Exhibit H — DV Diamond Club v. SBA (Dkt. 11-9, E.D. Mich.)
Summary
Exhibit H in DV Diamond Club of Flint, LLC v. U.S. Small Business Administration, Case No. 4:20-cv-10899, in the U.S. District Court for the Eastern District of Michigan, filed April 17, 2020 as ECF No. 11-9. The 12-page exhibit contains a Paycheck Protection Program Borrower Application Form, SBA Form 2483 (04/20), with its certifications and addendum forms. Addendum A lists businesses by number of employees, with 488 total employees. The exhibit also includes a letter dated April 6, 2020 from attorney Brad Shafer of Shafer & Associates, P.C., addressed "To whom it may concern." The letter states that an SBA regulation could be construed, in Shafer's view incorrectly, to prohibit SBA loans to all "adult" businesses, and it lists Shafer's First Amendment practice and publications.
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“Exhibit H — DV Diamond Club v. SBA (Dkt. 11-9, E.D. Mich.).”
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Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.437 Page 1 of 12
DocuSign Envelope ID: 18F577F9-8A89-4CDC-816E-087C4FEE4861
Paycheck Protection Program O~IB Control No.: 32•15-0•107
Borrower Application Form Expiration Date: 09/30/2020
Check One: □ Sole proprietor □ Partnership O C-Corp O S-Corp !I LLC DBA or Tradename if Applicable
0 Independent contractor O Eligible self'..employed individual
0 501(c)(3) nonprofit O 501(c)(l9) veterans organization
0 Tribal business (sec. 31 (b)(2)(C) of Small Business Act) 0 Other
Average Monthly Payroll: x 2.5 + EIDL, Net of
Advance (if Applicable)
E uals Loan Re uest:
Purpose of the loan
(select more than one): @Payroll ~Lease/ Mortgage Interest l;:iaUtilities Oothcr (explain):
Applicant Ownership
List all owners of20% or more of the equity of the Applicant. Attach a separate sheet if necessary.
'
I I
I - - - ____ _ _ _ _ J /
l(quesrions (I) or (2) below are answered ''l'es. "rhe loan will not be approved.
Question Yes No
I. Is the Applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible,
voluntarily excluded from pmticipution in this transaction by any Federal department or agency, or presently involved in any
bankrnptcy?
2. Has the Applicant. any owner oflhe Applicant. or any business owned or controlled by any of them, ever obtained a direct or
guaranteed loan from SBA or any other Federal agency that is cun-enlly delinquent or has defaulted in lhe last 7 years and
caused a loss lo the govcmmcnl?
3. Is the Applicant or any owner of the Applicant an owner of any other business, or have common management with, any other
business? Jfyes, list all such businesses and describe the relationship on a separate sheet identified as addendum A.
4. Has the Applicant received an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes,
provide details on a separate sheet identified as addendum B.
/(questions (5) or (6) are answered 'Tes." the loan will not be approved.
Question Yes No
5. ls the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject
lo an indictment, criminal information, arraignment, or other means by which fo1mal criminal charges are
brought in any jurisdiction, or presently incarcerated. or on probation or parole?
□
Initial here to confirm your response to question 5-+
6. Within the last 5 years, for any felony, has the Applicant (if an individual) or any owner of the Applicant 1)
□
been convicted; 2) pleaded guilty: 3) pleaded nolo conlenderc; 4) been placed on pretrial diversion; or 5) been
placed on any fom1 of parole or probation (including probation before judgment)?
Initial here to confirm your response to question 6->
7.
□
Is the United States the principal place of residence for all employees of the Applicant included in the
Applicant's payroll calculation above?
8. Is the Applicant a franchise that is listed in the SBA 's Franchise Directory?
□EXHIBIT H
Page 1
SBA form 2483 (04/20)
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.438 Page 2 of 12
DocuSign Envelope ID: 18F577F9-8A89-4CDC-816E-087C4FEE4B61
Paycheck Protection Program
Borrower Application Form
By Signing Helow, You Make the Following Representations, Authorizations, 11nd Certifications
CERTIFICATIONS AND AUTHORIZATIONS
I certify that:
• I have read the statements included in this form, including the Statements Required by Law and Executive Orders, and I understand them.
• The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the
Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavi111s
Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Ruic).
• The Applicant (I) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more
than the greater of 500 or employees or, if applicable, the size standard in number of employees established by the SBA in 13
C.F.R. 121.201 for the Applicant's industry.
• I will comply, whenever applicable, with the civil rights and other limitations in this form.
• All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the
Paycheck Protection Program Rule.
• To the extent feasible, I will purchase only American-made equipment and products.
• The Applicant is not engaged in any activity that is illegal under federal, state or local law.
• Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was
for a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.
For Applicants who arc individuals: I authorize the SBA to request criminal record information about me from criminal justice agencies for the
purpose of detennining my eligibility for programs authorized by the Small Business Act, as amended.
CERTIFICATIONS
The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:
~ The Ap1>licant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent
contractors, as reported on Form(s) I 099-MISC.
~A~ Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.
-1J:Jo The l\inds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments,
us specified under the Paycheck Protection Program Ruic; I understand that if the funds are knowingly used for unauthorized purposes,
the federal government may hold me legally liable, such as for charges of fraud.
The Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant's
payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities
for the eight-week period following this loan.
I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments,
covered rent payments, and covered utilities, and not more than 25% of the forgiven amount may be for non-payroll costs.
During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another
loan under the Paycheck Protection Program.
✓-~~vJ··" I further certify that the information provided in this application and the information provided in all supporting documents and
forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan
from SBA is punishable under the law, including under 18 USC I 00 I and 3571 by imprisonment of not more than five years and/or a
fine ofup lo $250,000; under 15 USC 645 by imprisonment ofnot more than two years and/or a fine ofnot more than $5,000; and, if
submitted to a federally insured institution, under 18 USC IO 14 by imprisonment of not more than thirty years and/or a tine of not
more than $1,000,000.
I acknowledge that the lender will confirm the eligible loan amoulll using required documents submitted. I understand.
acknowledge and agree that the Lender can share any tax information that I have provided with SBA's authorized representatives,
including authorized representatives or the SBA Oftice of Inspector General, for the purpose of compliance with SBA Loan
reviews.
Date I 1
Print Name Title
CPA
EXHIBIT H
2 Page 2
SBA Form 2483 (04/20)
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20
DocuSign Envelope ID: 18F577F9-8A89-4CDC-816E-087C4FEE4861
PageID.439 Page 3 of 12
Paycheck Protection Program
Addendum A - Certification Regarding Affiliation
Below, list and describe the relationship for any other businesses the Applicant or any owner of the Applicant has:
1) ownership in AND/OR
2) common management with
Business Name Owner Name - % Owned - Relationship (i.e. title) - No. of Employees
- - - -%- - - - - - - - - -
_ _ _ _ %- _ _ _ _ _ _ _ __
_ _ _ _ %- _ _ _ _ _ _ _ __
- - - -%- - - - - - - - - -
_ _ _ _%- _ _ _ _ _ _ _ __
_ _ _ _%- _ _ _ _ _ _ _ __
_ _ _ _ %- _________
I certify that I have disclosed the names and relationships of any other business the Applicant or any owner of the Applicant has ownership in or
common management with.
Date 7 .
Print Name Title
EXHIBIT H
Page 3
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.440 Page 4 of 12
ADDENDUM A
OWNS MORE THAN 50%
#OF
***CORPORATE NAME*** OWNERSHIP INFORMATION EMPLOYEES
20
14
61
17
17
52
25
37
133
46
3
10
50
3
Total Employees 488
EXHIBIT H
Page 4
Page 1 of 1
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.441 Page 5 of 12
DocuSign Envelope ID: 18F577F9-8A89-4CDC-816E-087C4FEE4B61
Paycheck Protection Program
Addendum B - Economic Injury Disaster Loan (EIDL)
Provide details below about any SBA Economic Injury Disaster Loan received between January 31, 2020
and April 3, 2020:
Applicant Business: -D \J U ~G__r<\010ci Cl ~'o d't ~ / I
1. Note Date:
2. Loan Amount:
3. Use of Proceeds:
4. Have you received an "advance" under an EIDL COVID-19 loan? Yes: _ _ No: _ _
► If Yes, how much was the "advance"? _ _ _ _ _ _ _ _ _ _ _ _ __
1 f
Signature-'J)'f Own~r of Applicant Business Date
Print Name Title
EXHIBIT H
Page 5
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.442 Page 6 of 12
OocuSign Envelope ID: 18F577F9-8A89-4COC-816E-087C4FEE4861
Paycheck Protection Program
Addendum C - Additional Owners
If applicable, list additional owners of 20% or more of the equity of the Applicant that did not fit an the
first page of the application.
Applicant Business: D\) 1) I /
Owner-
Owner Name Title ship% TIN (EIN, SSN) Address
11UA
I
I
Date
Print Name Title
eA
EXHIBIT H
Page 6
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.443 Page 7 of 12
DocuSign Envelope ID: 18F577F9-8A89-4CDC-816E-087C4FEE4861
Paycheck Protection Program
Addendum D - Certification
~ - - 1 certify that Applicant was in operation on February 15, 2020 and had employees for whom
the Applicant paid salaries and payroll taxes or paid independent contractors, as reported on
Form(s) 1099-MISC.
I certify that current economic uncertainty makes this loan request necessary to support the
ongoing operations of the Applicant.
fi l )'if/
1 i
/ ),, '/ 1 I certify that the funds will be used to retain workers and maintain payroll or make mortgage
interest payments, lease payments, and utility payments.
/\ J\d.,.-,,..
/,' /'> I certify that the Applicant has not received another Paycheck Protection Program loan.
~-~ I certify that Applicant (select one):
_ _ Is an independent contractor, eligible self-employed individual, or sole proprietor.
~Employs no more than the greater of 500 or employees or, if applicable, meets the
size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for
the Applicant's industry.
/_/_\_{_I certify that the Applicant is eligible under the Paycheck Protection Program Rule . .See CCT"Vl.Che.c\
r 1
Signature t>f Owner of Applicant Business Date
Print Name Title
EXHIBIT H
Page 7
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.444 Page 8 of 12
LAW OFFICES
SHAFER & ASSOCIATES, P.C.
A PROFESSIONAL CORPORATION
3800 CAPITAL CITY BLVD., SUITE 2
LANSING, MI 48906
E-MAIL info@bradshaferlaw.com
BRADLEY J. SHAFER PHONE: 517-886-6560 MATTHEW J. HOFFER
ALSO Ml'MBl:R. i\/, 13/\R FAX: 51 7-886-6565 Mall@bradshafcrla\,·.com
Il rad !u;bradsha fer! a\\'. co 111
To whom it may concern:
The purpose of this letter is to briefly discuss one aspect of the Payroll Protection
Program ("PPP") loan application process as it is currently being administered under the recently
enacted CARES Act; that being the particular provision found in 13 C.F.R. § 120.1 l0(p), that
could be construed (l believe incorrectly) to prohibit SBA loans to any and all "adult" businesses
under the belief that they present entertainment of a "prurient sexual nature."
The term "prurient" is one part, of one element, of the three-prong legal test of
"obscenity," which is the topic of my comments below. But before I discuss that in detail, I'd
like to first share with you some of my credentials so that you can make your own evaluation of
my qualifications to speak on this topic.
I have been an attorney since 1984 and am licensed in both Michigan and Arizona. I am
also fully admitted to practice law before, and has actually practiced in, the United States District
Courts for both the Eastern and Western Districts of Michigan, for both the Southern and Central
Districts of Illinois, the Northern District of Indiana, the Western District of Texas, the Third,
Fourth, Sixth, Seventh, Eighth, and Ninth Circuits of the United States Court of Appeals, as well
as the United States Supreme Court.
My practice concentrates on two primary areas of the law: First Amendment (Free
Speech and expression) litigation -- which I believe to be particularly relevant to the subject of
this letter -- and labor law. I am a past President of the First Amendment Lawyers Association (a
national organization of trial lawyers who specialize in the protection of First Amendment rights)
and am Chairman Emeritus of that group, and was one of the attorneys in the Supreme Court
case of Barnes v. Glen Theatre, which established the constitutional protections of nude
performance dance entertainment.
Because of my qualifications regarding Free Speech and expression rights, I have also
received special permission to litigate and argue cases across the country in various federal and
state courts in California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky,
Missouri, North Carolina, Nevada, New Jersey, New York, Ohio, South Dakota, Tennessee,
Washington, and West Virginia.
EXHIBIT H
Page 8
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.445 Page 9 of 12
April 6, 2020
Page 2
Moreover, I am a published author on the topic of legal obscenity (again, relevant to the
topic here). Sec, for example, Shafer, Patent Offensiveness: The Black Hole of Miller, 10
Thomas M. Cooley Law Review 1, 1-69 (1993) (this is the most comprehensive law review
article ever published on this topic, and is particularly relevant to the issues I discuss below);
Shafer, Sex. Lies. and Videotape: In Critique of the Miller Test of Obscenity, 70 Michigan Bar
Journal No. 10, 1038-1045 (October 1991 ); Shafer, Jurisprudence of Doubt: Obsccnitv.
Indecency and Morality at the Dawn of the 21st Century, 84 Michigan Bar Journal No. 6, 22-26
(June 2005); Linz, Donncrstcin, Land, McCall, Scott, Shafer, Klein, and Lance, Estimating
Community Standards: The Use of Social Science Evidence in an Obscenity Prosecution, 55
Public Opinion Quarterly 1, 80-112 (Spring 1991 ); and Linz, Shafer, Donnerstcin, Land,
Gracsser, and McCall, Discrepancies Between the Legal Code and Community Standards for Sex
and Violence: An Empirical Challenge to Traditional Assumptions in Obscenity Law, 29 Law &
Society Review 1, 127-168 (1995).
That having been said and without getting into an esoteric analysis with full legal
citations, the most important thing I believe that I can impart to you is that the concept of
"prurience" has no legal recognition except as part of legal test of obscenity, which looks at
whether:
The average person, applying contemporary community standards, would find
that the work, taken as a whole, appeals to the prurient interest;
Applying contemporary community standards, the work depicts or describes, in a
patently offensive way, sexual conduct specifically defined by applicable state
law; and
A reasonable person would find that the work lacks senous literary, artistic,
political, or scientific value.
This comes from three Supreme Court cases: Miller v. California, Smith v. United States, and
Pope v. Illinois.
Moreover, the Supreme Court has been clear that all three test clements must be found to
exist before the expression can be found to be devoid of constitutional protection (the case of
Reno v. ACLU). Simply put, constitutional protections do not evaporate based on a finding of
just one of these test elements. In that regard, I would point out that the PPP regulations
distributed on Thursday even specifically state that all loans guaranteed by the SBA pursuant to
the CARES Act will be made consistent with constitutional protections, including the First
Amendment.
EXHIBIT H
Page 9
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.446 Page 10 of 12
April 6, 2020
Page 3
You should also understand that the Supreme Court has specifically defined "prurient
appeal." It means a ''shameful or morbid," and "unhealthy" interest in sex, as opposed to a
normal, healthy, interest in sex. This comes from two other Supreme Court decisions: Roth v.
United States and Brockett v. Spokane Arcades, with the Court noting in Brockett that
government cannot ban entertainment that, "taken as a whole, does no more than arouse 'good.
old fashioned, healthy' interest in sex." This definition certainly docs not encompass all "adult"
entertainment. And, the Supreme Court has been clear that mere nudity in-and-of-itself docs not
make an entertainment performance legally obscene.
With these fundamental legal concepts in mind, it should be clear that performance dance
entertainment, whether it be clothed, "topless," or even fully nude, does not satisfy these legal
precepts, and indeed there is absolutely no history here whatsoever of any performances being
charged with, let alone being convicted oi~ being legally obscene.
First, the performances at issue arc not legally obscene in that they do not satisfy the
three tests of obscenity (all of which arc constitutionally required, and there has never been even
an allegation that they do). Second, the performances at issue do not satisfy even the single
prong of being of a "prurient" sexual nature because they do not appeal to a "shameful or
morbid," and "unhealthy" interest in sex as specifically defined by the Supreme Court
particularly when applying the '·contemporary community standards" which must be done in
these legal circumstances.
Consequently, it is my opinion that the denial of a PPP loan based upon these regulatory
provisions (which are not found in the PPP, nor are they contained in the PPP loan applications
themselves) would be an unconstitutional action in-and-of itself.
As you arc aware, last Thursdays' regulations make clear that these loans arc to be issued
on a "first-come, first-served" basis. The wrongful denial of a PPP loan application based upon
the "prurient sexual nature" regulation (again, not adopted in the PPP itsel1) could then result in
irreparable harm both to the applying business and, even more importantly, its innocent
employees who arc engaged in a perfectly legal and indeed constitutionally protected --
occupation, if the loan funds arc exhausted before this matter can be rectified.
Finally, let me point out SBA Standard Operating Procedure, Lender Development
Company Loan Programs, Doc. No. SOP 50 10 5(J) (January 1, 2018), which states. at Section
15( c) thereof (p. 93 ), that in the event you have an applicant that "may have a business aspect of
a prurient sexual nature,'' you are to "submit your analysis and supporting documentation to the
SBA at PSMReview@sba.gov for an eligibility determination."
EXHIBIT H
Page 10
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.447 Page 11 of 12
April 6, 2020
Page 4
I'd be happy to discuss these matters in further detail with you and/or provide to you any
supporting materials that you may desire in order to verify my comments above. Should you
have any further questions. please feel free to call me currently on my cell at 517-285-5222 (I'm
home-bound right now because of the pandemic), or email me at brad@bradshaferlaw.com.
Thank you for your consideration in this matter.
Sincerely:
Brad Shafer
EXHIBIT H
Page 11
Case 4:20-cv-10899-MFL-DRG ECF No. 11-9 filed 04/17/20 PageID.448 Page 12 of 12
DocuSign Envelope ID: 18F577F9-BA89-4CDC-816E-087C4FEE4861
Paycheck Protection Program
Addendum E - Additional Information
Applicant Business:
1. Use of Proceeds:
Estimate the use of the Loan Proceeds requested (sum should equal requested loan amount). Enter "O" if
no Joan funds are going toward a certain purpose:
Payroll:
Lease/Mortgage Interest:
-
Utilities: _ _ _ _ _ _ _ _ _ _ _ _ __
Other( _ _ _ _ _ _ _ _ _ _ _ ): _ _ _ _ _ _ _ _ __
2. Business Description:
Please briefly describe the nature of your business:
h
3. Franchise Information:
Is the Applicant a franchise? Yes:
If yes, list the franchise: _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
I .
Date
Print Name Title
EXHIBIT H
Page 12
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