June 23, 2020 / RACHEL COHRS
An appellate court ruled on Monday that lower courts cannot stop the Small Business Administration from excluding hospitals in bankruptcy proceedings from forgivable COVID-19 relief loans.
Hidalgo County Emergency Service Foundation, an ambulance service in Texas, sued the Small Business Administration because it was denied a Paycheck Protection Program loan because it is in Chapter 11 bankruptcy proceedings. SBA rules state that companies that are debtors in bankruptcy proceedings aren’t eligible for PPP loans.
A bankruptcy court originally sided with Hidalgo and placed a preliminary injunction on the SBA prohibiting it from considering bankruptcy status in Hidalgo’s application, but a three-judge panel of the 5th U.S. Circuit Court of Appeals ruled that the court didn’t have authority to enjoin the SBA.
Some small hospitals in bankruptcy proceedings have also sued to get access to PPP loans.