Litigation Update: Vitolo v. Guzman

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On May 27, 2021, the Sixth Circuit issued a decision in Vitolo v. Guzman.  Over a dissent written by Judge Donald, the Court held that the Small Business Act of the American Rescue Plan Act created unconstitutional racial, ethnic, and gender-based priority preferences in distributing covid-relief grants to small businesses.  Upon finding the plaintiffs would win on their constitutional claim, the Court granted the plaintiffs a preliminary injunction pending appeal.

Joining us to discuss is Mr. Daniel Lennington, the attorney who represented Mr. Vitolo before the Sixth Circuit.

Featuring: 

  • Daniel Lennington, Deputy Counsel, Wisconsin Institute for Law and Liberty

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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript

[Music]

 

Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group Teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Evelyn Hildebrand:  Welcome to The Federalist Society's virtual event. This afternoon, June 10, we discuss the Sixth Circuit's decision in Vitolo v. Guzman. My name is Evelyn Hildebrand, and I'm an Associate Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today's call.

 

      Today, we are fortunate to have with us, Mr. Daniel Lennington. Dan Lennington serves as Deputy Counsel for the Wisconsin Institute for Law and Liberty, where he focuses on the Equality Under the Law Project. Started in early 2021, this project uses strategic litigation to enforce the Equal Protection Doctrine at all levels of government. Before joining WILL, Dan served in Wisconsin state government as the Assistant Deputy Attorney General and Senior Counsel. Dan's government service also included appointments as Deputy Solicitor General and Assistant Attorney General, during which he argued cases before the Wisconsin Supreme Court, the Seventh Circuit, and state and federal trial courts around the state. Before joining the Wisconsin Department of Justice, Dan was an award-winning federal prosecutor in Oklahoma. He's a graduate of Hillsdale College and Valparaiso University School of Law. And we're very pleased that Mr. Lennington's able to join us to discuss this case this afternoon.

 

      After our speaker gives his opening remarks, we will turn to you, the audience, for questions, so be thinking of those as we go along and have them in mind for that portion of the event. If you do have a question, please enter it into the Chat or the Q and A function at the bottom of your screen. With that, thank you for being with us today. Mr. Lennington, the floor is yours.

 

Daniel Lennington:  Thank you, Evelyn. I just -- as an introduction, I want to tell you a little bit about the Wisconsin Institute for Law and Liberty. We are a non-profit public interest law firm headquartered in Milwaukee, Wisconsin. We represent clients pro bono, and we typically sue local, state, and federal government officials to enforce constitutional rights. We're considered a center-right law firm, and I think it's safe to say that our litigation projects align with the core beliefs of many Federalist Society members.

 

      Starting earlier this year, we started a project called Equality Under the Law. The purpose of this project is to enforce the equal protection guarantee of state and federal constitutions. Namely, the idea that every American should be treated equally under the law. More and more this concept is, unfortunately, becoming alien to our current culture. Presently, just for this project alone, the Equality Under the Law Project, we have about 32 clients in 15 different states across the United States. Some of these lawsuits we're pursuing include challenges to racial quotas, challenges to race-based scholarships, we've been involved in disputes involving critical race theory in schools, and racial segregation in schools.

 

      Recently, we filed a lawsuit in federal court called Faust v. Vilsack, which challenges race-based loan forgiveness for farmers. This case that we're going to talk about today, Vitolo v. Guzman, actually came out of the litigation involving farmer loan forgiveness. After we filed that lawsuit against the USDA for race discrimination, one of -- a restaurant owner from Tennessee called me and said, "Do you know that they're doing the same thing for restaurants that they're doing for farmers?"

 

      And I was a little skeptical at first, but he walked me through the Small Business Administration process, and I looked at the law and found that yes, indeed, there are a number of racial preferences that are embedded in the American Rescue Plan Act of 2021. That was the main COVID legislation signed by President Biden on March 11. There's actually six significant race-based benefits that are in that law, one of which is farmer loan forgiveness for non-white farmers, and the other one we're going to talk about here today is called the Restaurant Revitalization Fund.

 

      As I said, we received a call from -- his name is Antonio Vitolo. He runs a restaurant called Jake's Bar and Grill just outside of Knoxville, Tennessee. He told me that on May 3, he applied for a loan from the federal government, the Small Business Administration, from this fund that was called the Restaurant Revitalization Fund. This was, again, established by the American Rescue Plan Act, which was signed on March 11. The SBA opened this program for applications on May 3, just over a month ago. It's a limited pot of funds. It's $28.6 billion, and the goal is to help restaurants that have been impacted by COVID.

 

      I think most people realize that restaurants are one of the main industries that have been impacted significantly by COVID, so Congress thought they should provide funds to impacted businesses. But during the testimony, which created the Restaurant Revitalization Fund, Congress heard testimony that the actual amount of money needed was about $300 billion. So right off the top of the bat, Congress knew that it didn't appropriate enough money. They only appropriated $28.6 billion.

 

      The offending provision in this law is called a priority period. The law provides that during the initial 21-day period that the Administer awards grants. The Administrator, the Small Business Administration, is supposed to prioritize grants to eligible entities that are small businesses owned or controlled by women, veterans, or socially and economically disadvantaged small business concerns. Now, this last phrase, socially and economically disadvantaged small business concerns, means an individual who's experienced racial or ethnic prejudice, and under the SBA regulations, a socially disadvantaged individual, or an economically disadvantaged individual, is presumed to be someone who is Black, Hispanic, Native American, Asian Pacific, or a Subcontinent Asian American.

 

      There is no mechanism established in the law to get in or out of this group, but the regulations do say that there is some way based on a preponderance of evidence to be included or discluded in this group, although there's no mechanism. So, in short, this 21-day period -- the SBA was supposed to prioritize applications for restaurants that were owned by minorities -- certain minorities, women, and veterans.

 

      We also have some reliable information that Congress also knew that minority-owned restaurants would -- when they applied that their request would actually swamp the $28.6 billion fund. So there would be more applications just from minority restaurants than the fund was worth. When SBA opened the program on May 3 and said -- they said on their website that whatever information an applicant puts on their application, as far as their race, they are going to take that information and give you -- put you in the priority group or the non-priority group, based on your race or your gender.

 

      Our applicant, Tony Vitolo, put his name in and he received emails immediately saying that because he was not white -- or because he was white, he would be put in the back of the line. He would be put in the non-priority queue. One of the interesting things about Jake's Bar and Grill is it's owned 50/50. It's owned by Tony, 50 percent, and his wife, who is a Hispanic-American. So even though his wife, who is Hispanic and a minority, because she didn't own 51 percent of the business, the business is deemed a non-priority.

 

      We filed our complaint May 12, which was just about a month ago in the Western District of Tennessee. On that very same day, the Small Business Administration announced exactly what we had heard from Congress that immediately there was more money requested by minority restaurants than there was money in the fund. We also filed a Temporary Restraining Order Motion and a Preliminary Injunction Motion on that same day. The case was heard that following Monday by Judge Travis McDonough of the Chattanooga Division of the Eastern District of Tennessee. He held a hearing, and at the hearing, he denied the motion for a TRO, and he held his decision on the Preliminary Injunction Motion for several days.

 

      The government's response to our motion and the opinion of the district court was the same in that the priority period from the Small Business Administration was necessary to alleviate the effects of racial discrimination in the past. The government said that past discriminatory practices have, to some degree, adversely affected our present economic system. They relied on racial disparities based on statistics, and the SBA said that they did not want to participate in a system that would just exacerbate discriminatory impacts. The government also claimed that their program was narrowly tailored because it was just for 21 days, and anyone who thought they were socially disadvantaged could just say on an application that they are socially disadvantaged.

 

      The district court agreed, and they emphasized in their opinion as far as evidence of racial discrimination, a 2020 mystery shopper study from Washington D.C. that showed lending disparities among banks. The district court believes that because of this study, this was evidence enough for the Small Business Administration to embark on a nationwide program that had a racial classification to alleviate the impacts of past discrimination. We appealed the Temporary Restraining Order.

 

      As I said before, there was a lag in time between the denial of our Temporary Restraining Order and the denial of our Preliminary Injunction Motion, and we did not have time to wait because every day we went by, May 15, May 16, May 17, the fund was dwindling. There is a division of authority as to whether you can appeal a denial of a TRO. Basically, there's a Supreme Court decision that says you can't do it, but there are numerous courts of appeals decisions that say if it's really important, you can do it.

 

      So we took that authority, appealed the denial of the Temporary Restraining Order. The Sixth Circuit held the case for a few days and then issued a letter back to the district court and said, "Are you going to rule on that Preliminary Injunction Motion?" And the clear signal from the court of appeals is that they wanted to clear up their jurisdictional issue because the court of appeals does have jurisdiction to hear an appeal from a denial of a Preliminary Injunction Motion, but not necessarily a Temporary Restraining Order. So the district court finally issued its decision and a written opinion denying the Preliminary Injunction Motion.

 

      The court of appeals, on May 27, issued their opinion. It was written by Judge Thapar. The takeaways from the opinion that I wanted to point out, I think, are really important statements about how the government must meet the strict scrutiny test. Strict scrutiny is applied whenever racial classifications are at issue in a case, and the government in our case never denied that strict scrutiny applied. The government conceded that from the very beginning. Judge Thapar said in his opinion that when considering the compelling interests prong of strict scrutiny tests, that the government must meet all three of these tests in order to discriminate based on race, which is what the priority period was, was discrimination based on race.

 

      First, Judge Thapar said, "The government must provide concrete evidence of a specific recent episode of past discrimination." So this rule was in contradiction to what the government had provided. The government provided just generalized notions of past societal discrimination. Judge Thapar said that's not enough. You can't just rely on a generalized notion of discrimination. You have to point to a specific recent episode of past discrimination that you, as the government, want to remedy.

 

      Number two, Judge Thapar said that the government must prove that this past discrimination that it wants remedy was intentional. This was in contradiction to the government's evidence that there were statistical disparities. So, for example, the government said that minority restaurants had a harder time getting access to credit, or minority restaurants were harder hit by COVID, or minority restaurants had difficulty with certain aspects of the U.S. banking system. Judge Thapar said, "Statistical disparities don't cut it." He said, "There are simply too many variables to support any inferences of intentional discrimination." Too many variables to support inferences of intentional discrimination, so that's the second part. It has to be intentional discrimination.

 

      In number three, the third test is that the government must have participated in this past discrimination. Judge Thapar said the government didn't meet any one of these three rules, and it had to meet all three: concrete evidence of a specific episode of recent past discrimination, intentional discrimination, and government participation. It couldn't meet any of those.

 

      As to narrow tailoring, Judge Thapar commented that there was an easy race-neutral alternative. The government said throughout its briefing that minority restaurants and women-owned restaurants didn't benefit from prior government programs under the Trump Administration. Instead, Judge Thapar said, "The easy alternative is this, just give money to businesses who have not benefited from previous COVID programs, or give the money to businesses that were unable to get credit during the pandemic." Judge Thapar mentioned numerous alternatives that were available that were race-neutral.

 

      The government also said that the program was narrowly tailored because people of all colors can be socially disadvantaged. The judge -- court rejected this and said that there was actually a presumption in the law, which I mentioned at the beginning, that Hispanics and African Americans and certain Asians and Native Americans could actually -- those were presumed to be socially disadvantaged, so the preference and the presumption was actually a hurdle in and of itself.

 

      Finally, Judge Thapar said that this program is underinclusive. He said, "Why does a minority or a woman need to have 51 percent ownership in a restaurant to be eligible? Why not 50 percent like Mrs. Vitolo, Tony's wife? Why does it have to be 51 percent?" And so the judge -- the court said it was underinclusive. Also, the program was underinclusive because it excludes many Asians and North Africans for no reason at all.

 

      This is -- a really interesting point is that the federal government's definition of White is any individual whose ancestors come from any European country or North Africa or the Middle East. So this is a long-standing definition by the federal government, goes back decades. It was actually reaffirmed during the Obama Administration that individuals whose ancestors come from North Africa, Tunisia all the way to -- Morocco and Tunisia all the way over to Egypt, those are all Whites under federal law. And anyone from the Middle East is also White, from Saudi Arabia to Turkey to Lebanon up through Iran.

 

      Also, the law does not include all Asians as Asian. So, for example, someone from Afghanistan or someone whose ancestors are from Mongolia are neither Asian nor White under federal law, so they're in this limbo, and they're in an uncategorized group, according to federal law. This is not just the Small Business Administration. This goes to the Census and all sorts of areas of federal law.

 

      The conclusion of the Sixth Circuit's decision was this, and I think this is a really good way to sum up Judge Thapar's reasoning. He said, "The stark realities of the Small Business Administration's racial gerrymandering are inescapable. Imagine two childhood friends, one Indian, one Afghani. Both own restaurants and both have suffered devastating losses during the pandemic. If they 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 sorted business to divide us up by race, and the government's attempt to do so here violates the Constitution."

 

      So at the end of the day, the Sixth Circuit imposed an injunction pending appeal. The injunction reads that the SBA is required to fund the plaintiff's grant application if approved before all other later filed applications without regard to processing time or the applicant's race or sex. Judge Donald, in defense, argued that this case should have been dismissed as moot because the 21-day period had already expired. She also claimed that there was substantial evidence supporting the government's compelling interest in the form of statistical disparities, and she thought that narrow tailoring was present, according to the dissent, because the period was only for 21 days.

 

      After this decision on May 27, we immediately amended our complaint. We added six more restaurants from five more states, and we filed an emergency Temporary Restraining Order with the district court. We asked for the relief, the injunction, to apply to our new clients, or otherwise, we asked for a nationwide injunction. Our basis for this motion was that the SBA's story about what it was doing with the fund was very confusing and contradictory. The SBA gave primarily three positions for what it was doing with the fund during this litigation.

 

      First, to the Sixth Circuit, before the decision, the SBA claimed that they had stopped discriminating because the priority period was over, the 21 days was gone, but their language was very loose. They said, "We won't consider race when beginning to process applications." But they continue to process and award priority applications who are already in the queue.

 

      The second position after the decision on May 28, on that Friday, the SBA came back and sent a letter to the panel and said that they had gotten rid of any head start that had been given to priority applicants, that they had reordered the queue, and that they were now processing in the order that they received applications. But they were still processing and paying priority applications at this time. So that's why we had to file our emergency Temporary Restraining Order Motion.

 

      Finally, this week the Small Business Administration changed their position for a third time, and they confirmed that they were no longer processing any priority applications. They were only working on and awarding and reviewing the non-priority applications. Just this morning, about three hours ago, the district court issued an order confirming this representation by the Small Business Administration that they would no longer process any priority applications. And the Small Business Administration is now ordered to notify the court immediately if they fund our client's applications or if they start processing any priority applications.

 

      So we feel like this is a nationwide injunction in practice. Although it might not be worded as a nationwide injunction, it is in effect a nationwide injunction. Priority applications are no longer being considered, and our client's applications are currently being processed. Tony Vitolo has received his grant for $104,000, and the other six restaurants from five states are still in the queue and still awaiting. We are a bit concerned. Money is supposed to run out the day after tomorrow, and Congress is talking about whether to add $60 billion more to the fund. But we're hopeful that our clients will get the relief that's entitled to them. So that's all I have right now. Thank you.

 

Evelyn Hildebrand:  That's fascinating. Thanks so much for that presentation. I do have -- there is one question in the queue, but I wanted to ask a question first. It's just the Moderator's privilege [Laughter]. I wanted to know what happens to the priority applicants who filed but whose applications are no longer being considered. Do they have to refile, and then it's a first-come, first-serve basis, so they're now shuffled to the back of the line, so to speak?

 

Daniel Lennington:  We don't know what's happened to them. So I should explain that the reason why there was this problem with the queue is because it takes three weeks to process an application. So even if you filed on May 3, it wouldn't be until May 21 that you would start to get your money anyway because there's a lot of steps -- intervening steps. There has to be an IRS verification. They have to verify your signature. They might have to go back to you and ask for more paperwork or more information, so there is this lag time.

 

      There was a point in which priority applicants were being processed but not yet awarded. The SBA stopped them and froze them. What I assume is that those priority applications will keep their number. Imagine you're at a deli counter, and you're taking a ticket. They're going to keep their number, but if the fund runs out, they're just going to have to wait for Congress to replenish it. But I'm sure they will keep their spot in line.

 

      The whole point of our litigation is that we believe that first-come, first-serve is the only equal way to spend money and that the priority period actually allowed people to jump the line based on their race. Putting those pieces back together was a tricky administrative task, but we believe that as of at least a week ago, the SBA is now going in a true first-come, first-serve basis. So we believe that the short answer is, yes, we think they'll keep their place in line if there's enough money for them.

 

Evelyn Hildebrand:  Great. Okay. Then as far as the other -- the one client, the Vitolo's, already received their grant money. Then the new clients that you are now representing, is it a procedural posture difference that those clients didn't get their grant money already and they're just in their place in line? Can you explain the difference between their positions?

 

Daniel Lennington:  Yeah. So this is a really interesting issue because all of our clients, they all applied within about 10 minutes of the program opening up on May 3. So they all applied on May 3 within a 10 minute period. They were some of the first people in line. Now, the fact that Tony Vitolo got paid off — we speculate, and we've talked to attorneys who have other similar cases around the country — we think it may be a strategy that the U.S. Department of Justice asked the Small Administration to pay off these plans to move their case.

 

      Now, I'm purely speculating, but that speculation's based on talking to other attorneys who have other cases and that it doesn't necessarily make any sense the way that certain plaintiffs were paid off and certain ones that have not -- were not plaintiffs, were not paid off. All of these existing plaintiffs all applied very, very early on May 3, and they should have a very low number in the queue. Why they haven't been paid yet, we don't know. It is completely a black box.

 

Evelyn Hildebrand:  Interesting. Thank you for that. Let's go to some audience questions at this point. I do have some more questions. But John Sheller (sp) asked, "This sounds like reparations by another name. Did that point surface in the case?" Do you have comments or a response to that?

 

Daniel Lennington:  I would say, no. This is not a case in which reparations was mentioned. What was mentioned was just the disparities on how COVID impacted minority-owned restaurants and that we needed to help out minority-owned restaurants because they were impacted significantly. Now, this impact was based on the theory that there have been decades of discrimination against minorities, and this is sort of built up over years in that this is to remedy it. But it's not in the context of reparations.

 

      What I would say is that our other case, Faust v. Vilsack, which deals with farmers, that case is very much rooted in reparations. And a lot of the dialogue and arguments in that case go back to the 19th Century and the early 20th Century, and how because of discrimination, land was taken away from African American farmers, and now it should be given back to them. So I would say in the farmer context, that is much closer to a reparations type argument in terms of the type of language that's used by the government and those supporting the lawsuit. But the restaurant case was not that type of rhetoric, I would say.

 

Evelyn Hildebrand:  Could you go into the — I know it's beyond the scope a little bit — but the Faust case, just a little more information about it? Because that's -- I'm sure that's of interest to our audience, as it is to me.

 

Daniel Lennington:  Yeah, so that's under Section 1005 of ARPA, the American Rescue Plan Act, and it says that the U.S. Department of Agriculture is appropriated such sums as may be necessary to forgive all loans of all socially disadvantaged farmers. Now, a socially disadvantaged farmer is a minority farmer, and so the law says they must forgive all the loans of minority farmers, plus 20 percent will be deposited in their bank accounts.

 

      We filed that lawsuit in April. We filed a Preliminary Injunction and a Motion for a Temporary Restraining Order last week. On Friday, about a week ago as of tomorrow, we had a hearing on that case. The United States replied earlier this week, and we replied last night. We are expecting the judge in the Eastern District of Wisconsin to issue a decision on the Motion for a Temporary Restraining Order.

 

      What we're asking for is that we're asking for that loan forgiveness program to be put on hold. The USDA has admitted that they have already started to forgive loans, so the money is already going out the door, and what we would like the court to do is to put that process on hold while we decide the Preliminary Injunction Motion and the merits of the case.

 

Evelyn Hildebrand:  Is the fact that you got a Temporary Restraining Order, in this case, going to be a persuasive point for the other?

 

Daniel Lennington:  Yes, absolutely. So Judge Thapar's opinion is really a road map for our case and the USDA case. We're emphasizing those three points that the government has to show a specific episode of discrimination. It has to be intentional, and the government has to have participated in that past discrimination. So we say that none of those three elements apply in the Faust case either.

 

      Interestingly, the USDA embarked on a two-decade process of remedying their own discrimination in what was called the Pigford settlement. During the Pigford litigation, USDA admitted that they themselves did discriminate against the Black farmers. Our position, in this case, is that, yes, the USDA can go back, and they can fix their past discrimination by identifying the farmers that they may discriminate against, or even their heirs, and forgiving loans, giving cash payments, whatever necessary to make those people whole. But there's no evidence that, in this case, that this remedy, which is, forgive all loans to all minority farmers — again, except for certain Asians — that this is somehow tied to a specific program of discrimination by USDA.

 

Evelyn Hildebrand:  Right, that certainly does not seem to fit the narrowly tailored requirement. That's a very broad -- broad kind of remedy. I guess that goes to another question I had, and then we'll go to another audience question. Regarding the narrow tailoring regarding the -- specifically the argument that Congress could have chosen to award loans based on those who had not yet received COVID relief funds, as opposed to based on race, was there an argument in response either in the dissent or that the government raised that was of interest to you? Because that seems like a pretty, at least on my reading, that seems like a very compelling and very easy response that went largely unanswered.

 

Daniel Lennington:  Right. So Congress and the two Administrations since COVID started have tried a number of things to help businesses. There's been the CARES -- the CARES Act was one of them, and then this ARPA Act, and there's been other, sort of, congressional administrated responses.

 

      The government stated that we'd tried everything to get to these minority-owned restaurants, and nothing has helped them. We have tried over and over and over, and this is the only way to help them. That was basically their argument is that despite all of these attempts to help these restaurants, nothing worked, and therefore, we must do this new thing, the 21 day period. That obviously wasn't persuasive to the court.

 

Evelyn Hildebrand:  Interesting. Well, let's go to the audience questions at this point. Looking ahead, is the government -- and this question comes from Mr. James Horden (sp), "Is the government appealing to the Supreme Court, and what is the status moving forward?"

 

Daniel Lennington:  We do not believe that they are going to appeal to the Supreme Court. They basically conceded that there's a nationwide injunction against them. They have changed the way their program is working, and, frankly, I think that if they sought cert in this case, they -- and this is speculation on my part, is that they think it would make it worse. They think a five justice opinion or a six justice opinion from the Supreme Court would probably go at least as far as Judge Thapar's opinion, and perhaps even farther, because the cases that are being cited by Judge Thapar — opinions written by Chief Justice Roberts, the Parents Involved case — is very strong on the very high hurdle that the government needs to cross in order to use race in dolling out benefits or making decisions. So, in my opinion, I think they thought going to the SCOTUS would make it extra worse.

 

Evelyn Hildebrand:  Yep, that makes sense. Okay. I think that the next question would be from Mr. George Lenew (sp), "Isn't there still a problem that SBA is still treating applicants depending on whether you were a member of a group?" So I guess that goes to whether or not there's still a harm that needs to be remedied.

 

Daniel Lennington:  We don't think so as of going forward. We don't think that there is a harm that they are no longer considering based on race. They're processing and awarding applications based on your position in line, so that's race-neutral. So we think going forward -- now, the fact that our clients are harmed in the context of that, that the half of the fund ran out during this time when they were using discriminatory criteria, that is a harm. So our clients were pushed down the line. Who's to say they would not have gotten their award if they had been first-come, first-serve from the beginning? We're not sure. The issue is, can we get damages from the federal government?

 

      So the Bivens case says that you can get damages for a constitutional violation from the government, from government officers, but that doctrine has become more and more narrow over the years. And I believe there are three Supreme Court justices that say that we should overturn Bivens, that we should get rid of Bivens' damage claims. There are places you can get Bivens damages. So, for example, search and seizure cases or First Amendment cases, but it's not necessarily been extended the equal protection context, so us getting damages for what happened backward-looking might be -- would be a hill battle. But forward-looking, we think that there's no future discrimination going on with this program, with SBA.

 

      Now, SBA has a number of other programs where they are using racist factors, and we may have to litigate over those. There's still preferences in contracting. The Adarand case in which the SBA lost, they turned around a few years, and they started doing the exact same thing again. They do the exact same thing that they did in the Adarand -- they do it today, but they haven't been subject to a litigation. We have a client in Florida who is interested in challenging that.

 

      The Small Business Administration under ARPA has a new program called the Small Business Investment Initiative, I believe, which is a $10 billion program which gives priorities based on race. They have a community navigators program, which gives preferences based on race. These are all in the American Rescue Plan, and you can go to that bill and search for the word disadvantaged, which appears 48 times in the bill, and every time it uses the word disadvantaged, that's a code word for race. So racial classifications are throughout ARPA. They're throughout the current set of statutes that Small Business Administration administers, and we don't see them stopping any time soon, absent litigation.

 

Evelyn Hildebrand:  Do you see this as a place where -- I suppose it depends since this is a pretty new set of litigation, pretty new -- the outcome of the litigation is certainly new -- do you see Congress stepping in to update this if they see the results of the -- the results that are happening coming from courts across the country?

 

Daniel Lennington:  We heard today from a congressional staffer that perhaps our victories in the Vitolo case, and assuming we have a victory in the Faust case, that it may trigger what's called the Byrd Rule in the Senate in which if there is a reconciliation package, and where the filibuster rules are avoided, that certain matters that are subject to litigation -- certain matters which have been decided on by courts can't go into a reconciliation package.

 

      I don't know -- I don't promise to know -- profess to know all the details of how the reconciliation process works, but we do think that there may be a strong argument that if there is a second reconciliation bill that it may trigger a rule which would allow these controversial provisions, primarily socially disadvantaged individuals and economically disadvantaged individuals, that those would probably have to be stripped out. Now, this is a political process. This is not a legal process, but that's just what -- I'm reporting that second hand.

 

Evelyn Hildebrand:  Is that -- and maybe you don't know the answer to this -- is that retrospective? So they would have to go back through the already passed laws and strip those terms, or is that perspective?

 

Daniel Lennington:  They'd have to be prospective, yep.

 

Evelyn Hildebrand:  Prospective, okay.

 

Daniel Lennington:  So to root out all of these terms in current law, we're going to have to litigate. And, unfortunately, because they're in statutes, you can't generally use a cause of action in a statute to go after another statute. So, for example, there's an Equal Credit Opportunity Act. We can't go and file federal lawsuits saying that this statute violates the Equal Credit Opportunity Act. We have to use the U.S. Constitution. We have to say the Constitution is violated by ARPA or any of these other provisions.

 

      So it's left primarily to public interest law firms that work pro bono to do the work because there's no incentive for attorney's fees. You generally can't get attorney's fees in these cases when you just sue under the Equal Protection Doctrine in the Constitution without some other statute that provides for attorney's fees. In this case, there is no -- we can't use Title VI, or we can't use the Equal Credit Opportunity Act, or we can't use the APA or anything where we might be able to get attorney's fees.

 

      If you're a private attorney out there and you're like, "I want to get into the game here. Maybe I could make some money," It's -- seeking to have statutes struck down as unconstitutional is not a place to make a lot of money unless you're suing states or localities under 1983, where you can make money. But going up against federal government is an uphill battle, and especially to get any sort of damages is an uphill battle.

 

Evelyn Hildebrand:  Interesting. Is there advice that you would give attorneys if they were looking to take on a case like this?

 

Daniel Lennington:  We're very careful on plaintiff selection. Tony Vitolo is a really great guy, and he is very articulate, and he's willing to go on television, and very open to public scrutiny. So you have to make sure your clients are willing to do publicity and that they will have their life gone through with a fine-tooth comb. You have to have a plaintiff who is very willing to stick their neck out and to make this decision.

 

      There's a poignant story about when Rosa Parks was trying to decide whether she would be the person who became the face of the litigation against the Montgomery segregated buses. They had to decide, and they said that she was the best plaintiff because she had all these assets about how she didn't have a past criminal history and how she would be very respectful of the whole process in that the attorneys, in that case, went to great pains to make sure that she would be the best plaintiff to represent that cause. And she turned out to be the excellent and historic plaintiff to represent that cause. So I'm saying that if you're an attorney willing to take on one of these civil rights cases, you have to find a plaintiff who you scrutinize very, very carefully before you put their name on the complaint.

 

Evelyn Hildebrand:  Interesting. Well, this has been fascinating. Are there any other questions from the audience? If not, then I will hand the floor over to you for any closing comments you would like to make.

 

Daniel Lennington:  The last question says, "An injunction pending appeal by the Sixth Circuit applies the appeal goes forward. But what is left to do in light of Thapar's opinion?" That's a great question. I just got a briefing order from the Sixth Circuit asking me to file a brief in June. I'm not sure what I’m going to say in the brief except read Judge Thapar's opinion. But that is correct that we may have to go through the hoops, but by the time the briefs -- that we may end up dismissing the appeal and dismiss -- and the case may go to final judgment because it does -- in effect, we have gotten all the relief that we need, arguably, at this point.

 

Evelyn Hildebrand:  Thank you.

 

Daniel Lennington:  So I have nothing further. Thanks for all the questions.

 

Evelyn Hildebrand:  Wonderful. All right. And thank you for reading that question. I read it, and I forgot to ask you. So, in that case, I will just add my thanks to the gratitude of our audience. And on behalf of The Federalist Society, I want to thank our expert, Mr. Daniel Lennington, for the benefit of his valuable time and expertise today, and I want to thank our audience for participating. We welcome listener feedback by email at info@fed-soc.org. As always, keep an eye on our website and your emails for announcements about upcoming Teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.

 

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Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.