BUFFALO, N.Y.—The Pharoah’s Gentlemen’s Club of Buffalo plans on appealing a decision handed down Friday that rejected its contention its eligible for a Paycheck Protection Program loan.
On Friday, a federal judge said that Pharoah’s is unlikely to prove that the Small Business Administration’s exclusion of adult entertainment businesses from the PPP violates its right to equal protection and freedom of speech.
In his decision, U.S. District Judge Lawrence J. Vilardo denied the strip club’s motion for a preliminary injunction.
In the suit, Pharoah’s operator, Peter Gerace, argued that his business is a form of protected free speech and that the SBA’s restrictions against businesses presenting "live performances of a prurient sexual nature" are unconstitutional.
Gerace told AVN that Pharoah’s sought $340,000 to help cover expenses for 150 workers during the COVID-19 shutdown, which began in early March.
The club, offering exotic dancers in pasties and panties, is the largest such adult venue from Buffalo to New York City, said Gerace, who has operated it for 15 years.
“We tried submitting an application to the SBA, which later referred us to regional and commercial banks, like Five Star Bank. We were denied,” Gerace said. “American Express wouldn’t even take our application.”
After the runaround, Gerace sought legal counsel, filled out additional applications, and in June filed the lawsuit against the SBA.
“We are going to appeal this judge’s decision to the 2nd U.S. Circuit Court of Appeals,” Gerace said in an interview today. “We have been discriminated against. We are hardworking individuals."
Vilardo, in his ruling disseminated Friday, said that federal courts have gone both ways on whether the SBA’s eligibility requirements for a PPP loan contradict the plain text of the CARES Act.
He noted that at least two other federal courts have found the SBA’s exclusion of strip clubs is contrary to what Congress intended when it passed the law creating the loan program.
“At least two courts have held that the SBA’s exclusion of businesses providing entertainment of a “prurient sexual nature” is contrary to Congress’s intent in passing the CARES Act,” Vilardo wrote.
“But other courts, including one in this district, have recently held that the SBA did not exceed its authority in barring certain organizations from obtaining PPP loans.”
The federal court judge said that nothing in the CARES Act requires that adult businesses be eligible for participation in the PPP, which are designed to help employers cover payroll, rent and other expenses during the COVID-19 outbreak.
“Stated differently, it is more likely that the government will succeed on its argument the PPP loans are subsidies, and as a result, that the SBA may decide what types of speech it is willing to subsidize,” Vilardo wrote.
Pharoah’s suit against the SBA follows a Homeland Security raid of the club in December. The raid was reportedly tied to the indictment of a former DEA agent accused of protecting drug dealers and taking bribes.
