As we’ve talked about on the blog and our Facebook page over the last few days, we’re here to help small business owners who are running into trouble applying for and receiving a Small Business Administration loan that is part of the latest economic stimulus package. Being on probation can result in denial, so we can help work past this hurdle and get you the grant you desperately need during the pandemic.
Other business owners are also running into different issues in regards to receiving the federal loan. A strip club in Michigan has issued a complaint against the Administrator of the Small Business Administration and the U.S. Secretary of Treasury, claiming that denying his business a loan would violate first and fifth amendment rights.
The Complaint
The DV Diamond Club of Flint, Michigan, the parent company of the strip club “Little Darlings,” alleges that even though they fit the bill for a business that would be eligible to receive the stimulus grant, they fully expect their request to be denied, as they’ve heard similar establishments have unjustly had their claims denied.
“In order to mitigate its business losses and to provide monetary relief to its employees – since at least 75% of PPP loans are to be used for employee wages and salaries, DV sought out to apply for a PPP loan,” the company stated in its complaint. “DV is fully qualified — but for the Regulations and the SOP (Standard Operating Procedure) or the SBA’s application thereof — to receive a PPP loan under all relevant statutes, regulations, and procedures. However, DV reasonably believes that its Application will be rejected or fatally delayed due to the SOP and/or the Regulations.”
The compliant continues:
“Specifically, DV has learned that other similar establishments have had their applications for PPP loans rejected on the belief that the clubs present ‘live performances of a prurient sexual nature’ within the meaning of 13 C.F.R. § 120.110(p). DV reasonably fears its Application will suffer the same fate as the applications of these other businesses which have had their applications denied. Neither DV nor any of the entertainers who have performed on its premises have ever been charged, let alone convicted, of any crimes of obscenity.”
They also fear that regulations will cause a delay with processing their application until all loan funds are exhausted, which could render a future claim moot.
“In the event that DV is unable to obtain PPP loan it may lack the staff and/or funds to reopen following the COVID-19 pandemic, resulting in the permanent ruination of its business; the inability of DV to engaged in protected First Amendment activity; and the inability to DV’s staff, entertainers, and customers to continue engaging in or viewing protected First Amendment activity. As a direct and proximate result of the unconstitutional aspects of the Regulations and SOP and the Defendants’ and their delegates’ application of the Regulations and the SOP against DV and its interests, DV, DV’s employees, and the entertainers who perform on DV’s premises have suffered and will continue to suffer irreparable injuries, including but not limited to financial ruin, business ruination, and the inability to present protected First Amendment protected entertainment.”
It’s certainly an interesting case, and while you can argue that one business may be more essential than another, if both businesses meet the criteria for a loan, one shouldn’t have their claim denied simply because of the nature of their industry. Hopefully businesses that meet the criteria are not unfairly governed as these loans are disseminated.
If you need help with your SBA loan, reach out to Avery and the team at Appelman Law Firm today.
