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Detroit — Federal officials were barred Monday from enforcing a regulation that had kept strip club owners from obtaining emergency loans during the COVID-19 outbreak.

U.S. District Judge Matthew Leitman issued a preliminary injunction barring the U.S. Small Business Administration from enforcing provisions that prohibited sexually oriented businesses from obtaining loans through the federal Paycheck Protection Program.

The provisions prohibited loans to businesses that provide live performances of a “prurient sexual nature." On Monday, Leitman said the SBA exceeded its authority and that Congress intended such businesses to be included among those eligible for emergency loans.

"There is a substantial risk that plaintiffs will lose their businesses if they do not obtain PPP loans now," Leitman wrote. 

The legal fight in federal court in Detroit was prompted by businessman Jason Mohney, who oversees a national strip club empire. His lawyer filed a lawsuit last month alleging the SBA regulation discriminates against an $8 billion industry that includes thousands of strip clubs nationwide and more than 57,000 employees. The discrimination was happening at a time when strip clubs have been shuttered during the COVID-19 global pandemic, according to the lawsuit. 

The lawsuit was filed on behalf of his Flint topless club, Little Darlings, against the U.S. Small Business Administration, SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin.

"We are pleased with the result," said Bradley Shafer, attorney for the Little Darlings club.

The judge's order comes amid a shrinking pool of money remaining to help businesses survive the COVID-19 pandemic. Approximately $125 billion is left from two rounds of funding that totaled $659 billion.

"We are concerned about the closing of the program impacting on the relief we have been able to obtain," Shafer added.

rsnell@detroitnews.com

Twitter: @robertsnellnews 

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