By Khorri Atkinson

Law360, Washington (April 20, 2020, 10:31 PM EDT) -- A trade association of political consultants' demand for immediate access to COVID-19 relief loans appears to be on shaky ground after a D.C. federal judge suggested Monday the organization had not demonstrated irreparable harm attributable to the government's ban on assisting lobbyists. 

U.S. District Judge Royce C. Lamberth asserted that view during a brief afternoon teleconference hearing on the American Association of Political Consultants' motion for a temporary restraining order against the Small Business Administration alleging that the agency violated the First and Fifth Amendment and rights of its members, including Democrat and Republican media consultants, pollsters and lobbyists.

According to the AAPC's suit filed last week, President Donald Trump's administration is illegally barring businesses that "primarily engaged in political or lobbying activities" from benefiting from the $349 billion Paycheck Protection Program included in the $2 trillion Coronavirus Aid, Relief and Economic Security, or CARES, Act, which Trump signed into law late last month. 

Judge Lamberth said the government regulation at issue in the case had "never been challenged" in the 25 years it has been on the books. He also said "I'm not sure I understand" whether the association had established an injury in order to seek relief from the court. 

Holtzman Vogel Josefiak Torchinsky PLLC partner Jonathan Lienhard, who argued for the association, responded that firms that are part of the group have been forced to lay off workers, that at least one agency was denied a loan and that the firms need financial relief to help them pay salary, mortgage and rent.

"You've got companies that face real economic harm and real economic uncertainty, and should, therefore, be allowed to apply for this loan," Lienhard argued. "The fact that they meet the basic requirements for this program, but for the fact they sell politicians ideas instead of selling widgets, constitutes the demonstration of harm necessary."

Until the night of April 2, hours before the loan application opened and the SBA issued an interim final rule, the AACP did not expect the government would still enforce the regulation even though Congress said "any business should be able to apply," Lienhard added. 

Lienhard later challenged the government's argument that the loan is a form of government subsidy that therefore makes it illegal for AACP members to access. He insisted that "a loan is not a subsidy" and that members' lobbying and political activity are not being subsidized, but rather that they need help pay mortgage, rent and salary. He also noted that loan recipients are required to pay a 1% interest rate.

Judge Lamberth was not swayed by Lienhard's argument that the loan is not a subsidy. He said that notion "is not totally accurate" because the government plans to forgive most, if not all, of the loans.

But Lienhard rebutted that forgiveness is not guaranteed and that the government had not established clear guidelines on how a forgiveness program would work. 

Judge Lamberth did not challenge that answer, but his tone and line of questioning throughout the hearing suggested he agreed with the government. The judge asked government attorney David Morrell no questions and said he aimed to issue a ruling by Tuesday.

During oral arguments, Morrell reasoned that the U.S. Supreme Court's 1983 ruling in Regan v. Taxation With Representation of Washington establishes that the First Amendment does not compel the administration to subsidize lobbying or speech of any other kind that the government does not wish to promote. The high court reaffirmed that holding in its 6-3 2009 decision in Ysursa v. Pocatello Education Association , Morell added. 

In Ysursa, the Supreme Court upheld an Idaho state law that blocked school districts and local government employers from deducting a portion of union members' paychecks to fund union political efforts. The justices reversed a district court's ruling that found the law in violation of the unions' right to free speech.

The SBA faces a similar challenge in a Michigan federal court, which is set to hear a TRO request next week. That case was bought earlier this month by DV Diamond Club of Flint LLC, a strip club that said the government unlawfully denied it a loan because of an SBA regulation barring relief for establishments that have "live performances of a prurient sexual nature."

The American Association of Political Consultants is represented by Jonathan Lienhard, Shawn Sheehy and Jason Torchinsky of Holtzman Vogel Josefiak Torchinsky PLLC and Joseph Sandler of Sandler Reiff Lamb Rosenstein & Birkenstock.

The Small Business Administration is represented by David Morrell and James Gilligan of the U.S. Department of Justice's Civil Division, Federal Programs Branch.

The case is American Association of Political Consultants et al. v. U.S. Small Business Administration et al., case number 1:20-cv-00970, in the U.S. District Court for the District of Columbia.

--Additional reporting by Ryan Davis. Editing by Peter Rozovsky.

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