Thousands of Minority And Women-Owned Restaurants Won’t Get Aid Because Of Lawsuits

The Small Business Administration said thousands of restaurant owners will not get the federal pandemic relief they were counting on, because of injunctions blocking the government from prioritizing businesses owned by women and people of color. The SBA could not say how many are in New York City but several local owners were notified over the weekend.

Thousands of restaurants have closed in New York City during the pandemic. Andrew Rigie, executive director of the NYC Hospitality Alliance, said it’s “extremely worrisome” that restaurants aren’t getting grants for which they were already approved.

The $28.6 billion Restaurant Revitalization Fund was part of the federal stimulus package approved in March. It was intended to help an industry starved of customers during multiple forced shutdowns. For the first 21 days, it gave priority to applications from small businesses owned and controlled by women, veterans, and socially and economically-disadvantaged individuals, including people of color.

But two lawsuits in Texas and another in Tennessee led to injunctions. They argued giving priority to those applicants discriminated against white business owners under the Constitution. The Texas suits were brought by a conservative group founded by Stephen Miller, the architect of former president Donald Trump’s anti-immigrant policies, and Mark Meadows, Trump’s former chief of staff.

Most of the aid had already been distributed by the time a federal court ruled in late May that a white Tennessee restaurant owner had faced discrimination. The Small Business Administration (SBA) said it awarded $18 billion to 72,000 priority applications. Combined with non-priority applications, the agency said more than 100,000 restaurants received a total of $27.4 billion in relief funds.

But the injunctions mean the remaining $1.2 billion can’t be given to priority groups. The SBA sent emails to 2,965 priority applicants over the weekend saying they would not be receiving their grants, even though initially they’d been approved. 

Chris LaCass, an organizer with the New York City group Save Our Storefronts, said he heard from several restaurant owners who were devastated by the news. He noted that women and people of color have historically had trouble getting loans and government aid.

“To see this is heartbreaking,” he said. “The reason for the priority is that they were already on the edge. All of that discrimination that they faced put them closer and closer and closer to the edge as time went on because they ran out of their own personal savings.”

LaCass said the business owners who got the emails were afraid to speak because they feared additional rejection by the government. Their applications are still in the pool if Congress approves aid in the future.

One Black restaurant owner talked with Gothamist/WNYC on the condition that her name wouldn’t be used. She said she’d been approved for more than $200,000 in grants to pay back rent and utilities she owes due to business interruptions caused by the pandemic, and doesn’t know what she’ll do now. She said she cried when she got the email Sunday telling her she won’t be getting the aid, and said the conservative groups who filed the lawsuits are “using racism to fight racism.”

On Monday, Patrick Kelley, SBA’s associate administrator for the Office of Capital Access, gave a virtual briefing for the nearly 3,000 restaurateurs who suddenly learned they won’t be funded.

“Obviously we understand you are deeply disappointed, frustrated, outraged,” Kelly told them. 

But because of the court rulings, Kelly said SBA will have to distribute what’s left of the $28.6 billion to non-priority applicants. “We share your frustration with this outcome and we are going to remain committed to doing everything we can to support businesses getting help,” he said.

That includes lobbying Congress for an additional $60 billion in restaurant relief, under a bi-partisan proposal. He said the need exists because SBA was unable to approve another 170,000 applications worth more than $43 billion. Kelly also said restaurants that weren’t given their priority aid can apply for low interest loans.

SBA did not say whether more minority and women owned restaurant owners will be notified that the federal aid they expected will now be canceled, beyond the nearly 3,000 who received emails over the weekend.

Michael Cole, Jr., owner of the ice cream business Mikey Likes It, said he didn’t get an email but he also hasn’t heard yet whether his application was approved. He presumes he won’t get any money now because of the lawsuit. Cole said his two stores in the East Village and Harlem owe tens of thousands of dollars in rent and utilities and he was hoping to use the government aid to work out a deal with his landlords. “It just puts me back in a stalemate with them,” he said. 

As an African-American, Cole said business owners like himself deserve to be prioritized. “Some other businesses have better relationships with their bankers and they know what to put on these documents for them to clear so much money,” he explained. “Some of us as minority businesses don’t have the tools, the opportunities” to do the same. 

The NYC Hospitality Alliance and individual restaurant owners are now calling on members of Congress to replenish the Restaurant Revitalization Fund to help all worthy applicants. But because of the litigation, SBA said women and minority-owned businesses won’t get priority. 

Valerie White, executive director of Local Initiatives Support Corporation New York City — which provides technical assistance and raises funds for these same groups — said the lawsuits are hurting people who suffered the most, physically and economically, from COVID-19. 

The court case, she said, “gives a symbolic message that those systemic inequities are not going to be addressed.” She’s been calling for additional aid from both the government and private sector to help these small businesses. An April survey by LISC found nearly three quarters of the local minority-owned small businesses that responded fear they’ll have to close their shops permanently if they don’t receive immediate financial relief.

White, who used to run New York State’s Division of Minority and Women’s Business Development, also wondered if the federal lawsuits could jeopardize small business aid from the state because it gives similar priorities to women and people of color. Empire State Development, which runs the aid programs, did not respond to a question from Gothamist/WNYC.

It’s not clear if the Biden administration will challenge the recent court rulings. The Justice Department also did not respond to a query, and the SBA said it couldn’t comment on litigation. 

LaCass said Biden should be standing up for the priorities that were included in the restaurant aid. “This is an issue of discrimination,” he said, “of systemic racism.” He said the president should halt the restaurant program completely now, so that people of color don’t face additional discrimination.

But Stephen Miller, president of the group America First Legal, which sued in Texas, said he was ready to bring more lawsuits if any more priorities are granted to aid programs based on race.

“The Biden Administration has inflicted needless pain and suffering on countless Americans through its deplorable and unconstitutional scheme that sent restaurant owners–on the basis of their race–to the back of the line for a limited pool of funds.”

Beth Fertig is a senior reporter covering the city’s recovery efforts at WNYC. You can follow her on Twitter at @bethfertig.