Strip Clubs Challenge 'Prurient' Loan Discrimination in Court

Strip Clubs Challenge 'Prurient' Loan Discrimination in Court

PHILADELPHIA — A group of strip club owners in Pennsylvania, California, New Jersey, South Carolina and Maryland are suing the federal Small Business Administration (SBA) in a Pennsylvania federal court over their discriminatory policy classifying sex-oriented businesses as “prurient” and preventing them from receiving COVID relief.

The seven businesses, representing eight strip clubs, allege the federal agency is preventing them from accessing the same sources of relief funding that other bars and restaurants have enjoyed, legal news site Law 360 reports.

The plaintiffs include the owners of Cheerleaders Gentleman's Clubs in Philadelphia, Pittsburgh and Gloucester City, N.J.; the Vanity Club, Gold Club, Larry Flynt's Hustler Club and Condor Club in San Francisco; and Fantasies Nightclub & Sports Bar in Baltimore.

The clubs object to the SBA determining “whether a business presents live performances of a prurient sexual nature without having ever visited the establishments or having viewed the live performances at the establishment. Plaintiffs do not present live performances of a prurient sexual nature on their premises. All of the performances on plaintiffs' premises appeal to normal, healthy, sexual desires.”

The 'Prurient' Clause Strikes Again

At the core of the lawsuit is the federal government’s use of the antiquated and unusual word “prurient,” as XBIZ has been reporting since the beginning of the pandemic.

The “prurient” clause on the SBA loan application replicates mid-1990s language designed to discriminate against sexually oriented businesses.

The word “prurient” is an imprecise, obscure word that means “appealing to unhealthy sexual interests” and was used by the U.S. Supreme Court in a landmark 1973 ruling. Several members of the adult entertainment community and First Amendment lawyers have pointed out that people who do not consider their sexual expression “unhealthy” are exempt from application of the “prurient” clause.

Last year, several sexually oriented businesses across the country sued the SBA for discrimination based on the “prurient clause.”

Alleged First and Fifth Amendment Violations

According to Law 360, the seven strip club operators now allege that “SBA's rules improperly classified them as ‘prurient’ and obscene and violated their First and Fifth Amendment rights by presumptively denying them access to Restaurant Revitalization Fund grants under the American Rescue Plan Act of 2021.”

They are seeking “a nationwide injunction blocking the SBA from refusing them and similar businesses money from the program based on regulations that had not gone through the normal vetting and approval process.”

The SBA, their filed complaint states “is arbitrarily and without authority incorporating and applying the regulation to prohibit adult entertainment establishments from receiving RRF grants.”

"As applied,” the complaint continues, “the SBA's construction of the term 'prurient' is not supported by current constitutional standards of obscenity which, as articulated by the United States Supreme Court, defines and operationalizes 'prurient' as a 'shameful or morbid' and 'unhealthy' interest in sex, as opposed to 'normal, healthy sexual desires.'"

The lawsuit quotes earlier cases concerning the PPP loans, like DV Diamond Club of Flint, LLC v. U.S. SBA.

“The Eastern District of Michigan had barred the SBA from following its previous definition of ‘prurient’ in denying pandemic relief, but the agency continued to do so for the RRF program,” Law360 reported.

Brad Shafer of Shafer & Associates, representing the plaintiffs, provided further context to Law360.

"Congress said who was eligible; Congress defined what an affiliated business was," he said. "Congress didn't include the regulation [and] Congress didn't include a requirement to withdraw the second-draw PPP application.”

SBA reps declined to comment about the lawsuit to Law 360, and they did not specifically comment to XBIZ when previously asked about the “prurient clause,” although they did point out that it was not a Trump-era innovation, but the result of a mid-1990s review during the Clinton administration, which has been copied as boilerplate ever since.

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