Intellectual property law firm Ramey & Schwaller – now known as Ramey LLP – has lost its bid to have its lawsuit against Amegy Bank reinstated after the bank froze the Houston firm’s account over an allegedly false answer on its application for Covid-19 relief funding.
The U.S. Court of Appeals for the Fifth Circuit ruled that a federal judge in Houston correctly rejected Ramey’s claims against Amegy’s parent company, Zions Bancorporation, regarding the bank’s decision to freeze and seize $249,300 related to Ramey’s forgivable loan request under the Paycheck Protection Program.
Ramey, a seven-lawyer firm that specializes in patent prosecution and litigation, sought the PPP loan in April 2020. Amegy Bank handled the loan application and it was approved by the U.S. Small Business Administration.
As part of the PPP loan application, question five asked if “any individual owning 20 percent or more of the equity of the applicant [was] subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole.”
Ramey answered “no.”
Three months later, however, bank officials discovered while doing a criminal background check on Ramey related to a separate request for a line of credit that the Ramey firm’s owner, William Ramey, had criminal charges pending against him in Harris County state courts.
Based on the new information, Amegy Bank officials notified the Ramey law firm in July 2020 that it believed the firm had made a “false statement in the loan application” and held the law firm in default and froze the firm’s accounts as an offset to the loan balance.
“The bank’s actions caused ripple effects,” according to the Fifth Circuit opinion. “For one, when the law firm applied for another PPP loan from Chase Bank, Chase denied the loan because of a ‘PPP loan issue with other lender.’ For another, in April 2021, SBA denied the law firm’s request for loan forgiveness on the grounds that ‘the borrower was ineligible based on William Ramey[’s] false response to question number 5 on the loan application.’
“This case hinges on whether Ramey answered the application’s question five falsely,” Judge Cory T. Wilson wrote for the unanimous three-judge panel. “If he did, then Ramey & Schwaller defaulted on its loan, the law firm’s claims against Amegy Bank fail, and the bank’s counterclaim succeeds.”
The Ramey law firm sued the bank in Texas state court in October 2020 seeking a declaratory judgment that the loan was not in default and sought damages against the bank. The bank had the case removed to federal court and cross-sued the law firm claiming breach of contract.
The federal district judge ruled against the law firm and granted summary judgment in favor of Amegy Bank, finding that the Ramey firm had answered falsely on question five.
The three-judge panel upheld the district court’s findings in an 11-page order.
In November 2021, a Harris County grand jury declined to indict Ramey on any allegations.
The case is Ramey & Schwaller v. Zions Bancorporation, Amegy Bank, Fifth Circuit No. 22-20107.