Mona Z. Hanna

Hanna is the managing partner of Michelman & Robinson’s Orange County office and the chair of the firm’s litigation department.

“We’ve been back to work in the Irvine office for several weeks,” she said in late April. “I now have my second vaccination, and I’m feeling like a Superwoman. And we’re all starting to feel like there is light at the end of this long dark tunnel.”

The government’s response to the pandemic triggered litigation. Hanna and her team represent three small businesses in a first-of-its-kind lawsuit against the Trump administration that seeks to nullify guidance issued by the Small Business Administration and the U.S. Treasury to re-impose a “credit elsewhere test” as a criterion for loans made under the Paycheck Protection Program. Zumasys Inc. v. U.S. Small Business Administration, 8:20-cv-00851 (C.D. Cal., filed May 4, 2020).

The complaint Hanna drafted argued that employers who received PPP funds and were subject to the test ended up in a worse financial position than if they had terminated or furloughed their workers.

“The ‘guidance’ is the opposite of what the law intended; that is, to help businesses employ American workers and keep businesses afloat” during the pandemic, she wrote, because it requires that if possible they borrow money elsewhere to repay their PPP loan rather than to seek loan forgiveness.

Two weeks after she filed the complaint, the SBA came out with new guidance that reversed the government’s reliance on the credit elsewhere test, Hanna said. “I can’t say it was cause and effect, but there certainly was a correlation in the timing.”

Later, the plaintiffs’ loans were forgiven. Hanna said she will voluntarily dismiss the complaint. “But to the extent that the SBA and the Treasury give guidance contrary to the intent of the law, or add additional requirements, this could be a problem in the future,” she said. “This case was an important milestone that made businesses aware that government guidance isn’t necessarily the law.”

In a long-fought potential class action that reached a state appellate court, Hanna prevailed for her insurer client over plaintiffs who complained about insurance rates charged by a rental car company but failed to establish any fraudulent business practice or economic injury. Adhav v. Midway Rent A Car Inc., B285586 (2d DCA, op. filed July 24, 2019).

“It’s the only published decision in this area, and I’m proud of it because if it had gone the other way it would have been bad for the industry,” Hanna said.

— John Roemer