A recent coronavirus lawsuit claims strip clubs are being discriminated against and denied small business relief during COVID-19 closures.

The coronavirus lawsuit was filed by the DV Diamond Club of Flint, a company which operates two dozen strip clubs in Michigan, Nevada, Louisiana, Illinois, Florida, Oklahoma, and California.

After Michigan Governor Gretchen Whitmer issued a shelter in place order to slow the spread of COVID-19, the company’s locations in the state were forced to close until April 30.

Like many other businesses, DV Diamond Club reportedly has an uncertain future due to the financial hardship associated with this pandemic.

When the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed, the $349 billion Paycheck Protection Program was introduced.

This program aims to protect small businesses, nonprofits, and other organizations from job loss and financial injury during the widespread coronavirus closures.

However, according to the COVID-19 lawsuit, low interest business loans from the program are being denied to companies that provide services or performances of a “sexual” nature.

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According to DV Diamond Club and its director Jason Mahoney, the U.S. Small Business Administration discriminates against the $8 billion strip club industry despite being affected by the COVID-19 outbreak.

Mahoney told The Detroit News that the pandemic hit the strip club industry after five years of incredible growth. Despite how successful Mahoney’s empire was before the pandemic, he says his company and others could be ruined without federal assistance.

“People we work with are part of our team, our family, so you start off by telling your family members that they’re out of a job and you’re not sure when they will get their jobs back,” Mahoney revealed. “You work all your life to build something up and in the blink of an eye you’re starting all over again.”

Mahoney reportedly filed for a loan with the program in an attempt to save his business from going under. However, despite DV Diamond Club being “fully qualified,” the coronavirus lawsuit predicts that the application will be “rejected or fatally delayed,” due to discrimination by the U.S. Small Business Administration.

“DV has learned that numerous other similar businesses, which presented non-obscene female performance dance entertainment of an ‘exotic,’ ‘topless’ and/or fully nude variety have had their applications for [Paycheck Protection Program] loans rejected by their [Small Business Administration] lending banks, or derailed, on their bank’s belief that the business is disqualified by the regulations,” the COVID-19 lawsuit argues.

“DV reasonably fears its application will suffer the same fate as the applications of these other businesses which have had their applications denied.”

According to the coronavirus lawsuit, the U.S. Small Business Administration regulations violate the First Amendment’s right to freedom of speech and the Fifth Amendment’s rights to occupational liberty.

As a result of these alleged violations, DV Diamond Club and other companies have suffered from financial ruin and other injuries.

The U.S. Small Business Administration has denied to comment on the pending coronavirus lawsuit. Instead, the regulator referenced their rule on the Paycheck Protection Program.

“[Small Business Administration] has determined that financing lawful activities of a prurient sexual nature is not in the public interest,” the Small Business Administration regulations note. “The lender must consider whether the nature and extent of the sexual component causes the business activity to be prurient.”

The coronavirus lawsuit also challenges these regulations, arguing that the rules are invalid.

According to the DV Diamond Club, the U.S. Small Business Administration’s “clarifications” are unlawful because the requirements under the law were already clear in finding that the plaintiff is eligible for relief.

“Because it is clear and unambiguous as to which businesses are eligible for [Paycheck Protection Program] loans under the CARES Act, including this Plaintiff, the [Small Business Administration] lacked authority to promulgate regulations with restricted or otherwise ‘clarified’ what businesses were eligible for [Paycheck Protection Program] Loans,” the coronavirus lawsuit argues.

The coronavirus lawsuit seeks a variety of relief including measures which would allow DV Diamond Club and other businesses to recover federal assistance from the coronavirus relief program.

The strip clubs are represented by Bradley J. Shafer and Matthew J. Hoffer of Shafer & Associates PC.

The Strip Club COVID-19 Lawsuit is DV Diamond Club of Flint LLC d/b/a Little Darlings v. United States Small Business Administration, et al., Case No. 4:20-cv-10899-MFL-DRG, in the U.S. District Court for the Eastern District of Michigan.

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