By Lauraann Wood

Law360 (May 11, 2020, 9:19 PM EDT) -- A gentleman's club claimed in Illinois federal court Friday that its application for a Paycheck Protection Program loan has been unlawfully delayed because the U.S. Small Business Administration has misinterpreted the nature of its business.

Chicago-based Admiral Theatre Inc. said in its suit that the SBA's regulations and operating procedures surrounding its PPP program, which was enacted to provide businesses relief amid the ongoing COVID-19 pandemic, conflict with the text outlining the program itself and violate its and its workers' First and Fifth Amendment rights.

Admiral claimed that it believes its application for PPP funds has been wrongfully delayed out of a misguided belief that it offers the type of "prurient" entertainment that is ineligible for relief under the program. Prurient interests are "shameful or morbid," and Admiral provides entertainment that "is designed to appeal to a healthy interest in basic human sexuality" and in full compliance with governing laws and ordinances, its suit said.

The club is asking the court to find the program's adult business restriction unconstitutional, temporarily restrain SBA lending banks from enforcing it, declare that the agency's use of the word "prurient" holds the same meaning as earlier courts that have construed the word, and award it damages and other costs.

Since the SBA is fighting two similar lawsuits and the $349 billion that funded the program a second time has a limited availability, Admiral worries the administration "will cause its application to be delayed until all PPP loan funds are exhausted, rendering any pending or later request for judicial relief to be moot," the suit said.

The club has been closed for business since Illinois Gov. J.B. Pritzker and Chicago Mayor Lori Lightfoot entered orders requiring nonessential companies to halt operations in light of the coronavirus pandemic, according to its suit. Admiral submitted its PPP loan application to Belmont Bank & Trust Co. on April 6 and then spent several days "trying to inspire" the bank to submit its application to the SBA, the suit said.

After the club inquired about the application's status, Belmont Bank sent Admiral a letter on May 4 stating SBA General Counsel Bill Gery had made a determination regarding the club's loan eligibility and anticipated responding to the request by April 24, but that he hadn't because he was still waiting for an eligibility determination from his superior, the suit said.

Other establishments offering similar types of exotic, topless or fully nude entertainment have been rejected for PPP funds because their banks believed they present live performances of a prurient nature, according to Admiral's suit. The SBA is defending at least two other lawsuits over the issue in Michigan and Wisconsin federal courts and has "vigorously opposed all relief" requested in those suits, the club said.

In Wisconsin, the SBA has already requested a stay while it appeals a preliminary injunction order, Admiral said. But given the pressures and workload that have fallen on the SBA under the Coronavirus Aid, Relief, and Economic Security Act and amid the pandemic, Admiral "reasonably fears that no agency decision will be forthcoming while PPP funds remain, or that the SBA will decide that [it] is not eligible when there is no time for them to obtain relief while PPP funds still remain," according to its suit.

Representatives for Admiral and the SBA did not immediately respond Monday to a request for comment.

Admiral is represented by Luke Lirot of Luke Charles Lirot PA and J.D. Obenberger of J.D. Obenberger & Associates.

Counsel information for the SBA could not immediately be determined Monday.

The case is Admiral Theatre Inc. v. U.S. Small Business Administration et al., case number 1:20-cv-02807, in the U.S. District Court for the Northern District of Illinois.

--Editing by Bruce Goldman.

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