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When a Litigation Plan Approval is Required

Litigation Plan

In some cases, the Lender will or must seek assistance from outside legal counsel. In such a case, the Lender will develop a written plan that encompasses the work to be performed and the fees to be charged. Depending on the nature and scope of this work, SBA may need to be consulted prior to implementation.

  1. No Prior Approval. SBA’s prior approval is not required for Routine Litigation. Routine Litigation means uncontested litigation, such as non-adversarial matters in bankruptcy and undisputed foreclosure actions, having estimated legal fees not exceeding $10,000.
  2. Prior Approval Required. Lender must obtain SBA's prior approval of a litigation plan before proceeding with any Non-Routine Litigation, as defined below: Non-Routine Litigation includes:
    • All litigation where factual or legal issues are in dispute.
    • Any litigation where legal fees are estimated to exceed $10,000.
    • Any litigation involving a loan where a Lender has an actual or potential conflict of interest with SBA
    • Any litigation where the Lender has made a separate loan to the same borrower which is not a 7(a)
    • Any litigation involving the appointment of a receiver.

For all loans, either Center or District Counsel will review all attorney’s fees (even those under $10,000) incurred by lender for to ensure that they were necessary, reasonable and customary (this includes post purchase reviews). This also includes cases where a litigation loan has been approved for legal fees in excess of actual final expenses.

If expenses are determined to be unnecessary, unreasonable or not customary they will be deducted from any purchase request. If the lender has already deducted them from recoveries, lender will be requested to reimburse the SBA for those fees and expenses deemed to be either unnecessary or unreasonable. In the case where legal fees are being reviewed as part of a post purchase review, copies of all attorneys’ invoices, as noted above, will be reviewed for necessity, reasonableness and whether or not they are customary for the area. If SBA Counsel determines that they were not reasonable, necessary and customary the lender will be responsible for reimbursing the SBA for the fees that are disapproved.

To submit a request for litigation plan approval, submit completed litigation plan Tabs Tabs to SBALitigation@sba.gov or (202) 481-6001 fax.