Warning that some political consulting firms are in “dire need of an infusion of funds” given the fallout from the COVID-19 pandemic, an industry group has turned to the courts for relief.
The American Association of Political Consultants (AAPC) has sued the Small Business Administration to get an emergency injunction to stop it from denying consulting firms access to loans available through the SBA’s Paycheck Protection Program (PPP) on the basis of their “political or lobbying activities.”
“There is a long-standing SBA rule that says that businesses primarily engaged in political or lobbying activity are ineligible [for loans],” Rose Kapolczynski, president of the AAPC, told C&E. “Congress in the CARES Act said all business concerns are eligible, but the SBA has decided to use their old 7(a) loans ineligibility standard for the CARES Act Paycheck Protection Program … We just want political consultants to be treated like every other small business. It’s about fairness and freedom of speech.”
The case will get its first hearing in the U.S. District Court for the District of Columbia on April 20, according to Kapolczynski.
Republican campaign law attorney Jason Torchinsky, who serves as the AAPC’s general counsel, framed the case as a First Amendment issue.
"The courts have ruled repeatedly that government aid cannot be tied to restrictions on free speech,” Torchinsky said in a statement. “The lawsuit merely asks SBA to provide our members with the same access to the Paycheck Protection Program as every other small business in America."
While Torchinsky is the lead attorney for the AAPC, he’s being supported by Democratic campaign finance and election law attorneys Joe Sandler and Neil Reiff of Sandler Reiff Lamb Rosenstein & Birkenstock, P.C. The suit names the SBA and its administrator, Jovita Carranza.
The AAPC became aware of the SBA’s loan restriction before the PPP was launched on April 3. But it waited until the SBA announced its rules for the PPP loans to see if consulting firms would be excluded from its funds. Once those rules were published, it decided to proceed with a lawsuit, according to Kapolczynski.
Since the rules were unveiled, the SBA has made some changes, including clarifying that faith-based organizations could participate in the PPP. And prior to that, the AAPC’s suit notes that Congress, through the CARES Act, had allowed some entities previously barred from receiving loans to “participate in the PPP” including veterans groups and tribal businesses.
Still, political consulting firms remain some of those excused from the program.
“If you’ve had a felony or are incarcerated, you’re excluded, and strip clubs, and us,” said Kapolczynski.
Now, the impact of the economic downturn from the novel coronavirus has been uneven in the consulting industry. Digital firms are seeing an increase in business, but event production, signature gathering, field, and fundraising consultants are taking a hit.
“There’s so much uncertainty around political campaigning right now,” said Kapolczynski. “But the entire political consulting industry could be affected if the recession that we’re teetering on the edge of right now is as bad as people expect. That could mean that there is much less money available for campaigns and that will ripple through the industry. That will mean less direct mail, less television, fewer staff on campaigns.
“The point [of the PPP is] to keep the economy from collapsing and getting it restarted as quickly as possible so every business should be helped.”
The AAPC is asking for an emergency injunction because the SBA “has already begun administering loans” through the PPP on a “first-come, first served” basis, according to its court filings: “Plaintiffs bring this suit on an emergency basis because time is of the essence.”