The restaurant owner in question, Antonio Vitolo, owns the Jake’s Bar and Grill in the small town of Harriman, Tennessee. He applied to receive federal relief from the $28.6 billion Restaurant Revitalization Fund that was created as part of the American Rescue Plan Act of 2021 – the coronavirus relief package that was pushed by the administration of President Joe Biden.
Vitolo’s case was against the SBA and its administrator, Isabella Castillas Guzman. Vitolo was represented by the Wisconsin Institute for Law & Liberty (WILL), a nonprofit conservative law firm. WILL first filed a case before the District Court for the Eastern District of Tennessee, but was rejected. WILL then brought the case before the appeals court.
After filing his request for relief funding, Vitolo was told that restaurants owned by women and people of color would be prioritized during the first 21 days of fund disbursement, which began on May 3.
Vitolo was later informed by the SBA that his restaurant was eligible for $104,590 in relief funds if there is still enough money remaining in the Restaurant Revitalization Fund after the 21 days of priority disbursement. Vitolo had no choice but to either wait for non-priority disbursement or sue the SBA.
Appeals court ruled that priority relief funding is discriminatory
In the majority opinion, Judge Amul Thapar wrote: “Under a regulation that predates the pandemic, the [Small Business Administration] presumes certain applicants are socially disadvantaged based solely on their race or ethnicity … If you are in one of these groups, the Small Business Administration assumes you qualify as socially disadvantaged. Indeed, the only way not to qualify is if someone comes forward ‘with credible evidence to the contrary.'”
Some of the groups that the SBA has presumptively listed as socially disadvantaged, and can therefore qualify for priority consideration, include African Americans, Hispanic Americans, Asian and Pacific Islander Americans and Native Americans.
Vitolo and his wife each own 50 percent of the restaurant. Vitolo is White and his wife is Hispanic. Because the restaurant was not 51 percent owned by a woman or a person of color, Vitolo had to qualify as “socially and economically disadvantaged” to get priority status.
To do this, he would have to prove he has experienced racial or ethnic discrimination or cultural bias with, as Thapar put it, a “preponderance of the evidence.” This stands in contrast with the lenient evidentiary standards set by the coronavirus relief plan for non-White people to prove that they have experienced discrimination or bias.
The appeals court had no problem with the relief package itself, but the racial and gender preferences in the bill that specifically favored subsidies for non-Whites and women.
“The case is about whether the government can allocate limited coronavirus relief funds based on the race and sex of the applicants. We hold that it cannot. Thus, we enjoin the government from using these unconstitutional criteria,” Thapar wrote in the majority opinion, adding that the government has failed to provide any “exceedingly persuasive justification” for its inclusion of discriminatory criteria.
The appeals court ordered the SBA and the government to fully fund Vitolo’s grant application and to review future grant applications without regard for processing time or for the race or sex of the applicant. The only priority the appeals court did not strike down was for veteran-owned restaurants.
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