Philly’s Cheerleaders strip clubs are suing for access to federal bailout funds for restaurants and bars

Lap dances and social distancing don’t work together — nor, it seems, does the exotic dancing industry and the government agency charged with doling out billions in federal pandemic aid.

For the second time in two years, strip clubs are suing the Small Business Administration over their exclusion from the latest round of bailout funding. And a coalition of 10 “gentlemen’s establishments” — including peddlers of pole dances in Philadelphia, Allentown, and Gloucester City — say they are being unfairly denied financial relief due to SBA regulations barring grants to sexually “prurient” businesses.

In a lawsuit filed in federal court in Philadelphia earlier this month, lawyers for the clubs argue that it’s a fight they’ve already had — and won — when they previously took the agency to court over the $953 billion Paycheck Protection Program, claiming its rules infringed upon the clubs’ constitutional rights to free expression.

“It’s exasperating. It’s frustrating,” said Bradley J. Shafer, a lawyer representing the owners. “They’ve had some of the most devastating financial hits of any industry and they really can’t afford to file individual lawsuits all around the country each time this comes up.”

At issue in their latest suit is the $28.6 billion Restaurant Revitalization Fund created by the Biden administration’s American Rescue Plan Act and launched earlier this month. The program was designed to provide relief grants directly to struggling restaurants and bars whose bottom lines have been crippled by months of forced shutdowns or restrictions that require them to operate at limited capacity.

Like the PPP program before it, launched under the Trump administration, the guidelines for the new restaurant fund issued by the SBA state that those who sell “sexually oriented products or services” will not be considered.

Congress itself did not include such restrictions when it passed either program into law. Its origins, the SBA has argued in the earlier suits, date to regulations the agency adopted in 1994.

That year, Congress revised the administration’s enabling act to prohibit it from granting financial assistance to purveyors of “any product or service that has been determined to be obscene by a court of competent jurisdiction.”

In the nearly three decades since, the SBA has interpreted that to include businesses that make a significant portion of their profits from live performances of a “prurient sexual nature.”

The agency has defended its position in court, saying it has an obligation “to direct its limited resources and financial assistance to small businesses in ways which will best accomplish the SBA’s mission, serve its constituents, and serve the public interest.”

But while John Meehan — owner of two Cheerleaders Gentlemen’s Clubs in South Philadelphia and two others in Gloucester City and Pittsburgh, all four named as plaintiffs in the suit — acknowledges that the dancers who perform in his clubs provide sexually themed entertainment, he wouldn’t call it “prurient” or “obscene.”

The U.S. Supreme Court wouldn’t either. In a series of decisions between 1957 and 1985, the court specifically defined “prurient interest” as a matter of law, describing it as “shameful or morbid” and “unhealthy” interest in sex. Discussing a state statute that sought to ban “obscene” publications in one of those cases, the justices said government cannot prohibit entertainment that “taken as a whole, does no more than arouse ‘good, old fashioned, healthy interest in sex.’ ”

No one is discussing a post-pandemic ban on exotic dance clubs but the same principles apply, Shafer said Friday.

“All of the performances on the premises appeal to normal, healthy, sexual desires,” he wrote in the lawsuit.

Federal judges, too, have struggled with the SBA’s attempt to classify what is “prurient.”

In the host of similar lawsuits across the country over the PPP program — which offered loans that could be forgiven to businesses that kept their staffing levels stable during the pandemic — courts were nearly unanimous in deciding that the SBA’s definition of “prurient” was vague and its decision to exclude strip clubs infringed upon their First Amendment rights.

“The government has singled [strip clubs] out for unfavorable treatment based solely on the content of their speech,” U.S. District Judge Lynn Adelman, of Wisconsin, wrote in an opinion last year in one of the earliest cases challenging the PPP restrictions. And federal appellate courts that have reviewed decisions like it have almost all agreed.

According to an analysis by the Reuters news agency, dozens of strip clubs across the nation eventually were approved for between $12 million and $28 million worth of loans as of July of last year — saving a total of 2,548 jobs.

Meehan’s four clubs applied for and received PPP loans totaling roughly $634,000 after suing last year and are awaiting a decision on a second-round loan.

A restaurant fund grant could prove similarly lifesaving to his business, he said in his suit.

Since the pandemic hit, he was forced to shut down his clubs entirely for six months and has only been allowed to reopen at limited capacity since late summer. For awhile that meant figuring out how to set up an outdoor-only venue with pole dancing stages and igloo-like tents for private dances.

They’ve since been allowed to resume dancing inside. But a Restaurant Revitalization Fund grant would allow him to retain staff and pay for necessary cleaning, Shafer said Friday.

“Some of the plaintiffs may well fail if they don’t get that funding,” he said. “It’s just that simple. ... They haven’t operated at full capacity for 14 and 15 months in. There are very few businesses that can weather that storm.”

The SBA does not comment on pending litigation. U.S. District Judge Edward G. Smith has given the agency until July 2 to respond to the suit in court.

Staff writer Jacob Adelman contributed to this article.