U.S. SBA halts some grants under injunction in lawsuit filed by white restaurant owners

WASHINGTON (Reuters) – The U.S. government on Friday said it would not disburse approved pandemic relief funds to more than 2,900 small businesses owned by women, veterans and disadvantaged people to comply with an injunction issued by a federal court in Texas.

FILE PHOTO: U.S. President Joe Biden speaks to employees inside W.S. Jenks & Son hardware as he visits the small business that has benefited from the Paycheck Protection Program, in Washington, U.S., March 9, 2021. REUTERS/Tom Brenner

The program, part of President Joe Biden’s American Rescue Plan, has provided more than $27 billion in COVID-19 relief funds to more than 100,000 restaurants, but some aid has been frozen in the wake of lawsuits brought by white restaurant owners in Tennessee and Texas who alleged discrimination.

Administration officials said they would continue to fight to maintain the program.

The Justice Department filed notices in U.S. District Court for the Northern District of Texas and the Eastern District of Tennessee on behalf of the Small Business Administration regarding 2,965 small businesses that had been approved for funds under the Restaurant Revitalization Fund.

A conservative legal group founded by Stephen Miller and Mark Meadows, close aides to former President Donald Trump, had filed a lawsuit in Texas on behalf of the owners of the restaurant Blessed Cajuns, arguing that the Biden administration’s efforts to prioritize applicants on the basis of race and gender is unconstitutional.

Biden administration officials say the SBA was trying to prioritize aid to minority- and women-owned businesses, many of which had run into trouble applying for and receiving aid under the Trump administration rescue plans.

Under a preliminary injunction issued by the court in Texas, the SBA must keep approving funds for non-priority applicants, but cannot hand out money to those designated as “priority” candidates until the case is settled.

Biden in February launched changes here to try to reach smaller and minority-owned firms.

The SBA will direct those applicants to other resources, while continuing to “do everything we can to support disadvantaged businesses getting the help they need to recover from this historic pandemic,” an administration official said.

The filing submitted Friday made clear that the 2,965 applicants were fully approved for the funds from May 26 to May 28, shortly before the injunction was entered on the docket.

SBA said it would not pay the claims, given the injunction.

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