Court rules against SBA minority preferences

The Cincinnati-based Sixth Circuit of Appeals ruled that a provision of President Biden’s American Rescue Plan Act, designed to grant preferences to minority-owned small-restaurant owners for COVID relief, are unconstitutional

The specific provision struck down was part of the law’s $29 billion Restaurant Revitalization Fund grant program for small, privately owned restaurants struggling to meet payroll and rent due to the COVID crisis.

The law grants priority status in filing for aid to restaurants that have 51 percent ownership or more by women, veterans and specific racial and ethnic groups. 

The court ruled that the COVID relief program violates the Fourteenth Amendment, which guarantees equal protection of the laws, because it effectively requires struggling businesses owned by white males or certain other ethnicities and nationalities to go to the back of the line.

The lawsuit was filed by the Wisconsin Institute for Law and Liberty, a nonprofit conservative law firm, on behalf of Jake’s Bar and Grill in Harriman, Tennessee. 

The bar is co-owned by Antonio Vitolo, who is white, and his wife, who is Hispanic.  If the wife’s ownership had been 51 percent instead of 50 percent, they would have qualified for preference. 

The decision by the three-judge panel was 2 to 1.  Circuit Judge Bernice Bouie Donald, who’s African-American, filed a dissenting opinion.  She said the record shows that minority groups have lagged behind in getting access to SBA loans and the law is a reasonable remedy.

“The majority’s reasoning suggests we live in a world in which centuries of intentional discrimination and oppression of racial minorities have been eradicated,” she wrote. “The majority’s reasoning suggests we live in a world in which the COVID-19 pandemic did not exacerbate the disparities enabled by those centuries of discrimination.”

Circuit Judge Amul Thapar, who is the son of an Asian Indian immigrant, said there are race-neutral remedies for racial disparities.  If minorities had trouble getting access to capital or credit during the pandemic, then give preferences to all who have been denied capital or credit, he wrote.  Or simply give priority to all who have not yet received coronavirus relief funds.

Judge Donald said this would be cumbersome to administer, and would delay getting needed funds to small businesses who need it most.

Judge Thapar also criticized the definition of which minority groups are eligible and which aren’t. 

As Glenn Greenwald noted, every minority group in the chart below is eligible for preferences under SBA rules, even though many are doing better than the average American or average white American.  Among those excluded are refugees from Afghanistan, Iraq and Syria, who most certainly have a lot of problems.

Hat tip to Glenn Greenwald. Click to enlarge.

I think Judge Thapar’s ruling is right and just, and has a good chance of being upheld by the Supreme Court.  If it is, conservative judges will have done President Biden a political favor by taking this divisive issue off the table for the 2022 elections.

LINKS

Appellate Court Strikes Down Racial and Gender Preferences in Biden’s COVID Relief Law by Glenn Greenwald.

Decision by the U.S. Court of Appeals in Antonia Vitolo and Jake’s Bar & Grill vs. Isabella Casillas Guzman, administrator of the Small Business Administration.

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