The U.S. Court of Appeals for the Sixth Circuit has granted a temporary injunction which would stop the Small Business Administration from prioritizing applications for COVID-19 Restaurant Revitalization Fund based upon the business owners’ race or sex.
The policy mentioned above is part of President Biden’s $1.9 trillion American Rescue, enacted to help kickstart the American economy from the devastating effects of COVID-19. This legislation also authorized a fund of $29 billion for restaurant owners suffering from economic hardship. The money was to be handed out on a first come, first served basis until the fund eventually runs out. However, for the first 21 days of processing applications the Small Business Administration {SBA} will only consider applicants that are at least 51% owned and controlled by women, veterans or those who are “socially and economically disadvantaged.”
The definition of the final category covers those who have been “subjected to racial and ethnic prejudice” or “cultural bias”, with the SBA automatically presuming that members of specific racial groups or ethnicity have suffered from the above and are therefore eligible to be prioritized.
The plaintiffs in the case argued that this part of the policy is unconstitutional because it would constitute discrimination on the basis of sex or race, because those who don’t belong to the relevant groups risk missing out on receiving a portion of the fund. The defense in turn acknowledged the use of race and sex to prioritise the relief applications but argued that the limited use of these criteria was still constitutional. Furthermore, the defense also argued that the policy was designed to remedy the injustices of the past.
However, in response to this the majority noted that the Supreme Court had only ever allowed for this in the past if three criteria could be met : 1} “the policy must target a specific episode of past discrimination” and not just societal discrimination at large, 2} “there must be evidence of intentional discrimination in the past” not just disparities, and 3} “ the government must have had a hand in the past discrimination it now seeks to remedy.”
Judge Amul Thapar and Senior Judge Alan Norris wrote the majority opinion for the court, with Judge Thapar describing the case as being about “whether the government can allocate limited coronavirus relief funds based on the race and sex of the applicants. We hold that it cannot.” To further illustrate his point Judge Thapar enlisted the help of analogy, “Imagine two childhood friends – one Indian, one Afghan. Both own restaurants, and both have suffered devastating losses during the pandemic. If both apply to the Restaurant Revitalization Fund, the Indian applicant will presumptively receive priority consideration over his Afghan friend.”
The majority also decided that the sex-based preference of the policy violated the Equal Protection clause but ruled that the government may “continue to give veteran-owned restaurants priority in accordance with the law.”