Florida Adult Businesses Sue SBA Over PPP Application Denials

TAMPA, Fla.—Operators of eight Florida adult entertainment businesses filed a federal lawsuit this week against the Small Business Administration after they were each rejected after applying for the federal Paycheck Protection Program (PPP). The Gulf Coast businesses, including the nightclubs Fantasyland, DaVinci’s, Silks, Blue Diamond Dolls, Sammy’s and the adult bookstore X-Pressions, filed the action in federal court to obtain an emergency declaration and injunctive relief forcing the federal agency to end discrimination over First Amendment-protected expression. Attorney Luke Lirot, who represents the eight businesses, told AVN that the lawsuit is “fully ripe” because the latest PPP extension round for applications has a deadline of Aug. 8. “The well has run dry for many,” Lirot said. “The guys who need paycheck should be getting the benefits. A general disaster relief program must be equal. It’s not the case where you can pick and choose.” Since the SBA’s loan program started, adult entertainment businesses applying for the PPP have seen mixed outcomes. Several gentlemen’s clubs have received federal aid along with a handful of other adult businesses. But some adult companies have challenged PPP application denials in courts. At least two courts, one in Michigan and the other in Wisconsin, have held that the SBA’s exclusion of businesses providing entertainment of a “prurient sexual nature” is contrary to Congress’s intent in passing the CARES Act, which is part of the PPP. In another court, one club was told it was unlikely to prove that the exclusion of adult entertainment businesses from the PPP violates its right to equal protection and freedom of speech. That case is likely to be appealed, according to the club owner. Lirot said that the businesses he represents along the Gulf Coast have more than a combined 100 employees. And each of them have been out of work since mid-March, when the pandemic forced Florida’s governor to respond with an executive order that effectively shuttered non-essential businesses, he said. “I do not know why it has been so uneven,” Lirot said. “Some of the companies [involved in the suit] went to three different banks, some were denied just once and gave up.” Lirot said that he thinks that SBA officials, including its legal counsel, understand the challenges of running businesses, “but I think the directive [in regards to the ‘prurient sexual nature’ exclusion] is coming from a higher level.” “When we applied for the PPP, we published a ‘Prurient Memo’ to explain why gentlemen’s clubs cannot be denied,” Lirot said. “So [the banks] were aware. We anticipated that ‘prurient’ would be misconstrued.” Lirot’s suit on behalf of eight adult business clients specifies free speech violations and violation of the due process clause. It seeks a preliminary injunction and permanent injunction in relation to the SBA’s denial of plaintiffs’ loan applications.