

Respondent

discretion

Section

to

7 (a)

and that its actions were not arbitrary
17

and capricious.
A

they
law.

5

tt

U.S.C.

shall

aspect

if

of

runs

Virginia

the

6-7.

set

aside
n

capricious,

§

706 (2) (A) .

it

relied

Respondent's
w

or

not

Respondent

on

factors

in

actions

if

accordance with

acted arbitrarily

and

[did]

not

which

Congress

offered an explanation

problem.

counter
v.

Cir. 2022)

to

United

the

evidence

States

Forest

ft

or

its

decision

implausible.

was

24

Serv.,

for

F.4th

915,

Wild

ff

926

(4th

The court's oversight of Respondent

(citation omitted).

highly deferential, with a presumption in favor of finding the

agency action valid.

As
§

ff

at

it to consider, entirely failed to consider an important

intend[]

N\

court

"arbitrary,

capriciously

IS

29

reviewing

are

that

ECF No.

previously

636 (a) (36) (B)

Id.

ft

(citations omitted).

discussed,

grants

the

Respondent

plain

language

discretion

of

to

15

apply

U.S.C.

the

13

C.F.R. § 120.110 ineligibilities to First PPP loans, as Respondent
deems

further

supported

supra

Section

IV.B.

This

reading

Congress's

later

removal

of

Respondent's

See

appropriate.

by

discretion when it enacted the Second PPP.

Id.

is

For these reasons.

upon de novo review. Petitioner's fourth objection is without merit
and

is

OVERRULED.

E.

Fifth Objection

Fifth, and finally. Petitioner objects to the finding that it
did

not

situated

present
ff

sufficient

evidence

showing

it

was

similarly

to other businesses that received loan forgiveness.
18

ECF

No.

28 at

The North American Industry Classification System

18-24 .

classifies

("NAICS")

Safety Servs.,
Petitioner's

Inc,

v.

NAICS

by

businesses

industry

United States,

code

R&R

u

Petitioner stated that over one hundred
under

its

NAICS

code

\\

Consol.

size.

167 Fed. Cl. 543, 547

522220.

is

and

at

(100)

As

35.

(2023) .

evidence,

companies operating

received loan forgiveness for first-draw PPP

loans between November 2020 and December 2021.

ECF No.

f/

15

Petitioner did not provide other evidence.

(Pet'r Mem.).

at

17

R&R

at

35-36.

In
Martin

response.

Respondent provided an employee
the

Andrews,

Deputy

Director

of

affidavit by
Office

Respondent's

of

Financial Program Operations at the time the PPP was implemented.
ECF No.

17-1

("Andrews

Based

Declaration") .

on

that

affidavit.

Respondent noted that it approved "slightly less than half of the
14,534

loan

companies

forgiveness

with

NAICS

code

applications
522220.

Mem.);

Andrews

Declaration at

codes

are

dispositive

not

entity's

business

Andrews

Declaration

information,

primary
4-6.

activity.
at

and
ff

ECF No.

//

7.

ECF No.

Petitioner does

not

29

at

27-28

do

not

definitively

ECF

No.

29

like financial records,

activity.

17

at

by

(Resp't

at

19

define[]

an

(Response);

see

Respondent

looks

to

other

when determining a business's

19;

see

dispute that

it

Andrews

Declaration

at

is a

company that

is

primarily engaged in the business of lending.
19

[it]

to

Respondent contends that NAICS

Instead,

4-5.

submitted

See

ECF

No.

28

at

19

it

Rather,

(Objections).

argues

that

other businesses

were

also primarily engaged in lending, but received loan forgiveness.
Id.

Again, the court should "uphold a decision of less than ideal

clarity if the agency's path may be reasonably discerned.
24

(quoting

Roe

Dep't

v.

of

Def.,

947

F.3d 207,

220

/f

R&R

(4th

at

Cir.

2020)), and the court may consider an agency's affidavit to provide
such

clarity,

see

411

Camp,

U.S.

at

For

142-43.

the

reasons

discussed previously regarding the Seaborn Declaration, the R&R's
reliance upon
at

36-39;
The

the

supra Section
Andrews

Declaration

Declaration at 4-8;
indicators
Andrews

that

Declaration

applications
contractors
4-7.

a

The

were

of

to review PPP
contractors

triggered.

Respondent

business's

financial

be

codes

R&R

were

not

Andrews

these NAICS codes were

ineligible
than

for

a

PPP

flagged

PPP

retained

two

applications

If manual

Id.

would

for

loan

review

to

PPP

review

other

different

of

Id.

at

for manual

a business

factors,

like

was

a

determine whether the business

loan

forgiveness.

Declaration was written.
20

loan.

11 million PPP loan

loan forgiveness applications.

records.

actually ineligible

time the Andrews

Instead,

Respondent

submitted.

NAICS

ineligibility.

Because more

4-8.

review in different ways.

was

business

could

business

that

shows

R&R at 36-39.

at

See

IV.C.

indicators

dispositive

Declaration was permissible.

Andrew's

Id.

At

the

Respondent had received

14,534

loan forgiveness applications with the same NAICS code as
Id.

Petitioner.

at

Roughly half of these applications were

7.

Id.

approved for loan forgiveness.

Petitioner identified only 141 companies that received loan
R&R at

forgiveness and had the same NAICS code as Petitioner.
ECF No.

28

evidence.

at

22

R&R

at

Petitioner

(Objections) .

identified

no

38;

other

Meanwhile, Respondent demonstrated that

35-36.

NAICS codes do not dispositively identify whether a business was
ineligible

for

As

36-39.

a

PPP

such,

Petitioner

loan.

the

evidence

similarly

was

Andrews

was

situated

Declaration

at

insufficient

to

these

4-8;

to

R&R

at

show

that

businesses

that

received loan forgiveness, and the Magistrate Judge did not err in

Upon de novo review, Petitioner's fifth objection is

so holding.
without

merit

and

is

OVERRULED.
V.

CONCLUSION

After reviewing the record in its entirety and conducting a
de novo

review of

specifically

Magistrate

obj ected.

Judge's

of the R&R to which Petitioner

those portions

R&R

the

court

accepts

and

finds

no

and

with

the

In

sum,

the

ECF No.

28,

and ADOPTS

error.

hereby OVERRULES Petitioner's Objections,

agrees

court

AND APPROVES IN FULL the findings and recommendations set forth in

the Magistrate

Judge's

thorough

August

ECF No.

25.

9,

2024,

Accordingly,

Petitioner's

and well-reasoned R&R,

Motion
21

for

Summary

filed on

Judgment,

ECF

No.

14,

is DENIED,

No.

16,

is

GRANTED,

Respondent's Motion for Summary Judgment,
and this matter

The

is DISMISSED.

is

close the case

DIRECTED to enter judgment in favor of Respondent,
on this court's docket,

Clerk

ECF

and send a copy of this Opinion to counsel

for the parties.
IT

IS

SO

ORDERED.

hi
Rebecca Beach Smith

Senior United States District Judge
REBECCA

SENIOR UNITED

March

\ , 2025

22

BEACH

STATES

SMITH

DISTRICT

JUDGE