We have been discussing litigation of strip clubs denied pandemic relief, including a recent ruling in favor of such clubs in Nevada. I have been highly critical of such denials. Now, another judge, has ruled correctly in favor of these businesses. District Judge Matthew Leitman in Flint, Michigan, issued a preliminary injunction barring the Small Business Administration from excluding businesses that present live performances or sell products of a “prurient sexual nature” from loans under the Paycheck Protection Program. Businessman Jason Mohney who owns various clubs including Little Darlings (left) brought the action. The Trump Administration is dead wrong in litigating these cases to use the pandemic funds to impose a moral judgment on certain lawful businesses.
Moheny runs an array of clubs and noted that this is an $8 billion industry that includes thousands of strip clubs nationwide with more than 57,000 employees. This is discrimination based on objections over the morality of a legal business supported by consenting adults. As many on this blog know, I have been a critic for decades of morality legislation that seeks to impose the majority’s view of proper morals on those who do not share those morals.
This is only the latest such ruling against the Administration, which deserves to lose each and every appeal. What is interesting in this decision is the discussion of Chevron. I have repeatedly testified on the Chevron doctrine and my objections to its expansive interpretation. (e.g,. here and here). The court “concludes under step one of Chevron that the PPP Ineligibility Rule conflicts with the PPP and is therefore invalid.”
While the court concludes that it is not necessary to address the underlying constitutional claims (under the doctrine of avoidance), Judge Leitman rejects the threshold claims against this industry:
“Defendants are correct that it would ordinarily be absurd to conclude that Congress meant to provide financial assistance to, among others, certain sexually oriented businesses and private clubs that discriminate. But these are no ordinary times, and the PPP is no ordinary legislation. The COVID-19 pandemic has decimated the country’s economy, and the PPP is an unprecedented effort to undo that financial ruin. More importantly, the PPP is an effort to protect American workers – as noted above, it is located within a Title of the CARES Act named the “Keeping American Workers Paid and Employed Act” – and Congress could rationally have concluded that those workers need protection no matter the line of business in which they work. From this perspective, Congress’s decision to expand funding to previously ineligible businesses is not an endorsement or approval of those businesses.”
The opinion is DV Diamond Club of Flint LLC et al v U.S. Small Business Administration et al, U.S. District Court, Eastern District of Michigan, No. 20-10899. It is a solid and detached analysis that reaches the correct decision — a decision consistent with similar rulings across the country.
Here is the opinion: Diamond Club v. United States Small Business Administration