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Restaurants rushed to file applications with a federal aid fund prioritizing women and minority-owned businesses. A new lawsuit alleges discrimination.

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Biden talks stimulus funds for restaurants 09:55

A $28.6 billion federal restaurant aid fund has in its first week received more than 266,000 applications from struggling restaurants, many of which come from the women- and minority-owned businesses the fund is prioritizing. But a new federal lawsuit filed Wednesday by a conservative law firm claims that's discrimination.

The Wisconsin Institute for Law and Liberty filed suit against Small Business Administration head Isabella Guzman, accusing the agency of race and gender discrimination in the administration of the Restaurant Revitalization Fund, the program passed as part of the American Rescue Plan to provide relief to hard-hit restaurants and bars.

The program aimed at helping restaurants hit hard by the pandemic has seen applications seeking twice as much aid as the program has funds for, signaling just how much strain COVID-19 has put on the industry.

The administration announced at the fund's launch more than a week ago it would prioritize businesses owned by women, veterans and other socially or economically disadvantaged individuals for the first 21 days of the program, then process applications for all businesses on a first-come, first-serve basis. The lawsuit claims the agency discriminated against defendant Antonio Vitolo, who owns Jake's Bar and Grill in Harriman, Tennessee, because as a White man he was not eligible for priority treatment, even though his wife and co-owner is a Hispanic woman.

The lawsuit filed in the Eastern District of Tennessee is seeking a temporary restraining order and injunction to halt the administration from paying out any grants, unless it starts processing and paying out money in the order applications were received regardless of an applicant's gender or race.

"Under the guise of pandemic relief, the American Rescue Plan Act enables the federal government to engage in illegal and unconstitutional race and sex discrimination. This is ugly, pernicious, and toxic. We will fight it wherever it shows up," said the institute's President and General Counsel Rick Esenberg in a statement.

The Small Business Administration declined to comment on pending litigation. But on Wednesday, the agency announced it had already received more than 147,000 applications from women, veterans and other disadvantaged restaurant owners in just over a week, requesting $29 billion in funds. To date, the administration has distributed $2.7 billion in aid to 21,000 restaurants since the program opened May 3.

This is not the first lawsuit filed against a federal program aimed at helping disadvantaged groups hurt by the pandemic. A group of farmers sued the federal government charging the administration's efforts to help minority farmers through a COVID-related loan forgiveness program was discriminatory.

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