Eatery cannot block COVID-19 loan priority for minorities

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Law360 (May 19, 2021, 9:31 p.m. EDT) – A federal judge in Tennessee on Wednesday rejected a white restaurant owner’s offer to prevent the Small Business Administration from paying COVID-19-related repairs to restaurant owners unless the agency does so regardless of the race or gender of the applicant.

U.S. District Judge Travis R. McDonough ruled that Antonio Vitolo, owner of Jake’s Bar and Grill LLC, could not get a temporary restraining order because he failed to rebut the government showing that he had a compelling interest in ending the effects of historic discrimination. . As a result, said the judge, he did not demonstrate a likelihood of success on the merits.

Congress has reviewed evidence showing that an initial government response to the pandemic – Paycheck Protection Program loans – failed disproportionately to reach minority-owned businesses, the judge said. McDonough. So when, in March, under the American Rescue Plan Act of 2021, Congress created a $ 28.6 billion restaurant revitalization fund, it also chose to give preference, in certain cases, to companies owned by women or by those which are “socially and economically disadvantaged”.

Vitolo, who requested $ 104,590.20 from the fund, argued in his complaint filed last week that the practice of prioritizing certain groups violated the equal protection clause and due process clause of the US Constitution by impermissibly granting benefits based on race and gender.

He sought a temporary restraining order that would prevent the SBA from paying its RRF rewards unless it does so in a way that ignores race and gender, a temporary injunction that would force the SBA to process claims in the order they are received, regardless of race and sex; a declaratory judgment that the SBA’s practices are unconstitutional; and a permanent injunction against the practice.

But on Wednesday, Judge McDonough said Vitolo had not cleaned up the bar for his temporary relief, believing the restaurant owner had shown no chance of success. Congress has considered the evidence that the PPP has failed to reach minority-owned businesses because past systems of discrimination resulted in a current lack of relationships between these businesses and banks, he said. note.

“This same phenomenon pushed minority-owned businesses to enter the pandemic with more financial insecurity, and therefore falter at disproportionately higher rates as the pandemic unfolded,” the judge said. “The government has a compelling interest in remedying the current effects of historical discrimination on these minority-owned businesses, especially as the PPP has disproportionately failed these businesses due to factors clearly linked to this history. . “

The government tried a racially neutral approach with the PPP, the judge noted, and concluded that it had not helped minority-owned businesses equally. And lawmakers have also looked at the gender-related evidence, the judge said.

“Congress had before it evidence showing that women-owned businesses suffered from historic discrimination that put them at greater risk of an economic shock like COVID-19, and that they benefited less from early programs. federal COVID-19 relief, ”he said.

Representatives for the parties did not immediately respond to requests for comment on Wednesday.

Vitolo is represented by the Wisconsin Institute for Law & Liberty.

The government is represented by Alexandra Rachel Saslaw of the United States Department of Justice, Civil Division, Federal Programs Branch.

The case is Vitolo et al. c.Guzman, case number 3: 21-cv-00176, in the United States District Court for the Eastern District of Tennessee.

– Edited by Michael Watanabe.

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