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Catholic Diocese sues Small Business Administration

The Catholic Dioceses of Rochester and Buffalo have filed a federal lawsuit against the U.S. Small Business Administration claiming they were improperly excluded from the agency’s Payroll Protection Program, which was created to provide relief to entities suffering financial hardship because of the COVID-19 pandemic.

The $350 billion Paycheck Protection Program (PPP) was passed in late March to provide up to $10 million per applicant to pay workers for two months. The program that ran out of money in about 13 days offered loans with an interest rate of 0.5%.

But the loans will be completely forgiven if all employees are retained and the money is used for payroll, rent, mortgage interest or utilities.

Both Dioceses are in the midst of Chapter 11 bankruptcy because of the financial impact of numerous lawsuits claiming child sexual abuse by priests over the past several decades.

The complaint filed Wednesday in U.S. District court for the Western District of New York asks the court to declare that rules excluding entities in bankruptcy from the PPP are “unlawful, discriminatory against prospective borrowers who are debtors in bankruptcy, and beyond its statutory authority.”

The lender application form for the PPP “states that the PPP loan cannot be approved unless the applicant certifies that neither the applicant nor any owner is presently involved in any bankruptcy,” according to the 15-page complaint.

The Dioceses are represented by the law firm of Bond Schoeneck & King PLLC.

“The plaintiffs, like many other businesses, have been financially affected by the COVID-19 pandemic in ways that could not have been foreseen,” the plaintiffs claim.

“The New York State ‘stay at home’ directive that requires 100 percent of the state’s non-essential workforce to stay home and prohibits gatherings of more than 10 people has further exacerbated this crisis for plaintiffs,” according to the suit.

The primary source of income for the Diocese is “offertory collection during masses and, a significant portion of the offertory collections occur during Holy Week which includes Easter Sunday mass,” according to the suit.

But because of the stay at home order there has been “a significant decrease in revenue” which is expected to continue as long as the “stay at home” directive continues, the suit claims.

“Without a PPP loan, the plaintiffs will be forced to lay off or furlough essential employees,” the suit claims.

Officials at the Diocese of Rochester declined to comment. The Diocese of Buffalo did not immediately respond to a request for comment.

Attorneys at Bond Schoeneck & King did not immediately respond to a request for comment.

It’s not clear how the complaint will proceed now that the PPP has run out of funding. / (585) 232-2035