The U.S. Supreme Court has declined to review a Fourth Circuit decision that barred a Virginia-based risk management firm from receiving $5 million in debt relief under the CARES Act, affirming that repeated missed payments made the loan ineligible for government assistance during the COVID-19 pandemic.
In its Monday order list, the justices denied certiorari to PACEM Solutions International LLC without explanation, as is customary, leaving intact the Fourth Circuit’s August 2025 ruling. The appeals court upheld a Virginia district court’s summary judgment in favor of the U.S. Small Business Administration (SBA), finding the loan “not performing appropriately” under CARES Act standards — disqualifying it from relief payments.
PACEM borrowed $5 million in 2018 but missed its first principal payment in March 2019. Over the next 15 months, the company paid only $250,000 toward principal despite multiple loan modifications, including a deed of trust securing the loan against its $7.6 million Florida munitions factory. The missed payments stemmed from delays in a $65 million contract with Iraq’s Interior Ministry, but the Fourth Circuit held that ongoing delinquencies and modifications rendered the loan non-performing.
The SBA initially advanced $35,000 in relief but, after a November 2022 investigation, determined PACEM never qualified and sought repayment. The circuit emphasized the CARES Act did not require the SBA to cover payments on loans already in default or restructured due to non-performance.
The ruling reinforces strict eligibility criteria for pandemic-era SBA relief programs, where payment history and loan status take precedence over external business hardships — even for small firms facing major contract delays.
PACEM is represented by Milton C. Johns of Executive Law Partners PLLC. The government is represented by Peter B. Baumhart of the U.S. Attorney’s Office for the Eastern District of Virginia.
The SBA and PACEM representatives did not immediately respond to requests for comment.
This case underscores the limited judicial flexibility in CARES Act enforcement, particularly for loans with pre-pandemic delinquency patterns, and may influence similar SBA clawback efforts nationwide.
