Appeals court balks at bringing back challenge to federal Covid relief program benefiting women, veterans

MANHATTAN (CN) — Restaurant owners who claim they were unfairly denied pandemic-era small business grants because of priority programs for women and veterans asked the Second Circuit on Wednesday to revive their challenge to the American Rescue Plan Act.

The 2021 act offered $1.9 trillion in economic relief including to support small businesses like restaurants via grants. The plaintiffs claim they were unjustly excluded from priority consideration in the program, calling it unconstitutional and discriminatory because it was limited to restaurants that were “at least 51% owned and controlled by women, veterans or the ‘socially and economically disadvantaged.’”

Appealing a federal court dismissal of their claims, the restaurants focused Wednesday on the 1971 Supreme Court ruling in Bivens v. Six Unknown Named Agents , which enshrined the right to seek monetary damages from federal officers for constitutional violations.

“I think the gravamen of this appeal is the third cause of action — the cause of action for a Bivens claim,” said Edward Yankelunas, the plaintiffs’ lawyer, of Tiveron Law PLLC in Amherst. “That’s what makes this an important appeal.”

“But you didn’t sue anyone in the individual capacity,” U.S. Circuit Judge Denny Chin, a Barack Obama appointee, shot back. “How do you have a Bivens claim if you haven’t sued anyone individually?”

The plaintiffs targeted a number of high-profile politicians in their challenge to the 2021 law — President Joe Biden, then-House Speaker Nancy Pelosi, Senate Majority Leader Chuck Schumer — but sued them only in their official capacities.

U.S. Circuit Judge Reena Raggi piled onto Chin.

“You only have a Bivens claim if you sue individually,” she said. “In the official capacity, you’ve got — the United States has sovereign immunity.”

Arguing for the federal officials, Justice Department attorney Jeff Sandberg agreed. “If nothing else, qualified immunity would apply here,” he said.

Sandberg said that the implications of recognizing this suit as a Bivens claim would be “extraordinary.”

“I’m not aware of any Bivens claim, even in the old days, being recognized as a vehicle for challenging the constitutionality of the act of Congress,” Sandberg continued. “It would create tremendously perverse incentives, and separation of powers problems, to be expecting federal officials to pick and choose which federal statutes they’d like to enact based on their own personal view as to their constitutionality.”

Standing to sue under Bivens has been narrowed since 1971, but Yankelunas said that it certainly hasn’t been eliminated.

“I have a case, I believe, that we have discrimination based on gender with respect to the ability to receive federal funds,” Yankelunas said, arguing that the suit therefore had standing under Bivens .

Judge Raggi appeared skeptical, though.

“Your quarrel is with Congress,” the George W. Bush appointee said. “It wasn’t the employee who decided that he was going to implement a grant program in an allegedly discriminatory manner. It was Congress that decided it.”

Yankelunas said in reply that Isabel Casillas Guzman, administrator of the Small Business Administration and another defendant in the suit, enforced the act and directed employees to enforce it.

Raggi feared that logic could set a dangerous precedent.

“Then, every federal employee has an obligation to see whether Congress’s statute violates any constitutional protection,” Raggi said. “Because if he thinks it does, he can be personally liable for carrying out what Congress has ordered.”

While no ruling was immediately issued on Wednesday, the other two judges seemed to concur with Raggi’s concerns. Rounding out the panel with Raggi and Chin was the Biden-appointed U.S. Circuit Judge Myrna Perez.

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