By Dave Simpson

Law360 (May 19, 2021, 9:31 PM EDT) -- A Tennessee federal judge Wednesday rejected a white, male restaurant owner's bid to stop the Small Business Administration from paying out COVID-19-related relief to restaurant owners unless the agency did so without regard to the race or gender of the applicant.

U.S. District Judge Travis R. McDonough ruled that Antonio Vitolo, who owns Jake's Bar and Grill LLC, can't get a temporary restraining order because he has failed to rebut the government's showing that it has a compelling interest in stopping the impacts of historical discrimination. As a result, the judge said, he has not shown a likelihood of success on the merits.

Congress reviewed evidence showing that an initial government response to the pandemic — Paycheck Protection Program loans — disproportionately failed to reach minority-owned businesses, Judge McDonough said. So when, in March, as a part of the American Rescue Plan Act of 2021, Congress created a $28.6 billion Restaurant Revitalization Fund, it also opted to give preference, in certain instances, to businesses owned by women, or by those who are "socially and economically disadvantaged."

Vitolo, who sought $104,590.20 from the fund, argued in his lawsuit filed last week that the practice of giving certain groups priority violates the U.S. Constitution's equal protection clause and due process clause by impermissibly granting benefits based on race and gender classifications.

He sought a temporary restraining order that would block the SBA from paying out its RRF awards unless it did so in a way that ignores race and gender, a temporary injunction that would force the SBA to process applications in the order they are received, regardless of race and gender; a declaratory judgment that the SBA's practices are unconstitutional; and a permanent injunction against the practice.

But on Wednesday, Judge McDonough said that Vitolo hadn't cleared the bar for his temporary relief, finding that the restaurant owner hadn't shown a likelihood of success. Congress reviewed evidence that the PPP failed to reach minority-owned businesses because past systems of discrimination have translated to a present lack of relationships between these businesses and banks, he noted.

"This same phenomenon caused minority-owned businesses to enter the pandemic with more financial precarity, and therefore to falter at disproportionately higher rates as the pandemic has unfolded," the judge said. "The Government has a compelling interest in remediating the present effects of historical discrimination on these minority-owned businesses, especially to the extent that the PPP disproportionately failed those businesses because of factors clearly related to that history."

The government tried a race-neutral approach with the PPP, the judge noted, and found that it had failed to help minority-owned business equally. And lawmakers also considered evidence related to gender, the judge said.

"Congress had before it evidence showing that woman-owned businesses suffered historical discrimination that exposed them to greater risks from an economic shock like COVID-19, and that they received less benefit from earlier federal COVID-19 relief programs," he said.

Representatives for the parties did not immediately respond to requests for comment 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. v. Guzman, case number 3:21-cv-00176, in the U.S. District Court for the Eastern District of Tennessee.

--Editing by Michael Watanabe.

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