Last week, while the press drooled over the president’s ice cream selection, the Sixth Circuit Court of Appeals in Vitolo v. Guzman declared unconstitutional the Biden administration’s race-based approach to distributing COVID-relief funds.
While Vitolo only addressed the race- and sex-based reverse discrimination in the American Rescue Plan Act of 2021, the precedent could prove fatal to many other federal and state statutes, regulations, or practices, leaving the Biden administration with a difficult choice: accept defeat in Vitolo and risk a domino effect, or appeal and face an even more unpalatable decision from a newly comprised Supreme Court.
Whites Need Not Apply
In passing the American Rescue Plan Act of 2021 (ARPA), Congress created a $28.6 billion fund for grants to restaurants impacted by the “uncertainty of current economic conditions.” But rather than provide Americans access to these funds equally, Congress expressly mandated race- and sex-based discrimination in doling out the money.
Specifically, the ARPA provides that during the “initial 21-day period in which the Administrator awards grants,” the Small Business administrator, who is currently the named defendant Isabella Casillas Guzman, must “prioritize grants to . . . small business concerns owned or controlled by women,” veterans, or “socially and economically disadvantaged small business concerns.”
The ARPA then incorporates the Small Business Act’s definition of the terms “socially disadvantaged” and “economically disadvantaged.” Thus, “socially disadvantaged” means individuals “who have been subjected to racial or ethnic prejudice or cultural biased because of their identity as a member of a group without regard to their individual qualities,” and “economically disadvantaged” means individuals who are “socially disadvantaged” and “whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area.”
Notwithstanding the statutory definitions that appear to create a need for an individualized assessment of whether a person is socially or economically disadvantaged, the Small Business Administration (SBA) promulgated regulations that focus solely on the race of applicants, declaring black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and subcontinent Asian Americans all presumptively “socially disadvantaged.”
Conversely, white Americans and those from, or decedents of those from, North Africa, Iran, Iraq, Turkey, Syria, Saudi Arabia, Jordan, Yemen, Kuwait, the United Arab Emirates, Qatar, Lebanon, Mongolia, Kazakhstan, Turkmenistan, Tajikistan, Kyrgyzstan, or Uzbekistan are excluded from the statutory definition. Also, because to qualify as “economically disadvantaged” under the SBA an individual must be “socially disadvantaged,” whites and the other regulatorily less-desirable races cannot presumptively qualify as “economically disadvantaged.”
What Percentage of Whites Are in Your Business?
Shortly after ARPA passed, the SBA announced the application period for the restaurant grants. In its press release, the SBA stressed that for the first 21 days of the program it “will prioritize funding applications from businesses owned and controlled by women, veterans, and socially and economically disadvantaged individuals.” The press release added that “[a]ll eligible applicants are encouraged to submit applications as soon as the portal opens,” because “applications will be funded on a first-come, first-served basis.”
On May 3, 2021, the first day the SBA accepted applications, Antonio (“Tony”) Vitolo submitted an application to the SBA, seeking a grant for Jake’s Bar and Grill, LLC, a Tennessee restaurant Vitolo owns with his wife. However, even though his wife is Hispanic, because Tony is white and because they equally own Jake’s Bar and Grill—and thus a controlling 51 percent interest is not owned by a woman or a government-sanctioned race—the ARPA and SBA frozen consideration of his application.
After receiving email confirmation from the SBA that it would not process his grant request because it was focusing “reviews on the priority applications that have been submitted,” Vitolo and Jake’s Bar and Grill sued Guzman. In his one-count complaint, Vitolo alleged that the ARPA, as implemented by the SBA, violates the Equal Protection Clause of the U.S. Constitution by discriminating on the basis of race and sex.
With the SBA reporting that as of May 12, 2021, it had received more than 147,000 “priority” applications seeking a total of nearly $30 billion in grants—an amount in excess of the entire allocated by the ARPA to restaurants—Vitolo sought a temporary restraining order to halt the unconstitutional distribution of grants, as without an injunction the fund would likely be depleted before the SBA considered his application. Federal District Court Judge Travis McDonough, a Barack Obama appointee, denied Vitolo’s motion for a temporary restraining order then also refused to enter an injunction pending an appeal.
Vitolo filed an emergency appeal with the Sixth Circuit Court of Appeals, seeking an injunction pending further proceedings. On Thursday, in a split 2-1 decision, the federal appellate court granted Vitolo’s emergency motion and enjoined the SBA from using the race- and sex-based criteria in processing Vitolo’s application.
Racism Is Unconstitutional
The Sixth Circuit’s majority opinion began by rejecting the Biden administration’s arguments that Vitolo lacked standing and that the case had become moot because the priority period had ended. The opinion, authored by Trump-appointee Amul Thapar and joined by Reagan-appointee Alan Norris, then focused on the constitutionality of priority based on race.
“Government policies that classify people by race are presumptively invalid,” the Vitolo court explained, and “to overcome that presumption, the government must show that favoring one race over another is necessary to achieve a compelling state interest,” and the government “must narrowly tailor its remedy to advance that interest.”
The court further explained that while “remedying past societal discrimination” may constitute a compelling state interest,” to qualify, three criteria must be met: “First, the policy must target a specific episode of past discrimination. It cannot rest on a ‘generalized assertion that there has been past discrimination in an entire industry.’ Second, there must be evidence of intentional discrimination in the past. . . . Third, the government must have had a hand in the past discrimination it now seeks to remedy.”
The SBA’s asserted reason for using race to distribute the restaurant funds failed to satisfy any of these criteria, Judge Thapar explained, first because the government has not identified any “specific incidents of past discrimination.” Rather, the government pointed to “societal discrimination against minority business owners.” Second, the government failed to show there was past intentional discrimination in play, with the SBA instead focusing on statistical disparities. Finally, the government failed to show that it had participated in the discrimination it seeks to remedy.
When Racism Is Not a ‘Compelling Government Interest’
Even had the government established a compelling governmental purpose for awarding COVID-relief funds based on the race of the applicants, the state-sanctioned discrimination would still violate the Equal Protection Clause, Judge Thapar explained, because the discriminatory disbursements of grants were “not narrowly tailed to further that interest.” Here, the majority explained that the SBA could have ensured the funds reached small business owners without access to capital or credit, or who had not received funds previously, by prioritizing those considerations. But instead, the SBA made race essentially dispositive to access the funds.
The two-judge majority decision then repeated the analysis concerning the priority provided to women, albeit asking not whether there was a compelling governmental interest, but whether the government provided an “exceedingly persuasive justification” for the sex-based classification. Again, the court found Congress and the SBA’s rationale lacking and held that treating women more favorably than men in the allocation of federal funds violates the Equal Protection Clause.
Writing for the majority, Judge Thapar concluded that “the plaintiffs are entitled to an injunction pending appeal.” However, Judge Thapar also added that “since the government failed to justify its discriminatory policy, the plaintiffs will win on the merits of their constitutional claim,” making clear that although the question before the Sixth Circuit was limited to whether to grant an injunction until the court could rule on the merits of Vitolo’s claim, the outcome—and Vitolo’s victory—was but a forgone conclusion.
Obama Appointee Supports Institutionalized Racism
While it would (or should) seem self-evident that state-sanctioned discrimination violates the constitutional guarantee of equal protection under the law, Bernice Donald, an Obama appointee, dissented from the court’s decision in Vitolo. Judge Donald first took issue with the procedural machinations that brought the emergency motion to the federal appellate court before she proceeded to address the merits of the constitutional claim.
Here, notwithstanding the Supreme Court’s clear mandate that government race-based discrimination needs a compelling justification—and something beyond general claims of societal discrimination—she reverted to regurgitating the left’s divisive “systemic-racism” talking points. “The majority’s conclusion that Plaintiffs are entitled to injunctive relief requires us to make several assumptions,” Judge Donald pronounced, before laying out those supposed assumptions:
The majority’s reasoning suggests we live in a world in which centuries of intentional discrimination and oppression of racial minorities have been eradicated. The majority’s reasoning suggests we live in a world in which the COVID-10 pandemic did not exacerbate disparities enabled by those centuries of discrimination. The majority’s reasoning suggests that we live in a world in which Congress passed the Restaurant Revitalization Fund (‘RRF’) not to aid the nation’s economic recovery, but to arbitrarily provide special treatment to racial minorities and women.
Although Judge Donald’s parallel sentence structure may have struck a lovely literary tone, it was bereft of legal merit. The question before the court was not whether Congress acted arbitrarily. Nor was the Sixth Circuit to resolve whether throughout the world there have been centuries of intentional discrimination. Rather, the issue for the court was whether the government had a hand in specific episodes of past intentional discrimination, so as to justify the consideration of race for remedial purposes.
Yet the evidence Judge Donald highlighted amounted to nothing more than congressional testimony that minority-owned businesses were more vulnerable to economic distress, more likely to operate in industries hardest hit by COVID shutdown orders, more likely to have difficulty accessing business capital, and less likely to have accessed the previous COVID-relief funds. That evidence utterly failed to satisfy the Supreme Court’s standards for the use of race (or sex) for remedial purposes.
Even Judge Donald seemed to recognize the weakness in her reasoning, dropping a footnote to explain the analysis might be different if the race-based criteria had been included as a “part of legislation enacted prior to the pandemic.” Judge Donald’s closing comment to her fellow Sixth Circuit judges likewise suggests the Obama appointee knows that, on the merits, she’s wrong.
“I urge my colleagues on this Court to consider establishing clear procedures for emergency matters, so that we are not again placed in a position where we must address constitutional questions of profound importance on a moment’s notice without development of the record,” Judge Donald closed her dissent.
Biden Administration In a Tough Spot
The Biden administration must now decide whether to accept defeat or to whether seek further review, either by asking the full Sixth Circuit to rehear the case or by petitioning the Supreme Court for review. Absent reversal, the Vitolo precedent will put at risk all race and sex-based preferential spending programs. But rehearing or an appeal to a freshened Supreme Court chances a broader declaration against state-sanctioned discrimination.
While the Biden administration weighs its options, Vitolo’s lead attorney Rick Esenberg, of the Wisconsin Institute for Law and Liberty, remains confident in the outcome.
“The Sixth Circuit recognized what the Biden administration apparently does not. The Supreme Court has made clear that racial preferences cannot be justified by the desire to achieve racial balance or to comport with fashionable ideas like ‘equity,’” Esenberg said in an interview. And “[i]f the case goes to the Supreme Court,” Esenberg added, “we are confident that it will reiterate that each of us has the right to be treated as an individual and not to be discriminated against on the basis of race or sex.”
Or, as Chief Justice John Roberts put it: “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”