PHILADELPHIA – Strip club owners in five states, including Pennsylvania, have sued the U.S. Small Business Administration in federal court, claiming the SBA’s moral judgment about their businesses violated their constitutional rights and caused them to be deprived of receiving loans issued to restaurant and nightlife owners adversely affected by the COVID-19 pandemic.
MAG Enterprises, Inc. and Oasis On Essington, LLC of Philadelphia, Mag Pitt, LP of Pittsburgh, Mag Entertainment, LLC of Gloucester City, N.J., KWLT, LLC of Allentown, KWON, LLC of West Columbia, S.C., BT California, LLC, Gold Club-SF, LLC and S.A.W. Entertainment, LTD of San Francisco, Calif. and Kimmico, Inc. of Baltimore, Md. first filed suit in the U.S. District Court for the Eastern District of Pennsylvania on May 14, versus the U.S. Small Business Administration, its Administrator Isabel Casillas Guzman and the United States of America, all of Washington, D.C.
“This is a civil action wherein plaintiffs seek an immediate, emergency, temporary restraining order, and further injunctive relief, to restrain defendants from violating their constitutional rights by discriminating against businesses and workers who are entitled to benefits from the support for restaurants provisions (the “Restaurant Revitalization Fund” or “RRF”), Section 5003 of Title V, of the recently-enacted American Rescue Plan Act of 2021,” the suit says.
The U.S. Congress created the fund to respond to commercial losses incurred during the COVID-19 pandemic, and to provide grants to restaurants, bars, taverns, and related businesses, assuming they met all stipulations and directed Guzman to authorize grants to eligible recipients.
However the plaintiffs argue that the defendants have moralized against their businesses and their purpose, alleging that the SBA’s rules and regulations unfairly classified them as “prurient” and “obscene” – and violated their constitutional rights, by denying them access to the relief funds.
“The SBA is arbitrarily and without authority incorporating and applying the regulation to prohibit adult entertainment establishments from receiving RRF grants,” the suit says.
“The SBA determines 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.”
According to the plaintiffs, their exile from the funds based on the nature of their business violates federal laws and overextends the bounds of the group’s authority.
“The SBA’s actions defy Congress’s words in the statute, exceed the SBA’s authority, contradict the SBA’s enabling act, discriminate against First Amendment-protected businesses, and are otherwise invalid under the Administrative Procedures Act, 5 U.S.C. Section 500 et seq.,” per the suit.
“The SBA’s Program Guides and incorporation of its business loan rules violate businesses’ and workers’ fundamental rights under the First and Fifth Amendments of the United States Constitution and generally exceed the SBA’s authority.”
For counts of violating the First and Fifth Amendments to the U.S. Constitution, violating the American Rescue Plan Act, through Monell and under 42 U.S.C. Section 1983, strict liability and negligence, the plaintiffs are seeking a national form of injunctive relief preventing the SBA from holding out on paying grants to them and similar businesses, due to alleged regulations which were improperly approved, and other damages.
The plaintiffs are represented by Arthur Fritzinger of Cozen O’Connor in Philadelphia, plus Bradley J. Shafer, Matthew J. Hoffer and Zachary M. Youngsma of Shafer & Associates, in Lansing, Mich.
The defendants are represented by Matthew E.K. Howatt of the U.S Attorney’s Office, also in Philadelphia.
U.S. District Court for the Eastern District of Pennsylvania case 5:21-cv-02213
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com