Summary
The document is a Report and Recommendation in an Administrative Procedure Act action concerning the Small Business Administration’s partial denial of forgiveness for a Paycheck Protection Program loan. The court recommends granting the SBA’s motion for summary judgment and denying QX Logistix’s motion, concluding that QX was “in business” during the statutory period and therefore was ineligible to use the alternative loan-calculation methodology. It also rejects QX’s arguments that full use of the loan proceeds for payroll required complete forgiveness, that SBA guidance was contradictory, and that SBA should be estopped from denying forgiveness.
Court
United States District Court for the District of Delaware
Jurisdiction
United States District Court for the District of Delaware
Decision date
January 21, 2026
Docket number
C.A. No. 25-90-MN
Disposition
other
Questions Presented
- Whether QX was entitled under 15 U.S.C. § 636(a)(36)(E)(i)(II) to calculate its PPP loan amount using the methodology for an eligible recipient that was not in business during the relevant period.
- Whether the CARES Act's phrase "not in business" means that an entity must have payroll costs, or instead means that the entity had begun generating revenue from its intended operations.
- Whether SBA's determination that QX was in business before June 30, 2019, and its resulting partial denial of loan forgiveness, was contrary to law under the APA.
- Whether SBA's decision was arbitrary and capricious because it allegedly conflicted with PPP application materials and program guidance.
- Whether SBA should be estopped from denying full loan forgiveness based on alleged affirmative misconduct.
Holdings
- Section 636(a)(36)(E)(i)(II)'s methodology is available only to an eligible recipient that was not in business during the period beginning February 15, 2019, and ending June 30, 2019. The statute does not make Section (I) unavailable merely because an applicant lacks a full year of payroll.
- For purposes of 15 U.S.C. § 636(a)(36)(E)(i)(II), an entity is "in business" when it begins generating revenue from its intended operations; payroll costs are not a necessary predicate to being in business.
- The administrative record reasonably supported SBA's determination that QX was in business and generating revenue before June 30, 2019, making QX ineligible to use the Section (II) methodology.
- A borrower is not entitled to forgiveness of loan funds that it was ineligible to receive, even if the borrower used the entire loan proceeds for payroll costs.
- SBA's partial denial of QX's forgiveness application was not arbitrary or capricious.
- QX's estoppel argument failed because it was forfeited and, alternatively, QX identified no evidence of affirmative misconduct by SBA.
Court Document
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