Good News: Adult Businesses CAN Apply For SBA Disaster Loans

Earlier this week, AVN called the adult industry's attention to the sex-negative prejudices built into the Small Business Administration's Economic Injury Disaster Loan Program, whose application states that a business is barred from applying for such a loan if it "present[s] live performances of a prurient sexual nature or derive[s] directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature." In explaining that clause of the application, AVN looked to a mainstream dictionary's definition of the word "prurient"—and that was wrong. It's the legal definition of "prurient" that's applicable here, and several First Amendment attorneys called that fact to our attention. "It is true that the application form does require that the applicant state that they are not involved with prurient sexually-oriented activities," noted prominent First Amendment attorney Lawrence Walters. "However, I believe a valid argument can be made that adult businesses are not involved with prurient sexual activities because prurience has been defined in case law to mean a 'shameful or morbid interest in sexuality,' and I believe adult businesses could validly take the position that they're involved with a healthy interest in human sexuality and not a shameful or morbid interest. So ultimately, it may come down to a court interpreting, first off, whether the exclusion applies to a particular adult business, and secondly, if the loan was denied based on this exclusion, whether that is constitutional, and I believe that denying a loan based on the content of entertainment or speech would be an unconstitutional conditioning of a government benefit." It's important to note that every obscenity case involving adult content—videotapes, DVDs, magazines, websites—has hinged in part on whether the material was "prurient" in nature. "It is critical to recognize that that the U.S. Supreme Court has equated 'prurient interest' to a 'shameful or morbid  interest in sex, nudity, or excretion'," explained adult defense attorney and legal scholar Reed Lee. "This goes back at least to the Memoirs case in the mid-1960s. It was the primary vehicle for narrowing the  category of the legally obscene to almost nothing. When I was doing  obscenity defenses 25-30 years ago, we had quick acquittals when the  jury got this definition of 'prurient' (and particularly when they heard  that 'morbid' means 'of or pertaining to disease') And those cases  involved what would still pass for fairly edgy hardcore today." "Both Free Speech Coalition and the First Amendment Lawyers Association are looking at this problem," Lee continued. "For myself, I am inclined  to think that a well-advised adult business can legitimately check the box disclaiming prurience (because its wares are not 'shameful or  morbid') and perhaps fly under the radar and get what others are getting  by way of relief." Indeed, it's the "flying under the radar" that worries the attorneys. "Ultimately, it will come down to some loan processor at the SBA or potentially their legal department deciding whether or not the prurient exclusion applies to any particular adult business," Walters predicted, "and that is inherently the problem: You are allowing government agents to make decisions on critical disaster relief based on the content of speech, which flies in the face of the First Amendment." Interestingly, the prohibition against businesses of a "prurient sexual nature" being unable to receive SBA loans dates back to the regulation's entry into the Code of Federal Regulations back in 1996, found at 13 C.F.R. §120.110. Subsection (p) of that section has language mirroring the prohibition in the eligibility requirements for the Economic Injury Disaster Loan program—but as First Amendment attorney J. Michael Murray (who's still waiting for the Third Circuit's decision in the 2257 lawsuit he's been prosecuting) points out, that particular section has been ignored in the eligibility requirements for small businesses to the Payroll Protection Program just rolled out in the $2 trillion CARES Act which was just signed into law by President Trump. "If you go to the SBA's website and look at their Payroll Protection Program, they've got a sample of an application form that does not include that question, and that's the program that they're trying to finalize to go into effect on April 3. That's based on the bill that Congress passed about a week ago, the $2 trillion stimulus bill... Now, with the COVID-19 bill, I think small businesses can get a disaster loan, [and] I think a few adult businesses may have applied, and yes, that appears to still be on that form, but the other program that they're going to start to implement, which is that you can borrow up to two-and-a-half months' worth of your payroll, and if you use it for your payroll, at the end of the period—you can use it for like eight weeks, and at the end of the period, you can apply for loan forgiveness, and the principal amount of that loan will be forgiven. "You actually go through the bank; the SBA guarantees it," he continued, "and on that program, if you go to their website, you'll see that there's a sample application form for that program, which is the one that I think a lot of adult businesses currently might be trying to use, and it looks like that 'prurient sexual nature' exclusion won't apply to that program at all, and that makes sense, because if you read the statute that was passed, it would suggest that there shouldn't be an exclusion. In fact, there's a bunch of exclusions that would probably not apply to that." But regarding the Economic Injury Disaster Loan program, however, Murray is in total agreement with his First Amendment litigator colleagues. "As far as we First Amendment lawyers are concerned, the 'prurient' of a 'prurient sexual nature' is really a legal term of art that goes back to the legal definition of obscenity," Murray told AVN, "and remember, 'prurient' is a 'shameful or morbid or unhealthy interest in sex,' and the adult industry, their materials don't appeal to a shameful or morbid interest in sex; they appeal to a normal, healthy interest in sex and they're perfectly accepted by contemporary community standards. So the adult industry takes the position that none of its materials would be of a prurient sexual nature because that's a legal term of art going way back to the definition of obscenity, which the U.S. Supreme Court talked about way back in 1954 in Roth v. United States, and then of course it was incorporated in the first part of the three-part test for obscenity in Miller v. California in 1973. So if the government were to use that criterion as an exclusion and attempt to apply it to adult businesses, first of all, there would be an argument that it doesn't apply because it doesn't meet the prurient sexual nature test but if the government were to take that position, then you've got a content-based regulation that we would argue is unconstitutional under the First Amendment because it's a content-based distinction that can't meet the test for strict scrutiny, or even intermediate scrutiny if that were the test, and the argument would be that it doesn't meet it." But if there's one thing that all of the First Amendment attorneys AVN consulted agreed upon, it's that adult businesses of any type that want to apply for either an Economic Injury Disaster Loan or the Payroll Protection Program should first discuss the idea with their attorneys, who may be able to help craft the application so that adheres to all the guidelines set for in the law. Pictured: Trump signing the CARES Act stimulus bill