Court upholds strip clubs' exclusion from pandemic relief program

2 minute read

A dancer sanitizes the pole before performing on the outside patio at Cheerleaders Gentlemen's Club in Gloucester City, New Jersey. Cheerleaders received a Paycheck Protection Program (PPP) loan from the Small Business Administration. REUTERS/Rachel Wisniewski

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  • Ban on loans for adult businesses wasn't based on speech
  • At least one other appeals court came to the same conclusion

(Reuters) - A U.S. appeals court on Wednesday said Congress did not violate the free-speech rights of adult entertainment businesses by barring them from participating in a pandemic relief program.

A 7th U.S. Circuit Court of Appeals panel said excluding strip clubs and other businesses including banks, casinos and lobbying firms from the second round of the Paycheck Protection Program (PPP) last year was well within Congress' authority to decide how to spend taxpayer money.

"Congress is not trying to regulate or suppress plaintiffs’ adult entertainment," Circuit Judge David Hamilton wrote. "It has simply chosen not to subsidize it."

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The 2nd Circuit came to the same conclusion last March.

The Small Business Administration, which paid out nearly $800 billion in PPP loans, did not immediately respond to a request for comment. Nor did lawyers for a group of businesses that sued the agency.

The PPP was created in 2020 to help employers cover payroll costs during the COVID-19 pandemic. The SBA barred certain types of businesses from receiving loans, including those that present live performances or sell products of a "prurient sexual nature."

That prompted a group of adult entertainment businesses to sue in Wisconsin federal court, and a judge last year found that excluding employers from the program based on the type of business they are in amounted to an intrusion on speech protected by the U.S. Constitution.

But, the 7th Circuit on Wednesday said the exclusions had nothing to do with speech, evidenced by the broad range of businesses barred from collecting PPP loans including casinos, life insurance companies and loan packagers.

Last year, the SBA in a court filing said it would process PPP applications from dozens of adult businesses that had challenged the exclusion in a separate case. The 6th Circuit has stayed an appeal in that case in the meantime.

The case is Camelot Banquet Rooms Inc v. U.S. Small Business Administration, 7th U.S. Circuit Court of Appeals, No. 21-2589.

For the plaintiffs: Bradley Shafer of Shafer & Associates

For the SBA: Courtney Dixon of the U.S. Department of Justice

Read more:

SBA sidesteps ban to forgive strip clubs' pandemic relief loans

Judge grants strip clubs access to 2nd round of pandemic relief

2nd Circuit says SBA can bar strip clubs from pandemic relief

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.