On Thursday, a federal appeals court issued an injunction against prioritizing COVID relief to restaurants based on their owners’ race and sex, finding that was unconstitutionally discriminatory. The ruling involved the Restaurant Revitalization Fund, a $28.6 billion program in the COVID relief law President Biden signed in March. The law requires the Small Business Administration to give priority to restaurants owned by certain minorities and women, while bumping white males and other minorities to the back of the line, for funds that will soon run out.
The ruling was in response to a lawsuit brought by the Wisconsin Institute for Law & Liberty on behalf of Antonio Vitolo, a Tennessee restaurant owner, whose application for relief was not being processed until minority and female applications are fulfilled. After a trial judge denied his request for an injunction, he appealed to the Sixth Circuit Court of Appeals, which granted him an injunction in a 2-to-1 vote.
The court’s majority opinion issued by Judges Amul Thapar and Alan Norris said that “This 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…Since the government failed to justify its discriminatory policy, the plaintiffs will win on the merits of their constitutional claim.” Judge Bernice Donald dissented.
The Restaurant Revitalization Fund prioritizes restaurants owned by women and certain minorities for the first 21 days, after which the fund’s money will swiftly run out.
This is unconstitutional. Race and sex discrimination are not permitted under the federal Constitution, except for narrow circumstances that don’t apply to the restaurant sector. The restaurant industry is not a white old-boy network, much less one where the federal government played favorites at the expense of women and minorities. So there’s no legal reason for giving women and minorities a preference there.
Only evidence of recent, widespread, intentional discrimination against a minority group by the government can justify giving that minority group a racial preference. (See Middleton v. Flint (1996); Brunet v. Columbus (1993); Michigan Road Builders v. Milliken (1987)).
But as the court noted, the government pointed to “little evidence of past intentional discrimination against the many groups to whom it grants preferences. Indeed, the schedule of racial preferences detailed in the government’s regulation—preferences for Pakistanis but not Afghans; Japanese but not Iraqis; Hispanics but not Middle Easterners—is not supported by any record evidence at all.”
The result was quite arbitrary, said the court: “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. Why? Because of his ethnic heritage. It is indeed ‘a sordid business’ to divide ‘us up by race.'”
Similarly, the government failed to justify handing out relief to women rather than men. Although the government offered “a few examples of statistical disparities between women-owned and male-owned businesses,” these statistics did “nothing to support an inference of intentional discrimination” against women that would justify giving them a preference, said the court.
Under Sixth Circuit rulings, women can be given a preference only if the government recently engaged in “intentional discrimination” against them. For example, an affirmative action program for women was invalid because the government had not discriminated against women in the past 14 years. (See Brunet v. Columbus (1993)).
To be constitutional, any preference also has to be needed to remedy the present effects of past discrimination. But that’s not true in the restaurant industry, which isn’t shaped or pervaded by discrimination. It is not disproportionately male or white compared to most industries, so even if affirmative action were somehow justified in other industries, it wouldn’t be in the restaurant industry.
The government argued that it could hand out money based on race or gender because it had been a “passive participant” in past discrimination by banks against minority restaurant owners. The trial judge bought this argument, writing that “historical patterns of discrimination are reflected in the present lack of relationships between minority-owned businesses and banks.”
But the appeals court rejected this argument, because so few examples of discrimination were cited, and because historical patterns are evidence of societal discrimination, not governmental discrimination. The Supreme Court has ruled that “societal discrimination” against a minority group is not a valid reason for giving priority to members of that group — only governmental discrimination, or discrimination that the government is an accomplice in, is. (See Richmond v. J.A. Croson Co. (1989)).
As the appeals court explained, to be a “passive participant” in private discrimination, “the government must have had a hand in the past discrimination it now seeks to remedy,” not merely failed to prevent it.
The government’s allegation that Congress’s “prior relief programs had failed to reach” certain minority groups as much as whites was not evidence of intentional discrimination, as federal court rulings require for a racial preference. (See People Who Care v. Rockford Bd. of Educ. (1997)).
Hispanic restaurant owners receive preference under the COVID relief law, even though Hispanics aren’t significantly underrepresented in the restaurant industry — 18.2% of restaurant owners were Hispanic in 2020, which is very close to the Hispanic percentage of the U.S. population. Female applicants receive preference, even though 44% of all restaurant owners are women — higher than their share of business owners in many other economic sectors.
In addition to this provision that violates the Constitution, the COVID-19 relief law also contains some destructive provisions that reduce the size of our economy. Economists had expected that the U.S. economy would add over a million jobs in April 2021, because it had been growing rapidly since fall 2020. But after Congress passed Biden’s $1.9 trillion COVID relief plan in early March, employment grew by far less than expected in April, resulting in a shortfall of 700,000 jobs, due to work-disincentives contained in Biden’s plan.