A federal bankruptcy judge's decision clears the way for the Archdiocese of Agana to apply for a Paycheck Protection Program loan without being denied it on the basis of its reorganization bankruptcy status.
The judge's June 29 ruling came a day before the PPP application period closes.
The archdiocese has been losing about $126,000 a month from parishes and schools because of the COVID-19 pandemic, court documents state.
It applied on May 8, for a $151,769 PPP loan with the U.S. Small Business Administration, in an effort to keep its employees on payroll during the COVID-19 pandemic.
SBA denied the application because of the archdiocese's bankruptcy status.
The archdiocese sought Chapter 11 bankruptcy protection in January 2019 to be able to settle clergy sex abuse survivors' claims exceeding $1 billion.
U.S. District Court Chief Judge Frances Tydingco-Gatewood said SBA "acted outside its statutory authority" by excluding those who are in need the most: "Chapter 11 debtors."
The judge issued an order granting the archdiocese's motion for preliminary injunction. She said this cures the archdiocese's exclusion from the PPP.
"Without a doubt, the PPP funds would provide a lifeline to the financially distressed Archbishop of Agana. While it will not resolve its financial troubles, the PPP funds will likely help facilitate a path towards a successful reorganization," the judge said in her order.
Tydingco-Gatewood also denied SBA's oral request to stay the injunction pending appeal, particularly because the harm to SBA, if any is far outweighed by the harm to the plaintiff if the stay is granted.
"There will likely be no PPP funds available to plaintiff by the time the appeal is concluded," the judge wrote.
The archdiocese has had to reduce its payroll from a five-day workweek to a three-day workweek. It also had to make two reductions in force, due to the loss of revenue.
Currently, the archdiocese is unable to resume normal operations because it does not have sufficient funds to pay for its payroll, the court said.
"If plaintiff can no longer afford to pay its payroll, it will likely cease to exist. The effects will be devastating, not just for plaintiff, but for an island with a population of approximately 160,000, the majority of which are Catholics," the judge stated in her order.
The PPP loan is part of the Coronavirus Aid, Relief and Economic Security, or CARES, Act, a massive financial assistance package for states and territories to help them deal with the pandemic.