On Friday, June 11, the Small Business Administration paused the disbursement of pandemic relief funds to thousands of minority-owned businesses. The decision comes after a federal judge in Texas issued an injunction on the release of the funds following a lawsuit from a Dallas-Fort Worth restaurant that alleges the program’s plan to distribute funds to businesses owned by women, veterans, and racial minorities is unconstitutional.
The pause in disbursement prevents more than 2,900 of those businesses from receiving COVID relief funds allocated in the Restaurant Revitalization Fund, according to Reuters. The lawsuit was filed by a legal advocacy group called America First Legal, founded by Stephen Miller and Mark Meadows, both aides to former president Donald Trump, on behalf of a Keller restaurant called the Lost Cajun. (Note: the Reuters piece refers to the restaurant as “Blessed Cajuns,” which is the limited liability corporation that operates the Lost Cajun.)
In the suit, the Lost Cajun owners Janice Smith and Jason Smith, along with Pennsylvania restaurant owner Eric Nyman, allege that the Small Business Administration’s plan to distribute pandemic relief funds to small businesses is unconstitutional. The owners of the Lost Cajun are white and claim that the decision does not provide them equal protection under the law, as required by the United States Constitution.
According to the lawsuit, Janice Smith and Jason Smith applied for assistance from the Restaurant Revitalization Fund on May 5 and discovered that they were entitled to more than $187,000 in relief. Neither of the owners qualifies for prioritization as a “socially disadvantaged individual,” which means that their application wouldn’t be processed until after that 21-day period in which the Administration has been directed to process applications from those groups.
Of course, the Biden Administration’s guidance does not prohibit white business owners from obtaining relief from the fund, it just requires that the Small Business Administration prioritize applications from women-owned, minority-owned, and veteran-owned businesses for the first 21 days that applications are open.
The suit alleges that the Smiths are “being subjected to unconstitutional race and sex discrimination by the “priorities” that the statute commands for minority- and women-owned businesses,” and that because more than half of the requests for Restaurant Revitalization Fund monies were made by business owners under those categories, it’s possible “that the entire $28.6 billion that Congress allocated to the Restaurant Revitalization Fund will be depleted before the plaintiffs can even be considered for relief under the program.”
The lawsuit opens the door for a class action suit, in which “all restaurant owners and restaurants in the United States who are encountering or who will encounter race or sex discrimination from the Small Business Administration,” could be potentially entitled to relief from the court.
A similar lawsuit, filed in Tennessee in May, also alleged that the program was discriminating against white people by prioritizing minority-owned businesses. That suit is still pending, but unlike in the Texas case, Tennessee judge Travis McDonough denied the group’s request for an injunction that would’ve paused the disbursement of funds. An appellate court later overturned McDonough’s decision.
The temporary injunction issued by District Judge Reed O’Connor allows the Small Business Administration to continue disbursing funds to “non-priority” applicants, according to Reuters, but it’s unclear when the more than 2,900 businesses whose applications were impacted by the injunction will be able to receive their funds.
The Biden administration has vowed that it will continue to fight the Texas judge’s injunction in court, but it remains a mystery when Restaurant Revitalization Fund applicants who applied as “socially disadvantaged individuals” will be able to receive the funds they need.