​​​​​​​Lobbyists Take Fight Over Virus Relief Ban To DC Circ.

By Khorri Atkinson
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Law360 (April 22, 2020, 9:56 PM EDT) -- A trade association of political consultants took their bid demanding access to COVID-19 relief loans to the D.C. Circuit on Wednesday, less than a day after a federal judge refused to force the Trump administration to allow them to tap into a multibillion-dollar loan program.

The American Association of Political Consultants, which lost its request for a temporary restraining order and preliminary injunction against the U.S. Small Business Administration, offered no details of the appeal in a one-page notice filed with the appellate court.

Holtzman Vogel Josefiak Torchinsky PLLC partner Jason Torchinsky, an AAPC attorney, told Law360 in an email that he's hoping the appeals court will grant an expedited review and that "small businesses cannot wait while the government plays favorites."

An SBA spokesperson told Law360 the agency doesn't comment on pending litigation. 

The AAPC, which represents Democratic and Republican media consultants, pollsters and lobbyists, sued the SBA last week, alleging that the agency violated its members' free speech rights and equal protection principles under the Fifth Amendment's due process clause. The SBA regulation being challenged prohibits businesses that "primarily engaged in political or lobbying activities" from tapping into the $349 billion Paycheck Protection Program, which is included in the $2 trillion Coronavirus Aid, Relief and Economic Security, or CARES, Act President Donald Trump signed into law late last month.

Holtzman Vogel partner Jonathan Lienhard, who argued for the association in a teleconference hearing Monday, said firms that are part of the AAPC have been forced to lay off workers, that at least one agency was denied a loan and that his clients need financial relief to help them pay expenses, including salary, mortgage and rent. Lienhard insisted that members should not be forced to forego their fundamental constitutional rights in order to obtain a loan.

But U.S. District Judge Royce C. Lamberth rejected the association's argument in a Tuesday night order, saying the SBA regulation in question had never been challenged on these grounds in the 24 years it has been on the books. The coronavirus pandemic, not the federal government, has directly or indirectly created the financial obstacles which may threaten AAPC members' ability to engage in future political speech, the judge wrote.

Judge Lamberth reasoned that when Congress passed the CARES Act, it chose not to alter the restrictions set forth in the contested regulation. Furthermore, the executive and legislative branches responded to the COVID-19 crisis "with this virtually unanimous legislation" and "for the judicial branch to intervene now and issue the requested injunction under these circumstances would not be in the public interest," the judge said. 

"Suddenly finding a constitutional right in a twenty-four-year-old regulation that has never even been litigated before and that was not suddenly enacted to deal with this crisis is something that the judicial branch should not do," the judge added.

A major point of tension in the case is whether the loan program is a form of government subsidy that therefore makes it illegal for AAPC members to access. The association insists it is not, noting that loan recipients are required to pay a 1% interest rate. But Judge Lamberth agreed with the government's reasoning that the loan is a subsidy because the expenses AAPC members are seeking to cover qualify for loan forgiveness under the CARES Act.

On this argument, Judge Lambert said he's bound by the U.S. Supreme Court's 1983 holding in Regan v. Taxation With Representation of Washington , which establishes that the government does not subsidize nonprofit organizations seeking tax-exempt status and while engaging in lobbying efforts to influence legislation. The high court later reaffirmed that holding in its 6-3 2009 decision in Ysursa v. Pocatello Education Association , the judge added. 

At the D.C. Circuit, a major test would be whether federal courts can impose an injunction against the SBA. The defendants argued in court filings that the association is unlikely to succeed on the merits because a section of the Small Business Act restricts the availability of injunctive relief against the agency. Circuit courts remain divided on how to interpret this statute, and the D.C. Circuit has yet to take a clear position on this issue, Judge Lamberth wrote Tuesday.

According to the judge, the D.C. Circuit's 2012 ruling in ELK Associates Funding Corp. v. U. S. Small Business Administration suggested that at a minimum, injunctive relief is available when the SBA exceeds its statutory authority. Judge Lamberth did not examine this issue because he said the association is unlikely to succeed on the merits of its constitutional challenges.

Nonetheless, the judge emphasized that his ruling isn't undercutting the financial hardships and "detrimental effects of this pandemic" that political consultants, lobbyists and their staff are experiencing as coronavirus cases continue to grow nationwide.

"These are trying times," the judge contended. "But the court is bound by existing precedent and cannot enjoin a constitutionally valid regulation on account of financial hardship."

The SBA faces a similar challenge in 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.

The appeal is American Association of Political Consultants et al. v. U.S. Small Business Administration et al., case number 20-5101, in the U.S. Court of Appeals for the District of Columbia Circuit. The underlying 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.

--Editing by Breda Lund.

For a reprint of this article, please contact reprints@law360.com.

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